Stunned councils consider lawsuits over budget cuts
Loss of grant-in-lieu revenue catches municipalities off-guard
A feeling of “shock” has settled over Saskatchewan’s cities and towns as local leaders realize the financial implications of lost grant-in-lieu revenue, says the president of the Saskatchewan Urban Municipalities Association (SUMA).
Gordon Barnhart said many mayors had been waiting for the provincial budget to see if the municipal revenue sharing formula would change to their detriment. When it didn’t, they felt relief, not immediately realizing that removing grants in lieu of taxes from provincial Crown corporations was just as bad.
“It’s kind of like if you’re watching a magician and you’re concentrating on the shiny object, but in the meantime the trick was played with the other hand that you hadn’t noticed. I feel badly for that. I wouldn’t say that we were tricked, but it certainly didn’t appear to be what it really was in the end,” Barnhart said.
“I don’t think that people realized what grants-in-lieu were until all of a sudden it’s gone,” he continued.
Provincial Crown corporations pay the grants instead of property tax. Last week, the province announced it was axing the grants paid by SaskPower, SaskEnergy and TransGas to 109 municipalities, eliminating a municipal revenue stream that has existed since the 1930s.
On the weekend, Saskatoon city council held an emergency meeting and unanimously voted to take legal action against the province. Regina’s city council was to meet Monday night.
Barnhart said SUMA is looking into whether a legal challenge is viable.
“If there’s some hope of resolution through a lawsuit, taking it to the courts, then I’m quite sure that SUMA would be backing that,” he said.
With the City of Regina now dealing with an $8.5-million shortfall this year from the loss of the province’s grants-in-lieu of taxes program, council is ready to look at several options but stresses that going into reserves is a last resort. On Monday night, council postponed its regular council meeting to host an emergency council meeting to address this issue.
“(Reserves are) the last thing anyone on council wants to go to,” Coun. Joel Murray said. “Our reserves are already allocated to future capital, infrastructure and emergencies and grant-matching opportunities. The reserves are not the answer.”
Coun. Barbara Young also felt that dipping into reserves was not the answer to the shortfall.
“Certainly, using all of our reserves to pay this down is not the way to go,” Young said. “We have seen from the federal budget that there will be funding coming forward and we will have to match that funding to use it for our infrastructure.”
Prior to the meeting Monday, councillors would not say if an increase to property taxes was on the table. Last week, Mayor Michael Fougere said that grants-in-lieu loss in revenue would be the equivalent to a four-per-cent increase in the mill rate, the same amount the mill rate was increased in February (which added more than $100 per year to the average home’s tax bill). Saskatoon city council, which held an emergency meeting on Sunday, has instructed city administration to look at other savings and revenue sources before committing to a tax increase, something Regina council may also do.
Regina, along with Saskatoon, were hit the hardest with the loss of grants-in-lieu of taxes, but several other communities in the province are also feeling the pinch. Moose Jaw will lose $2.7 million, while North Battleford and Prince Albert will lose $1.1 million and $2.4 million respectively. Smaller communities are also losing the revenue stream, with places like Maple Creek, Indian Head and Gull Lake losing $61,000, $48,000 and $27,000 from their budgets.
“We don’t have the ability to run a deficit. We always balance our budget and we save for a rainy day,” Murray said. “The provincial government, unfortunately, they have not saved and now they are coming to cities and municipalities small and large. All of SUMA has been firm in their stance. Every municipality across the province is in opposition to this.”
Coun. Lori Bresciani reiterated a common argument among Saskatchewan municipalities this week, that the province is downloading costs to cities and towns.
“It is a form of downloading and I also think one of the biggest things is the timing,” Bresciani said. “This came as a surprise.”
The council meeting on Monday night was the first chance for councillors to discuss the issue and find a solution. At Saskatoon’s emergency meeting, council decided to look into what legal measures could be taken to stop the provincial government from removing grants-in-lieu of taxes. While no one has stated that the city will go that route, administration and council will be open to ideas to deal with the budget shortfall.
“I think one of the biggest things is to be able to discuss the options and where we have the shortfall and how we are going to deal with it,” Bresciani said. “I need to hear from our administration of the impacts and, in light of the budget, the predicament it has put us in.”
“We are taking stock of the situation,” Coun. Bob Hawkins said. “There are options on the table.”
“Everything is going to be looked at because this is a huge clawback for us and we are going to have to deal with it,” Young said. “I think it is too early to say what we are going to do because we will have to look at every option.”