‘Uncertainty’ the operative word as city unveils budget outlook in age of COVID-19
Reduced police and fire staffing, library closures, and cuts to street maintenance are few of the possible “service adjustments” on the table as Vancouver tries to limit property tax increases while coping with financial pressures from the COVID-19 pandemic.
None of this is a sure thing, as the five-year budget outlook on July 8’s council agenda makes clear: The words “uncertain” or “uncertainty” appear 11 times in the 17-page document. “Unpredictable” makes a couple of appearances, too.
The report underscores the challenges of trying to plan ahead in the age of COVID-19, which the city’s director of city-wide financial planning and analysis calls “an environment of continued uncertainty.”
City staff will present the budget outlook to council Wednesday
to provide early direction on city priorities and tax increase targets set by council for next year’s budget, before they hammer out the details toward the end of the year and decide where to cut or increase spending or revenues.
The outlook is a regular part of the budgeting process, but this year is, of course, far from regular.
“There are many aspects of the city that we know will be different in 2021,” the report says.
“Residents and businesses are faced with significant economic and social impacts. Critical social issues have seen an increased focus in this time, including an increased global focus on racism, and continuing local focus on the opioid crisis and homelessness. At the same time, the current crisis has also highlighted the importance of continued progress on climate change.”
While most people may agree those issues seem important, taking action on them costs money.
And many current councillors — most notably those representing the Non-Partisan Association — have made it clear that they want to limit property taxes, which account for more than half of the city’s revenues.
That’s where staff will have to do some hard work and council must make some hard choices.
Staff continue to search for cost savings. The budget outlook also notes: “While this uncertainty makes it challenging to anticipate what 2021 and beyond will look like, there are some changes that we have seen already that have the potential to significantly change the way organizations operate. We have seen a shift to working from home that will influence the future of workspace, and an accelerated transition to online service delivery as examples.”
In April, a month after the new coronavirus had effectively shut down much of Vancouver (and the world), city staff outlined for council the pandemic’s potential impact on the operating budget.
Depending on how long it would take before physical distancing restrictions were lifted and city revenues could recover to pre-COVID-19 levels, the staff estimated a “potential unmitigated gap for the city” of $61 million to $189 million.
By the end of April, the city had closed facilities, issued temporary layoff notices to more than 1,800 unionized employees, and reduced wages for non-union staff including politicians. Hundreds of job vacancies still have not been filled.
In May, staff presented council with an update based on a “midrange scenario” — with a phased restart of city operations starting in September and city revenues returning to normal levels by January 2021 — forecasting a $136-million revenue shortfall.
This week’s update improves the financial forecast by $12.3 million over the May estimate, largely because of increased parking revenues due to “ramping up of enforcement.” And while some other city revenues have begun to recover, it’s unclear when they’ll return to pre-pandemic levels.
To cover costs associated with previous council directions — such as infrastructure renewal and hiring for the Vancouver
Police Department and Vancouver Fire and Rescue Services — staff estimate they would need a property tax increase of seven per cent for next year.
But a majority of council, citing complaints from the public about the 2020 budget’s seven per cent property tax increase, directed staff earlier this year to provide options to limit next year’s tax increase to no more than five per cent.
To reduce the potential property tax increase from seven to five per cent for 2021, costs need to be reduced by about $17 million, staff estimate. Based on the proportion of tax-funded expenses in each department, staff supply an “illustrative scenario” showing:
A $6-million reduction for police, the single largest expenditure area in the city’s operating budget, including delaying hiring of 20 officers and 10 professional staff, and holding 55 vacancies
$3 million in cuts for fire and rescue services, including delaying hiring of 25 fire suppression staff, two fire prevention staff, and an assistant chief and lieutenant.
A $1.5-million cut for parks staff, including holding vacancies for about 18 front-line positions
$1.4-million reduction for engineering, which would impact street cleaning and maintenance
$1 million in cuts for libraries, forcing closure of “two small library branches”
$3 million in delayed spending on various other areas, including renewal of city assets, and reducing corporate support staff
Those possible cuts are provided as examples, and now begins the work of making tough choices. Council will provide further direction to staff on their priorities, and staff will seek the public’s input on their priorities between now and the presentation of the proposed 2021 budget to council in December.
Of course, a lot can change between now and then. The future, as this week’s budget outlook notes, remains quite uncertain.