Inflation to heavily impact Strathcona County's Budget 2024

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While the county is remaining mum on this year’s proposed tax increase, council is already being braced for another hard budget season.

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During the Tuesday, Oct. 3 regular council meeting, the county’s Chief Financial Officer and Corporate Services Associate Commissioner Jennifer Cannon advised elected officials that they’re on the cusp of another hard budget season.

As part of the the 2023 Budget approval, it was forecasted that the tax rate for 2024 would be 3.84 per cent. But inflation might have other plans.

“Other than The Pointe debentures and operations coming in 2025, these things are out of our control. It’s the carbon tax, inflation, and a reduction in grants. All of those things are continuing to impact us,” Cannon told council.

The CFO detailed that capital inflation is significantly outpacing operating Consumer Price Index (CPI) and that construction prices continue to be volatile as supply chains are challenged. Other budgetary pressures include annual programs nearly doubling in the past three years, and of course, significant growth projects such as Cambrian and Bremner have been approved.

“We will focus on minimizing the tax rate, as we always do as much as possible, while maintain service delivery levels and fostering financial sustainability,” the CFO promised.

Some pinch spots due to inflation, climate change, and council approving more projects include vendors downing costs to the county to the tune of $2.2M in operational services and $1.4 million for professional and consulting services, added pressures in utilities and insurance rates, and timing of The Pointe having an impact on Budget 2025.

A few bright spots for Budget 2024 includes a half million dollars in net revenues for Recreation, Parks and Culture, which is experiencing higher than anticipated usage, Enforcement Services collecting $1.2 million in revenue due to poor driver behaviour, and favourable interest rates for investments and debt, with another $1 million and $1.2 million respectively coming in.

“It’s a different era. This inflation is something that we haven’t experienced in 50 years. Interest rates are going up, grants are going down, utility costs are going up, and you put all of that together and here we are,” forecasted Mayor Rod Frank.

Revitalizing reserves highlighted

Between eroding grant funding, minimized surpluses, the county will also have to address its reserves, in order to keep pace with inflation and growth pressures. It was depleted during COVID in order to keep taxes low and it was also hit by unforeseen circumstances such as the parkade explosions.

The presentation warned council that action is required now in this area, otherwise, the county will face “negative outcomes”.

“If we don’t, it will impact future service levels,” Cannon said. “We’re looking to act now and adapt now. We’re in a good position where we have a couple of years to come up with good strategies. I really do feel for municipalities who weren’t in the position we were in prior to COVID… We do have the means to get through, but we will have to have discussions about it.”

The federal Carbon Tax is also hitting the county’s purse. With an annual increase of $15 per tonne, it’s projected that the county will spend more than $6 million on the carbon tax for natural gas and electricity usage, and it will fork out more than $8 million on the carbon tax for gas and diesel. Unlike homeowners, municipalities do not receive a rebate from the feds in this area.

Budget 2024 Capital Plan insights

For the first time in the county’s history, this budget cycle will also ask council to approve a three-year Capital Plan. Switching from the one-year approach, administration advised that the change will save both time for county staff as well as dollars. In particular, it’s expected locking in with contractors will result in better rates, which CAO Darrell Reid said could save millions alone.

Three recently approved capital projects — The Pointe, the Bremner water supply, and the Centre in the Park — total $120.9M in the capital budget. Of that, it’s expected that the county will take on $77.9 million in new debt and dip into reserves for $38.5M. The Pointe is also projected to have a 0.86 per cent tax impact.

Notably, there are some big omissions from the budget. Those include any kind of council directed initiatives, asks included in the recently approved Strathcona County Emergency Services Master Plan (which includes requiring $3.8M to hire 24 firefighters and to invest $23.7M to build Fire Station #7), and the $65M indoor field-house (which comes with a 1.22 per cent tax impact). Looking at the new fire hall, in order to operate, it would require at least $2.5M in annual operational support for new firefighters, which was estimated to have a 0.97 per cent tax increase.

As of Dec. 31, 2022, the county’s debt totalled $133.1M, which is 29.5 per cent of its debt limit ratio by the province. Of that, $16.1 million was being provided to service the debt (about 4.1 per cent of the budget). Currently, with the new projects approved, the county’s debt has risen to $211M, which is 38.9 per cent of its debt limit ration ($21.5M is servicing the debt, which is 5.2 per cent of the budget). If council moves to approve the additional capital asks, the municipality’s debt would grow to $344M, hitting 59.3 per cent of its debt limit ratio, and it would require $30.5M to service the debt, accounting for 7.5 per cent of the budget.

Another chance to talk to council about Budget 2024

One non-statutory public hearing concerning the budget was hosted in September, but residents will get another chance to provide feedback during a second hearing scheduled for Nov. 22. To register to speak, email legislativeofficer@strathcona.ca or call 780-464-4014.

Budget documents are expected to be made to the public at 9 a.m on Nov. 15. County departments will deliver their budget asks on Nov. 15, Nov. 17 and Nov. 22. Presentations from community partners such as the Heartland Housing Foundation and the Strathcona County Library will take place on Nov 22.

Three days, Nov. 27 and 30 and Dec. 4 have been set aside for budget debate but council will decide how long that will last.

lmorey@postmedia.com

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