Calgary's city manager is warning that even with the stirrings of an economic recovery, the hangover from the financial downturn will last at city hall for years to come.

The city is looking at a $170-million gap in its operating budget that it must close for 2018.

Jeff Fielding told city council's priorities and finance committee on Tuesday that the drop in revenues is an on-going problem that will not be solved overnight.

"There is nothing on the forseeable horizon that will fix our bottom line situation," Fielding told the committee.

He said it will take years for the city to recover from losing 30,000 downtown jobs and millions of dollars in investment.

Revenues down

Several city revenues streams are not flowing as well as they were forecast in the city's original 2015-18 budget plan.

Transit ridership is down and that means that Calgary Transit is recovering only 46 per cent of its costs through fares. The city expects 50-55 per cent of transit costs to be recovered through passenger fees.

Enmax is reporting lower franchise fees due to the downturn and that's also reduced its dividends to the city.

But it's the downtown office vacancy rate that's hurting Calgary the most. It's gone north of 25 per cent and that has shifted millions of dollars in the property tax burden to building owners outside the core.

Earlier this year, city council approved a $45-million package to help business property owners outside downtown with higher tax bills.

It all translates into a budget headache at city hall — both for this fall's finalization of the 2018 budget and for the 2019-2022 budget plan in development.

Raising taxes not the solution

Fielding said he knows that there's little political or public appetite for raising taxes to give the city higher revenues, which means finding savings and cutting jobs are on the table.

He told the committee that 427 city jobs have been cut over the past two years, primarily through attrition, but more job losses are expected.

"We're working on the basis of cutting costs and eliminating necessary expenditures where they need to support our businesses so we're trying to streamline that right now," said Fielding.

He plans to present more details to city council next week.

Mayor Naheed Nenshi said it's a "very serious" situation, one that will mean some tough decisions for the new city council that will be elected by Calgarians next month.

"Partially for 2018, but really for the 2019-2022 business cycle that will involve increased taxes or fees, or significantly cut services. Really, they have to make that decision."

Challenge for council candidates

Nenshi, who is running for re-election in the Oct. 16 election, said he hopes Calgarians hold all candidates to account on their plans given the city's fiscal situation.

"If you have candidates coming to your door saying, 'I'm going to invest way more in transit or police and I'm going to freeze taxes', you'd better ask them how they plan on doing that," said Nenshi.

The city has maintained its credit rating, found millions of dollars in savings and it has significantly boosted infrastructure spending to capitalize on lower costs through Alberta's recession.

But Nenshi said the city can only shelter people from the impacts of the revenue crunch for so long.

Coun. Ward Sutherland, who is the vice-chair of the committee, said he hopes Calgarians take time to learn about the city's fiscal challenges.

"I think this is really imperative that people understand the situation of the city in how responsible administration has been but also how difficult it's going to be in the future to make choices for the council," said Sutherland, who is also seeking re-election next month.