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City Budget Bulletin #3: Priority-Based Budgeting

Nobody is better equipped to streamline operations than the employees and their managers at the City of Edmonton—they just need a robust process and the will to see it through.

City reports show a Priority-Based Budgeting approach (PBB) was initiated from 2012 to 2015, but PBB isn’t mentioned anywhere beyond 2015. Perhaps the fact that Edmonton was booming much of this time led to its lack of implementation, but after tax-funded spending increases surpassed population and inflation growth by $650 million between 2006 and 2016, it is now critical that we get costs and property taxes under control without compromising quality services.

The City has engaged in a Program and Service Review, but as of the end of its first year (2017) it had only identified $2.8 million in possible savings (0.1% of budget) while costing $925,000 to carry out. We are hopeful the City’s indication that 2018 items will generate bigger savings bears itself out, but it seems very unlikely this approach will get us the scale of savings we need to really offset past and future tax increases. The City of Calgary is two years from completing a multi-year “zero-based review” which, like PBB, forces each department to start from scratch and reconsider what needs to be done and how it can be done better. Calgary estimates savings already of up to $68 million annually at a one-time cost of $7 million.

Regardless of the results of the Program and Service Review, the fact remains that the city needs to better align its spending with its core priorities. PBB forces a municipality to establish a matrix of ranked priorities that the City considers its primary responsibility. It then reviews all of its operations and decides which tax-supported activities are most relevant in light of these established priorities. The U.S.-based Centre for Priority Based Budgeting guides municipalities through the process. This is the same agency that provided assistance to our City when we first attempted to implement PBB in 2012. As they describe it:

“Priority Based Budgeting provides a comprehensive review of the entire organization, identifying every program offered, identifying the costs of every program offered, evaluating the relevance of every program offered on the basis of the community’s priorities, and ultimately guiding elected and appointed officials to the policy questions they can answer with the information gained from the Priority Based Budgeting process, such as:

What is the local government uniquely qualified to provide, offering the maximum benefit to citizens for the tax dollars they pay?

  • What is the community truly mandated to provide? What does it cost to fulfill those mandates?
  • What programs are most appropriate to fund by establishing or increasing user-fees?
  • What programs are most appropriate for establishing partnerships with other community service providers?
  • What services might the local government consider “getting out of the business” of providing?
  • Where are there apparent overlaps and redundancies in a community because several entities are providing similar services?
  • Where is the local government potentially competing against private businesses within its own community?”

PBB has attracted the attention of many North American municipalities who have struggled to control costs while maintaining service levels. Municipalities in the Edmonton Metropolitan Region and elsewhere in Alberta are in various stages of adopting PBB:

  • Strathcona County has fully implemented Priority-Based Budgeting.
  • St. Albert City Council voted unanimously to implement PBB by 2020.
  • The Town of Beaumont has partially adopted PBB.
  • Fort Saskatchewan City Council has asked their administration to prepare a report on PBB.
  • Grande Prairie City Council is instituting PBB for its 2019 budget and beyond.

While PBB cannot be implemented in time for the approval of the 2019-2022 budget, if started now it would begin to streamline spending within this budget cycle, and then guide the next four-year budget to ensure we can continue to build a great city while maintaining a fair and competitive tax environment. 

Questions for the City:

  1. With operational spending increases doubling population and inflation growth from 2006 to 2016, resulting in an additional $650 million in City operations, how can the Program and Service Review alone generate enough savings to offset the tax increases hurting Edmonton businesses?
  2. Can City Council and Administration secure support and buy-in from all departments to follow through with a robust PBB process?

Let us know what you think of this Bulletin and, if you agree, contact the Mayor and Council. Tell us how property taxes have affected you and any savings or other ideas you have for making Edmonton more competitive for business.

Contact us at policy@edmontonchamber.com

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