Alberta finance minister totes up flood costs in update

EDMONTON – Alberta’s finance minister says the bills are coming in for flood recovery in southern Alberta and the price tag is “very high.”

Doug Horner says $148 million has been spent so far on flood relief and another $556 million has been allocated for the coming months.

Horner, who was giving the province’s first-quarter budget update Thursday, confirmed Premier Alison Redford’s earlier estimate that the final bill to be shared by insurers and three levels of government will be around $5 billion.

“This was an unprecedented disaster and it comes with a very high price tag,” Horner told a news conference.

“The June floods precipitated the immediate evacuation of about 100,000 people from their homes (and) more than 14,500 homes have been damaged.”

About $1.7 billion of the $5-billion cost is expected to be covered by insurance companies, he said. The rest will be up to governments, but it hasn’t been determined who owes what.

Raging waters June 20-21 after a torrential downpour swamped downtown Calgary and its low-lying neighbourhoods and inundated many surrounding communities. The town of High River was devastated. Redford immediately promised $1 billion in relief.

Horner said Alberta’s GDP, ironically, has gone up slightly as a result of increased business to repair damaged homes, businesses and roads. It’s expected to rise 0.2 per cent this year and 0.4 the next.

But “that doesn’t mean the flood was good for our economy,” said Horner, who noted that reconstruction is likely to strain a tight labour pool and push up the cost for building materials.

As for the first-quarter update, higher oil revenues have put the province on sounder economic footing since the budget was introduced in March, he said.

The budget predicted a $451-million deficit on day-to-day spending. Horner said the province may now end up even for the year — or possibly in a surplus.

The price of the benchmark West Texas Intermediate oil is hovering around US$110 a barrel. That’s $7.50 a barrel higher than the provincial budget estimate.

Each $1 uptick over a budget year is equivalent to $142 million.

Higher oil prices and investment income saw revenues in the first three months of the 2013-14 fiscal year hit $9.9 billion, about $211 million higher than expected. Operational spending was $9.2 billion, about $113 million less than expected, due mainly to the timing of health grants.

“We’re moving in the right direction, but it’s early,” said Horner.

Premier Alison Redford warned that higher energy revenue doesn’t mean the government will reverse funding cuts laid out in this year’s budget.

“We have a plan to live within our means, to continue to do what we said we would, which is to be accountable for every taxpayer dollar, to ensure that we’re putting our results-based budgeting in place and that we’re continuing to find in-year savings.

“What we no longer want to happen is to have a situation where every three months, we cross our fingers, see what the price of oil is and then make a decision.”

Critics accused Horner of practising voodoo economics. They pointed out that the province is borrowing billions of dollars to pay for infrastructure but doesn’t include that figure in its bottom line.

“Doug Horner is a budget contortionist and a Twister champion if he thinks that our budget is balanced in the province right now — and it’s not balanced despite record revenues,” said Opposition Wildrose critic Rob Anderson. He estimated the true consolidated deficit figure at about $4 billion or $5 billion.

Derek Fildebrandt of the Canadian Taxpayers Federation said given that 88 per cent of the capital budget is from borrowing, that deficit, plus flood-aid costs, will leave the government $7.4 billion in the hole this year.

“It certainly is some sort of fantasyland when the minister claims that we are potentially on track to run a surplus this year,” said Fildebrandt.

Horner said the province’s contingency fund still has $3 billion in it after the first three months of the fiscal year.

Liberal Leader Raj Sherman said Horner’s update was the first true account of what the government’s failure to prepare for a flood has cost. He noted that the province didn’t follow through on recommendations following flooding in 2005 and, in 2012, didn’t apply for money from the federal government for flood mitigation.

“(As a result) we are heading into possibly another $5 billion in (flood) costs, not to mention the negative effects on the economy and the disruption of the lives of Albertans,” said Sherman.

NDP Leader Brian Mason said he wants to see rigorous scrutiny in the months to come of who gets flood aid and who doesn’t.

He suggested the rules need to be clear for those living in riverside luxury homes, for example, versus those living in condos outside flood-prone zones.

“There’s potential for an awful lot of money to go out the door to people who do not need it,” said Mason.

“When the premier promised at the outset to pay every dime of every cost for everybody in the province, I thought it was pretty thoughtless of her.”

— With files from CHED

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