It’s the economy, stupid!

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This article was published 24/06/2024 (490 days ago), so information in it may no longer be current.

Despite a cost-benefit analysis showing that the public benefits of widening Kenaston are less than its total costs, the city’s public works committee recently recommended that the project move forward anyway.

By the time you read this, the executive policy committee will also have put its rubber stamp on it, and it will be headed to council for final approval.

What could push council to ignore all that data? In a word, the economy!

Kenaston is often touted as a “critical trade corridor” for the movement of goods, products and services, and key to the vitality of our local economy. Without it, we’d all end up “naked and hungry,” in the words of David Linton of the Manitoba Trucking Association.

After all, again according to the Manitoba Trucking Association, the trucking industry directly and indirectly contributes more than $2 billion to Manitoba’s GDP annually, while moving over $20 billion dollars of freight in and out of Winnipeg every year.

That sounds impressive, until you consider that only four per cent of traffic on Kenaston is truck traffic, according to the city’s own data. That means, of the combined $140 million in total benefits over the next 30 years that are projected for the widening in the cost-benefit analysis, the weighted share to the trucking industry of those benefits comes to less than $450,000 per year.

Those are just the benefits, without counting any costs.

For a $2 billion a year industry, those benefits would need to be multiplied ten- or a hundredfold before they’d even qualify as a rounding error.

For a quarter of a billion dollars, we’re proposing to widen Kenaston and add a third span to the St. James Bridge, while other bridges in the city are being closed due to lack of maintenance. You’d hope that kind of money would provide a better return on investment than what amounts to less than a rounding error.

In speaking to the public works committee on this matter, Chris Lorenc of the Manitoba Heavy Construction Association told councillors that the city “should guide decisions by investment principles.” I wholeheartedly agree.

After all, infrastructure spending is an investment, and the cost-benefit analysis stated the widening of Kenaston would provide an internal rate of return of 1.4 per cent.

Setting aside the fact that anyone can get a better return than that on a savings account these days, it’s important to note that the city’s latest bond issue had it paying 4.65 per cent interest on its borrowed money.

If you think that borrowing money at 4.65 per cent to invest it at 1.4 per cent is a guaranteed path to the poor house, then congratulations, you’re a smarter investor than the City of Winnipeg!

But it’s actually much worse than it seems. Because when a private citizen invests money at a rate that doesn’t cover their cost of capital, they suffer the financial consequences themselves, usually without impacting anyone else. But when an order of government like a city does it, not only are the effects felt in that city’s own finances, there are also knock-on effects in the wider economy, because they are diverting huge sums of limited capital away from more productive uses.

Which means that when a city invests money in a project that returns less than its cost of capital, it acts as a net drag on the economy.

So, far from providing a much-needed boost to the local economy, the Kenaston widening will actually be a net drain on it. But that’s not what we’re being sold.

I should emphasize that these aren’t my numbers. They’re the city’s own numbers in the city’s own report, coupled with those from the lobbyists that are supporting the project. This is literally their best-case scenario.

And while it’s easy to dismiss all of this based on the intangibility of the concept of “the economy,” it actually matters.

As Premier Kinew is fond of saying, it’s the economic horse that pulls the social cart. Hobbling that horse with the Kenaston widening is going to have real impacts on real people’s lives. Our lives. Job creation, economic activity, government revenues, government services, all will end up lower than if we didn’t do the widening.

So given all this, why would council even consider going down such a dreadful economic path?

It’s easy to be cynical and assume that something shady is going on. But you should never attribute to malice that which can adequately be explained by ignorance.

Fortunately, ignorance can be cured. We can still teach council that it’s never too late to stop pouring money into a bad investment.

Michel Durand-Wood lives in Elmwood and has been writing about municipal issues at DearWinnipeg.com since 2018.