Budget debate not short on options

By Collin Gallant on June 20, 2018.

cgallant@medicinehatnews.com @CollinGallant

A deeply divided city council will resume formal debate in early July on how to fund the 2019-2022 budget, but a wide-ranging discussion on Monday night shows an equally wide array of opinions.

Eventually the matter was tabled after nine members first wrangled with the question in instituting new utility fees, or combining a lesser fee with more reserve funds.

Making up a multi-million-dollar revenue gap with purely tax hikes was also suggested, involving increases of seven per cent each year for the budget period.

Mayor Ted Clugston went one step further saying neither was needed, that he believed a new era of power plant dividends were on the way.

For the record, that’s four options for nine people to vote on.

“I’ve been very clear that we’re going to make $30 million per year for the next three years in Genco, and we will take a dividend out of it,” Clugston told reporters after the meeting, citing new major customers and lower costs.

A week earlier the city’s power generating company, referred to as Genco, announced its profit projections had tripled to $33 million for this year.

During debate he said council’s legacy shouldn’t be adding “a new tax” in the form of a hotly debated — and defeated — municipal consent and access fee, which would have meant an added cost to utility bills.

That possibility is now off the table, said Clugston, unless two-thirds of councillors, or six of nine, vote to bring it back.

“The next debate will have to be between either raising taxes or taking a bigger dividend from Genco,” he said.

The option on the table is a proposal to use tax revenue in place of the utility fee income. That would move expected tax increases from a planned four cent each year, to seven per cent per year for the budget term.

That, says Coun. Kris Samraj, would “more clearly” link the municipal budget to municipal tax revenue.

“Let’s not be dramatic,” Samraj stated. “We’re talking about having (tax) rates similar to Lethbridge after four years.”

The entire issue arose as administrators sought direction from council before building the 2019-2022 city budget. Its goal of cutting a revenue shortfall by about $3 million per year for a total of $12 million annually in the final year, was based largely on a the new utility fee.

Administrators argued it would provide a stable source of income, similar to the city’s gas and power distribution units, rather than the more volatile gas and power production units.

Coun. Robert Dumanowski backed the fee as a way to better align the public utility with industry standards. Coun. Darren Hirsch said it was needed to fill the gap and also protect city reserves from further erosion.

“We’re at a crossroads in terms of the finances of our city,” he told council. “(From reserves) $70 million has been spent to spare the taxpayer (from major single-year tax increases) in the Financially Fit program, that we’re trying to wind up.”

Four councillors backed full fee implementation, while another, Coun. Phil Turnbull, says a more prudent option is a scaled back fee, combined with some dividend revenue, and then a re-evaluation.

“A four-year budget is too long; we don’t know where we’ll be in four years,” he said, before his motion was defeated.

Coun. Julie Friesen stated new revenue was needed, but the fee should be pushed off one year, then phased in at a slower rate. That amendment did not have a seconder.

Coun. Jim Turner voted against the utility fee in 2016, but supported it this week, and then said heavy tax increases would “kill” economic growth.

“I never want to see a tax or fee increase, but when you have a $16-million deficit, you can’t raise taxes enough or cut enough to make it (all) up without a balanced approached.”

Commissioner Brian Mastel said new dividends “provide flexibility” but might not be sustainable after the province changes the Alberta power market in 2020.

Utilities commissioner Cal Lenz, as well, told the audit committee that short-term profits were forecast, but a switch to the capacity market in 2020 would smooth out price spikes and lower costs to consumers.

“We took a risk to spend ($55 million) on a new power plant before we’d ever heard of Hut 8 or Aurora Cannabis,” said Clugston, referring to new major power contracts signed this year. “They came here because of low utility rates.”

A municipal consent and access fee would be phased in over the four years, adding $2 million each year, for a total of $6.3 million in 2022. By 2022, it would cost an average household about $167 per year.

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