Winnipeg Free Press - PRINT EDITION

Living in a glass house

PST hike not unlike city's proposal

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New homes under construction.


New homes under construction.

Do as I say, not as I do.

Not long after increasing the provincial sales tax to raise money to improve infrastructure, the province is denying the City of Winnipeg legislative authority to allow it to do pretty much the same thing.

This week, city council was briefed on a plan to charge a "development fee" on every new home and commercial development. Details on the amount of the fee are still fuzzy, but some have pegged it at $10,000 to $12,000 per residential lot, likely more for commercial projects. It is expected fees of this magnitude would provide another $30 million annually for infrastructure.

The money from these fees would be used to offset the increased cost of providing services and infrastructure for new developments. Although it has not come to a vote yet, Mayor Sam Katz and a good number of councillors seem to be in favour of moving ahead with this plan.

To impose the fees, the city would need an amendment to the Winnipeg Charter, the provincial legislation that defines municipal authority. Unfortunately, the province is not inclined to make those changes.

A spokesman for Kevin Chief, the provincial minister responsible for the City of Winnipeg, said the province is not interested in making any changes to legislation to "introduce new fees or levies, including additional fees on new-homes sales."

The irony of that statement is certainly not lost on the majority of council. The province is still fighting a public relations war over its decision last spring to increase the PST by one percentage point to generate an estimated $290 million a year in additional money for infrastructure.

Why would the province kill this idea, even before council has a chance to vote on it? Wouldn't the NDP government in particular have some sympathy for the city's predicament?

In this case, the speed bump is entirely political. The province is concerned it, and not the city, will be blamed for another tax or fee increase.

At a time when the NDP has plummeted in opinion polls -- a drop in support brought on in part by the PST increase -- it seems apparent Premier Greg Selinger simply will not take the chance of getting hit by any blowback from the city's new-home development fee.

To be fair, the province is being consistent. Selinger's predecessor, former premier Gary Doer, regularly swatted aside city requests for legislative authority to impose municipal fuel and sales taxes.

In fact, Chief's comments were identical to those uttered when someone suggested raising the PST to fund infrastructure. Selinger remained loyal to that script right up until last April, when he reversed course and implemented the infrastructure tax hike.

In April, then-finance minister Stan Struthers explained a tax increase was essential if the province was to have any hope of addressing its infrastructure needs. "We realized we had to do something very significant that would position us for opportunities for people now, protection for communities now, for economic growth now, but also build our capacity to be prosperous in the future."

That certainly sounds consistent with what the city is saying now about development fees. The province should not give in to gratuitous requests from municipalities looking for tax measures. However, that does not seem to be a fair way of characterizing the latest city proposal.

The province is fully aware development fees are common in other cities; in fact, it has long been known almost every city as big or bigger than Winnipeg charges a development fee on new homes.

Winnipeg does ask developers to pay for some of the infrastructure needed to serve new subdivisions, primarily residential streets, intersections, sidewalks, sewer and water and storm retention. However, the city is annually on the hook for tens of millions of dollars to build community and recreational centres, fire halls and transit access.

The city is also stuck with the horrendous costs of other major street improvements needed to handle increased traffic from these new developments. Can anyone say Kenaston underpass?

Let's not mince words: The proposed development fee will increase the price of a new home in Winnipeg. But given the money is, theoretically at least, dedicated to improving infrastructure for those areas, it can be seen as a fairly levied, appropriately used revenue measure.

In this case, however, it's impossible to see the province taking any steps to meet the city's wishes. And while provincial obstinacy is the principal cause, the city must take some responsibility for shooting itself in the foot on this one.

You might remember the city in general, and Katz in particular, blasting the province for the PST hike even though it was going to provide millions of additional dollars for Winnipeg and other municipalities. That kind of posture may play well at city hall, but it closes a lot of doors and minds in the Manitoba legislature.

Development fees should be fully discussed and debated, and a decision on whether to allow the city to move ahead with implementation should be made on the merits of the argument.

It certainly should not be dismissed out of hand by a provincial government that, having failed miserably to sell its own tax hike to the public, appears now to be paralyzed by fear of shadows and new ideas.

Republished from the Winnipeg Free Press print edition November 6, 2013 A4

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