The 2% Solution
Questions & Answers
- How would the property tax reduction and freezes work?
- What happens with the provincial government now?
- Where is user-pay garbage in the New Deal?
- Why should the provincial gas tax contribute to repairing Winnipeg streets?
- What is this New Deal really all about?
- Why ask the federal government for a portion of the GST rather than a portion of the federal gas tax.
- What does a 2% solution mean ?
Under the proposed New Deal citizens would NOT see a property tax increase until 2011. To ensure this, the mill rate would be recast in the year of an assessment. Under the New Deal proposal, market values would only be captured after 2011 – after a 4 % tax reduction had been passed onto citizens and after the five years of property tax freezes.
During a reassessment the only way a citizen would see an increase in their municipal portion of the property taxes would be if for some reason their property value increased MORE than the average increase across the city.
Keep in mind that the city does not have any authority over the education portion of the tax bill, which now makes up over 50% of a Winnipegger’s property tax bill.
The Mayor and Premier meet on a regular basis and this is the only major item on the Mayor’s agenda with him. In the meantime members of council are meeting with Liberal leader Jon Gerrard and Conservative leader Stewart Murray to review the proposed New Deal with them.
User pay garbage has nothing to do with the New Deal. It was an idea discussed before the New Deal and may be discussed in the future as a way to encourage recycling and good environmental practices.
User-pay garbage is intended to be revenue neutral for the City. At this time the introduction of user-pay garbage would result in a corresponding further property tax reduction.
The City of Winnipeg is unique among other towns and cities in Manitoba because it repairs provincial roads that go through Winnipeg - which include many major streets, like Portage Avenue, Main Street, Fermor, St.Mary's, St. Anne's, Broadway and Lagimodiere.
When those roads leave Winnipeg there’s an immediate change. The province pays for the repairs. Even when those roads become main streets in towns like Portage, Brandon, Morris or Morden the province continues to repair them using gas taxes.
Under the New Deal proposal Winnipeg would like the same right to use the gas tax raised in Winnipeg to fix provincial roads in Winnipeg.
The New Deal proposes Winnipeg would keep ONLY a portion of the gas taxes and ONLY those gas taxes raised in Winnipeg. It is not asking to keep any of the gas taxes raised anywhere else in the province.
Right now the province collects $122 Million in gas tax at Winnipeg pumps, of which about $10 to $15 Million is returned in grants to the City of Winnipeg for road repairs.
Under the proposed New Deal the federal government has been asked to consider sharing 2/3 of 1 per cent of the GST with the City of Winnipeg. That would generate about $62 million.
While there is a possibility of generating $62 million with 5 cents a litre of federal motor fuel tax, it would not be our first choice, because the gas tax does not grow over time.
The Conference Board of Canada estimates that GST revenue will grow about 4.7% every year, while fuel tax only grows 1%. For example $50 million of gas tax today equals about $55 million a year in 10 years. However $50 million of sales tax today grows to $78 million a year in 10 years.
For a city to be sustainable it must have a revenue base that grows with the economy or at least keeps up with inflation. Relying too heavily on fuel tax puts us back in a fiscally challenging situation in the not too distant future.
As well we know the federal government is flexible on the issue of GST or gas tax. The Speech from the Throne this year stated, “We are committed to providing a portion of the gas tax if, eventually, that’s what works best for municipalities.” And the federal budget included this reference, “the Government will work with the provinces to share with municipalities a portion of the gas tax revenues or determine other fiscal mechanisms that achieve the same goals.”
This deal represents what we heard from you citizens. We heard them say:
“We understand there is a problem and we want you to fix it”
“Don’t reach into our pockets to do it.”
“Get a better share of the revenue pie from the other orders of government;” and
“The City must operate more efficiently.”
The New Deal proposal approved by EPC April 7th, that will go to Council on April 21st, 2004, addresses what citizens have said.
Of all the taxes currently collected by all 3 levels of government in Winnipeg, the City government collects 7%. Under the New Deal proposal the City would receive 2% more of the total tax pie.
The Federation of Canadian Municipalities, www.fcm.ca has a campaign called Bridging the Gap which points out the chronic under funding of Canadian municipalities. The FCM agrees that with a 2 per cent increase in their share of the pie, cities would be able to address many of their infrastructure challenges.
In consultations the public asked the city to seek a greater share of the total tax pie. Over 80 per cent of those polled agreed that existing tax revenues going to the provincial and federal governments should be shifted to the city.