City projects $785K year-end deficit

As of June 30, the City of North Bay is projecting a year-end deficit of $784,887 and its financial department is recommending any shortfalls come December 31 be covered by its tax stabilization reserve.

City departments are required to monitor their expenditures and revenues on an ongoing basis and provide projections looking ahead to the end of the year. Those year-end projections are reported to North Bay City Council on a semi-annual basis — with forecasts for the rest of the year as of June 30 and as of September 30 each year — with the final results prepared the last of the year. City staff will present and file the first of those semi-annual reports during Tuesday's regular meeting.

The City is forecasting a reduction in expected year-end revenues — including COVID-19 related facility closures and other pandemic restrictions — of approximately $2.3 million but notes 2021 municipal funding and Transit Safe Restart funding has been applied against gross COVID-19 revenue losses and increased costs. 

"It is anticipated that cost savings experienced as a result of the City’s mitigation efforts will continue to assist in reducing the projected year-end deficit; however, it is recommended any realized shortfalls at year-end will be transferred from the tax stabilization reserve," according to the associated staff report.

"The mitigating actions established under the direction of the CAO contributed to the year-end projected position including estimated corporate-wide net expense savings of approximately $1.4 million."

The City's policy states reserves are "intended to be used to offset one-time expenses and reduce the risk to the taxpayers of significant budget impacts arising from uncontrollable events and activities." 

The Tax Rate Stabilization Reserve contains $1,855,398 and the Operating Budget Contingency Reserve, $1,106,474, per the staff report.

"The Tax Rate Stabilization Reserve balance is currently well below the City’s targeted level of 5% to 10% of the total municipal tax levy being $4.9 million to $9.7 million for 2021. In addition, the Operating Budget Contingency Reserve is slightly below the City’s targeted level of 1% of the gross operating budget, being approximately $1.43 million."

The use of reserves was approved in the 2021 budget process with the understanding it would be necessary again for the 2022 budget to fund "temporary shortfalls in user fee revenues while services gradually return to pre-pandemic levels."

The report advises services were expected to be gradually phased back in during the first half of the year but this did not occur. "Managing the 2021 budget variances requires an ongoing strategic approach and review of services to mitigate the City's losses. Actions such as monitoring discretionary spending and hiring, deferring training and other initiatives, and strategic scheduling of staff will continue." 

Grant funding, such as the COVID-19 Recovery Funding for Municipalities, Municipal Safe Restart, and Phase 3 Transit Safe Restart, is "enabling the City to continue to provide services at reduced levels to ensure the safety of citizens and staff and is assisting to stabilize future budget increases."

Find below notable 2021 year-end financial projections for the City's business units, compiled as of June 30 and focusing on major variances between the budget passed for 2021 and the year-end projections from those departments. The report notes the City performed a general review, including a review of wages and benefits, fuel, fleet, utilities, insurance costs, and major revenue generators. For the full summary, click here.

Community Services is projecting a year-end deficit of $510,591. Factors contributing to the projected deficit include lower revenues from arenas and parks. This shortfall is partially offset by personnel gapping, scheduling, and vacancies; lower utilities, training, conference, and advertising costs; as well as reduced community programming.

Corporate Services is projecting a surplus of $423,090. Factors contributing to the projected surplus include gapping and vacancies and lower supplies, training, conference, and contract costs; partially offset with higher insurance costs and lower revenues (licenses and fines).

General Government Activities is currently anticipating a year-end deficit of $567,574. Factors contributing to the projected deficit include lower revenues (dividends, methane sales, MAT, and education taxes retained), and higher tax adjustments; partially offset with lower contract costs and debenture interest, along with higher investment and bank interest revenues.

Infrastructure and Operations is currently projecting a year-end deficit of $174,289. Factors contributing to the projected deficit include lower revenues (Transit, Parking and Facilities) and higher contract costs; partially offset with personnel gapping and scheduling, lower fuel, utilities, and Transit Para Bus contract costs.

The City is projecting winter maintenance to be on budget by year's end with the possibility of a small transfer to the reserve fund. This assumes that the late fall/early winter of 2021 will be similar to 2020. The winter maintenance reserve sits at zero.

Transit revenues have been significantly impacted by COVID-19 and Transit Safe Restart grant funding in the amount of $393,412 was carried forward from 2020. In addition, Transit has received funding through the Phase 3 Transit Safe Restart Agreement of $1,162,221. 

"Transit Safe Restart funding expected to be allocated to the 2021 fiscal year is approximately $1,099,125 as defined by the eligible costs/revenue losses within the Transit funding stream guidelines. It is anticipated that approximately $456,508 of Transit Safe Restart will be carried forward to 2022," reads the report.

The City notes the financial projections often line up with the final figures before the end of the year as departments find savings and efficiencies. COVID-19 closures and lost revenues from ice surfaces and sports fields due to pandemic restrictions factor heavily into the projections, as do the lower transit numbers and decreased parking revenues.

In 2020, a projected deficit last summer was avoided as the City received $2,978,900 in Municipal Phase 1 Safe Restart Agreement funding and $1,201,515 in Transit Phase 1 Safe Restart funding. 

In May, the City of North Bay reported a 2020 year-end surplus of $1,348,629 and Council authorized the Chief Financial Officer to transfer that year-end surplus to the Tax Stabilization Reserve Fund.

"Mid-last year we kind of thought 2021 would start and we would be back to normal and here we are in May and things are not back to normal," said Deputy Mayor Tanya Vrebosch in May. 

The budget chief added, "We are cognizant this will be another challenging year for us and staff are doing an excellent job making sure we come out of this in a positive way at the end of the year."