Some city councillors don’t want Edmontonians to panic when they hear about this year’s projected budget deficit.
According to a financial update that went to council Wednesday, the deficit is projected to be $73.8 million.
The variance is equivalent to a 2.6 per cent of the overall tax-supported expense budget, the city said.
“It’s a couple of per cent. It’s quite small, so let’s keep that in context,” said Ward papastew Coun. Michael Janz. “I don’t want to get things blown out of control.”
The biggest part of this deficit comes from unexpected salary settlements to Edmonton police officers. Earlier this year, an arbitrated settlement forced the city to increase police pay and now the city is saddled with $43 million in backpay.
If the deficit doesn’t improve, the city will have to use its budgetary cushion – the financial stabilization reserve (FSR).
The current forecast deficit will put the FSR below its minimum balance of $61.6 million, and that would need to be paid back over the next three years, according to the city.
Ward pihêsiwin Coun. Tim Cartmell said situations like these are why the FSR exists.
“It’s so we don’t get dramatic swings year over year. We have the reserve that takes the edge off of things like this and allows us to recover over time,” he said.
“It’s not an immediate concern, it’s not a tomorrow thing – it’s an ‘over three years’ thing.”
The city will still need to find ways to get more cash – through cuts or increased revenues.
“For municipalities, the choices are very limited. So it always ends up being either increased user fees or increased property taxes and we want to limit both,” said Mayor Amarjeet Sohi.
“But at the same time, we want to continue to provide quality public services that Edmontonians so much depend on.”
“The capacity of people to take on ever more tax increases is virtually zero, I would think, so we’re in a crunch,” said Cartmell. “We’ve got to figure something out.”
Another contributor to the deficit is lower transit revenues – they’re forecast to be $11.7 million lower than budgeted.
Sohi said with some hybrid work arrangements sticking around after the pandemic, monthly bus pass sales are down.
“Also, we have been deliberate in making sure that transit is affordable for low-income Edmontonians, so discounted fares are also causing some of the deficit numbers that we have seen,” he said.
About $8.5 million is projected to be missing from city coffers by year end too, due to lower than expected ATCO franchise fees.
However, Cartmell said that is actually partially a good thing as ATCO becomes more efficient and lowers its operating costs.
“Franchise fees are proportional and they’re tied to operating costs,” he said.
“So if operating costs go down, franchise fees go down. Importantly, people’s bills go down.”
City council will start discussing the next two years’ budgets and how they’ll need to be amended in November.
–With files from Mason DePatie, Global News