City, Hydro settle dispute

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This article was published 08/02/2011 (5450 days ago), so information in it may no longer be current.

A year-old legal battle between the City of Winnipeg and Manitoba Hydro has ended in a compromise, allowing each side to focus on their respective budget and Bipole headaches.

The resolution of the dispute gives Mayor Sam Katz $5.3 million in help for balancing the 2011 operating budget without raising property taxes.

On Monday, the city and Manitoba Hydro announced the end of their dispute over municipal gas and electricity taxes. City auditors announced last year the Crown corporation had been collecting the taxes improperly for decades and had shortchanged the city $10.6 million between August 1999 and December 2004.

In February 2010, the city took Hydro to court to collect that money and later increased the claim to $15 million. Katz and council finance chairman Scott Fielding (St. James) also tabled an $818-million operating budget that relied on $10.6 million in disputed Hydro money.

At the crux of the argument was the city’s insistence Hydro should have been levying the taxes on top of the federal GST. Hydro disagreed.

After slogging in the courts for more than 11 months, Hydro agreed to pay the city $5.3 million — half of its original demand — in exchange for the end of the court proceedings.

Fielding called the deal a “fair settlement,” noting critics of the lawsuit predicted the city would wind up with nothing. “It made more sense to have an agreement as opposed to going all the way through the courts, where the only people who win are lawyers,” he said.

The city also agreed to avoid similar claims in the future. Hydro agreed to create a “small working group” with the city in an effort to streamline the collection of taxes — a move that could involve some future revenue for the city.

Hydro spokesman Glenn Schneider said both sides were under pressure to resolve the matter and “negotiated hard” to reach an agreement. Schneider said the city needed to settle the dispute to shore up its budget and Hydro wanted to avoid the added costs of a court battle.

Hydro will continue collecting the tax on power and gas before GST is factored in, so customers aren’t forced to pay more, he said.

“I think everybody negotiated hard and I think we ended up with an agreement that benefits customers, first off,” Schneider said. “We end up paying some money, but not what the city was looking for.”

Fielding said the city will incorporate the $5.3-million Hydro payout into the 2011 operating budget, where the money could be used to help avoid a property tax hike. It’s too late for the cash to be devoted to the 2010 budget, which wound up in a deficit position.

“This is what happens when you put funny money in the budget,” said Transcona Coun. Russ Wyatt, who has been critical of the plan to demand money from Hydro since the day it was announced. “Some of us on council warned of this.”

Wyatt wants to know why the city settled for half of what it was originally seeking when it appears Hydro admits the city’s legal position had merit.

Colin Craig of the Canadian Taxpayers Federation was disappointed Hydro didn’t put up more of a fight.

“We were hoping Hydro would have stuck to its defence of the way the tax was collected, because a tax on a tax was never a good thing,” said Craig, an outspoken critic of Hydro’s Bipole III plan. The embattled Crown corporation is probably happy to have the city dispute off its plate, he surmised.

Fielding and Katz are expected to table the city’s 2011 operating budget within a month.

bartley.kives@freepress.mb.ca jen.skerritt@freepress.mb.ca

City ends 2010 $3.8M in red

The end of the Hydro dispute will not help the city avoid red ink for fiscal 2010.

Year-end financial figures released on Monday show the city wound up with a $3.8-million deficit, at least on paper.

According to a report that comes before council’s finance committee Thursday, most city departments exceeded their financial targets last year. At the end of December, the city would have had a $6.8-million surplus on its $818-million operating budget, if not for the $10.6 million of disputed Manitoba Hydro money that did not materialize.

As a result, the city was $3.8 million short on its budget, a variance of less than half of one per cent on the overall total.

The good news is the city also took in $5.6 million more property tax revenue than it expected in 2010, as the pace of new developments exceeded expectations. That money is normally transferred to reserves, but $3.8 million of this cash will be used to wipe out the paper deficit.