Council using extra funds to cover shortfall

Hey there, time traveller!
This article was published 22/09/2023 (1133 days ago), so information in it may no longer be current.

Brandon City Council voted 8-3 in favour of using $966,145 in extra operating funds from the province to cover most of a projected budget shortfall and to put the rest in a new contingency reserve at its Monday meeting.

At the Sept. 7 council meeting, Coun. Glen Parker (Ward 9) delivered a report from the city’s audit and finance committee stating that a $1.46-million budget shortfall was being projected for the end of the current fiscal year.

The largest contributor to that shortfall is supplemental property tax revenues being approximately $463,000 fewer than expected, with other factors being lost revenue from the Sportsplex with the closure of the ice arena ($340,000), extra security for downtown Brandon ($94,000) and the Western Manitoba Regional Library’s annual operating grant ($39,000).

City departments have been asked to scour their individual budgets to find $500,000 in savings to make up for the rest of the shortfall, with a temporary hiring freeze put in place as well.

The city received $2.3 million in operating funds from the provincial government in February after it ended the freeze on municipal grants. The provincial funds can be used to cover the shortfall, but some councillors still had questions as to how the city developed such a shortfall.

Under Manitoba law, municipalities are not supposed to run deficits. If a municipality is in that situation, it must notify the Municipal Board and put a plan in place to recover the deficit.

“This isn’t the first time we’ve ever run a deficit in the city,” said Coun. Shawn Berry (Ward 7). “If we hadn’t have got this grant from the government, this $2.3 million, how would we have covered it off?”

Troy Tripp, an accounting manager for the city, said the shortfall in tax revenues was due to reduced construction activity this year. Those projections were only obtained a week before they were presented at the last council meeting.

He also noted that there have been increased financial pressures from maintenance costs on Brandon’s vehicle fleet and overtime costs. However, in the latter case, the costs have been offset to some degree by an increase in revenue from additional ambulance transfers both locally and long-distance carried out by Brandon Fire and Emergency Services.

While there has been lost revenue from the Sportsplex closure, Tripp said there have also been minimal savings on contracts and salaries as well.

He said city administration has been keeping an eye on the Sportsplex situation for a while. At first, the closure was expected to be temporary and the financial impact was projected to be minimal. As the year has gone on, it became clear it was going to be a longer-term issue.

“In previous years, we would look at what we could do within our own budget,” Tripp said.

“There’s options when you’re earlier on in the year with labour force and how you deploy that. If you have projects going on, you can prioritize them and push them on to later years … if we did not have this additional funding set aside from the province, we would have to continue to scour through the budgets, what’s left of it from today to Dec. 31.”

Mayor Jeff Fawcett said the city tends to encounter some financial unknowns every year, whether it’s unexpected overtime costs for the Brandon Police Service or million-dollar sanitation budget shortfalls.

A rainy-day fund can be made to cover some of those potential shortcomings, but Fawcett noted they can’t be too big due to constraints.

“I hate to say this, but this is not a ridiculous number to be out at,” Fawcett said. “It’s not great, we don’t love it. But historically, we have been able to tighten it up without additional funding. The reason is, we’ve never had that additional funding. The funding that we were given by the province only offset the lack of an increase over the last eight years. It wasn’t new money, it was money finally given to us.”

City manager Ron Bowles said Brandon often sees a high projected deficit at the beginning of a year that trends down over time, including last year. This year, he said Tripp came to him in August to let him know that the deficit would not be resolved by the end of the year.

The choice before council, he said, was to either use the extra provincial funds or to leave them alone, or face “fairly deep cuts” to services.

After hearing from Tripp and Bowles, Berry said several months ago he’d brought up the subject of the $2.3 million from the province. He said he feared that if it wasn’t put into reserves, it would be used for something else after years of depleting reserves at budget time because of a lack of transfer payments.

“This money should have been put into reserves four months ago,” Berry said.

“We should have been dealing with the deficit at that time because we knew there were some deficits coming. We’ve dealt with it before, we can deal with it again. We don’t start the year with a deficit, Ron. We start the year at a zero balance. We accumulate deficits throughout the year. We get into a danger zone, we need to start dealing with it right away.”

On the hiring freeze, Berry said council had heard throughout the spring and summer the city can’t get things done because there’s not enough labour. He said he didn’t understand how a freeze helps solve the problem.

Parker made the case that 60 per cent of the extra provincial funds will still end up going in reserves. He said predictions regarding supplemental tax revenues have worked out quite a few times, it just didn’t this year.

“We’re fortunate at this particular time that we don’t have to saddle our taxpayers … with an additional $966,000 when we have the money available to cover it off,” Parker said.

Noting that Brandon has 27 reserves projected to be in deficit positions in the next decade, Coun. Bruce Luebke (Ward 6) said he could not support a motion to create a new reserve for the remaining balance of the provincial funds.

Ultimately, Luebke, Berry and Coun. Tyson Tame (Ward 10) were the only councillors to vote in favour of an amended motion that would not have transferred the remaining balance into a reserve after covering the shortfall.

They were also the only three councillors to vote against the original motion, which transferred remaining funds into a reserve.

» cslark@brandonsun.com

» X: @ColinSlark