Savings Vs. Shortfalls

Sask’s two biggest cities reject Wall’s reckless budget advice

Province | by Paul Dechene

It must be awesome being premier Brad Wall. The dude’s got everything figured out: “Do you have a surprise eight to 10 million dollar hole in your municipal budget? No probs. Smash your piggy bank. What are savings for?”

Or, as he actually put it during question period on April 10, “This particular [provincial] budget, we faced a massive reduction in resource revenues, and we’re asking those towns and cities and villages to share in under three per cent of that gap. Mr. Speaker, 2.5 per cent of the total gap in revenue.

“We’re asking those municipalities to share in from a position of strength,” Wall continued. “I would note that many of them have huge reserves. There is no need for them to increase taxes.”

On the very same day he said this, both Regina and Saskatoon had convened special meetings of their councils to take the next steps in grappling with the financial impacts of the 2017 Saskatchewan budget. Most damaging of those impacts: Wall’s government is ending the grants-in-lieu program whereby cities are compensated for providing services to provincial crowns.

The Province is also hiking the PST by a point — a move that’ll hit municipal governments just as it’ll hit households.

When all the changes in the provincial budget are added up, this year alone Regina and Saskatoon expect to be short $10.3 million and $9 million respectively. And, in 2018 and beyond, those shortfalls will grow dramatically if they’re not dealt with now.

Both cities are planning to compensate for the lost revenue through some combination of property tax hikes and service cuts.

And both have indicated their unwillingness to dip into their reserve funds.

After Regina’s April 10 special council meeting, Mayor Michael Fougere responded to a question about Brad Wall’s suggestion that cities tap into their reserves by saying, “I won’t talk about political spin as much as what reserves really are for. They are not meant to cover off over-expenditures. They’re not meant in our case to cover a loss of revenue on the operating side. They’re meant to plan for the future. We have several reserves meant for very specific issues. They fund those operations. They also fund working with the federal government for infrastructure projects. For emergencies such as flooding. But they are not meant to cover a decision by the province to cut funding.

“I think people would find out very quickly if we did that, we’d empty our reserves and we’d be in the same place the province is in and we’d be going back to the taxpayers for a much higher mill rate increase. It’s not sustainable. It’s not good business practice.”

This point that depleting reserves would leave cities in the same place as the province is a note that’s been struck not just in the Queen City but also by Saskatoon’s council and the Saskatchewan Urban Municipalities Association. And that’s not surprising. While Brad Wall claims in the legislature that his government was forced into this austerity budget because of a drop in resource revenues, that doesn’t tell the whole story. As it turns out, apart from a spike in 2009, non-renewable resource revenues have been fairly constant for the last decade. And this year’s low revenue numbers are consistent with previous dips in 2010 and 2007.

What is different in 2017 isn’t so much the drop in oil and potash revenue as it is that the Growth & Financial Security Fund, the provincial rainy-day fund Wall’s government has happily been drawing from over the last decade, has dropped from $1.6 billion in 2007 to zero dollars in 2016, thus leaving the province without the buffer against resource revenue fluctuations they had during previous low points.*

And now that they’ve tapped out their main reserve, Wall’s government is browbeating Saskatchewan’s cities and towns into adopting the same short-sighted financial management strategy.

Despite Wall’s arm-twisting, Saskatchewan’s two largest cities aren’t saying “uncle” just yet. To begin with, both will be raising property taxes. At their April 10 governance and priorities committee meeting, Saskatoon’s council committed to an additional 1.69 per cent property tax increase on top of the 3.89 per cent already approved in their 2017 budget. And Regina’s city council is considering a proposed 2.5 per cent property tax boost on top of the 3.99 per cent increase they approved in February.

Saskatoon also opted to raise parking fines from $20 to $30, eliminate $3.5 million in planned salary increases, and, most interestingly, is considering charging the province market-value property taxes on land occupied by four new P3 schools.†

Oh, and they’re also planning to take the province to court to force them to restore the grants-in-lieu program.

During the April 10 question period, Brad Wall made his final pitch to drop the tax hikes and service cuts and spend their reserves instead. “Some [municipalities] say, well that’s our rainy day fund,” said Wall. “Well, Mr. Speaker, now is the time to use it as we work towards a new revenue-sharing formula. And I’m not sure how that’ll be constituted, but I promise you this, it’ll be markedly better than anything they got from the NDP.”

Perhaps, by saying that his government plans to overhaul municipal revenue-sharing completely, Wall meant to inspire confidence that things will get better soon. But by hanging on to their reserves, Saskatchewan cities indicate that they’ve little confidence there is only one rainy day in their future.

No, they’re preparing for a monsoon. ❧


* Credit where credit’s due: Saskatoon journalist Tammy Roberts was the first person I read who called bullshit on Brad Wall pleading resource-revenue poverty. Roberts did a serious deep dive into Saskatchewan’s public accounts on her blog OurSask.ca. The piece is titled “SaskaBroke: The Demonization of Public Service and Where All That Money Really Came From” and it’s a glorious piece of research and a crucial read. I’m basically lifting her insights and using them for my purposes here.

† Under a deal currently being negotiated, the province will pay $4 for the P3 school sites. But as that negotiation is not complete, Saskatoon may be able to change the terms and charge the full market rate.