Vaughn Palmer: B.C. NDP ramps up capital spending in latest update
Credit to Author: Stephen Snelgrove| Date: Thu, 12 Sep 2019 01:36:17 +0000
VICTORIA — Just three months into the budget year, Finance Minister Carole James has added several billion dollars worth of hospital, school, housing and other projects to the capital plan.
James took the wraps off the expanded plan Tuesday, all the while insisting that the additions were affordable within the NDP budget and the province’s vaunted triple A credit rating.
“This is the largest capital plan that we’ve seen in B.C.’s history,” she told reporters in releasing the report on the first quarter of the 2019 financial year. “We know the difference that it’s making in communities that haven’t seen this kind of investment.”
The changes added 19 projects with a combined price tag of $2.66 billion to the plan.
Many were announced piecemeal earlier. This was the first time they were been gathered together in a single quarterly update on the budget.
While governments sometimes add projects and tweak others in quarterly announcements, the sheer scale of Tuesday’s changes was unusual.
It suggested the New Democrats were pushing to get as many projects out the door as they can, meaning this may not be the last of the mid-year top-ups to the capital plan.
Heading the list of approvals were three new hospital redevelopments for Terrace, Williams Lake and Burnaby with a combined price tag of $1.21 billion.
There were also $273 million worth of school projects for Coquitlam, Quesnel, Victoria and Langford.
The latter two communities are represented in the legislature, respectively, by James herself and by Premier John Horgan. But, in fairness, the Quesnel school and two of the three hospitals are in B.C. Liberal ridings.
The finance minister also confirmed approval for four new transportation ministry projects — three highways and one ferry improvement — at $497 million.
Then came three new affordable housing projects for Vancouver and Burnaby at $238 million and the replacement of the Nanaimo correctional centre, budgeted at $157 million.
B.C. Hydro has been green-lighted to add $283 million worth of upgrades and refurbishing to four separate facilities.
The revised capital plan also confirmed cost escalations in several projects already on the schedule.
When the New Democrats approved the second and third phase expansions at Royal Columbian Hospital in New Westminster two years ago, the cost was pegged at $1.1 billion. The two phases are now expected to come in at $1.236 billion when completed in 2026. The $136 million escalation is blamed on “increased construction costs due to market conditions.”
The update also included a footnote on the escalating cost of rebuilding the Trans Canada highway through Kicking Horse Canyon.
Transportation Minister Claire Trevena last week revised the budget upward from $450 million at the outset of the year to $601 million.
But according to the Finance Ministry, the higher number “excludes $11 million of past planning costs,” making the all-in figure $612 million.
Provincial taxpayers are on the hook for the entire amount, Ottawa having long ago capped its contribution on the cost-shared project at $215 million.
About a quarter of the overrun is accounted for by one of the NDP’s union-favouring community benefit agreements.
But many of these projects, including all the hospitals, are not being done under those agreements, for reasons the New Democrats have yet to explain in any detail.
The reported cost escalations in the report, combined with a few reductions, added $311 million in all to the capital plan.
With that, plus the 19 new projects, the New Democrats will have added about $3 billion to the capital plan since tabling the budget back in February.
Back then, James was touting the plan, then budgeted at $20.1 billion over three years, as the biggest in provincial history. But some of this week’s additions will be built and paid for over more than three years.
For her part, James argues that with the government forced to scale down its growth projections for this year and next, projects like these are more important than ever to the economy and job creation.
“We’re continuing our key investments because they will help us, in fact, weather the storms that we’re facing,” she told reporters by way of justifying the several billion dollars worth of additions to the plan. “So the investments that we are putting in are helping communities and helping with jobs in every corner of British Columbia.”
About half of the three-year capital plan will be financed internally, the rest through increased borrowing. But James insisted that the extra borrowing could be undertaken without damaging the province’s top-ranked credit rating.
“We continue to be on solid footing, with being the only province that has a AAA credit rating, one of the lowest unemployment rates in the country, a balanced budget and zero operating debt.”
She noted that the taxpayer-supported debt, measured as a percentage of gross domestic product, remains at a relatively low 15 per cent. Measured as a share of annual revenue, it is below 90 per cent.
Both measures are among the best in the country. Both are reasons for B.C. earning the highest credit ratings under both the previous B.C. Liberal and current NDP government.
But if the approaching storms turn into a full-blown recession, it could lead to a significant drop in GDP and revenues. If that were to happen, James and her colleagues might have to choose between reining in the borrowing, or living with a downgrade to the credit rating.