Council opts for small utility fee

By Collin Gallant on July 4, 2018.

cgallant@medicinehatnews.com @CollinGallant

City councillors have voted to cut a proposed utility fee in half — and re-evaluate its existence in 2022 — and use more money from projected energy dividends to balance the next four-year city budget.

That stance, taken Monday after two weeks of behind-the-scenes talks, was approved by an 8-1 vote, with only Mayor Ted Clugston saying new utility fees would scare off new industry.

The majority disagreed and supported a “compromise” two weeks after a badly split council debated how to raise an additional $6 million per year by 2022.

“Energy dividends, the golden goose of our community, is not as reliable as it was in the past,” said Coun. Darren Hirsch while introducing a series of instructions to city budget planners as they draw up the next budget due in January.

The overarching goal is to reduce a structural dependency on energy dividends that were once bountiful and provided $24 million per year to tamp down taxes in the “Gas City.”

Without gas profits however, finance officials have suggested raising taxes by four per cent each year, with half dedicated to replacing an energy dividend currently being filled with city reserve funds.

Hirsch says the city has to spend $70 million over four years to avoid rate shock and subsidize city taxpayers, while cutting costs and seeking new revenue.

“Our city’s (Tax Stabilization) bank account will be at zero in this council term,” said Hirsch, adding that savings, a smaller than traditional dividend and the new fee would meet budget goals and begin to rebuild reserve balances.

“We can have our cake and eat it too,” he said. “It’s prudent … a fair and balanced approach.”

Most council members called it an unwanted but necessary approach that they would support.

Only Clugston voted against the measures, mostly due to the creation of the municipal consent and access fee.

“I think we should grow the tax base, not tax the tax base,” he said. “This is a decision of council, so I’ll support it … but I’m optimistic about the Genco (power generation) dividends going forward.”

The MCAF recovers from ratepayers rents charged by a municipality to a utility company for municipal rights-of-way — all of which in Medicine Hat are publicly owned.

However, council members argued it would provide stable income to the city and shield taxpayers, while scaling it back would help protect ratepayers.

The monthly effect on average residential utility bills would be $1.97 in 2019, then $3.90 in 2020 and $5.83 in 2021, said Hirsch.

That’s compared to the original proposal that would have seen a similar phase-in cost ratepayers a total of $14 per month when fully implemented.

Coun. Robert Dumanowski argued two weeks earlier that fully implemented MCAF was the most prudent course, available to all other municipalities, but called Monday’s motion “the right path forward.”

“Our resolve is greater than our differences,” he said.

Coun. Phil Turnbull, who had verbally sparred with Dumanowski over the fee in late June, said he too supported the approach.

“I thought (full MCAF) was way too high,” he said Monday. “We’ve come to a compromise. Doing nothing is not an option.”

Coun. Kris Samraj had suggested last week supplanting the MCAF with an additional three per cent tax increase, bring it to seven per cent for three years. On Tuesday he said using municipal tax revenue to fund the municipal budget was “the most honest and direct way” to address the gap. His motion fell 8-1, and later he supported Hirsch’s proposal.

“We’re all very concerned about the financial situation of the city, which is not insurmountable. We’re all very positive about the outlook.”

Overall, the city, which this year will use $16 million in reserve spending to balance the budget, will reduce that requirement to $5 million over four years.

That’s due to $3 million per year in MCAF revenue in 2022, tax increases of four per cent annually, $1.6 million in programming cuts, $1 million more in income from user fees, and containing costs increases to general inflation of two per cent.

Additional dividends amounting to $12 million over four years would be needed to make the budget plan work.

Analysts predict $16 million this year could come from power plant profits to the tax stabilization fund, but that wouldn’t cover the new requirement.

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