Red Deer homeowners should prepare for double-digit tax increases next year as city council grapples with a budget shortfall of at least $17 million.
The revenue gap could go as high as $19 million and remains even if council saves $3.4 million by reducing service levels. And already taken into account is a $4 million increase in a utility fee that gets passed on to utility bills, as well as an anticipated $1 million more in tax revenues from growth.
In a report presented to city council on Tuesday, city growth and finance general manager Mike Olesen said that city revenues have not kept pace with expenses.
"To ensure our annual operational programs have remained in functional balance, we have utilized our reserves to keep tax changes low while ensuring our service levels are maintained and/or increased. This pattern has created the structural deficit we know today," says his report.
The city has also been drawing down on its reserves and the capital infrastructure program is expected to be in a deficit position within five years.
Olesen said the reduction in service levels is a significant improvement over past years.
"That said, we have $17-$19 million that we need to generate. And we have a suffering capital program that is really in a position that we have to make sure that we're changing.
Olesen said he wanted to prepare council that "we may need to make some pretty significant moves in order to close this gap."
Coun. Kraymer Barnstable sought to sum up where the city stood now.
"I know that the decisions and the plan is up to council when we hit budget in a couple of months. But at this point, basically our plan to cover this gap is a tax increase of upwards of 10-11 per cent, unless something comes to the fold, unless something comes to the forefront?" he asked.
"Is that a correct way to read this at this point? Is that an accurate statement of where we're sitting today?"
"I think that is a fair assessment," said Olesen. He went on to clarify that such a tax increase range is not necessarily where the budget will start or finish in November.
"There's still plenty of work to do."
Coun. Dianne Wyntjes asked what effect the past string of zero or minimal property tax increases had on city finances.
Olesen said the low or no tax increases often came at a time when the demand for services was increasing.
"When you look at the zeroes we've experienced and you look at the population growth as well in Red Deer, it generally costs municipalities money to service residential."
While tax revenues increase as the community grows, the cost of providing services and inflation exceed new revenues. That means reserves meant for emergency situations get drawn down or services get eroded or projects get held.
While population growth is good for communities and local businesses, its impact on the city's bottom line is limited.
"We can't sit back and let time heal this because growth will not close the gap fast enough," he warned.
Coun. Lawrence Lee said provincial downloading has also made it harder for municipalities to balance their budgets. The province once earmarked $3.8 billion for municipalities. That number is now $1.2 billion, he said.
