The City of Red Deer is looking at chopping as much as $140 million from its spending plans because of Alberta’s economic uncertainty and its potential effect on provincial grants for municipalities.
The province’s move to slash municipal grants in last month’s budget meant some quick tinkering by the City of Red Deer’s number crunchers, who had to contend with a $4.3-million shortfall.
That tweaking could turn into some serious budget juggling next year if the current economic malaise continues and the province makes deeper cuts to its $1.4-billion Municipal Sustainability Initiative, a 10-year program rolled out two years ago to help municipalities cope with a backlog of infrastructure projects.
When the province cut the amount to be doled out under the program this year from the expected $600 million to $400 million, Red Deer saw its share drop from a projected $12.4 million to just over $8 million.
But next year, the city was in line for $29 million in sustainability cash. How much of that will come is anybody’s guess.
Red Deer financial services manager Dean Krejci said on Friday that if times remain tough, the province may freeze the grant at $8 million — a potential loss of $21 million. Or it could take a similar approach to this year and reduce it by one-third.
“So, we’re really not sure for the future if we have a $10-million problem or a $21-million problem,” said Krejci, who said they will try to pry more details out of the province about what to expect.
“Otherwise, we will probably assume the worst and carry on at $8 million a year and adjust our capital schedule accordingly until we hear otherwise.”
“If it carried on at $8 million, we would look at potentially having to cancel as much as $140 million worth of projects over the next seven years,” he said.
Krejci said it is better to take a conservative approach and remove or delay projects early. Items can always be put back in the capital budget later if more funding becomes available.
An Alberta Municipal Affairs spokesman would not speculate this week on how sustainability grants might be affected if the economy and oil prices do not show significant signs of recovery. Spending decisions are up to the Treasury Board and would be made prior to the next provincial budget, said spokesman Jerry Ward.
Freezing grants would make a major dent in the $235 million over 10 years that the city was hoping to funnel into its $1.7-billion capital plan.
Krejci said city staff haven’t pegged which projects could be candidates for the chopping block. That work will be done as background for the 2010 budget process. Council usually passes the capital budget, which includes all the major road, bridges and building projects, in December.
While the economic and grant uncertainty makes long-term budgeting more difficult, Krejci said municipalities were told up front the numbers were dependent on a strong economy.
And Alberta municipalities are still getting significant dollars compared with other jurisdictions. “Even with the cuts, the level of funding we do get from the Alberta government is tremendous.”