Winnipeg lacks the financial dexterity to deal with mundane climate change

If you're a 62-year-old office administrator with five grandchildren, a big mortgage and a mountain of credit-card debt, it's a big deal to suddenly win $14.2 million in the lottery.

If you're the City of Winnipeg, a windfall of that size means squat and diddly.

Based on financial figures from the end of November, the city is on track to post a $14.2-million surplus on all of its operations for 2018. By the time the Dec. 31 accounting is done, the pool of black may be even larger.

While $14 million may sound like a lot of money, it barely amounts to a rounding error for a corporation the size of the City of Winnipeg. In 2018, the city spent $1.08 billion on services that include everything from policing and fighting fires to clearing snow and filling potholes.

Failing to spend 1.3 per cent of that money does not mean the city is awash in money — and anyone who makes that claim hasn't been paying attention to Winnipeg or any other Canadian city.

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Winnipeg remains a city with a serious financial problem, simply because the cost of delivering services tends to rise faster than the revenue that's available to pay for those services. The severity of this problem is somewhat hidden if you only look at the city in any individual year.

That's because unlike the province or the federal government, which are free to spend more money than they collect in any year, Winnipeg has no choice but to balance its budget. The city can incur debt, but it's not allowed to post a deficit.

That's why every calendar year in Winnipeg ends up with a modest surplus or similarly modest deficit. The bean counters at 510 Main St. run a very tight ship, at least when it comes to the accounting.

Cost-saving measures

This is not as simple as it might sound. In order to ensure spending matches income every year, every department in the city is expected to find ways to save cash. They include euphemistically named practices such vacancy management, which involves deliberately failing to fill empty positions in order to save cash, sometimes at the cost of operational efficiency and efficacy.

They may involve service cuts, such as the decision to no longer sweep leaf litter off city streets every fall. And up until recently, they involved draining money away from reserve funds set up to prevent financial ruin.

In 2017, the city siphoned $5 million away from its financial stabilization reserve — essentially, its rainy day fund — in order to balance the budget without cutting $5 million worth of services or raising property taxes above the 2.33 per cent level promised by Mayor Brian Bowman.

This shaved the reserve down to within whisker of a level where risk-management nerds start freaking out. In Canada, municipalities are advised to set aside no less than six per cent of their total budget in their financial stabilization reserve.

Right now, there's about $65 million sitting in that fund. If city council observes the city's own financial policies, that reserve fund will be topped up next month using the surplus from 2018.

It's tempting for politicians to avoid this practice. But Winnipeg needs its fiscal stabilization reserve fund now, more than ever.

That's because the risk-management pendulum for Canadian cities has swung away from the happy-go-lucky days prior to the 2009 worldwide recession, when the answer to every municipal  financial problem involved convincing Ottawa or the provinces to hand over more money.

Today, the doomsayers have the floor in any rational discussion about long-term financial risks. For starters, the federal government and most provinces are struggling too much with their own financial houses to give any serious consideration to cities.  

Adding to this mundane scenario is the prospect of another worldwide economic slowdown, which economists expect this year or next.

Impacts of climate change

But the real buzzkill is climate change, which has already made its effect known on a number of Canadian cities.

Heat waves, like the ones that plagued Toronto and Montreal last summer, cost actual money in terms of emergency-service spending, energy costs and economic productivity. Forest fires and grass fires can threaten entire communities, droughts place restrictions on the use drinking and industrial water and even minor floods cause immensely expensive damage.

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In Winnipeg, arguably one of the world's most climate-adapted cities to begin with, we have a tendency to shrug off these risks. This city has proven adept at reducing per-capita water usage over the decades, digging out of periodic blizzards and protecting properties from both spring and summer floods. 

The Red River Floodway is not just a drainage ditch. It's a large-scale geo-engineering project designed specifically to deal with the eventuality of another major environmental disaster

But this can not make us smug. All of Winnipeg's institutional flood-fighting knowledge will mean little if and when the sheer frequency of new climate-induced financial demands begin to hamper the way the city functions.

To be clear, climate change likely won't wipe Winnipeg off the map the way boreal-forest fires threatened to burn away Fort McMurray in 2015. The potential for a single, sudden, catastrophic disaster should not keep Brian Bowman or Brian Pallister up at night, assuming either of them gets a lot of sleep these days.

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More realistically, climate change poses a threat to Winnipeg in terms of emerging financial costs and operational demands that will eventually place more demands on the city budget.

For an example of what a minor climate-related headache looks like, consider the emerald ash borer. In 2018, Winnipeg suddenly had to allocate $1.3 million to start protecting trees against the invasive beetle, which threatens to decimate the city's urban forest canopy.

While the presence of this particular organism can not be attributed to climate change, our slightly milder winters — our January lows simply aren't as low as they used to be — are increasing the likelihood of new invasive pests arriving.

A few million bucks won't break the bank. It may also not be enough to protect the urban forest canopy. 

Future city budgets are bound to face a number of new insect-control, flood-mitigation, water-conservation and fire-protection demands, none of them meeting the disaster-scale threshold that could trigger financial aid from other levels of government. 

Winnipeg is not equipped to deal with a series of new financial headaches, precisely because of the way its budgets are built every year. The city may be forced to deal with them through drastic measures that could go beyond the current menu of incremental service cuts or property-tax hikes.

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Right now, the only tool the city has to weather the coming storm is the fiscal stabilization fund. How the city intends to deal with climate change, otherwise, is anyone's guess. 

"Those are precisely the questions we need to contemplate when putting together a multi-year budget," city council finance chair Scott Gillingham (St. James) said last week.

"These are the matters that we need to take a longer-term view of and consider the environmental impacts as we look at budgeting."

Right now, Winnipeg only creates a single-year budget and that's about to change. Consider that the next time someone grumbles about the city squirreling away a $14-million surplus for a rainier, stormier day.