Red Deer City Hall. (Advocate file photo.)

Red Deer City Hall. (Advocate file photo.)

City of Red Deer’s savings are getting depleted during slow post-pandemic financial recovery

Operating reserves will have to be replenished over next four years

Post-pandemic recovery still left City of Red Deer with a larger than expected operating deficit at the end of 2022 that required a transfer of money from municipal operating reserves.

A financial report released on Thursday by the City of Red Deer’s Chief Financial Officer, Ray MacIntosh, showed city operations had not yet returned to pre-pandemic levels as of Dec. 31. “The expectations of revenue increases in those areas exceeded actual results,” his report states.

The city’s total operating revenues increased by $8.1 million, but this fell significantly short of the anticipated and budgeted $14.7 million. MacIntosh believes the pandemic changes people’s behaviors.

With more Red Deerians working from home, fewer people are using transit buses. There are also fewer memberships sold at city recreation facilities, perhaps because more people have invested in home gyms.

Meanwhile, higher inflation widened the shortfall between actual city revenues and projections. General expenses increased by $20 million, or five per cent higher than anticipated.

These increases were due to higher fuel costs in transportation and fleet, higher transmission costs and tariffs for electric light and power, and increased salaries at recreation facilities, transit, as well as ongoing overtime for police and emergency services.

According to the 2022 Financial Report, lower-than-expected revenues and growing expenses left the City of Red Deer with an operating deficit that is much higher than expected.

The deficit at the end of 2022 was $43.5 million. This is $11.2 million more than a previously budgeted deficit of $32.4 million for the year.

The City of Red Deer ended up with a balanced budget after drawing from its operating reserves to fill this shortfall.

But MacIntosh said a depleted operating reserve will impact the city’s ability to fund operations in future emergencies. He reported that city reserves overall have declined by $21.3 million (11 per cent).

A policy has since been approved that requires city council to replace this reserve money within city budgets that are passed over the next four years.

Although MacIntosh said the city’s financial recovery has improved over the first six months of 2023, he believes there will still be a deficit that will require a transfer of operating reserves at the end of this year. But he anticipates a smaller deficit than in 2022.

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