Province, city not interested in changing generous MTS tax break

Landline distribution system has been taxed at a flat rate for decades


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Manitoba Telecom Services has been enjoying a tax break for decades — a decision that has cost the city millions in potential revenue.

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This article was published 26/05/2016 (2387 days ago), so information in it may no longer be current.

Manitoba Telecom Services has been enjoying a tax break for decades — a decision that has cost the city millions in potential revenue.

Even with the recent proposed sale of MTS to Bell, government officials remain unmotivated to touch a loophole in the City of Winnipeg Charter that has kept the taxation rate of MTS’s landline distribution system — which includes wire and poles — at a flat rate of $1.2 million for more than four decades.

“These restrictions do make Winnipeg unique and are quite antiquated and do limit the city’s ability to tax distribution systems, lobbying for change – right now at least – is not one of my priorities,” Mayor Brian Bowman told the Free Press this week.

Bowman noted mayors before him have tried to lobby for a greater share of utilities taxation revenue under the charter and have failed. Any amendments to the charter must be legislated by the province.

Premier Brian Pallister, a staunch supporter of the proposed $3.9 billion purchase of MTS by Montreal-based BCE Inc., said through a spokeswoman that with Bowman uninterested, he isn’t ready to look at the decades-old provision either. 

“We have not had any communication with the City of Winnipeg on any requests for changes to the City of Winnipeg Charter. We are not looking to make any changes in this legislation, at this time,” said Olivia Billson, a spokeswoman for the premier, in a prepared statement.

MIKE DEAL / WINNIPEG FREE PRESS An MTS manhole cover on the sidewalk outside the MTS building on Corydon Ave. The telecom company has been afforded healthy tax breaks for decades, even after it was privatized in 1996.

It has been a provision on the books for almost 100 years. Telephone companies operating in Winnipeg (MTS is the city’s primary provider) would see the value of their distribution system assessed at a fixed rate. It has only been increased once, jumping from $900,000 as established in 1918 to $1.2 million in 1971 after amalgamation. The rate did not change in 1996 when MTS was privatized under the Gary Filmon Progressive Conservatives. Other real property, such MTS’s real estate stock in Winnipeg, is subject to property taxes.

Canadian Taxpayers Federation vice-president Scott Henning argues it’s unfair that one private company has to pay taxes based on market value, while a company such as MTS gets a special fixed rate.

“They shouldn’t be treating the guy that owns a shoe store any differently than the phone company just because they have a different type of businesses,” said Henning. “There is no question the phone company is now larger than it was in 1971, as is the city and inflation alone has increased significantly since 1971.”

Henning argues an inflationary increase should be attached to the rate to even out the playing field. According to the Bank of Canada, $1.2 million in 1971 dollars equals about $7.4 million in 2016, factoring in inflation.  

Bowman has long lobbied for the city to find alternative sources of revenue, campaigning in the 2014 election to end the city’s reliance on property taxes and find a new model of taxation.

“Right now, the municipality doesn’t have direct skin in the game in terms of economic growth. So we talk about, ‘Are we going to raise property taxes? Are we going to increase or cut services?'” Bowman said in May 2015.

BORIS MINKEVICH / WINNIPEG FREE PRESS FILES Brian Pallister has been a vocal supporter of the Bell/MTS deal.

Coun. Russ Wyatt (Transcona) said MTS is not alone in not paying its fair share of taxes in Winnipeg. The assessment rate paid by Manitoba Hydro, a Crown corporation, when it comes to the land under and near transmission lines, also hurts the city’s finances, he said. As a Crown, Manitoba Hydro is exempt from paying property taxes. It pays a grant in lieu based on its real property in Winnipeg; last year it paid $9 million.

“Winnipeg is getting a raw deal,” Wyatt said. “They (the tax formulas) are all dated. They are all very old formulas.They have never been revisited in a long time.”

Wyatt argues any changes to the charter would need to be balanced and fair as to not drive business out of the city. The easiest solution would be to index the assessment rate to inflation, he said. 

“But there is no doubt we are losing revenue,” Wyatt said. “They (MTS) have definitely not kept their rates at 1970 levels. Their rates have gone up, so why shouldn’t our rates go up accordingly?”

MTS declined to disclose how large its distribution network is in Winnipeg, citing security reasons. In a prepared statement, MTS spokesman Jeremy Sawatzky noted MTS does pay “millions” in property taxes for its Winnipeg real estate stock, but said “we do not disclose the total figure.”

“This charter only has a limited application to some of our telephone cabling and wires, and then only a smaller percentage of them — all of which are all MTS’s responsibility to maintain,” Sawatzky said in a statement.

When asked about why MTS should be given this fixed rate or whether is was fair, Sawatzky said the company wasn’t going to “engage in speculation.”

Paul Thomas, professor emeritus of political studies at the University of Manitoba, pointed to the failed attempts of former mayor Glen Murray to diversify the city’s ability to tax utilities such as Manitoba Hydro or telephone companies. His attempts at a “New Deal” came to a crashing end under then-NDP premier Gary Doer, who wasn’t interested in dealing with the issue.

History would likely repeat itself if city officials tried to reopen the charter to look at the deal, Thomas said.

“Pallister has been quite outspoken with this (Bell-MTS) deal. With the additional investment it would bring, they would likely (also) meet a dead end,” said Thomas. “You have to ask yourself, who has an incentive to raise this issue? Not the provincial government and I am not even sure Mayor Brian Bowman would be all that keen on picking a fight. He is pretty much pro-business and he may think there are easier way to get additional revenue.”

JOHN WOODS / THE CANADIAN PRESS FILES Winnipeg Mayor Brian Bowman: 'lobbying for change – right now at least – is not one of my priorities.'
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