A weak Canadian dollar and inflationary pressures has forced the city to dip into reserves to cover a projected shortfall in its fleet budgets.
Council approved a request of $1.36 million from the Public Works department to purchase the outstanding equipment for 2014 and the projected budget differential in 2015 on Monday.
The city typically purchases its fleet units out of the United States.
Public Works manager Greg Sikora said the low dollar means the city has less buying power to purchase its equipment for its fleet in 2015.
He did not have the specific details for the required units available at the meeting.
Council voted to adjust the replacement budget to $7.2 million, up $1 million, and growth budget to $2.37 million, up $324,000. The one-time adjustment does not affect the tax base because the request was made mid-year.
The money will be drawn from the equipment replacement and growth reserve. It currently has a balance of $21 million.
Elaine Vincent, director of Development Services Division, told council that the reserve is sustainable and will meet any demands in the 10-year planning cycle.
Sikora said deferring the purchases would pose risks such as paying more for equipment down the road and potentially interrupting service levels.
For example, the community would be affected if the city’s ice surfacer broke down and there was no replacement, he said.
There’s also the risk of using equipment that is past its useful life. For example, a basic truck has an eight-year life cycle and a bus has an 18-year life cycle. Units are replaced when they near the end of its cycle. It generally costs more to fix an old piece of equipment than it is to buy new.
Mayor Tara Veer said the preference is not to make such a substantial adjustment before the August mid-year budget review. Veer said the city found substantial savings in both the fleet and growth replacement charges.
“We did budget a little bit lower this year so that factored into it,” said Veer. “But the greatest risk was if we didn’t make the adjustment now the community would have seen delays in service levels particularly of areas of road maintenance, parks, transit and snow and ice removal.”
Veer said waiting to make the purchases until the mid-year budget review in August or next budget would make the problem go away. She said there would be impacts in the interim period.
Coun. Ken Johnston asked administration about the option of partnering with other municipalities such as Grande Prairie or Lethbridge to purchase equipment.
Paul Goranson, director of Corporate Services, told council the city has done this in the past when it makes sense. Goranson said it depends on the nature of the equipment and the suitability for the city.
Johnston said the city is building strength and longevity in its fleet which is good news. Johnston said he is pleased the city is able to draw on the reserves to fill this shortfall but he said there needs to be more conversations
“The situation is we cannot delay,” he said. “I will bring up foreign exchange. We have many financial institutions the city … We need to sit down and have those conversations and come up with a plan that will hedge us just a little better.”
In other council news:
l The fishing pond in Heritage Ranch will now be called Mitchell Pond. Council endorsed a request from the naming committee to name the pond after a well-known angler and conservationist, Barry Mitchell. A local branch of Trout Unlimited brought forward the request.
l Council gave first reading to a bylaw that will lower the interest rate on the Red Deer and District SPCA’s $1-million loan to 3.6 per cent from the current rate of 5.058 per cent.
Earlier this year the city reduced the interest rates for other community groups. The audit committee flagged the inequity.
A total of $923,155 is outstanding on the SPCA’s loan which was borrowed in 2007 to build a new facility. Coun. Ken Johnston said in it is a pleasure to support an organization that literally is going to the dogs. Second and third reading will be considered on Aug 17.
l Administration will have more time to work out the details of a regulatory framework for wood fire boilers in the city. Council extended its timeline to November to allow for more time for research and to coincide with the expected completion date for the province’s particulate matter response plan for the Red Deer region.
l Another item has been added to the city’s advocacy list. Council backed Coun. Buck Buchanan’s motion to call on the Alberta Urban Municipalities Association and the province to ensure second language learning opportunities are available within local communities.
l Backyard chickens seem to not have ruffled any feathers in Red Deer.
Council heard that in the past year there have been few issues related to urban chickens.
Red Deer was one of the first cities in Alberta to pass a bylaw to allow up to four chickens in July 2014. Chicken licences are tied to population. The maximum number of licences is based on one chicken licence per 1,500 persons or 65 in 2014. With the boost in population, the city will now permit two additional licences.