Budget 2025-2026

Information about this project has been moved to https://www.medicinehat.ca/en/government-and-city-hall/current-and-previous-budgets.aspx

• Council approves 2025-2026 budget, 5.6 per cent property tax increase each year

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  Medicine Hat – Medicine Hat City Council approved the 2025-2026 budget Monday night that includes a 5.6 per cent property tax increase in 2025 and another 5.6 per cent in 2026.

  Based on the 2024 average assessed value of residential properties ($315,000 for a single-family home), Medicine Hat homeowners can expect a municipal increase of approximately $10 per month in 2025 and again in 2026.

  Residential utility customers will see a one per cent increase in utility rates, while commercial rates go up five per cent and industrial customers increase by four per cent. Medicine Hat’s 2025 utility rates for the average residential customer remain $768 per year lower than the average current 2024 rates of other Alberta cities.

  The budget is one of the City of Medicine Hat’s primary financial planning tools for aligning strategy with appropriate financial resources. It is a key accountability tool for ensuring the City’s financial resources are being spent in alignment to the strategic vision of Council.

  The City of Medicine Hat’s 2025-2026 budget reflects administration’s commitment to sustained prosperity and well-being of this community, including competitive taxes and utility charges, while ensuring fiscal capacity and flexibility to address the challenges and opportunities that lie ahead. This focus of balancing the needs of today with the requirements of tomorrow became the theme of this budget development process.

  “Today, the municipality is facing revenue pressures due to a historic budget gap, foregone property tax revenue during the pandemic, reduced fine revenues and development fees, and declining investment revenues. For tomorrow, we must prudently safeguard our resources to maintain infrastructure and services, face energy transition, meet our abandonment obligations, and grow for the future,” said Corporate Services Managing Director and Chief Financial Officer, Dennis Egert. “We worked diligently to present a responsible budget that maintains service levels in the midst of rising costs, while investing in the services and infrastructure our residents depend on.”

  Budget presentations to City Council began in April and continued throughout 2024.

  “Council wanted the budget process to be as transparent as possible. We hope that walking through its development at open public meetings has led to greater understanding both for City Council and community members,” adds Egert.

  The historic level of earnings experienced by the City’s Energy Business over the past few years are not anticipated to continue into 2025-2026. The approved budget sets the City on a path to close the municipal budget gap without reliance on energy dividends by 2028.

  The budget includes $449.5 million for operating expenses and $99.4 million for capital projects in 2025. In 2026, the operating expense budget is $460 million and the capital spend is $112.9 million.

  Highlights of the budget include the following:

  • $19.3 million in growth capital
  • $10 million in new operating initiatives
  • $193 million in sustaining our existing infrastructure
  • Zero per cent inflation increases to non-salary costs for all departments but for unavoidable cost pressures
  • 5.6 per cent property tax increase in 2025 and in 2026
  • $10 million withdrawal from Medicine Hat Endowment Fund (over two years) to support Council’s Strategic Plan and reduce the Municipal Budget Gap
  • 2025 utility rates that are lower than the 2024 rates of other Alberta cities

  For a full breakdown of the City’s budget, visit medicinehat.ca/budget.

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  For media inquiries, please contact:
  media@medicinehat.ca

• Final budget presentation

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  Administration proposed the final 2025-2026 Budget to Council on Monday, December 2 for approval. View the:

  • Budget Briefing
  • New Growth Opportunities
  • Business Plans
  • Budget Highlights

  Read the presentation | Watch the meeting

• Watch: Committee of the Whole - Land Development and Real Estate

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  On Wednesday, November 13, 2024 City Council members gathered in an open Committee of the Whole to hear about the Land Development and Real Estate budget. This budget accounts for the land inventory owned by the City of Medicine Hat, both purchases and sales, to support development.

  Watch the meeting (External link) | Read the presentation

• Watch: Committee of the Whole - Municipal

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  On Tuesday, November 5, 2024 City Council members gathered in an open Committee of the Whole to hear about the Municipal budget. The Municipal unit is in the portion of Medicine Hat’s budget that accounts for the “quality of life” for residents by providing governance, safety, roads, amenities, and facilities that residents rely upon for their daily lives. The primary funding source for the municipal budget is property taxes.

  Watch the meeting (External link) | Read the presentation

  
  

• Watch: Committee of the Whole - Energy Production

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  On Wednesday, October 30, 2024 City Council members gathered in an open Committee of the Whole to hear about the Energy Production budgets. Energy production covers both electric generation (power plant, etc.) and gas production (gas wells and abandonment/reclamation obligations).

  Watch the meeting | Read the presentation

• Watch: Committee of the Whole - Rate-Based Utilities

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  On Tuesday, October 22, 2024 City Council members gathered in an open Committee of the Whole to hear about the Rate-Based Utilities including water, sewer, solid waste (garbage/recycling), and electric and natural gas distribution.

  Watch the video here | Read the presentation

• Watch: Council Committee of the Whole - New Growth Initiatives 2

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  On Tuesday, July 9, 2024 City Council members gathered in an open Committee of the Whole to gain clarity about new growth opportunities that were presented for deliberation on June 25th.

  What are New Growth Opportunities? These are the options presented to Council that improve quality of life if we were to invest in new services, programs, operational initiatives, and capital projects in the upcoming 2025-26 budget cycle.

  Watch the video here (External link) | Read the presentation

  

  
  

• Watch: Council Committee of the Whole - New Growth Initiatives 1

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  On Tuesday, June 25, 2024 City Council members gathered in an open Committee of the Whole to hear about new growth opportunities for deliberation as we develop the City’s 2025-2026 budget.

  What are New Growth Opportunities? These are the options presented to Council that improve quality of life if we were to invest in new services, programs, operational initiatives, and capital projects in the upcoming 2025-26 budget cycle.

  Watch the video here | Read the presentation

  
  

  

• Budget Commitments

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  Budget Commitments

  The following five commitments underpin the 2025-2026 budget planning process:

  1. Address community needs and ensure excellent service: Our foremost obligation is to our community. We must prioritize initiatives that address the pressing needs of our residents and uphold a standard of excellence in the services we deliver.
  2. Balance affordability with the need to invest in City infrastructure and operations: It’s important to strike the delicate balance between affordability for our residents and the requirement to invest in our city's infrastructure and operations. We must make prudent investments today to lay the groundwork for a prosperous tomorrow.
  3. Ensure financial sustainability of our municipality: Our municipality's financial health, without reliance on our energy production business unit, is essential for our long-term viability. We must be committed to reducing our reliance on volatile commodity revenues through responsible budgetary practices and prudent management of resources.
  4. Thoughtful use of reserves for future needs: Our reserves represent a critical asset for addressing future challenges and seizing future opportunities, including energy transition, abandonment and reclamation obligations, and Facilities for the Future. We will exercise thoughtful discretion in utilizing these reserves to meet the evolving needs of our community and clearly articulate the intent of these funds.
  5. Alignment with Council Strategic Priorities: We also need to ensure that every dollar we spend aligns with council's strategic priorities and our corporate strategic objectives. We’ve launched our integrated planning process that includes the long-range forecast, business cases for all new capital growth projects, a criteria-based process to rank all the projects, and departmental business plans based on objectives and priorities. This will help to ensure we are only undertaking projects that are needed for our community and create long-term value for the city.

• How is the City's budget structured?

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  Four business units

  The City of Medicine Hat's finances are split into four distinct business units:

  1. Municipal:

     • The Municipal unit is in the business of improving the “quality of life” for its residents by providing governance, safety, roads, amenities, and facilities that residents rely upon for their daily lives
     • Primary funding source is property taxes
     • Cost-recovery model

  2. Land Development & Real Estate

     • Purchases land and develops it within the City for sale
     • Revenues are primarily driven by real estate market

  3. Rate-Based Utilities

     • Operating Segments: Water, Sewer, Solid Waste, Electric Distribution, and Gas Distribution
     • Rates are set using AUC rate making principles that establish the formula for calculating utility rates

  4. Energy Production

     • Operating Segments: Electric Generation and Gas Production
     • This is the group that generates electricity and supplies gas.
     • Rates are driven by market forces and therefore have a greater degree of risk and reward for the City.

  

  
  

  Two types of budgets for each

  Each business unit above will include two different types of budgets:

  1. Operating - like your traditional income statement highlighting the City's annual revenues and expenses. When we refer to 'budget gap' we are referring exclusively to the Municipal operating budget. The approved operating budget authorizes spending which has an expiration at the end of the budget cycle.
  2. Capital - identifies capital and infrastructure projects like rehabilitation of existing roads or the purchase of a new rec facility. Unlike the municipal operating budget capital budgets do not expire at the end of the year but carry on to the end of the project. In addition, a funding source must be identified for the capital project.

  

  The City further classifies those budgets as follows:

  Tier 1: Base Operating and Sustaining Capital

  • Maintain status quo services and infrastructure
  • Established by reviewing prior year budgets and spending trends and applying inflation

  Tier 2: Operating Initiatives and Growth

  • How the City intends to invest its time and finances to introduce new services, programs or capital infrastructure for the City
  • Tied to Council’s Strategic Plan and thus the primary focus of deliberations with Council

  Tier 3: Other Items

  • Amortization, interest on debt, etc.,
  • Driven by tier 1 and 2 as well as other assumptions
  • Typically a supporting act for other discussions thus are typically not highlighted individually

  
  

  Reserves

  It is important to understand why we need to keep reserves:

  1. Future asset planning
     • The City of Medicine Hat invests an average of $110M every year in capital projects, but that investment can vary greatly by year depending on the needs each year. It is prudent management to store funds away every year to help pay for capital when it arises as opposed to expecting residents to pay as these expenses arise.
     • For example, if you lived in a condo, your condo board may expect to have to replace the roof 20 years from now, instead of making the condo residents pay the whole cost of the expensive roof repair all in the same year, they may decide to start collecting now and spread the cost over 20 years. The city does the same thing with its reserves.
  2. Help the City to grow
     • Beyond asset planning, the reserves also provide an opportunity for the City to expand services, amenities, neighbourhoods and much more to improve the quality of life of its residents. Reserves afford the ability of council to designate funds for future projects.
  3. Contingency
     • Municipalities are not allowed to run deficits (governed by the Municipal Government Act). In years where the City doesn't collect enough revenue to cover costs, we use reserves to cover the gap.
     • In the City of Medicine Hat we have been working hard to close the budget gap, however, even with a closed gap, there is still the possibility that the City could reach an operational deficit in a given year due to things like an unusually bad investment year, damages from a storm, flood or drought, or even an unusually snowy winter resulting in more snow removal than planned.
  4. Offset liabilities
     • Reserves are only one half of the balance sheet. The City also has liabilities.
     • At the end of 2023, the City had over $770 million dollars in financial liabilities. And the that only includes the liabilities that the City is legally liable for. It does not include costs like: The future costs to replace our aging infrastructure, or energy transition.
     • One way that the City tries to communicate its future liabilities is by restricting funds for future use. As a part of this years budget we will be recommending the designation of reserve funds to help pay for some large future costs that the City needs to consider to fund the requirements of tomorrow.
  5. Reduce debt
     • Debt is a lot more expensive than it was four years ago during the last budget cycle.
     • When the cost of debt is high, utilizing reserve funding can help reduce the burden on future generations for debt principle and interest payments.
  6. Steady, predictable tax increases
     • Reserves provide the ability for the City to plan for steady predictable tax increases by allowing the city to weather some of the impacts of inflation and to catch up its revenues over a more steady time period.
  7. Reduce the budget gap
     • Reserves reduce the budget gap by providing a base for investment income. Interest on investments can be funneled back into the regular budgets without having to draw on the principle.

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