Utility rate spikes prompt concerns about affordability, transparency
Posted on December 3, 2016 in In the Media
Saskatoon residents and businesses could face a bigger financial hit from increases to utility rates in 2017 than from the city’s property tax hike.
The City of Saskatoon’s property tax increase of 3.89 per cent will result in an annual increase of $66.18 for an average home with an assessed value of $325,000. A 9.5 per cent increase to residential water rates in 2017 would mean a $109.92 increase in the annual cost of water for a household that uses 306 cubic metres of water in a year.
The budget documents justify the hike in water rates by suggesting they are needed to pay for infrastructure upgrades, specifically to replace lead pipes over the next 10 years.
However, Todd MacKay, prairie director for the Canadian Taxpayers Federation, noted the city has started drawing money from its utilities to help pay for its operating budget.
“At that point, it’s not a water rate, it’s a water tax,” MacKay said. “That’s when I’ve got a concern, both in terms of affordability for residents, but also accountability.”
The city’s 2017 budget includes $30 million drawn from its three utilities — Saskatoon Light & Power, water and waste water — as so-called returns on investment, and another $32.53 million in grants from utilities.
The $62.53 million from utilities accounts for the largest contribution to city revenues aside from the $217 million the city plans to collect in taxes.
The city has transferred money from Saskatoon Light & Power for several years, but only started shifting a return on investment from its water utilities in 2016. In the 2017 budget, the city plans to transfer $5.35 million from the water utilities.
“That’s a really blurry line, it’s a really slippery slope,” MacKay said.
The city’s budget is counting on more money from its 2017 water rate increase — $12.2 million — than from its property tax increase, $7.9 million. The city is also planning water rate increases of 9.25 per cent in 2018 and 2019 in order to raise another $27.4 million.
MacKay also noted the property tax increase, although it is the lowest in seven years, still outpaces the expected growth in the city’s economy of 1.7 per cent.
The city’s debt is expected to reach $489.6 million in 2023. MacKay said he remains concerned the debt looms as a “delayed tax” and the city relies too much on assumptions that interest rates will stay low and the economy will stay reasonably healthy.
Keith Moen, executive director of the North Saskatoon Business Association (NSBA), said businesses will struggle with the increased utility rates.
“It’s going to be challenging,” he said.
Moen noted the city is adding 57.4 full-time employees, while the provincial government has imposed a hiring freeze to acknowledge tougher economic times. He applauded the city for improving productivity and focusing on upgrading infrastructure.
“If they’re going to take the money and spend it wisely, we consider that a return on investment,” Moen said.
Kent Smith-Windsor, executive director of the Greater Saskatoon Chamber of Commerce, expressed concern about rising utility rates affecting the city’s ability to attract new businesses.
Some wonder why the food processing industry does not have a greater presence in Saskatoon, Smith-Windsor said. Food processing companies will use utility rates to help decide where they locate, he added.
The city has made strides in saving money through increased productivity at the urging of the chamber, but economic conditions in the city have changed, Smith-Windsor said.
“We’re cautious in our support today, even though they adhered to the principles we put forward.”
He noted city staff levels have grown at a slower rate than the population.
Moen wrote a letter to city council, urging a less complex budget document that’s easier for the average resident to understand.
Certified accountants on the NSBA tax committee have a difficult time deciphering the current budget, he said.
“Make it easy.”