City budget: Big decisions on the way
By Collin Gallant on June 30, 2018.
cgallant@medicinehatnews.com
@CollinGallant A two-year-old budget strategy planners use to tackle the city’s major revenue shortfall proposes a number of levels, and adjusted in concert could erase the city’s reliance on unreliable commodity profits over 10-years. On Tuesday, city councillors will continue debate about how new profits might fit into that plan, and appear willing to work toward a compromise when council convenes after the holiday weekend. Mayor Ted Clugston told the News such discussion seems “counter-intuitive” considering the “Financially Fit” budget model was built to tackle a $24-million shortfall when energy profits dried up in 2016. “The discussions have been happening for quite some time,” said Clugston, saying returned profitability of the power plant — expected to be $33 million this year — should be part of those talks. “The goal still has to be to cut that reliance on energy profits out of operational (spending),” he said. “We’re trying to be progressive and not leave a mess for the future councils, and (council members) are all trying to do the right thing, but how we do it is the question.” When last council met they appeared deadlocked in discussing budget assumptions that will shape the next city budget. A thin, 5-4 majority defeated the proposed implementation of a utility fee, then different councillors voted 5-4 to consider using straight tax increases to make up the difference. Coun. Robert Dumanowski was the most vocal supporter of a new municipal consent and access fee, and then railed against higher than proposed tax increases to stand in their place. On Friday, he said the options should be considered a “this side or that side” argument. “It’s not negotiable that we’ll have to find a compromise to move this issue forward,” he said. “I’m committed to being flexible. If everybody digs in their heels to take some principled stance, it’s going to get us no where.” City administrators proposed several major policy items they say will raise about $10 million per year in revenue by 2022, including a new utility fee for residents. Over the same time, a cost-cutting program combined with new income would shrink the budget requirement by a total of $12 million per year. Coun. Phil Turnbull suggested approving a lower fee for 2019, filling the gap with utility reserves, then re-evaluating the financial viability of energy profits, all the while searching for more budget savings. He admonished Dumanowski during debate on June 18, but this week said councillors are discussing solutions. “It’s got to be a balanced approach,” he told the News. “I think we can find more savings.” As it was left, councillors had rejected imposing the utility fee, and voted in favour of an amending motion by Coun. Kris Samraj to consider a steeper tax hike — a total of seven per cent — to make up the difference. Council will have to vote on the tax proposal when it rises from the table. To reconsider the fee would require a two-thirds majority, or six votes on the nine-member council. A municipal consent and access fee would see the city’s utility pay rent on rights-of-way to the municipal government, providing a measure of stable income, unlike a dividend. The practice is common in other cities, when the charge is recovered from consumers of the often private utility. But in Medicine Hat, the absence of the fee was considered a clear sign of local utility rate advantage. Administrators say the entire budget goal is to find about $3 million per year in either new taxes, fee or business revenue, or lowered costs. That would reduce the annual shortfall from $16 million this year, to about $4 million per year in 2022. Phased in over three years, the fee would account for about half the amount administrators are seeking. Charging rates lower than other municipalities would collect $2 million in the first year, $4 million in the second, then $6 million in 2021. At the same time, taxes would also rise by a planned 4 per cent each year, equal to about $2.8 million, with half to cover new spending and inflation, and the rest to fill the gap. 25
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