Council Wrestling With Gloomy Financial Outlook

City council during Monday’s meeting which heard some sobering financial data regarding the future of Medicine Hat’s reserve funds and was hit with $32 million in budget amendments for 2026. (Photo Alex McCuaig)

Outgoing Coun. Darren Hirsch stated the last council were “lobbing a grenade at the next council” in the form of additional last-minute spending approvals at the October meeting.

The pin may not have been pulled on that financial bomb, but council is at least caught in a Chinese finger trap of even more funding requests and uncertain future pulling against the desire to keep taxes from rising.  

“This is absolutely not sustainable,” said Coun. Stu Young during Monday’s presentation of the second 2025 Tri-annual Management Report which forecast city reserves could be depleted in the next eight years except for the Endowment Fund. “If this is assuming every year a 5.6 per cent tax increase, we’re still going to result in this. Obviously, that’s not sustainable. . .This is a big deal and I’m not quite sure what we’re doing about it.”

Coun. Stu Young

That comment came even before council heard of the city’s energy division’s request for a $16 million budget amendment for its new southside electric substation and more than $15 million for required maintenance to turbines. Both amendments are being requested for the 2026 budget with council hearing the turbine maintenance is an advancement of work scheduled for 2027.

The report, originally scheduled to be presented just prior to the end of last council’s term, was deferred to Monday after the Oct. 6 Audit Committee was cancelled. It does not factor in the last council’s approval of millions required for an aquatic recreation facility, north end sports field complex nor costs associated with a buildout of the Saamis Solar Project.

“We’re moving in the wrong direction,” Kristen Young, city controller, told council regarding reserves which are collectively being drawn down by $40 million annually. “Even if we include a 5.6 (per cent) tax increase each year, we are not in a financially sustainable position.”

But Coun. Ted Clugston, former alderman and mayor, said such gloomy forecasts are something he’s heard before as he drilled down to understand the city’s ledger sheet.

He noted that following not getting re-elected in 2021, the city had $250 million in reserves, “and it was end of days and we’re going to be bankrupt in a year.

“Now we have $800 million in reserves and we’re drawing down $40 million per year, yet we’re making $40 million a year plus interest income, equity growth.”

Clugston asked for a better understanding of the investment income dynamics as it pertains to depleting reserve funding.

Coun. Ted Clugston

The city controller explained those revenues are portioned out to the municipality’s general revenue account with some put into the Energy Transition Reserve and Endowment Fund.

“But the vast majority of it is sitting in municipal general revenue to offset property taxes,” said city controller Young.

Clugston responded that, “I’m still feeling there is a gap here of a fairly large magnitude.”

The report, current to Aug. 31, also outlined the city has spent more than a million dollars for severance packages to nine employees in the first two trimesters of the financial year.

“That is a huge amount of money for nine people,” Coun. Young chimed in. “I’d like to understand some of the specifics behind that because I think that points to something.”

Coun. Young said he’d like to know if those are payments to employees who’ve had a long history at the city.

“I think it points to the health of our employees,” he said, adding he’s also trying to understand the issues with the city not presenting full-time equivalent (FTE) statistics but a headcount that includes seasonal and part-time staffing.

“I’m interested why we can’t figure out FTEs. I’ve worked at companies significantly larger than this and we’ve always been able to have FTEs - you can pull FTEs at any time,” said Young.

Staff responded more information on the requested information could be available sometime at the beginning of next year.

Council heard the city’s $79 million Energy Transition reserve will be depleted in the next two years while the $79 Abandonment Reserve is $60 million short of covering energy sector environmental liabilities. That’s not including the costs currently being factored into the future shutting of the main power plant.

That cleanup cost is currently pegged at $48 million.

Council deferred a decision on the energy division’s budget amendments until December.