If you went to dinner with 16 friends and only 11 of you were picking up the bill, eventually, you might get a little sore. Whether we are talking about traffic on Calgary Trail, social disorder issues from folks brought into Edmonton, or big investments made in culture, Edmontonians are paying their own taxes -- plus a little bit more to ensure taxes are kept low in regional municipalities.

Worse yet, those low regional taxes further drain lucrative business and industrial opportunity from Edmonton, creating a negative feedback loop that is really hard to pull out of. 

We aren't asking for a special deal, just a fair deal.

This content is pulled from the October 2024 Fiscal Gap Report by City Administration.

Free Rider Problem

When people and businesses from surrounding municipalities rely on these services and infrastructure, an unintended free rider problem is created. A “free rider” benefits from resources, goods, and services, without paying for their full costs. City services and infrastructure are utilized by residents and businesses of Edmonton’s surrounding municipalities, but the City is not able to capture revenues from these users, as property tax is limited to properties within Edmonton’s boundaries.

The City of Edmonton effectively provides various services and infrastructure projects for a Census Metropolitan Area population of 1,563,600, while only generating property tax from its resident population of 1,128,800.90 The non-residential properties located outside Edmonton’s boundaries also benefit from the services that Edmonton provides without paying property taxes in Edmonton. The following subsections provide a few examples of the free rider effect. These examples are not an exhaustive list, but are meant to provide context around this issue, and how it drives City expenditures relative to its revenue-raising capacity, contributing to its fiscal gap.

24.1 ROAD NETWORK

As of year-end 2022, the City had a total asset replacement value of $34.7 billion. The largest asset category was roads and related infrastructure, with an asset replacement value of $14.2 billion, 41% of all City infrastructure. The average annual renewal requirements over 2024 to 2032 to maintain the City’s road network is $296.5 million. Additionally, the annual operating expenditures required to service Edmonton’s roadway network in 2023, including bridge and road maintenance, snow and ice control, street cleaning, traffic control, on-street parking and traffic safety was $165.6 million.

Vehicle Kilometer Traveled (VKT) is a widely used indicator in transportation planning that measures the level of roadway use. VKT is estimated by multiplying the lengths of roadway segments with the amount of vehicles traveling on them. The City of Edmonton estimates that 68% of per-capita VKT on City roadways is driven by Edmonton residents, while 32% is driven by regional residents.

Traffic also flows from Edmonton into surrounding municipalities. The City of Edmonton estimates that 9.1% of per-capita VKT on regional roadways is from Edmonton residents, while 90.9% of per-capita VKT on regional roadways is from regional residents. These figures demonstrate a disproportionate use of City roadways by regional residents. The City provides a road network capacity that accommodates the demands of the Edmonton metropolitan area population, but generates property tax to support these services only from Edmonton-based properties.

It could be argued that there is an over-provision of road network infrastructure by the City of Edmonton to accommodate a broader metropolitan population: in order to accommodate the VKTs of regional road users, the City’s road network is oversized by 47%.94 Put another way, if Edmonton did not have a large regional population, its road network would be significantly smaller, with lower operating and renewal costs.

24.2 FREEWAYS & EXPRESSWAYS

The City also builds and maintains freeways and expressways that serve a regional clientele. For example, the City is funding 50% ($500 million) of the Yellowhead Trail Freeway Conversion project, which services much of the Edmonton region; the remaining 50% is funded equally by the provincial and federal governments. The operations and maintenance of Whitemud Drive is also borne by the City, though these assets are intended to serve personal traffic and goods movement for the entire region.

24.3 REGIONAL DEMAND PRESSURES ON POLICING RESOURCES

As of July 1, 2023, Edmonton had an estimated population of 1,128,800, whereas the municipalities surrounding Edmonton had an estimated population of 434,800; the latter constitutes Edmonton’s non-resident regional population. As with other large metropolitan areas, the regional population spends a fair amount of time in the centre city (Edmonton), but declares their residence elsewhere in the region. This additional population works, shops, visits and socializes in the city of Edmonton. EPS resources become strained with the additional responsibility of protecting and administering enforcement services for this larger population, who are not contributing towards Edmonton’s policing costs through their property taxes. This drives policing costs in Edmonton, without commensurate revenue generation opportunities, ultimately contributing to the City’s fiscal gap.

24.4 MAJOR CULTURAL COMMITMENTS THAT SERVE A REGIONAL CLIENTELE

Edmonton’s size affords it budgetary advantages in the provision of major cultural programming and infrastructure. The City makes a number of commitments to large-scale cultural facilities and events, such as: large sporting stadiums, art galleries, symphony halls, museums, Olympic-sized pools, indoor soccer fields, golf courses, major theatre, large-scale festivals, major events, historical parks, indoor botanical gardens and many other services, all of which are beyond the scope and capacity of smaller municipalities to provide to the same extent. These facilities and events attract and serve residents and businesses across the entire Edmonton region. Yet, for the majority of these events and facilities, the costs are borne by the City of Edmonton, its residents and businesses.

24.5 RECREATION & ATTRACTION FACILITIES

In 2023 there were over 8.5 million total visits at City recreation and attractions facilities, including daily admissions, booking, rentals and registered program attendance. Generally, Community Recreation and Culture does not collect demographic information from many types of attendees, such as walk-in admissions and space rentals; though some users who sign up for regular programs or access provide some information about their residence. Of these individual users who sign up for regular programs, roughly 14,000 of 223,000 were from outside Edmonton based on postal code data. Note these figures are rough estimates as verification would require line-by-line analysis to confirm accuracy of the self-reported information.

The cost of delivering recreation services is covered in part from user fees and in part from tax support. Regional attendees pay the user fee, but do not pay property taxes in Edmonton. The City’s share of services provided to people living inside or outside municipal boundaries is difficult to estimate, as Edmontonians use parks and recreation facilities in surrounding jurisdictions as well.