Unlike the Province, the City is required to balance their books each year. Once again, they achieved balance, but there are storm clouds on the horizon.
Winnipeg is forecasting an almost $86 million deficit in their 2019 budget, and an over $100 million deficit in 2020. Those are large structural deficits the City has to face each year. Unfortunately, they are fighting with one hand behind their back due to the broken revenue model that hampers Canadian cities.
Our city generates over 54% of its revenues from property taxes, an antiquated form of taxation that was developed over 100 years ago when our country looked very different. When Canada was first formed, over 80% of the population lived in rural areas. Now those ratios have switched, with over 80% of Canadians living in urban areas.
Property taxes have many warts. They are more difficult to administer than most taxes. They don’t automatically grow with the economy. Property taxes also don’t take into account the ability of an individual to pay them.
Canada is an outlier in this area. In Sweden, Germany and Switzerland, for example, over 80% of municipal tax revenues come from income taxes. Amongst the 35 OECD countries, in only 3 are property taxes equivalent to over 3% of GDP, Canada amongst them.
People have been flocking to cities like Winnipeg for decades, to take advantage of economies of scale, which leads to increased productivity, better job creation and higher economic outcomes. By 2025, almost 60% of global GDP is expected to come from just 600 cities. We need to modernize the municipal revenue model in Canada if we are to remain globally competitive.
The City of Winnipeg should be applauded for their 2018 budget, but they can’t go it alone. They are doing what they can, setting aside $2 million in capital spending in the 2018 and 2019 budgets to continue developing their innovation strategy, as well as to conduct several pilot projects.
This shows the City is putting their money where their mouth is, and looking at ways to more efficiently and better deliver services. However, they are still trapped by a revenue model that is handcuffing them at every turn. Now is the time to have the conversation with all levels of government about reviewing the municipal revenue model.
For further information on this and other Chamber advocacy initiatives, please contact Director of Advocacy, Michael Juce, at [email protected] or 204-944-3315.