Manitoba can’t afford costly — and ineffective — bailouts

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This article was published 27/08/2016 (3677 days ago), so information in it may no longer be current.

An honest mechanic will admit it when a car can’t be fixed, even though it’s not what the owner wants to hear and it doesn’t make the cash register ring.

Premier Brian Pallister is proving himself to be like that honest mechanic. It probably isn’t padding his poll numbers, but he isn’t throwing taxpayers’ money at problems the province can’t fix.

The government can’t save the port in Churchill. It can’t save the paper mill in The Pas. It’s sad. But it’s the truth.

“It’s a company that’s been losing money,” said Mr. Pallister after Tolko announced plans to close its paper plant in The Pas. “Sadly, this is the result.”

This is not, however, the only course of action open to the government. It could announce big bailouts and enjoy the local fanfare of news releases and press conferences. But those millions would ultimately fail to fundamentally change the situation.

Consider the Tolko plant. It employs 332 people out of the 5,500 people in The Pas. The release that announced the closure didn’t get into details, but simply stated: “We cannot continue to sustain the losses at the operation.”

A few details have trickled out since. Prices are low for the paper the plant produced. The fuels that fire the plant’s boilers are more expensive than the natural gas used in other plants, but piping natural gas into The Pas would cost $180 million.

The provincial government can’t change commodity prices. Providing a natural-gas hook-up for the plant would cost more than half a million dollars for every Tolko job. It’s unfortunate, but it’s reality, and government can’t change it.

Consider the grain port in Churchill. About 90 of the 750 people in Churchill are losing their jobs because Omnitrax is closing the port. After some weeks of confusing silence, Omnitrax made the reason for the closure clear: “There was not a single committed contract for grain this season.”

The reality is there’s never been much interest in shipping grain through the Port of Churchill. Churchill shipped 525,200 metric tonnes of grain during the 2014-15 fiscal year. That’s about the same amount of grain shipped through Vancouver in an average week. Now the trickle of grain that’s flowed through Churchill has dried up completely.

Millions of dollars from taxpayers have already been lost in failed attempts to save Churchill. Subsidies to Omnitrax, for just last year, totalled nearly $6 million. That’s about $65,000 per job.

There have been calls for new subsidies and even nationalization of the port. But none of this would change the situation. Grain exporters are picking other ports. The provincial government can’t change that.

Sometimes a neighbour can provide a much-needed objective point of view. Saskatchewan Agriculture Minister Lyle Stewart has publicly raised concerns about grain transportation capacity. But he’s made it clear the Saskatchewan government won’t be putting any money into a port that handles less than two per cent of Canada’s grain exports.

There is another hard reality at play. The Manitoba government is running a deficit of $911 million. The province will pay $874 million just to cover the interest on provincial debt — that’s more than $680 per Manitoban. Government money won’t fix the problems facing Tolko or Omnitrax, but even if it could, Manitoba simply doesn’t have money to give.

It’s always tempting for a government to do something even when nothing can be done. A significant portion of the province’s debt is no doubt due to politicians who have succumbed to that temptation. It is a costly delusion.

Taxpayers’ money can’t fundamentally change the situation for Tolko or Omnitrax. It’s a sad, but obvious reality. Mr. Pallister is doing the right thing by telling people in Churchill and The Pas the truth.

Todd MacKay is the Prairie director of the Canadian Taxpayers Federation.