Proposed 2019-2022 CAPITAL BUDGET THE CITY OF EDMONTON CITY COUNCIL October 23, 2018 1
OUR CAPITAL BUDGET | Financial and Corporate Services | Financial Strategies & Budget | 10.23.2018| 2 Opening Comments - City Manager Good morning - We’re pleased to present the 2019-2022 ● proposed Capital Budget. The City of Edmonton’s Capital and Operating Budgets are ● about building a great city. They work together as two parts of an overall commitment ● to imagining and animating Edmonton. This Capital Budget is about the “stuff” that we build and ● maintain. It’s about the new - and renewal of - roads, bridges, ● sidewalks, parks and facilities that we use every day. It’s a mix of maintaining the infrastructure we have and ● building the infrastructure we need - all in benefit to
Edmontonians and their quality of life. ● It was thoughtfully prepared to help City Council make ● informed decisions on how best to prioritize and allocate available funding. I’m enormously proud of the work done by City of ● Edmonton employees across the corporation to give you the most accurate data and analysis possible. And now I’d like to hand the presentation over to Barry ● McNabb, Branch Manager of Financial Strategies and Budget.
PRESENTATION OUTLINE 1. Overview & Economic Context 2. Available Capital Funding & Debt Capacity 3. Capital Investments in 2019-2022 ($4.3B) a. New Infrastructure Growth ($2.3B) Previously Approved Transformational/Growth ($1.8B) i. New Growth Projects ($0.3B Constrained/$0.2B Unconstrained) ii. b. Renewal of Existing Infrastructure ($2.0B) 4. Next Steps & Closing Remarks | Financial and Corporate Services | Financial Strategies & Budget | 10.23.2018| 4 Thank you Ms. Cochrane and Good Morning Mr. Mayor and members of Council In this presentation of the Proposed 2019-2022 Capital ● Budget, I will begin by providing a brief overview of the development of the budget including the economic context in which it was prepared. I will then review the projected available capital funding ● over the 2019-2022 timeframe, with Ms. Padbury then discussing the debt capacity of the City of Edmonton to finance capital investments. Mr. Meliefste and Mr. Leeman will then review at a high ● level the $4.3 Billion of capital investments recommended by Administration as part of the 2019-22 Capital Budget
including: ● the continuation of transformational and other ○ growth projects during the 2019-2022 timeframe in the amount of $1.8 billion that were previously approved by City Council the proposed new growth projects ○ Administration is recommending for 2019-2022 based on $306 million of constrained and $241 million of unconstrained available funding, and the renewal of the City’s existing infrastructure ○ in the amount of $2 billion. and then finally we’ll look at next steps following today’s ● presentation working towards Council deliberations and approval of the budget in late November and early December, with Ms. Cochrane providing closing remarks. ●
OVERVIEW OF CAPITAL BUDGET Capital Investment Outlook (Council April 2018) ● Limited available funding for new projects ○ Council reconfirmed priority on renewal ○ Proposed 2019-22 Capital Budget Guided by: ● Council's strategic goals ○ Principles & prioritization criteria (Council June 2018) ○ Capital Project Governance (C591) ○ | Financial and Corporate Services | Financial Strategies & Budget | 10.23.2018| 6 The foundation for the development of the Proposed ● 2019-2022 Capital Budget is the 10-year Capital Investment Outlook that was presented to Council in April 2018. The Capital Investment Outlook identified a potential ● funding gap of $3.8 billion over the next 10 years, with $15 billion of projected funding being available for $18.8 billion of potential infrastructure investment. As part of the guidance and direction received during the ● discussion of the Capital Investment Outlook, Council reinforced the need to continue to invest in the renewal and maintenance of the City’s existing infrastructure. This direction has been reflected in the Proposed ○
2019-2022 Capital Budget, as Mr. Leeman will ○ discuss further in this presentation. The development of the Proposed 2019-2022 Capital ● Budget has also been guided by: the City’s strategic planning framework and four ○ strategic goals which were approved by Council earlier in the year the capital planning principles and prioritization ○ criteria used in prior budget cycles which were reaffirmed by Council on June 26, 2018, and the Capital Project Governance Policy ○ A key element of the 2019-2022 Capital Budget is its ● alignment with the Capital Project Governance policy and in particular the project development and delivery model, which Mr. Meleifste will be reviewing in a few moments
CONTEXT FOR CAPITAL BUDGET (Economic Outlook/Emerging Issues) ● Constrained Capital Budget ○ Continued economic uncertainty (oil prices, tariffs) ○ Moderate population (1.9%) /economic growth ( 2.5%) ○ Rising interest rates & borrowing costs ● Emerging Issues Could Impact Budget ○ Metropolitan region, annexation, grant funding In depth Economic Presentation (2019-2022 Operating Budget Nov 7/18) | Financial and Corporate Services | Financial Strategies & Budget | 10.23.2018| 8 The development and execution of the proposed 2019-22 ● Capital Budget is very much dependent on the state of the municipal, provincial and global economies. The Province and City are gradually recovering from the ● significant and prolonged downturn in the economy that began in mid 2014...and this gradual improvement and growth is expected to continue over the next four years with moderate population and economic growth of 1.9% and 2.5% respectively. However, economic uncertainty and volatility is also ● expected to continue with fluctuating oil prices and potential US trade restrictions and tariffs. This economic uncertainty could impact the projected ●
capital funding over the next four years, including the ● timing and amount of federal and provincial grants. This economic uncertainty, along with rising interest rates, ● could also impact the cost and delivery of projects included in the 2019-2022 capital budget. And finally there continues to be emerging issues that ● could impact the proposed 2019-2022 Capital Budget going forward, including potential shared investment in the greater metropolitan region and the growth in City boundaries through annexation Administration will be providing a more in-depth analysis ● of the economic outlook and the continued growth of the City on November 7 as part of the presentation to City Council of the Proposed 2019-2022 Operating Budget.
CAPITAL FUNDING & DEBT | Financial and Corporate Services | Financial Strategies & Budget | 10.23.2018| 10 This next slide provides a breakdown of the projected ● available capital funding and debt included in the Proposed 2019-2022 Capital Budget. It is important to note that debt is not a funding source in ● itself but rather a method of financing capital projects. The issuance of debt is an important tool to allow the City to ● complete its capital infrastructure, including providing matching funding in order to qualify for provincial & federal grants. The Capital Budget includes $824 million of debt financing in ● 2019-2022 with an additional $94 million in 2023 & beyond. This debt financing is for the continuation of ● transformational and other growth projects previously
approved by City Council. ● Given the current economic and funding constraints, and the ● need to maintain sufficient debt capacity for future transformational and emerging projects including the continued build-out of LRT, Administration has not included the issuance of debt to finance any new proposed projects in the 2019-2022 Capital Budget. Administration has provided a list of unfunded projects in ● the Proposed Capital Budget that were rated as important to the City through the Corporate Prioritization Process that would be eligible under the City’s debt funding policy if Council chose to do so. Mr. Melifste will be reviewing these projects in a few ○ moments later in this presentation. So as also shown on this slide, the City’s ability to execute on ● its capital program is very dependent on obtaining funding from the federal and provincial governments which comprise $2.1 billion, or nearly 50% of the total $4.3 billion of funding excluding debt financing. this grant funding will assist with the continued renewal and ● maintenance of the $30 billion of existing infrastructure and facilities as well as the completion of other transformational projects including Yellowhead Trail and the LRT buildout.
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