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COVID-19 financial impacts deep: City has balanced, sustainable recovery plan

For immediate release: April 24, 2020 - 3:35pm
FI20-1208

The COVID-19 pandemic has had wide and deep effects on City work and finances; as a result, the Administration has developed a comprehensive strategy to mitigate the impacts.

“The pandemic has been like nothing most of us have ever experienced in our lifetimes,” says City Manager, Jeff Jorgenson.

“The impacts of the pandemic have had a profound impact on the City’s finances. While sobering, we feel the situation is manageable, thanks to the prudent financial management practices in place. The proposed strategy the Administration is presenting to City Council on Monday includes a balance of:

  • maintaining civic services;
  • reducing expenditures;
  • utilizing fiscal stabilization reserves; and
  • continuing to work with other orders of government on solutions.

“The strategy we are recommending will need to be gradual and will take time. If the financial response is too severe, our diverse economy and citizens will be negatively affected. By maintaining services as much as possible, we can continue providing citizens with the quality of life they deserve and expect.”

Jorgenson says the City plays an important role in our local economy with our capital programs, which are essential to maintenance of the City’s assets like streets, roads, and underground utilities. 

“Deferral of these important capital works would only result in the City falling behind in infrastructure renewal. Through proposed continuation of our capital programs, the City will continue to serve an important role in keeping our community working and continue the important investments in our infrastructure.”

The financial details are outlined in a report set for discussion at the meeting of City Council Monday, April 27.

In the wake of the provincial government’s plan to re-open the Saskatchewan economy, the report looks at three financial impact scenarios of when physical distancing restrictions could be lifted and services reopen.

The total estimated negative impacts of COVID-19 on the City of Saskatoon for the three scenarios are:

  • Restrictions End June 30 – approximately $32.2 million
  • Restrictions End September 30 – approximately $52.7 million
  • Restrictions End December 31 – approximately $68.6 million

However, there are offsetting savings attributable to item such as fuel cost reduction, reduced workforce, reduced bulk power charges, and utility stabilization reserves. With these savings included, the preliminary projected preliminary deficits would be:

  • Restrictions End June 30 – Deficit of approximately $20.2 million
  • Restrictions End September 30 – Deficit of approximately $32.0 million
  • Restrictions End December 31 – Deficit of approximately $43.0 million

Through the Federation of Canadian Municipalities, the federal government is being asked to consider a relief program for the municipal sector, but the outcome of the request is uncertain.

However, the Administration has proposed several options to manage the remaining COVID-19 shortfall, including:

  • Hiring freeze;
  • Non-essential spending freeze;
  • Travel and training reductions;
  • Cost reductions for park maintenance due to reduced staffing levels; and
  • Use $2.8M of fiscal stabilization reserve in 2020; hold remaining $2M for 2021.

Factoring in these savings totalling $9.5 million for 2020, the remaining projected deficit would be reduced to:

  • Restrictions End June 30 – approximately $10.1 million
  • Restrictions End September 30 – approximately $22.0 million
  • Restrictions End December 31 – approximately $32.9 million

If the Administration’s recommended strategy is approved, the City will have offset the majority of the negative impacts of COVID-19.  For example, for the September 30 Scenario, savings of $32.7 in total will offset the $52.7 million of negative COVID-19 impacts, resulting in a net projected deficit of $22.0 million.

As the situation continues to evolve, the Administration will be able to update financial projections. Additionally, ongoing discussions with other orders of government on possible assistance are occurring.  Considering this, the Administration is not recommending substantive changes to infrastructure renewal or service delivery strategies other than those outlined in this report.

If there is a remaining deficit that is not covered by relief packages, the Administration recommends City Council consider making adjustments to the 2021 operating and capital budgets.

“Taking this approach will allow the City to adapt to the ever-changing landscape in front of us, and will allow us to provide an economic stimulus role – this year – in 2020 – with construction and other capital projects already in the budget,” Jorgenson points out. “We’ll then be able to continue working with the other orders of government on relief solutions.”

Read the full report here