Unfortunately, the recovery did not return The City’s operations to pre-pandemic levels. The expectation of revenue increases in those areas exceeded actual results.
Operating expenses were also heavily impacted. Pandemic recovery as well as higher inflation have contributed to the general increase in expenses over last year in the amount of $20.2 million (5%). These increases come in the form of higher fuel costs in transportation and fleet, higher transmission costs and tariffs for electric light and power, and increased salaries at recreation facilities, transit, as well as ongoing overtime for police and emergency services.
On an object basis, these increases are primarily impacting salaries, contracted services, and materials and supplies expense, offset by the decrease in grants to organizations. The City planned on these costs rising, however, and came within $3.5 million (1%) of budgeted expenses.
Due to lower-than-expected revenue and increasing expenses, The City reported an operating deficit of $43.5 million for the year ended December 31, 2022. This is $11.2 million (35%) over budget of $32.4 million.
Operating deficits can affect The City’s ability to fund operations in the future, as it has a direct impact on tax supported reserves. Reserves overall have declined by $21.3 million (11%); $18.7 million of that decrease is the Operating Reserve- Tax Supported (ORTS). The City budgeted a decline (use) of ORTS during 2022 and expected a year-end balance of $17.5 million, however due to the operating deficit, the actual year-end balance is now $8.9 million.