Local economic forecast is not robust, says City of Red Deer CFO

Tax talks already begin at council for 2019 budget year

Local economic forecasts for 2019 are less than rosy, prompting tax austerity talks around the Red Deer city council table.

Shortly after approving the 2018 tax rate, council discussions already started on what the guideline should be for the 2019 operating budget.

The city’s Chief Financial Officer Dean Krejci recommended a 2019 property tax increase parameter of no more than 2.5 per cent. He cautioned Red Deer’s economy is recovering, but not yet recovered.

Forecasts are for a modest two per cent economic growth over the next year.

Construction revenue is expected to remain low, with inflation exceeding growth. Krejci said additional cost savings and revenue growth will be needed. Administration is advised to consider efficiencies in transit, recreation and snow and ice control.

Coun. Tanya Handley thought council could try tightening its budget to a 2 per cent increase for 2019, rather than the suggested 2.5 per cent parameter. Many city residents are only now starting to pull themselves out financial hardship, so council needs to keep taxes as low as possible, she said.

Most other councillors agreed with Handley’s sentiment, but didn’t think it was feasible, considering rising inflation, as well as a city policy to put one percent of property tax increase aside for future capital projects.

Coun. Vesna Higham said these two factors would essentially reduce a 2 per cent increase to less than one percent. This would either jeopardize city service levels or risk the city’s savings policy, which Higham believes is crucial to good financial planning.

Handley’s suggestion was defeated. Only Coun. Dawe supported the 2 per cent parameter, saying which ever way the provincial election goes next spring, the government will make cuts to reduce the deficit. The city might as well plan on working with less money, he added.

Council did approve two other parameters designed to reduce the financial impact on city residents.

Administrators were directed to keep 2019 utility increases to a maximum of 2.25 per cent from a proposed 2.5 per cent. And parameter around the three-year forecast for the city’s operating plan was limited to a 2.5 per cent increase from a proposed 3 per cent.

Red Deer’s 2018 property tax increase of 2.02 per cent, when combined with the education tax requisition, averaging to an overall local tax increase of 1.5 per cent. The overall rate dropped because the province’s equalized assessment formula for education taxes “worked out in our favour this time,” said Coun. Dawe.


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