City’s next budget may need some major recalibration

October marked the one-year anniversary since the most recent municipal election, an exercise that largely provided a steady-as-she-goes mandate to elected officials at city hall in Medicine Hat.

So steady-as-she-goes, it turns out, that the onequarter mark of the current council term passed two weeks ago without much notice.

However, those easy summer days are winding down.

A new city budget approaches and with it the need for city councillors to re-endorse its standing longterm budget plan.

“Financially Fit” seeks to cut out a structural shortfall with cost cutting and tax increases. Until it balances out, tens of millions of dollars will be drawn out of rapidly dwindling reserve funds to make up the difference.

With eight years to go, the gap is about $16 million, with four- and fiveper-cent tax increases on the full horizon for the foreseeable future.

Of course the initial year of any council term is essentially used to set up the next three, and such was 2018.

A four-year budget is due in January that will carry the city operations past the next election in 2021.

But the last 12 months has featured some heated debate.

Councillors were deeply divided about the imposition of a new utility fee that was eventually scaled back and tagged with a three-year deadline at which point the municipal consent and access fee will have to be renewed.

The fee itself is a crucial, philosophical issue for the city, which has in its very DNA the idea that low cost, public utility service is as much the “Medicine Hat Advantage” as low tax rates.

Those rates were kept low by profits of the city’s business units, chiefly natural gas production, which are now gone, spurring city budget authors to action in 2016.

The year, of course, has been highlighted by two major economic announcements — the addition of Hut 8 data processing facility and the Aurora Cannabis production facility to the economic landscape.

The city scored two big wins last spring, and they’ve progressed, or in the case of Aurora, is progressing, at breakneck pace.

That seems to feed into a clarion call from city councillors and business leaders — both allergic to tax increases — who want to “grow the tax base” to offset the need to raise taxes.

But that’s a long-lead proposition considering development costs money to taxpayers today, and simply won’t occur in the case of Medicine Hat’s two headline economic development projects.

Hut 8’s operations are largely exempt because most of its assessment is covered by a machinery classification that isn’t charged in Medicine Hat.

As the News revealed in late September, property taxes are being phased out province wide for greenhouses and other intense agricultural operations inside corporate limits of a city or town in Alberta.

When Aurora is operating, sometime next year, it will be 70-per-cent exempt, with the level rising to 100 per cent in 2022.

The benefit is to the city’s power generation company via two massive power supply agreements.

One has already played a large role in quadrupling of profit forecasts for the power plant.

Financially Fit model is explained as a series of levers for council to adjust, each controlling some facet of costs or revenue at city hall.

We’ve heard plenty about new power plant revenue, but a larger recalibration could be required as part of the next budget.

(Collin Gallant is a News reporter. To comment on this and other editorials, go to www.medicinehatnews.com/opinions.)