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Need to keep a lid on property taxes
Oct 20, 2006

Some things you read about are worth repeating and one of these items is the need to keep a lid on property taxes. 

In response to a September 24, 2006, article on the question of raising city property taxes written by Free Press reporter Mary Agnes Welch, the Winnipeg Real Estate Board’s civic and legislative affairs chair, Dana Downey, wrote a strong letter to the editor which rebuked any notion of raising municipal taxes until the province at least phases out the education tax on property. 

Depending on what school division boundary your home falls within, education taxes represent approximately half of your property taxes. It was interesting how the reporter chose not to reference this portion of your property tax bill when listing property tax comparisons for a 1,200-square-foot three-bedroom bungalow in major cities across the country. 

Welch also refers to Peter Holle, president of the Frontier Centre for Public Policy, in her article. To her credit, she included Holle’s comment that, before taxpayers are asked to pay more taxes, “the city needs to rethink how it does things.” 

Holle mentioned structural reform, competitive bidding processes and best practices applications such as how to design, build and operate a water treatment plant. 

In any event, here is a follow-up editorial Holle wrote as a response to Mary Agnes Welch’s story. Without giving his ideas cart blanche approval, it is clear the Winnipeg Real Estate Board and its 1,200 REALTORS® are more on side with Holle’s position than deferring to the easy way out and increasing property taxes to raise revenues. 

It should also be noted that the Winnipeg Chamber of Commerce has just released a civic election candidate survey answered by 45 of the 52 candidates (mayoral and city councillors included), in which two-thirds of respondents agreed the city should implement user fees to decrease its reliance on property taxes. 

The chamber’s taxation policy is for a revenue neutral system of taxation, meaning you cannot increase user fees without a corresponding decrease in property taxes.

Higher property taxes? 

by Peter Holle

Let’s commend Winnipeg city council for not raising property tax rates for the last seven years. It should stay the course.

Rising property values by themselves raise taxes. Because property taxes are calculated by multiplying a mill rate by a property’s assessed value, the tax collected rises automatically when market value increases. The rates used to be adjusted to keep revenues neutral, but that’s not the case in recent years. 

Property taxes remain the largest revenue source for Canadian cities. When they’re high, they depress property values. They encourage urban sprawl by penalizing the dense development typically found in central cities. Parking lots are valued and taxed less than a multi-storied building, so we end up with more parking lots downtown. The system effectively subsidizes commuters who live outside the city but use services paid for by local property owners. 

The path to a robust, denser city requires alternatives to property taxes for funding services. We should pursue the thoughts that emerged from the “New Deal” tax discussions led by former Mayor Glen Murray. We can shift to fully cost-recovered user fees wherever possible, a responsible, “green” policy that encourages conservation. Like many cities, Winnipeg should implement a hotel tax to capture revenues from visitors. On a higher government level, grants-in-lieu of property tax on all provincial properties paid to the city should be raised to normal rates. Finally, if higher levels of government harmonized the GST and PST and gave cities a two-per-cent cut of the action, growth and development would become a benefit — not a problem. 

Changing the City of Winnipeg Act to mandate high-performance local government would create a financial windfall. If the city exposed most of its operations to competition, the scope for savings is substantial, according to Geoffrey Segal, the director of government reform at the Reason Foundation. “Managed competition” means that in-house service providers submit internal bids against outside suppliers. A rule of thumb says about half a city’s spending can be “competed,” which typically produces a 30 per cent saving. 

Applied to Winnipeg’s $721 million budget, the competitive model would generate $108 million in annual savings, without any reductions in service. Second, if all city departments paid a capital charge on assets, including thousands of properties, they would be inventoried properly. That would force the sale of surplus or redundant assets and generate tens of millions in one-time revenues, ideally re-invested in our crumbling road infrastructure. These changes would create a rapid slim-down in overhead and make the city’s use of capital more intensive and efficient.

What muddies the water most is that over half of the property tax bill collected by the city goes to school boards to help fund education. The province should dump this antiquated system — and the unaccountable operating model that comes with it — and bring in a student-based payment system funded by general revenues, not property tax. That would immediately boost values and revenues for the city.

More property taxes? Only if you like sprawl, inefficient services, dead capital, low property values and runaway school spending

(Peter Holle is the president of the Winnipeg-based Frontier Centre for Public Policy.)

o If you didn’t have a chance to attend the Winnipeg Chamber of  Commerce/Winnipeg Real Estate Board mayoralty forum, it is being rebroadcast by Shaw TV on Channel 9, today — Friday, October 20 — at 7 p.m.