Councillor questions revenue profit strategy
Phil Turnbull wants to know why current Hatters can’t benefit from recovering energy division with property tax breaks
One day after council released its strategic priorities for the next four years, one councillor is going against the grain saying a firm stance to cut energy dividends out of budgets should be more flexible.
Phil Turnbull told the News the city had no choice to adopt the “Financially Fit program” to raise revenue via taxes when gas and power dividends dwindled three years ago.
However, with “utility divisions healing,” residents will expect some relief from tax increases slated to be in the four per cent range each year until 2026.
“What happens if we start making $18 million to $20 million per year?” asked Turnbull, chair of the council’s utility committee. “Shouldn’t the shareholders — the citizens of Medicine Hat — share in that? I want make sure we have the ability to say, let’s take a year off, and adjust.
“Nobody should do something you can’t review.”
He says he’s still supportive of the plan to cut into a current $16-million operating budget gap, but that a regiment of tax increases could become increasingly hard for the public to accept.
Some councillors are saying it’s something they’re willing to discuss as they go into discussions next month ahead of the 2019-2022 budget.
Council’s strategic priorities were developed in January by the recently-elected group of nine councillors. It states the city will continue with a plan to replace energy dividends with more traditional revenue. By 2022, it aims to raise another $12 million per year in spending cuts or tax and fee increases.
Coun. Darren Hirsch has opposed a number of new spending projects this year and tells the News revenue options should be considered as well.
“I’m in favour of anything on the revenue side that’s sustainable,” said Coun. Darren Hirsch, citing a previous $23million dividend is likely too high to depend on year after year.
“Maybe it’s $5 million, but we need to take a look and have that discussion. I’d like to get to the a plateau of relative stability.”
Profits could indeed be returning to the city’s business units.
Budgeters predict cost cutting and a sell-off of gas wells last year will move the gas production business wholly in the black for the first time in five years.
Administrators also state that after booking an operating loss in 2016, the power plant should show a relatively small profit in the $1-million range last year.
The city’s 2017 actual operating results should be available in May. Those results won’t include a recently announced power deal with Hut 8 data processing that could add millions in profits.
Financially Fit aims to increase revenue from taxes and users fees as well as cut costs to reduce an operating budget gap that was previously filled by a $23-million dividend from the city’s gas production division.
This year the gap is predicted to be only $16 million, thanks to some building closures, a wage freeze last year and a tax increase of four per cent last year and another four per cent planned for 2018.
In 2016, the city also changed how it calculates dividends and how they can be spent. Until 2026 (10 years after Financially Fit was launched), half of dividends could be used to replenish reserve funds currently filling the gap.
The rest would be hived off into a Heritage Savings reserve. After 2026, all dividends would go into the fund.