capital plan 10-year debt-free Meeting Alberta's infrastructure needs with a sustainable, prioritized and innovative plan

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1 10-year debt-free capital plan Meeting Alberta's infrastructure needs with a sustainable, prioritized and innovative plan february 13, 2013

2 THE WILDROSE February 2013 I. EXECUTIVE SUMMARY 1 3 KEY PRINCIPLES 1 º SUSTAINABILITY 2 * GRAPH OF THE 10-YEAR PLAN 2 º PRIORITIZATION 3 º INNOVATION 4 II. WHAT IT MEANS FOR BUDGET MUNICIPAL INFRASTRUCTURE SUPPORT 6 º THE PLAN 6 PROVINCIAL TRANSPORTATION NETWORK 7 SCHOOLS 8 HEALTH FACILITIES AND EQUIPMENT 9 OTHER GOVERNMENT FACILITIES 10 Wildrose Official Opposition 501 Legislature Annex Street Edmonton, Alberta T5K 1E4

3 I. EXECUTIVE SUMMARY Albertans understand the importance of investing in infrastructure both to our economy and quality of life. We need new schools, roads, health facilities and other projects to accommodate our province s continued growth. However, Albertans also recognize that, as a province, we need to live within our means. Albertans have made it abundantly clear that planning to go into long-term debt to build capital is not a responsible plan. As with all government spending programs, Alberta s capital plan must be financially sustainable, properly prioritized, and able to demonstrate that taxpayers are receiving good value for money spent. The PC government has failed to achieve any of the above criteria. Their capital plan is unfocused, involves ongoing borrowing, and is shrouded in secrecy making it impossible to properly assess whether decisions are being made in the best interests of taxpayers, or on PC political prospects. The Wildrose 10-Year Debt-Free Capital Plan follows three key principles: sustainability, prioritization and innovation; and on these principles Albertans can count on a Wildrose government to deliver predictable and feasible infrastructure funding based on the real needs of Alberta communities. Danielle Smith MLA, Highwood Leader of the Wildrose Official Opposition Rob Anderson MLA, Airdrie Wildrose Official Opposition Finance Critic, Treasury Board Critic Drew Barnes MLA, Cypress-Medicine Hat Wildrose Official Opposition Transportation and Infrastructure Critic 1

4 SUSTAINABILITY Going into debt for capital is not a sustainable capital plan. The truth is that no province in Canada spends as much on infrastructure as Alberta. Over the last six years, Canada s most populous provinces (every province except the Maritimes) have spent $700-$1,100 per person on infrastructure. During that same period, Alberta s government has spent an average of $1,780 per Albertan. Not only has this spending spree almost entirely drained our $17-billion Sustainability Fund, but it has also fuelled massive inflation in the province s construction industry, meaning our high spending doesn t necessarily result in more infrastructure when compared with those other provinces. The Wildrose 10-Year Debt-Free Capital Plan calls for approximately $48 billion in capital spending spent evenly over the next 10 years. This amount will be allocated in a steady and sustainable stream of infrastructure dollars that slides higher with the rate of inflation plus population growth. Careful spending of these funds will allow us to build and maintain the core infrastructure that families, patients, students and municipalities need without taking out loans our children will have to pay later. GRAPH OF THE : TOTAL Municipal Infrastructure $1,812 $1,883 $1,956 $2,032 $2,112 $2,194 $2,280 $2,368 $2,461 $2,557 $21,654 Transportation Network $905 $940 $977 $1,015 $1,055 $1,096 $1,139 $1,183 $1,229 $1,277 $10,815 Health Facilities & Equipment $638 $663 $689 $716 $744 $772 $803 $834 $866 $900 $7,624 Schools $325 $338 $351 $365 $379 $394 $409 $425 $441 $459 $3,884 Government & Other $362 $376 $391 $406 $422 $438 $455 $473 $492 $511 $4,326 Capital In Year Amount $4,042 $4,200 $4,363 $4,534 $4,710 $4,894 $5,085 $5,283 $5,489 $5,703 $48,304 Total Spending (Cumulative) $4,042 $8,242 $12,605 $17,139 $21,849 $26,743 $31,828 $37,111 $42,601 $48,304 _ (millions of dollars) In Year Amount $4,042 $4,200 $4,363 $4,534 $4,710 $4,894 $5,085 $5,283 $5,489 $5,703 Total Spending $4,042 $8,242 $12,605 $17,139 $21,849 $26,743 $31,828 $37,111 $42,601 $48,304 2

5 PRIORITIZATION When governments are in power for too long, they pick up bad habits. One of the worst is using the allocation of public dollars to reward political friends and buy votes. The only way to ensure this isn t happening is to publicize the government s priority lists for infrastructure and explain the criteria used to rank projects. This will de-politicize the awarding of projects and make sure that the communities with the highest needs will be the first to receive funding for capital. Wildrose has repeatedly asked the PC government to publicly make available an infrastructure priority list, but they have continually refused to do so. Albertans understand that the government can t build everything at once, but they have the right to know where their community s project is on the priority list. Transparent prioritization also helps industry to plan and taxpayers to save. Construction companies need to know what equipment to buy, who to hire and who to train. When these companies know about the pool of available projects and capital funding that they are competing for ahead of time, they are able to better plan and lower their costs, thereby lowering costs for taxpayers. The Wildrose 10-Year Debt-Free Capital Plan will ensure that each infrastructure dollar spent is going to the highest priority project. The Wildrose 10-Year Debt-Free Capital Plan calls for: Publishing an infrastructure priority list for four key areas: Provincial Transportation Network, Schools, Health Care and Equipment and Other Government Facilities. Ordering each of these four priority lists, according to a consistent, publicly disclosed and objective set of prioritization criteria. (This will eliminate the politicization of the capital allocation process.) Reliable funding for municipalities so they can prioritize and plan for their own infrastructure needs in the long-term. (This will be accomplished through implementing the Wildrose Plan for municipalities, which will send 10% of all provincial tax revenues and 10% of all provincial cash surpluses to municipalities. Actual funding for municipalities may grow even faster than the schedule in this document, if provincial tax revenues and cash surpluses out-pace the rate of inflation plus population growth.) 3

6 INNOVATION We have all heard and read reports about government inefficiency and waste. There are opulent buildings built with no staff to open them and inflated contracts going to companies with ties to PC politicians. These kinds of behaviours are the hallmarks of a government that has been in power for too long. Wildrose would make sure that capital spending in Alberta takes advantage of the most innovative and creative ways to save money. This means being open to new partnerships, adopting innovative designs, and searching for new ways to deliver the quality infrastructure Albertans need for the lowest possible price. The Wildrose 10-Year Debt-Free Capital Plan will: Partner with local developers, municipalities, school boards and Alberta Health Services to accelerate the building of priority infrastructure where additional funding from these entities is offered. Stabilize our annual capital spending so that construction companies can plan their hiring and equipment purchases more effectively and thereby reduce costs, rather than having to guess whether there will be significant cuts or increases to capital projects on a year-to-year basis. Improve tendering practices to ensure construction firms aren t unfairly gaming the system. End the practice of cost-plus contracts, which encourage massive cost overruns on construction projects. Refrain from making building announcements until project planning is well advanced, which will lead to less costly changes and lower bids. Allow developers to build schools as a feature of their new neighbourhoods whenever practical, integrating all or part of the cost into the homes surrounding them. Making standard the core + modular build model to both reduce costs now and allow for seamless flexibility as student populations shift (modular classrooms cost only $200,000 and can be moved as needed). Find ways to improve the low utilization rates of schools. 4

7 II. WHAT IT MEANS FOR BUDGET 2013 In order to create an effective capital plan, it is important to establish a practical baseline for what we should be spending on infrastructure given Alberta s fast growth and relatively high construction costs. Accordingly, we looked at capital spending levels across western Canada and Ontario (who all face growth pressures to varying degrees), and added an additional 15% premium to reflect Alberta s special circumstances. Currently, Alberta spends roughly 80% per person more than the average of these provinces and double what Saskatchewan is spending this year despite its own unprecedented growth. If Alberta were to spend to the average of these provinces, it would mean spending only $3.5 billion this year. The PCs have proposed spending over $5.7 billion next year 63% more than the four-province average. Adding a prudent but practical 15% to reflect Alberta s unique circumstances brings our capital plan to $4.042 billion for The Wildrose would then increase this amount annually for inflation and population, which would result in approximately $48 billion over the next 10 years. For the fiscal year, we would allocate this $4.042 billion in capital spending into the following envelopes: Municipal Infrastructure Support Provincial Transportation Network Health Facilities and Equipment Schools Other Government Facilities $1.812 billion $905 million $638 million $325 million $362 million Total 2013 Capital Plan $4.042 billion 5

8 MUNICIPAL INFRASTRUCTURE SUPPORT Municipalities shouldn t have to go begging, cap in hand, every time their municipality needs infrastructure improvements. They need stable, fair and predictable funding from the province so they can meet the priorities of their communities. The Wildrose capital plan for 2013 would see roughly $1.8 billion spent on municipal infrastructure support in 2013 with over $21 billion transferred to municipalities for their projects over the next 10 years. Wildrose would establish a new relationship between the province and municipalities; one that recognizes municipalities as a democratic order of government and equips them with the resources they need to make decisions and serve their citizens. The Wildrose Plan would provide Alberta s municipalities with the independence and financial certainty they ve been asking for to build and maintain their community infrastructure. The Wildrose Plan would: Collapse the current patchwork of municipal infrastructure grant programs into a single provincial transfer called the Community Infrastructure Transfer. Send 10% of provincial tax revenues and 10% of budget surpluses directly to municipalities for their infrastructure needs. Empower local governments to find innovative solutions for today s needs and plan responsibly to meet the needs of tomorrow with the knowledge that as the economy grows, so will their funding for infrastructure from the province. Focusing programs on a specific set of priorities will invariably lead to situations where some communities are excluded from having their priorities addressed. Consequently, AUMA believes that a long term, stable and flexible funding approach will best address the priority needs of Alberta s communities in accordance with their sustainability plans. AUMA July 2012 (millions of dollars) In Year Amount $1,812 $1,883 $1,956 $2,032 $2,112 $2,194 $2,280 $2,368 $2,461 $2,557 Total Spending $1,812 $3,695 $5,651 $7,683 $9,795 $11,989 $14,268 $16,637 $19,098 $21,654 6

9 PROVINCIAL TRANSPORTATION NETWORK The Wildrose 2013 capital plan would see roughly $905 million spent on our provincial transportation network in 2013 with about $10.8 billion spent on such projects over the next 10 years. In this funding would be targeted as follows: Maintain the current commitment to the Edmonton and Calgary ring roads planned for Fast-track the twinning of Highway 63 with the goal of having it completed and paid for within four years. (This will ensure the safe and effective economic development of our northern oil sands.) Address urgently needed upgrades and maintenance on Alberta s highways as per an objective and publicly disclosed Provincial Transportation Network priority list. The investment of $10.8 billion in our Provincial Transportation Network will ensure that Albertans have roads and highways that safely transport people around the province and effectively support our industries. The Wildrose capital plan will increase maintenance of highways and bridges over the next 10 years while investing billions into new transportation corridors. Our plan is much more modest than the PCs because a Wildrose Government will not borrow money to pay for road projects and maintenance. These are important but depreciating assets that our children will have to pay to maintain. Future generations shouldn t have to make interest payments on top of maintenance costs just because today s government can t set priorities. We are also confident that Wildrose will be able to build more with less by: Stabilizing our annual capital spending so that construction companies can plan their hiring and equipment purchases more effectively and thereby reduce costs, rather than having to guess whether there will be significant cuts or increases to capital projects on a year-to-year basis. Improving tendering practices to ensure construction firms aren t unfairly gaming the system. Ending the practice of cost-plus contracts, which result in massive cost overruns on construction projects. Making the Provincial Transportation Network Priority List and the criteria used fully transparent and open to the public thereby eliminating the PC practice of awarding projects based on political priorities rather than actual need. (millions of dollars) In Year Amount $905 $940 $977 $1,015 $1,055 $1,096 $1,139 $1,183 $1,229 $1,277 Total Spending $905 $1,845 $2,822 $3,837 $4,892 $5,988 $7,126 $8,309 $9,538 $10,815 7

10 SCHOOLS Alberta is in the fortunate position of having a growing population of children. To deliver the world-class education Albertans expect, we need to ensure our kids have the schools and teachers they need to learn. The Wildrose 2013 capital plan would see $325 million spent on new schools and maintenance with about $3.9 billion spent on these important community-building projects over the next decade. For our K-12 system, this will include approximately 100 new schools including 65 new elementary schools and 35 new junior high and high schools to meet the needs of Alberta s fast-growing communities. It would also allow for over 60 major school modernization projects. The cost to build educational facilities in Alberta is far too high. Alberta spends about $13 million to build a K-4 school in Calgary, while in Nova Scotia a K-6 elementary school was recently built for $6.6 million. Next door in Saskatchewan they spent $15.5 million to build a K-8 school. As is the case with our 2013 capital plan for the Provincial Transportation Network, we are confident that we can get better value for education capital dollars by: Committing to a long-term stable plan so that builders can better manage their costs. Reforming the tendering process so Albertans are not overpaying for schools. Making the priority list and criteria for education infrastructure transparent and public, so Albertans can be assured their money is being directed to meet their real needs, and not the government s political needs. Finding ways to improve the low utilization rates of some schools. Making standard the core + modular build model to both reduce costs now and allow for seamless flexibility as student populations shift (modular classrooms cost only $200,000 and can be moved as needed). Allowing developers to build schools as a feature of their new neighbourhoods whenever practical, and integrate all or part of the cost into the homes surrounding them (the PC government currently will not permit this solution). (millions of dollars) In Year Amount $325 $338 $351 $365 $379 $394 $409 $425 $441 $459 Total Spending $325 $663 $1,014 $1,378 $1,757 $2,150 $2,559 $2,984 $3,425 $3,884 8

11 HEALTH FACILITIES AND EQUIPMENT Health care is a top priority for Albertans that takes up over 40% of the annual provincial budget each year. As former AHS CEO Stephen Duckett noted, the Alberta government has an edifice complex, meaning it is fixated on making announcements and cutting ribbons for new health facilities, but doesn t give adequate consideration to what matters to patients: having health professionals able to provide the care they need when they need it. Although the PCs have grossly mismanaged capital allocation in our health care system, there is obviously still a need for investment; especially in cancer care, seniors accommodations and smaller urgent care centres that reduce the burden on crowded and more expensive emergency rooms. The Wildrose 2013 capital plan would spend $638 million on health facilities in and over $7.6 billion on such projects over the next decade. In 2013, Wildrose would focus funding towards finishing projects that are nearly complete and start on the highest priority projects as per our Health and Equipment infrastructure priority list, which would include a focus on increasing spaces for seniors, urgent care centres and medical equipment. (millions of dollars) In Year Amount $638 $663 $689 $716 $744 $772 $803 $834 $866 $900 Total Spending $638 $1,301 $1,990 $2,705 $3,449 $4,221 $5,024 $5,858 $6,724 $7,624 9

12 OTHER GOVERNMENT FACILITIES Listening to Albertans, Wildrose has heard loud and clear that roads, schools, hospitals, and seniors care facilities are the most urgent priorities when it comes to infrastructure spending, but we also know Alberta s communities have other needs beyond that core foundation. In addition to providing municipalities the funding they need to address their priorities, the Wildrose capital plan for 2013 would see roughly $362 million spent on other government facilities in That works out to more than $4 billion over the next 10 years. While the current government talks all the time about its conversations with Albertans, the projects they prioritize show that they aren t listening. Whether it s carbon capture and storage, or fancy new MLA offices, this government blows hundreds of millions each year on pet projects and corporate welfare grants disguised as capital spending. These misplaced initiatives take resources that could otherwise have been spent on things like municipal buildings, museums, courthouses or improvements to our parks. The Wildrose capital plan would spend to improve post-secondary, community and government facilities, but in a responsible manner. Cultural centres, recreation facilities and civic buildings are important because they help to support vital, engaged and healthy communities. Our communities also benefit, however, from having a provincial government that controls spending, avoids debt and keeps tax rates low. Our capital plan will build community projects and government infrastructure according to the priorities of Albertans while ensuring we are in a position to afford them. (millions of dollars) In Year Amount $362 $376 $391 $406 $422 $438 $455 $473 $492 $511 Total Spending $362 $738 $1,129 $1,535 $1,957 $2,395 $2,851 $3,324 $3,815 $4,326 10

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