The British Columbia finance ministry says its revenue projections are up $1.3 billion from its September update, driven by higher energy prices and tax revenues.

The higher than expected revenues are offset by a new $1-billion one-time provision for public sector compensation agreements. This results in a $337-million improvement to the surplus, which is now forecast to reach $1.6 billion.

A significant increase in natural gas royalties and stronger corporate and personal income tax revenues are the main drivers behind an improved surplus forecast, Finance Minister Carole Taylor announced.

Forecast energy revenues are up $757 million, due primarily to a $695-million increase in projected natural gas royalties driven by a sharp price increase since August. Income tax assessment data for 2004 is higher than previously forecast, resulting in prior-year adjustments for 2004/05 and a stronger revenue base for 2005/06. As a result, personal income tax revenue is up $261 million, while corporate income tax revenue is up $283 million.

Taylor cautioned that a significant portion of forecast revenues, including prior-year income tax adjustments, equalization transfers, and the effects of high natural gas prices, are not expected to be sustainable over the medium term.

“We only need to look to the beginning of the decade to see how energy revenues can spike up and drop down just as fast,” said Taylor. “That’s why we need to remain prudent as we move forward.”

Total provincial debt is now projected to decline to $35.5 billion, down $351 million from the previous year. The taxpayer-supported debt-to-GDP ratio is forecast to fall to 16.9%.

The report also shows continued strong economic activity across many sectors over the first nine months of 2005. Compared to the same period last year, exports are up 7.8%, retail sales up 6.3%, employment up 3.2%, and non-residential building permits up 68.9%. While manufacturing shipments are up 1.8% over the same nine-month period last year, this result masks a weakening trend in manufacturing shipments in recent quarters.