Adjustments are being made to the city's budget plan to account for higher revenue and rising operational costs.--NEWS FILE PHOTO
cgallant@medicinehatnews.com@CollinGallant
Changes to the coming year’s city budget plan expects higher investment income and strong electricity revenue, but also higher costs in the plan that still calls for a 5 per cent property tax bump in 2024.
Council met Monday night in a committee of the whole format to discuss potential amendments to debate next month.
It includes the addition of $1 million in spending approved this year, as well as the effect of inflation offset by some growth in the tax assessment base and additional investment returns from utility-fed reserve funds that are set to receive a windfall in 2023.
Altogether the changes shrink a structural budget gap next year before it is expected to be eliminated two years hence.
Monday was an opportunity for council members to ask questions and study the budget one month before a final document is presented. Council will consider the final plan on Nov. 20.
“Some of the broad assumptions we presented to council last year are still in place, and we continue to focus on those objectives,” said corporate services head Dennis Egert. “We’re in a different position than we were in 2018 and this budget reflects dimensions of financial sustainability and organizational health.”
The budget had planned to reduce the amount of reserve funds needed to bridge an operating deficit to $12 million in 2023 and $6 million in 2024 as the last stages of a financially fit plan to erase the absence of natural gas dividends, which dried up in 2015.
Egert said the new budget predicts only $5 million will be needed next year, before the budget balances in 2025.
“We’re still on track to balance the 2025 and 26 budgets, and we’re looking forward to presenting that next year.”
A budget presentation states the changes reflect the higher cost environment and a number of approvals from council that will affect next year’s budget.
The largest portion is a returning $500,000 grant the city will now provide to the HALO air rescue society.
The city also added $100,000 for 24-hour on-site security at the transit parkade and washrooms, as well as added an inclusion co-ordinator related to Truth and Reconciliation and restaffing positions in the Invest Medicine Hat economic development office ($415,000 combined). Those added $1 million to the budget gap, and was covered out of reserves.
For 2024, revenue would increase by $5.5 million, due to $500,000 in larger than expected tax base growth and investment income higher by $4.2 million since the fund grew more than expected due to power plant dividends.
New and planned expense increases total $3.3 million, with the difference in new revenue reducing reserve cash needed next year to balance the budget.
“The net effect is an improvement to the bottom line, by about $900,00,” said budget analyst Aaron Hoimyr.
Of the spending increases, $1.5 million relates to contracted services, mainly higher investment management fees as the portfolio expanded last year, and $1.1 million for salaries and wages for new positions and the settlement of the Medicine Hat Police Services contract.
Coun. Darren Hirsch requested analysis of provincial operating grants versus a program that has recently cut payments to the city in lieu of property tax paid on provincial buildings.
Mayor Linnsie Clark asked about efforts to accelerate the Heritage Savings Fund, from which tax sustaining dividends could be paid in 2025. It could reach $200 million this year.
“We were expecting to see an analysis of long-term infrastructure liabilities and overall financial outlook,” she said.
She was told, in terms of the utility company, that was “in process” but there was no immediate timeline.
In terms of capital budget amendments, the cost of water, sewer and road upgrades on Third Street downtown (between Fifth Avenue and near S. Railway) planned for 2024 could double and require an additional $3.6 million for the now $7-million project.
That would increase water supply to the North Flats area as a new major operating expense project, and municipal works is requesting that it update the Medicine Hat Regional Airport strategic masterplan, last done in 2006.
