The City has three types of surpluses: Operating, Annual and Accumulated. The City can and has used Operating Surplus in the past to help reduce property tax increase impacts. However, the other two types of surplus amounts reported don’t represent funds available for use.
The chart below explains where each surplus type comes from and the areas it can support. The content below the chart expands on each surplus type.
|Surplus type||Balance||What it is and where it comes from||Areas it can support|
|$143 million for the year ended Dec 31, 2021||The City doesn’t budget for operational surplus, but is directed by Council to not run a deficit. Through our commitment to reduce costs and grow revenues, while avoiding a deficit, it’s likely every year there will be an operational surplus.||Surplus is used to help Calgarians and has been used to reduce tax requirements. The surplus is transferred to the Fiscal Stability Reserve (FSR).|
|$1.111 billion for the year ended Dec 31, 2021||Annual surplus accumulates due to accounting standards that result in the grants received from government grants or developers being recognized as revenues when utilized to construct the infrastructure assets that depreciate as an expense in future years.||As an indicator only, this surplus includes the Operating Surplus but does not necessarily create further availability of funds. Therefore, it partially supports budget requirements.|
|$22.929 billion balance at Dec 31, 2021||This indicator represents The City’s total net economic resources, both financial and non-financial and it is the sum of net financial performance since inception. Approximately 87% of the Accumulated Surplus is represented by Tangible Capital Assets, which are those infrastructure assets developed to provide services to citizens.||This is the equity in The City comprising mainly of the value of infrastructure and equity holdings in Enmax. The value from this holding cannot be realized as funds to support other areas unless the asset, such as infrastructure (roads, bridges, Enmax) is sold.|
All surplus amounts and details are shared in the Annual Report. The Annual Report provides a comprehensive view of The City’s financial statements. It also includes The City’s efforts to ensure practical cost management, savings and positive operating cash flows.
At The City operating expenses include costs of delivering services as well as operation and maintenance of facilities, infrastructure, equipment, systems and vehicles. The City has an operating budget for these costs and it’s largely funded by property tax and user fees. The City doesn’t plan or budget to spend more or less than we take in. In other words, we don’t budget for a deficit or a surplus. Achieving an Operating Surplus is reflective of The City’s commitment to reduce costs.
The 2021 Operating Surplus of $143 million is a result of multiple factors including The City’s strategic decision-making, reduction of expenses and intentional workforce management as well as returns on financial investments. During the 2022 Budget Adjustment process in November 2021, Council approved the use of $38 million from the 2021 operating surplus to support the following capital initiatives:
- $15 million for the implementation of truth and reconciliation commitments
- $10 million for additional funding for Affordable Housing, and
- $13 million for various programs including those addressing climate, safety, and mobility.
This leaves $105 million to be used at Councils direction.
These operating savings (the surplus) are used to help Calgarians. The surplus is transferred to Fiscal Stability Reserve (FSR), which serves as a contingency fund for operational emergencies, urgent or contingency capital expenditures, and to compensate for unplanned revenue reductions with significant financial impacts.
As the Operating Surplus may not be a re-occurring revenue it cannot be used to reduce the re-occurring operating budget.
The majority of the Annual Surplus of $1.111 billion is due to accounting standards that result in the capital funding received from government grants or developers being recognized as revenues when utilized to construct the infrastructure assets that depreciate as an expense in future years. The amount reported is used as an indicator to represent whether The City was able to generate enough revenue to cover expenses in the year.
As a hypothetical example, if a $50 million grant is received for the construction of a bridge that has a 50-year life, we would recognize $50 million in revenue but only $1 million in expense, creating a $49 million surplus (even though we spent the full $50 million).
As an indicator only, the Annual Surplus does not necessarily create an availability of funds. Therefore, it’s not used to support budget requirements or reduce tax impacts.
The Accumulated Surplus of $22.929 billion represents The City’s total net economic resources, both financial and non-financial. It is the sum of net financial performance since inception. It is the equity in The City comprising mainly of the value of infrastructure and equity holdings in Enmax. The value from this holding cannot be realized as fund to support other areas unless the asset, such as infrastructure (roads, bridges, Enmax) is sold.
This Accumulated Surplus also represents amounts indicated in both the Annual Report Surplus and Operating Surplus.