Grounds For Separation

Alberta has ample grounds to walk away.

I started this blog back in January with the post “The Last Good Day”. It was intended to provide a thorough and comprehensive statistical view of life in Alberta, with an emphasis on Calgary.

In order to provide the best overall picture of the situation, I have chosen the statistics and information rerlating to a number of areas including:

• Population
• Federal Payments to Provinces
• Oil Prices
• Alberta Government Revenues
• Downtown Calgary Office Space Vacancy
• Unemployment Rate
• Personal and Corporate Bankruptcies
• Provincial Income Support Levels
• Crime Rate in Calgary
• Suicide Rate in Alberta

While these numbers may come as a shock to some, others simply will not care, engaging in schadenfreude at Alberta’s expense. For others nothing short of the complete destruction of Alberta would satisfy them.

This message isn’t for them. It’s for anyone who wonders why we in Alberta feel the way we do. This is why we are angry and so many of us are ready to break from Confederation. We have plenty of good reasons to want a better deal and if one isn’t forthcoming then the only alternative is to strike out on our own.

A joint effort.

To be fair, what has happened in Alberta isn’t solely Justin’s fault. Regressive job-killing policies and taxes on the part of former Premier Rachel Notley and Calgary Mayor Naheed Nenshi have also contributed to the ruination of Canada’s former economic engine.

With Jason Kenney now at the helm in Alberta things will slowly atart to improve, but if justin Trudeau somehow manages to win in October, any hope of recovery will be ruined.

I told you what was going to happen.

Back in January I warned that if something didn’t happen to help the Alberta economy, and soon, the effects would soon be felt throughout the Canadian economy.

The latest economic numbers seem to be bearing this out, and soon, the numbers that are being seen in Alberta will be seen across the country. If Justin Trudeau and the rest of the Worst Canadian Government Of All Time aren’t voted out of office in October, Canada will become an economic basket-case.

1. Population

For reasons that confound me, more people continue to come to this province than leave it. All this is managing to do is add more stress to a system that is already strained. With continuing high unemployment, unless these people have jobs to come to Alberta for they will only be a drain on the social system.

Link to Q3 Alberta Population Report:

Click to access 2018-q3-population-report.pdf

2. Federal Payments to Provinces

Equalization and Transfer Payments

Major Federal Transfers

The Government of Canada provides significant financial support to provincial and territorial governments on an ongoing basis to assist them in the provision of programs and services. There are four main transfer programs: the Canada Health Transfer (CHT), the Canada Social Transfer (CST), Equalization and Territorial Formula Financing (TFF).

The CHT and CST are federal transfers which support specific policy areas such as health care, post-secondary education, social assistance and social services, early childhood development and child care.

The Equalization and TFF programs provide unconditional transfers to the provinces and territories. Equalization enables less prosperous provincial governments to provide their residents with public services that are reasonably comparable to those in other provinces, at reasonably comparable levels of taxation. TFF provides territorial governments with funding to support public services, in recognition of the higher cost of providing programs and services in the north.

https://www.fin.gc.ca/access/fedprov-eng.asp

Equalization and Total Federal Payments Charts 2012-2020

Ontario goes from receiving 21% of Equalization funding in 2012/13 and by 2019/20 that number would dwindle to 0%. Quebec would pick up Ontario’s share however as it goes from receiving 48% in 2012/13 to 66% in 2019/20

The total amount of federal support going to the provinces remains at a constant rate from year to year. What changes is the amount being distributed. In 2012/13 those payments totaled nearly $57 billion and have risen to over $78 billion in 2019/20, an increase of 72%.

3. The Price of Oil

The benchmarks off of which our oil is priced are West Texas Intermediate (WTI) and Western Canadian Select (WCS). WCS is the grade of crude produced by the oil sands. It is heavier, and not as easy to transport as the light and medium grades of crude oil, such as WTI, therefore goes for a lower price. The difference in price between WTI and WCS is called the “spread”.

The price difference can also be attributed to other factors, such as supply and demand. The price of WCS plummeted in relation to WTI in November of this year, and the spread hit an all-time high of $55(US)/bbl as inventory levels reached capacity. Over time, the lack of pipeline capacity has resulted in an over-supply of WCS, translating into a lower price.

There has been slightly less volatilty in the price since measures were put in place to reduce inventory levels, however the province is still losing hundreds of millions of dollars in revenue due to the lack of a pipeline to a deep water port.

4. Alberta Government Revenues 2013/14-2017/18

Fiscal 2015/16 saw a huge drop in resource revenue for the Province of Alberta, falling by 50% over 2014/15. Bitumen royalties fell from $5.04 Billion in 2014/15 to $1.22 Billion the following year. Crude oil royalties plummeted from over $2.2 Billion to under $700 Million and natural gas royalties fell from $989 Million to $493 Million. This would also translate into lower income tax revenue for the province.

While the amount of personal income tax collected fell slightly between 2014/15 and 2017/18, the amount of corporate income tax collected fell by over 40% over the period. The amount of fuel taxes rose by over 45% in 2015/16, due in large part to an increase in the provincial fuel tax in 2015.

The “sin taxes” collected also seem to tell a story. Albertans gambled less after 2015/16, drank more between 2013 and 2018, and seemed to be smoking about the same amount of tobacco. After realizing a budget surplus of $1.1 Billion in 2014/15, the Government of Alberta ran budget deficits totalling $25.1 Billion between 2015/16 and 2017/18. The forecast for 2018/19 is for a deficit of $7.5 Billion.

The one thing Alberta does have going for it right now is that Jason Kenney can set about making things right again, but we still don’t know the true extent of the damage the Notley regime did to the provincial finances. In any event, it’s going to take time.

5. Downtown Calgary Office Space

In Q1 of 2014 there was over 40 million square feet of downtown Calgary office space with a vacancy rate of 8.13%. The average rent for class “A” office space was $34 per square foot. In Q1 of 2018 there was close to 44 million square of downtown Calgary office space and the vacancy rate had jumped to over 27%.

The average rent for class “A” office space was down to $14 per square foot. Assuming the same vacancy rate and price per square foot over this period, this translates into a loss of $2 Billion in rental income, and a report released in March suggests the city has lost $250 million in tax revenue as a result of the decline in non-residential property values.

Council looks to 'rip the Band-Aid off' city's tax crisis with residential rate hikes

To Be Continued In Grounds for Separation, Part 2

The human impact of the crisis in Alberta with a look at unemployment, bankruptcies, income support, crime, and suicide. See the toll the last 5 years has taken.