Finances a Central Concern

Frontier Centre, Local Government, Media Appearances, Taxation, Uncategorized

 

On the doorsteps of Saskatoon, voters are telling city council candidates they’re concerned about how taxes and spending on expensive projects are affecting the city.

It’s become one of the central election issues. At ward forums across the city, candidates have had to answer questions about growing budgets and shrinking reserves.

Several candidates — mostly those challenging incumbents — have said the No. 1 issue on the doorstep is taxes and spending.

Two mayoral candidates, incumbent Don Atchison and challenger Lenore Swystun, sparred Friday over the city’s books, sending out duelling press releases.

Swystun has tried to portray Atchison as a big spender focused on legacy projects, while Atchison has defended the spending as a necessary fix to a huge infrastructure deficit.

But a former city finance director says the numbers might simply indicate a city in transition, one that once maintained slow growth and is now using its economic momentum to fix outstanding problems.

The financial shifts aren’t abnormal and fit somewhere in the middle when compared to other western Canadian cities, said Ken Pontikes, a sessional lecturer with the University of Saskatchewan political studies department and a former director of finances for Saskatoon from 1984 to 1988.

The fact is, Saskatoon has more debt than ever and is paying more in 2009 to cover interest on loans than it did in 2006 and 2003, the last two election years.

Since 2003, tax hikes surpassed inflation in Saskatoon in every year except election years. The revenue stabilization fund — the city’s rainy day fund — is empty after hovering around $4 million in recent years.

"What we’re seeing now is a big change in finances affected not only by the growth of the city but by funding made available from other levels of government," said Pontikes.

Ottawa has been generous with funds for municipalities in the past several years and the city is essentially grabbing the money it can before the grants disappear.

Grants from provincial and federal governments have increased steadily since 2004, rising to $63.9 million in 2008 from $18.9 million.

"We have an infrastructure deficit and we have undersized infrastructure and a lot of pent-up projects that should have been done a while ago and now the funding is available and the city is moving ahead," said Pontikes.

The city takes out loans to help fund its share of the projects, but in the long run — once the sports complexes, the new bridge or art gallery are opened — the annual operating costs will escalate.

"With capital funding, it’s in and out because the federal government gives money to build a project, but then does not support it in terms of operating expenses," said Pontikes.

"That’s where, in the end, a municipality has to be careful about chasing all these dollars . . . not only about their share of capital cost but because if they don’t have money in reserve, a municipality will borrow more."

The city’s $241.7-million capital budget in 2009 is the largest ever, including $17.7 million in loans, up from a total of $68.7 million in 2003.

The 2009 operating budget totalled $280 million, which is about $20.5 million more than in 2008 and up from $182.5 million in 2003.

Debt held by the city hit $115.3 million so far in 2009, up from $42.7 million in 2006 and $29.9 million in 2003.

The city will spend almost $11 million this year to service its debt, an increase from about $4 million in 2003.

"We’ve always had a low debt ratio in Saskatoon and it still puts us in good company compared to other municipalities," said Pontikes. "Our debt rates are going up, but they’re not unreasonable."

When the mill rate increase passes the rate of inflation, people on fixed incomes are hit hardest, but others might feel increases in city services or capital projects justify a tax hike, said Pontikes.

But the Frontier Centre for Public Policy released a report Friday on government transparency in Saskatoon and Regina and found Saskatoon doesn’t properly measure performance, such as when the city increases snow removal.

The problem stems from the city failing to regularly link the measurements to spending, said the report.

"All municipal government performance measurements should be linked to expenditure, as residents need to know if they are getting value for money," said the report.