Higher taxes are just part of the problem

Opinion

Hey there, time traveller!
This article was published 10/02/2024 (586 days ago), so information in it may no longer be current.

Last weekend, Brandon City Council voted to raise property taxes by 9.4 per cent. It is a larger tax hike than we experienced in the previous 10 years combined, and it’s only the start of the increases.

In order to pay for the cost of expected wage increases and millions of dollars in spending on new capital projects, we could see similar-sized tax increases for the next 10 years or more.

That was the conclusion of the report by the MNP consulting firm, which examined the city’s future revenue needs relative to expected future expenses.

Since the release of the MNP report, there has been much discussion about the reasons why such large tax increases are required. The general consensus is that past city councils made the mistake, year after year after year, of failing to raise taxes at a level that kept pace with increased costs and projected capital expenses.

Indeed, most (if not all) of the city’s property tax increases over the past decade were below the inflation rate, didn’t reflect the city’s increased labour costs and didn’t set money aside to fund future big-ticket infrastructure projects.

Even worse, council regularly strip-mined reserve accounts — where money would normally be set aside to pay for future projects — in order to further reduce the size of the tax increases. Those city councils were regularly robbing Peter to pay Paul, setting us up for the looming cash flow problem that makes oversized tax increases necessary for the next several years.

That’s bad, but that’s not all. At the same time, they were stripping reserve accounts and not raising taxes at a level high enough to cover costs, the city was also mismanaging the its water and sewer utility.

By effectively freezing water and sewer rates for several years, the utility had to run a multi-year deficit. As the Public Utilities Board pointed out several weeks ago, it is illegal for a municipal water and sewer utility to run a deficit in any year, let alone several years.

The fact Brandon was in deficit for several years is a major reason why we will see our water and sewer rates more than double by next year.

In short, it is about to become much more expensive to live in Brandon because past city councils and city bureaucrats focused far too much on keeping taxes and water rates down, and far too little on the long-term consequences of doing so.

Who do you blame for this? The city claims the federal and provincial governments have failed to provide an adequate level of funding over the years. That’s a common complaint made by many cities, especially during budget season, but Brandon repeatedly failed to apply for funding that it was eligible for.

They can’t complain they didn’t get money they didn’t ask for.

Our current city council blames past city councils for creating this situation, but many of the people currently sitting at the council table also served on those councils, and in fact voted for the super-small tax increases and reserve depletion that created the fiscal challenge we now find ourselves in.

If they had been as concerned about Brandon’s fiscal sustainability then as they appear to now be, a decade of huge tax increases may not have been necessary.

How does the city get out this mess? It won’t be easy. That’s because a lot of the planned future spending is for capital projects that should have been done years ago, and will only become more expensive if they are further delayed.

That said, we can avoid a decade of large tax increases if the city can increase its revenues from new growth and other sources, including the federal and provincial governments.

That will be far easier said than done. With each year’s large tax increase, Brandon will become less competitive in its ability to attract large commercial and industrial projects — the kind that create large tax revenues. It will become increasingly cheaper for companies to spend their money in lower-tax communities, even if they are just outside Brandon’s boundaries.

Indeed, we will also likely see a housing boom in nearby communities like Forrest, Kemnay, Chater, Alexander and Souris, as property owners choose to enjoy the benefits of Brandon, but at a far lower tax cost.

If that happens, it will impact the viability of residential development in the city. A drop in housing starts will result in lower “growth revenue” from taxes and development fees. That will only make the budget squeeze even more challenging.

All of that paints a gloomy picture, but it underscores the seriousness of the situation facing Brandon. Stable, thoughtful leadership will be required to navigate us out of this mess.

Given that many of those sitting at the council table bear some responsibility for creating this crisis, however, it remains to be seen as to whether this group is capable of providing that leadership.