Financially fit goals reached by 2025: City

By COLLIN GALLANT on April 5, 2023.

cgallant@medicinehatnews.com@CollinGallant

There is no mention of ‘financially fit for the future’ – accelerated or otherwise – in the city’s 2022 financial statements, released Tuesday, but officials say the goals of the budget-balancing exercise in Medicine Hat are on track.

Financially fit was launched in 2015 to carve out dividends in budgeting from the city’s shrinking natural gas company, and will be accomplished in the 2025 budget year, said officials.

“We are stop-gapping the difference with reserves, but we’re really looking forward to 2025,” said Dennis Egert, managing director of city’s corporate services division.

Budget authors had planned to use $9 million in reserve funds last year, but eventually needed another $8.9 million to deal with higher costs due to inflation, dry weather, costs to cleanup after the July windstorm and lower business activity blamed on the COVID-19 pandemic.

Reserve cash will account for $5 million in the 2024 budget, which has already been approved, and the 2025-26 budget is forecast at this point to require no withdrawal.

“I’m relatively happy with it, it’s $9 million (this year), but consider where it was at the worst of it – $45 million, down to $24 million and on,” said Coun. Darren Hirsch, chair of the audit committee which received the report.

“There’s no mention of ‘financially fit’, but we do have to tread carefully.”

Overall, the statements also show a phenomenal year in electricity sales, lower debt compared to both revenue and assets held, although a down year for city investments.

The commodity business actually recorded an $84-million “write-up” in value, after years of writing down the assumed value of the business.

Cash and investment holdings at Dec. 31 totalled $682.1 million, including $409 million in restricted funds, such as grants and money set aside for a certain purpose.

Of that, $630 million is invested and returned a 6.86 per cent loss during the year, about even with benchmarks, while treasury officials expect a positive 6 per cent return in 2023 and 2024.

“Anyone with investments would have seen much the same in their own returns,” said Egert, who noted the city’s recent update to investment allocations protected it from a theoretical 10 per cent loss.

“If we were more conservative, we’d have been down even more,” said committee chair, Coun. Darren Hirsch. “That’s the lesson of diversification.”

Total city debt sat at $465 million, about half the allowable under provincial regulations.

The debt-to-revenue ratio dropped, but largely as a function of higher than expected earnings in electricity and natural gas sales.

The energy commodities business earned three times forecasted revenue at $187.9 million, as sales of power alone topped $307 million – double projections due to higher prices captured on the export market.

While the financial position of the city improved, municipal operations faced inflation, less funding from the province and generally lower economic activity.

“We’re not sitting idly by but we’re responding to these challenges,” said Egert, who said loss of revenue was offset to a degree by maintaining staff vacancies. “It’s important to note that we’re still emerging from COVID. From where we were one year ago, we’re fully operational today.”

Fine revenue was nearly $700,000 lower due to a change in provincial fine revenue distribution.

The Medicine Hat Regional Airport showed a profit in 2022 of $120,000, compared to a $1.2-million budget, while lower rentals at city parks and rec facilities contributed to a $1-million drop in revenue.

The city’s annual report for 2022 will be presented to council at its April 17 meeting.

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