Red Deer city Coun. Lawrence Lee feels it’s time to hear from the public about what “tolerance levels” are for service reductions. (Black Press file photo).

COVID-19 has pushed City of Red Deer’s finances over a precipice, say councillors

Mayor hopes to be back on more solid footing within two years

COVID-19 measures have “annihilated” the City of Red Deer’s financial standing, making future service cuts a necessity, says Coun. Lawrence Lee.

Given that so many Red Deerians have been telling the city to tighten its belt, Lee invites citizens to submit their preferences regarding which services should be reduced in future — recreation, transit, parks maintenance or other?

“I would like to hear from the public where their tolerance levels will be,” said Lee at Monday’s council meeting.

With ongoing fiscal uncertainty and shrinking municipal revenues, Red Deer city council approved a short-term borrowing bylaw that could increase the municipality’s overdraft by $10 million — up to $40 million from a previous $30 million.

This will ensure the city can keep paying its bills — even though council was warned it might have to put off doing some future capital projects.

Chief financial officer Dean Krejci had previously explained to council that more short-term borrowing is a “prudent” measure that ensures the city can continue providing essential services throughout the pandemic.

But he cautioned the additional loan will likely raise the city’s debt level to the provincial limit — meaning the 2020-21 capital plan will likely have to be revisited, with some projects struck off the list.

Like other municipalities, the City of Red Deer’s revenues have taken a beating because of measures to prevent the spread of COVID-19 and lessen the impact on residents and businesses.

Recreation facilities are closed and transit ridership has dropped off. There’s also the loss of parking fees and a steep decline in revenues from development.

Most significantly, citizens who may be financially affected by COVID-19 have been allowed to defer paying property taxes to Sept. 30, instead of the usual June 30 deadline.

With this gap in tax collection and the absence of provincial/federal stimulus or relief funding for municipalities, council was told the city could soon face a cash-flow problem, unless additional borrowing was approved.

Council therefore gave final reading to a borrowing bylaw for an additional $10 million — with the stipulation it only be sought if needed.

Instead of paying the amount back within three years, as administration recommended, it must be paid back within two years. (Only Coun. Buck Buchanan was opposed, in the belief this could leave council too little time to get back in its feet, financially.)

Mayor Tara Veer suggested the shorter repayment term, saying the city will still have “two full years” to get into a better cash flow position.

Coun. Michael Dawe noted much has been made over the additional $10 million in borrowing on social media. Many citizens do not understand that it’s not for any new spending, but simply to ensure the city can keep running until property taxes can be collected, he said.

“I want to make it clear that this is just contingency borrowing… A contingency is for when something goes wrong and that’s where we are right now (with COVID-19).

“We’ve hit bottom and we have to work our way out of the precipice we have fallen off of,” said Dawe.

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