City balances budget off plunge at the pumps

By COLLIN GALLANT on October 7, 2020.

cgallant@medicinehatnews.com@CollinGallant

The city’s financial picture has brightened since the onset of the coronavirus pandemic, and by some measures even better once cost savings from facility closures and the drop in fuel prices are factored in.

Mid-year financial statements presented to city council’s audit committee on Tuesday show that to Aug. 31, the overall city budget was showing a $500,000 favourable variance.

However, operational impacts have been “significant” and the savings mostly come from $720,000 gained on better gasoline and diesel fuel contracts.

“To year end we’re projecting a balanced budget and we do have strong budget control,” said Dennis Egert, the city’s corporate services commissioner.

Division officials have just begun applying a potential $7.5-million grant from the province, announced this month, to cover added expenses and lost revenue against operating results.

The June financial statements predicted similar figures, but initial estimates assumed facility closures to year end, dependent on a large number of variables.

Committee member, Coun. Jamie McIntosh, remarked that considering the situation last spring, and lingering unknowns, the results are reassuring.

“The fact that we’re talking about a balanced budget, when four months ago there were so many unknowns, is a major positive story,” said McIntosh.

Administrators credit mitigation measures they took to cut expenses after many city facilities closed and general economic activity crated in March to June period.

But they stated losses will compound to the end of the year, leading to a $1.5-million loss. That will eat into what was projected even in June to be an operating surplus by year-end.

The report also details that after a tumultuous spring in the financial markets, the city’s outside equities investment fund is essentially back to par for the year.

Lower commodity prices and sales combined to hamper the city’s energy and utility interests.

The net effect of closing facilities and laying off staff was calculated as an $800,000 gain at Aug. 30, but would reverse to a $900,000 loss as rec centres open up at less than capacity.

That will mean a $1.4-million drop in revenue in municipal operations, not including tax cancellation measures totalling $3.9 million that will be replaced with reserve funding.

The combined outlook is now predicting revenue of $73.5 million for 2020, about $5.5 million less than predicted, and mostly due to lower sales.

In terms of investment funds, the city’s AIMCo. managed long-term fund dipped briefly into negative territory in mid-March, but has since recovered, according to a treasury report.

The market value of the fund, created by $175 million in deposits over three years, was worth $197 million at the end of August.

That translates to 0.10 per cent return over the entire eight months of 2020.

Internally managed money for short-term use, totalling $195.4 million earned 1.4 per cent in the period.

“In the news they’re always reporting when the Dow plunges, but there’s been a remarkable recovery,” said chair, Coun. Darren Hirsch. “We’ve rebounded.”

In a breakdown of COVID-related issues, the report states that city land sales are $1.2 million less than projected due to fewer residential lot sales.

Revenue in planning and development (mainly from permits and business licensing) and the Medicine Hat Regional Airport is expected to be $1.2 million by year end.

A bright spot, the city’s fleet expenditures gained significantly from fuel prices that fell to as low as 70-cents per litre of gasoline in April.