City Projects $3.1M Year-End Deficit in 2025 Third Quarter Financial Update
- Tuesday, December 2nd, 2025 - 8:39 pm
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City finances are tightening as 2025 nears its end, with slowing development, rising maintenance costs, and delayed capital projects all shaping the latest third-quarter outlook. The newest figures reveal where pressures are building – and what risks may carry into 2026.
The City’s 2025 Third Quarter Budget Monitoring Report shows a projected year-end operating deficit of $3.1 million, equal to 0.54 per cent of gross operating expenses. Earlier second quarter estimates projected a $3.8 million deficit. The tax-supported budget is currently forecast to end $434,000 in deficit, while non-tax-supported areas are expected to finish $2.6 million in deficit. Final results may still shift due to fourth-quarter activity.
Multiple revenue sources are tracking below expectations. Building permit revenue under the Ontario Building Code is the largest shortfall, with a projected $3.1 million deficit caused by slowed construction activity and delayed high-value permits. Water and wastewater revenue is projected to fall short by $995,000, and engineering development fees are trending $188,000 below budget. Parking revenues may end $115,000 below target, with the possibility of a larger impact related to a major permit holder. Court Services expects a $398,000 revenue deficit due to reduced charge volumes and delays in processing fines.
Other revenue areas are outperforming. Transit reports a $500,000 surplus due to higher ridership. Culture and Recreation projects a $600,000 surplus driven by strong camp and event activity. Economic Development expects a $410,000 surplus, largely from land sales and grant funding. Committee of Adjustment fees are projected to exceed budget by $275,000, and Environmental Services anticipates a $242,000 surplus from transfer station activity.
City-wide compensation pressure has eased since earlier forecasts, with the projected compensation deficit reduced to $700,000. The ratified CUPE 241 and 973 agreements added $2.4 million in unbudgeted costs for 2025. Overtime pressures remain significant in Paramedics, Fire, Transit, Building Maintenance, and winter operations. Vacancies have provided offsetting savings but are no longer enough to counterbalance all pressures.
Fuel costs are expected to end the year $1.4 million under budget following the removal of the federal consumer carbon tax. Utilities spending is close to budget. Building maintenance pressures amount to a projected $850,000 deficit due to aging facilities, emergency repairs, and equipment failures. Fleet maintenance is projected to end $2.2 million over budget, driven by aging vehicles, rising parts costs, and higher contracted maintenance expenses.
Winter control operations continue to show strain. Severe weather early in the year contributed to a projected $525,000 deficit in Roads and $100,000 in Parks for overtime and materials.
On the capital side, total spending reached $135.3 million at the end of Q3, with an additional $197.5 million committed through purchase orders. The City is at risk of falling short of its target of having 80 per cent of capital budgets spent or committed by year-end, largely due to procurement delays and project complexities. Several major projects are shifting commitments into 2026, including Speedvale Road Reconstruction Phase 2.
Capital revenues face additional risks. Development Charge (DC) collections remain low, reaching only 15 per cent of the annual budget by September. New provincial legislation now allows DC payments for most residential projects to be deferred until occupancy, significantly delaying municipal cash flow. A major DC appeal could create a financial exposure of $15 million to $20 million if successful.
The City continues to pursue federal and provincial grants. As of Q3, $56.7 million in applications are awaiting decisions. Recent grant approvals include $10 million for the South End Community Centre, $1 million for Lyon Pool rehabilitation, and several smaller infrastructure and environmental grants.
The City maintains its AAA credit rating; however, increased reliance on debt and ongoing financial pressures continue to pose long-term risks. Staff will continue monitoring trends through year-end and may use contingency reserves where required.
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