COVID-19 didn’t stop city hall from racking up a huge surplus in 2021, but council will need to authorize an $8-million backstop for the Ottawa Police Service, which ended the year in the red.
The city released the financial results as it closes the books on the second year of the pandemic.
Discretionary spending freezes and other cost reductions helped lead to $52.2 million of budgeted money left unspent at the end of 2021.
That’s even after all of the city’s costs related to COVID-19 were tallied and paid using pandemic-specific grants from upper governments.
The Ottawa Police Service was one of the few areas that ended with a deficit. The main reason was an unplanned salary bump for some police employees.
A job evaluation settlement with civilian workers ended with 180 police staff receiving pay adjustments totalling $5.2 million. The police force and the Ottawa Police Association have an agreement to review jobs to make sure they’re in proper classifications and pay grades.
To cover the $5.2 million, the city proposes to allow the police force to borrow $9 million for a new south-end police station instead of using money in the police reserves. With the freed-up cash, the police force can cover the extra salary payments for the year.
The other $2.8 million in the police deficit is largely a bookkeeping matter beyond the control of the police force and police services board. It’s the amount assigned to the police force for tax rebates and remissions after property assessment appeals. The city will use money from the tax stabilization reserve to cover that portion of the police deficit.
With such a large surplus in the overall city budget, council will have to sign off on the distributions to various reserves after deficits in departmental budgets are wiped out.
Two reserve accounts are poised to receive major contributions from the 2021 surplus. The tax stabilization reserve, which is the main general operating reserve, will get $20 million in surplus funds, while the transit operating reserve will get $15 million.
The $15-million surplus in transit services is from savings in salaries and LRT maintenance. The city holds back maintenance payments from Rideau Transit Group when the Confederation Line isn’t working properly, and the city shut down the entire LRT system for 54 days last fall after the second derailment in as many months.
The citywide surplus isn’t related to the upper-government payments to cover budget holes associated with COVID-19, according to the finance report.
The city added up $353.8 million in costs attributed to COVID-19 across the corporation in 2021, with the upper levels of government contributing funds to offset the budget deficit specific to the pandemic. The total cost included financial impacts to OC Transpo, which alone took a $133.5-million budget hit last year, mostly because of decreased fare revenue.
All other surpluses for 2021 were from “cost savings initiatives, expenditure reductions and increased revenues,” the finance report says.
Some of the departmental surpluses included:
- $14.9 million in community and social services, thanks to upper-government funding that helped reduce the reliance on municipal funds;
- $17.8 million in public works and environmental services, partially attributed to a $2.9 million in savings from winter maintenance because of below-average snowfall and freezing events, reducing snow removal and salt costs; and
- $8.7 million in planning, real estate and economic development from collecting more building fee revenue and leaving staff positions vacant.
The rate budget, which funds water, sewer and stormwater projects with water bill revenue, also had a $4.6-million surplus. The money will flow into the reserves earmarked for those rate-funded areas.
Areas that ended 2021 with deficits included emergency and protective services — the city expects upper governments to cover paramedic service shortfalls with COVID-19 funds — and payments in lieu of property taxes (PILT). The city had anticipated a lower PILT from the airport because of decreased passenger counts. The city was also in a PILT dispute with the federal government about how the grants are calculated.
The year-end surplus was much bigger than the estimate provided to council last fall for the tax-supported and rate-supported budgets, which were on track to be in the black by $6.1 million and $2.1 million, respectively.
The finance and economic development committee will be asked to approve the financial report during a meeting on April 5.