As Red Deer enters its fourth year of disappointing growth, city councillors are already looking toward their toughest budget yet.
Council approved a guideline this week that will cap the 2020 municipal property tax increase at a maximum of 2.5 per cent in an attempt to balance public demand for services with the need to rein in spending.
It means that next year’s property taxes can go up by a maximum of 2.5 per cent — or less if more savings can be achieved, said Mayor Tara Veer.
But that’s still more than the zero per cent increase the Red Deer & District Chamber of Commerce asked for in 2019. And a tax freeze is still what the chamber’s policy adviser, Reg Warkentin, believes is needed to keep more Red Deer businesses from leaving the city for the lower-cost county.
Both Warkentin and Veer are waiting to see what the fallout will be from the new provincial budget, which won’t be approved until fall.
With a new United Conservative government at the helm in Alberta, and no progress so far on new pipeline construction that would get oil and gas to foreign markets, Red Deer could get less from the provincial government than it received last year. If this happens, Veer said the 2.5 per cent guideline will likely have to be reconsidered.
But even as it is, there’s little wiggle room for new spending, stressed the mayor.
Veer noted with only “very modest revenue growth” anticipated for 2020 — and less than in 2019 —the 2.5 per cent tax increase also has to include a one per cent contribution toward the cost of new capital projects — such as the long-sought-after aquatic centre — and contain inflationary and salary increases.
Veer feels four years of slow economic growth mean the city has entered a “new normal” of small incremental revenue increases, instead of the “peaks and valleys” of Alberta’s boom and bust past — and the budget will reflect that.
“It will be a bumpy ride,” predicts Coun. Lawrence Lee. “Let’s hope it doesn’t get too rough…”
On Monday, council opted for the same 2.5 per cent parameter as it worked under for the 2019 budget (a lower tax increase of 2.15 per cent was actually achieved by council).
Early in 2020, council will discuss achieving savings through efficiencies and innovations to all areas of operation — including snow and ice removal, transit, roads and sidewalks.
As well, councillors will consider hiking existing service fees — as well as implementing new fees, which are yet to be determined.
Lee feels that 2.5 per cent is a reasonable parameter since even maintaining the status quo in city programs and services would mean property taxes would have to rise by 4.5 to five per cent.
Coun. Frank Wong believes the guideline allows the municipal’s belt to be tightened, while still maintaining many of the services local residents have come to expect.
The 2.5 per cent cap recognizes the city is not yet recovered from the downturn, said Wong, while allowing for future planning.
But Warkentin remains in favour of no tax increase for 2020. While city council feels it’s reining in spending, “there’s a big difference between what they feel they are doing and what they are doing,” said Warkentin, who believes it’s time for city “to do everything in its power to help residents and businesses get back on their feet over the next few years” by freezing taxes.
Warkentin warned that Red Deer is already losing many businesses to the lower taxes regime and expenses afforded by Red Deer County.
While it can be argued the county doesn’t have to put aside money for amenities such as a new aquatic centre, Warkentin said the businesses leaving the city don’t care that it’s not an even playing field — they will go where it’s affordable.
Veer cautions that there’s always an expense to zero tax increases.
What results is much higher tax hikes when the economy is stronger. She said more money is ultimately needed to play catch-up and pay for all the infrastructure deficits that have occurred during the zero years.
By being realistic about the need for small incremental tax increases, city council is trying to avoid “future rate shock,” said Veer.
Red Deer city council will deliberate on the 2020 capital budget in late fall and start operating budget talks in January.