(rdnewsNOW/Ashley Lavallee-Koenig)

By Ashley Lavallee-Koenig

"TURNING POINT" FOR THE CITY

City of Red Deer sets the stage for Operating Budget debate

Nov 19, 2024 | 5:12 PM

City council began debate of the 2025 Operating Budget Nov. 19, with opening remarks from City Manager Tara Lodewyk setting the stage as a turning point for the municipality and its future.

When all costs and revenues are considered, including $3.4 million in service level changes determined by council earlier in the budget process, there is about $18.2 million left to balance. Over the next few days, council will determine whether to do this through service cuts, reserves, property tax increases, or a combination of these factors.

Read more: City council considers service levels ahead of budget debate

The most significant contributors to the total are a deficit caused by relying too much on reserves to cover ongoing expenses in prior budgets ($11 million), union settlement costs ($4 million), and RCMP contract increases ($3 million).

Lodewyk said this is a difficult position for Red Deer to be in and is a cumulative result of increased expenses amidst lower revenues during COVID-19, years of low population growth, and reductions in federal and provincial grant funding, among other factors.

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Pulling from reserves to keep tax rates low has also been a contributing factor, a move the City Manager said has had a yo-yo effect.

“History has proven that when we keep taxes low and do not keep up with increasing expenses that we will face years of high tax increases,” she commented in her opening message. “From 2020 to 2022 we had very minimal tax increases and now we are facing years of higher than desired tax increases.”

For the 2020 budget, property taxes were increased by 0.97 per cent. In response to the pandemic conditions and strain put on residents that year, there was no increase in 2021 or 2022. In 2023, the property tax rate increased by 4.61 per cent and in 2024, by 6.15 per cent.

To reconcile this $18.2 million gap through revenue generation, administration proposed an 11.25 per cent property tax increase as one option to council.

Lodewyk did caution against comparing percentages across municipalities, as various factors influence the size and scope of the tax base drawn from for these funds, meaning that percentage looks different for Red Deer than other municipalities.

For better context, she outlined the effects of this increase for an average home in Red Deer (currently assessed at about $350,000) in dollars compared to Lethbridge, a comparable municipality to ours.

The current property tax rate in Red Deer is a yearly expense of $2,570, or $214 per month, for the average home. If the rate increases by the proposed 11.25 per cent, this will result in a yearly cost of $2,890, or $238 per month. Comparing 2024 to 2025, this represents an increase of $24 per month in fees that support the services the City provides.

Lodewyk compared this to Lethbridge, which will have an average yearly property tax of $3,000 for 2025 ($250 per month), a value she attributes to its council keeping its rate increases consistent.

“I know the percentage sounds large, but we are competitive for the services we provide,” she said.

Councillors responded to the full picture of the city’s financial reality with opening remarks outlining how they intend to approach the issue over the week.

Councillor Kraymer Barnstable shared that he would like to see the proposed tax rate get reduced by half before he can give his full support, citing a need to be consistent in his messaging and promises to residents.

His comments followed Lawrence Lee’s, who shared that he will be looking for ways to reduce redundancies across city departments through “lean-ovation,” such as better utilizing tools like AI to increase efficiency, and listening to suggestions from frontline staff. He also echoed comments from Lodewyk and Mike Olesen, Growth and Finance General Manager, on the stark reality of this year’s budget.

“We have to be reminded that our operations are in jeopardy and become critical to our city manager when we have less than 90 days of operating revenue in our reserve, and we’re at that point — the public has to realize that,” he said.

Dianne Wyntjes said her decisions will be made with consideration for the future city council of Red Deer as she doesn’t want to “keep kicking the ball down the road” and push addressing the city’s financial struggles into the future.

The final remarks were made by Councillor Vesna Higham, who echoed similar concerns as her colleagues with an added emphasis on the province’s role in the situation.

“We have our fill of providing basic service,” she commented. “The reality I want to share with the community is — and this is shocking to me and it’s an embarrassment — that we receive less now, in 2024, for LGFF capital and infrastructure funding than we did back in 2014.”

LGFF refers to the provincially distributed Local Government Fiscal Framework funding, which uses a formula to determine how much funding municipalities receive.

Tomorrow, Nov. 20, council will continue to hear detailed reports from each division of the city’s operations and determine if and where cuts can be made.

Red Deerians can tune in online.