Winnipeg mayor confident 'there's coming a time' for new funding deal for Manitoba cities
Scott Gillingham has pressed Premier Wab Kinew for growth-based funding, without success so far
Winnipeg Mayor Scott Gillingham has a prediction: some day, a Manitoba premier will agree to create a new funding formula for cities that includes some form of growth revenue.
Over the last year, Gillingham held out hope that Wab Kinew would be the premier who delivered that new model. Instead, the province announced a two per cent annual increase to municipal operating grants, which Gillingham and other municipal leaders said won't meet the growing costs their communities face.
Gillingham unveiled a budget earlier this month that includes a 5.9 per cent property tax hike — the largest since 1990. He said desperate financial times called for the measure, which went against his campaign commitment to hold the increase to 3.5 per cent, but cities can't depend on property taxes alone to bring in more money.
"I really believe that there's coming a time when a premier is going to make that decision, to enter into a new funding model with municipalities — one that incentivizes growth and rewards cities for growth," Gillingham said in a year-end interview with CBC.
Enid Slack, director of the Institute on Municipal Finance and Governance at the University of Toronto, says cities across Canada are facing financial pressures similar to Winnipeg's, but some are finding ways of bringing in new tax revenue.
Some other provinces do have revenue-sharing agreements. In the 2024-25 fiscal year, Saskatchewan will give municipalities $340 million, equivalent to 0.75 per cent of a percentage point of its provincial sales tax (which is currently six per cent), under its revenue-sharing program.
Quebec transfers one percentage point of its 9.975 per cent sales tax to municipalities every year, and last year passed a bill granting municipalities new taxation powers. Cities in Quebec can now tax vacant houses, and municipalities with transit services can tax vehicle registrations.
In British Columbia, the TransLink transit service receives a share of fuel tax, parking tax, and property taxes collected in 21 municipalities in the Metro Vancouver region.
While some tax measures can be positive generators of income, others, like taxes on vacant homes, work more as deterrents against certain types of behaviour, Slack said.
"If a vacant homes tax is successful, you won't bring in very much money at all, because there won't be any vacant homes," she said.
Taxes won't solve funding woes: blogger
One researcher has proposed giving cities access to the federal personal income tax, allowing them to decide whether to charge an income tax and at what rates.
In a report published in March, David Macdonald, a senior economist with the Canadian Centre for Policy Alternatives, wrote that Canadian provinces have rarely granted cities the power to levy their own taxes, but examples exist in other countries. Chicago, for instance, has a city-specific sales tax of 1.25 per cent.
If Winnipeg charged a one per cent income tax on individuals making more than $246,000, Macdonald estimates the city could raise $16 million. Cities would not have to collect the tax themselves, as the Canada Revenue Agency already does that, Macdonald said.
Winnipegger Michel Durand-Wood, who writes about municipal issues on his blog Dear Winnipeg, doesn't agree that new taxes will solve the city's financial problems.
Winnipeg's unfunded infrastructure deficit — the work that needs to be done but isn't due to lack of money — sits at $8 billion over the next 10 years, or $800 million per year.
"That amount of money … just doesn't exist in the economy," Durand-Wood said. "It's not there to be taxed, because that money has to come ultimately from us," regardless of whether the city or province collects it. He also notes both the Manitoba and federal governments are facing large deficits.
As well, a tax that grows automatically with the economy, like a sales tax, would fall during a recession, he said. Those taxes are also less transparent than property taxes, he argued, which must be approved every year by council.
Rather than looking for new ways to raise money, cities should look for ways to build more sustainably, through infill rather than greenfield development, and promoting active and public transportation, Durand-Wood said.
While Slack agrees that sales taxes would fluctuate with the economy and aren't as transparent as property taxes, she argues a mix of tax sources would benefit cities.
Non-residents, like tourists or commuters, use a municipality's services but don't pay taxes there, she said.
However, "a sales tax is a way of capturing some of the benefits that are being used by non-residents."
A new funding model has been a dream of Winnipeg mayors going back at least to the time of Stephen Juba, who was first elected in 1956.
Gillingham has set a goal of limiting the 5.95 per cent property tax increase to one year, returning to the 3.5 per cent increase after.
With growing demands for services and an empty reserve fund, getting there will be a challenge without some sort of new revenue source or service cuts.
But Gillingham says between the larger hike this year, and controlling its costs, the city is "making every effort" to bring the property tax back down in future.
When asked whether he would commit to bringing it back to 3.5. per cent, Gillingham responded, "I'm committing to doing all we can to get there."
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