Fredericton receives good financial report for 2016

The City of Fredericton is in good financial shape, according to its 2016 audited financial statements.

Annual audit and financial results were presented to the city's finance and administration committee on Monday.

The city ended the year with a surplus of $3.3 million in its general operating fund, despite a forecasted budget shortfall of just over $500,000 heading into the 2016 budget.

City officials said early tendering of construction projects results in $1.6 million in savings, and an increased focus on provincial and federal infrastructure funding led to $5.8 million in funding for projects.

The city also ended 2016 with a $2.1 million surplus in its water and sewer utility fund resulting from deferred capital projects.

Surplus comes despite rising costs, slowing revenue growth

Adam Bell, manager of financial accounting and reporting, told the committee that because the city cannot have a surplus or a deficit, the money will be put to use in 2018.

Bell said the general operating fund surplus will be used to manage the funding gap created by rising labour costs and slowing revenue growth.

Salaries and benefits accounted for 52.5 per cent of the city's $118 million in expenses in 2016, and Bell said labour costs are rising faster than inflation.

On the flip side, Bell said property tax revenue, which accounted for nearly 70 per cent of the city's $140 million, remained nearly stagnant.

He said the surplus from the water and sewer utility fund will be used to continue projects to replace aging water and sewer pipes.

Bell said the city is not meeting its annual renewal targets for water and sewer, as well as roads and streets, but is making progress.

The city also managed to pay down $3.7 million in long-term debt, which now stands at $20 million; that's down from $97 million in 2011.

Committee chair pleased with year-end results

Coun. Greg Ericson, who chairs the city's finance and administration committee, said Monday evening that the surpluses are a reflection of good budgeting practice and good fiscal planning and management.

"The audit reflects that we're right on target with our budgeting targets," said Ericson, "and that our financial plans are all being fulfilled and we're moving in the direction that we need to."

Ericson said the city takes the warning about personnel costs growing faster than revenue very seriously, and it's not something that can go on indefinitely.

"This is one of the areas that those cash surpluses help us address the flattening revenues," he said.

Ericson said the city has closed a $7.5 million financial gap through Lean Six Sigma and workforce reduction strategies over the last several years, so there's a great chance the city will close the gap even more.

"There may be some areas where we do not hire for retired replacements and so on," he said. "There's not going to be any reduction in staff through firings or anything like that, it'll be through attrition if anything. But we lean on the Lean Six Sigma to try to get the best bang for our buck out of our services through efficiencies."