Cities aren't allowed to deficit spend - or are they That question is debatable considering what is going on with the City of Winnipeg's Special Operating Agencies (SOAs).

Early in 2006, the Canadian Taxpayers Federation (CTF) made its pre-budget submission to the city for its coming fiscal year. In it, the CTF pointed out the Special Operating Agency concept is being misused at City Hall. Shortly afterwards, in her review of the city's SOAs, the city auditor noted "despite the SOA initiative arising out of a commitment to 'affordability' and 'efficiency,' associated costs have not been tracked and no cost-benefit analysis had been performed to ensure that the time and funds invested resulted in value for money with respect to the benefits received." The comments come years after the agencies first began.

SOAs are government departments, reorganized into independent business units. The idea is that a department can be more efficient and can prepare itself for potential privatization, if it is allowed to behave like a business instead of a bureaucracy. For example, businesses often cut long-term deals with vendors to get quick, affordable access to supplies. In contrast, government departments normally tender out for most purchases. Tendering can save money on price, but sometimes results in slower service or costly paperwork. Some SOAs are allowed to choose between these policies to find the option that works best.

For years, the CTF lobbied governments to consider SOAs as an alternative to conventional bureaucracies. They have worked well at the provincial level, where Manitoba's Fleet Vehicles Agency, for example, is considered a model of efficiency and transparency. But City Hall managed to distort the model, hiding inefficiency and waste.

Take the experience of Glacial Sand and Gravel. The city's gravel agency tried to run like a business. In the process, its managers lost over a million dollars, despite growing demand for gravel as a construction material. Thanks to Mayor Katz's initiative, the city is in the middle of an extended process to sell or lease the gravel pits.

But has anyone learned from the experience City council dug itself deeper into the SOA pit on July 26th when it approved the business plans for all of its SOAs for the 2006 fiscal year.

Although it is shocking enough to see business plans passed with less than half of the year left, that is not the worst of it. As Glacial is being wound down, city council voted to expand their line of credit to $2.5 million. And the Parking Services Agency can now borrow $3 million, an increase of 600% over last year's credit limit! The City's Fleet Vehicles Agency's new credit limit: $14.3 million. And finally, Golf Services is now allowed to borrow $1.65 milllion, up from $400,000.

In other words, less than a few months after the city auditor criticized the city's SOAs for a lack of transparency, city council cheerfully approves proposals that will allow these agencies to borrow almost $22 million for operating expenses. If these agencies were line departments, they would not be allowed to borrow at all, since cities are supposed to balance their operating budgets under provincial law.

Will all of this new credit be used to keep city SOAs afloat, or will it be used to keep the city bureaucracy afloat through 'chargebacks' to the agencies

In April, the CTF's budget submission said that SOAs are meant to be a middle ground between private and public management for certain services, not a new form of crown corporation for city managers and politicians to hide behind.

Who is going to have to pay the price for council not heeding the auditor's criticisms of SOAs Taxpayers will - in lost dollars and lost accountability