A massive wildfire last spring, along with lower than expected taxes and interest revenue, forced Sturgeon County into the red last year.
Council approved the county's audited financial statements yesterday, revealing a deficit of $282,448 caused in large part by the Redwater fire.
On paper, however, Sturgeon is posting a much higher deficit of about $8 million, but that's due to accounting rules, not a cash flow problem.
The issue, which has continued to emerge on the county's financial statements over the last three years, stems from a pre-paid tax arrangement for the Fort Hills upgrader.
The company behind the project gave the county $12.7 million to pay for road construction around the site.
Under the agreement, Sturgeon will credit the company against its property taxes when its plant gets up and running.
Standard accounting rules won't allow the county to recognize that money as revenue until it starts crediting it against the property taxes, even though it is already in the bank.
Since Sturgeon can't credit the money now, but is spending it, they are forced to report the deficit.
In his presentation to council, Phil Dirks, a partner with the firm that performed the outside audit, said the number was not something council had to worry about.
"It is really just an accounting invention that is writing that deficit at the top of the page."
Ordinarily, a municipality that runs a deficit three years in a row — which Sturgeon has now done — has their finances taken over by the provincial government. The province has given Sturgeon an exemption however, because it relates to Fort Hills.
Fire costs
The much smaller deficit amount of $282,448, relates to money that was overspent. The Redwater fire cost the county more than $1 million, which was offset with $400,000 from the province.
Most of the county's other departments came in well below budget, allowing Sturgeon to recoup most of the fire costs.
Sturgeon County also did not take in as much money as planned in 2009. Property tax revenue was down about $500,000 and the county's investments returned about $600,000 less than hoped.
Manager of corporate services Rick Wojtkiw said the county expected 2009 would be a tough year for investment income.
"We had an idea that we would be in a slump for a while, but we didn't think it would be that long."
Wojtkiw said the county did write an even more conservative 2010 budget as a precaution.
