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2004-07
capital plan
Quality
infrastructure is an essential part of the government’s twenty-year
strategic plan to achieve Alberta’s vision of a vibrant and prosperous
province. Over the last decade, rapid economic and population growth has
strained the province’s infrastructure network.
Last
year, as part of its new fiscal framework, the government implemented
a more systematic approach to addressing Alberta’s infrastructure
needs with the creation of the Capital Account and the use of alternative
financing. For the first time, a three-year Capital Plan was published,
setting out the government’s commitment to capital projects.
This
year, the new 2004-07 Capital Plan commits to support $6.5 billion in
capital projects over the next three years, consisting of:
- over
$3.5 billion in support for the infrastructure of school boards, post-secondary
institutions, health authorities, municipalities and other local authorities
and organizations, and
- nearly
$3 billion in investment in provincial government-owned infrastructure.
This
plan shows that the government is serious about addressing Alberta’s
infrastructure needs. Our level of support is unmatched in the rest of
the Canada.
capital
priorities
The 2004-07 Capital Plan commits nearly $6.5 billion
to provincial and local infrastructure over the next three years. This
is $900 million more than was committed in the 2003-06 Capital Plan. The
increased support means that new capital projects will start and other
projects will proceed at a quicker pace than was planned last year.
Local
Authorities Projects
The Capital Plan will support over $3.5 billion of local
authorities’ capital projects and equipment purchases. Support has
been focused in three main areas – health, education and municipal
transportation – with each area receiving around $1 billion over
the next three years. In addition, over $500 million in capital projects
will be supported in such areas as water and wastewater management, community
facilities, centennial projects and housing programs. This support will
help local authorities continue to deliver quality services to Albertans
in their communities.
Provincial
Government-owned Capital
The prime area of investment in government-owned capital
will be the provincial highway network, with over $1.7 billion being invested
over the next three years. About $1.2 billion will address pressing needs
for new or upgraded government-owned facilities, parks and information
technology systems.
funding
Sources of the 2004-07 Capital Plan
The fiscal
framework introduced in Budget 2003 allows the government to address Alberta’s
infrastructure needs more systematically. Previously, the amount allocated
in a particular year for capital depended primarily on the resource revenue
outlook for that year. The base budget for capital was about $1.1 billion
per year. In good years, significantly more money could be spent. In other
years, the capital budget would have to be held closer to the base amount.
This uncertainty made capital planning difficult for both the provincial
government and its local partners.
The government
now has flexibility to enter into more predictable, longer-term capital
commitments through the use of the Capital Account and alternative financing.
This new approach has also allowed capital spending over the next three
years to be nearly doubled from what was previously included in the annual
base budget. The 2004-07 Capital Plan averages nearly $2.2 billion a year.
The 2004-07
Capital Plan is funded from three sources:
- Current-year revenues
– close to $3.4 billion, or slightly over half of the three-year
Capital Plan, will be funded from current-year revenues. This used to
be the only source of funding for capital.
- Capital Account
– $1.9 billion, or about 30%, will be funded from the Capital
Account.
- Alternative financing
– over $1.2 billion in capital projects will be funded through
alternative financing, including public-private partnerships (P3s).
Capital Account
The Capital
Account helps increase the predictability of capital spending by allowing
money to be carried forward from one year to pay for capital projects
in future years. The Capital Account was established in 2002-03, with
a deposit of $910 million.
Additional
funds can be transferred to the Capital Account when the balance of the
Sustainability Fund exceeds $2.5 billion. It is expected that $893 million
will be allocated to the Capital Account from the Sustainability Fund
in 2003-04. Further planned allocations of $706 million over the next
two years will bring total funding of the Capital Account to $2.5 billion.
This
$2.5 billion is being used to fund capital projects of both local authorities
and the provincial government. The Capital Account funded $623 million
in capital projects in 2003-04, and will fund a further $1.9 billion in
capital projects over the next three years.
Alternative
Financing
It is
anticipated that $1.2 billion of alternative financing will be used for
approved capital projects over the next three years. Last year, the government
accepted the recommendation of the Financial Management Commission to
use alternative financing for some capital projects. This could include
both public-private partnerships and capital borrowing.
Two public-private
partnership projects are expected to begin construction in 2004-05, the
Calgary Courts Centre and Edmonton Southeast Ring Road. In both cases,
a private consortium will design, finance, construct, operate and maintain
the asset for a period of 30 years. The government will make payments
over 30 years, instead of paying for the projects as they are built. The
net present value of the alternative financing for the two projects is
forecast at $703 million over the next three years.
The Capital
Plan also assumes that alternative financing of $525 million will be used
for approved capital projects of local authorities, starting in 2005-06.
The specific projects and methods of alternative financing have not yet
been determined. The government will pay the financing costs for these
alternatively financed projects.
All alternative
financing proposals, including those for local authorities’ projects
funded by the province, must be assessed on their merits using a thorough
business-case analysis. The Advisory Committee on Alternative Capital
Financing, a committee of private-sector experts, is assisting the government
with these assessments to determine if value for taxpayers’ money
is being achieved.
Public-Private
Partnerships (P3s)
Public-private
partnerships allow the government to access private-sector expertise and
innovation in constructing capital projects and provide the opportunity
to reduce ongoing operating and maintenance costs. P3s will only be pursued
where value for money can be achieved compared to traditional means of
construction, financing and operating. An important factor is the degree
to which risks associated with the design, financing, construction and
operation of facilities are transferred to the private sector.
Alberta
will account fully for all of its P3 projects. If the project is a capital
lease, as is expected to be the case with the Calgary Courts Centre and
the Edmonton Southeast Ring Road, the government will report a capital
asset equal to the net present value of future capital lease payments
on its balance sheet, together with an offsetting liability, in recognition
of its obligations under the agreement with the private-sector partner.
Calgary Courts
Centre
In October
2003, BPC Realty Holdings was selected as the Province’s preferred
partner to develop a consolidated court facility in downtown Calgary.
Negotiations are in the final stages. Occupancy is expected in early 2007.
Currently, the Court of Appeal, the Court of Queen’s Bench and the
four divisions of the Provincial Court in Calgary are located in six different
facilities, and there are increasing challenges to provide sufficient
space for courtroom services in these facilities. The Calgary Courts Centre
project will make the justice system much more accessible and efficient
for Calgarians and those living in surrounding areas by bringing all three
levels of the courts together in one place and providing for future expansion.
Edmonton
Southeast Ring Road
The southeast
portion of the Edmonton ring road is planned to be Alberta’s first
highway constructed through a public-private partnership. Alberta Transportation
has identified three qualified partners to submit proposals to construct
and operate the road.
Construction is expected to begin in the fall of 2004, with completion
by the fall of 2007 if there are no significant delays due to weather.
The road will be built to freeway standards immediately, so there should
be no add-on construction costs over the 30-year life of the agreement.
If the process for this P3 highway project works well, the same model
could be used for further sections of the ring roads in both Edmonton
and Calgary.
capital
PLAn
details
Provincial
Highway Network
The largest
component of the Capital Plan is the investment of $1.7 billion in the
provincial highway network. Capital projects will include new highways,
highway resurfacing and widening, interchange and intersection construction
and improvements, and bridge work. Major projects over the next three
years include:
- twinning the North-South
Trade Corridor,
- continued work
of the North-South Trade Corridor on interchanges at 130th Avenue South
and Douglasdale Drive on the Deerfoot Trail in Calgary,
- the Calgary and
Edmonton ring roads, including commencing work on the southeast section
of the Edmonton ring road and the northwest section of the Calgary ring
road,
- 20 interchanges,
including Highway 2 at Innisfail, the Trans Canada Highway in Medicine
Hat and at Cassils Road in Brooks, and Highway 16 at Campsite Road,
- 34 bridge replacements
and 12 new bridges, and
- work on almost
2,800 kilometers of highways across Alberta.
Municipal
Transportation Grants
The Capital
Plan includes $934 million over the next three years for annual municipal
transportation grants based on:
- 5 cents per litre
of fuel delivered in Edmonton and Calgary,
- $60 per capita
for all other urban municipalities, and
- formula-based
grants for rural municipalities.
Health
Facilities and Equipment
The Capital
Plan will support nearly $1.1 billion of health facilities and equipment.
$913 million of health facilities are planned, consisting of $163 million
for new projects and $750 million for ongoing projects, including:
- the new Alberta
Children’s Hospital in Calgary,
- the Alberta Heart
Institute in Edmonton,
- expansion and
upgrading of the Royal Alexandra Hospital in Edmonton,
- completion of
the Red Deer Regional Hospital redevelopment, and
- upgrading or replacing
long-term care facilities in Westlock and other rural areas.
$180
million is being provided for diagnostic and medical equipment, We//net
and other health-related information systems. The diagnostic and medical
equipment is funded by transfers from the federal government.
Schools
The Capital
Plan will support $636 million of school capital projects, consisting
of $236 million for the construction of new and replacement schools, and
$400 million for expansion and upgrading of existing schools.
Over
the next three years, $473 million will be provided to complete projects
currently in progress and $163 million will be available for new projects.
Post-Secondary
Facilities
The Capital
Plan will support $416 million of post-secondary projects, consisting
of:
- $166 million of
new post-secondary facilities, including continued construction of the
Health Research Innovation Centres at the Universities of Alberta and
Calgary, and the National Institute for Nanotechnology in Edmonton,
and
- $250 million for
expansion, upgrading and major maintenance of existing facilities.
Over
the next three years, $312 million will be provided to complete projects
currently in progress and $104 million will be available for new projects.
Water
and Wastewater Management
The Capital
Plan includes $267 million for water and wastewater management, consisting
of:
- $96 million in
grants to municipalities for water and wastewater treatment,
- $90 million for
government-owned dams, canals and erosion-control infrastructure,
- $72 million in
irrigation rehabilitation grants, and
- $9 million for
upgrades to government water monitoring systems.
Community
Facilities and Centennial Projects
The Capital
Plan will provide $232 million for community facilities and centennial
projects over the next three years, consisting of:
- $116 million for
the Community Facility Enhancement Program,
- $73 million for
government centennial projects, including planning of the Provincial
Museum redevelopment and upgrading the Calgary and Edmonton Jubilee
Auditoria, and
- $43 million for
centennial legacy and partnership grants, and heritage infrastructure
grants.
Other
Infrastructure Programs
The Capital
Plan includes $282 million for other infrastructure programs managed by
various ministries, consisting of:
- $76 million for
the Canada/Alberta Affordable Housing Agreement,
- $68 million for
Alberta’s share of the Infrastructure Canada/Alberta Program,
which is cost-shared on an equal basis among the federal, provincial
and municipal governments,
- $41 million to
complete the Alberta SuperNet,
- $26 million for
upgrading provincial parks including water and wastewater improvements,
- $19 million for
the Leduc Agrivalue Processing Incubator,
- $10 million for
a level III biocontainment laboratory,
- $8 million for
upgrading seniors lodges,
- $4 million for
waste management grants, and
- $30 million for
other capital projects.
Other
Government Capital and Information Technology
The Capital
Plan will support $857 million of other provincial government capital
and information technology projects.
CAPITAL
PLAN DETAILS
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