The City of Calgary finished last year with an operating surplus of $38 million, and it managed to identify more than $600 million in savings.

That's according to numbers released in the city's annual financial report, which was discussed during a meeting of the audit committee on Tuesday.

According to one councillor, closely monitoring spending has improved the city's financial picture. But another councillor says the surplus is a sign taxes could be lower.

"The city is incredibly well managed. We have done a huge amount of work during this economic downturn in reducing our costs as well as continuing to deliver good service to Calgarians. That is going to become more difficult in the years ahead," said Coun. Evan Woolley.

Calgarians are expecting us to watch very closely the expenses of this company, and I think it's going to become tighter as we move forward. - Coun. Evan Woolley

Woolley said that while the surplus might seem like a big number, it's important to remember it's in the context of a $4-billion portfolio that needs to be managed well to ensure Calgary's economic future — so it shouldn't necessarily go to new projects or lowering taxes.

And he said some of that reserve fund, which has increased steadily for the past five years, has been allocated already, just not spent yet.

"In the coming years, we will see less capital money coming from the other orders of governments. Calgarians are expecting us to watch very closely the expenses of this company, and I think it's going to become tighter as we move forward," he said.

Coun. Jeromy Farkas said the surplus means Calgarians are being overtaxed.

"Given that the city is flush with cash, it's a very hard sell to continue to go back to businesses and homeowners, particularly [those] who are struggling with the downturn, with these tax increases," he said.

Farkas said the reserve should be used to stabilize tax rates, not for spending on what he described as projects "that may actually have dubious need.

"So by using these reserves that used to be investments … we're not going to have that interest income next year," he said.

"Given the year-over-year surpluses the city's been able to generate, I think we have to ask those hard questions at budget time. Do we need every tax dollar that we raise? And it's obvious that the answer is no."

Taxes brought in $2B in revenue

The city brought in $3.238 billion in revenues last year. The largest chunk of that came from property taxes at $2.1 billion. Business taxes brought in $45 million.

The city's expenses were $3.2 billion, $1.8 billion of which went to salaries, wages and benefits for city workers.

Calgary's credit rating remains AA+. Rating agencies are expected to update that in the coming weeks.