(rdnewsNOW/Sheldon Spackman)

By Alessia Proietti

Confusion

BUDGET: potential utilities tax increase of four per cent, among others

Nov 29, 2022 | 10:11 AM

Red Deer city council began their 2023-24 budget deliberations on Monday with The City’s financial background outlining the proposed increases in property taxes, utilities, fees and charges and the need to replenish various reserves.

The City released the draft operating and capital budgets on Nov. 7, requesting community feedback. The Operating budget consists of $413 million for 2023 and $418 million for 2024. The Capital Budget totals $102 million in 2023 and $106 million in 2024.

UTILITIES

For a typical home assessed at $345,000, an approximate increase of four per cent would be seen on monthly utility bills such as water, wastewater, solid waste and electricity. Based on an average water consumption of 17 cubic metres, an increase of $170.20 for 2023 can be seen, adding to a monthly increase of $6.29. In 2024, this would be an increase of $176.64 or $6.44 monthly.

This will bring a dividend increase of $3.225 million in 2023 for the City and $3.440 million in 2024.

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PROPERTY TAX

A potential property tax increase was proposed of 4.79 per cent, or $6.756 million, in 2023 and a 4.38 per cent increase, or $6.525 million, in 2024, as per council guidelines. Of that, one per cent of each year’s increase will be transferred to capital reserves for future projects.

For 2023, in relation to a typical home, this would represent a property tax increase of $119.29 per year or $9.94 per month.

READ: Red Deer operating and capital budgets released; 4.79 per cent property tax increase proposed

With two previous years of no tax increase, the capital projects reserve (CPR) and debt repayment reserves (DRR), which are dependent on operating surpluses, have declined. According to City officials, as the CPR still funds $20 million per year for tax-supported facilities and infrastructure, this has led to a projected combined reserve balance of under $1 million by 2025.

Capital Project Reserve and Debt Repayment Reserve combines (2023-2024 Capital and Operating Budget p. 19)

Property tax dollars, making up nearly 38 per cent of budget funding sources, go towards roads, water, maintenance of city parks, transit, 911 dispatch and other services. For each tax dollar spent, 22 cents goes towards policing and 10 cents goes towards the parks system.

2023-2024 tax allocation (2023-2024 Capital and Operating Budget p. 10)

According to administration, in comparison to other cities, Red Deer has a competitive tax rate ratio of 2.05, meaning for every dollar spent by residential property owners, commercial property owners pay roughly two dollars. In Lethbridge, the ratio is 2.5, whereas the ratio is 3.05 and 3.81 for Edmonton and Calgary, respectively.

Red Deer also has no Machinery and Equipment Tax or Business Tax.

FEES & CHARGES

Administration recommended a total of $403,342 in 2023 and an additional $312,583 for 2024 for increased fees and charges. This portion makes up roughly nine per cent of overall revenues for the City.

Fees and charges include permits, licenses, recreation rentals and admissions, police client service charges and cemetery fees, among others.

The City says, like property taxes, they limited increases to fees and charges, keeping many at zero over the past two years.

SOURCES OF REVENUE

While the City has various funding sources like franchise fees and investment returns, among others, they expect uncertain federal and provincial grants to reduce in the following two years.

Ray MacIntosh, Chief Financial Officer for the City, said that borrowing interest rates were also on the rise, reducing the appeal for The City to take out any loans.

City of Red Deer revenue sources for 2023-2024 budget (2023-2024 Capital and Operating Budget summary page)

DEBT LIMIT

Council previously directed administration that the City’s debt limit does not exceed 75 per cent of the provincially legislated limit. However, administration projected The City’s debt will be close to the 75 per cent mark from roughly 2022- 2027.

Debt Limit (2023-2024 Capital and Operating Budget p. 21)

MacIntosh said in 2023, The City is projecting an additional debt of $17.073 million and $18.083 million in 2024. Hypothetically, he said if The City wanted to repay the debt accrued in 2023 with new tax dollars, they would have to allocate a 12.7 per cent tax increase.