$10M surplus for 2023 to boost reserves: Preliminary Year-End Financial Results released

Increased ridership leading to higher Transit revenues and lower than anticipated spending for snow clearing have, in part, contributed to a nearly $10 million 2023 civic operating budget surplus.

“I am pleased to report the City’s Civic Operating Preliminary 2023 Year-End Financial Results indicate a $9.9 million (1.68%) surplus,” says Clae Hack, Chief Financial Officer. “The City’s stabilization reserves, designed to deal with unforeseen circumstances such as higher than normal amounts of snow and fuel volatility, have been significantly relied upon in recent years because of the financial impacts from the pandemic. This surplus is recommended to replenish these reserves, so the City is well-prepared to respond to future financial challenges in a sustainable and proactive manner.”

The City of Saskatoon will present the Preliminary 2023 Year-End Financial Results and forecast for the year ending December 31, 2023, to the Standing Policy Committee on Finance on March 6, 2024.

It is important to recall that the 2023 Budget included an ambitious target of $5.7 million in savings in addition to structural budget and other post-pandemic revenue challenges.

“Administration took these targeted savings measures and budget challenges seriously in 2023. We adopted strict discretionary spending and hiring restrictions early in 2023 and continued it for the year. This resulted in approximately $5.5 million in savings,” says Hack.

In addition to the Administration’s savings efforts, favourable external factors experienced in 2023 contributed to the surplus of $9.9 million in 2023 which included:

• Fewer, smaller scale snow events in 2023 compared with typical years resulted in a $5.7 million surplus in the City’s snow and ice management program;
• A higher than anticipated interest rate environment resulted in $1.2 million in additional investment income;
• Temporary closure of Harry Bailey Aquatic Centre for renovations contributed to an overall surplus for Leisure Centres of $1.0 million; and 
• Notably, Saskatoon’s population grew by 14,000 in 2023; this helped contribute to significant increases in Transit and Access Transit revenues which, in turn, supported a quicker return to pre-pandemic ridership with $3.5 million in higher than budgeted revenues.

“While the Preliminary 2023 Financial results are certainly welcome based on the need to replenish the City’s stabilization reserves, it is important to note that this surplus has minimal impact on the 2024 Budget recently approved by City Council. We cannot budget for a future with no snow events, nor can we continue to budget for the $10 million in pandemic relief funding that was fully used in 2023. These items, along with unprecedented inflationary pressures and their impact on City services levels were the focus of extensive budget discussions. These realities have not changed because of this surplus,” adds Hack.

The City Administration recommends using the surplus of $9.9 million, as follows:

• The $5.7 million surplus related to Snow and Ice Operations be added into the Snow and Ice Management Contingency Reserve. This will bring the reserve to a balance of approximately $6.2 million to provide funding in future years for higher-than-normal snowfall; and
• The remaining $4.2 million civic surplus be allocated to the Fiscal Stabilization Reserve, bringing the balance to approximately $5.8 million which will then be available to offset future operating budget deficits or challenges.

“The recommendations presented in this report provide City Council and the public with assurance that the City’s stabilization reserve funds will be replenished and available for future unforeseen financial challenges,” Hack adds. “The City’s approach to stabilization reserves has been a key tool for the City to utilize in addressing unforeseen financial challenges, without impacting service levels. This approach is a proven Municipal Government Financial best practice.”

In addition to the City’s Property Tax Supported or Civic Operating Budget, the City Utilities, funded by Utility charges including Saskatoon Light & Power, Storm Water, Saskatoon Water/Wastewater and Waste Services also posted a surplus of $10.96 million (2.75%).This surplus was largely due to a longer and warmer than normal summer which resulted in higher electricity and water usage. Cost savings were realized as the City’s Utilities also put in place discretionary hiring and spending restrictions for the majority of 2023 in alignment with Civic operations.

For additional context, the Water/Wastewater Utilities experienced three deficits and three surpluses in the past six years (including 2023). The City’s operating budget, including Utilities, is always based on a variety of assumptions including weather fluctuations which impact the financial performance of the utilities significantly. Over the past six years (2018 – 2023), Saskatoon Water/Wastewater has realized an approximate 1.36% positive budget variance, and this has been used to help pay for infrastructure maintenance and required expansion which can help keep future rates lower and reduces the need to borrow money.

The recommendations for City Council on the allocation of the surplus funds in 2023 are subject to the confirmation of the City’s year-end financial status, conducted annually via the external accountant’s audit process. The City’s 2023 Annual Report will be released this summer.

Visit saskatoon.ca/budget.