Is Chief Peguis Trail extension worth the price?

Opinion

The City of Winnipeg is currently considering a report on the extension of Chief Peguis from Main Street west to Brookside Boulevard. I find it hard to believe that a new road with a total cost of $900 million is even being considered with the current state of the city.

We have an $8-billion infrastructure deficit; this road alone would increase that by over 11 per cent. If the roof on your house is leaking, you don’t go and remodel the bathroom.

So, why is this road being considered? The same reason given when most infrastructure spending is being considered, namely that it is an investment. So, that raises the question: what is an investment? The most succinct definition I could find, used by a number of dictionaries, is that an investment is “a commitment of resources to achieve later benefits.”

In transportation infrastructure, as in any sector, there are both good and bad investments. In order to determine whether this project is worth doing, we need to understand what constitutes a good and a bad investment. A good investment is one where the initial cost is less than the value over time relative to the risk. Conversely, a bad investment is the opposite; its initial cost is equal to or greater than the value over time relative to the risk.

This project fails the test on both variables. First, let us consider its value over time. The city’s own benefit-cost analysis indicates that the financial return is marginal at best, predicting a $1.8-billion municipal financial surplus after 75 years. While this sounds impressive, it is less than one year’s worth of current revenue for the city. To quote the report, “while a surplus is projected, it is likely insufficient to help significantly address infrastructure or servicing needs in other regions of Winnipeg.”

So, at best, the road will be cost-neutral, but will not provide any benefit to the city as a whole.

What about the second variable: risk? Here too, the project fails the test to be considered a good investment. This is a high-risk investment, with even the marginal projected return resting on an assumption of annual property tax increases of 3.5 per cent for the next 75 years. To again quote the benefit-cost analysis, “Annual tax increases of 2.48 per cent is the minimum viable rate to break even over 75 years, as increases lower than this will result in a deficit.”

During my entire life, annual property tax increases have averaged 1.98 per cent, which would be “insufficient to financially sustain the development under consideration.” However, even this still does not account for the replacement cost of Chief Peguis Trail, or any of the other local and regional roads within the developments presumed to provide the tax basis for this project.

Now let us compare this to a regular investment tool, bonds. Assuming a conservative interest rate of three per cent, we would have doubled our investment in less than 25 years. Furthermore, bonds are one of the safest investment tools, so this return would be virtually risk-free.

However, not only is this development a bad investment, even the best-case scenario rests on a series of flawed, even irresponsible, assumptions. Most notable is the assumption that 100 per cent of all new land development revenue in the areas around this project are devoted entirely to paying for the western extension of Chief Peguis Trail. If this holds true, that would mean these areas would have no local or regional roads, they would not receive coverage from the police or the fire department, area residents would also not get any recreational amenities (pools, libraries, parks…) as all of these services, and many more, are paid for by property taxes.

Finally, even if the assumptions made prove true and we get the best-case scenario, what about the opportunity cost? What else could this $900 million be used for? Just in the last three months, council has received reports on the lack of funding for transit, community grants, the downtown Community Connections space and city parks.

We could fund all of these requests, and still have over half a billion dollars left over if we reallocated the money intended for this project.

No one lives in a city for its roads (although some people do for the transit).

I have never met anyone who said to me, “I’m from Toronto, home of the Gardiner Expressway” or, “I’m from Houston, home of the Katy Freeway.” Likewise, no one will ever say, “I’m from Winnipeg, where we just extended Chief Peguis Trail westward!”

People identify with a city for its history, its arts and culture, and its beauty. Let us invest in the things that make us who we are, not in another road project from the 1970s.

Max Schreckenbach is an (almost) lifelong resident of Winnipeg passionate about building on its history for a more sustainable future.