Everything You Need To Know About Edmonton’s Taxes!
“Where do my tax dollars go?”
Recently, I sat down with our City tax folks, Cate Watt and Anton Szabo, to discuss Edmonton’s property tax system and help demystify the direct link between your taxes and the services we enjoy every day.
During the 2023–2026 budget deliberations, Council voted on a 4.96% adjustment to the tax levy. In the 2019–2022 budget cycle, the average tax rate was 1.075% (This was a huge challenge, more on that later.) While a change in taxes can feel alarming, it’s important to note that the way municipalities form budgets is very different from federal and provincial governments. Federal and provincial governments can carry deficits, but cities cannot. Another unique thing about municipalities is that every year we must declare our increases as part of the municipal budgeting and tax bylaw-setting process. Other levels of government don’t do that, they automatically collect higher taxes when the economy grows and never report it.
This is one of the many ways that municipalities are more transparent, and therefore more accountable, for their budgets.
So, how do we decide on the tax rate?
The City determines what the total cost will be over four years to provide new and maintain existing infrastructure, as well as all the services we utilize daily; such as funding Edmonton Police, Fire Services, Parks and Roads, Recreation Centres, and Attractions. This total amount determines what the tax rate will be. We generally consider population growth and the inflation rate as we determine this number. Given our current environment of extremely high inflation rates, coupled with a rapidly growing population, if we kept up with that formula our tax rate would be closer to 10%, but we settled on a 4.96%. If the amount of property taxes collected stays the same or increases at a rate below the rate of inflation it means there are fewer dollars available for existing City services and programs, and reduced financial capacity to invest in our city. This approach is not sustainable long-term as the City is expected to maintain service and program levels, while also seeing through its commitments to transformational change.
Tax Levy Vs Tax Rate: What’s the difference?
The tax rate is not the tax levy, this frequently gets confused!
The tax levy is the total amount of taxes (money) needed to operate the City. The tax rate is a result of dividing the total amount that Council needs from the tax levy by the value of all the properties in the tax class. Municipal property taxes are set by the City and account for approximately 70% of your total property tax amount.
The calculation of each homeowner’s share of municipal property taxes is based on 2 factors:
- The City Budget (the amount the City requires to continue offering municipal programs and services). Currently, the City’s operating budget is 3.3 billion dollars.
- The Total Assessed Value of all the properties in the City.
The costs of services are distributed among all Edmonton properties, in the following manner:
Then, to determine the exact amount each homeowner is required to pay, the City applies this tax rate to the value of your property in the following manner:
Overall, changes in property values do not affect the amount the City requires to continue providing municipal programs and services. If your property’s assessed value changes more than the overall market change in Edmonton, your taxes will increase. Or, if your property’s assessed value changes less than the overall market change in Edmonton, your taxes will decrease.
What’s the difference between property taxes and income tax?
Income tax is understandable; the more money you make, the more you pay. Provincial and federal governments set their tax rate, and when incomes go up, they make money. They don’t declare increases — the amounts are not as transparent.
Property taxes are different. If your home increases in value, that doesn’t necessarily translate to a higher tax bill. Property tax is a budget-based approach to tax collection. City Council determines how much money is needed and then the rate of tax is set to get the exact amount of money needed. The tax rate is a floating number to ensure that Council can run deficit-free.
Municipalities have very few revenue tools, so property tax is the main way we can fund services. Whereas provincial and federal governments have other places to tax — such as oil and gas royalties, fuel taxes, consumption taxes etc.
This means that Edmonton will always only collect what we need.
There’s no unpredictability. There is no incentive for tax assessors to get it wrong, because increasing values overall will actually decrease the tax rate, and still collect the exact same amount. A fair and equitable assessment of property is needed to ensure the taxes are distributed fairly. As the number of properties in Edmonton increases from new businesses coming in, or new property being built, this results in real growth and everyone’s piece of the tax pie could get a little smaller.
Education Tax
When you get your tax bill, it also includes the Education Tax, which is a provincial tax that is set by the Government of Alberta and accounts for approximately 30% of the total property tax amount. Your property’s assessed value is used to calculate your share of Edmonton’s education property tax requisition. The City of Edmonton collects the Education Tax amount on behalf of the provincial government.
Edmonton will be paying 489.4 million in Education Tax this year.
So, why doesn’t the education tax get collected with Provincial Income Tax? Good question! It’s a legacy that dates back to the founding of Canada as a nation. Most provinces have always had this historical practice; they take money from municipalities to fund education. We call it an Education Tax, but really it’s just another provincial tax. The Government of Alberta tells us it goes to Education, but they can technically use that money as they see fit.
My Property Portal
The link to My Propery Portal is on your notice, with your account number and access code. You will be able to review your data which includes:
- what the City knows about your property including
- any permits that had been issued,
- sales of the home,
- and sometimes, inspections of the property.
Review this data and if you see an error that is wrong, please let us know. We want to ensure this data is accurate.
You can also compare equity — how your home compares to the value of your neighbours. There’s a map on the website that will show you the assessment of your neighbourhood, and how your assessment sits comparatively. The City provides you with a list of sales within the last 5 years in your community. This includes the listed price and sale price. By reviewing data, comparing assessments, and looking at sales, you can see where you should be.
Common Questions
Why does Sherwood Park pay less in taxes?
A: They have a lot of oil and gas properties which are very high-value properties and contribute a lot to their non-residential tax base. This was a decision made by the provincial Lougheed government — literally generations ago. Furthermore, they have significantly fewer people. If you look at our surrounding communities, the smaller the community with a larger industrial base, the less the resident tax rate is. One of the things we talk about a lot in terms of regional collaboration is that the CoE is the regional hub. Edmonton is where major services are located; the hospitals and educational institutions are here, and they are tax-exempt. So we have a lot of people coming in to use these amazing facilities, but they are not contributing to the tax base because they live away.
Our outlying communities don’t have the budget or the ability to build all of these amenities that you see in the City of Edmonton. They don’t pay the cost for them, but they do come and use them. Some people have asked, “Shouldn’t we be charging them with a levy to come into the city to use our things?” However, they do pay that levy in a natural process when they use services or shop in our community. Our economy will benefit from their visits, but our tax base does not benefit.
Why are so many of my taxes being spent downtown instead of in my community?
A: One of the reasons is perception. 1% of the buildings/assessable tax base exists in the downtown core, but it contributes over 10% of the overall City tax pool. There is a higher concentration of population in the inner city and they pay their fair share, if not more.
If you’re having a conversation about equity and where money should be spent, we also have to look at where that money comes from. While taxation is agnostic and just looks at what comes in, the reality is, in denser areas of town, you’re going to see larger property tax revenues. Therefore, spending more in those areas is fair and also a necessity because higher population density requires a higher level of services.
For Example: If you live in an area that is mostly condos/apartments, you expect to have good transit service, because typically people don’t have as much parking available to them, etc. If you live in areas that have more challenges with derelict properties, you might have more police and fire coverage. Pocket parks, larger boulevards, etc. Creating liveable areas in denser zones. If we didn’t have a thriving downtown and we let it dilapidate, it would have a fiscal impact on everyone else.
I just wanted to see value for my taxes. I think they should be spent this way or that way!
A: It’s a useful metric to point out — we pay for fire, police, roads, transit, rec centres, parks, and services, and if you compare total taxes paid per household, typically property taxes only account for about 6–8 % of total taxes paid. The other 92–94% of taxes go to other orders of government. So that value-for-money proposition for about 6 cents on the dollar — all those services, the snow clearing, roads, etc. is a good deal. For every dollar of taxes that people pay, they are only paying about 6 cents to the city and what you get is all the services you see and enjoy every day.
We are closer to the taxpayer, closer to the community, are better able to hear what your experience is and therefore be more agile in making changes. When you think about what you get for your provincial tax dollar, you may think about healthcare. But the municipality in some ways also pays for those as well, because healthcare property isn’t taxable and they exist within our city. The least funded is the one you have the most connection with.
For example: the road in front of your house costs tens of millions of dollars to build and maintain. Individually, that would be impossible for us to afford. Our personal property tax would not pay for it over the course of our entire lives.
By pooling our resources we can build our city.
Find out more about how your taxes work for you in the video below!
