Winnipeg forecast deficit shrinks, but could still face bigger shortfall in 2025

The City of Winnipeg's financial outlook shows a smaller deficit than it forecast last quarter, but lower-than-expected tax revenue could leave the city with a bigger shortfall to cover in this year's budget.

The latest budget update shows the city expects to overspend its budget in 2024 by $20.5 million — $2.9 million less than the deficit forecast in the third quarter update released in November, the city announced in a news release Monday.

While the overall deficit has been reduced, the city says it now has less money in its reserve fund to help cover the shortfall.

The city had planned to use more than $14.3 million from its rainy day fund to cover a portion of the deficit, but that number has now fallen to $9.7 million. 

That leaves the city with $10.8 million left to cover from other revenue sources or spending cuts.

The city had budgeted $7 million in provincial funding to cover the remaining deficit this year, leaving approximately $3.8 million which the city will need to cover in 2025.

The difference is largely due to less tax money coming in from new building construction and renovations than the city had expected.

Net taxes added — meaning revenue from new buildings, additions and renovations added to the assessment and taxation rolls after annual property tax amounts have been set — fell by approximately $11.3 million. That was partially offset by an increase in property tax revenue of $4.6 million. 

Previous budgets have repeatedly drawn down the city's fiscal stabilization reserve. Finance committee chair Coun. Jeff Browaty told reporters in November this is the first time he can recall the city having to make up a shortfall from a previous year in the following year's budget.

On Monday, Browaty said the city automatically transfers revenue that comes in as "net taxes added" into the fiscal stabilization reserve. This year's budget identified the way the city calculates net taxes added as one of the financial risks it could not mitigate, he said.

"So right now with the [reserve fund] being so precariously low, that challenge is exacerbated," he said, adding the city is still looking into why revenue from net taxes added was lower this year.

"If you look a year prior, was there a trend of less permit and inspection revenue? I think there was. So that was sort of an indication that there was challenge forthcoming. We don't do the best at forecasting what net taxes added are."

The city is legally required to table a balanced budget every year, meaning any shortfall at the end of the year must be accounted for in the next year's budget.

Property and development committee chair Coun. Sherri Rollins says the city has "fiscal restraints" that the provincial and federal governments, which can both legally run deficits, do not. 

"Mayor Gillingham, certainly, has made plain that he has really argued for a new deal, and some additional mechanisms to which Winnipeg could make up for lost revenue, and that's a discussion that we're going to continue to have," she said.