City needs to ramp up effort to shrink its budget shortfall
Medicine Hat will need to speed up its plan to erase a structural deficit in the municipal budget by 2027, city hall finance officials have told a council committee.
That is due to new financial challenges posed by the pandemic, affecting revenue and service delivery, provincial and global recession, and the expectation of another rough provincial budget due in March 2021.
“When you add up those headwinds it takes us way back,” corporate services commissioner Denis Egert told council’s audit committee on Oct. 6. “The execution (of Financially Fit) will be accelerated.”
In 2017, council passed the “Financially Fit for the Future” budget plan to tackle a $24-million gap in revenue that opened up when the city’s natural gas division halted dividends.
The plan was to see phasedin tax increases (four per cent a year), matched by reduced spending, wage freezes and generally lowered service levels. Council voted to close The Arena and Heald Pool.
In the meantime, reserve cash has made up the difference, but that has dropped from the full $24 million in 2017, to about $15 million in the 2020 budget.
However, with new budget pressures, Egert stated in a “CFO report” to the committee that even more needs to be done.
His office is new reviewing city programs, making a new survey of potential cost cuts as well as new revenue generating activities.
“We’re envisioning a scenario of significantly reduced property tax rates and reduced assessment growth,” he said. “The overall goal is to reduce the cost structure of the city.”
The process has advanced already this summer, he said, and announcements will be made “periodically.”
A general update will come in December, when the next update to the city’s four-year budget is due.
Mayor Ted Clugston told reporters in late September that he expected a larger than normal annual update this winter, but didn’t expand on the topic.
To the audit committee, Egert stated the city faces new challenges of dealing with the pandemic and great changes to revenue and challenges to delivering services. The price collapse of oil hits the city’s energy interests, and revenue will be strained as a global recession settles in.
As well, the city has absorbed cuts in transfers from the province in two provincial budgets and the third is due in March.
The city works off a four-year budget cycle (the current plan expires after 2022), but last year a more in-depth presentation examined the effect of lower transfers from the province.
The city again expects lower transfers from the province in the new budget due in March.
Egert also said his department will examine each of the city’s business units in returns of dividends, as well as the potential and effectiveness of awarding tax incentives to bolster development.