While the City of Airdrie’s financial situation is not as dire as it seemed a few months ago, the municipality is still facing a projected shortfall of roughly $2.5 million.
In an Aug. 17 presentation to the Council Budget Committee (CBC), Chief Administrative Officer (CAO) Paul Schulz and Budget and Financial Planning Team Lead Palki Biswas gave a second-quarter fiscal update, highlighting the impact the COVID-19 pandemic has had on the City’s coffers in 2020.
According to Schulz, the projected deficit for the year has decreased to $2.5 million from $3.5 million – as projected in the first quarter – with revenue decreases of $8.9 million and savings of $6.4 million.
“If I can say anything about this year, it’s been marked by ongoing and changing circumstances, and that’s been the case since the onset of COVID-19,” he told the committee.
“This extraordinary time really makes for difficult decision making, as council is very aware.”
The City’s approved 2020 budget amounted to just under $159 million, including a $109 million capital fund. The $2.5 million deficit accounts for roughly 1.55 per cent of the total budget.
According to Biswas, revenue losses were largely due to the closure of the City’s community facilities in March. While many facilities have reopened in recent months, she said the closures resulted in a drop of more than $4 million in income.
Meanwhile, the reduction in Airdrie Transit services and removal of customer fares for nearly three months resulted in further losses of $1 million.
“We still continue to see pressures on City revenue, which are quite significant,” she said.
The City’s income from its tax base has lessened by $300,000 compared to the first quarter, Biswas said, while the municipality’s utility fund is projecting a $1.6 million loss from operations.
Reduced cash flow projections in light of the municipality’s COVID-19 relief measures, she added, means the City will earn approximately $586,000 less in revenue. The City’s relief measures included waiving late penalty fees for unpaid taxes, utility deferrals and relaxing sign placement fees for businesses.
“We’re also seeing reduced census contract revenues of $514,000 due to the changes implemented by the Alberta government,” she said.
While the municipality has lost significant income due to the pandemic, the City has also seen cost savings of $6.4 million, Biswas said, including nearly $2 million from reduced staffing levels. She said the savings largely stem from employing a smaller park maintenance team, closed community facilities, a hiring freeze that will last through 2020 and the cancellation of staff travel and associated training for the year.
“Other large savings are seen in contracted services and goods, primarily for transit, community facilities and parks,” she said. “[This] will see a combined savings of $2.3 million.”
The City’s other savings came from reduced electricity and natural gas costs due to the closure of its indoor facilities, she added.
In order to manage the deficit, Biswas said staff’s recommendation was to draw from the City’s general operating and utility reserves and to reduce City services, as well as transfers to the operating and capital reserves.
According to Biswas, the balance in the City’s reserves was $116.2 million as of June 30, with a forecasted year-end balance of $96.5 million. However, she cautioned that $37.2 million of that was “restricted in nature,” leaving $59.3 million in available funds.
“We need to keep in mind the overall equity of the City of Airdrie [is] approximately $850 million,” she said, adding the municipality also has $57.1 million in outstanding debt.
Biswas also recommended CBC endorse the cancellation of eight capital projects, resulting in further savings of $635,000. The projects include installing new signage for the exterior of Bert Church LIVE Theatre, installing new playground and fitness equipment and replacing the Parks department’s three-ton dump truck, among other things.
CBC endorsed the capital budget amendment unanimously. City council later approved it at a meeting the same day.