Coun. Robert Dumanowski discusses the 2024 city budget update at Monday night’s council meeting as Couns. Cassi Hider and Darren Hirsch sit nearby.
NEWS PHOTO COLLIN GALLANT
cgallant@medicinehatnews.com@CollinGallant
Council heard Monday that huge profits from the city’s utility interests are still offsetting property taxes, but through investment returns powered by stashed-away electricity profits from years past.
The 2024 budget update will still require about $5 million more tax revenue, and a 4 per cent tax increase, as it was presented Monday evening to council.
But, with a structural deficit set to be closed in 2025, thanks in part to investment income, and a 10-year process of phasing in tax increases, councillors said they can see using more investment funds in future years.
Before approving the update by an 8-1 count, Coun. Shila Sharps questioned why the entire planned tax increase in 2024 couldn’t be covered by utility profits, on track to be $130 million in 2023, or from the investment fund’s balance, which will soon top $400 million.
“We’ve got boatloads, so I’ll ask it,” she said after hearing the city plans to collect about $89 million from property owners next year, but also use about $20.5 million in investment income.
That dividend is $4.25 million more than expected thanks to a larger than planned balance after major power profits in 2022. And whereas a 3 per cent return was envisioned, the actual return will be 4.46 per cent this year.
Coun. Darren Hirsch said it is structured to the benefit of taxpayers.
“People get asked why we don’t use utility revenue (to offset taxes), but we do,” said Hirsch, citing $6.2 million in a general transfer from reserves – equal to an 8 per cent tax increase, he said – and $4.5 million in new investment income (a near 5 per cent increase).
“Run the numbers, it’s significant savings to tax payers,” said Hirsch.
Budget analyst Aaron Hoimyr told council that utility revenue is hard to predict, and the philosophy is one-time revenue is better allocated to one-time expenses, while recurring investments provide more stable income.
According to adjustments presented this fall by staff, the deficit – which has existed since the mid-2010s when the $24-million natural gas production dividend dried up – would only be $6.2 million.
Corporate services head Dennis Egert told council the deficit will be eliminated in the next two-year budget, due late next year. At that point, council may want to examine the best use of funds from the $200-million Heritage Savings fund.
“We have it planned before the 2025-26 budget to have that discussion with council about what is planned for that endowment,” he said.
Coun. Robert Dumanowski said the city finance department has massaged the figure lower by 75 per cent, and could leave additional space in future budgets for direct transfers from utility profits to offset taxes.
“With the kind of diversified investments we have, there will be that opportunity … to leave a gap,” he said. “We’re making strides in the right direction.”
The updated current deficit is about $200,000 more than projected next year, despite $1 million in new spending approved in 2023 that carries forward.
Most relates to a $500,000 annual grant to HALO Air Rescue Society, plus a $279,000 staffing boost in the economic development office, $140,000 for a new inclusion officer and $100,000 for 24-hour security at the downtown transit terminal.
Increases to existing items include $1.9 million in salaries and corporate restructuring (including $700,000 due to a new police contract), an additional $1.5 million in higher fees on investment management and $800,000 in other adjustments to provincial transfers.
Offsetting the increase is 4.5 million more in investment revenue, made larger off a $117-million increase to the city’s reserve balance with utility profits, and $400,000 more in grants, mainly from higher provincial operating amounts.
At the same time, capital grants from the province will decrease.
“(The budget) maintains for the most part the original budget assumptions and continues to advance council’s strategic objectives,” said Hoimyr during a presentation.
Those goals include maintaining service levels, offering competitive property tax rates, balancing financial sustainability and “organizational health.”
“It reflects the environment of stubbornly high inflation, (the cost of) corporate reorganization and commodities,” said Hoimyr. “It keeps us on track to (fiscal) balance in 2026.”
Though the budget calls for a 5 per cent tax increase, one per cent is related to assessment growth, so a 4 per cent increase may accomplish $5 million more in tax revenue.
Natural growth (new buildings) could add $500,000 in unplanned revenue, and another $1 million would come from an increase to the municipal access fee paid on utility bills.
