By Medicine Hat News Opinon on February 16, 2017.
The Medicine Hat City Council and administrators have delivered what they promised in the first installment of a 10-year plan to reduce the city’s budget on resource revenue.
But now that the initial shock or panic of the city’s troubling financial position has seemingly passed, it’s time to ask the question “what will Medicine Hat’s outlook and, indeed, ‘advantage’ be in 2026?”
The recently adopted city budget, covering this year and next, shows that a $23-million budget gap will close by about $7 million per year in 2018.
Planners had aimed for $8 million with the Financially Fit for the Future budget review that mixed of budget cuts, fees increases, wage controls and, most notably, tax increases.
For taxes to supplant the entire amount of flagging energy dividend would require a tax hike of 40 per cent.
That’s a very difficult situation, and some credit for creativity must be given.
However, the fact of the matter is that by 2026, Medicine Hat’s property taxes will likely be one-quarter to one-third higher than they are today.
Does that put us simply on par with other jurisdictions?
Will smart budgeting be enough to make up what was recently an $800 per year per house tax subsidy from gas profits?
Will Medicine Hat become just another city among many?
Tackling the budget that had likely grown fat over the years thanks to bonanza gas revenue is laudable and perhaps overdue.
It is suspected, however, that for many residents ‘running a tight ship’ is not as attractive a slogan as ‘great city services combined with low, low taxes.’
Financially Fit, as necessary as it might be, will greatly affect both.
In 2018, the budget involves program cuts (about $1 million per year), higher fee income, cost containment ($1.6 million), other savings ($600,000), and tax increases ($2.8 million).
As much as $77 million in reserve funds will be needed to make up the difference over a decade. That avoids rate shock, but is a hefty withdrawal.
Yet, the drop in commodity prices has made the traditional $24 million dividend to municipal coffers unsustainable on a yearly basis.
In some ways, budgeters achieved what was once thought impossible to lessen bare tax increases, including a one-year wage freeze for firefighters and a reduction in police budget.
However, will such trophies be available in three years, or five, or 10?
There is also relatively low-hanging fruit.
The Medicine Hat Arena, with an operating cost of $700,000 per year, will be shuttered, sold or demolished. Many Hatters likely thought that was the plan all along.
An ongoing overhaul of the city fleet provides savings as well, but there is but one fleet to overhaul.
Finance officials have spelled out possible hurdles, including wages rising over time and a current policy to generously cover 40 per cent of new development costs.
Future cuts, closures and fee increases will be painful, and balancing it all will be difficult.
So too will a much-needed conversation about the identity of Medicine Hat.
Long-time Hatters have long disputed the local tax advantage, or argued that it’s already long gone. That’s perhaps understandable, if not factual. No one wholeheartedly believes their tax bill is too low.
Recent arrivals to the city, or those who pay taxes in another city, know exactly how low local taxes are at present.
For 110 years, money rolled in from gas wells, and the the city’s main selling point was an industrious local government keeping taxes low.
How will we see ourselves and sell our city in another 10 years?
It’s a question better asked today.
(Collin Gallant is a News reporter. To comment on this and other editorials, go to http://www.medicinehatnews.com/opinions.)
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