Reducing tax hike probably popular, but it is prudent?

Cutting Saskatoon’s 2018 property tax increase will be regarded as popular, but it’s a questionable practice.

You don’t have to conduct in-depth research to find out why it’s a bad idea. It’s right there in the same City of Saskatoon report that recommends council approve decreasing the tax hike.

The report proposes that Saskatoon’s 2018 property tax increase be dropped to 3.79 per cent from the 4.7 per cent city council approved in November.

The city has an extra $1.99 million in 2018 after the provincial budget, so the administration is backing an extremely rare rollback on the property tax increase. How rare? As far as anyone can recall, it’s never happened before.

If that’s not enough of a clue that reopening a budget is a bad idea, here’s a line from the same report that recommends it:

“Reopening a budget to deal with significant changes in assumptions based on new information should not be a regular practice and should only be considered when the impact is significant or poses a risk to the City’s ability to operate effectively.”

Clearly, the city’s ability to operate effectively is not threatened by an extra $1.99 million from the province.

So what would the harm be in slicing a little bit off the property tax hike?

Well, council sets aside three full days in November each year to meticulously consider how it will spend taxpayers’ money in the coming year. This year’s budget was, to quote the city’s chief financial officer, Kerry Tarasoff, “not a very sexy budget.”

The budget’s sex appeal was drained by little new spending and a struggle to fill the revenue hole left when the province eliminated grants-in-lieu in its March 2017 budget.

The Saskatchewan Party government’s budget earlier this month restored some of that money under a new name, prompting the city’s proposed budget redo.

Such a move would badly undermine the budget process. Why reopen the budget when the city gets an extra $2 million?

In the city’s $1-billion budget realm, small changes often result in more or less money of similar amounts.

The city was forced to reopen its 2017 budget a year ago to try to find a way to make up for an $8.3-million crater created by the province’s surprise decision to eliminate grants-in-lieu.

Plus, we already know the city is struggling with revenue on several fronts.

The city came up short by $3.1 million in its 2017 budget. That prompted it to transfer the $3.1 million from a reserve fund that is replenished for that purpose, since cities cannot run a deficit.

When the city has a surplus at year’s end, like the $2 million in 2016 or the $5 million in 2012, that money goes into the fund to make up for years like 2017.

The report to be considered by city council’s governance and priorities committee today says that reserve fund now contains less than half of what it should, at about $5 million.

Offering the extra $2 million in provincial revenue as a refund for taxpayers instead of propping up what is perhaps the city’s most important reserve fund seems risky — not the financial approach for which Saskatoon city hall is renowned.

Remember how city politicians and administrators bristled last year at unsolicited advice from the provincial government to raid the city’s reserve funds to make up for less provincial revenue?

A year ago, reserve funds and keeping them topped up were considered vital.

The city is also forecasting revenue shortfalls for 2018 in areas like transit and parking tickets of $3.97 million.

That makes this a terrible year to contemplate forgoing $2 million in revenue.

It’s sure to be popular, though. Dropping the property tax increase to 3.79 per cent would make it the lowest since 2009.

It will be interesting to see if anyone on council dares to speak or vote against the measure.

But will voters remember a tax cut when city council faces its next election in the fall of 2020?

Subsequent years when the city may have imposed larger tax increases, possibly even to make up for a 2018 discount, will likely eclipse any memory of a tax cut from April 2018.