Imagine a company that budgeted for the upcoming year as follows:
CEO: Well, we spent that much last year, so let’s just keep it the same this year.
CFO: But our revenue is down. We should look at adjusting our spending to reflect that.
CEO: Just raise prices. Our customers will understand.
Sounds preposterous, right?
After all, a business that continue spending in the face of declining sales will simply not stay in business for long.
Yet the City of Edmonton has been stubbornly late to acknowledge this is how they handled the municipal budget.
And if you wonder why the value of your property has gone down – yet your property taxes have gone up – look no further than the spend-first-think-later mentality that has been prevalent at City Council for the better part of a decade.
To be fair to city councillors, we feel they are all genuinely interested in city building. Whether it be an elaborate art project on a major road, a gondola, or even bike lanes, we earnestly believe each of these councillors want to make Edmonton a better city. That is a noble goal, and they deserve to be thanked for their commitment to the city.
The problem, however, is that it’s very hard for councillors to know when spending is out-of-control when they don’t even know what they’re spending money on. So while we have been quick to criticize council, the problem is just as much the bureaucratic mess itself.
Fortunately, there appears to be some positive developments on that front, as council is discussing moving towards a priority-based-budgeting system. While this should have occurred a few budget cycles ago, there does appear to be positive steps to moving beyond a system where the previous year’s spending is constantly carried forward.
Here is Councillor Nickel’s comments on the topic:
A key theme of our blog is addressing factors that influence Edmonton’s commercial real estate market (with property taxes being a major contributor), but naturally we also write about the market itself. And to that extent, our office just released the Q2 Market Report for the Greater Edmonton region.
We pulled out two interesting charts relating to the industrial market. While there was a slight improvement from Q1, we’re still seeing a higher vacancy rates and lower rental rates compared to this time last year. As noted by ATB, there are economic headwinds which will make it a challenging market. If that’s the case, let’s hope the rest of council sees this as a the problem it is, and acts swiftly.
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Chad GriffithsPartner, 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 BrownPartner, 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 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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