Road Map for New Brunswick

Building highways may seem like a great way to create jobs in Canada's only bilingual province, but it will only pave the way to more debt.

Some provinces take modern autoroutes for granted. Not New Brunswick. Frank McKenna, then-Premier, began a major capital program in the early '90s to upgrade the Trans-Canada Highway to four lanes. It seemed like a good idea at the time. A number of deaths had been caused by collisions, and besides, didn't we deserve highways as good as Quebec and Ontario anyway?

With a small population of 750,000 people, road construction has left the province saddled with debt. The recent burgeoning debt load hasn't stopped our present premier, Shawn Graham, from proposing to spend another $1 billion expanding Route 11 between Shediac and Miramichi into four lanes. Before we allow him to bet the farm on highway construction, perhaps we should examine the implications of this adventure.

Spending on roads has always been simple politics. It's about finding a massive work project that will create jobs, and using it to lengthen your run in power (just like Huey Long). But there's a catch: who's going to pay for the project? Road upgrades cost hundreds of millions of dollars, and you usually have to go into debt and eventually raise taxes. In the 1990s, the province contracted a private company to build a highway between Fredericton and Moncton in exchange for the right to toll, but in 2000 then-Premier Bernard Lord removed the tolls and arranged compensation for the road contractor. Then he continued down the typical path of road construction, financed through debt and taxes.

The existing book value of New Brunswick's highways is $4.2 billion. We pay $394 million in interest annually because of money the government borrowed to build them. Those costs are partly defrayed by a provincial gas tax that provides $199 million a year, and motor vehicle registrations that bring in approximately $100 million more. On a user-pay basis, the province is short $95 million.

Assuming we don't go back to toll roads, the best solution would probably be to raise the gas tax. Since we use 1.5 billion litres of gas and diesel each year, a 6.3-cent hike per litre would do the trick. Ironically, one of the reasons we are short of revenue is that Premier Graham lowered the gas tax 3.8 cents after he was elected.

Now let's suppose that the premier succeeds in persuading the federal government to cost-share his billion-dollar dream for four lanes between Shediac and Miramichi. That means it'll only cost us New Brunswickers $500 million of debt, requiring another $47 million in interest a year. That translates into an additional gas-tax hike of 3 cents. So, even with 50-per-cent federal funding, we need to raise the gas tax a total of 9.3 cents per litre. Or perhaps we could just lay off 1,800 teachers or nurses. No matter how you slice it, there is no free lunch – and no free highways.

There's another problem. You can only ask the federal government for $500 million so many times. And perhaps there are priorities more important than expanding our traffic arteries.

For one thing, we could pay down the debt on our existing highways. Or we could invest in wind turbines or other green projects to reduce our dependence on oil. The $1 billion, used as a wind project, would have a $35-million return starting in the first year and growing as electric rates rise. In contrast, highway expansion is a money pit requiring increased annual payments and maintenance costs.

The most important reason that highway construction should be avoided is peak oil – the start of a permanent decline in world oil production, which should be evident within several years. The era of the personal car is coming to an end. We can expect reduced government revenues due to unemployment, reduced gas tax revenue, and higher demands for social services. Will the future $4.7-billion highway debt and inadequate government revenue cause severe financial stress, similar to a banana republic being dictated to by the International Monetary Fund?

Jeff Rubin, the former chief economist at CIBC, has suggested that high oil prices is a causal factor for recessions and that in the near future, many millions of North Americans won't be able to afford to drive.

The day is long past that highways are a prudent investment. Unfortunately for the residents of New Brunswick, Premier Graham has become a weapon of mass financial destruction, busily building roads that lead us towards poverty. If he were serious about his self-sufficiency agenda, we would spend less on roads and more on energy efficiency and mass transit. The future of personal transportation looks a lot like present-day Cuba: roads sparsely travelled by a few cars. The question is - do we really need a billion-dollar four-lane highway for donkey carts and bicycles?