City dodges fiscal bullet thanks to federal aid, stable property tax base

Opinion

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This article was published 26/11/2020 (1245 days ago), so information in it may no longer be current.

The City of Winnipeg may not have the deep pockets senior levels of government do when it comes to weathering the financial storm of COVID-19.

But the city’s bottom line is also the least affected by it.

The federal government has taken the biggest financial hit from the pandemic, going hundreds of billions of dollars into debt to prop up a coronavirus-ravaged economy, and to offset plummeting tax revenue.

The Manitoba government is also deep in the red. It’s projecting the largest deficit in the province’s history: a $2.9-billion shortfall expected for 2020-21. That’s nearly three times the size of any previous deficit.

The city has its share of pandemic-related challenges — but they pale in comparison to what senior governments face.

The city’s 2021 budget, which was released Friday, pegs the impact of the pandemic on city coffers at $62.2 million. It’s a fair chunk of change, but it represents only 3.6 per cent of city hall’s $1.72-billion consolidated budget. With the help of $74.5 million in federal pandemic support this year, the city will be able to balance its operating budget in 2020 and 2021 with relatively little pain.

The city’s biggest financial challenge involves Winnipeg Transit. With ridership expected to run below normal levels well into next year, the bus utility will require tens of millions in bailouts to keep buses on the road.

The city is using all of its $32.3 million in federal transit funding to backfill Transit’s losses in 2020 (along with $9 million Transit had left over from previous years of retained earnings). In 2021, property taxpayers will contribute $104 million to Transit, up from $67 million in 2020.

Beyond that, the effect of the pandemic on city coffers has been remarkably manageable. The city expects to lose about $16.5 million in non-Transit revenues in 2021, including lower fees from parking, permits, recreational facilities and a small decline in entertainment taxes.

The city has identified $4 million in additional costs from the pandemic, including municipal accommodations, protective equipment and overtime.

For the most part, the city has dodged the fiscal bullet. The main reason is that the city’s chief source of revenue – property taxes – has been largely untouched.

City hall doesn’t reap the benefits of an economic boon the way senior levels of government do. It doesn’t have the growth revenues (like consumption and income taxes) that rise as the economy expands. But there’s an upside to that: city revenues don’t collapse during severe economic downturns, the kind we saw in 2020.

Which means the city’s tax base has been left largely unscathed.

With the help of a 2.33 per cent rate hike this year, property tax revenues are projected to grow by 3.6 per cent in 2021, up $23 million from the previous year. Despite some pandemic-related business failures in 2020, business tax revenues are expected to increase 3.0 per cent next year.

Sewer and water rate revenues are also up, due in large part to annual increases to utility rates.

The city will take a $36-million “dividend” from the utility for general revenues in 2021. None of that revenue has been affected by the pandemic.

Meanwhile, the city’s finances are in good enough shape to add $500,000 to economic development and $2 million to affordable housing. The Assiniboine Park Conservancy will get more money, and the total number of full-time equivalent positions at the city will increase by a net 16 next year.

There’s little doubt that without the $74.5 million in COVID-19 support from the federal government (city hall got no pandemic money from the province), the city would have had a tougher time making ends meet.

Unlike the province or Ottawa, the city can only borrow for capital spending, not operating expenses. Without federal aid, the city would have had to dip further into its reserves, raise taxes and fees, reduce spending or adopt all of the above to make up the difference. But those measures would have had minimal impact on the city’s bottom line over the long term.

For the federal and provincial governments, the financial impact of COVID-19 will be felt for years to come.

tom.brodbeck@freepress.mb.ca