A NEO-CONSERVATIVE REVOLUTION FROM BELOW? WATCH OUT, CANADA

Winnipeg’s Sam Katz, who has been mayor since shortly after Glen Murray resigned in 2004, is worth watching. It’s not clear whether he is a fire-breathing neo-conservative or – as the Winnipeg Free Press’s astute city hall observer, Bartley Kives insists – a moderate, but lately there have been some straws in the wind, and they may herald a new direction in Canadian urban politics, one that could be emulated in other cities.
Mayor Katz (rhymes with “dates”) has set the objective of eliminating the business tax, leaving a $55 million budget hole that must be filled in ways not clearly specified. He is a shrewd, sophisticated political operator, who, so far, has commanded city council votes with apparent ease, and side-steps embarrassing questions with the finesse of a magician making a coin disappear. He is also a skilled practitioner of budget magic, as we will see.
So what does that have to do with a social revolution? Stay tuned.

In order to consider the question of how the $55 million budget hole will be filled, the mayor appointed the so-called Economic Opportunity Commission (EOC). The EOC claimed to have consulted widely before returning its recommendations last June, but most of those who made presentations were city councillors or city officials. Subsequently, the EOC report was made part of the budget process, without further public scrutiny.
The mayor and his supporters will bend every effort to avoid public debate about the policy directions involved in achieving the savings needed to abolish the business tax. Indeed, it would be naïve to suppose that a city council embarking on a plan to improve the fortunes of one group of citizens to the tune of $55 million a year will be particularly forthcoming with those who will carry the burden.
It is up to voters, therefore, to look out for themselves, to follow those coins, as they move from one budget category to another, and to try to understand the implications for Winnipeg’s future. In doing so, it is important to take a critical look at some of the possible sources of savings. For starters, city council has approved a transit fare increase, from $2.00 to $2.25, which is expected to yield an additional $2.2 million annually in revenue. Some of that money, according to the mayor, will go to increased costs, but an undetermined amount will be put into a reserve fund for a future rapid transit system.
So, an undetermined portion of $2.2 million will go into a fund to pay for a transit system the cost of which Mayor Katz estimates at $300 million to $1 billion. Since the mayor has already demonstrated his unwillingness to consider funding rapid transit in the conventional way, one transit line at a time, it seems less than certain that there will ever be a rapid transit system. If so, what will happen to the reserve fund? Will the money slip quietly into general revenues, or go to lessening the cost of another reserve fund, and in the end help indirectly to pay for the tax cut, or future tax cuts? The question is worth asking.
Similar manipulations have been a regular feature of Winnipeg’s budget process in the past, and Mayor Katz bids fair to be even better at it than his predecessors. For example, when federal gas tax funds were made available to municipalities, Winnipeg was required to put a minimum of 10% of the money into transit. Katz has recently gained favourable publicity by investing in bus shelters, hybrid buses, and diamond lanes.
However, when the draft capital budget was announced in late November, ongoing revenue from the transit-targeted gas tax funds were quietly shifted into the “Transit Building Replacement Reserve”. In plain English, the transit improvement money was shifted into public works. And what has happened to the money previously allocated to transit buildings? Voters and skeptical councillors would be well advised to follow those coins.
City council has also passed an 11.6 per cent increase in water and sewer rates. The money is supposedly needed to help pay for a $300 million water treatment plant, but, at the same time, the transfer from water and sewer rate revenues into the general fund is to be increased by $11.1 million, bringing the total being diverted annually to $32.5 million. The money, it should be noted, is being diverted from sewerage improvements at a time when the city is under a legal obligation to invest heavily in a seriously deficient sewer system.
To be sure, under pressure from opposition Councillor Dan Vandal, Katz revived a broken election promise to end the practice of diverting water and sewer revenues into the general fund, but not this year. In any event, we are hardly likely to have seen the last of this kind of budget sleight of hand.
Other possible sources of savings are set out in the EOC report. Five million dollars was to come from selling off pools and fitness centres, turning them over to voluntary associations or contracting out the services. With regard to sell-offs or conveyance to voluntary associations, we need to ask ourselves whether we want these services to be viewed as businesses that have to turn a profit, or to keep them as a public service available to everyone, including those who can’t afford a fitness club membership.
Another $2 million in savings was to come from the library system. Here two recommendations are notable. One is to make more use of volunteers. This might work with a few marginal items like reading programs, but do we want volunteers to do any of the more technical jobs involved in library maintenance? The other notable recommendation is to partner with schools where library branches and schools are located close together. How would that work? Would school children have to go to the local library branch for their school library needs, or would library patrons have to go into schools?
Neither option seems feasible. A more likely outcome would be the closing down of library branches, with the justification that students using it would be able to use their school library instead. In fairness, Mayor Katz has provided a verbal assurance that savings from pools, fitness centres and libraries are “off the table”. But, in view of the fact that a total of $7 million in savings were anticipated, it is worth remembering that something taken off a table can be replaced.
Another recommendation of the EOC report reads: “Sell off or tender out the management of the city’s golf courses.” The report also recommends that the city consider off-loading the costs of various city services in commercial districts on the members of Business Improvement Zones. Included in the list of services the EOC feels BIZs might be asked to pay for are street and bus shelter cleaning and enforcement of panhandling and vagrancy by-laws. Golfers and small business people take note: the business tax reduction is a potential source of worry for a lot of people besides the usual suspects from the social activist community.
The EOC report further recommends that the city undertake a “pilot project” in off-loading the costs of some city services to neighbourhood associations. It claims that around the world such associations “raise billions of dollars every year in order to support local projects such as pools, play structures, park maintenance, street cleaning and a number of other services.”
If readers of the report are having difficulty imagining the residents of a suburban subdivision voluntarily agreeing to fund some of their own services in order to unburden the city, they may wish to reflect on the situation of homeowner or community associations, popularly known as gated communities, which supply some of their own services. This is common practice in many American jurisdictions. When the idea of community associations was first proposed, municipal officials were delighted at the potential savings.
The other side of the coin, however is that neighbourhoods supplying their own services thereby build a case for property tax cuts. This has become a major issue in the United States and, in at least one state, New Jersey, anti-double-taxation legislation requires municipal governments to refund the costs of services supplied by homeowner associations. The best-case outcome of this course of events is a city studded with barricaded enclaves of privilege. The worst case is a municipal government with an eroding tax base, struggling to maintain services in moderate and low-income neighbourhoods. Before we start down this road, we had better take a good look at where it leads.
These and similar items could be walked onto the city council floor one by one, and, if Katz is successful, there is no reason why similar events could not unfold in other cities. What we are looking at here is a potentially substantial agenda of social change from below. At one level, Mayor Katz’s budget magic makes interesting political theatre. But in an overview of the actual issues involved, there are serious questions at stake: What value do we place on quality public services? How much do we care about a transit system’s contribution to clean air and the role of sewerage in ensuring a pure water supply? Will we stand by while our community fragments into a series of enclaves of privilege and poverty ghettos?
Does a revolution from below, engineered by local government, sound far-fetched? Consider what happened when the Thatcher government in Britain gave local governments the right to sell council (public) housing. In a single stroke, newly-minted property owners became Tory voters, affordable housing became a much bigger problem than before, and fundamental social change was set in train. Roy Hattersley, author and former Labour cabinet minister, sets out very clearly and succinctly, in a 2002 Guardian article, how it happened.
Those of us who care about the Canadian society that has been bequeathed to us by the likes of Tommy Douglas and Mike Pearson – and all the rest of us – will be well advised to take an interest in the boring subject of municipal budgeting, and to think through the final implications of a municipal tax-cutting agenda. If we don’t, we may wake up one day to find ourselves living in very different cities, and a different country, than the one we know now.
Want to find out more? For a discussion of the political and social issues surrounding neighbourhood associations, take a look at:
Evan McKenzie, Privatopia: Homeowner associations and the rise of residential private government. New Haven: Yale University, 1994.
There is a veritable library on the sale of British council houses, and the implications for Thatcherism, Reaganomics, and neo-conservatism. Here are three items, representing a variety of viewpoints:
Paul Pierson, Dismantling the welfare state? Reagan, Thatcher, and the politics of retrenchment. Cambridge: Cambridge University Press, 1994.
Cliff Hague, “The development and politics of tenant participation in British council housing”. Housing Studies, 5 (4), October 1990 , 242-56.
David Marsh and R. A. W. Rhodes, “Implementing Thatcherism: Policy change in the 1980s”. Parliamentary Affairs 45 (1), 33-50.

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