Winnipeg city council is on shaky ground if it thinks P3s will pave the way for a $56 million business tax cut.
The city’s 2008 capital budget includes plans for P3s to upgrade and maintain two key roadway and overpass systems, as well as build and operate three police stations. The city will make lease payments to the private sector for decades to come.
The move is part of Mayor Sam Katz’s push to contract out, privatize and shut down city services, based on the advice of a pro-business report to council. The report takes a slash-and-burn approach to reach its ultimate goal, replacing the estimated $56 million in revenue the city will lose each year if it eliminates the business tax.
Academics and community groups are joining CUPE 500, which represents Winnipeg municipal workers, to fight the mayor’s right-wing agenda. The local is organizing a campaign under the theme of ‘Positively public – the Winnipeg way’.
It won’t be easy to fill the $56 million hole created by cutting the business tax. Privatizing won’t remove any debt from the city’s books, since long-term P3 lease payments are a significant financial obligation that must be accounted and budgeted for. The Canadian Centre for Policy Alternatives says the city’s “Economic opportunity” commission is creating opportunity for a select few, at the expense of the community.
Cutting the business tax in Regina didn’t solve any problems. Since eliminating its business tax, the city of Regina has been feeling the financial crunch, and has pushed cutbacks, privatization and contracting out.
The optics of businesses interests pushing for a business tax cut is a classic case of the fox guarding the chickens, says economics professor Ian Hudson.
Hudson, who teaches at the University of Winnipeg and is a CCPA research associate, has studied P3s. He warns the city not to expect any economic miracles. “Given the actual history of these kinds of partnerships in Canada, predicting any savings at all should be regarded as an exercise in optimism,” he writes.
Winnipeggers don’t have to look any further than the Charleswood Bridge to see what to expect from a P3. University of Winnipeg economics professor John Loxley analyzed the P3 deal and found that private financing of the $11.6-million bridge cost taxpayers $1.4 million more than if the bridge was built publicly. Over 10 per cent of the project cost was eaten up by the expense of preparing and evaluating P3 bids.
While the city of Winnipeg would normally repay a loan over a 20-year period, the Charleswood P3 is a 30-year deal, increasing costs and incurring debt for an additional 10 years. Loxley also points out that the city’s lease payments are considered financial liabilities, so no debt is being kept off the city’s books.
Amazingly, the Manitoba branch of the Canadian Taxpayers Federation argues that P3s would “protect” taxpayers. While the chorus from the right has long held that tax cuts will “boost the economy”, it’s a false promise. In Regina, the supposed benefits of eliminating the tax on local businesses - including a flagship Eaton’s store - never materialized. Eaton’s closed its doors in 1999.
There is some good news for public services in Winnipeg. In October, CUPE 500 scored a victory when council agreed it was more cost-effective to keep a new 311 call centre in house rather than contract it out.
Visit the CUPE 500 web site for the latest campaign news.