City operations posts small surplus
By COLLIN GALLANT on April 16, 2020.
cgallant@medicinehatnews.com@CollinGallant Medicine Hat’s municipal operations posted a small surplus in 2019 due to cost cuts and managing unforeseen costs, while power sales saw dividend balloon, according to the city’s annual financial report, released late last week. A $200,000 carry forward amount includes changes to deal with a $1.6-million error in original property tax calculations as a total of $4 million in cost saving measures were implemented over 12 months. On the other side of the ledger, the dividend from power sales from the city’s utility came in 90 per cent higher than expected at $42 million. Top finance officials said the results – which details the city’s financial standing on Dec. 31 – do not include more recent substantial changes in operations related to COVID-19 pandemic response, but do provide base information about the city’s footing. “They largely covered the operating reports and financial statement ending 2019, which was a long time ago,” said corporate services commissioner Dennis Egert. “But it’s a great way for us to report to council and the public about how we performed.” The full report, presented to council’s audit committee on April 8, will be forwarded to council and provincial officials at the local April 20 council meeting. They show that actual debt grew, but dropped in comparison to revenue and on a per capita basis, while the combined balances of reserves fund grew for the first time in six years, thanks largely to a booming stock market in 2019 and power profits. The city is also halfway to its 10-year budget goal of eliminating a structural deficit caused by the loss of natural gas profits. “It was a good year,” said Mayor Ted Clugston, who said the bare report shows that city finances began to turn a corner. “Unfortunately they are a snapshot in time, and the world has obviously changed since then, but I’ve always said Medicine Hat is in an enviable position, and even with the COVID downturn … we have more wiggle room.” Audit committee chair Coun. Darren Hirsch agreed. “Overall, we’ve stopped the bleeding, but there’s more work to be done,” he said. “We’ve suspended the downward trend and posted a good year despite some headwinds.” Hirsch however, cautioned that the single biggest positive comes from electrical sales to the Alberta power grid, which fluctuates from year to year. “We can’t hang our hat on that all the time – it’s a blessing – but we are challenged in our (gas production).” The city’s power company (Genco) had forecast $28.3 million in net earnings, but higher export sales at higher prices pushed that figure to $42 million. The separately calculated dividend was split up among reserve funds, with half going to the Heritage Savings fund, which became the city’s largest designated fund. One quarter was moved to the tax stabilization fund to cover deficits while staggered tax hikes and costs are phased in. In terms of cost control, the net results (revenue less expenses) in each of the city’s three main municipal divisions were $1 million or more less than budgeted thanks to mid-year changes, while the police budget was even. Property tax revenue was lower than expected due to a $1.6-million miscalculation that administrators revealed during a budget update in late December. In utilities, beyond the highlight year for the power plant, operating results for eight utility units show seven beat earning expectations. Gas production still lost $31 million, about $2 million less than expected thanks to early cost cutting ahead of a major abandonment program planned to begin this spring. The city’s total debt, as of Dec. 31, sat at $402.7 million, putting it at about 52 per cent of its provincially mandated debt limit. Cash on hand and investments totalled $472 million, mostly for restricted use. 22-21
