December 6, 2019

Winnipeg
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City risks red ink via lawsuit, snow

Soaring snow-clearing costs are straining the city's budget, controller warns.

KEN GIGLIOTTI / WINNIPEG FREE PRESS

Soaring snow-clearing costs are straining the city's budget, controller warns.

City council's decision to bank on disputed Manitoba Hydro money to balance Winnipeg's operating budget has come back to haunt finance officials, who are now making contingency plans to prevent a deficit at the end of the year.

In a report to council, officials warn the city's failure to settle a lawsuit against Manitoba Hydro, as well as heavy snowfall this fall, can potentially put the City of Winnipeg in the red.

Last February, the city sued Manitoba Hydro to obtain $10.6 million in power and gas taxes collected by Hydro on the city's behalf since 1999. After conducting an audit, the city contends the taxes should have been collected on top of the GST.

The disputed money was used to help balance the city's $817.6-million operating budget, which council approved in March. But the lawsuit against Hydro has crawled through court, leading city controller Patricia Bodnar to warn the city must take measures to prevent the dispute creating a hole in the city budget.

"There is potential for a deficit to occur, relating to several factors, including possible inclement weather during November and December impacting snow-clearing costs — and the claim from the gas and electricity audit not being resolved with Manitoba Hydro by year end," she notes in a report that comes before council's finance committee Friday.

The report predicts a $3.8-million surplus at the end of 2010, based on financial data from the end of October. But that prediction arrived before the 2010 snow-clearing budget was exhausted and it assumes the Hydro money is coming before the end of the year. The Winnipeg Police Service is also $500,000 over budget on overtime.

The city has four plans to ensure there will be no deficit. First, it could suspend a planned transfer to the fiscal stabilization reserve, a pot of money the city normally tops up as a financial security measure. Second, the city could forgo the interest it earns from this fund and a second stash of emergency money called the mill rate stabilization reserve. If that isn't enough to fill the financial hole, the city could draw money from the general purpose reserve in 2011. Finally, the city could also raid the mill rate reserve.

"If Hydro doesn't pay their bill, this is our plan to address the shortfall," council finance chairman Scott Fielding (St. James) said. A deficit is not a foregone conclusion, he said, as the city will probably exceed its property-tax revenue projections by about $4 million.

Fielding and a spokeswoman for provincial Finance Minister Rosann Wowchuk said both sides of the Hydro dispute are still talking. Mayor Sam Katz, who previously suggested — incorrectly — that the disputed money could be booked as a receivable, declined to comment.

bartley.kives@freepress.mb.ca

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