Williams-era capital spending pales in historical terms

Danny Williams is proud of how much money his administration spends, like, for instance, the amount spent on roads, bridges, schools and other public works.

In the run-up to the 2007 general election, Williams told the St. John’s Board of Trade that his administration “invested like never before in neglected and crumbling infrastructure, and creating significant employment.”

Here’s what he told a small audience in Ottawa in early June:

We [weathered the recession better than anybody] by taking our already aggressive infrastructure strategy from four years earlier and expanding it. "Stimulus spending" was well underway in our province long before it became the trend of 2009.

A five billion dollar infrastructure plan in a province of our size is substantial to say the least, and has not only helped to create jobs and boost consumer confidence; it is also rebuilding communities so that we have the economic foundations necessary to succeed.

He just “expanded” an “already aggressive” infrastructure strategy. That’s the same line he used on Calgarians in 2009.

But figures available from the provincial government show that Williams’ claims don’t match reality. There was no shortage of capital spending nor could Williams’ approach be characterised accurately as aggressive let alone unprecedented.

Between 1991 and 1995, for example, public sector capital spending in the province ranged between 25.4% and 30.4% of the total CAPEX spending in the province.  From a low of 9.4% in 2004, Williams has doubled the share of CAPEX spending but the highest year is still only 18.4%.

But the real tale comes when one looks at the actual amounts adjusted for inflation. In 1991, for example, while the province experienced the worst economic downturn since the Great Depression, public sector capital spending was $548.8 million in 1991 dollars.  It peaked at $898 in 1994.  During that time the entire provincial current account budget was less than $3.5 billion.

Adjusted for inflation (to 2009), though, capital spending in that same period ranged from $853.62 million to $1.284 billion.  The best the province has seen since 2007, by contrast is 2010, where public sector capital spending is expected to hit $1.127 billion.

The figures are available at the provincial finance department’s website.

This comparison does not take into account the project delays and massive cost over-runs experienced during the Williams period to date.  Almost half the capital works projects announced in 2009 as “stimulus” were either begun or announced previously. At least one dated back before 2003.

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Connies and "stimulus"

According to the parliamentary budget officer, capital works projects funded by the federal government's stimulus program are far enough behind that some of the provinces and cities might lose out on the promised cash from Ottawa.

According the PBO report, an optimistic projection would see all projects finished on time, a middle scenario would see 936 projects unfinished by the deadline resulting in $293-million or 7.3 per cent of infrastructure stimulus money going unspent. A pessimistic scenario would see 1,814 projects missing the deadline, resulting in $500-million - or 12.5 per cent - of the infrastructure stimulus lapsing.

Meanwhile in the easternmost province, a Reform-based Conbservative Party has consistently had trouble delivering everything from capital works to legislation. Cost over-runs are now the norm.

And if that wasn't bad enough,almost half of their "stimulus" was actually old stuff already underway.

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Are you smarter than a cheese grater, now?

Remember that fisheries research cash announcement that seemed to have been cobbled together within the past six weeks?

Well, there’s a bit more evidence of the whole thing was baked up in a few weeks.  The evidence comes from the release of a consultation document to support development of a coastal and oceans management strategy by the provincial governments.

Environment minister Charlene Johnson is in the thick of it, once again, with this quote from the news release:

“Our oceans play a very valuable role in our ecosystems and it is important that we employ an appropriate policy framework for their management,”…

Charlene has an interest in and jurisdiction over the ocean.

Interesting.

In late May – about six weeks ago – she sure didn’t.

That’s because, according to Johnson, “if the Leader of the Opposition was so concerned about the environment and offshore she should have asked me a question where jurisdiction does fall under my department and that is when the oil reaches the land, Mr. Speaker.”

In that same session, natural resources minister Calamity Kathy Dunderdale went so far as to put a specific delimitation on where the shore began: the “Minister of Environment and Conservation … has no responsibility beyond the high water mark.”

Dunderdale – who is also Danny Williams’ hand-picked choice as second in command on the good ship Williams – also had no trouble defining where the fisheries minister stood:  his “did not go any further than that either as far as the offshore was concerned.”

How truly odd, then, that the other minister involved in the oceans strategy consultation was none other than Clyde Jackman, minister of fisheries and aquaculture.

Now we’ve already had more than a few chortles  at Dunderdale’s expense over this whole issue of jurisdiction. Okay so maybe there were a few guffaws too. But for an administration  whose deputy premier only a few weeks ago was adamant that  ministers had absolutely no responsibility for what went on below the high water mark on the shore, this new document is a gigantic change of direction.

All in six weeks.

But that’s not the end of it.

This new strategy is supposedly about…well, let’s let Charlene tell us:

“Our goal is sustainability and ensuring we use our resources effectively…”

Laudable stuff, indeed.

The word “sustainable” occurs no fewer than 36 times in the consultation document itself, usually in conjunction with the word “manner”, as in things must be done in a “sustainable manner”.

The responsibility for this sustainable stuff rests with none other than Charlene Johnson and her intrepid little department:

The Department of Environment and Conservation is responsible for developing and implementing the Sustainable Development Act, the Sustainable Development Strategy, and coordinating interdepartmental interests. It supports the Sustainable Development Roundtable, comprised of stakeholders from around the province, and
the development and monitoring of indicators to ensure development adheres to the principles of sustainability. (p.13)

Sustainable Development Act?

Yes, that would be the same piece of legislation that was part of the Tory campaign platform in 2003, passed into law in early 2007 but never implemented.

The roundtable?

Doesn’t exist, apparently.

And that sustainable development strategy?  Well, if the Act had been put into effect, then the whole thing would already exist. Instead, government is trotting out yet another consultation to develop yet another strategy on things which apparently are beyond its ministerial competence and all of this is being done before they bother to put into an effect a commitment made in 2003.

For those who are counting that is a total of seven years to get exactly nowhere.

The Sustainable Development Act required that cabinet approve a comprehensive strategic environment management plan for the whole province within two years of the Act coming into force.  In other words, if this Act had been put into effect the year it was passed, the entire province – including the fisheries related bits – would already have a plan.

And then five years after that, the whole thing would be reviewed again complete with public consultation.

To put it bluntly, had the current administration done what it committed to do in 2003 and what it finally got around to passing through the House of Assembly in 2007, this entire business and a whole lot more besides would already be done or well under way.

As it is, one has to wonder why the SDA remains in mothballs and why this  particular “consultation” appears now, out of the blue, and focuses – as it appears – on areas over which the provincial government has no legislative jurisdiction.

Taken together with Friday’s announcement, it looks a we bit curious if not downright suspicious.

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Related:

• “Your serial government at work” (2007)
• “To listen to old, archived messages, press 2…” (2006)
• “Res ipsa loquitur, once more” (2005)  a.k.a. “…and there shall be plans, and planning for plans and plans to co-ordinate the plans of the planning for plans…”

Burdening our children with increased debt: fish centre costs escalate wildly

An aquaculture centre that was supposed to have opened in 2009 for a cost of $4.2 million will now cost $8.8 million and construction isn’t set to start until later this spring.

Cost of the project shot up 22% in 2009 alone on a project that even then was already 71% over budget. Former fisheries minister Tom Rideout announced the project in 2007 as part of government’s pre-election vote buying orgy of public spending.

The provincial economy shrank by 26% in 2009.

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Yipppeee! Bring on those higher energy prices

From the New York Times:

In 2009, some 31,000 households in Rhode Island will have their utilities shut off, and the effort to juggle energy bills and mortgages is helping push some homeowners into foreclosure, said Henry Shelton, director of the George Wiley Center, a consumer advocacy group here. (Here, as in many states, utilities may not disconnect the poor in the winter.)

Since 2000, the cost of heating a home with fuel oil has more than doubled and the cost of heating a home with electricity has risen by one third, outpacing many incomes. The recent surge in unemployment has thrown even more people into energy debt.

High energy prices will hamper any recovery in the United States.

Hindering a recovery of the American economy will screw everyone who depends on exports into the Untied States as a staple of their own economy.

Like say Canada generally and Newfoundland and Labrador in particular.

Any fiscal plan built on perpetually high energy prices is inherently flawed and prone to failure.

Catastrophic failure.

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Oil and the budget

The provincial government seems to be in one of those strange places it goes every now and then.

It’s a world where the messages are decidedly mixed, if one picks a generous way to describe it.

Totally confused would be another way of saying there are two completely contradictory messages rolling at the same time.

Both of them are coming from the current finance minister who is also a former finance minister and notorious for running an open cheque-book department.

In the latest incarnation, Tom Marshall is seen supporting a CBC news story that rising oil prices are wiping out the projected government deficit.

Just yesterday it was a tale of looming financial woes. Tom Marshall even repeated the message that government spending  - i.e. the spending he oversaw in the job before - is unsustainable. 

In the CBC story, though, Marshall tries desperately to avoid giving any firm indication of the province’s current financial state:

If the price averages $70 a barrel for the entire year, it could wipe out the provincial deficit, but Marshall cautions against such predictions yet.

"It's not just the price," he said. "It's the volume. It's the exchange rate and of course we don't know what's going to happen in the future in terms of production numbers."

There are a couple of things to note here.

First of all, Marshall knows exactly where things are at this, the midpoint in the fiscal year.  he also knows where things are likely to wind up within a relatively narrow range of possibilities.  Marshall just didn’t want to share, even if CBC actually asked, and he likely won’t share until December if recent practice holds firm.

Of course, there’s a reason why the government holds on to information.  They clam up so that people who ought to have accurate information can’t get it, but that’s another issue. 

Second of all, we can fill in some numbers but not others. 

The stuff we are missing includes revenue figures like sales tax, mineral royalties and personal income tax.   If those are lower than expected, then it would take more than high oil prices to deliver a balanced budget. It’s unlikely those figures will turn out lower than estimated since the finance department routinely low-ball revenues these days.  But still, we don’t know because they aren’t saying.

We also don’t know what government spending is actually like. Operational spending may be up or it may be down.  Ditto the capital budget, or the “stimulus” as it is known currently.  If projects are behind schedule or delayed – as many are – then the cash budgeted for those projects will reduce the overall spending part of the budget.  A healthy chunk of the massive surplus in the last couples of years has been coming from forecast spending that just never happened and wound up not happening for two or three budgets.

As for oil, we can get a fairly good idea of what that looks like. 

Price is one element.  The 2009 budget used a figure of US$50 a barrel and an exchange rate that put oil at the equivalent of around Cdn$60.  Oil is currently almost $20 a barrel higher than that, even allowing for the lower exchange rate with the American dollar.

Production is another element.  Last year, oil production exceeded 125 million barrels.  This year, the provincial budget used a figure of  98.5 million barrels or a decline of  21%.  As it stands right now production in the first five months of the fiscal year is down about 27% compared to last year.  A 27% drop in production would mean a total production of about 93.75 million barrels.

But that’s not the whole oil picture.

The other bit is the percentage of each barrel the treasury gets and neither the budget documents last March nor Tom Marshall these days will talk about that publicly either. 

Thanks to the 19 year old Hibernia royalty regime, the provincial government take at Hibernia jumped to between 30% and 42.5% this year when the project hit pay-out.  Terra Nova and White Rose are already in pay-out and are pumping 30% royalty rates based on the original royalty regimes from before 2003.

And that’s where it gets interesting.

The budget figures don’t appear to include the higher royalty rates. factor those in and even the lower production total of 93 million barrels would produce provincial royalties of at least $1.9 billion. When your humble e-scribbler ran the numbers in August - estimating the revenues from each project -  the figure came out about the same as last year’s oil royalty. 

What all this means is that even allowing for some variation in other revenues and in overall spending, the books will likely be balanced this year on an accrual basis even at the low-end estimate.  On a cash basis there would a shortfall;  the budget forecast $1.3 billion. 

On the upper end, the forecast accrual deficit would turn into a surplus of something on the order of $500 million.  On a cash basis, the books would be balanced.

All in all, though, one must wonder why there is some much confusion coming from the current and former finance minister(s).  They could be letting the rest of is on their own projections since, the only negotiations going on right now are with voters.

Voters have a right to know how their own finances are looking, don’t they?

Oh yes.

And let’s not forget in all this that the budget last year included $1.8 billion in temporary investments that no one wanted to draw any attention to.

Makes you wonder why Tom and Jerome and Danny have been putting on the poor mouth again, even if just for a minute now and then.

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“Stimulus”: price tag on delayed fisheries centre jumps 71% before construction starts

That aquaculture veterinary facility promised by the provincial government to start in 2007 was originally supposed to cost $4.2 million.

It was supposed to open in 2009.

Tenders for site preparation just went out.

The tender for construction won’t be out until the fall.

The new cost is $7.2 million, 71% higher than when it was first proposed.

Tracy Perry, the provincial Conservative member of the legislature for the area attributes the cost over-runs to “design and tender work” whatever that means.

The facility will still take two years to build.  Construction is supposed to start this year but the thing just went to tender, two years behind schedule.

Odd then that back in January, fisheries minister Tom Hedderson described the building as if it was already under construction:

“As well, the new aquatic veterinary facility that my department is building in St. Alban’s is going to help improve on these protocols even further by enabling more timely testing and results.” [Emphasis added]

There’s also a news release from the same time where Hedderson is quoted as saying the same thing.

Incidentally, the size of the new facility hasn’t changed even though the price tag is almost double what it was.

In 2007, then fish minister Tom Rideout told the people of St. Alban’s that the facility would house 10 staff and their offices and equipment. “He said the new facility should be operating by the end of 2008.”

In 2009, the completed facility “is expected to house 10 staff, including development and inspection personnel, as well as aquatic health staff and veterinarians.”

Wonder why the project took two years to start and will cost almost twice as much – during a major recession – if it is basically going to do now what it was supposed to do then.

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Due diligence: Gaultois fish plant shut

Newfoundland and Labrador Hydro chopped the power because of an unpaid bill by the previous owner.

Provincial fisheries lifted the plant license in a dispute over construction of a wastewater treatment system for the plant.

The provincial government apparently fronted the money, the preliminary work was done but the contractor wasn’t paid.

[Provincial fisheries] Minister [Tom] Hedderson said that Atlantech did the work and were ready to put the treatment equipment in the Gaultois plant. However, a serious problem arose when the company was not paid for its initial work. Basically, government gave GB Seafood International the first $182,000 of an approximate $400,000 project to pay for the work completed by Atlantech. However, the money was never paid to the PEI company and no one seems to know where the money is.

Read the rest from The Coaster.

The money for this little disaster came from a 2007 announcement by former fish minister Tom Rideout. 

That would be the same one in which he announced construction of an aquaculture veterinary facility that would be finished by 2009.

They called the tender for construction this month.

And announced it again, not like Tom hadn’t already announced it at least once before.

Anyway…

Do the words due diligence mean anything to anyone any more?

The best line in The Coaster story is the one where it’s clear there’s nearly $200,000 of public cash gone and no one knows where it is.

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