Ottawa implemented spending freeze as Mother Nature buries the operating budget

The city of Ottawa implemented a discretionary spending freeze and a hiring pause for "positions not impacting service delivery" in the first half of the year, as staff looked to help offset the million dollars in costs associated with heavy snow, freezing rain, tornadoes and other weather events.

A report for the finance and corporate services committee shows the city of Ottawa is projecting a $6.6 million deficit in the tax-supported services budget this year. The expected deficit includes $11.7 million of tax-supported services pressures relating to COVID-19, which is offset by $11.2 million in funding from the upper levels of government.

"The overall 2023 forecasted deficit is driven by the significant winter season, with snowfall and freezing rain volume substantially above the five-year average, as well as responses to the April 5th ice storm, the summer tornadoes and flooding, and the continued residual clean up related to the 2022 Derecho," says the report from Cyril Rogers, general manager and Chief Financial Officer of the finance and corporate services department.

The report for the Sept. 5 committee meeting shows the city is projecting millions of dollars in savings from vacancies in several departments, including Community and Social Services, Recreation, Cultural and Facility Services and Planning, Real Estate and Economic Development.

The projected deficit does not include a financial forecast for OC Transpo, with an updated financial report to be presented to the Transit Commission in September. The 2023 budget forecasted a $39 million budget deficit for the transit service this year.

The biggest driver of the tax-supported deficit this year is the Public Works Department, covering winter maintenance operations and parks, which is projecting a $26 million deficit in 2023.

"The forecasted Public Works deficit is a result of the January-April winter weather, the response to the April 5 ice storm, continued residual clean up cost associated with the 2022 Derecho and the clean up cost associated with the summer tornado and flooding events," the report says.

Ottawa's winter maintenance budget is projecting a $19.7 million deficit after Ottawa saw 221 cm of snow, increased freezing rain hours and a one per cent increase in the number of freeze-thaw cycles, which resulted in "significant operational costs" associated with maintaining the road, sidewalk and pathway networks, according to staff.

During the summer, Ottawa has been hit with three tornadoes and a one-day rainfall of between 39 mm and 100 mm of rain.

Spending freeze

The city of Ottawa ended the second quarter of the year with a $16.8 million deficit in the tax-supported program area, and a surplus of $538,000 in the water and wastewater budgets. The financial results included $7.7 million in COVID-19 budget pressures, which was offset by $7.1 million in COVID-19 funding.

Staff say the deficit in the first six months of the year was "driven by the significant winter season," and action was taken to control spending.

"The City implemented a discretionary spending freeze and a hiring pause for positions not impacting service delivery early in Q2 as a cost mitigation strategy to offset these significant weather events and continued mitigations against the full year forecast," the report says.

The report shows savings were found in several departments across the city of Ottawa to help offset the budget deficit.

The Planning, Real Estate and Economic Development Department is projecting a $5.350 million surplus at the end of the year, which staff say is "largely due to gapping from vacancies, savings from purchased services and savings related to the discretionary spending freeze."

A $1.81 million surplus in Recreation, Cultural and Facilities Services is due to savings form vacancies, program supplies and savings related to the discretionary spending freeze.  A projected $1.125 million surplus in the Community and Social Services Department is mainly from vacancies, lower demand in community bus passes and lower than expected COVID-19 expenses, staff say.

The Infrastructure and Wastewater Services Department is reporting an expected surplus of $850,000 due to vacancies and discretionary spending savings.

Staff say the city of Ottawa posted a $4.9 million surplus in non-departmental budgets in the first six months of the year due to higher than anticipated investment income and lower financial charges. The city is projecting $11.65 million in non-departmental savings by the end of the year, which will help offset the budget deficit.