November 13, 2006

PROJECT UPDATE

Alberta projects may be scaled back or postponed

CALGARY

Finance Minister Shirley McClellan who stunned municipal leaders with her recent announcement that one in three provincial projects could be put on hold because of rising construction costs has backtracked.

Sort of.

The province is facing a $3 billion increase in construction costs, McClellan told an Alberta Urban Municipalities Association conference early last month. But reports that provincial projects could be put on hold were taken out of context, McClellan said following a cabinet meeting at the end of October.

“You know we’re not cancelling a school here and a school there or anything like that. We’re not adding a lot more at this time because of the cost escalations, there’s no question,” said McClellan. “Money that we have available is utilized in covering the cost of the present projects. It remains a concern to us but we are able to meet our obligations on all of our projects.”

Calgary Mayor Dave Bronconnier took that to mean that projects under way will continue. Her clarification, he says, is “a positive indication that there won’t be any cancellations (but) what troubles me even more is that there’ll be no new projects. Stopping and starting midstream—one week it’s a go, the next week it may not be—is not where Calgary needs to go”.

While McClellan now denies the Alberta government is contemplating canceling projects because of rising construction costs she is not the only member of the provincial government to talk about hitting the brakes.

Infrastructure Minister Ty Lund in August asked Calgary’s post secondary institutions to scale back construction plans on nearly $2 billion worth of capital projects. “We may have to stretch some projects out a bit,” Lund said, pointing out it would be preferable to delay the start, to modify or to phase in some “big ticket” projects rather than break ground on a building and run out of funds due to soaring construction costs.

Lund offered assurances that projects that have already received government approval will go ahead. “I am not anxious to cut off little pieces here and there or cut down the size of labs or reduce classrooms,” he said. “If projects are on the books they are still going ahead but we’re asking them to work with us to find ways to reduce costs.”

Premier Ralph Klein also asked municipalities to postpone building projects.

He suggested last month that because of soaring labour and material costs the province could delay projects it has a financial hand in and that cities should consider the same move given an escalation in construction costs that he pegged at 30 to 40 per cent.

“I know there is a screaming demand for more infrastructure but, folks, the price is beyond belief. The best time to build is during a recession or depression.

Suzanne Zwarun

Correspondent

That’s when you get the best possible prices.”

Alberta, being in anything but depression mode, saw concrete prices jump 37 per cent between December 2005 and February 2006. By March 2006 concrete prices had jumped another 27 per cent. An industry-wide shortage of asphalt over the summer also stalled projects.

Provincial entreaties to go slow are falling on deaf municipal ears. “Calgarians want to know: are we going to stop those projects? The answer is no,” was Mayor Dave Bronconnier’s reply to the premier.

By the mayor’s calculation, construction costs are increasing by one per cent a month. Putting a two-year hold on a project would mean a 24 per cent increase in its cost. “We did go slower in the ‘90s and now we’re paying a price for it. We’ve tried that route of not building and it’s not served the city well.”

Still, one renegade alderman has some sympathy for the province’s go-slow position.

Ald. Diane Colley-Urquhart, chair of the land use, planning and transportation committee, says Calgary needs to re-evaluate the number of major projects it is tackling.

“What we’re seeing is that we have the highest construction costs that we’ve ever seen, a backlog of infrastructure. I’m not convinced that we need to be doing all these projects right now. We can’t continue to borrow and increase taxes to keep up. No matter how many bridges we build, how many interchanges we put in, how many roads we build, it never really seems to make it better.”

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