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Don't expect magic solutions

Tax hikes, service cuts only options for Katz and Wyatt

Hey there, time traveller!
This article was published 28/11/2013 (1363 days ago), so information in it may no longer be current.

In a magical world without wage inflation, crumbling infrastructure and technological change, municipal property taxes would never, ever rise and city services would never, ever wind up on the chopping block.

Unfortunately, Winnipeg's city hall is located at 510 Main St., not Platform No. 9æ at King's Cross Station. So this afternoon, when Mayor Sam Katz and council finance boss Russ Wyatt lift the lid on the city's spending plans for 2014, you can bet on another property tax hike as well as service cuts.

Winnipeg City Hall


Winnipeg City Hall

Next year's property tax hike is expected to be in the vicinity of 2.95 per cent, which is less than the 3.87 per cent hike this year and a 3.5 per cent hike in 2012, the year the city's 13-year tax freeze finally came to an end.

A three per cent hike would raise about $14.5 million in additional revenue for the city. Based on recent budgets, that won't be enough to cover the rising cost of delivering city services -- a package of spending the city calls its operating budget.

In 2013, the operating budget rose $28.9 million, mostly to cover the rising cost of operating the Winnipeg Police Service and Winnipeg Fire Paramedic Service. Spending on those two city departments rose a combined $31.3 million in the last operating budget, which of course was greater than the overall spending hike.

In other words, the city started clawing back on every other department this year in order to help pay for police and fire-paramedic services. Expect more of the same in 2014 -- starting, ironically enough, with emergency services in other city departments.

The city expects to find $160,000 in savings in community services by eliminating the positions of two social workers who find temporary homes for people displaced by fires, co-ordinate flood-evacuee services and handle queries from frequent 911 callers who otherwise tie up police and fire-paramedic resources.

Do not expect Katz or Wyatt to draw attention to these cuts, which seem counterproductive in light of a police effort to free up officers from duties that are better handled by social workers. A rigid reading of the city's responsibilities would suggest the province can handle this job, which is why it's reasonable to expect the mayor and Wyatt to take a hard line on an unpopular move.

Katz and Wyatt will also trumpet the fact one percentage point of this year's property tax hike -- or just under $5 million -- will be devoted to infrastructure renewal. But the reality is, this extra money will only begin to address the gaping maw that is the capital budget, the city's spending blueprint for repairing roads, fixing bridges and replacing equipment.

In 2013, spending on capital projects in this city added up to $374.7 million, with the city raising $71.5 million of that money itself through taxes and fees. The rest of the cash came from other levels of government or was borrowed from banks or through public-private partnerships, which are build-now/pay-later schemes intended to get things built before the cost of doing so rises even higher.

The city is running out of wiggle room for borrowing through public-private partnerships, based on a city policy that prevents politicians from mortgaging the city's future by approving too many of these deals. The city has more room for conventional borrowing, but that comes at a high price, as financing payments add up even when interest rates are low.

For example, $15.2 million worth of borrowing to cover part of the latest cost overruns on the Winnipeg police headquarters will eat up an additional $1 million in capital spending every year.

Over the past week, in a series of pre-budget announcements, Katz has trotted out a few pieces of good news, highlighting increased city spending on library acquisitions, athletic fields and bike-and-pedestrian paths. But the mayor simply doesn't have a lot of spending options to consider this year, as major service cuts would amount to political suicide in 2014, a civic election year.

You could argue Katz doesn't have any reason to worry, as it's unlikely to see him run again and just as unlikely to see him win. But the mayor must keep his political options open -- and the rest of council, which includes many politicians who will seek re-election next fall, won't support draconian spending cuts.

Will voters forget this budget by the time October comes around? Perhaps. But many won't forget the financial mismanagement of major capital projects such as the Winnipeg police headquarters.

There are no magic wands capable of solving Winnipeg's financial woes. So it's safe to expect another modest tax hike and a series of service cuts, the only options available to your elected officials.


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Updated on Friday, November 29, 2013 at 8:08 AM CST: Replaces photo

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