Utility fee defeated. Now what?

Split vote nixes municipal consent and access fee, then approves major tax hike, before council finally tables entire issue

After a proposed new utility fee failed at Monday’s city council meeting, members approved a surprise amendment to nearly double proposed tax increases to make up the difference was accepted, then tabled it.

Tune in next time for the thrilling conclusion to the city’s four-year budget assumptions.

During a rolling 90-minute debate on how the city could best meet its budget goal of erasing a $12-million reliance on reserves to account for longgone energy division profits.

Administrators and several councillors argued more stable revenue would come from a municipal consent and access fee, known as MCAF. That would bring in $6.3 million per year in 2022 to help balance a revenue gap currently at $16 million.

That fell by a 5-4 vote after others argued it was too large, hasty and, according to Mayor Ted Clugston, unnecessary, based on his belief that new power dividends are on the way.

Following that, five members approved a motion by Coun. Kris Samraj to replace fee revenue by boosting proposed tax increases from 4 per cent to 7 in 2019, and move to one-year budgets.

At that point the whole item was tabled until July 3.

“(We knew) this would be controversial and we saw that tonight — we saw a lot of passion from councillors, all of it justified,” Clugston said afterward.

During debate he “implored” council not to add the new fee, and later stated his opinion that a projected $33-million power dividend this year would be followed by others.

“Dividends are not a dirty word,” he said during debate. “The taxpayers have take a lot of risks with this utility and they deserve a dividend.”

In a similar vein, Coun. Phil Turnbull had suggested using $1 million from the forecasted dividend to lessen the fee next year, then decide if it was needed.

“We need to raise our revenue, or cut costs, or some combination of that,” said Turnbull. “A year from now we’ll know better what Genco (the city’s power generating company) is doing, and we’ll have another year to cut costs.”

Coun. Darren Hirsch, who earlier in the night called relying solely on tax increases a “suicide” scenario for the city, and eventually asked that the issue be tabled.

“We need to take a little bit of a refresh on this, have another look and get administration to provide some feedback that’s needed for good decision,” he said.

Hirsch had supported the fee, saying the city had paid $70 million in reserve funds to avoid tax rate shock since 2015. Even with the fee, another $35 million would be required before the books would be balanced in 2026.

Samraj had said he would prefer the money for municipal budget be made up strictly via tax increases, which he said would put local tax rates on par with Lethbridge.

“It’s going to be the same either way,” said Samraj of the tax-versus-fee issue. “What it does is make it clear and act as a wake-up call for people. This is a conversation that we’ll have to have with people over and over again.”

Coun. Robert Dumanowski supported the MCAF option, and later called a 7 per cent tax increase “untenable.”

“(MCAF) is an approach used by every municipality outside of Medicine Hat,” he said. “Financially Fit with the MCAF is the solution.”

Coun. Jim Turner voted against the fee in 2016 but supported it on Monday.

“We’ve had the lowest tax rates for years, and we’re in a mess,” he said. “Do we kick the can down the road some more? Or do we make the tough decision?” Coun. Julie Friesen unsuccessfully proposed a slower fee phase-in, then eventually cast the deciding vote on scrapping it entirely.

“An additional tax will impact people — I respect all the points, but this kind of tax hurts those who can least afford it,” she said. “Having said that, we can no longer rely on revenue coming in.”

Jamie McIntosh said new revenue from the fee was needed.

“The next three years is a window for us to move forward,” he said.

Coun. Brian Varga opposed the fee saying “this will affect everyone.”

The budget assumptions proposed on Monday were to give authors some targets as they prepare to present the next city budget in January.

Commissioner Brian Mastel said “we’re grappling with a sizable but not insurmountable shortfall.

“We’ve taken big steps in the last two years.”

A once $23-million shortfall is $16 million this year, and would be about $4 million in 2023, according to the presentation.

Property tax increases of four per cent would half cover new costs and half replace the former energy dividend.

The city would also seek to collect an additional $1 million over time by raising fees and charges by moving to a user-pay model.

Over that time officials hope to gain $1.6 million in operational savings by reducing service levels, and also seek to save $500,000 per year in operational savings meant to offset general inflation.