The annual City budget debate is drawing to a close. Once again, there were many contentious issues, particularly snow removal. It is interesting to contrast this year’s budget deliberations with the one that took place 100 years ago in 1914.
The year had been a tough one for Red Deer. The great settlement boom had collapsed. In particular, the wild frenzy of real estate speculation came to an abrupt end. Many people, who had fashioned themselves millionaires at the peak of the real estate bubble in the boom years of 1911 and 1912, found it increasingly difficult to pay their taxes.
A growing number decided it was easier to let their properties go, than to continue to pay their mortgages and taxes. As the number of properties going into default increased, the value of the remaining lots dived. The City faced the double whammy of plunging assessments and soaring arrears in taxes.
Further adding to the crisis was the very high level of municipal debt that had been incurred in the boom years. The City had been following an aggressive public works program including the installation of concrete sidewalks in the downtown area, the expansion of water and sewer systems into new residential districts and the extensive graveling and grading of streets.
The first impulse of City council was to raise property and business taxes to cover the financial shortfalls. However, the higher the taxes were raised, the more the amount of arrears grew. Soon the amount of delinquent taxes was more than double what it had been less than two years before.
City council then decided to impose a rental tax on properties used for business and professional purposes. The Red Deer Retail Merchants Association loudly protested that such a tax was very unfair. The Association predicted that the new tax would push local businesses, who were already suffering from a sharp drop in sales and income, into bankruptcy.
A special City council meeting was held in early February to further debate the issue. The councilors were deeply divided over the implementation of the rental tax, but in the end, a rate of 5% was set as a “compromise”.
However, the issue soon resolved itself. The amount of new revenue actually raised by the measure proved to be far less than estimated. The special tax was eventually dropped.
Meanwhile, City council began making significant cuts in expenditures. Staff were laid off, or offered reduced salaries in exchange for keeping their jobs. Expenditures on public works were cut to a minimum. Only the completion of a bridge across Waskasoo Creek on Third Street North (53 St.) proceeded. Some minor improvements were also made to the public parks, such as the installation of swings for children.
Only one new service was initiated.
Despite the growing fiscal crunch, City council agreed that the benefits of establishing a public library outweighed the impact on the City budget. Hence a grant of $350 was approved. The council of the Village of North Red Deer also gave a grant of $50, while some local groups, such as the Alberta Natural History Society and the Horticultural Society as well as several private citizens donated nearly $100.
The outbreak of the First World War deepened the financial crisis. The City began to rely on its bank overdraft for operational expenses. When the City’s bankers finally balked at extending any more credit, the Council decided to deal with the situation temporarily by moving its accounts to a new bank.
While many hoped that both the War and City’s financial crisis would soon be over, many years would pass before the City was able to finally establish a new and relatively stable financial footing.