How to stop Calgary from becoming the next Detroit

[taco.vidal]

http://www.theglobeandmail.com/opini...ticle31208120/

MARK MILKE
Contributed to The Globe and Mail
Published Saturday, Jul. 30, 2016 8:00AM EDT

Ever since the price of oil began to collapse in late 2014, some have wondered if Calgary will become the next Detroit. The comparison will arise again with recent news that more layoffs are coming to Alberta: 350 positions at Nexen, 70 positions at AltaGas; and 300 at ConocoPhillips, with most of the latter at its Calgary head office.

The Detroit reference is to the decades-long decline of the Motor City where the population peaked in 1950 at almost 1.9 million people and then began to hollow out. As of 2012, Detroit had fewer than 700,000 people, about the same as in 1910.

Detroit’s decline is sometimes invoked as a cautionary tale for Calgary. Some climate change activists who see fossil fuels as destructive sneer that Canada’s energy capital is receiving some sort of karma-like payback.

[GGG]

Detroits problems were only marginally do to the auto collapse. It's really a taxation problem where white people need to the burbs that were outside the tax base. Detroit is a donut and really not a comparable to Calgary.

[polak]

Some climate change activists are hypocritical ######bags.

[Northendzone]

Seems to me that fossil fuels will still be in demand for quite some time yet, but, I am not sure how to diversify the economy though. Right now if o&g is strong, then the rest of the economy goes well due to all of the spin off.

Of course it is unlikely that notley and friends can steer us out of the current quagmire unless the opec guys decide they have lost enough money and jack up the price of oil overnight.

[Locke]

The Detroit comparison is in some ways quite apt, I've actually been making it myself for a while now.

Detroit's major issues were twofold:

1. People emigrating from Detroit to local suburbs, earning their money in Detroit but paying their taxes to their local municipality. (See: Airdrie, Okotoks, Chestermere, Langdon, DeWinton, etc.)

And I hate to say this because I harp on this ton, but here goes anyways:

2. Public sector compensation/pensions.

All you really need to know. Technically they're both symbiotic of the real problem which was that the City of Detroit needed public officials to operate a City of ~2 million where only of fraction of that were paying into the City's operating budget.

It doesnt matter if you live in the Burbs but still use Detroit roads, Detroit infrastructure, Detroit transit, etc.

And in terms of pensions, Detroit was paying the same in pensions as they were to active duty workers. That system was always going to fail and its no surprise that the first thing on the chopping block when they entered into insolvency was public sector pensions.

[GaiJin]

From 2013

http://www.theglobeandmail.com/opini...ticle15820368/

[Lanny_McDonald]

Originally Posted by Northendzone

Seems to me that fossil fuels will still be in demand for quite some time yet, but, I am not sure how to diversify the economy though. Right now if o&g is strong, then the rest of the economy goes well due to all of the spin off.

Of course it is unlikely that notley and friends can steer us out of the current quagmire unless the opec guys decide they have lost enough money and jack up the price of oil overnight.

You can diversify your economy by designing and building next generation devices that use the product you have, where demand is drying up. Alberta should be leading the world in developing products that use fossil fuels more efficiently, and developing demand for the fossil fuels through the manufacture and sales of these products.

For example, Alberta should be designing and building fuel cells for clean electrical power and heat generation. They should be focusing on residential units fed with natural gas that generate electricity for power, and heat for water and HVAC use. These could be used on or off grid and make homes completely self-sufficient for power generation. This would drive sales toward this tech and then create a larger market for natural gas.

[edslunch]

Originally Posted by Locke

The Detroit comparison is in some ways quite apt, I've actually been making it myself for a while now.

Detroit's major issues were twofold:

1. People emigrating from Detroit to local suburbs, earning their money in Detroit but paying their taxes to their local municipality. (See: Airdrie, Okotoks, Chestermere, Langdon, DeWinton, etc.)

And I hate to say this because I harp on this ton, but here goes anyways:

2. Public sector compensation/pensions.

All you really need to know. Technically they're both symbiotic of the real problem which was that the City of Detroit needed public officials to operate a City of ~2 million where only of fraction of that were paying into the City's operating budget.

It doesnt matter if you live in the Burbs but still use Detroit roads, Detroit infrastructure, Detroit transit, etc.

And in terms of pensions, Detroit was paying the same in pensions as they were to active duty workers. That system was always going to fail and its no surprise that the first thing on the chopping block when they entered into insolvency was public sector pensions.

#1 is a very minor effect if at all. I don't see this as comparable at all.

Edit: and your painting #2 as a pension/compensation problem when it's primarily a taxation problem.

[Finger Cookin]

Since Detroit took 60+ years to get to its current state, I'm not worried. I'll be long gone before Detroit 2 supplants Calgary.

[Northendzone]

Isn't the new carbon tax supposed to go towards funding alternative fuel development?

[Locke]

Originally Posted by edslunch

#1 is a very minor effect if at all. I don't see this as comparable at all.

Edit: and your painting #2 as a pension/compensation problem when it's primarily a taxation problem.

Well...I actually indicated that the two problems are interconnected.

Sure, you could simplify it as a 'taxation' problem, but then you have to admit that item #1 is....whats that now? A taxation problem?

People who earn their living in Calgary, use Calgary infrastructure, transit, roads etc, but pay their taxes to some other jurisdiction?

Yup. I'd call that a taxation problem.

Oh? You mean we dont pay enough? Thats a flawed argument that I'm getting tired of.

[CliffFletcher]

Originally Posted by Locke

People who earn their living in Calgary, use Calgary infrastructure, transit, roads etc, but pay their taxes to some other jurisdiction?

Yup. I'd call that a taxation problem.

It is. But it's not anywhere close to the scale of Detroit and other American cities that are broken up into a dozen counties. If the municipality of Calgary encompassed the borders of the city circa 1970, and everything built since then was in other jurisdictions, then yeah, we would be hooped. But people from the bedroom communities around Calgary make up only a small fraction of the users of Calgary infrastructure and facilities. It's something to keep an eye on, but not a serious problem at this point.

[accord1999]

Originally Posted by New Era

You can diversify your economy by designing and building next generation devices that use the product you have, where demand is drying up. Alberta should be leading the world in developing products that use fossil fuels more efficiently, and developing demand for the fossil fuels through the manufacture and sales of these products.

Alberta has a population of barely 4 million people, basically a medium sized American city or a small city in China. If the oil & gas industry is on, there's barely enough skilled labor, professionals and research for that. Alberta's simply too small to be diversified enough to survive relatively unscathed when an industry as relatively large as O&G in Alberta suffers.

Alberta can do a lot of good things, but it's not going to compete with the world's greatest manufacturing nations and greatest engineering companies in leading the way to more efficient transport technologies and other usage of fossil fuels who have been focused on those challenges for decades.

[Huntingwhale]

[Lanny_McDonald]

Originally Posted by accord1999

Alberta has a population of barely 4 million people, basically a medium sized American city or a small city in China. If the oil & gas industry is on, there's barely enough skilled labor, professionals and research for that. Alberta's simply too small to be diversified enough to survive relatively unscathed when an industry as relatively large as O&G in Alberta suffers.

Alberta can do a lot of good things, but it's not going to compete with the world's greatest manufacturing nations and greatest engineering companies in leading the way to more efficient transport technologies and other usage of fossil fuels who have been focused on those challenges for decades.

And this is exactly why Alberta will be a failed economy in the near future. If you can't adapt, the world will pass you by. If you have a flagging product, you need to find ways to build a market to continue to use that product. Continue with the excuses of why Alberta can't do something, but that has been the core of the problem with the Alberta economy for a couple decades. No one has been willing to step up and kickstart a new segment to the economy. What is interesting is that transformative technology is not usually driven by big corporations, but by small groups of high minded individuals. I think there are plenty of those in Alberta, and plenty of money to make it happen. The only thing holding it back is the can't do mentality.

[FlamesAddiction]

The price of oil will rebound and the oil sands will become profitable again. It's only a matter of time.

But it is a non-renewable resource, not to mention one that people are trying to move away from for environmental and political reasons. If the economy can't be diversified, eventually all good things come to an end.

As I mentioned in the other thread, the Alberta government should have been collecting more taxes during the boom times and spending more on developing other industries and subsidizing entrepreneurs more. What you are seeing now is the result of decades of conservative government policy in action.

In the short term, I would love to see more political will from Canada to boycott scummy countries like Saudi Arabia to get the price back up.

[GGG]

The other thing is that the current jobs in the city can support the current oil production indefinitely. Canada is one of the lower cost places to maintain supply. The initial Processing facilities represent about 50% of the capital cost of producing the oil. So adding additional wells is far cheaper and sustainable in a $40 oil environment then new construction.

Now the rate the world turns away from fossil fuels will be much slower than the rate of resovoir decline so those who can maintain production at a lower cost will do better in a declining oil demand environment.

The world has hit peak $40 oil. So Alberta has some of the lower cost oil to maintain production so in a world with flat or declining demand Alberta is well positioned not to die. Companies with debt will go bankrupt but the producing assets will still produce and maintain production.

[Locke]

Originally Posted by CliffFletcher

It is. But it's not anywhere close to the scale of Detroit and other American cities that are broken up into a dozen counties. If the municipality of Calgary encompassed the borders of the city circa 1970, and everything built since then was in other jurisdictions, then yeah, we would be hooped. But people from the bedroom communities around Calgary make up only a small fraction of the users of Calgary infrastructure and facilities. It's something to keep an eye on, but not a serious problem at this point.

Its not a serious problem yet, which is exactly my point.

The part where it becomes a serious problem is when the major industry takes a hit and large chunks of that central population leaves which is something that we may see if theres no serious turnaround for the next 4 years.

People here in Calgary are still expecting that rebound and so we're seeing a slowing in population growth but nobody is leaving yet. 'Yet' being the operative term.

If it does happen and it tends to happen quickly, note the other thread about the recession dragging people down, Property Taxes will not be getting paid but the costs of operating the city arent decreasing along with it.

[Shazam]

Not going to happen.

Calgary is weird in that the "inner city" is basically devoid of middle class residents. You're a renter or you're a baller. Ballers are highly resistant to downturns.

Calgary's inner city is also just basically low-density single family housing which means high intrinsic demand and low supply.

[FlamesAddiction]

The issue with Calgary is that it is the poster boy for the 21st century global economy, which assumes a transient and mobile work force. A lot of people moved to Calgary with the intention of making money and moving on if necessary. A good chunk of newer Calgarians will jump ship and move on to the next frontier, and then another portion will stay but become part of a larger underclass.

Winnipeg might be a better comparison if things continue to go south. A lot of people don't realize that Winnipeg was once the 4th largest city in Canada and had a booming economy. Now it survives, but it doesn't really prosper.