Alberta to spend big on infrastructure

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Alberta's NDP government, weighed down by an economic slump and growing energy-sector job losses, is devising what is expected to be a hefty stimulus package to beef up the province's infrastructure – even against the backdrop of a multibillion-dollar deficit.

Premier Rachel Notley has provided limited details in recent weeks about the planned stimulus package expected in her government's first budget at the end of October. Despite a deficit that will be the largest in two decades, and that the government has warned could grow to $6.5-billion, Finance Minister Joe Ceci says the province could borrow more to speed an economic recovery and create jobs.

"Do we have the money? Yes. I think we would have the capacity to borrow some more for investments in infrastructure," Mr. Ceci told The Globe and Mail on Friday. "We're forecasting GDP to be on the growth side in 2016, so an investment in transit and other infrastructure would come at the time when it would bolster a brightening GDP."

Alberta's government has been tight-lipped about the size of the stimulus package and what specific projects could be involved. Before they are revealed in October, Ms. Notley will provide details about her strategy in a series of speeches planned for investors in Alberta, New York, Toronto and Montreal.

Part of that strategy will be driven by a multi-year capital plan penned by former governor of the Bank of Canada David Dodge. A draft of that plan has been finished and has already been sent to Ms. Notley's chief lieutenants.

"We believe there is a multiplier effect that will take place with investment in good public infrastructure projects, so we will as a cabinet and caucus make some decisions in the short term about how quickly we move on the recommendations of the Dodge Report," Mr. Ceci said.

The scope of that plan is widely expected to be enormous. After a decade in which Alberta's economy and population boomed, many of the province's schools, hospitals and roads need to be rebuilt and expanded. Edmonton and Calgary have capital plans calling for a total of $12-billion in new spending. The Counties for the Alberta Roadbuilders and Heavy Construction Association says a further $4-billion is needed to repair roads in rural areas.

If the government were to take on new debt to invest, now is a good time according to Christopher Nicol, an economics professor at the University of Lethbridge. "It might not be a bad idea to go that route because if you are going to borrow money to do this kind of work, it almost couldn't be at a better time because your borrowing costs would be quite low."

For Calgary, which has nearly $6-billion in unfunded capital projects on its drawing board, from light-rail transit to beefing up roads around the airport, Mayor Naheed Nenshi says the time is right for infrastructure investments.

"It's got to get built anyway," he said. "So it makes sense to do some counter-cyclical work here and build while materials are cheap and while labour is cheap, rather than to building while we're competing with giant capital projects in the energy sector."

He says that none of the projects are optional and the city is ready to begin with $1.1-billion worth of disaster and flood mitigation work that became urgent after the 2013 flood.

The mayor, who spoke with Infrastructure Minister Brian Mason on Friday about the issue and has also discussed it with Mr. Dodge, said the funding needs to be earmarked soon to have to biggest benefit.

"We need to make decisions this autumn and winter in order to get stuff in the ground in the next construction season," Mr. Nenshi said.

With nearly half of Edmonton's capital plan set aside for rehabilitating existing infrastructure, most of the city's projects are shovel-ready, according to Mayor Don Iveson.

"In a city notorious for its potholes, that investment is important," he said. "Our issue now is really dealing with growth and preparing ourselves to deal with the next wave of growth, whether that's a year out or five years out; we're still incredibly far behind because of the growth that we've seen over the past decade."

The city's biggest project is the planned expansion of the municipal light rail system. After the city's second LRT line opens on Sept. 6, construction on a third line will begin in 2016. However, the city has now exhausted its transit funding.

"The good news is there is a new federal fund. There was an investment north of $2-billion in Toronto, a considerable announcement in Ottawa and a $1.5-billion investment in Calgary. Some Edmontonians are concerned, because where's our $1.5-billion announcement? I'm fully confident when we put our application forward we'll get equitable federal support," he said.

With $1.5-billion, the federal government could cover one-third of the $4.5-billion Edmonton needs to complete the LRT system.