It’s hard to have anything but admiration for the way Albertans have responded to the devastation wrought by last month’s flooding.
People have volunteered by the thousands to help in the cleanup. A myriad of flood relief campaigns have helped to raise millions of dollars for the victims. Calgary Mayor Naheed Nenshi has been a shining example of leadership during a crisis. And Alberta Premier Alison Redford reacted to the unfolding disaster in the most genuine and open-hearted of ways.
But two weeks after Ms. Redford toured the shattered areas and promised to do whatever it takes to rebuild homes and lives, the commitments she made are beginning to sink in. Specifically, it’s her promise to pay for the cost of the reconstruction, including homes that were damaged or lost altogether, that some are now questioning.
While it was a noble and remarkable gesture, the potential scope of that vow is setting off alarms.
No one knows how much the rebuild will cost, although initial estimates have put the damage as high as $5-billion. As we now know, most insurance programs don’t cover overland flooding, which homeowners living on a flood plain and along the banks of the Bow and Elbow rivers must have known. So in promising to rebuild and repair, Ms. Redford has made her government a de facto insurance company.
Those who suffered damage to their homes must be thrilled. But there are undoubtedly many Albertans wondering why the government should be on the hook for replacing $2-million riverbank palaces known to be at risk in a flood.
One of the central tenets of any real-estate purchase is “buyer beware.” And it’s a generally accepted principle that when you buy on a riverbank, you assume the risks that go with that move.
And then there are those who suffered damage to their homes when the Elbow flooded in 2005. At the time, the government placed a $100,000 cap on damage compensation. Those same people can only look on with envy and anger at the decision to fully compensate this year’s losses. Might some of them come looking for recompense?
The Alberta government is only now beginning to consider some of the incredibly complex questions that this matter places before them, such as how the value of a home will be established. Will it be based on tax-assessment notices or the estimated appraised values of properties at the time of the flood? Property assessments are often lower than what people can get for their homes on the market. Meantime, the value of the flood-plain land generally goes down after an event, so any compensation based on current assessments could be lower than what they might have been before the flood.
No matter what, the final reimbursement figure is going to be massive, and Ms. Redford is going to have to find a way to pay for it. The Premier has already cut a cheque for $1-billion just to get flood relief going.
It’s not the best time for this government to have to come up with billions of dollars. It’s already been under fire for putting the province into debt for the first time in years. Once upon a time, it would have used money in the Sustainability Fund, which overflowed with more than $17-billion. But it’s been plundered so badly over time that by next year, it’s estimated that there’ll be no more than $700-million left in it.
Ottawa is going to help out, certainly, but it will still leave Alberta with a massive bill to pick up.
Ms. Redford’s dilemma may take some extraordinary action. One possibility is a temporary tax. Maybe it’s a 1-per-cent sales tax, with proceeds going to reconstruction efforts. It might not be popular, but it might be more acceptable than adding $3-billion more to the province’s debt.
There are no easy answers to the many tough questions stemming from the flood and the well-meaning but expensive promises made in the immediate aftermath.