A Lack of Vision Plagues Manitoba

by Graham Lane

Published in the Winnipeg Sun, March 29, 2018

Ontario’s PCs have an excellent chance to push the exhausted Wynne Liberals aside after a lengthy scandal-ridden rule. Doug Ford will scrap Wynne’s carbon dioxide tax, joining Saskatchewan, New Brunswick and Alberta (when Kenny becomes premier), spelling a chaotic end to Trudeau’s climate tax grab. Meanwhile, Manitoba’s hapless Pallister Government stumbles along with its carbon tax plans, hitting consumers and industry with more expensive energy, supposedly to save us all from a ludicrous thing called the “Climate Crisis”.  

The Pallister Carbon Tax (PCT) will deliver more play money for bureaucrats, and become a handy source of electoral slush funds. In the upcoming carbon tax central planning hodge-podge, primary agriculture will be exempted. But, it’s a shell game – for example, farmers’ hired trucking will be subject to the tax. And, there remains a huge question for how Manitoba’s fertilizer and chloride plants will be treated long-term, such are the  self-flagellating non-problems of green central planning.

When it comes to suffocating opportunity for nothing, the PCT puts another avoidable nail into Manitoba’s coffin, likely driving a prospective soybean plant to Saskatchewan. Westman’s business leadership needs to visit the Premier and explain how his tax games jeopardize his PC electoral funding gravy train. In the last election, a PC fundraiser reputed personally raised sufficient donations to fund five riding campaigns. Not a chance in 2020.

Rural people need to join city folk and take off the gloves. Explain to Pallister just how vulnerable his leadership position is beyond last week’s hydro board meltdown debacle. While delivering a pea processing plant to Portage, he overlooks the rest of the province. Within the next 10 years, the Killarney-Turtle Mountain region was on track to secure over a billion of private sector investment. In the Virden area, there was hope for a comparable $1 billion of new private capital. And, in the Russell-Binscarth area, there is another $1 to $2 billion of private investment potential.

The investments would not require direct public subsidies, but need infrastructure investment in water supply, waste water treatment, natural gas supply and electrical systems (all essential infrastructure systems to enable communities to survive and thrive). Questions remain as to the clean water supply and waste water treatment for Portage’s pea and now expanded potato processing.

Instead of hidden tax increases (Hydro rate hikes and the PCT), Pallister should embrace a smart development agenda. The Deloitte report brought a devastating critique of the government’s incompetent industrial development process. It is fine to encourage home-based businesses and the artisan economy, but Manitoba needs to attract large-scale industrial investment.

Deloitte’s report highlights Pallister’s inept management of this major file (targeting significant investments).

Quote:

“The province is unable to articulate a forward-looking vision for the Manitoba economy. As a result, industry, academia and peer governments are uncertain about how best to engage with the Government of Manitoba.”

Interviews with Manitobans said the Pallister government had:

– A “lack of vision” 
– No framework for making economic development decisions
– No clear indication of what assistance is available to companies 
– No plan to deal enhance “skills level and training of Manitoba’s labour force”
– A “lack of meaningful collaboration opportunities between industry and government”

This has to sting. What part of inept does Pallister not understand?

 

Hydro Death Throes

by Graham Lane

Published in the Winnipeg Sun, March 23, 2018

Hydro’s board of directors, except for a PC MLA,  has resigned. If Hydro was a private sector company, the board’s action would be a prelude to calling in a bankruptcy advisor and liquidating assets. As it is, it  could spell the end of Pallister as premier.

Recognition of the boondoggle should lead to structural changes to save ratepayers and taxpayers.

  1. Separate the stranded debt from this fiasco and shift it to the provincial ledger. Pay it off over 30 years.
  2. Have annual rate hikes at the rate of inflation until the ‘dust’ settles.
  3. Sell off Centra Gas to create some working capital to service debt.
  4. Structurally separate the generation and export transmission assets from the local distribution utility.
  5. Sell off the export business to long-term investors in the pension and insurance industry sectors.
  6. Convert the local distribution systems into consumer-owned cooperatives.
  7. Partner with efficient private sector operators to manage the local distribution assets.

To put it bluntly, Hydro is bankrupt, only propped up by the provincial government.

Ever since the government and Hydro launched the folly of investing in new northern dams and export transmission lines without securing adequately priced long-term export contracts, various experts have long predicted this day would arrive. Between provincial administrations and former Hydro executives and board members, a multibillion dollar enterprise has been driven into insolvency.

There is also a need to launch a public inquiry to determine why all the checks and balances of the system failed. Knowledgeable observers saw this slow-motion disaster coming as early as a decade and more before. Hard questions need to be asked about governance, political oversight, the influence of engineering contractors, the competence of executive managers, the advice provided by consultants, and the role of labour unions in this train wreck. None of those parties will emerge looking good, but it is time to ensure a “never again” future for key provincial infrastructure.

Special attention also needs to be placed on the lack of action by the Premier, his cabinet and advisors to grasp the immensity of the problem and take appropriate actions.  With the mass resignation, Hydro’s board has expressed a total lack of confidence in the current government.

Pallister had one huge job to do, pull Hydro out of its death spiral. But he and his advisors acted like a deer frozen in headlights. The decision of Hydro’s Board to resign should be respected, they couldn’t fulfill their fiduciary duties under the current circumstances – prevented from exploring restructuring options that could salvage value from the current mess. Don’t buy Pallister’s pathetic ‘Metis’ spin on the board’s resignation. There will be no happy outcome from this situation, only losers and losses.

There needs to be a leadership transplant inside the government, placing knowledgeable people in positions of influence and authority.  Quit hiring consultants to produce requested reports protecting executives, politicians and  bureaucrats. Bring in bankruptcy and insolvency trustees to perform a work-out.

Dealing with the ruin will be painful, but immensely worse would be to maintain the operation as a walking dead zombie organization destroying our economy.

The mass directors’ resignation screams out the need transform the leadership of the existing provincial administration. If PC party elders do not act now, the future of the PC party will come into question.

Pallister’s Fake Tax Cuts

by Graham Lane

Published in the Winnipeg Sun, March 16, 2018

Ahead of Monday’s provincial budget, a Sun editorial rang true when it focused on the need for Manitoba’s economy to grow more robustly. A recent Tom Brodbeck column cited provincial budget expense increases under Pallister, outlining that despite Pallister’s pre-budget promises to right the good ship Manitoba we are headed for the reef. Projected economic growth of 1.8% (2018) and an anemic 1.3% (2019) is pathetic.

While the Pallister government plays at ‘reform’, tinkering around the edges with measures like public sector wage restraint and lowering the annual rate of grant increases to education and municipal governments, it remains completely clueless about the big picture “elephant in the room” issues underlying Manitoba’s decades long relative national decline. Tinkering will not do it, Mr. Premier. Although you were elected to change the political and economic circumstances of Manitoba, you are governing more like your spendthrift predecessor Mr. Selinger.

Instead of upping an already excess tax load on individuals and industry – by way of a politically toxic carbon dioxide tax and hiding behind the PUB by forcing inflationary electricity rate hikes – Pallister should have started by thinking ‘big’ by reducing government’s suffocating weight on the economy. Payroll tax and ridiculous land transfer fees, the personal tax exemption is still “way, way” below our western provincial neighbours, and we have overall governmental expenditures still heading higher.

Pallister’s majority ‘conservative’ government acts like a minority government, with the minority partner being the disgraced NDP.  Apart from public fatigue following 17 years of NDP rule, the PCs came to power largely on the strength of one promise: to roll back Selinger’s PST increase.

Not only has Pallister given himself a full four-year term to keep that promise, he is planning to pay for it by creating a new tax and increasing the overall tax burden, while ludicrously calling it “the biggest tax cut in Manitoba history”. The premier says he will replace one point of the PST with a whole new “PST”:  the Pallister Carbon Tax. Pallister’s “cure” will be worse than the disease.

Leaving aside his latest budget promise, that personal exemptions will climb by 2021 to the current 2018 Canadian average, and that the PST will drop back to 7%, Pallister focuses on bringing in more revenue from same group of sheep that the NDP regularly sheared. Is this what conservative voters worked so hard for to get rid of the NDP?

Hydro rate increases and new carbon taxes on natural gas heating, gasoline and diesel will quickly absorb the tax savings through a future exemption increase. The “best budget ever” headlines Pallister is promoting are really nothing more than fake news about fake tax cuts from a fake conservative party.

There was a reason that Caroline Mulroney suddenly pitched aside deposed Ontario Conservative Party Leader Patrick Brown’s ‘smarty pants’ carbon tax program in her leadership campaign.  It was the same reason that Doug Ford will most likely be the next premier of Ontario. As in Manitoba, the conservative voting base abhors, as Ford would say, the “out of touch” elites’ hyped-up nonsense of the carbon tax.

So don’t be surprised if a new political party arises, with a focus on real reform, particularly lowering taxes while axing the Pallister Carbon Tax.

Garbage in, garbage out: Regulatory Failures

by Graham Lane

Published in the Winnipeg Sun, March 9, 2018

The curtain is falling on the Public Utilities Board’s (PUB) most expensive Hydro rate hearing. The hearing follows a series of external and internal reviews of the still-unfinished Hydro expansion. Since 2003, $100 million or more of ratepayer money has gone down the drain, wasted in hearings and reviews.

Wasted because those hearings relied on incredibly wrong forecasts – ‘garbage in’ ‘garbage out’ decisions resulting from a series of administrations trying to justify the unjustifiable.

The post-Limestone dam history of PUB and the Clean Environment Commission feature Hydro hearings littered with wasted costs and disappointments for ratepayers. The winners: lawyers, consultants, contractors, suppliers to Hydro, American utilities, northern First Nations and Hydro executives. The losers – ratepayers, taxpayers, farmers, the economy, and, above all, common sense.

In 2004, the CEC was commissioned by the-then NDP Doer government to review Hydro’s ‘already begun’ Wuskwatim project. Billed to be a model for First Nations as minority owners, Hydro blew past cost forecasts. Wuskwatim was to cost $900 million, with its electricity sold profitably to American utilities. The project ended up costing over $2 billion while export prices fell.

The First Nation ‘partnership’ was then reworked and reworked again, ensuring steady income for the First Nation despite ‘real’ large losses for ratepayers. (And $1 billion was spent just to bring First Nations into ‘no-lose’ minority shareholdings in money-losing Wuskwatim, Keeyask and the derailed Conawapa.)

At the bidding of the NDP Selinger government, PUB undertook an incredibly expensive NFAT review – Needs for and Alternatives to – of Hydro’s plans for Keeyask and Conawapa. Against advice, the hearing ignored options, Bipole III and money already spent on Keeyask and Conawapa. PUB then green-lighted Keeyask and billions more was then wagered and lost. Projections of costs and revenues again proved ridiculously faulty.

Fast forward to the Pallister PC government, which broke its promise to halt and review Bipole III and Keeyask. Instead, its newly-installed Hydro board of directors, and at a cost of $4 million plus, contracted Boston Consulting (BC) to again review Keeyask. Forecasts relied on by the American consultancy again proved wrong –  spending on Keeyask and Bipole III still continues.

PUB now considers how high rates should jump. PUB has no mandate to halt Keeyask nor to consider a halt and route diversion for Bipole III. And, the Pallister government provides no indication that it will help consumers by either shrinking its enormous annual levies on Hydro’s ratepayers or absorb Hydro’s debt to cut rate hikes. But, the government is ultimately responsible for the entire foolhardy boondoggle.

Pallister now hides behind PUB’s skirts, ignoring government’s moral responsibility to lessen the burden on ratepayers.

There are many lessons to be learned from this sorry history of a massive misadventure in trade undertaken by a monopoly Crown corporation and involving regulatory bodies reliant on bad data. One is that proponents should be careful not to employ faulty forecasts.

Massive projects risking the province’s economic well-being should neither proceed nor continue without at first thorough and after ongoing risk assessments and all options. Avoid ‘garbage in garbage out’ hearings which waste money and time, resulting in disastrous outcomes.

Above all, government should never hide behind the skirts of regulatory bodies.

Fletcher’s Citizen Inquiry

by Graham Lane

Published in the Winnipeg Sun, March 2, 2018

Money laundering is illegal. This nefarious process takes ‘dirty’ money and launders it “clean” in the eyes of the law. It is as old as the hills.

For a legal application of the concept, right here in Manitoba, just think Manitoba Hydro. The Government now takes $400 million a year – over $1 million a day – from the utility in so-called ‘levies’. They come straight from Hydro’s struggling revenues, therefore ultimately from the pockets of every ratepayer.  The government gets ‘fees’ for providing loan guarantees for money borrowed and for ‘water rentals’, and levies a tax on Hydro’s outstanding loans.

Perversely, the Government has a substantial financial interest in encouraging Hydro to spend large on megaprojects like the Keeyask generating station – skimming over a million dollars a day in its  ill-gotten ‘levies’. Is this not a howling conflict of interest, in which the government constantly preaches cost-cutting but, at the same time, milks ratepayers by pushing Hydro’s giant capital projects? Could this perhaps even be called ‘debt laundering’?

Concerned citizens, will be astonished to learn that Hydro’s debt is now headed for $25 billion – a $20,000 millstone of future debt for every man, woman and child in Manitoba. The fact that 100% of this debt – mainly for huge, doomed capital projects aimed at export sales to the USA – is being paid by ratepayers is also shocking. Nowhere else in Canada (or the USA) do provincial/state governments saddle domestic customers with such capital debts for exports.

The Government, as the sole shareholder, must ultimately take total responsibility for Manitoba Hydro, its largest Crown Corporation.  As has been asked many times before, why has there been no public inquiry into how Hydro got into such a financial mess? Credit rating agencies, such as S&P Global, have concluded that Manitoba Hydro cannot be considered “self-supporting”, putting the Province at risk of further repeated credit downgrades. These downgrades have occurred twice during the last two years. Ultimately they result in higher interest rates threatening our economy.

Perhaps there still is hope.

All hats off to Steven Fletcher, the policy savvy MLA from Assiniboia, who last week took the bull by the horns and conducted his own ‘Citizens’ Inquiry’ into Manitoba Hydro. I was pleased to be one of the presenters at last week’s first hearing. The proceedings were broadcast live on Facebook and can still be viewed on that social media site:  @citizeninquiry.

It’s an important story our politicians are trying to hide: suspect accounting, political smoke screens, dubious management, evaporating export markets, out-of-control costs, increasing electricity rates, and, likely, a collapse in public confidence in Hydro.  It all demonstrates an urgent necessity for a full inquiry.

Fletcher’s inquiry reveals that Manitobans, one way or the other, have to get to the bottom of Hydro’s problems and find fair and proper solutions. The Pallister Government should hold a full independent inquiry as promised before the election – or at least commission more “forensic evaluations” of Hydro’s capital projects (as recently with Keeyask).

If this government doesn’t park its major conflict of interest and take action, citizens themselves will find a way forward. Contact the ‘Citizens’ Inquiry’ to participate – on a totally confidential basis. Just go to @CitizensInquiry on Facebook.