City must focus on productive growth

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This article was published 21/10/2022 (1101 days ago), so information in it may no longer be current.

When it comes to infrastructure, there’s a divide among mayoral candidates, with some saying continued infrastructure expansion is critical to remaining competitive and growing our economy, and others insisting that we should focus on fixing the infrastructure we have before considering adding any more.

It’s true that our trade infrastructure is the platform on which our economy moves. And it’s the economy that generates the money required for the public services and programs that could help address such issues as livability, housing, poverty and crime.

But is continually adding more and more of that infrastructure the best way forward?

Decisions about infrastructure investments can be compared to investing in the stock market. Should you just invest as much as you can in the stock market? Obviously, some stock investments are money-makers, and others are money-losers, so it makes a difference what kind of stocks you’re investing in.

The same can be said for infrastructure investments.

And the fact we find ourselves with so much more in maintenance liabilities than our tax base, our economy, can support should tell us our infrastructure investment choices in the past have been money-losers.

Think about it: we can’t afford the infrastructure we have, so we tell ourselves we need to build more infrastructure to generate the income to pay for it. With every passing year, with every iteration of new infrastructure investment, we become more and more desperate to generate new growth, simply so we can pay for the old growth. That is the defining feature of a Ponzi scheme.

Talk about bad investments.

The reality is that creating growth is easy; what’s not so easy is creating productive growth — growth that pays not only for the costs of building the infrastructure that created it, but also for that infrastructure’s ongoing maintenance and eventual replacement, with enough left over to help fund the public services we all depend on.

There was a time in history when expanding roads was that kind of investment. That time has long passed.

It’s no longer enough to ask, does this investment create growth? We need to be asking, does this investment create enough growth? In other words, what is the return on our investment on this project? And given that we have very little money to invest to begin with, are there other projects that would give us better returns instead?

It’s about investing smarter.

Road widenings, such as the Kenaston Boulevard proposal, and road extensions, including the Chief Peguis proposal, have long been touted as sound investments in trade infrastructure to grow our economy. But are they?

Most studies tend to agree that every $1 collectively invested in such projects by the three orders of government will generate between $1.30 and $1.90 in economic growth.

But economic growth does not equal government revenue. The total revenue of the three orders of government together adds up to slightly less than 40 per cent of GDP, a measure of the total economy.

That means $1 spent only returns between $0.52 and $0.76 in actual dollars to government, not even enough to cover the initial construction, never mind anything else we could use our tax dollars for.

Are there better options? You bet there are.

Various economic studies on transit investment have shown returns of between $3.37 and $3.70 for every dollar spent.

The city of Halifax found investing in street tree infrastructure returned $8 for every dollar spent.

And a study of more than 50 U.S. cities found a return on investment of $11.80 for each dollar spent on walking and cycling infrastructure, while creating twice as many jobs as road expansion projects.

All of those have one thing in common: they make it possible for us to move people and goods more efficiently, squeezing more value out of our existing road investments. And they can be done as part of the existing maintenance cycle, as roads come due for renewal, increasing our economic capacity as we go. No expansions necessary.

On top of that, there are some infrastructure investments that aren’t even infrastructure at all. If the land values, and thus the tax base, surrounding our infrastructure aren’t large enough to sustain that infrastructure, those land values need to be increased. We can do that by changing our zoning rules to enable mixed-use infill. The cost of doing that is zero, making the return on it infinite.

It’s true that as a city, we’re in deep. That’s why it’s important to recognize whether the candidates seeking our votes this fall are in fact suggesting smarter investments, or whether they’re just peddling a recycled version of the same old Ponzi scheme that got us here.

Michel Durand-Wood lives in Elmwood and has been writing about municipal issues since 2018. He blogs at DearWinnipeg.com, and is a contributor to AnatomyOfAPothole.ca, a local campaign to raise awareness about the city’s infrastructure and finance issues leading up to the election.