July 20th, 2024

City budget proposals suggest operating expense freeze, among other measures

By Collin Gallant on June 26, 2024.

Repaving along Dunmore Road continues this week as Medicine Hat city council begins discussions about capital spending priorities for the 2025-2026 city budget.--News Photo Collin Gallant

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Early budget proposals would see departmental spending frozen at current year levels through 2026, budgeters said Tuesday at a special meeting of council.

The requirement that managers absorb higher inflation “amounts to a cut” over two years, city finance officials said, but a slightly higher than expected tax increase would be needed even with other efficiencies and new spending.

The expected tax increase would now be 5.1 per cent, finance official Aaron Hoimyr said, about 2 per cent of which is related to the additions to the two-year capital plan proposal from staff that was presented Tuesday.

That’s a $36-million capital plan and adding $5.3 million in operating expenses for 55 projects whittled down from a list of 82.

“There are affordability issues in the city, but affordability is not the only issue that the city is facing,” Hoimyr said. “There are social, economic and infrastructure challenges as well. We’ve tried to outline the concept of cost and benefits … there are real costs that must be born by the tax or ratepayer. It’s a fine line.”

The tax increase, holding departmental budgets, along with other cuts totalling $2 million and an increase of utility revenue and investment returns, now worth $8 million, would bring the budget into balance.

Mayor Linnsie Clark said that in terms of an operating budget freeze, she was concerned about implications on service levels.

“There will be consequences and it’s difficult for us to make decisions without knowing the impact,” she said, attending via video conference link.

Hoimyr said discretionary spending areas are mostly affected and a service level “inventory” was being prepared for final budget talks in the fall.

Council members will now study the new capital and operating proposals before reconvening July 9 to focus on the project list in the third of seven special budget deliberation sessions. Council will finalize the list July 15 at a regular council meeting.

Councillors received general financial assumptions in April, and will meet four times between Oct. 22 to Nov. 13 in final deliberations. The budget must be passed by year end.

The projects list introduced Tuesday would translate to about a 2 per cent increase to property tax and also use about $4.5 million in cash from the operating reserve.

Capital investments would also have an effect on utility rates, including 4 per cent upon completion for water, sewer (2.48), solid waste (4.57) and electric distribution (0.1).

Among the largest new growth capital recommendations is the construction of a food waste composting facility, $9.5 million; Kipling Street water main twinning, $6.5 million; Brier Park sewer, $4.9 million; development incentives, $2.6 million; Riverside Third Street upgrades, $1.5 million; downtown street upgrades, $1.5 million; and landfill compacting, $1.5 million.

Among the largest of operating additions are funding for the police service’s downtown street patrol, about $300,000 per year in operating expense, and a similar amount for a recommended expansion of Special Transit service.

The economic development office is requesting $1 million to launch a land utilization and marketing program.

Not recommended, or “deferred” to future budget consideration, include a proposal to add solar power generation arrays on some major city facilities ($3 million), repairing irrigation lines on the provincially owned Gershaw interchange ($2.5 million) and more general intersection improvements ($2 million).

Left out of operating program recommendations for 2025-26 are the city’s high-profile donation to HALO air rescue society, worth $500,000 per year.

Also recommended for the cut would be a continuation of the $1.5 million per year in utility relief for low-income Hatters who qualified for “Fair Entry” subsidies (though general subsidies on bus passes and facility passes would remain).

Inserting those items back onto the list would add another 1 per cent in tax increases unless corresponding cuts were made, officials said.

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