Thank you for the opportunity to speak to you today, and for opening up the budget consulting process to the public.
Two years ago a group of community members were working on the 2018 Alternative Municipal Budget. This was the fourth time over a 12-year period that the Canadian Centre for Policy Alternative’s Manitoba office did an alternative municipal budget. In the 2018 version, “Imagine a Winnipeg . . .” https://www.policyalternatives.ca/publications/reports/imagine-winnipeg, we dared to imagine a city that used the budget to deal with our two most pressing issues: climate change and income inequality.
We know that these alternative budgets are aspirational documents, but we don’t think that the ideas contained in them are beyond the pale. We do our best to respect the City’s fiscal framework, and contrast our revenues and expenditures with yours.
We like to think that we do the budget you wish you could do. We can say, OK, what would it take to really deal with the infrastructure deficit? What would it take to really start making up for the 14-year tax freeze? What would it take to really provide community services that make our city more livable, that prepare us for climate change? We think we provide some doable strategies that end up not really being that radical. We open up some space for you to take leadership on the most pressing issues of the day.
We understand that it’s a lot easier to criticize from the sideline than it is to be on the frontline. We know that politicians don’t get elected by promising to raise taxes; if we learn anything from the 1990s, we see that you have a better chance of being elected if you freeze taxes.
But what if you also win elections by being strong leaders; leaders who do not allow the city to slide backwards? Alternative budgets open up some space for you to take leadership on controversial issues, and the ideas we have presented over the years, such as the impact fee, remain valid. In fact, our analysis of the City’s fiscal situation is very similar to your own experts’.
The council briefing presented in October this year highlights the problems we faced in the 1990s, and how the city tried to reverse the decline by reducing taxes and deferring operating and capital expenditures. But at the same time, infrastructure was deteriorating and urban sprawl marched on, so it wasn’t really an effective strategy. All it did is differ the difficult decisions so that you have bigger problems to deal with today. Did we reduce debt too much, thereby allowing the infrastructure deficit to grow to a point where it’s hard to contain? Should we not have at least increased taxes to keep up with inflation?
The council briefing doesn’t pose these questions, but it does point out that we’re facing a budgetary structural deficit that could “impede on future growth and the desirability of Winnipeg as a destination for prospective residents and businesses”; and “low property tax revenue has led to deferred capital investment and constrained service delivery.”
The council briefing acknowledges that the City has HARD fiscal choices to make. Those who worked on the AMB, many of whom have presented at committees this week, agree. But the difficult decisions we have taken are different from yours: we increase revenues rather than cutting services.
When you increase taxes by a mere 2.33%, and dedicate it all to roads and rapid transit, you’re effectively reducing spending in other tax-supported areas by the rate of inflation and population growth. And when you cut spending in community services, in urban forest maintenance, in transit, you weaken community responses to income inequality, environmental protection and in providing 21st century solutions to urban sprawl and equitable access to essential services.
In 2018, the AMB increased property taxes by 7.33%: 5% more than you did. We recommend that level of increase again.
A rough calculation shows that the additional 5% we would raise property taxes would bring in around $30M in 2020. That would surely allow you to at least maintain spending in community programming, our urban forest, and public transit. The average property tax in Winnipeg is $1,774: increasing the tax rate by 7.33% would add around $150/year, or $12.50/month to the tax bill. At $1924, the new average tax bill would still be the lowest in Canada.
And because these increase hit low-income people hard, we acknowledge that some sort of rebate program should be implemented to mediate the impact.
We also recommend that you begin to reverse the business tax cuts. Winnipeg is amongst the lowest-cost cities in NA in which to do business: business needs proper community services and a healthy workforce and should not expect ever decreasing taxes. A 5% increase would put the business tax at 5.2% and generate approximately $3M in taxes. That money could be dedicated to library services to help ensure a well-educated workforce that businesses could benefit from.
The AMB recognizes that the City relies too heavily on property taxes. It has recommendations for different funding sources – ideas that would alter behaviour at the same time as they raise money.
Some of those ideas are ground shifting and would require planning and provincial cooperation to implement. We hope you are planning for these sorts of policy changes as they are required if we are going to slow down climate change. An example is using mobility pricing to shift the cost of infrastructure maintenance to those who drive instead of using public transit, rather than using property taxes. Simply using one tool of mobility pricing, an ex-urban commuter fee, could raise $40M/year for the City (see The High Cost of Free Riding and How We Fix It available at https://www.policyalternatives.ca/publications/reports/high-cost-free-riding-and-how-we-fix-it ).
Other ideas would be easier to implement and could provide more immediate relief to our revenue dilemma: charging a tax on surface parking lots could bring in around $34M a year which could be used to maintain bus service so more people would be willing to use transit.
The October council briefing noted that “deferral of capital investment means the infrastructure gap will grow and key community needs won’t be met”. The AMB recommended that the City borrow more money on the capital budget so we could begin to deal with our $7B infrastructure deficit. We all know that the longer we let things deteriorate, the more it costs to fix them. Now is the time to borrow, while interest rates remain low. We estimated that if we borrowed $690M/year, it would cost $37.6M in debt servicing. I know, that’s a lot, but it would allow us to deal with our infrastructure deficit in 10 years.
In sum, I can’t agree enough with the conclusions presented in the October 2019 briefing to council. The 1990s were indeed challenging with high taxes, high debt and low population growth; the city hoped to stop the decline with tax cuts and operating/capital expenditure deferrals: but we know all this did was make things worse. Now, our situation is reversed: exceptional population growth (which is putting more pressure on services and infrastructure), combined with the lowest property taxes and spending per capita in the country has created a perfect storm of deteriorating services and infrastructure.
We respectfully propose that you take a more aggressive approach at dealing with this dire revenue situation by increasing property taxes to 7.33%, reversing the business tax cuts, borrowing more money for capital projects that are not related to NEW roads, and look at other ways of raising revenues while encouraging Winnipeggers to use public transportation.
If you do, you will put Winnipeg back in the ranks of Canadian cities that are not afraid to take decisive action, and you will win the support of thoughtful Winnipeggers who understand that there is a very high cost to low taxes. And I assure you that you will have the support of everyone who works in the community and environmental sectors.
Lynne Fernandez holds the Errol Black Chair in Labour Issues at the Canadian Centre for Policy Alternatives, MB.