Saskatoon City Council held an emergency meeting on Sunday afternoon to deal with a surprise budget shortfall after the provincial government announced its budget on Wednesday.

“We have a real problem on our hands,” Saskatoon Mayor Charlie Clark said. “It’s a problem that we weren’t anticipating.”

The City of Saskatoon is facing an $8 million deficit in its 2017 budget after the province announced it was cutting the grant in lieu of taxes program. Crown corporations – SaskPower and SaskEnergy – used to provide grants to communities instead of paying property taxes. Now, the province will take the money – about $36 million. City Manager Murray Totland says the hit will cost as much as running all city leisure facilities and most of Saskatoon’s snow and ice program.

The City has $141 million in reserve money, but that would only provide a one-time solution to the provincial funding cuts.

“It’s a large amount of revenue to simply disappear out of our operating budget with really no means for us to backfill it,” Totland said.

The City needs to balance its budget each year, meaning that council will need to set a mill rate by April to send out a tax notice to residents by the end of May.

City Councillor Randy Donauer suggested a hiring freeze until council decides what to do next. He also said SaskPower and SaskEnergy should pay for fire and police services.

“I’m assuming they want services,” he said. “So we need to provide that for them at a reasonable fee.”

Councillor Bev Dubois said the city could look at service agreements with the province on P3 schools and charge higher lease payments. Zach Jeffries suggested cutting some services or deferring projects.

City officials have made it clear that they feel the province has put them in a tough situation. Council held a closed-door meeting to discuss legal options to take against the province and Saskatoon’s mayor will meet with the Minister of Intergovernmental Affairs on Wednesday for further clarification.

Based on a report by CTV's Mark Villani