‘We need to leverage our energy strengths but pivot to new industries’

Joseph Lougheed talks about how Alberta can emerge with a stronger, more resilient economy

Joseph Lougheed is a partner with Dentons Canada LLP.

Joseph Lougheed

What’s your sense of where Calgary’s economy is these days?

Lougheed: Obviously, we’re facing some challenges. While I’m very much an optimist and Calgary booster, I do expect the next six to 12 months in Calgary to be flat economically. The targeted curtailment of oil production will help in the medium term, but for the longer term at least in energy we need pipe in the ground and that will take time. Extra rail takeaway capacity will help as well, but that is also 12 to 15 months out.

While we have 75 per cent occupancy downtown, it will be a long road to fill the balance of the space. Homebuilders are really struggling. Our small businesses, particularly in the Beltline, are under pressure. We will all need to hold on to our cowboy hats this year and ride this out.

That said, it’s not all negative news. The federal government’s purchase of Trans Mountain is positive. Our agribusiness sector is generally strong, as is industrial real estate. Our transportation and logistics sectors are strong and our technology ecosystem is growing, with more and more startup ventures choosing Calgary and Alberta.  We have a highly-educated young workforce, great post-secondary institutions and a determined, resilient, free enterprise nature.

What’s it going to take to turn things around for this city?

Lougheed: Well, far smarter folks than me have tackled this but I will give it a try. Obviously, higher realized oil and gas prices are needed. In the long term, we need Line 3, Trans Mountain and Keystone XL built. More LNG facilities in B.C. and more petrochemical facilities in Alberta. All of these, however, will take time. The broader problem, at least in the energy space, is that we are a high-cost, over-regulated jurisdiction. Global capital is mobile and it’s increasingly not choosing Alberta. There are obviously exceptions but the trend is clearly down. Investors are voting with their feet. We need to lower costs and create more regulatory certainty for global capital.

In the broader economy, I believe we need to leverage our energy strengths but pivot to new industries; technology, clean-tech, agribusiness, medical/health-care advancements, and transportation and logistics are examples.

But we need to make some very tough choices. We need to reduce taxes, regulations and the cost of doing business – we need to make Calgary more competitive. This will also mean that public sector spending needs to come down as well – in the city and province. We can’t have it both ways and it’s not responsible to keep borrowing our way out of the challenges we face.

In Alberta, we also need to have a thoughtful conversation about a sales tax – there, I said it.

What’s your sense of the mood of people in Calgary?

Lougheed: Well, it saddens me to say this as I am a positive person, but I think a lot of people I talk to right now are frustrated, nervous and quite frankly a bit exhausted. We all know friends who have lost their jobs. Companies are struggling, people are struggling, our not-for-profits are struggling. Western alienation is real and I fear it’s growing right now.

But you know what? Albertans are strong. We’re resilient. We must not give in. Each of us must stand up and do what we can for our economy, our community, our neighbours.

How much of our struggles today can be blamed on the actions or inaction of governments at all levels?

Lougheed: While no level of government can control external shocks like dropping commodity prices, they can make the impacts of these shocks better or worse.  For example, all levels of government over the last five years have added taxes, costs and burdens on taxpayers and businesses, all during a downturn. The economic effect is cumulative. We’re increasingly not competitive. Since 2015, we’ve seen higher personal taxes (federal and provincial), higher corporate taxes, higher costs due to labour law changes, carbon taxes, higher minimum wage costs, more regulations, regulatory uncertainty, a massive increase in public debt; sorry, I could go on.

As well, the assessed tax value of our downtown core has dropped, causing the surrounding business taxes to increase to try and make up the difference. This is not sustainable. To be honest, downtown Calgary’s real estate has subsidized residential taxes over the years and kept them relatively low. This can’t continue much longer without threatening the viability of many small and medium sized businesses that are being asked to pick up the slack.

With the current plight of the oil patch and Alberta’s feeling that Ottawa is contributing to that, what would your father (former Premier Peter Lougheed) think about what’s going on now?

Lougheed: I think he would be quite annoyed, to be honest. But it’s too simplistic to just blame Ottawa alone; lots of factors, including actions and inactions of the federal government, have led us to where we are.

If my father were here today, I’m sure he would issue a call for all Albertans to work together on constructive solutions to our collective challenges; to stand up not just in Alberta’s interests, but all of Canada’s. He would have unwavering faith in the future, as do I; the long term for our city is strong not because of our energy, but because of our people.

– Mario Toneguzzi

calgary alberta economy

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