The City of Edmonton is missing a billion dollar opportunity

Jon Dziadyk is the Edmonton City Councillor for Ward 3.

The City of Edmonton has approximately 14,000 employees and most departments, as one would expect, do not make money. Revenues arise from a variety of sources, but city operations are supported by a reliance on property taxes. But when a department makes a return, versus a loss, rarely is it scrutinized and that is the flaw. Government isn’t a business, but business principles need apply. We can do better.

The City of Edmonton, a multibillion dollar organization, manages cash flows in many ways, including through investments. Some of our investments return yields of 11 percent which allow us to reduce our reliance on property tax increases to finance new infrastructure and programs or, my favourite, to concentrate on core municipal responsibilities which, at the moment, is snow clearing. Something that is not a core municipal responsibility is developing suburban land. Yes, the City of Edmonton grades and services land in order to flip it for profit. There are a host of reasons as to why this should be left to the development industry.

Prior to my election to Council, I worked as an urban planner and am knowledgeable about land development. Under consideration are three parcels of land, two of which are in my ward, that have a market value of $85 million. The fear is that our administration will continue to develop this and sell these parcels for revenue generation. The projection is that this exercise will yield a return of about four percent, over 30 years (expected build out time), which would generate the seemingly high figure of around $200 million once a substantial amount of additional money is invested into the project. Four percent does not sound very lucrative to me. Why aren’t we asking what is the best use of the $85 million at our disposal?

The first observation that I would make is that the development industry would not embark on a project with such a low expected return given the inherent risk in real estate, so why are we? Secondly, if sold, the city would start earning property tax on this land immediately but could still shape its realization through zoning and permitting. Finally, and most significantly, if the $85 million was invested, per our proven track record, we could earn 11 percent on it compounding. During the same 30 year horizon, the City could be sitting on $1.9 billion. What if we only earned 9 percent? Answer: $1.1 billion.

So why isn’t this being done? Despite attempts at being a nimble organization, the City is a bureaucracy and not a business. Internal controls and mandate checks could tighten our book of business but we need more than myself and a few others to advocate for this.

As an elected representative of the people, and steward of this organization, I will be making moves to exit us from most land development and invoke business principles where appropriate. We could use the $85 million worth of land assets to generate more revenue than many would dream possible. Next step, lower taxes.