Spendmonton: Chapter II

We touched a nerve last week.

By suggesting the city of Edmonton has champagne tastes (which are being paid for by tax payers), we pointed to three areas to show city council’s propensity for spending:

1.   Leasing the most expensive office building in Edmonton;
2.   Building a $321M recreation centre;
3.   Building a $210M bus barn.

We had a number of interesting responses.

One was from Councillor Knack, who respectfully clarified some of the math for the Lewis Estates recreation centre. The actual building will cost $179M with the remaining $142M required for land servicing and soft costs.  While we feel the total cost is the best representation of the actual expense, we have a keen appreciation for Councillor Knack’s tact, and can see why he is well-liked within his constituency.

We also had feedback that reveals we may have written too much on the issue, with our last article being the proverbial straw that broke a back or two.  But as strange as it may sound, we respect and welcome the criticism.  While it would be more productive having a conversation when we know who is on the other end, at least a discussion is happening.

Our intent is not to denigrate our city, but judging by the amount of comments we had on last week’s article, there are a lot of people who are genuinely concerned about property taxes.

So let’s elaborate on the effect the increased spending & property taxes are starting to have on Edmonton’s commercial real estate market:

1.  This spring market was one of the slowest in the past 10 years.  And this isn’t our subjective opinion, there have simply been fewer sales in the entire market compared to most of the last decade.

2.  There was a 22% decline in building permit applications compared to a year ago.  This presents two problems: first, municipal revenue is already down $4.8M off the budget, and is expected to grow to $8.4M by the end of the year.  Second, the tax base will not grow at the pace the City was forecasting.  There will be a shortfall in immediate revenue due to the drop in permitting applications, followed by lower-than-anticipated tax revenue going forward.

Those two stats should be sobering for city council.  There is less activity – both from a sales perspective and with new construction – yet there does not appear to be any meaningful discussion from council on how municipal costs can be brought under control.  In what other organization, company or household can this type of pressure not evoke some type of change?

In Calgary, people are losing their minds over the recent tax increases, with some going so far as suggesting the province needs to intervene.   You might find it interesting to learn that even with Calgary’s massive increases of late, their non-residential tax is still comparable to Edmonton’s (less than 1% difference).  And worse, the residential tax rate is 36% higher in Edmonton than in Calgary.  If businesses in Edmonton are mad, homeowners should be too.

EdmontonCalgaryDifference
Non-Residential Tax Rate21.849622.0217-0.78%
Residential Tax Rate9.08066.65436.47%

We want to stress that we are not trying to troll Edmonton city councillors or administration, but instead convey the message that a number of businesses and households are emphatically against dramatic increases in municipal spending. These costs – which have consistently exceeded population growth and inflation – are requisitioned from tax payers at a time when the economy is still struggling.

We write about this topic because it’s important to us.  We simply want Edmonton to continue being a place we’re all proud to call home.

 

 

We write a blog on Edmonton’s commercial real estate market every Friday at 11:00 am.  Subscribe to get the posts delivered right to your inbox and we’ll include a free copy of our ebook Leasing Commercial Real Estate in Edmonton.

 

Our Team

Chad Griffiths

Chad Griffiths

Partner, SIOR, CCIM

Chad is a partner with NAI Commercial Real Estate and focuses on the Greater Edmonton area. Chad entered the industry in 2004 and has completed over 400 commercial transactions with clients ranging from small, local companies to large institutional owners. Chad has been a top 15 producer with NAI Canada-wide since 2013.

Ryan Brown

Ryan Brown

Partner, BCom, SIOR

Ryan is a partner with NAI Commercial Real Estate in Edmonton and is currently ranked nationally as one of NAI's top advisors. Having executed in excess of $100 Million worth of sales transactions and over 2 Million square feet of lease transactions, Ryan has developed a firm understanding of asset evaluation and an aptitude for building design, functionality, and long-term practicality.

Darcie Bouteiller

Darcie Bouteiller

Associate

Darcie is a licensed Commercial Real Estate Agent in the Province of Alberta with a focus on the Edmonton market and its surrounding areas. Darcie accomplishes custom solutions for her clients through her personable nature and results driven attitude. Darcie can help if you are looking to invest in commercial real estate or are looking for representation for a sale or lease transactions.

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4 thoughts on “Spendmonton: Chapter II

  • This is a respectful, professional rebuttal to the Councillors explanation, it’s unfortunate there is not a forum to really have a meaning full discussion and analysis of city spending, other than at the voting booth, where social issues always grab the headlines. The problem of course is the wider issue of city wide spending in all areas. It’s funny when a “pet project” comes along it’s easy to find several million dollars to scrape up, but when it comes to cutting expenses we hear the same old tired line…Good Lord! do you want us to lay off police and fireman!!! Think of the children!

  • Cities spend hundreds of thousands of dollars on public engagement every year. They think that having an open ear will provide the balanced feedback they expect. But hardworking citizens barely have enough time to review their assessment notice, let alone attend the myriad of public meetings and consultations held almost daily. You know who does have time to attend these sessions? The retired, the unemployed or underemployed, and the NIMBY activists. All valid viewpoints, mind you, but hardly representative of the majority of taxpayers.

    When was the last time a Councilor reached out to one of their business constituents to gather feedback? I’ve heard some Councilors suggest it would be lobbying if they reached out to a business for feedback.

    • Thanks for the comment, Greg. I agree with everything you’re saying. I think Councillors are reluctant to talk to businesses more due to the fact they know they won’t get positive responses. In Edmonton, the businesses property tax is 2.4x the rate for residential properties, so naturally businesses will feel they already contribute more than their fair share. Sadly, many councillors would rather live in an echo chamber where they get support for their spending shenanigans. The truth is often hard to hear.

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