The financial pressures at city hall are continuing to mount, according to a new report from city administration outlining the current and future fiscal situation.
It says a number of factors causing a budget crunch will be "coming to a head" during the 2024-25 budget deliberations. It cites a number of factors the city is facing including "base budget issues", funding plans for future spending, higher than normal inflation, and impacts of the pandemic.
The report, titled 2023 – 2025 Budgetary Pressures and Trends, outlines a number of areas where the city will have to find a way to cover and reduce costs as well as the likelihood of another deficit.
It says the 2023 budget asks administration to find a way to reduce $5.5 million in costs through efficiencies. However, the report says achieving that goal may not be easy.
"While the Administration has evidenced savings results in the past, the savings target combined with the other pressures has placed additional pressure on the budget to achieve expected results”.
As for operating revenues, the report says the city will need to see a $10 million increase in operating revenues from 2023 to 2024 to offset the loss of one-time funding sources, which were used to cover shortfalls dating back to 2021.
“Although the City continues to see a positive trend in revenues returning, based on a preliminary review, a full return to pre-pandemic revenues in 2024 is unlikely.”
It adds that when the pandemic began, there was a significant impact on fee or charged-based operating revenues such as Transit, leisure centres, parking and fines.
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An ongoing structural budget shortfall of $2.6 million related to Microsoft software licenses, cyber security and project management was also detailed in the report and outlined during 2023 budget talks. It says this financial issue will have to be addressed in future budgets.
City administration says an initiative to streamline internal systems will eventually need more money. The report says implementation of the Fusion program is currently being funded through a capital project, however, the source of money will be depleted by the end of this year. It says money will be needed in 2024 for continued implementation and stabilization.
“While the implementation of Fusion came with the goal of achieving significant savings, efficiencies, and improvements in controls, there is still much work to be done to fully realize these improvements. Continuing to support the Fusion work is critical to the ongoing improvements of the system and City processes overall”
Recovery Park also needs a funding plan or phase-in money to cover operations starting in 2024. And a future budget will need to start putting money aside for two new fire halls, which the report says are needed to maintain existing service levels.
“While the capital funding has not yet been finalized, the projects are being included in the 2024-2035 Major Capital Prioritization Process and likely to receive some level of funding over the next five years.”
The report says higher-than-normal inflationary adjustments could also be needed in the future as well.
“In addition to the base issues identified as we head into 2024, the City will be faced with higher inflationary pressures than in past budgets. While significant strides were made as part of the 2023 budget to address fuel and energy cost increases the inflationary impact to other contracted services were not adjusted”
The good news, according to the city, is that Municipal Revenue Sharing from the provincial government is expected to substantially increase in 2024 and 2025.
“Based on existing forecasts of provincial sales tax revenues, we estimate annual increases to the MRS of $5.1 million in 2024 and $4.0 million in 2025, which will help to offset some of these financial pressures”
The report from Administration says the financial impacts from various factors are becoming evident.
“The Administration’s current plan is to go through the refinement of the budget and push the boundaries on resource requests to deliver services in 2024/2025 keeping in mind the current financial realities and the need to ensure the budget is sustainable and achievable” the report reads.
This week, the city councillors on the finance committee passed a series of motions to draw over $9 million from reserves to cover a budget shortfall of nearly $11 million in its 2022 budget, which drained multiple reserves, including a reserve for fuel and fiscal stabilization.
Clae Hack, the Chief Financial Officer for the City of Saskatoon, warned councillors in 2022 that the city was running out of options to cover budget shortfalls.
This latest report is included in the agenda for next weeks Governance and Priorities meeting on Wednesday.
