Windsor held the line on taxes for years. Staff say that can't continue with current service levels

Administration is warning Windsor's council that the city can no longer operate under a mandate to maintain service levels without a tax increase.

The city will not be able to meet increased demand for services caused by population growth while keeping property tax bills as low as homeowners have come to expect, according to a budget document.

Windsor has seen budgets passed with no increase to property taxes for 10 of the last 17 years, while the tax increases that have been approved came in below inflation.

"The fiscal restraint over the last decade was largely unprecedented," wrote David Soave, a member of the city's budget staff, in the report to council.

City staff say that the average home in Windsor is assessed at $163,000 and the owner would be paying $570 more this year in taxes if rates increased at the rate of inflation. (City of Windsor)

The budget will be debated during a special meeting of council on Monday morning.

Council is reviewing a proposed 2024 budget that will raise taxes by 3.9 per cent after what Soave described as an "extremely challenging process" due to high inflation rates.

It would be one of the lowest rate increases in southwestern Ontario this year if approved by council.

Windsor's mayor Drew Dilkens says it's an "almost pain-free" budget that balances the cost of inflation while maintaining last year's service levels.

But city administration is warning that with continued inflationary pressures following years of fiscal restraint, there is no apparent way to hold the line on taxes.

"It is no longer possible to find sufficient savings within the city-controlled budgets to offset the annual budget increases without a significant impact to existing municipal services," wrote Soave.

Windsor's 'unprecedented' run of fiscal restraint

Since 2008, Windsor has not raised taxes beyond inflation while growing its reserves and paying down debt.

Windsor had $230 million in debt with $75.3 million in reserves as of 2003, with the debt shrinking to $92 million and reserves topping out at $294 million last year.

The city notes in its budget report that the reserves remain lower compared to peer municipalities and claims debt would have ballooned to $500 million if it had not moved forward with debt reduction policies and a pay-as-you-go approach to capital projects.

That approach sees the city pay for infrastructure with money from the reserves instead of through debt.

While city staff warn about the ability to absorb the costs to provide similar services to a growing population, council is also being warned that there's "significant long-term capital funding needs" for the city.

Windsor's "enviable" position with debt means it has the option of taking on debt for those long-term capital projects, according to budget documents.

"Put simply, the need for infrastructure demands over the coming years, including large new or replacement facilities, cannot be met without debt financing being one part of the solution," writes the city's manager of strategic capital budget development and control Mike Dennis.

What should cities be paying for?

One of the biggest questions that cities like Windsor should be asking as they move forward with budgets is what services and infrastructure a municipality is responsible for, one expert says.

"It's time to have a conversation on who does what, what's the federal rule, what's the provincial rule, what's the municipal, what should municipalities be paying for?," said Enid Slack, director of the institute on municipal finance and governance at the University of Toronto.

Windsor city council's budget deliberation begin on Monday, Jan. 22, 2024. (Dax Melmer/CBC)

"If it's everything they're doing now, and that may be the right answer, then we have to think about, well, can they do that on the property tax or do they need access to other revenues?"

Cities are traditionally responsible for many services that people interact with everyday like snow clearing, staffing the neighbourhood community centre, police services and public transit.

But that list is growing in Ontario, says Slack, especially around social services and public health.

"Should cites be involved in immigration settlement? Should that be something they paid for, should they be paying for highways? What, what things should municipalities be doing?"

Last year, Windsor urged upper levels of government to send more resources because it could no longer handle the hundreds of asylum seekers arriving from the United States through Toronto.

Dilkens has also pushed for Ontario to take on the millions spent servicing the E.C. Row Expressway because it's a regional road.

"I mean we're talking here about fiscal sustainability," said Slack. "Are cities fiscally sustainable if they're depending largely on property taxes, some other smaller taxes, user fees and transfer some other governments? And I would say these challenges are big, and I think it's going to be hard for municipalities going forward."