Between fiscal rock, budgetary hard place

Hey there, time traveller!
This article was published 16/12/2023 (747 days ago), so information in it may no longer be current.

If you’re surprised, you haven’t been paying attention.

For more than a year, in multiple columns and editorials, Matt Goerzen and I have been ringing the alarm about the City of Brandon’s finances. We’ve written about the city’s plan to borrow tens of millions of dollars for various projects, and how we are in danger of hitting our debt ceiling.

We repeatedly discussed the city’s massive, and growing, infrastructure deficit, and questioned how all that borrowing, and years of debt payments, would impact the city’s ability to repair and replace our crumbling roads, curbs, sidewalks and sewers. And we wrote about the city’s consistent inability to accurately predict the cost of infrastructure projects, resulting in cost overruns measured in the tens of millions of dollars.

We questioned how the city’s exploding debt load would impact our ability to afford the new aquatic complex everybody wants, or pay for repairs to the Sportsplex pool and rink. We wrote that years of low tax increases (often below the inflation rate) and depleted reserves had put the city in a financial squeeze.

We alerted readers to the likelihood of big property tax increases in the future, and about the impact it would have on home and business owners at a time when Brandonites are increasingly struggling to afford the basics of life. And we discussed the collapse of property values in the downtown area, and how it would inevitably result in higher property taxes for homeowners.

We wrote about the city’s plan to double our water and sewer rates over the next 18 months, and how the Public Utilities Board had pointed out that such a big rate increase was only necessary because the city had failed to comply with PUB orders and hadn’t applied for a rate increase in years.

We repeatedly called for greater openness and transparency from city hall about the city’s finances and plans. In response, we were told again and again that the finances were just fine.

We were called fearmongers, and “Chicken Littles.” We were accused of “fake news” — of getting our facts wrong and exaggerating the seriousness of the situation.

We knew we were right, however, and yesterday’s release of a study by MNP into the city’s finances confirms that our concerns were accurate and justified.

As was reported in yesterday’s Sun, the MNP report says that the City of Brandon will need to impose “extraordinarily” large property tax increases over the next decade in order to remain financially sustainable.

It says that “tax increases have not been sufficient to reflect inflation and have resulted in diminished reserves at a time when Brandon requires significant investment in infrastructure,” and that “the existing funding and taxation plan will not sustainably fund capital growth and renewal, even in the near term.”

That’s as scary as it sounds, but Matt and I have been saying that for a long time. Year after year, city council was focused on keeping the tax increases as low as possible, even if it jeopardized the city’s long-term future.

The MNP plan recommends that the city raise property taxes by approximately 13 per cent annually between 2024 and 2027, and approximately three per cent from 2028 through 2033. Alternatively, it recommends a decade of nine per cent annual tax increases, along with delaying several capital projects.

Under either scenario, your property tax rates would basically double over the next decade, and that’s on top of the massive water rate increases we are experiencing.

There would also be increases in development fees levied on developers, regular utility rate raises, drainage fees for commercial and residential properties (a new indirect tax on properties) and higher fees charged at the city landfill.

Take a moment to let that sink in. Now, take out your property tax bill from last year and ask yourself if you will be able to afford such big tax increases, year after year after year. If you can’t — for example, if you’re living on a fixed income, or you’re a business owner struggling to stay afloat — what are you going to do?

The MNP report suggests that the tax and fee increases are overdue and that, on average, Brandon’s property tax rate is 47 per cent lower on average than the rates in Fredericton, N.B., Grande Prairie, Alta., Medicine Hat, Alta., North Bay, Ont., and Prince Albert, Sask.

That’s a dangerous comparison, in that it implies that Brandonites have been getting away with paying too little in property taxes for years, and can afford to pay more. Beyond that, the analysis is based on “per capita” comparisons, as opposed to mill rates. A simple online search reveals that there are dozens of Canadian cities that have lower property tax rates than Brandon.

Where do we go from here? There are no good options.

The MNP report sets out a detailed road map to return Brandon to a sustainable financial footing a decade from now, but that plan requires “extraordinarily” large tax increases, fee increases and other revenue increases to get there. If city council rejects the MNP plan — or even reduces the tax and/or fee increases proposed in the road map — the financial mess we are in will become even worse over time.

In short, we’re caught between a fiscal rock and budgetary hard place, thanks to years of short-sighted, irresponsible budget decisions made by city councils over the past several years.

They can’t say they weren’t warned.