Winnipeg Free Press - PRINT EDITION

Councillors kill tax-hike idea

And diversion from reserve, both to fund rapid transit

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Senior members of council have given a thumbs-down to a secret administrative proposal to increase taxes and divert funds from a newly created reserve account to pay for the city's share of the second phase of the rapid-transit corridor.

Senior members of the administration met privately this week with Mayor Sam Katz and members of his executive policy committee, where the 24-page proposal was formally presented.

The financing plan involved a new 0.3 per cent property tax -- that would be in place from 2015 to 2023 -- and a scheme to divert 10 per cent of a new one per cent tax that's dedicated to a regional street-maintenance fund.

"The (politicians) in the room were surprised by the plan," said a source who was present at the meeting. "Surprised that such an idea would come from administration."

City hall is under the gun to come up with a financing plan for its share of the $590-million project before it formally makes an application for federal funding.

'People seem to be drunk on (rapid transit)'

-- Coun. Scott Fielding

The province has agreed to match the city's contribution of $225 million, but an application for $140 million in federal funding has to be submitted by June.

The regional street-maintenance reserve was a hallmark of the city's 2014 budget. Katz and other members of EPC repeatedly cite it as a major accomplishment. City council established a local-street reserve fund in 2013 -- and both funds are financed by one percentage point of the property-tax increase.

Katz declined to comment on the administration proposal. A spokesman said an alternative financing plan for the transit corridor is expected to be brought to city council for a meeting in May.

News of the financing dilemma caught two potential mayoral candidates by surprise.

Couns. Paula Havixbeck and Scott Fielding said the public would not accept another tax increase given the mismanagement that's gone on at city hall and no one would support diverting money needed for street maintenance.

'The public would never have accepted another tax'

-- Coun. Paula Havixbeck

"People seem to be drunk on (rapid transit) and willing to go to unbelievable ends to make this work," Fielding (St. James-Brooklands), who is an opponent of rapid transit, said.

"After all the mismanagement and waste that's gone on with city projects, the public would never have accepted another tax," Havixbeck said. "That would be irresponsible." Havixbeck said cost overruns on the fire-paramedic hall replacement and the new police headquarters projects exceed $100 million,.

"That would have gone a long way to financing the next phase of rapid transit," Havixbeck said.

The administration is concerned with the city's debt level, the source said, adding the rejected scheme would have used cash flow to cover the city's share of the transit project.

The new initiatives would have raised almost $2 million annually.

"Rather than cut other budgets, the administration came up with this plan," the source said. "There's no (political) support for it. They were told to go back and come up with another proposal."

The source said the administration came up with the financing plan after the province rejected the city's proposed development-growth charge -- a fee that would be charged against new residential development to cover the costs associated with the pressure placed on the city's infrastructure for the new developments.

Similar fees are charged in other municipalities, but it would require new legislation at the provincial level to make it happen. The Selinger government, still reeling from the public backlash to the one-percentage-point increase to the PST, immediately rejected the growth-development charge, dismissing it as another tax the city did not need.

Fielding, who was a member of EPC until he left in October, disputed the source's belief administration had banked on the new growth-development charge to finance transit.

"They had always talked about debt-financing the transit project," said Fielding, who was Katz's finance chairman for six years, adding it now appears there are serious problems with the city's ability to manage its debt.

Fielding said the debt problems could hinder the city's ability to carry out needed work in the future.

"What does that mean for the future construction of existing and needed infrastructure?" Fielding said.

Republished from the Winnipeg Free Press print edition April 26, 2014 B1

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