Not everyone pays both taxes and utilities

By Collin Gallant on July 5, 2018.

cgallant@medicinehatnews.com @CollinGallant

For the most part, the terms “ratepayer” and “taxpayer” are used interchangeably, but a recent budget debate in Medicine Hat highlights the slight but important difference.

That is though, they are usually one in the same, not everyone is both.

On Tuesday, council voted 8-1 to support a compromise to introduce a new utility fee for the next four years that will raise $3 million per year by 2022, rather than further boosting a property tax increase to raise the same amount of money.

That may lead some to wonder what the difference is if utility bills or property tax goes up.

Complicating the picture is different tax rates for homes and businesses, as well as generally higher utility use, and therefore payment of fees, by business owners.

After attending Tuesday’s meeting, Chamber of Commerce vice-president Sarah MacKenzie said neither option is great, but higher utility fees will cost business owners more than a tax increase would.

“The MCAF (fee is charged as) a percentage of consumption, so the cost is weighted much heavier on business compared to residential,” MacKenzie said on Wednesday. “That was maybe not brought up but it’s why we took a stand.”

The municipal consent and access fee, or MCAF, is used to recover rents paid by a utility company to a municipality, but it has never been charged in Medicine Hat, which owns both. Administrators say the local rate would be about one-quarter that of other cities, though no analysis of cost to businesses was made public.

Eventually, councillors supported instituting an MCAF at about half the rate of a June 18 proposal that left council deadlocked.

The original rate would have raised $2.1 million in 2019 with MCAF, then eventually $6.2 million in 2022, at which point it will have to be renewed by council, or expire.

They agreed to a rate ladder that will see $1 million next year rising to $3 million in 2022, while councillors expect general power dividends to make up the difference.

Also on June 18, council entertained a motion by Coun. Kris Samraj to make up the money with an additional tax increase of three per cent, bringing to total tax increase to seven per cent for three consecutive years.

Samraj acknowledged Tuesday that he’d received a lot of negative feedback about the proposal, but hadn’t changed his opinion.

“I don’t think the framers of the (MCAF) regulation envisioned using it the way it’s proposed here,” he said, adding it is more “honest and direct” for municipal taxes to be spent on the municipal budget, rather than using utility revenue to pay for city programs.

Councillors at that time bristled at the size of the proposed hike, with Coun. Darren Hirsch, who introduced the compromise plan on Tuesday, calling bare reliance on the tax base “suicide” for the city’s financial security.

Coun. Robert Dumanowski strongly backed the fee, and told Samraj that altering tax rates to shield the business community from the hikes would mean residential hikes of greater than 10 per cent.

“It’s a better way to go,” said Dumanowski of MCAF at the time.

“It spreads the burden over a larger population and more diverse population — it’s meant to offset the single line item of ‘tax increase’,” he said on June 18.

“It’s not a diversion of a shell game or an opportunity to mislead the public. It’s the opposite.”

As for the definitions, ratepayers are generally considered to be utility customers, or citizens who pay rates for services. Only property owners pay property taxes.

While the majority are both, the notable exceptions are renters who often pay their own utilities, or customers of the city utility who live outside city limits and therefore pay municipal taxes elsewhere. They are taxpayers, but not taxpayers of the City of Medicine Hat.

Similarly, landlords usually recover taxes by adjusting rental rates, but the process of raising rents can take time.

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