Alberta floods to take heavy toll on province's budgets for next five years

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Alberta expects the most painful financial fallout from this year's floods will come in the next two or three years, and that the natural disaster will still hit provincial budgets five years from now.

The Progressive Conservative government has earmarked $704-million for flood relief, and spent $148-million of that in the first quarter of this year. The floods, which swept the southern half of the province, hit June 20. The quarter ended June 30. The province released its first-quarter update Thursday.

Alberta is in the midst of its sixth consecutive deficit, and the cleanup and reconstruction costs associated with the flood are expected to reach $5-billion. This bill will be shared among the province, the federal government and insurance companies. Alberta, however, is still tallying costs and does not know yet how much the federal government will cover.

The province's preliminary estimate for the fix-it projects it expects to share with the federal government is above $2-billion, Doug Horner, Alberta's Minister of Finance and President of the Treasury Board, said Thursday. Alberta can submit a claim to Ottawa for 90 per cent of that. Projects such as rebuilding bridges over the Trans-Canada Highway by Canmore, fixing a highway near Bragg Creek, repairing rail lines, covering some residential home-reconstruction costs, and other expenses, are eligible for federal assistance.

"We are going to be adding to that list substantially over the course of the coming months and perhaps even into the next year," Mr. Horner said, explaining why the province is unsure how much it will receive from Ottawa. Alberta is still submitting expenses to the federal government for costs associated with the Slave Lake fire in 2011.

Most of the costs tied to the floods, which affected almost all of High River and parts of Calgary, Canmore, Exshaw, Siksika Nation, Tsuu T'ina Nation, Morley, Kananaskis Country, and other communities, will hit the provincial government's coming budgets.

"I would guess the bigger hit to the capital plan is probably in the second and third years out," Mr. Horner told reporters. He said roughly $1.6-billion in insurance claims have been filed so far.

Wildrose Party finance critic Rob Anderson calculates that the province will only be responsible for $1-billion to $2-billion of the flood infrastructure costs.

"We do have to spend that money. We can't be cheap on our rebuilding efforts," he said. "But it does mean that we have to probably look at ways we can defer other spending in non-priority areas of government."

Mr. Horner said reconstruction efforts will bolster Alberta's gross domestic product by 0.2 percentage points in 2013 and 0.4 percentage points in 2014.

"Now, that doesn't mean that the flood was good for our economy," he said. "Flood related spending will put pressure on prices related to reconstruction. The increase in construction activity will see a rise in the prices for materials and labour. It also means increases in weekly wages and may further stretch the already tight labour market."

Alberta expects this year's deficit to range between $1.2-billion and $2-billion. It originally said the deficit would reach $1.975-billion. Higher oil prices have helped the government, and it revised its energy price estimates upward. It now predicts Western Texas Intermediate crude will average $94.81 (U.S.) a barrel this year, up $2.31 over its last prediction of $92.50. It revised its expected price for Western Canadian Select, heavy oil to $74.51 (Canadian) a barrel, up $6.30.