The city plans to better define how money in the Heritage Savings Fund, which has now reached $200 million, is accessed.-NEWS FILE PHOTO
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A plan to define how the City of Medicine Hat plans to used “unrestricted” cash in its sizeable bank account would also better define how cash in the $200-million Heritage Savings reserve can be accessed.
That account was created in 2017 to stockpile any excessive power profits from the city’s energy interests for what was then loosely described as a future benefit of the citizens if the city ever got out of the energy production business.
But, there is no specific formal guidance in the bylaw about using the cash other than “for the future benefit of Medicine Hatters.”
For at least four years as the fund grew faster than expected, councillors have called for a more direct, present-day benefit, and initial budget proposals assume using its dividends in the 2025-26 city budget to offset tax requirements.
A bylaw amendment reflecting the change, presented to committee Thursday, would change wording to halt required deposits and change the name, allow withdraws to offset taxes and potentially fund economic development or facilities projects.
“It doesn’t have a defined purpose,” finance director Lola Bart told the corporate services committee. “Medicine Hat is privileged among communities in North America to have a fund like this, and there’s an opportunity to do something transformational with the (income) returns from the fund.”
“It’s not restricting the funds to the areas, but it would be a general funding stream for those areas of” fiscal sustainability, with tax offsets, economic evolution and diversification and livability measures, like facilities and upgrades.
Council would approve use of dividend funds in the budgeting process each year, said Barta.
Going forward the fund would be called the “Medicine Hat Endowment Fund,” and it would no longer receive deposits, but energy profits would be directed to sinking liabilities or as capital dollars for power upgrades as decided by council.
The plan will be presented to council on Sept. 16.
If approved, it would be the second time in four years the dividend formula for the city would be amended.
In 2017, then mayor Ted Clugston was a major proponent of creating the fund, which according to an original formula, received 50 per cent of power and gas profits and couldn’t be accessed other than returns of the investment after they were adjusted for inflation.
In 2020, the dividend formula was changed when the fund grew faster than expected to $44 million and councillors argued a relatively stable dividend from the fund could offset expected tax increases on a dependable basis.
Finance officials then focused on building the fund to a $200-million balance, which they argued could provide a stable two or three per cent dividend without eroding the principal and adjusting it for inflation.
With returns and new money, it grew to $71 million in 2022, then ballooned after banner electric sales years in 2022 and 2023, and now sits at $200 million.
