Problems May Arise

Commentary, Frontier Centre, Media Appearances

Regina’s low indebtedness and debt-serving costs suggest its low taxing regime is sustainable, a new study said.

However, the 2007 Local Government Performance Index report released today warned Regina could face difficulties because of its poor level of public accounting disclosures.

If it experiences any infrastructure deficits that require funding, Regina could face a funding crunch because the city is not generating and setting aside enough capital to replace aging infrastructure.

Part of the problem is the city’s level of public accounting disclosure does not include any attempt to account for tangible assets, according to the authors of the report, Larry Mitchell and David Seymour with the Frontier Centre for Public Policy.

Mitchell and Seymour, who analysed the 2005 finances of Canada’s 30 most populous cities, concluded Regina’s level of public accounting disclosure was poor. But this problem is not just isolated to Regina; it is national in scope, they said, noting by 2009 all councils will be mandated to make those public disclosures.

“Municipalities own vast amounts of assets, but at this stage, they have a very limited idea of the status of those assets,” Seymour said.

For example, a city-owned bridge could be in need of major repairs or replacement, but accounting assumes it is in good shape and hasn’t allowed for the financial impact of needing to maintain it so the city has an infrastructure deficit, Seymour said.

“It would be good, and luckily it is going to happen in 2009, if municipalities first of all keep track of the city-owned infrastructure and capital assets and their status, and secondly if the city actually publicly reports on it. There are a small number of municipalities that do this,” he said.

“We need to start funding for depreciation on our municipal infrastructure, which in layman’s terms is saving money to eventually replace it.”

Regina Mayor Pat Fiacco has gone on record in the past calling for more federal and provincial dollars to support the city’s infrastructure needs. The infrastructure gap in Regina is about $100 million and if sewer and water utilities are added to the mix that’s another $100 million, he said last month. One million dollars is the equivalent of a one-per-cent property tax increase.

Until the cities have good information it is difficult to determine what replacement costs are, Mitchell said.

“There is a need for good information relating to the accounting for assets and their status, as good information on asset management is designed to ensure that on an ongoing basis the infrastructure is kept at a standard that is sufficient to meet the service needs required for the city,” he said.

“Politicians will attempt to tax us as little as they can. Unless you give them robust information that is publicly available showing that they need to tax more they won’t.”

The Frontier Centre for Public Policy is an independent, non-profit organization that undertakes research and education in support of economic growth and social outcomes that will enhance the quality of life in Canadian communities.