Mayor takes revenue generation to new level

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This article was published 07/02/2024 (617 days ago), so information in it may no longer be current.

It wasn’t the sexiest individual line item in the 2024 City of Winnipeg operating budget, but it might turn out to be among the most effective.

The budget proposes an increase to the accommodation tax, which is charged on every hotel, motel and short-term room rented in the city to six per cent from five per cent. For the first time, the additional money would go into general revenue rather than a dedicated fund to support Economic Development Winnipeg, the Winnipeg Convention Centre and a host of other events and organizations that promote Winnipeg tourism.

City officials were cagey about how much money this would generate in its first year, but it will likely be in the millions of dollars.

Why is this one measure so important?

Although modest in terms of impact and expected revenue, it’s one of a handful of signs in this budget that the city is getting bolder when it comes to identifying new streams of revenue to reduce its reliance on property taxes.

The same motivation was behind another decision in this year’s budget to ask the provincial government to allow it to levy a $1 per month fee on individual phone lines (both landlines and wireless) to support the rapidly rising cost of 911 services.

That measure — which the NDP government appears poised to approve, and is already widely used in at least seven other provinces — is expected to generate $7 million to cover the cost of operating the 911 call centre and dispatch services.

These two budget measures represent a significant change in strategy. In the past, the city has focused on increasing the rate of property taxes and jacking up fees for specific services.

Mayor Scott Gillingham revealed he has been talking with Premier Wab Kinew to find new sources of revenue and ease the city’s reliance on property taxes.

“That’s a part of the conversation I’m having with the Province of Manitoba (on) the new funding model and the opportunity for the city to identify new streams of revenue,” Gillingham said.

When Gillingham ran for mayor in 2022, he campaigned on finding a new funding model, without really defining what that meant. For the most part, he’s still not tipping his hand about a preferred solution.

In the past, discussions touched on giving municipalities a dedicated share of provincial sales tax. Former mayor Brian Bowman tried to introduce development fees, but his approach failed to survive a legal challenge from developers. Other voices have suggested Winnipeg take a page out of the revenue-strategy books of big cities in the United States, and look at a separate municipal sales tax.

Not surprisingly, these ideas have been flops.

The city currently has the legal authority to tax things such as alcohol sales, but it has not demonstrated the courage to go down that path.

Meanwhile, to create a separate municipal sales tax, the city would need to get approval from the provincial government to amend the City of Winnipeg Charter, an act of the Manitoba legislature. To date, provincial governments of all stripes have turned a deaf ear to calls to create new taxes, fearing they would share the political blowback.

However, there are signs the political landscape is changing.

First, municipalities just went through seven years of austerity at the hands of the recently defeated Progressive Conservative government. Without providing a proper explanation, the Tories froze operating grants to municipalities which forced most of them to rely on increases to property taxes and fees.

Although the details won’t be known until the Kinew government tables its own budget next month, Gillingham said the city expects to see a 2.5 per cent increase in provincial grants, which will translate into a modest increase of $3.4 million.

Although that is appreciated, Gillingham said it is not nearly enough to help support the escalating cost of providing civic services.

Gillingham is walking a very fine line in this year’s budget, which will likely be criticized by some as totally focused on the revenue side of the equation. Along with the bump to the accommodation tax and the new 911 levy, the city is raising property taxes by 3.5 per cent and hiking all other fees (minus frontage levies) by an average of five per cent.

Gillingham would surely lose political traction to argue for even more taxes if he wasn’t able to show Winnipeggers a tangible dividend from those increases. To that end, this year’s budget includes longer hours at libraries, more new spray pads, and enhancements to everything from rapid transit and active transportation to urban reforestation.

Again, on their own, these line items may not seem significant. Grouped together, it’s a solid effort to show Winnipeggers what they can get for their tax and fee dollars.

Will all that give Gillingham the leverage with the province to come up with a new funding model?

With a relatively new mayor and a new provincial government, the timing seems right.

dan.lett@winnipegfreepress.com