February 24, 2014

Balanced B.C. budget cuts back on capital spending

The B.C. Liberal's may be the only provincial government in Canada to balance the budget in 2014, but this improvement in the investment climate for the construction industry may be offset by cuts to capital spending.

“We did something yesterday that is somewhat unprecedented in this country in our recent fiscal history in B.C.,” said Rich Coleman, Deputy Premier of British Columbia and Minister of Energy and Mines.

“In actual fact, we may be the only province in Canada that does it, because Saskatchewan is on the edge of whether they can. But, we actually did present a balanced budget.”

Coleman made this comment on the B.C. Budget to a group of construction industry leaders, during a CEO Breakfast at Buildex Vancouver on Feb. 19.

The previous day, Finance Minister Mike de Jong presented the 2014 budget in Victoria, which forecasts a surplus in the next three fiscal years and maintains public investment in priority areas.

B.C. is forecast to end the fiscal year 2013-14 with a surplus of $175 million, with larger surpluses forecast in 2014-15 ($184 million), 2015-16 ($206 million) and 2016-17 ($451 million).

“The minister described it as a boring budget, but I am sure in the world of finance this refers to stability, which leads to investor and consumer confidence,” said Manley McLachlan, president of the B.C. Construction Association.

“We have a budget with no surprises and a commitment to capital spending on a feasible scale.”

Other construction industry leaders agree.

“There is a healthy capital spending program at about $11 billion over the next three years and this doesn’t include spending of crown corporation such as BC Hydro,” said Philip Hochstein, president of the Independent Contractors and Businesses Association of B.C.

“The construction industry should take heart in this and the fact that this is the kind of budget that is good to see, because it has stability, predictability and consistency.”

Despite the improvement of overall economic conditions, some construction industry leaders are concerned about the cuts in capital spending contained in the budget.

“While recognizing that sustained investment in infrastructure is critical to B.C.’s continued economic growth, this Budget, along with the recently announced Federal Budget, delays that investment, leaving an Infrastructure Investment Gap,” said Jack Davidson, President of the B.C. Road Builders and Heavy Construction Association.

“The investment gap will make it difficult for our industry to retain its skilled workers and impossible to train new workers, in anticipation of the large volume of construction activity forecasted to commence in 2016.”

The 2014 budget estimates total capital spending will increase to $6.620 billion in 2014-15, compared to $5.966 billion in fiscal year 2013-14.

However, total capital spending is forecast to decline to $5.790 billion in 2015-16 and $5.295 in 2016-17.

Despite the continued public investment, this figure represents a drop in capital spending compared to estimates for 2011-12 ($7.141 billion), 2010-11 ($8.1 billion) and 2009-10 ($7.2 billion).

Taxpayer-supported infrastructure spending on hospitals, schools, post secondary facilities, transit, and roads will total $11 billion over the next three years.

Self-supported infrastructure spending on electrical generation, transmission and distribution projects by BC Hydro is estimated to be about $6 billion in the same time period.

Budget 2014 includes $2.3 billion in capital spending over the next three years by post secondary institutions, which includes the replacement and renewal of existing infrastructure to address deferred maintenance.

Finance Minister Ken Krawetz is expected to table Saskatchewan’s fiscal 2014–15 budget on Wednesday, March 19.

Krawetz released a Mid-Year Report in November 2013 that projected the province will finish the year with a $22.8 million pre-transfer surplus.

Following an estimated increase of 1.4 per cent in 2013, the Ministry of Finance forecasts B.C.’s economy will grow by 2.0 per cent in 2014, 2.3 per cent in 2015 and 2.5 per cent per in both 2016-17 and 2017-18.

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