Provincial heavy construction industry wants PST vote

The Manitoba Heavy Construction Association is demanding Premier Brian Pallister hold a binding referendum before he makes any move to cut the provincial sales tax.

MHCA president Chris Lorenc said the provincial government has deeply cut infrastructure spending to create the fiscal resources necessary to reduce the PST by one point (to seven per cent). Those cuts are ruining the construction industry, he said, forcing many to drastically downsize and pushing some to the brink of receivership.

Even worse, Lorenc said, the funding cuts are undermining both the growth and competitiveness of the Manitoba economy.

Former NDP premier Greg Selinger decided not to hold a referendum on the government’s 2013 decision to raise the PST to eight per cent. Selinger’s unwillingness to hold a vote eroded the support from business and industry groups, who, in principle, supported a dedicated increase in PST to fund infrastructure.

Lorenc said the Pallister government can remedy that mistake, and ensure it makes the best decision for all involved, by asking Manitobans for guidance.

"Before rolling (the PST) back, a referendum would be the best way to go," Lorenc said. "If the revenues of that one point were dedicated to core infrastructure, I think people would vote to keep the tax as it is."

The MHCA has emerged as an unlikely foe for the Progressive Conservative government, as it heads into the last 18 months of its mandate.

Heavy construction had been an ally for most of the first two years it was in office. However, earlier this month, at the MHCA annual general meeting, Lorenc was highly critical of the government’s decisions to cut spending on roads by more than $230 million annually.

With Infrastructure Minister Ron Schuler and senior officials from his department in attendance, Lorenc accused the province of deliberately breaking a series of promises to keep total annual spending on roads at no less than $500 million. Based on those pledges, Lorenc said his organization publicly supported the government’s overall fiscal plan.

In the 2018-19 provincial budget, funding for roads was cut to $350 million.

"The government made all kinds of promises to us before and immediately after the 2016 election," Lorenc said. "And then, they reversed course. They broke their promises and now, the industry and the economy are in jeopardy."

The MHCA is making an effort to position it as an election issue in 2020.

MHCA recently published an insert in the Winnipeg Free Press, featuring columns from other business leaders, including Don Leitch of the Manitoba Business Council, and Manitoba Chambers of Commerce president Chuck Davidson. Both cautioned the Pallister government against making blind cuts to infrastructure spending.

The hand-wringing from industry and business groups highlights the delicate balancing act the Tory premier has been trying to maintain in his drive to shrink the budget deficit so he can finance his PST tax cut promise.

Since the election in 2016, Pallister has undertaken a series of austere fiscal measures, including cuts to infrastructure spending and a virtual freeze on health and education budgets. Although these measures have led to a smaller budget deficit than forecast, they also run contrary to assurances Pallister made during the campaign, when he promised Manitobans he would bend the spending curve to balance the province’s books but not engage in drastic cuts.

More specifically, Pallister had promised the proposed PST cut — which he said would be done during his first term in office — would not result in a drastic cut in infrastructure spending. Instead, he said, if elected, his government would maintain core infrastructure spending — roads, bridges, water and sewer, flood mitigation — at at least $1 billion a year.

That was a substantial sum, but considerably less than the NDP was pledging. In the last year of the NDP government (1999-2016), about $1.4 billion was spent on core infrastructure — $588 million of which was spent on roads, the lifeblood of the heavy construction industry.

Lorenc said he met with Pallister before and immediately after the election to discuss the impact of a PST cut on road investments. He said he was promised, repeatedly, spending on core infrastructure would be kept at $1 billion, with about half of that spent on roads.

However, in the ruling party’s first budget, the definition of core infrastructure was altered dramatically. The Tories now referred to it as "strategic" infrastructure, and included several additional categories of projects in the definition (such as spending on health and education capital).

The result was a steady decline in the amount of money dedicated to roads. Lorenc said in the first Tory budget (2016-17), road investments went down to $540 million. In the following year (2017-18), it went down again, to $502 million.

In February, Lorenc said he met with provincial officials, including Schuler, to get a pledge that roads funding would not drop below $500 million. In the 2018-19 budget, spending on roads went down to $350 million.

As is the fashion with the Pallister government, Schuler declined an interview request. In a prepared statement, the minister defended the current level of investment in roads as "strong, stable investment for the construction industry."

He also said the Tory government was "spending $1 billion in strategic infrastructure this year, as we committed to do."

That does not provide a measure of comfort to the MHCA.

"In the first couple of years, we tried to give the government the benefit of the doubt," Lorenc said.

"We knew we had to do our part to help them bring their financial house into balance.

"But none of their promises to us ever materialized. They really deceived us, and the impacts on our industry are very real."

dan.lett@freepress.mb.ca