Municipal price index concerns chamber

Basing property tax increases on a municipal price index (MPI) concerns the Greater Saskatoon Chamber of Commerce.

“We have pretty significant reservations on this, but we are not prepared to throw it out without having gone through some of this analysis,” said the chamber’s executive director Kent Smith-Windsor.

The city has developed its own Saskatoon-based MPI. It is forecast to be 3.25 per cent and is being used as a benchmark, combined with population growth, to determine a reasonable tax hike. The city has proposed a property tax hike of 5.17 per cent — equal to $82 next year for the average homeowner with a home assessed at $200,000.

The MPI is a locally calculated rate that takes into account staff wages, benefits, fuel and construction costs.

Developed by an intern from the Johnson-Shoyama graduate school of public policy, the formula weighs the amount particular goods — such as wages and fuel — that make up the city’s global budget, then forecasts increases in each category.

City finance manager Kerry Tarasoff has said the goal is “for better planning and forecasting.”

In contrast, Statistics Canada’s consumer price index (CPI), made up of food, shelter and other household costs, was 1.2 per cent year over year in October nationally and 1.5 per cent in Saskatchewan.

Calgary was the first municipality to adopt an MPI, followed by Edmonton, St. Albert, Alta., Ottawa and Waterloo, Ont.

When Saskatoon first raised the issue, SmithWindsor said the chamber looked at Ottawa’s MPI.

“There was a pretty vociferous critique of that methodology (in Ottawa),” he said, adding, “We have not seen a municipal price index be endorsed by anybody other than the city halls that are trying to use them.”

Smith- Windsor would like to see a third party look into the methodology.

“We definitely need a third party to look at this in good science.”

He wonders if the methodology will stand up to different economic cycles.

For example, SmithWindsor said the city has embarked on significant capital expenditures from 2008 through 2012.

“It is fair to say construction prices have gone up significantly from 2004 to 2008 and then beyond. But would that be the case if we were not the same growth cycle?

“The reason the Bank of Canada continues to use the CPI as a measure to set interest rate policy is because they say they have to use some measure that will be robust enough to look at many different cycles and be an appropriate measure. I’m not sure this approach will withstand third-party criticism.”

City council begins debate on the 2013 budget Tuesday.