The dark side of Alberta’s boom

According to the latest population projections from Statistics Canada, Alberta will overtake British Columbia as the third most populous province in the country by 2038 – if not before then.

Because of high fertility rates and unrelenting migration to the province, Alberta is expected to experience the highest growth of any province over the next couple of decades, possibly reaching nearly 7 million people a quarter century from now. There are now about four million calling the province home.

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Of course, people have been pouring into Alberta for years now, thanks to the energy business and the high-paying jobs it has created. Mostly this has been a good news story for Canada’s richest province. However, all those newcomers have created a rather large problem, one, in fact, that has reached crisis proportions in some communities.

What’s happened? Well, over the past decade, the government failed to keep pace with population growth. Consequently, there is a massive economic and social infrastructure deficit in the province. It consists of everything from roads and bridges requiring repair or replacement to hospitals and schools urgently needing to be built or upgraded.

The province’s new Premier, Jim Prentice, estimates it could cost up to $30-billion to address the infrastructure shortfall over the next five years. Along with finding new markets for the province’s oil, this is the issue that is keeping Mr. Prentice awake at night.

“We have communities in Calgary with 50,000 people that have one elementary school and nothing else,” Mr. Prentice told me in an interview. “Meantime, there [are] like seven or eight schools that are on the drawing board. We can’t have a community with 50,000 people with no schools.”

The math is inexorable: About 100,000 newcomers are arriving in Alberta every year. They bring about 15,000 school-aged children with them. Fifteen thousand kids equal 28 new schools. Guess what happens when the government ignores the demand for this kind of infrastructure spending for more than a decade: You get into the near-dire predicament the province finds itself in now.

“In high-growth areas of Alberta, like Edmonton, Calgary, Fort McMurray, Grand Prairie … we’re approaching pretty close to crisis proportions in parts of the public education system,” the Premier said. “We just don’t have any schools, classrooms to meet the demand. But it’s also economic infrastructure, too: It’s roads and bridges into Fort Saskatchewan that will carry the traffic for the petrochemical industry. It’s everywhere.”

His now-disgraced predecessor, Alison Redford, was aware of this problem too. This is how she defended piling up huge debt to cover the cost of building new schools and hospitals. Of course, Alberta is a province that has mostly viewed debt as evil. Ralph Klein will be forever revered for eliminating the province’s debt and building up a huge savings account – one that premiers Ed Stelmach and Ms. Redford later plundered.

Mr. Prentice says he doesn’t like debt either. During the Progressive Conservative leadership campaign he told people everywhere he went that he hated debt. It was music to people’s ears. He talked, too, of building up the province’s savings account. He promised never to run an operating deficit. How does he do that while building all these much-needed new schools and hospitals – expected to cost upwards of $30-billion?

In part, he’ll borrow the money, just like Ms. Redford did.

“I said I would maximize the cash component that would go into that [the infrastructure bill] and minimize the debt it’s going to take,” the Premier told me. “But I think on most scenarios there’s going to be a need to access debt markets to catch up on the quantum of infrastructure we’re talking about.”

This seems to suggest that at the same time Mr. Prentice is building the province’s savings account, he’ll be watching Alberta’s mortgage get bigger as well. My guess is most people won’t care as long as it’s for things like schools and hospitals that are so desperately needed.

Plus, the reality is that the government has no choice. It can’t ignore this problem any longer.

 

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