Edmonton city councillors heard some preliminary numbers Monday, projecting what the novel coronavirus pandemic is doing to the city corporation’s bottom line.
Through a lack of revenue and increased expenses, the city could be out $112.3 million if the current situation lasts until mid-September.
That scenario was presented to city council by Mary Persson, the deputy city manager of financial and corporate services.
“This estimate may be low. We are in uncertain times.
“We do have increased costs being inferred for increased cleaning and protective personnel equipment as we work through our response in the short term.”
Persson said the $112-million figure equates to a 6.7 per cent property tax increase in 2020. Since council last December already approved a 2.08 per cent increase, Persson said that combined total would be equivalent to an 8.8 per cent tax increase in 2020.
“We are not proposing a tax levy increase at this time,” she told council, as work at both the administrative and political level with the other orders of government continues to find one-time grants to offset the revenue loss.
Expenses can’t be cut quickly since more than $1 billion include salaried employees. Another $400 million involve contract and other workers who are not directly employed by the city.
Leading the revenue losses are Edmonton Transit, projected at more than $54 million, because transit is currently free of charge, and rec centres, which would be down $37 million.
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“The effects of the EXPO Centre activation is not included in the net financial effects,” Persson said.
“While we anticipate that these costs will be recoverable, there is no certainty at this time, but we do expect our partners in the federal government and others to step up.”
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She added that there is more than enough money on hand currently to ride out the storm.
“The city actually has a relatively strong cash flow position currently. As of March 19, we have $7 million in the bank and $359 million in a money market fund.”
“The projected budget numbers and reductions in revenues that were presented today were startling,” said Mayor Don Iveson.
City finance staff will work on a plan over the next couple of weeks and present some options to city council on April 15. Interim city manager Adam Laughlin said they’ll likely readjust the budget in several ways.
“The categories are expense reduction, using the financial stabilization reserve to a point where we’re comfortable understanding that we’re an order of government that can’t actually run a deficit so we need to be conscience of not going too far.”
Delaying projects is another option Laughlin suggested.
“Redirecting that funding from capital to operating,” he said is something they’d consider “on a one-time basis.”
To get there, Iveson said difficult decisions on further service reductions, cancelled projects or even more layoffs might happen, adding they can run a deficit in a round-about way.
“We cannot run a structural deficit,” he said, pointing to a technical difference. “We cannot create a permanent and ongoing deficiency in the city’s ability to pay its bills. Even a temporary measure in one year still must be paid back in future years.”
Currently, the city spends roughly $250 million a month in operating costs, plus almost double that, on average, on construction, with it reaching as much as an additional $500 million a month in the busy summer months during construction season.
“We’ll burn through that in six months,” said Councillor Mike Nickel.
That’s why talks are underway with the other orders of government to get relief.
“Until we hear that there’s going to be support for municipal institutions, this is going to continue to be a source of real stress and concern for mayors and city administrators across the country,” Iveson said, suggesting the Big City Mayors did have a receptive audience last week in a conference call with Deputy Prime Minister Chrystia Freeland, but no commitments.
In December, city council set the tax increase at 2.08 per cent over each of the next three years on the base budget. Iveson expects that to change because of this shock to the city’s finances.
“I don’t know where we’ll wind up, but we’ll be managing down from 2.08 rather than going up, would be my expectation at this point.”
City council also formally voted to set the deadline for paying property taxes at Sept. 30, instead of the end of June. Laughlin was quick to point out this is not tax forgiveness, but a deferral. You will still have to pay eventually.
“If it’s within your means, we strongly encourage you to pay your taxes and utility bills. You won’t be creating a backlog for yourself when we do get to the end of this pandemic.”
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