City of Ottawa saddled with $41M deficit for 2015
A cold, snowy winter, costly wage settlements and plunging utilities revenues have combined to saddle the City of Ottawa with a whopping $41-million deficit for 2015.
The bleak economic outlook is contained in an operating and capital budget update to the city's finance and economic development committee, which meets next Tuesday.
According to the report, the city's public works department is facing a $17.7-million shortfall, blamed largely on the high cost of cleaning up after a series of late winter storms.
At the same time, arbitrated awards to municipal employees belonging to two unions — CUPE 503 and the Civic Institute of Professional Personnel, or CIPP — resulted in an added budget pressure of nearly $10 million.
The province's decision to include some forms of cancer suffered by firefighters as work-related under the Workplace Safety and Insurance Act is expected to cost the city $4 million.
¾ of overtime budget spent in 6 months
Paramedics blame their projected $4.9-million deficit on high call volumes; the city's parks department is facing a $2-million hole due to declining facility rentals and dropping sponsorship revenue; and the city's bylaw department says dropping revenue from parking fines resulted in a $1.4-million gap.
Meanwhile the city spent three quarters of its overtime budget in the first six months of 2015, due in large part to winter maintenance and dealing with an epidemic of frozen pipes.
It all adds up to a $34.5-million deficit on the tax-supported side of the budget. At the same time, lower-than-expected sewer and water revenue means a $6.8-million shortfall on the rate-supported side.
A freeze on hiring and discretionary spending announced by city manager Kent Kirkpatrick in July will result in some savings.
City could dip into reserve funds
As well, the city could dip into reserve funds to help balance the books, including up to $20-million from a rate-supported capital reserve to cover the water and sewer deficit.
But it's unlikely to be enough to cover the combined $41-million deficit.
"While these measures will generate savings, they will not offset the full impact of the projected deficit from the winter maintenance costs, the arbitrated contract awards or the projected increased WSIB costs," according to the report.
"We'll continue to work towards identifying other sources of funding for council to use to cover the deficit by the end of the year," says Marian Similuk, the city's treasurer. "Our intention now is to deal with it in 2015, as opposed to making it something that has to be dealt with in 2016."
Veteran city Coun. Rick Chiarelli says he accepts that some of the causes of this year's deficit were unforeseeable, but that bringing in consecutive annual tax rates below promised targets has also contributed to the current cash crunch.
"By bringing in successive budgets that were below the tax target, we've gotten in a bit of a problem right now. And some of it just isn't defensible," Chiarelli says. "So we really have to resist the temptation to look good one day of the year, on budget day."
Mayor Jim Watson promised to cap the property tax rate at 2.5 per cent in his first term, and at two per cent when he was re-elected last year.
Council approved a combined property tax rate this year of 1.75 per cent.
In an e-mailed statement, the mayor's office says the mayor "is fully engaged on this issue and staff have kept him informed as these budget developments have unfolded," and that Watson is "working with senior management on both short-term solutions to balance the books and longer-term solutions as part of the 2016 budget development effort."