Wage reductions, more layoffs for City of Winnipeg workers part of worst-case COVID-19 scenarios

The City of Winnipeg has released three scenarios and three possible courses of action to contend with the financial implications of COVID-19.

The grimmest would see the city negotiate temporary wage reductions for all employees, lay off more staff and drain cash from some of its reserves.

That worst case is something Mayor Brian Bowman hopes will be avoided.

"There [are] some pretty ugly things in those tiers as you get further down to Tier 3" in the city's scenarios, Bowman said Tuesday.

"We hope we are not in a position where we have to consider those, because hopefully the economy is in a position where it is doing what it should be doing, and we hope to see supports from other levels of government."

The municipal government has already laid off more than 650 temporary workers and frozen some spending.

The city is also already poised to reduce transit service in April, finance some capital projects instead of using cash, and freeze wages for non-union staff.

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The latest fiscal outline is included in a presentation to the city's finance committee, which is scheduled to meet next Monday.

The report looks at three possible scenarios for the economic impact of the health crisis.

In the first, the assumption is made that COVID-19 remains a public health issue through the summer of 2020, social distancing measures begin to end by September and gross domestic product (GDP) contracts 3.1 per cent in 2020 and then grows 2.5 per cent in 2021. 

The second projects a second wave of COVID-19 beginning in December 2020 and social distancing measures once again being put in place until April 2021. GDP contracts 3.5 per cent in 2020 and then grows 0.8 per cent in 2021.

The third and most dire scenario is based on a more severe second wave of COVID-19 that hits the economy even harder. Social distancing measures stay in place until May 2021, non-essential businesses are shuttered and there is another global economic slowdown. 

In the worst-case scenario, GDP contracts 3.5 per cent in 2020 and a further one per cent in 2021.

Even the best-case scenario predicts unemployment levels over 10 per cent in 2021 and at worst 15.6 per cent that year.

The report says the city's goals through the economic fallout from COVID-19 (beyond maintaining essential services such as police and fire) are to "sustain employment both privately and publicly" in the short term and "be prepared to identify major shovel-ready infrastructure projects" in the long term.

Those projects would be financed by either the provincial or federal governments.

Bowman says the commitment to maintain the city's capital spending on roads, sewers and other infrastructure is "incredibly important to the economic recovery."

That got support from the Business Council of Manitoba, whose members have grown increasingly concerned about how a recovery would take shape.

"The important thing with infrastructure is you get something for your money," said business council president Bram Strain. 

"So you're not giving a subsidy, you're not giving out tax deferral. What … you're actually getting is a solid return. You are buying a product to improve the streets. You've improved the sewer, you've improved the utility system."

Regardless of which scenario unfolds, the city's revenue will drop significantly and its fiscal stabilization fund will be used to make up for the lost income.

That's led to the suggestion of other cuts, such as trimming back the Winnipeg Transit schedule. Bowman told reporters Tuesday a decision on that was due soon.

The head of the Amalgamated Transit Union says the city should find ways to deploy staff rather than making cuts.

"Service cuts at this point will hurt the local economy in the short and long term, and could result in the city losing experienced personnel," said ATU 1505 president Romeo Ignacio.