Red Deer City Council gave first reading for a $10 million borrowing bylaw at its June 15 meeting to deal with COVID-19.
The borrowing bylaw provides for additional access to cash flow over and above the $30 million provided through the short term borrowing bylaw.
“Like many other communities across Canada, we are in a situation where cash flow is temporarily required because of the financial strain caused by the pandemic,” said Chief Financial Officer Dean Krejci.
“As a result of tax and utility payment deferrals, for example, and decreased revenues, additional funds are temporarily required to ensure we can continue to provide services to our citizens. Administration has implemented a rigorous monitoring plan throughout this process and estimates a shortfall in cash flow of $31 million by September.”
The largest funding sources for the city’s operating budget are property taxes, user fees and sales of goods and services. With many customers opting to defer utility and property tax payments, paired with reduced revenue from recreation fees, transit passes, parking fees and police-related revenues, there is a shortfall in cash flow to fund operations.
The funding to cover these shortfalls would come in the form of a short-term line of credit, and need to be paid back within three years. As the city will begin to recoup the deferred utility and property tax payments on June 17 and Sept. 30, respectively, it would be paid back before the deadline ensuring minimal interest would incur.
“We understand the city borrowing money under any circumstance, even on a temporary basis, can make the public feel anxious,” said Mayor Tara Veer.
“Our priorities are, and continue to be, the health and safety of our community and providing essential services to our citizens while being financially responsible. The city will also need to consider long term capital and operating sustainability and will be reviewing projects and services in the coming months.”
The city will continue to monitor the financial situation as there is still uncertainty of the full extent of the impacts caused by COVID-19.
The COVID-19 Operations borrowing bylaw will go back to council for second and third readings at their regular meeting on June 22. If approved, administration will take the necessary steps to secure the $10 million line of credit.
–Markus Winkler photo