November 21st, 2019

City not ready to factor carbon tax savings into budget

By COLLIN GALLANT on May 16, 2019.

The Carbon Levy could decrease this year as a provincial price on emissions will likely be replaced by a lower national price, but the City of Medicine Hat isn’t yet adjusting its budget for a potential cost savings.

The incoming United Conservative government says it will scrap the charge set by the province at the end of May, leading to the likely establishment of the federal rate.

For the City of Medicine Hat, which heats substantial square footage of civic buildings, including five arenas, and operates an 800-vehicle fleet, it could mean a one-third reduction on the fee for about six months.

But with uncertainty involved in how the dispute between the two higher levels of government will be resolved, budgeters aren’t ready to change their projections.

City council adopted its four-year budget plan in late December, including assumptions that the Alberta plan would be in place and increase on a set schedule until 2022.

“We made assumptions at the time based on what we knew about legislated (rates),” said Dennis Egert, the city’s general manager of finance. “In the case of the levy, it was incorporated in to our estimations for utilities and cost (to operate) vehicles.”

The city’s whole-year carbon levy bill in 2018 was $338,000 related to natural gas for heating its facilities, and officials say another $134,000 attached to gasoline and diesel fuel. The charge is not applied to electricity.

Such a change likely wouldn’t result in budget amendments, said Egert, but changes are closely analyzed.

“Over the course of four years that will see more spending in one area or less in another, and we track that, and there are costs that slide from one year to another.”

The overall goal of the city’s budget plan is to seek cost reductions to offset tax increases to fill a structural budget deficit created when $24 million in annual natural gas dividends were cancelled. That gap was trimmed to $16 million in 2018, and the difference made up with reserve funds.

The complete elimination of the carbon levy could reduce the city’s compliance cost by about $500,000, savings that would be equal to about 0.75 per cent of property tax revenue.

The schedule in the adopted budget is to set tax increases in the 4 per cent range in each of the next four years, with half to fill the shortfall and half to cover costs. Meanwhile, the city administrators were also tasked to find efficiencies or program changes that could save another 1.5 to 2 per cent per year to dampen the effect of general inflation.

“We’re actively getting our arms around where those cost savings are going to come from,” said Egert.

Alberta’s rate rose to $30 per tonne in early 2018, and wasn’t scheduled to increase again to $40 until Jan. 1, 2021.

The federal rate is currently $20 per tonne, but that’s set to rise to $30 in January. Also, the federal schedule of increases would see the price rise by $10 each year until it hits $50 in 2022.

The provincial schedule of increases had the rate stay at $30 until 2021.

Officials also stated that in 2018 the city utility department collected $9.2 million from customers on natural gas sales – revenue that it forwards to the provincial government similar to the GST.

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