Budget Day Special: Is Finance Minister Fielding Right?

Dear Winnipeg,

Today is the day we finally get to see this year’s preliminary budget! [Are you as excited as I am? I thought so!]

I have to tell you, I am absolutely elated at the constructive dialogue that is happening right now surrounding the budget release. [No, wait… elated isn’t the right word. What’s that feeling when you finally get to eat a Pizza Pocket after not having one in the 20 years since high school? Right — heart-breaking disillusionment.]

It would seem that Mayor Brian Bowman and provincial Finance Minister Scott Fielding have been trading words all week about whether you have a revenue problem or a spending problem. The tussle mostly happened on the interwebs, but if it had happened in real life, I expect it would have looked something like this. [I think we both know which one is Brian and which one is Scott.]

So Brian wants to blame your financial woes on the Province having a tighter wallet than Scrooge McDuck. [How does he manage to swim in those coins anyway?]

And Scott thinks the Fat Cats at City Hall just need to tighten their belts and start clipping coupons!

Draft Coupon Idea for the Minister of Finance

You know, I thought we had settled this months ago, but apparently no one bothered to tell Brian and Scott. Since it has become painfully obvious that both the Mayor and the Province’s top money guy don’t seem to have a hot clue as to the depths of your financial woes, I think it bears repeating.

[Here we go with the math again!]

Let’s do a little thought experiment. Let’s trim the fat from the new budget! But why stop there? Let’s also trim the meat and the bones and see where that takes us?

Brian has budgeted $1.125 billion dollars to run things this year, which includes a 2.33% property tax increase. [What a fat cat!]

So let’s start cutting:

Council salaries? They don’t deserve a dime. Cut.

Police? Gone.

Firefighting? Also gone.

Ambulance? They should have left with the firefighters.

Libraries? Who needs ’em.

Pools? We were closing them anyways.

Transit? Whatevs.

Garbage pickup? No thank you.

Animal services? Cut.

Parks, community centres, arenas? Cut, cut, cut.

Planners, Accountants, and anyone else working at City Hall? Sorry, you’re out too.

Anything else we might have forgotten? Look, if we can’t even remember you, then you’re definitely off the team…

Ok, awesome. So it looks like we’ve managed to cut every single city service down to absolutely nothing, thus saving us a significant chunk o’ change. We were ruthless, but man, think of the savings! [Someone should give us a medal or a T-shirt or something!]

If we were spending any money, we could buy ourselves these!

With no services to administer, the only other obligation you have left is infrastructure replacement.

So a prudent number would be to set aside 2 to 4% of replacement cost every year (which would mean a full replacement every 25-50 years or so, depending on the type of infrastructure). Since you have $35 billion in total infrastructure value (over 85% of which is just roads and pipes), that means you’ll need to set aside approximately $1.1 billion for that every year.

Seems like a big number, eh? Way bigger than what you’ve been spending… remember though, you’ve basically made plans today to let the Louise Bridge fall into the river. And the Arlington Bridge isn’t looking so hot either. Plus, look at the condition of the roads! So yeah, that’s what it costs to stay on top of this stuff.

Yeesh! Even with no services, your infrastructure obligations chew up basically ALL of your income. Starting to be hard to make a case for wasteful spending… [But maybe we can still get those shirts!]

But wait.

About half the cash last year came from stuff like library fines, pool admission, parking tickets, dog licenses, building permits, etc. Remember when we closed all those departments? Yeah, so that income is gone too.

Ok, so now you are facing a $600+ million dollar shortfall. [Oh well, those T-shirts weren’t so great anyways.]

And so even with ALL services cut, you still can’t afford just the infrastructure you already have. Not even close. A 2% increase is really cute, but you’d need something like 102% (or 202%!), especially if we wanted any services. Still think this is a spending problem?

But this shouldn’t be news to anyone. This little nugget has appeared in some form or another in every Annual Report for at least the past 5 years:

The City has a structural deficit in the tax-supported operating budget. […] The City was most recently able to balance its 2018 tax-supported operating budget in large part by reducing transfers of cash to capital from operating to capital but this is not sustainable in the long-term. 2017 City of Winnipeg Annual Report

Let’s break that down:

The fact that you can’t make ends meet is a permanent issue. [“structural deficit”]

You’ve been able to fake it so far by not repairing your infrastructure. [“reducing transfers of cash to capital”]

But this is not sustainable in the long-term. [“Duh!”]

So does this all mean you don’t have a spending problem? Not necessarily. Just that when your house is on fire, you have bigger things to worry about than whether the thermostat is set a degree or two too high.

It should be obvious to you by now that the real problem you’re facing is insolvency.

Shocked? Don’t be. We just slashed your operating expenses to zero, and we still don’t have enough money to meet all your obligations. That’s insolvency brah!

Like I’ve told you before, you have an $85 billion tax base responsible for $35 billion in infrastructure, a ratio of like 2.5 to 1. That’s clearly too much infrastructure for the size of your tax base. I don’t know about anyone else, but if I own a $250,000 house here, I ain’t payin’ for $100,000 of infrastructure, even if it is over 25 years!

So what do we do?

Well, when 90% of development happens in areas that require new infrastructure to be built, and the infrastructure you already have is bankrupting you, that’s a good place to start.

If your financial planner said to you: “I’ve got 10% of your investments in Index ETFs, and 90% in a Ponzi scheme”, would your response be “Let’s try to get to 25% ETFs by 2030”?

I didn’t think so.

You need to stop building more infrastructure, and also stop letting developers build it for you, because every new piece of infrastructure built comes with an obligation to the people of Winnipeg to maintain and replace it. Forever. [And you’re already in default, my friend…]

Then maybe we can all start having the right conversations about our municipal finances and our infrastructure choices.

No more political theatre featuring obese felines in monocles squaring off against miserly cartoon ducks. It’s time to be honest with ourselves about the house of cards we’ve been building since before most of us were born.

Otherwise we’ll end up like Detroit. Or worse, since here in Canada good ol’ uncle Scott would be forced to bail us out. And we already know how he feels about that.

Love,

Elmwood Guy