Manitoba·Analysis

Budget prudence by necessity, not by choice

The mayor's apparent fiscal prudence was not the result of many choices. He really had no option but to flatten out the city's spending curve.

Even if Mayor Brian Bowman wanted to shower Winnipeg with budget goodies in 2018, he couldn't. Here's why.

Mayor Brian Bowman called the 2018 budget an example of fiscal prudence. But he really didn't have a choice but to rein in spending. (Trevor Lyons/CBC)

To hear Mayor Brian Bowman describe Winnipeg's spending plans for the next year, it's tempting to think the city is going out of its way to exercise fiscal restraint.

"It does not represent your typical pre-election spending budget," Bowman said on Wednesday when he unveiled the final spending blueprint of his rookie term as mayor. "Rather, it's a fiscally responsible, prudent blueprint for the coming year."

True enough, Winnipeg's budget for 2018 calls for the smallest spending increase in recent memory. Spending is going up a scant $1.5 million on a $1.08-billion budget.

In case you don't have a calculator button on the home page of your phone, that's a spending hike of 0.1 per cent.

​But make no mistake, this apparent fiscal prudence was not the result of many choices made by the mayor, council finance chair Scott Gillingham (St. James-Brooklands-Weston) or any of their allies on city council.

Bowman and Gillingham really had no option but to flatten out the city's spending curve, as Winnipeg has very little financial wiggle room. Here are three reasons why the mayor had no choice but to offer a somewhat austere budget in a year he's expected to seek re-election.

1. Provincial funding is flat

For starters, the Progressive Conservative government has frozen almost all of its funding for Winnipeg at 2016 levels. While the Tories would prefer to characterize this support as static or consistent funding, flat funding is a de facto cut when you consider city services face inflationary pressures.

This is particularly significant when it comes to a trio of programs where some of the cost increases used to be covered by the province: Winnipeg Transit operations, the Winnipeg Police Service auxiliary cadets and the Winnipeg police helicopter flights.

To date, no changes have been announced regarding the police cadets or Air1. But the mayor and Gillingham have made a lot of noise about an $8.3-million hole in the Winnipeg Transit budget that's a result of frozen provincial funding. 

While some of this transit hole has been filled by diverting cash from other budget line items, the city is poised to raise bus fares by a dramatic 25 cents a ride next year and cut up to 23 transit routes to make up the rest of the difference.

While the mayor tries to blame the province for these unpopular moves, ordinary voters may be confused. They city is spending $300,000 on a Winnipeg Transit WiFi pilot project — bus WiFi was a Bowman campaign promise in 2014 — at the same time service cuts for little-used routes at off-peak hours are on the table.

Transit rider Andrew Hask posted this picture to Facebook after hearing about Winnipeg Transit service cuts and fare increases last week. Overfull buses have led to passups. (Andrew Hask/Facebook)
Even worse, Winnipeg Transit has effectively conceded it's increasingly failing to meet passenger demand on its busiest routes. The number of times overfull buses failed to stop, forcing passengers to wait for the next bus, increased from 2016 to 2017, suggesting a need for more buses on the road.

It's impossible to estimate what impact — if any — there is between these "passups" and declining transit ridership. The Amalgamated Transit Union, meanwhile, blames reduced ridership not on poor transit service, but on the number of passengers who refuse to pay their fares.

Either way, reducing transit service is an odd response to passenger demands for better transit service. The province could step in and save the day by using revenues from its new carbon taxes to help fund Winnipeg Transit.

But the Pallister government has signalled it won't use carbon taxes for transit's operating costs. Rather, it wants to buy the city electric buses.

This has left policy nerds scratching their heads, wondering whether the greenhouse-gas emission reductions that result from replacing diesel buses with electric models is worth it when getting people out of personal vehicles and on to mass transit is a far more basic environmental goal.

The number of Winnipeg Transit passups peaks during university semesters, according to the City of Winnipeg (CBC News Graphics)

2. The mayor boxed himself in

While provincial money is important to the City of Winnipeg, grants from other levels of government actually constitute the second-largest source of funding for the city. It's pegged at $134 million in 2018, or 12 per cent of the city's operating budget.

The largest source of revenue remains property taxes, which are expected to rake in $586 million in 2018, or 54 per cent of the operating budget. Property-tax revenue is expected to rise $16 million, mostly because of a 2.33-per-cent hike on the total pool of taxes collected from existing properties. There's also some additional revenue from new developments that will start generating property taxes this year.

In 2014, Bowman promised to limit property-tax hikes to 2.33 per cent. He also promised to devote two percentage points of the proceeds to road renewals, which is something the city actually plans to do in 2018.

While keeping election pledges is important, politically, the policy result is clear: The city has not just placed a limit on its main source of revenue, it has decided where that revenue will go.

The net effect is a dramatic reduction in spending on any form of infrastructure other than road renewals. 

Tax-supported infrastructure spending will drop $74 million in 2018, to $246 million. The 2018 capital budget is one of the smallest spending blueprints for new equipment, public works and buildings since the early days of the Sam Katz administration.
Winnipeg plans to spend a record $116 million on road renewals in 2018. But overall infrastructure spending will drop $74 million. (Trevor Brine/CBC)

Under Katz, the city consistently increased the amount of cash that was transferred from operating budget, which covers services, over to the capital budget. Under Bowman, the amount of cold cash spent on infrastructure has been slashed by two thirds in only two years.

In other words, by promising to renew roads, Winnipeg really isn't fixing much of anything else and has no plans or the ability to build anything new.

You could call that fiscal restraint. You could also call it a return to the Glen Murray years, when infrastructure renewal was put off to ensure property taxes remained frozen.

3. There are no slush funds left to raid

As recently as 12 years ago, city department directors used to stash money in a number of nooks and crannies in the interest of ensuring they would always have enough wiggle room to cover costs. While this practice has not been eliminated in its entirety, it's far less common.

During the Sam Katz administration, budget bosses such as former St. Norbert councillor Justin Swandel did a good job of squeezing money out of reserve accounts and capital projects that never seemed to close. But the city drained these pots of money and started raiding the primary rainy-day fund, a crucial fiscal cushion formally known as the financial stabilization reserve.

There's only $65 million sitting in this account at the moment, which works out to six per cent of the city's operating budget. Anything less than a six-per-cent cushion is considered not just imprudent, but outright risky.

This account was raised in 2017 to the tune of $5 million. It won't be touched at all next year, barring an unforeseen deficit at the end of the year — which is the purpose of the account in the first place.​

The people of Winnipeg will have to wait until next fall to decide whether to reward this mayor and council for their financial restraint, or let them know big-spending election budgets really do win votes. 

Although it all might be a moot point, since, at this time, no big-players have signalled their intentions to run against Bowman, should he choose to seek a second term. 

ABOUT THE AUTHOR

Bartley Kives

Reporter, CBC Manitoba

Reporter Bartley Kives joined CBC Manitoba in 2016. Prior to that, he spent three years at the Winnipeg Sun and 18 at the Winnipeg Free Press, writing about politics, music, food and outdoor recreation. He's the author of the Canadian bestseller A Daytripper's Guide to Manitoba: Exploring Canada's Undiscovered Province and co-author of both Stuck in the Middle: Dissenting Views of Winnipeg and Stuck In The Middle 2: Defining Views of Manitoba. His work has also appeared in publications such as the Guardian and Explore magazine.

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