Council should heed financial wake-up call

Opinion

The City of Winnipeg’s finances are in such dire straits, city hall can barely maintain the fiscal cushion it has traditionally relied on to balance the books during lean years.

In fact, the balance in the city’s financial stabilization reserve — the so-called rainy day fund — is now at risk of becoming completely depleted.

City council mandates that the fund keep a balance equal to six per cent of its operating budget. The city is also required by law to balance its operating budget each year.

It relies on the reserve account to cover operating deficits when they arise with the goal of replenishing the fund in future years.

City hall has been able to do that most years in recent decades. But it has become increasingly difficult as the city struggles to cover rising costs using mainly property taxes, which do not grow with the economy.

The COVID-19 pandemic was particularly hard on the city’s finances, as revenues declined and costs related to the public health emergency rose. It has never fully recovered from that fiscal crisis and is now at risk of having a zero balance in the fund.

Should that occur, the city would not have the fiscal cushion it once had to cover future deficits.

This should come as no surprise to anyone who has been paying attention to the city’s financial crisis in recent years. The city does not have the growth revenues it needs to cover escalating costs. Eventually, the city and the provincial government will have to come to terms with this worsening problem and develop a new financial deal for the city.

There’s $31.7 million in the city’s rainy fund in 2024, well below the mandated six per cent balance. That would not be enough to cover this year’s projected deficit of $39.3 million. City officials announced plans last week to chip away at that shortfall.

Like most years, the deficit is expected to decline by the end of the year. It’s possible, and even likely, that it will shrink enough that the shortfall will be covered by the rainy day fund. But what about next year and the year after that?

If the city cannot replenish the fund in future years, where will it get the funds to cover future deficits?

Coun. Jeff Browaty (North Kildonan), chairman of the finance committee, said it’s not time to hit the panic button. Perhaps not. But the deteriorating condition of the city’s finances should be a wake-up call to city council and the provincial government that the status quo is not sustainable.

There should be an urgency around talks between the city and the province to develop a new financial deal for city hall that would include some type of growth revenues, such as a portion of income taxes and/or sales taxes. That has been talked about for years by previous mayors and provincial governments but has not materialized into a concrete plan. Successive politicians keep kicking the can down the road.

The city always has the option of cutting spending to meet its legally mandated requirement to balance the books. But the reality is, there is not much left to cut without reducing core services in areas such as snow clearing, street maintenance, libraries, police, fire, and recreational services.

If the provincial government values those services, it must sit down with the city and finally come up with a sustainable financial plan.