Sales tax in Alberta?

[GP_Matt]

Borrowing is such an easy trap for the government. Once that line is crossed I fear we will end up like Ontario.

[Slava]

Originally Posted by GP_Matt

Borrowing is such an easy trap for the government. Once that line is crossed I fear we will end up like Ontario.

Its just sensible though. Not many people would consider saving up the cash t buy a house; you take a mortgage out and pay it through the lifespan of the house. I have no idea why something like a highway or hospital would be considered any differently, especially when the current interest rates are incredibly low.

[GP_Matt]

Originally Posted by Slava

Its just sensible though. Not many people would consider saving up the cash t buy a house; you take a mortgage out and pay it through the lifespan of the house. I have no idea why something like a highway or hospital would be considered any differently, especially when the current interest rates are incredibly low.

Except that I don't buy a new house every year. The same way, the province doesn't build 25 years worth of infrastructure in the first year and do nothing for the next 25.
They build something every year so if they borrow this year, next year they have to pay down the original amount and borrow more for that years project. It is an endless cycle that we finally broke out of.

[bizaro86]

Originally Posted by Slava

Its just sensible though. Not many people would consider saving up the cash t buy a house; you take a mortgage out and pay it through the lifespan of the house. I have no idea why something like a highway or hospital would be considered any differently, especially when the current interest rates are incredibly low.

For your family, you only need one house.

The province of Alberta has a huge amount of infrastructure. If it has an average 50 year life, you should be replacing 2% of it every year. So you renovate one hospital per year, as opposed to borrowing money to renovate them all this year.

If we have to borrow money to pay for this year's one hospital renovation, then we're pushing this year's obligation into the future.

The analogy of a mortgage to buy a house is extremely poor, imo.

[Slava]

Originally Posted by GP_Matt

Except that I don't buy a new house every year. The same way, the province doesn't build 25 years worth of infrastructure in the first year and do nothing for the next 25.
They build something every year so if they borrow this year, next year they have to pay down the original amount and borrow more for that years project. It is an endless cycle that we finally broke out of.

Originally Posted by bizaro86

For your family, you only need one house.

The province of Alberta has a huge amount of infrastructure. If it has an average 50 year life, you should be replacing 2% of it every year. So you renovate one hospital per year, as opposed to borrowing money to renovate them all this year.

If we have to borrow money to pay for this year's one hospital renovation, then we're pushing this year's obligation into the future.

The analogy of a mortgage to buy a house is extremely poor, imo.

Sure but how many hospitals have we built in the last decade in Alberta? Not one a year? We certainly don't build brand new highways once a year and a project like the twinning of highway 63 is a one-time event.

We end up having to do enormous infrastructure spends in part because of the binge and purge nature of our budgeting though. The most glaring example is the situation with the new South Calgary Health Campus; Klein blew up the General Hospital and literally within weeks beagn speaking about the need for another hospital.

[ken0042]

Originally Posted by Slava

Sure but how many hospitals have we built in the last decade in Alberta? Not one a year? We certainly don't build brand new highways once a year and a project like the twinning of highway 63 is a one-time event.

Then why are we running a deficit even when you factor those mega projects out? The obvious answer- we are spending more than we are bringing in. That's the problem I see; we need to get our spending under control. It would be one thing if we were borrowing a billion or two here or there for a major project that has long term benefits. However we are talking about the day to day expenses of running the province are costing more than we make.

[bizaro86]

Originally Posted by Slava

Sure but how many hospitals have we built in the last decade in Alberta? Not one a year? We certainly don't build brand new highways once a year and a project like the twinning of highway 63 is a one-time event.

We end up having to do enormous infrastructure spends in part because of the binge and purge nature of our budgeting though. The most glaring example is the situation with the new South Calgary Health Campus; Klein blew up the General Hospital and literally within weeks beagn speaking about the need for another hospital.

Infrastructure spending isn't a one-time deal. We'll never be "done" building/renovating.

Also, the south hospital was necessary for reasons of location whether or not the General was kept. Otherwise the further south hospital in the city was rockyview. How many people live south of that, ~400,000?

[Slava]

Originally Posted by ken0042

Then why are we running a deficit even when you factor those mega projects out? The obvious answer- we are spending more than we are bringing in. That's the problem I see; we need to get our spending under control. It would be one thing if we were borrowing a billion or two here or there for a major project that has long term benefits. However we are talking about the day to day expenses of running the province are costing more than we make.

That's an entirely separate issue though; we're talking about the budget for capital expenditures here, and you're talking about the operating budget. I'm not advocating borrowing for operations.

Originally Posted by bizaro86

Infrastructure spending isn't a one-time deal. We'll never be "done" building/renovating.

Also, the south hospital was necessary for reasons of location whether or not the General was kept. Otherwise the further south hospital in the city was rockyview. How many people live south of that, ~400,000?

Well its true that we have ongoing needs, look at this new hospital. The major expense is the initial build and furnishing. Of course down the line we have to maintain and renovate this and there are operational expenses. I'm not for a second saying that we shouldn't consider those expenses (and we all do that for our homes as well). All I'm saying is that to fund the initial $1.5B (or however much it cost to build and get the hospital running) that we are better off borrowing that money.

I feel the same way about highway 63 being twinned, although my hope is that they would get a private company in there to toll it and maintain it.

[bizaro86]

Originally Posted by Slava

That's an entirely separate issue though; we're talking about the budget for capital expenditures here, and you're talking about the operating budget. I'm not advocating borrowing for operations.

Well its true that we have ongoing needs, look at this new hospital. The major expense is the initial build and furnishing. Of course down the line we have to maintain and renovate this and there are operational expenses. I'm not for a second saying that we shouldn't consider those expenses (and we all do that for our homes as well). All I'm saying is that to fund the initial $1.5B (or however much it cost to build and get the hospital running) that we are better off borrowing that money.

I feel the same way about highway 63 being twinned, although my hope is that they would get a private company in there to toll it and maintain it.

One year we build a billion dollar hospital in Calgary, then twin an expensive highway in the North, then next year it'll be LRT expansions, then ring road funding, then a new hospital in Ft Mac, then...

The province's capital budget is different than one families, because they have more than one major need. There will be a continuous stream of required major projects. If we borrow to pay for this years hospital, then next year we have to pay interest on the debt plus pay for next year's highway 63 twinning.

Of course, we could borrow to pay for that, but then the next year when we need LRT expansions we'll be trying to pay for the interest on two tranches of debt, plus an LRT expansion. Of course, we COULD just borrow for that also.

Once you start, it's very difficult to stop the cycle, which is why debt payoff has happened very rarely in other jurisdictions.

[GP_Matt]

Originally Posted by Slava

Sure but how many hospitals have we built in the last decade in Alberta? Not one a year? We certainly don't build brand new highways once a year and a project like the twinning of highway 63 is a one-time event.

We end up having to do enormous infrastructure spends in part because of the binge and purge nature of our budgeting though. The most glaring example is the situation with the new South Calgary Health Campus; Klein blew up the General Hospital and literally within weeks beagn speaking about the need for another hospital.

By my count, there are about 90 hospitals in Alberta. Some are bigger than others, but we are building and renovating some every year. As far as I know, the oldest hospital in Alberta is Beaverlodge which is 57 years old. That means that roughly 1.5 new hospitals are built every year. A focused plan should be in place to spread them out and stay on top of it.

[crazy_eoj]

Just as an FYI: Alberta has averaged about 75% more capital spending per capita than the rest of the Canadian Provinces over since 2008, and hasn't been below the average of all Canadian provinces since 1993.

Smart spending? You decide.

[seattleflamer]

Originally Posted by crazy_eoj

Just as an FYI: Alberta has averaged about 75% more capital spending per capita than the rest of the Canadian Provinces over since 2008, and hasn't been below the average of all Canadian provinces since 1993.

Smart spending? You decide.

Wouldn't Alberta's first or second place ranking in population growth among provinces since 2008 have something to do with that?

http://www.statcan.gc.ca/pub/91-209-...desc02-eng.htm

[Mean Mr. Mustard]

Originally Posted by bizaro86

One year we build a billion dollar hospital in Calgary, then twin an expensive highway in the North, then next year it'll be LRT expansions, then ring road funding, then a new hospital in Ft Mac, then...

The province's capital budget is different than one families, because they have more than one major need. There will be a continuous stream of required major projects. If we borrow to pay for this years hospital, then next year we have to pay interest on the debt plus pay for next year's highway 63 twinning.

Of course, we could borrow to pay for that, but then the next year when we need LRT expansions we'll be trying to pay for the interest on two tranches of debt, plus an LRT expansion. Of course, we COULD just borrow for that also.

Once you start, it's very difficult to stop the cycle, which is why debt payoff has happened very rarely in other jurisdictions.

So what is the option that you propose - not put any money into capital projects because there is a fear about going into debt? Decrease wages amongst the public sector, ignoring the high cost of living in Alberta which is secondary to the oil boom? Take money out of the Heritage savings fund?

All of the projects you listed are required projects, hospitals, roads and public transit... people complain about wait times but don't want to fund a hospital, say seniors should be bathed more often but want to cut staffing/wages, promote the oilsands and don't want to build the road, better public transit... with a low pricetag of course.

In my opinion going into debt while the interest rates are low makes the most sense, that in combination with increasing tax rates and introducing a PST/HST system. Alberta was able to pay off the debt because of resources money which we have been living off of for the past 15 years enjoying a low tax rate.

[chemgear]

Originally Posted by seattleflamer

Wouldn't Alberta's first or second place ranking in population growth among provinces since 2008 have something to do with that?

http://www.statcan.gc.ca/pub/91-209-...desc02-eng.htm

But his comment/stat is on a per capita basis?

[Rathji]

Originally Posted by chemgear

But his comment/stat is on a per capita basis?

If a million people move here in a short time, would more or less capital projects be needed in that time, than say a place that was a stable or negative population growth?

[chemgear]

Originally Posted by Rathji

If a million people move here in a short time, would more or less capital projects be needed in that time, than say a place that was a stable or negative population growth?

That's fair to consider.

[ken0042]

Originally Posted by Mean Mr. Mustard

So what is the option that you propose - not put any money into capital projects because there is a fear about going into debt? Decrease wages amongst the public sector, ignoring the high cost of living in Alberta which is secondary to the oil boom? Take money out of the Heritage savings fund?

I think what a number of us are proposing is that we find ways to balance the books without adding a PST. I would rather see wasteful spending reduced, and if it came to it an increase in income tax and luxury taxes. (Booze, etc.)

Or come up with other ways of funding projects. We have seen that continuous borrowing doesn't work- see the mess the USA is in right now. What I mean by other funding methods; look at schools being built as a P3. My understanding is that the builder pays for a good chunk of the cost in return for having a long term contract on maintenance and other annual costs. So the public cost is kept down, and a private company has a long term sustainable business.

Having no PST is a huge advantage for Alberta; let's keep it that way.

[Slava]

I'm totally against P3's. Its really just a different way of borrowing money.

[yads]

Originally Posted by Mean Mr. Mustard

So what is the option that you propose - not put any money into capital projects because there is a fear about going into debt? Decrease wages amongst the public sector, ignoring the high cost of living in Alberta which is secondary to the oil boom? Take money out of the Heritage savings fund?

All of the projects you listed are required projects, hospitals, roads and public transit... people complain about wait times but don't want to fund a hospital, say seniors should be bathed more often but want to cut staffing/wages, promote the oilsands and don't want to build the road, better public transit... with a low pricetag of course.

In my opinion going into debt while the interest rates are low makes the most sense, that in combination with increasing tax rates and introducing a PST/HST system. Alberta was able to pay off the debt because of resources money which we have been living off of for the past 15 years enjoying a low tax rate.

What I think those of us who are against raising taxes are proposing, is to first cut operational spending, then and only then should tax increases be looked at. We shouldn't be looking at a deficit and automatically assuming that revenue is the problem. When times are tough this should be the order of things:

1. cut expenses
2. raise revenues
3. raise debt

The order shouldn't be

1. raise debt
2. raise revenues
3. cut expenses

[crazy_eoj]

Originally Posted by Rathji

If a million people move here in a short time, would more or less capital projects be needed in that time, than say a place that was a stable or negative population growth?

There is a reasonable argument that you should be able to find many more efficiencies in capital spending with larger populations.

As the populations grow they generally focus on urban areas, meaning less infrastructure is required per person and less focus on spreading capital to small outlying populations.

Hasn't been the case in Alberta.