March 25, 2017

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Budget 2017

Biggest deficit is in infrastructure

Hey there, time traveller!
This article was published 11/4/2013 (1443 days ago), so information in it may no longer be current.

This endless winter is taking a toll. The population is cranky and the roads are opening up in the yearly unmasking of ruts, potholes and creases, swallowing front ends, rattling back ends and stretching nerve ends. Meanwhile, the provincial government tinkers away, leaving a mess for the next generation that will make today's controversy look like child's play. Will Finance Minister Stan Struthers show the government is serious about this problem on April 16 or will we continue to fiddle?

Depending on who is doing the estimating, the infrastructure deficit in Winnipeg alone is about $7 billion. Add the rest of the province and it might be double that number. Even if it is half that, we are facing a monumental task.

The first piece of business is to recognize the issue for what it is: insufficient revenue in the system to make a significant difference. Severe belt-tightening, scrimping and layoffs, none of which any government is likely to do, would not crack the nut. Only new revenue dedicated to fixing the streets, water and sewer systems, bridges and culverts will be effective.

The Business Council of Manitoba has been advocating an increase of one percentage point in the provincial sales tax, dedicated to infrastructure only and time-limited, as the best route available. The tax increase would generate $262 million a year, still not enough but better than any other alternative, such as raising the gas tax which generates a fraction of the revenue.

The balanced budget law, passed by the Filmon government and largely gutted by the NDP, still requires a province-wide referendum if any major tax rate, including the PST, goes up. The government is unlikely to amend that clause so a referendum would be necessary. That would be a good thing; let the people of Manitoba decide if they are prepared to pay one percentage point more on their consumption for the sake of the next generation. If the referendum fails the politicians can say they tried and the people have spoken. It would be refreshing if the official opposition gave the government some wiggle room here. It can do that by advocating a referendum and committing to honour the people's judgment either way.

There are two other options. The balanced budget law says no referendum is necessary if the total tax take does not go up. That means the Selinger government could reduce another tax by an equivalent sum to the rise in the PST; that would satisfy the requirements of the law. The payroll tax is the worst tax of all, since it is a disincentive to investment and stifles job creation. This option is attractive for two reasons; it raises money for infrastructure while removing an irritant the business community has been complaining about for years. This is a classic win-win situation.

A third option would be to allow the municipalities to introduce a one-per cent infrastructure levy with similar restrictions that the business council is suggesting should apply to an increase in the sales tax. It amounts to the same infusion of new revenue without the referendum requirement. It would have to be applied uniformly across the province to avoid a patchwork and confusing taxing arrangement.

The business council is not alone in its advocacy of raising new revenue directed at the provincial infrastructure deficit. Mayors from cities and towns, other business groups and union leaders are becoming increasingly vocal as the problems deepen while solutions remain elusive.

This is not a problem the province can and should solve on its own. We need a comprehensive long-term plan that includes the federal government and the municipalities. In his last budget, Finance Minister Jim Flaherty committed the Canadian government to a renewal of the Building Canada Fund that will contribute billions of dollars over a period of several years; the City of Winnipeg announced in its last budget it will dedicate a one-per cent increase in property tax revenue to fixing the streets.

Now it is Mr. Struther's turn to come to the table. It is not enough to boast of generosity in transferring funds to the municipalities. It is not enough to tinker with modest measures that won't even keep up with growing demand. Now is the time for the government of Manitoba to identity the issue, quantify the magnitude of the problem and introduce meaningful policy that will tell our children we have responded to the challenge of leaving healthier communities behind.

 

Jim Carr is the president and CEO of the Business Council of Manitoba, a group of 71 CEOs of Manitoba's leading companies.


This is the second of a three-part analysis of Manitoba issues that should be addressed in the April 16 provincial budget. Saturday: So many mistakes, so little time.

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