Recent critics of city operations are suggesting council freeze taxes using depleting reserve funds, even as energy division profits dry up.--NEWS FILE PHOTO
@@CollinGallant
Critics are maintaining calls for the city to use reserves built from power profits to offset taxes even as officials warn of a crashing electricity market and say the money is needed to stabilize spending for years ahead.
At two meetings this week administrators told council members discussing the city budget that lower than expected power plant profits this year will hurt reserve balances that are needed to offset tax increases for capital construction.
Bringing the expected tax increase next year below 5.6 per cent would heavily impact city services, councillors heard, and millions in utility revenue and reserve cash is already being used to balance the budget.
Sou Boss of the Medicine Hat Utility Ratepayers tells the News her group is still calling for cost cuts and using past profits for outright tax abatement.
“It seems the benefit to the citizens is not transparent,” she told the News on Friday. “It’s an affordability crisis, and how are we benefiting if it’s going up?
“There has to be a balance that can be found.”
Councillors said after budget presentations Tuesday that they are confident staff is focused on cost containment, and more will be known next month when the 2025-2026 municipal budget is discussed.
That operational budget most affects tax rates, though utility revenue will already provide $3 million municipal revenue in 2025, and another $5 million from investment revenue from previous utility profits held in reserve.
That wouldn’t come off the top of tax bills, but fill a structural deficit left over from when the city used huge natural gas production profits to offset taxes. Since 2014, the city has used a decreasing amount of reserve cash each year to balance the budget. Officials say closing that gap completely could be postponed until 2028, three years later than planned.
Coun. Robert Dumanowski says he still supports the two-year tax freeze he voted for during the last council term, which staff say has lowered city revenue by $7 million amid rising costs.
“I’m glad we gave the zeroes … we did the right thing at the right time,” he told the News. “It’s challenged us in post-COVID years when we now have significant uncertainty over inflation and capital costs.”
Local property tax requirements remained flat in 2020 and 2021, then rose 2.5 per cent and 4.3 per cent in 2023 and 2024, respectively.
The average proposed tax increase in six major Alberta cities, including Lethbridge, Red Deer, St. Albert and Airdrie is about 7.3 per cent in each of the next two years, according to local city staff.
That average is 1.7 points higher than the local proposal of 5.6 per cent, which includes $2.6 million in planned operating cuts, $11.7 million in lower capital spending and maintaining even workforce levels despite 10 new hires.
At Wednesday’s audit committee meeting, officials stated the power plant dividend, which was $134 million in 2024, will likely only provide $12 million to city coffers this year, due to falling prices and lower export sales on the Alberta power grid.
“If there’s anything we’ve learned over the last few months, is that we have to reduce our reliance on unreliable resource revenue,” said city accounting supervisor Aaron Hoimyr in conclusion at the budget meeting. “If it wasn’t for reduction (of power revenue) we would have been in a position to have lowered the tax (increase) below 5.6 per cent as requested by council.
“Additional cost reductions are not recommended at this time, but would be part of ongoing work into 2025.”
At 5.6 per cent, the impact on the average residence in Medicine Hat would be an extra $250 per year in 2026, while a 3.5 per cent increase would add $140.
Earlier this month, council passed a new policy for the Heritage Savings Reserve, which would earmark future investment returns from the renamed “Medicine Hat Endowment Fund” to the municipal budget.
