Alberta Election (2015)

[Colin Parkinson]

The comments about a reduction in labour and contracting costs due to the downturn, echo what the mayor of Fort Mac said. They are looking at catching up on infrastructure issues. Building large infrastructure project with long payoff times is what government does best. Good roads, bridges, transmission lines and even helping with rail lines pays off down the road. I can imagine how the BC NW would look like had WAC Bennett completed his rail line up to Dease lake.

 

[Rocky Mountains]

Any discussion of government debt in Alberta is pointless because Alberta has an embarrassment of revenue.  It has just been so badly managed.  Ralph Klein balanced the budget when oil varied from $10-$30 per barrel.  Without even looking at efficiencies, Alberta overpays its employees by over 20 %.  They signed a lot of long-term sweetheart deals with unions just before elections to have labour peace.  And now we elect a government that actually owes the unions for support.

 

[Edward Campbell]

I am going to come out "against" this for the simple reason that politicans and bureaucrats are weasles and will contort the spirit and the letter of any plan so long as it aggregates more power and influence to them.

Once this plan is "blessed"; look for hocky arenas, performing arts centers, convention centers, "public art" sculptures and a whole host of "other" projects to magically turn into "infrastructure" to get funding. Evne real infrastructure like roads,bridges, water and sewer pipes etc. will be directed to where the (NDP) voters are, so it will suck to be an Albertan living outside of Edmonton and Calgary.

The vast majority of these projects will have 0 or negative impact on GDP growth, and the debt overhang will pull the rest of the economy down with it (does no one at all remember the Great Depression or the financial crisis of 2008?). Public debt is only good so far as we can trust politicians and bureaucrats to spend it on real infrastructure, not disguised social spending and vote getting (and the answer to that is "not at all").

No, this is just a cover for doing what they want to do anyway.

I think there is ample evidence in the literature to suggest that a programme of steady, constant maintenance and renewal/replacement of "real infrastructure" is good for the economy and, always, money well spent. The problem, in most of North America, is that politicians build shiny new infrastructure and then skimp on the regular, steady, ongoing repair and maintenance ... until there is some sort of crisis.

          <rant> But the problem isn't the politicians, much less the bureaucrats, it is the icredibly f'ing stupid people who are allowed to vote and elect the politicians who, then,
                    do as the incredibly f'ing stupid people want ... </rant>

 

[KJK]

You mean like when the City of Edmonton takes 25 million from its paving budget over 5 years because there is no money but builds a 500 million dollar arena?

KJK

 

[Colin Parkinson]

I think there is ample evidence in the literature to suggest that a programme of steady, constant maintenance and renewal/replacement of "real infrastructure" is good for the economy and, always, money well spent. The problem, in most of North America, is that politicians build shiny new infrastructure and then skimp on the regular, steady, ongoing repair and maintenance ... until there is some sort of crisis.

          <rant> But the problem isn't the politicians, much less the bureaucrats, it is the icredibly f'ing stupid people who are allowed to vote and elect the politicians who, then,
                    do as the incredibly f'ing stupid people want ... </rant>

At lot of bureaucrats at the front end are always pointing out the unsexy stuff. As the saying goes in infrastructure; if you do your job well, nobody will notice"

 

[Brad Sallows]

I haven't been into AB for a long while, but I never thought of it as a province full of rotting infrastructure.  I'll be completely cynical, and assert that Dodge's (or rather, Dodge's credibility's) function is to be a smokescreen/squirrel: he and his efforts will be what the government points to whenever spending questions arise.

Planning infrastructure maintenance doesn't need outside consultants: the cities are full of civil engineers, including many on public payrolls.  Likewise, existing planners and engineers are more than capable of predicting where new infrastructure is most likely to be well-placed.  However, their recommendations won't fit a political template; hence, outside consulting.

People assume "infrastructure" means "useful" and "investment".  Infrastructure spending can also be misallocation of capital, which leaves you paying to maintain something you don't need or don't use.

 

[Edward Campbell]

I haven't been into AB for a long while, but I never thought of it as a province full of rotting infrastructure.  I'll be completely cynical, and assert that Dodge's (or rather, Dodge's credibility's) function is to be a smokescreen/squirrel: he and his efforts will be what the government points to whenever spending questions arise.

Planning infrastructure maintenance doesn't need outside consultants: the cities are full of civil engineers, including many on public payrolls.  Likewise, existing planners and engineers are more than capable of predicting where new infrastructure is most likely to be well-placed.  However, their recommendations won't fit a political template; hence, outside consulting.

People assume "infrastructure" means "useful" and "investment".  Infrastructure spending can also be misallocation of capital, which leaves you paying to maintain something you don't need or don't use.

Yep ...

 

[Underway]

You can always invest in infrastructure.  Fix up and repair bridges ahead of schedule, repave roads, pave some roads that are gravel.  Invest in bike lanes, improved sewers, public transit, parks, medical centres etc...

People assume "infrastructure" means "useful" and "investment".  Infrastructure spending can also be misallocation of capital, which leaves you paying to maintain something you don't need or don't use.

Completely agree.  Arena's and sports facilities top my list of worst "infrastructure" investments ever.  Community centres and the like are important but should not take away from infrastructure spending that benifits everyone and improves the economy or health of an area.  Even libraries (though I think they are more valuable than arena's) are not proper infrastructure spending. 

 

[Brasidas]

I haven't been into AB for a long while, but I never thought of it as a province full of rotting infrastructure.  I'll be completely cynical, and assert that Dodge's (or rather, Dodge's credibility's) function is to be a smokescreen/squirrel: he and his efforts will be what the government points to whenever spending questions arise.

Planning infrastructure maintenance doesn't need outside consultants: the cities are full of civil engineers, including many on public payrolls.  Likewise, existing planners and engineers are more than capable of predicting where new infrastructure is most likely to be well-placed.  However, their recommendations won't fit a political template; hence, outside consulting.

People assume "infrastructure" means "useful" and "investment".  Infrastructure spending can also be misallocation of capital, which leaves you paying to maintain something you don't need or don't use.

Alberta has a cyclical economy. At high points, the cost of building infrastructure becomes ridiculously high, and it makes sense to defer it. There are many unsexy projects that it would make sense to fund and ramp up right now. One more notable one might be the twinning of highway 63, but there are other roadwork, schools, and other facilities that would be cheaper now than later.

I absolutely agree on the Edmonton arena, and its not a time to waste money, but there are plenty of projects that were paid for at inflated prices at high times, and more that weren't paid for because the price was inflated. Now's the time, rather than when they cost too much again.

Depending on how much it costs to do so, in comparison to the waste that not planning might entail, I'd say it could be worth investing in an analysis and a framework for funding infrastructure projects in a cyclical economy. As opposed to mayors lobbying for pet projects in real time.

 

[cupper]

Alberta has a cyclical economy. At high points, the cost of building infrastructure becomes ridiculously high, and it makes sense to defer it. There are many unsexy projects that it would make sense to fund and ramp up right now. One more notable one might be the twinning of highway 63, but there are other roadwork, schools, and other facilities that would be cheaper now than later.

I absolutely agree on the Edmonton arena, and its not a time to waste money, but there are plenty of projects that were paid for at inflated prices at high times, and more that weren't paid for because the price was inflated. Now's the time, rather than when they cost too much again.

Depending on how much it costs to do so, in comparison to the waste that not planning might entail, I'd say it could be worth investing in an analysis and a framework for funding infrastructure projects in a cyclical economy. As opposed to mayors lobbying for pet projects in real time.

A couple of points I disagree with.

Deferred maintenance or improvements will never be cheaper in the future than it is to do it in the present. It's a basic time-value of money argument at its most basic. But further to that, what is only a minor issue at the current time will become a larger, more expensive problem as the infrastructure continues to deteriorate. The problem is that when you face a situation of government belt tightening, infrastructure spending decisions get reduced to a triage methodology, where money is directed to the worst case items which cannot be deferred any longer. Unfortunately the money never comes back when the economy improves, and deferrable projects continue to be put off until they can no longer be ignored.

Also, high and low cycles in the economy don't necessarily translate into the same high / low cycle in construction costs. In this case lower petroleum costs mean a downturn a petroleum based economy, but it also means lower construction costs, particularly in highway construction. Fuel costs for heavy equipment drop, prices for asphalt and certain construction materials drop.

 

[YZT580]

what effect will the new carbon tax have on any recovery?

 

[Brasidas]

A couple of points I disagree with.

Deferred maintenance or improvements will never be cheaper in the future than it is to do it in the present. It's a basic time-value of money argument at its most basic. But further to that, what is only a minor issue at the current time will become a larger, more expensive problem as the infrastructure continues to deteriorate. The problem is that when you face a situation of government belt tightening, infrastructure spending decisions get reduced to a triage methodology, where money is directed to the worst case items which cannot be deferred any longer. Unfortunately the money never comes back when the economy improves, and deferrable projects continue to be put off until they can no longer be ignored.

Also, high and low cycles in the economy don't necessarily translate into the same high / low cycle in construction costs. In this case lower petroleum costs mean a downturn a petroleum based economy, but it also means lower construction costs, particularly in highway construction. Fuel costs for heavy equipment drop, prices for asphalt and certain construction materials drop.

I don't think I disagree with you very much.

Deferring maintenance for the sake of saying "we don't have a deficit" or "look at me, I paid off the debt" is stupid. Having a plan for infrastructure spending in the long term is the smart way to go. Making late, costly triage decisions at the top of an economic cycle does directly lead higher construction costs - whereas having planned spending with long-agreed contracts keeps it down and manageable. During a low-point, front-loading some priority improvements when costs are lower makes sense, but it should be done within the context of a plan.

Deferring maintenance and paying a higher cost in the end is not a sound plan. Deferring a proposal for the twinning of a given stretch of highway, when the construction industry is so overheated that it's impractical isn't the same thing.

 

[Oldgateboatdriver]

To defer maintenance on infrastructure for any reason is always bad policy. Central Canada is paying for that right now (Tried to get around Montreal or Toronto in summer lately?).

However, in a boom and bust economy, it is perfectly acceptable to defer the construction of supplementary or new infrastructure to the bust periods in order to keep the boom going. For instance, adding a third lane to a two lane highway will reduce its usage for a while (maybe down to one lane or greatly slowed down lanes with traffic back ups during construction. During a boom this is a hindrance and if you know the B/B cycle to be about 10-15 years, then you can defer safely and reduce irritants to the economy in boom times. Acting this way is also quite correctly keynesian.

The question is should this be financed through deficits? My personal answer, and the likely correct Keynesian answer is: No. During the boom times, a portion of the extra revenue should be siphoned off and set aside for the infrastructure spending that you know will be required in bust times. This way you don't get into deficit, unless you made some minor miscalculations and then you can go into a small deficit to be paid off in the beginning of the next cycle.

 

[daftandbarmy]

what effect will the new carbon tax have on any recovery?

Probably less than the PST they will introduce next year

 

[Colin Parkinson]

To defer maintenance on infrastructure for any reason is always bad policy. Central Canada is paying for that right now (Tried to get around Montreal or Toronto in summer lately?).

However, in a boom and bust economy, it is perfectly acceptable to defer the construction of supplementary or new infrastructure to the bust periods in order to keep the boom going. For instance, adding a third lane to a two lane highway will reduce its usage for a while (maybe down to one lane or greatly slowed down lanes with traffic back ups during construction. During a boom this is a hindrance and if you know the B/B cycle to be about 10-15 years, then you can defer safely and reduce irritants to the economy in boom times. Acting this way is also quite correctly keynesian.

The question is should this be financed through deficits? My personal answer, and the likely correct Keynesian answer is: No. During the boom times, a portion of the extra revenue should be siphoned off and set aside for the infrastructure spending that you know will be required in bust times. This way you don't get into deficit, unless you made some minor miscalculations and then you can go into a small deficit to be paid off in the beginning of the next cycle.

The sanity is strong in this one  8)

 

[Brad Sallows]

Deferring maintenance risks eventual higher costs; doing maintenance early is an inefficient use of funds.  Maintenance should be planned and programmed and done when it is due.

Stockpiling funds in advance is prudent but politically impractical (nigh impossible).  Governing parties change, and someone will always want to raid the kitty.

I harbour a suspicion that the worst friction in the system is the preference of politicians to be conspicuously seen spending money on new toys rather than off voters radar, quietly and competently looking after existing ones.

 

[Colin Parkinson]

A big problem in countries like Malaysia, build big and new, forget about what has been built and needs repair. They really need to take kids out to look at streetworks and explain all the underground infrastructure. I did for my kids so they know where and how the water comes from and the where and how the poop goes. I suspect they are the only ones in their class that do know. We don't educate our kids on the fundamental building blocks of society and wonder why they get tricked to vote for Fluffy the talking hairdo. 

 

[Edward Campbell]

Apparently, this ...

                 

                      ... is Alberta Premier Rachel Notley's long term fiscal plan.  :nod:

 

[KJK]

ERC, if that is her long term plan I don't see it coming to fruition. She has done her best to chase all investment from the province. Even if oil were to rise back to $100 I don't really see much happening in such a hostile political environment. And this without weighing what might come out of the royalty review. I don't see much hope for the future while the NDP are in power in AB and shiny pony is in power in Ottawa.