2016 budget expected to be difficult

The one thing that was certain during Red Deer city council’s budget review on Tuesday was that the future is uncertain.

The one thing that was certain during Red Deer city council’s budget review on Tuesday was that the future is uncertain.

Council approved several new spending items in the 2015 operating budget while at the same time hearing from city administration that next year’s budget will be a tough one.

There are several unknown factors, not the least of which is this year’s provincial budget. Normally it would have been passed in the spring but it was delayed until fall following the change in government. The city does not fully know what the provincial budget’s impact will be but is hoping to see money starting to come through for the 2019 Canada Winter Games.

The games, described by city manager Craig Curtis as “a huge project involving so much of our corporation,” is ever-present in city planning as operating and capital expenditures are involved.

Mayor Tara Veer pointed to a softening economy that will need to be taken into consideration in the 2016 budget.

Several federal grants that the city applied for have been denied this year. “If the city isn’t meeting grant criteria, then the criteria need to change,” Veer said.

The drop in oil prices and the weakness in the Canadian dollar are also having an impact on the city’s growth and economy, and revenue from land sales will drop. Projected city revenue from growth is expected to fall by $500,000.

“Our financial situation here and in Canada has changed so much,” Curtis said, adding Red Deer’s economic forecast from the Conference Board of Canada is not great.

That forecast shows the city’s economy is expected to drop 1.2 per cent this year following a rise of 3.4 per cent in 2014. This is projected to cut employment 3.6 per cent and raise unemployment to 6.7 per cent.

Red Deer’s service sector, which was first forecast to expand by 1.9 per cent, is now being projected to grow by only 0.4 per cent.

On the positive side though, Red Deer stands up well in rankings regarding cost-effectiveness and entrepreneurial qualities.

The city’s 2015 operating budget came in at $330.6 million, with a 3.78 per cent tax increase. Budget guidelines state that the property tax revenue requirement must not exceed five per cent in each of the next three years.

If the city is looking at a tax increase of four to five per cent, there will be no room for any funding requests from departments unless it’s offset by additional revenue, Curtis said. “That will be our budget challenge. So as we look at additional services and enhancements … my strong recommendation is that we hold the line wherever we can.”

At the same time, Curtis pointed to a 2013 survey that shows Red Deer’s net property tax (after grants) for a representative bungalow compares favourably as fourth lowest among 13 Canadian cities.

The city’s debt per capita is $2,473. At the city’s peak in borrowing, 1983, the debt per capita in 2015 dollars was $3,434. However, that peak would be passed starting in 2018 if the city’s full capital plan is implemented.

Other financial challenges include a 20 per cent drop in the city’s base provincial Municipal Sustainability Initiative grant in 2015, which was offset this year with one-time funding from reserves.

The province is reviewing municipal funding and the two big cities are arguing their needs as metropolitan areas are greater, Curtis said.

And while family and community support services (FCSS) funding from the province is going to increase, the city must still fund its 20 per cent share of that.

The mid-year budget review saw council approve three additions to the 2015 budget. Council cannot change the tax rates once tax notices have been sent out. Funding for budget additions will come from reserves.

The additions include:

l $12,000 one-time funding, and $20,000 in 2016 ongoing funding, for more storage of RCMP exhibits, required because of the increased number of exhibits resulting in the success of the regional joint task force and ALERT teams. Coun. Ken Johnston wondered why the city is paying for this since justice is a provincial matter and the exhibits will be used for prosecutions.

l $40,000 one-time funding, and $100,000 in 2016 ongoing funding, toward corporate security. The city is reviewing city-owned sites and facilities as well as the implementation of security measures for new and renovated sites and facilities. The value of the city’s tangible assets is $1.8 billion.

l $50,000 to further analyze sustainable energy technology, with a view that this will help the city prepare in time for available grants.

Council also passed a motion that changes how the city capital and operating budgets are released to the public. The changes will relate to the 2016 budgets but the city is also going to do a more comprehensive review of the overall process.

Previously, the capital budget was released to the public and media as little as one day prior to going to council. It’s now expected to be released almost two weeks prior, in November, so the public will have a chance to provide feedback.

The operating budget will be released at least three weeks before the first scheduled council meetings in January.