Yukonomist: The wonders of the capital budget

Yukoners live in harmony with majestic annual cycles of cosmic abundance, such as the annual migration of the Porcupine caribou herd, the return of the salmon to Haines, and the territorial capital budget.

Like the eagles in Haines, government contractors perch expectantly around the Yukon legislature at a certain time of year for the annual running of the projects. Will it be a big year? How much will be chum, coho or chinook (think schools, highways or power lines)? How many other eagles are hanging around to compete for a piece of the action?

The capital budget announced by Finance Minister Sandy Silver in March has $478 million for this year, with $1.9 billion in the full five-year plan. That’s a solid chunk of investment for a Yukon economy that clocks in at around $4-billion a year.

This year, 44 percent will go to transportation. There are big projects on Whitehorse airport, the Klondike highway and the Teslin bridge over the Alaska Highway (or are we calling it the “Yukon Highway” now, as some Yukonomist sources have suggested?). 

Other capital priorities are housing and land (18 per cent) and community and First Nations projects (16 per cent).

Sectors getting less of the capital budget include climate change (6 per cent), education (5 per cent) and health (2 per cent). 

Other highlights include $23-29 million for 45 housing units to replace the Ryder apartments, $15-25 million per year for new Whitehorse residential lots, $45-58 million to move Whitehorse Elementary to Takhini, $2-4 million for new health equipment, $60-86 million for new sewage lagoons in Carmacks and Dawson, $13-16 million for a new Coroner’s building and $4-7 million for a new law court information system.

The capital budget lists dozens of projects. There are a few ways to think about them.

One dimension is incremental value-add. Are they just a replacement of a current asset, like the Teslin bridge? We need to replace bridges at end-of-life of course, but from a macro perspective a new bridge will not make the Yukon economy more productive or efficient. Or are they something that is new, but of limited upside; for example, a convention centre that fills local hotels in summer but is quiet in the winter. Or are they enablers of new social services or economic activity, like the $12-14 million for a new science building at Yukon University or the $40-51 million for the upgraded mining port facility in Skagway?

The second dimension is economic. Does the project provide social services to Yukoners or support a bigger and more productive private-sector economy? Again, you need both. The $6-9 million for housing addressing gender-based violence is important, but so are the investments in infrastructure for business.

These two dimensions give you four categories: social with net new benefits, economic with net new benefits, social status quo and economic status quo. 

Any capital budget will have all four. The strategic question is the mix. As I flip through the big-dollar projects in the capital budget, I see a lot of maintenance and replacement of existing assets. Think bridge and school replacements.

Relatively less of the money is going into net new infrastructure that will build a more financially sustainable Yukon private-sector economy. The Skagway port facility is in this category. So are the housing investments, since sky-high housing costs and the resulting wage and labor supply pressures have really hurt Yukon businesses’ growth prospects. Another example is the Yukon Resource Gateway project, pencilled in for $110-135 million over five years. This is a previously existing project and includes things like helping the proposed Casino copper mine upgrade 126 kilometres of their mining road and construct 18 creek bridges.

As we face the US trade war and a new world of economic uncertainty, including the impact of recessions and slower growth on our transfer payment provider in Ottawa, we probably need to be more focused than previously on growing the local economy. Which will not be easy given the capital needs of health, housing and other important areas.

A large part of the capital budget is political theatre. Everyone knows that not all the projects will actually happen, and that big projects that aren’t included in its numbers will be announced.

For example, the capital budget has $1-2 million to start the planning for a much-needed expansion of the Whitehorse hospital. Government officials talked before the budget of plans for a new “surgical tower.” We can be very confident this will happen since the need is so obvious, as evidenced by the number of stories in the Yukon News about surgical capacity since the Cornerstone Consulting report on the problem back in 2018.

But the capital budget shows zero dollars for it in future years.

You will not find the words “convention centre” in the capital budget despite the government announcing an $18.75 million contribution to the $75-million project just a few weeks later.

Ditto for big bucks for the $500 million in power investments that territorially-owned Yukon Energy mentioned later in the same legislative session.

It’s kind of like if you sat down with your spouse, pulled up a spreadsheet on the screen, and agreed on your annual family budget.

And then she goes the next day and spends $110,000 on a Silver Streak Challenge soft-top fishing boat. It may be wonderful that it comes with a 150-horsepower Yamaha, fully-welded hull, 18-degree deadrise and built-in delta pad, but it wasn’t in the family capital budget.

In that sense, listening to the Yukon finance minister talk about the capital budget is a bit like getting data on the Haines salmon run by listening to fellow patrons of the Fogcutter tavern. You’ll definitely get lots of information, but take it with a grain of cliché salt.

The same can be said about the budget’s overall spending projections. When Minister Silver said in his budget speech that “we have laid out a path to repay borrowed funds,” he didn’t explain how major spends like new surgical towers or diesel power plants would factor in. Will new borrowing finance these projects, or will other things be cut?

Like eagles and fisherfolk in Haines, we won’t know until we see the salmon.

Keith Halliday is a Yukon economist and the winner of the Canadian Community Newspaper Award for Outstanding Columnist. The audiobook version of his most recent book Moonshadows, a Yukon-noir thriller, has just been released.