Dear Winnipeg

A Fun Blog About Infrastructure and Municipal Finance
Happy Anniversary, Arlington Bridge Closure!

Happy Anniversary, Arlington Bridge Closure!

Dear Winnipeg,

Today is the one-year anniversary of the day the City suddenly and indefinitely closed the Arlington Bridge, having let it fall into disrepair because they didn’t have the money to repair or replace it.

Time to, um, celebrate?

Like I mentioned at the time, this wasn’t the first piece of infrastructure we had abandoned, and nor would it be the last. In the 12 months since then, the City has also announced the closure of the Portage & Main concourse, Happyland Pool, Windsor Park Pool, Eldon Ross Pool, plus 20 more wading pools.

Yeah, I heard the sad trombone too.

And sadly, but in no way surprising to anyone who has been reading here for any amount of time, according to a news article referencing the mayor last week, “the City of Winnipeg is heading into a 2025 budget cycle with few good options when it comes to delivering all the services the city offers, building and maintaining infrastructure and replenishing a rainy-day fund that was depleted during the pandemic.”

It’s easy to feel depressed about it all, but sometimes, the Universe throws you a bone.

The mayor said in an interview back in October, “It’s no secret that Winnipeg, like every other city in the country, is dealing with financial challenges.”

That’s quite a departure from when he was campaigning for our vote two years ago, when he told Winnipeggers that “our biggest challenges are short term and especially on the operating (budget) side.”

Today though, there’s finally recognition that our financial problems run much deeper. The city is no longer “talking about trying to get funding for bells and whistles of legacy projects,” the mayor said in a speech to a roomful of lobbyists on October 22nd. “We’re talking about funding for basic services.”

In trying to explain why we’re in this mess, he then went on to say that “the City of Winnipeg has to wait until the pipe’s in the ground, someone comes in to build a widget-making factory, builds their building, and the assessed value of that property goes up and they start paying property taxes.”

“Our return of investment on an economic investment takes years and years to begin to recoup.”

Oooh, so close, yet somehow so, so far!

It’s crucial to understand that what the mayor is describing here is actually a cashflow problem, not a revenue shortfall. It’s not something that requires any new revenues at all, much less a whole new “revenue model.” It just requires debt. And the judicious use of debt to smooth out delayed cashflows from capital investment is precisely what debt should be used for.

Making investments that take many years before they pay off is common in the business world. Take True North’s proposed redevelopment of Portage Place, for example. They were spending money on due diligence even before committing to the project. And they’ll spend hundreds of millions more over several years, most of it borrowed, before their first tenant ever pays them even a single dollar in rent.

In the words of the mayor, their return on investment will take years and years to begin to recoup.

And yet Mark Chipman’s company could keep doing this forever, getting wealthier and wealthier every step of the way.

So why is it different for the city? Why is it getting poorer with each passing year?

The difference is that Chipman makes sure his investments are profitable. That means the financial returns will be high enough to cover not only the interest and principal on the debt used to finance it, but also future costs like maintenance, wages, eventual replacement, with some left over for profit.

The mayor, on the other hand, is proposing the city borrow money to invest in the widening of Kenaston, which a cost-benefit analysis showed would provide a return of 1.4 per cent. Meanwhile, the city’s latest bond issue has it paying 4.65 per cent interest on its borrowed money.

That’s the actual issue. Not that our infrastructure investments provide “delayed” returns, but that the returns they provide don’t even cover the interest on the debt, much less any principal, maintenance, wages, eventual replacement and any left over to fund “bells and whistles” elsewhere in the city.

In other words, it’s not a cashflow problem, it’s an insolvency problem. And mixing up those two –— deferred returns and negative returns — is a fatal mistake.

But it would be short-sighted to blame this all on our current mayor. He’s just the latest one left holding the bag.

For nearly eight decades, we’ve been investing in a development pattern that costs more to maintain and service than it returns in taxable economic value. And when the chickens came home to roost along the way, we just doubled-down on another round of outward expansion using the same unproductive development patterns, hoping the new growth would pay for the old growth. And again, and again. You know, the same way a Ponzi scheme works.

Instead of investing in infrastructure and development that enables more car-centric, segregated-use, all-at-once-to-a-finished state greenfield growth, we need to invest in making our existing neighbourhoods into walkable, bikeable, transit-friendly neighbourhoods that allow gradual intensification through mixed-use infill.

Not because we prefer them, but because those are the profitable investments for a city. Just ask any city that’s bothered to do the math on it.

Here in Winnipeg, our net financial position, a type of liquidity-solvency measure for cities, currently sits at negative $1.2 billion. It’s been steadily worsening for decades.

Unsurprisingly, the eight years Gillingham has been mayor (or finance chair before that) have had no impact whatsoever on its trajectory. Because actually reversing that trend to improve our financial position would require us to change how we grow, by changing what types of infrastructure we invest in and what types of development we allow and encourage.

That’s why the proposed zoning changes that City Council has been hard at work discussing this week are so encouraging. Let me catch you up.

Last year at this time, Council approved changes to its federal funding application in order to access $122 million of Housing Accelerator Fund money to help create 14,000 housing units in the city over the next 3 years. The Feds had made the funds contingent on the City making some changes to their zoning by-law, and this was the City pinky-promising that they would do them.

By doing that, the City committed itself to the following “Rapid Zoning Changes”:

  1. Allowing residential development to happen on mall properties and on commercial corridors (like Marion St, Henderson Hwy and St. Mary’s Rd.
  2. Allowing up to four units to be built on any residential property in the city.
  3. Allowing up to four storeys on any residential property that is within 800m of a frequent transit route.

So here we are, twelve months later, and Council is now headed into a vote on the first of those items. The other two will be dealt with in March 2025.

Yes, that’s considered a “rapid” zoning change in city terms.

And although the vote hasn’t yet happened (the meeting is into its 18th hour over two days as I write this), the mayor has signaled his support for the changes. That’s very encouraging.

And if that passing vote does happen today, I can’t help but appreciate the sweet sense of cosmic justice for it to happen on the 1-year anniversary of the closing of a major piece of city infrastructure, to take a first step towards rectifying the root causes of it. Thanks for the bone, Universe!

Kissy-smoochy,

Elmwood Guy

P.S. If you’re interested in learning more about this, the Housing Accelerator Fund, and abundant housing in general, I invite you to come join us next week at Sargent Tommy Prince Place, where YIMBY Winnipeg is hosting an informative infill event. Here are the details:

Bringing Housing Home
Thursday, November 28th, 2024, from 7pm to 9pm
Sargent Tommy Prince Place (90 Sinclair St, Winnipeg MB)

Take in presentations by local experts, an interactive panel discussion, and learn how you can support more housing in your neighbourhood!

With presentations by: Brian Pincott (former Calgary City Councillor, current Winnipeg resident and board member for several non-profits) as well as myself!
And a panel discussion featuring: Richard Mahé (Planner & HAF manager, City of Winnipeg), Mel Marginet (Sustainable Transportation Coordinator, Green Action Centre), Kathryn Davies (More Homes Calgary), and myself. Moderated by Brian Pincott.

This event will be in-person AND online! It’s open to everyone, so subscribe to their YouTube Channel to join in online if you can’t make it in person.