Dennis Egert, managing director of the corporate services division, discusses the proposed 2023-2024 city budget on Friday. The plan moves to Monday's council meeting for discussion and a vote later this month.--News Photo Collin Gallant
cgallant@medicinehatnews.com@CollinGallant
The proposed city budget would end the use of reserve cash to balance the budget in 2025, instead using interest from investments in the utility dividend but also require a 4 per cent tax hike in each of the next two years, according to documents provided to the media on Friday.
The 2023-2024 city operating and capital budgets will be officially presented at Monday’s council meeting, then move to a new deliberations process before it is voted on next month.
“We believe it strikes a reasonable balance between fiscal sustainability and organizational health,” said corporate services managing director Dennis Egert, during an overview of the plan with the media on Friday.
It calls for no new large capital building or road projects in the next two years, modest growth in the workforce after pandemic reductions and also expects normalization of operations and non-tax income.
But, it also assumes high inflation, potentially less money from the provincial government and higher borrowing costs.
In total, city spending would rise by about 10 per cent to $136.6 million, two-thirds of which would be paid for drawing more investment income.
The remainder would come from higher taxes and an additional $3 million per year from higher “municipal and consent fees” on utility bills.
Current city council members received the full budget document late Friday afternoon when the public agenda package for Monday’s meeting was released.
New this year, budget deliberations in a “committee of the whole” format will take place on Nov. 16, before it is taken up again with a public hearing on Nov. 21 or Dec. 5. The budget, including utility fees, must be adopted before Jan. 1, 2023.
Total utility fee increases on bills would be 2.8 per cent higher next year, translating to about $11.75 per month for the average home, and 3.5 per cent higher ($14.55) in 2024. That is along with resetting fixed gas and power rates that are currently well-under record-setting rates on the open market.
The municipal budget gap previously filled by direct withdrawals of reserve cash would shrink from $11 million next year, to $6 million in 2024, then zero after that.
In its place would be cash from a new dividend model from an investment fund built up with profits from the gas and power production units.
That would complete a process launched in 2015 to remove dividends from the city’s volatile gas and electric businesses with cost cuts and tax increases.
The council group, however, pushed back hard on a general schedule of 4 per cent tax hikes, calling it unsustainable for taxpayers.
Instead they backed an “Accelerated Financially Fit” program that concentrated more on cost cutting and new revenue from assessment growth and investment income.
The new budget would return 4 per cent increases, in part to battle general inflation, estimated at 4 per cent on goods and services the city purchases.
Increased cost of labour and wages is set at 2.5 per cent higher as union contracts come due. The budget assumes a 1 per cent increase in assessment value (new taxable development) going forward, up from 0.5 per cent forecasts in the last budget.
The city power plant and gas production are also expected to have a strong year with highly volatile markets continuing in 2023, but returning to more moderate profit after that.
Egert said city municipal and utility operations are not immune to inflationary pressures affecting the wider community.
Interim city manager Glen Feltham said the budget includes benefit for taxpayers from large reserves the city holds, worth nearly $600 million, but also benefits from decisions to close large portion of petroleum operations.
The city had 4,500 active wells in 2018, which operated at a net loss of $30 million per year. Today, about 800 remain, and the difference has allowed the city to store an additional $200 million into investment funds that flow cash back to partly offset taxes.
“Some very good decisions have been made in the recent past,” he said.
For 2022, the city plans to move $83 million in commodity dividend to the Heritage Savings Reserve ($25 million) and the balance to another restricted account.
The city would also reinstate a transfer of profits from other utility operations, as much as $3 million, to the municipal operating budget after using the cash last year for infrastructure spending.
According to the plan, the size of the city workforce will increase by 27 next year to 1,060 full-time employees – still lower than the figure three years ago before reduced pandemic operations led to a round of early retirements and positions left vacant.
The city would continue with infrastructure rehabilitation programs for sewer roads and other city assets, but has not included major new buildings or utility corridors that would affect the tax rate.
“What needs to get done in the next two years will get done,” said Vanessa Bonneville, city controller, describing project priorities. “After that, it came down to affordability.”
