New revenue model can’t help a broke city

Hey there, time traveller!
This article was published 27/09/2024 (393 days ago), so information in it may no longer be current.

There’s a statistic we hear more and more often these days, that municipalities are responsible for 60 per cent of all infrastructure while only collecting 10 per cent of every tax dollar.

It seems everyone is repeating it, from city councillors, to the head of the heavy construction lobby, to the Federation of Canadian Municipalities and even columnists in this very newspaper.

It’s usually cited to defend the need for a “new revenue model” for cities. After all, the city’s infrastructure deficit — the work that needs to be done, but isn’t being done — currently sits at $800 million per year, about $200 million per year worse than five years ago, despite record infrastructure spending in each of those years.

Clearly, more money is needed, and on the surface, it does seem unfair that the current 10 per cent revenue share to cities would need to cover 60 per cent of all infrastructure.

But, as they say, there are lies, damn lies, and statistics. Consider these examples. The province is responsible for 100 per cent of health-care costs. Does that mean it should be entitled to 100 per cent of every tax dollar? And cities are responsible for zero per cent of national defence spending. Should that mean cities deserve zero per cent of all tax revenues?

Of course not. It’s apples and oranges. Just like that infrastructure statistic.

Despite that, it’s pretty obvious there is a problem. We can see it all around us: abandoned bridges, closed pools, pothole-riddled roads.

But is this really a problem that can be solved with more revenue?

Both the province and the feds are in a deficit position. For cities to get a larger portion of an already-too-small pie means cuts will be necessary elsewhere. So what should get the axe: health care, education, housing?

Alternatively, to increase the size of the pie means creating a new tax (even though there’s already nothing preventing city council from increasing property taxes). The question that never gets asked is, how much?

The provincial gas tax, which we’ve gotten a just-extended holiday from because we couldn’t afford it, only brings in about $330 million per year. For the entire province. If you weren’t a fan of a 14-cents-per-litre gas tax, you’re going to hate the additional 57 cents per litre required to fund infrastructure for all municipalities in Manitoba.

And PST revenues amount to approximately $370 million per percentage point. Who’s looking forward to a 10 or 11 per cent retail sales tax?

Or we could more than double our property taxes. Doesn’t seem very realistic.

When we bother to ask how much, we come up with this: today, the city’s infrastructure deficit is about $1,000 per year for each man, woman and child living here. And getting worse.

The reality is, no matter what kind of tax it is, and no matter which order of government collects it, the money is going to be coming from us. And we simply don’t have enough.

So what’s the solution?

It turns out the head of the Manitoba Heavy Construction Association may have inadvertently given us the answer.

Chris Lorenc was quoted in a Free Press article last week, saying that “at the turn of the (last) century, municipalities owned 15 per cent of infrastructure in the country.”

There’s a reason for that.

A 2023 study of Metro Vancouver found that compact, walkable, mixed-use development requires five to nine times less infrastructure per person than low-density, single-use, car-dependent development.

If municipalities had five to nine times less infrastructure than they do today, instead of owning 60 per cent of all infrastructure, they’d still be in the same range as a century ago.

What would it mean for Winnipeg specifically? If we had three times less infrastructure than we have today, we wouldn’t have an infrastructure deficit. If we had four times less, that would free up $100 million per year of revenue for additional services (or tax cuts). Just think of what we could accomplish with five to nine times less infrastructure to maintain.

And that checks out elsewhere, too. A 2021 study from the City of Ottawa showed that servicing low-density greenfield development costs the city $465 per person annually, while high-density infill development provides the city with $606 per person of net profit annually.

A full 88 per cent of our city’s infrastructure is just roads and pipes, a direct result of the development pattern we’ve adopted since the Second World War. We’ve simply built a city we can’t afford.

And since every dollar the government has comes from us, fantasizing about a “new revenue model” means ignoring the fact that we, the taxpayers, just don’t have the kind of money needed to support it.

Instead, we need to stop adding to the problem with infrastructure expansions, and start making better use of what we already have through infill development, and prioritizing modes of transportation that require much less infrastructure, such as walking, biking and transit.

Yes, it’s harder. But at least it’s based in economic reality.

Michel Durand-Wood lives in Elmwood and has been writing about municipal issues at DearWinnipeg.com since 2018.