Explainer: MCAF, the charge a ratepayer association wants eliminated, broken down

In most Canadian cities not Medicine Hat, a privately-owned utilities company partners with the municipality to supply power.

Municipal consent access fees are commonly used by municipalities for third-party utility companies setting up shop on city-owned property. The utility then downloads the cost to customers to make up the money.

WHY HAVE MCAF HERE?

Medicine Hat owns the public utility company COMCO.

But it’s using MCAF to balance the budget.

The previous term of council in 2019 introduced MCAF to offset a portion of the $23 million annual shortfall due to reduced commodity prices, according to staff.

The MCAF is closely monitored and compared to other municipalities to ensure they are fair and reasonable, according to Dennis Egert, the city’s corporate services managing director.

“In setting the fees for 2024 as part of our municipal budget, the benchmark to other Alberta municipalities shows that Medicine Hat fees are still low and competitive as compared to other Alberta jurisdictions that have instituted this fee,” Egert says.

WHAT IF MCAF WAS ELIMINATED?

If the city dropped the MCAF charge from residents’ utility bills, it would need to collect the money for the budget shortfall elsewhere.

A shift from MCAF to property taxes would result in an approximate seven per cent increase to property taxes, the city says.

FEE VS. TAX

A city spokesperson explained the math.

“With our current assessment base, every $800,000 the city spends translates to a tax increase of roughly one per cent,” they said.

Using that formula with a 2024 budget that projects MCAF revenues to be $6 million, the city arrives at the seven per cent tax increase.

The important difference between taxes and MCAF is that taxes are levied on property owners, while the MCAF is levied on ratepayers, people who pay utilities but might not own the property/pay taxes.

It is a “fee for use” rather than a tax, the city says.

MCAF REVENUES

The MCAF brought in nearly $5 million in revenues in 2023.

The 2024 budget update presented to council in December highlighted the budget shortfall decreasing to approximately $7 million, a significant reduction from the original $23 million shortfall from 2019.

BALANCED BUDGET

During COVID, the council of the day voted to eliminate a planned four per cent tax increase in each of first two pandemic years, Egert explained.

“[It] was a setback to the program’s goals but is testament to the city’s ability and willingness to change course in the best interest of our community,” Egert said.

“We are still working to achieve a balanced budget where the municipally is sustainable without reliance on our energy business.”

by Eli J. Ridder | @EliRidder