(rdnewsNOW file photo)

By Josh Hall (Twitter: @Vancan19)

belt super-tightening

Council asks City staff to find $13 million in savings for 2021

Jun 29, 2020 | 8:16 PM

Red Deer city council has instructed administration to find $20 million in operating savings over the next two years, including more than $13 million 2021 alone.

Council set that wish and several other guidelines for capital and operating budget in stone during their meeting on Monday.

Debate for each is scheduled for Nov. 30-Dec. 4, a vast departure from the typical process of holding capital budget over two days in November, then operating budget over up to two weeks in January.

Guidelines include:

a) A 0.5% capital contribution in 2021 & 2022 Operating Budgets (Council approved a 0.5 per cent contribution in 2020)

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b) A 1.0% capital contribution in 2023 – 2024 Operating Plan

c) A property tax increase to be no more than 0% — including the 0.5% capital contribution for the 2021 & 2022 Operating Budgets (The property tax increase in 2020 was 0.5 per cent)

d) A property tax increase to be no more than 2.5% — including the 1.0% capital contribution for the 2023 – 2024 Operating Plan (This amount will depend on the impact of the Capital Budget and Plan)

e) Utility rate increases to be no more than 0.5% in the 2021 & 2022 Operating Budgets (Utilities increased 2.4% for the average household in 2020)

f) The 2021 & 2022 Capital Budgets to meet approved council policy limiting debt to 75% of the Provincial Debt Limit

g) Reserves, excluding offsite reserves, will be in a positive balance. The City currently has over $200 million in reserves.

h) There will be no new fees or increases to existing fees in the 2021-2022 budget.

Item ‘c’ originally stipulated a 0.5 per cent property tax increase, but council amended it to zero. The 0.5 per cent capital contribution, which is normally built into the property tax increase, will instead be paid through other means.

Mayor Tara Veer cautioned that going to a zero per cent property tax increase over the next two years could cost the City and residents down the road.

“This motion will mean an additional $650,000 in operating savings, which obviously from a taxpayer’s perspective and what we’re hearing in the community, really reflects the state of our local economy,” she said. “But it will not be without consequence. There will be impacts to service levels. If council wants to consistently have high levels of service, at some point there will be trade-off.”

CFO Dean Krejci says cutting service levels is the primary mitigating factor separating what council of today is doing from how Red Deer’s elected officials dropped tax increases to zero in the 1990s.

As for the $20 million in operating admin will be tasked to find, Krejci says that’s going to be very difficult.

“If the expectation was for no change in service level, then I think it would be incredibly difficult,” he said. “That’s where you heard some of the councillors speak about the community having to get ready for a reduction in service level in order to achieve a zero per cent tax increase.”

Complicating matters is the introduction of multi-year budgeting, which was highlighted when Councillor Vesna Higham proposed dropping the capital contribution to zero over the next two years.

As a compromise, Mayor Veer argued for just a one-year decrease, but because the budget is being approved for two years at a time, there won’t be the same guideline-setting process for council to undertake in 2021.

“When the economic environment is more stable, that’s when you see the largest benefit from multi-year budgets because council can essentially set them and forget them,” Krejci explains. “When there are turbulent economic times such as the ones we’re living in, it is much more difficult to stick with a multi-year budget process without going back and having a look at it because of how much things can change.”

Krejci says for that reason the city manager has agreed to a review process next year to ensure council can in fact address any economic factors that may have changed.

City Manager Allan Seabrooke also noted that several shovel-ready capital projects are ready to be acted upon once the province gets the go-ahead to distribute stimulus funding.

“Without the anticipated reductions in revenue, and the additional expenses we may incur because of COVID, I think we probably would’ve been looking at less than half the amount of cost savings we now have to find, so between $7 and 10 million, instead of just over $20 million,” Krejci concludes.

The City anticipates releasing the proposed budget to the public about three weeks prior to budget debate in order for feedback to be provided to council.