Will infrastructure spending withstand budget crunch?

With Canada’s Finance Minister, Jim Flaherty, poised to present the 2013 budget on Thursday, Canada’s municipalities are expecting him to provide them some relief in terms of infrastructure spending support.

The government is struggling with lower than expected revenues and its desire to eliminate the deficit. But while we might expect this outlook to lead to cost cuts, most commentators believe that Flaherty will provide ongoing support for infrastructure funding.

An article by Bill Curry in The Globe and Mail on March 18 says that while the budget will generally be tight on new spending initiatives, infrastructure spending “is expected to be the one big exception.”

The current federal infrastructure funding agreement is set to expire in 2014, so the Federation of Canadian Municipalities has been negotiating on its replacement. Anxious to have long-term funding available to be able to plan the much-needed replacement and repair of roads, bridges and other infrastructure, the FCM has asked for about $6.6 billion annually for 20 years. However, they are reportedly expecting something more like $4.5 or $5 billion annually and if not for 20 years, then at least for a period longer than the current 7 year plans.

Currently the federal government is funding infrastructure through $1 billion in GST/HST rebates, $2-billion in federal gas tax transfers, and about $1.25 billion from the expiring Building Canada Fund,” explained Curry in the Globe and Mail on March 16. The federal government also gives other funds directly, i.e. not through payments to municipalities, such as through the public-private partnership program.

The Federation of Canadian Municipalities and other organizations such as the Association of Consulting Engineering Companies-Canada (ACEC) have been repeatedly calling for stable, multi-year federal funding for infrastructure over the last months. In a press release in February, FCM president Karen Leibovici said: “Secure, predictable funding is critical when planning and building infrastructure with a lifespan of 30 to 70 years…

The Federation of Canadian Municipalities (FCM) says Canada needs a 20 year plan with predictable funding to fix its crumbling infrastructure. FCM is also proposing new investment through predictable programs that will ensure matching provincial and municipal dollars, cut red tape and further leverage private sector investment.”

To see the March 16 Globe and Mail article, click here.