By COLLIN GALLANT on November 16, 2021.
Changes to the 2022 city budget are on hold after Coun. Shila Sharps led an effort to table the document, which was presented Monday for approval, until more answers are forthcoming about Invest Medicine Hat going forward.
After 90 minutes of presentations and questions from council about Medicine Hat’s financial plan went by with under two minutes on the city’s budget for land sales and economic attraction, Sharps made the motion to call back interim department head Eric Van Enk to answer questions on Dec. 6.
It likely won’t cause a delay in passing the municipal budget – which suggests a 2.5% tax increase and some further cost cutting to balance the budget – which came forward two meetings earlier than usual this year.
“I feel there’s uncertainty surrounding Invest,” said Sharps after it was tabled by a 7-2 vote. “It was a huge election issue and we need to make sure 100% about what we’re approving … I’ve never been a huge supporter, but I’m a member of council and I’m here to hear what they have to say.”
The update included a new land sales forecast, and overall wage expenses due to “realignment” for some employees in the corporate services division.
The new city budget will now be likely voted on at the Dec. 6 council meeting, while budget changes to the utility division were approved Monday.
The municipal budget as presented would come close, but not quite, to erasing a structural deficit in Medicine Hat’s operating budget. It would also raise taxes to account for inflation while using much less reserve cash to pay for long-gone natural gas income.
Hatters would face a 2.5% tax increase next summer, following two years of “zeroes,” to cover higher inflation costs, and find two thirds of an $8-million shortfall in cuts or new revenue.
Only $2.5 million, or about 2% of the city’s $125-million municipal budget, would be paid with reserves. That’s one-10th the amount used when natural gas profits disappeared eight years ago.
Mayor Linnsie Clark described the budget as “fair and reasonable” but it’s also the final year of a budget cycle before a new two-year budget is drawn up next year with input of the new council.
She didn’t expect wholesale changes once council debates it in December.
Corporate services division head Dennis Egert says it maintains a “Medicine Hat Advantage” when combined tax and utility rates are compared to other city’s in the province.
“We continue to remain competitive in this area,” said Egert.
Coun. Robert Dumanowski said the budget is complex but shows the city’s financial picture is brighter.
“We’re in a situation that we would have thought nearly impossible six or seven years ago,” he said. “It suggests there are positive things around the corner.”
This year’s increase will offset the effects of inflation and the loss of grants paid by the province in lieu of paying property taxes on provincial property, said Egert.
The city will also be required to begin raising wages by 2% for most workers after a two-year wage freeze, during which time council also froze property tax rates.
Last year, $15 million was cut from the budget to keep rates at 2019 levels, and that is expected to be completed by year’s end through layoffs, facility closures, a corporate reorganizations, transit changes, said officials.
At the same time, long-term investments have performed better than expected.
The 2.5% increase, coupled with an expectation of 0.5 assessment growth, would essentially handle inflation.
Efforts to reduce reserve spending in the budget and arrest a structural deficit would be lessened but mostly attacked with $2.5 million in spending reductions.
“That really aligns with longer-term (inflationary) average,” said Lola Barta, the city’s finance director. “If we’re not keeping up with inflation that becomes a longer-term problem. We’ve essentially had no tax increases for two years. A third year would put real pressure on our expenses.”