City's Options Limited
The City of Regina has few options to respond to changes in funding levels.
There are limited revenue options at the municipal level, namely property taxes, user fees and grants from other levels of government. A 1% increase in the mill rate is equivalent to about $2 million in additional revenue.
Out of every tax dollar that residents pay, approximately 8 cents goes to the municipal government and 92 cents goes to the federal and provincial government.
#1 - Reduce Expenses
- Changing a service to make it cheaper - improving efficiency which can result in employee attrition or changing processes that reduces costs
- Stop doing something that the City does today
- Reducing the quality or quantity of a service that the City currently provides, like reducing hours of operation or doing maintenance tasks less frequently
#2 - Increase Income
- Increase user fees for services, like issuing building permits
- Increase user fees for programs, like swimming lessons
- Increase property taxes on homes and businesses
- Find new ways to raise revenue, like adding surcharges
#3 - Increase Borrowing to Fund Capital Projects
Right now, the City sets aside money in reserves in part to fund new or large capital projects. The City also borrows funds for major projects which it pays back over time much like a home mortgage. The City is careful to balance borrowing with the use of reserve funds to finance major projects, like the new Mosaic Stadium. A significant portion of the City’s capital funding also comes from the annual operating budget. In 2017, current year contributions amount to almost $43 million for a total investment in capital of more than $120 million. Rebalancing this ratio to borrow more for capital projects can become a tax on the future.
The City’s current credit rating is AA+. The City’s current approved debt limit is $450 million. The opening balance on the City’s debt in 2017, not including Utility capital, was $258.4 million.
Careful borrowing and taking on some portion of debt is the preferred option to finance new capital or large projects, but not to finance daily operating costs. It would be like borrowing to pay your weekly grocery bill, which would soon become unsustainable.
Option #4 - Use Reserves to Fund Operating Expenses
The City has dedicated reserves, much like savings accounts, which are designed to pay for emergencies and fund major capital projects. They are a critical part of long-range financial planning. Reserves meet one-time needs, rather than on-going, day-to-day operating costs. At year-end 2017, the City projects reserves to be $159 million. This is money set aside for specific purposes, like building the new wastewater treatment facility. By saving for large capital projects, the City is able to plan for regular, reasonable property tax increases.