‘I think they’ve been misguided’
Municipalities defiant on government decision to slash grants worth $33M
The government’s decision to cut $33 million from municipalities is based on a “misguided” assumption that funds paid out by some Crown corporations are grants in-lieu of local property taxes, according to the association representing cities and towns.
While the province says the decision corrects an “unfairness,” grants paid to cities by SaskPower, SaskEnergy and TransGas are based on decades-old distribution deals, said Saskatchewan Urban Municipalities Association (SUMA) CEO Laurent Mougeot.
“These are legal, binding contracts,” Mougeot said of the agreements, which were made in the 1940s and 1950s when more than 100 communities agreed to be compensated for giving the newly-incorporated SaskPower exclusive electricity distribution rights.
“Those agreements were proper when SaskPower came along and they were proper for 60-some years. Now all of a sudden somebody looks at that, fails to understand what they really are, calls them by another name (and) looks at it as being unfair?”
Finance Minister Kevin Doherty’s 2017-18 budget redirected into government coffers $36 million in “grants-in-lieu of taxes” that would have been paid by SaskPower, SaskEnergy and TransGas.
Days after the budget emerged, in response to vigorous protests from local leaders, the province capped the reductions at 30 per cent of a given municipality’s revenue-sharing total, which reduced the total amount to $33 million from $36 million.
Other Crown corporations are expected to pay $29 million to municipalities, which also receive millions in provincial revenue sharing. A surcharge imposed by cities and towns on SaskPower electricity sales remains in place.
The cuts, which aim to shave the current $1.3-billion deficit to $685 million, have been widely criticized by mayors across the province. The Opposition Saskatchewan NDP called the decision to scrap some but not all grants “mind-blowing.”
The decision also led to a rift between urban and rural municipalities; however, Mougeout and Saskatchewan Association of Rural Municipalities president Ray Orb downplayed that on Tuesday, noting communities across the province are reeling from budget cuts.
Government Relations Minister Donna Harpauer told the Saskatoon Star Phoenix this week that eliminating grants paid by SaskPower, SaskEnergy and TransGas but not other Crown corporations was intended to make the system more equitable.
“The majority of municipalities were treated unfairly all these decades … This is a very inequitable, complicated program that needed to be addressed,” Harpauer said, adding that the Crown corporations in question could end up paying municipal property taxes.
That logic is faulty, Mougeot said, as it wrongly equates agreements to exchange distribution rights for perpetual compensation with funds paid by other Crown corporations, such as SaskTel and SGI, in lieu of local property taxes.
And while municipalities have a strong legal case, any court challenge is likely to be thwarted by new amendments to the Power Corporation and SaskEnergy Acts that “remove any ability for a party to take objection to the new law,” he added.
“I think they’ve been misguided along the way, and as they’re discovering what this means and the reality that these are legally binding contracts, they cover the ability for anyone to challenge them (with) very, very strong measures.”