National Summative Evaluation of the Gas Tax Fund and Public Transit Fund - 1.0 Introduction
1.1 Description of the Gas Tax Fund and Public Transit Fund
The Government of Canada established The Gas Tax Fund (GTF) and the Public Transit Fund (PTF) in 2005 as a response to the expressed infrastructure needs of local governments. Under both funds monies are transferred up-front to the provinces and territories, the City of Toronto, and in the case of British Columbia and Ontario, the initial recipients are the Union of British Columbia Municipalities (UBCM) and the Association of Municipalities of Ontario, respectively. These initial recipients then flow the money to municipalities and other eligible recipients. Unlike other infrastructure programs, the Government of Canada has no role in the selection or approval of projects under these programs which are best categorized under Other Transfer Payments by policies established by the Treasury Board of Canada Secretariat (TBS). In some cases, the initial recipients have a role in approving capital plans and projects, while in others the municipal recipients assume sole responsibility for selecting projects.
The GTF program was designed to provide $5 billion in predictable funding over five years (2005-2010) to nearly all municipalities to support environmentally sustainable municipal infrastructure that will contribute to the Government of Canada's environmental objectives of cleaner air, cleaner water, and reduced greenhouse gas (GHG) emissions. Long-term planning and collaboration were also key objectives of the GTF program.
To address identified infrastructure needs of the First Nations, a portion of the GTF was set aside and administered through the First Nations Infrastructure Fund (FNIF) and managed by Indian and Northern Affairs Canada (INAC). In the Northwest Territories, Nunavut and the Yukon Territory GTF funding is also available for indigenous First Nations where there are no treaty-established Reserve lands.
The Government of Canada has announced that $8 billion of additional funding under the GTF will be provided for the period extending to March 31, 2014. Budget 2008 announced that the GTF will be extended beyond 2014 and become a permanent $2 billion per year program.
The PTF program was designed as an exceptional measure to address the specific need for improved public transit services. When it was first announced in 2005, the PTF was planned to be a two-year program, however, it was subsequently reduced to one year ($400 million), and the funds that were to be provided for the second year were transferred to the provinces and territories as part of the Public Transit Capital Trusts.
Six key principles were recognized under both the GTF and the PTF programs:
- Respect for jurisdiction while recognizing the merit of inter-governmental cooperation;
- Flexibility, in recognition of the diversity of Canadian provinces, territories, municipalities and communities, regarding the allocation and mechanism for delivering the funds, the nature of municipal involvement, and the nature of provincial or territorial contributions;
- Equity between provinces and territories and recognition of the need to balance urban and rural needs and of the different capacities of municipalities;
- Promote long-term solutionsincluding long-term, stable and predictable funding and ongoing collaboration;
- Transparency in decision-making in a spirit of consultation;
- Accountability and reporting commitments to due diligence in the management of the Funds, to build upon existing delivery mechanisms, and to full accountability and regular reporting to Canadians with respect to the use of funds and achievement of outcomes.
1.2 GTF and PTF Common Features
The GTF and PTF share six common features: management through funding Agreements, accountability and reporting frameworks, flowing money up-front, capital spending commitments, planning requirements, and outcomes reporting.
GTF and PTF are implemented through agreements signed between the Government of Canada and each province and territory. These agreements contain the broad federal program terms and conditions, however, they differ most notably in the allocation mechanisms and triggers for funding to each local government or recipient.
In British Columbia, the Union of British Columbia Municipalities (UBCM) is a signatory to the Agreement and is responsible for the delivery of the GTF and the PTF programs.
In Ontario, the Association of Municipalities of Ontario (AMO) is also a signatory to the Agreement and plays a similar role to that of UBCM for all municipalities except the City of Toronto which is another signatory to the Agreement. Ontario has no role in the management of these Funds except in relation to funds under the GTF program for Unincorporated Areas.
The GTF and PTF accountability and reporting frameworks2 reflect the shared responsibility of all parties. The provinces and territories, UBCM, AMO and the City of Toronto, as signatories to the Agreement, must submit an annual audited expenditure report to Canada, including a narrative of the progress made in meeting commitments, and a listing of all eligible projects indicating the location, investment category, amount and identity of all sources of funding, nature of the investment and expected outcomes. As a condition for receiving funding, each municipality or eligible recipient must enter into a funding agreement with the province, territory, UBCM or AMO which mirrors the reporting requirements.
Both the GTF and PTF flow money up-front to these initial recipients before expenditures are incurred. However, apart from the first payment, subsequent funding is conditional on compliance with the terms and conditions of the agreements including submission of an annual expenditure report.
Eligible recipients can pool, bank, borrow against and cash manage these resources. Interest earned on funds that are banked must be used by eligible recipients to pay for eligible costs of eligible projects only, or for administrative costs. Provinces, territories, the City of Toronto, UBCM and AMO may incur expenses for administration costs, subject to prior approval of a business plan by Infrastructure Canada.
Canada and the signatories to the agreements also commit to complete joint evaluations with the results to be made public and Canada further commits to complete a national evaluation.
The GTF and PTF were designed so that the Government of Canada's contribution was to be used in addition to the funds already allocated by the other parties for municipal infrastructure. Since these programs are not cost-shared, in order to attain the objective GTF and PTF both require that provinces, territories, and local governments commit to maintain capital infrastructure spending for municipal infrastructure at an agreed upon level that involves a calculated amount based on recent and current spending.
In order to promote environmentally sustainable municipal infrastructure and long-term solutions, both the GTF and PTF require that planning commitments be met over the lifetime of the Agreements including: capital investment plans, integrated community sustainability plans or planning, and transit strategies. Compliance to the Public Sector Accounting Board standards relating to tangible capital assets is also required.
Finally, the GTF and PTF require that Signatories deliver an Outcomes Report on the cumulative investments made, including information on the degree to which these investments have actually contributed to the objectives of cleaner water, cleaner air and reduced GHG emissions.
Under the Terms and Conditions for the Program, provinces and territories compile data to assist in tracking performance and the achievements for GTF are reported in the INFC Departmental Performance Report. The framework documented in the federal/provincial/territorial agreements preserves the accountability of the Minister to Parliament for the spending of the funding.
1.3 GTF Features
GTF monies were allocated to provinces and territories on a per capita basis for a five-year period and per-year allocations increase over the course of the period3. Recognizing the needs of the smaller jurisdictions, a base amount for the five-year period was set for four jurisdictions: Prince Edward Island, Northwest Territories, Nunavut, and the Yukon Territory. The funds are transferred to each signatory twice a year, provided Infrastructure Canada has received a complete and audited annual expenditure report.
New Brunswick requested in June 2007 that it receive GTF funding in drawdown amounts equal to the amounts the Province advances to eligible recipients. The request for drawdown includes a list of payments made by New Brunswick to each municipality as well as costs incurred for eligible expenditures in Unincorporated Areas.
Under the funding agreements with Canada funds must be expended by the end of the Agreement, though in some instances funds may be spent by the end of the five-year funding period4. Some jurisdictions have imposed additional time limits and conditions for funding to eligible recipients to ensure that funds are not just banked, but are spent on eligible projects.
Under the GTF program, eligible recipients include all local and regional governments in Canada, totalling a potential for 3,647 eligible recipients. Though the program allows for eligible recipients that are not municipal entities, such as for-profit, non-governmental organizations and not-for-profit entities, in effect all eligible recipients are local and regional governments or municipal bodies.
The Northwest Territories, Nunavut and the Yukon are unique in that the GTF allocation applies not only to local governments but also to First Nations, since there are no treaty-established Reserve lands in the territories.
Manitoba, New Brunswick, Ontario, Prince Edward Island, and the Yukon are also eligible recipients for services provided in Unincorporated Areas. Additionally, in Prince Edward Island, recognition of the unique nature and role the province plays in the provision of municipal services has been supported by an allocation provided to the province for the rehabilitation of roads and bridges within incorporated municipalities and a one time allocation was made toward the completion of the PEI Sludge Remediation Program.
The Northwest Territories and Nunavut are also eligible recipients when they manage municipal infrastructure projects on behalf of local governments.
Allocation formulas to eligible recipients vary across the jurisdictions and include strict per capita allocation criteria, combination of a base amount and per capita allocation, combination of base amount, per capita and dedicated funding for specific investments, while some provide an allocation of part of the funds on an application basis.5
The agreements with eligible recipients determine the delivery mechanisms and the conditions that must be met in order to access the funds. Under the GTF program6, in 6 out of the 13 jurisdictions, the first payment was an up-front payment while in the 7 remaining jurisdictions the first payment was conditional upon submission to and approval by the province of a capital investment plan, or an equivalent. In all jurisdictions, subsequent payments are subject to conditions that include submission of an annual expenditure report and compliance with the terms and conditions of the agreements.
GTF eligible project categories include:
- Public transit including rolling stock, infrastructure, and intelligent transportation systems and technologies, para transit, and active transportation infrastructure;
- Water: drinking water supply, treatment, distribution systems, and water metering systems;
- Wastewater: wastewater systems and separate stormwater systems;
- Solid waste: waste diversion; material recovery facilities; organics management; collection depots; landfills; thermal treatment and landfill gas recuperation;
- Community energy systems;
- Active transportation infrastructure (e.g., bike lanes);
- Local roads, bridges and tunnels that enhance sustainability outcomes.
In addition, the GTF provides funding for capacity building activities including: collaboration, research, planning, policy development and implementation.
Two jurisdictions chose to limit the eligible project categories to align with their priorities: Nunavut (water, wastewater, solid waste, and capacity building) and Quebec (water, wastewater, local roads and bridges, and public transit).
1.4 PTF Features
PTF was allocated to the provinces and territories on a per capita basis for one year7. The funds were transferred to the provinces, territories, the City of Toronto and to the two associations in one payment following the signing of agreements8. Funds were transferred in 2005-2006 in nine jurisdictions, and in 2006-2007 for the remaining four jurisdictions.
Funds must be expended for eligible projects no later than March 31, 2010, unless otherwise specified through agreements.
Under the PTF, eligible recipients are essentially local and regional governments as well as municipal transit corporations or bodies which provide a public transit service, i.e. the 189 eligible recipients.
In British Columbia, due to the particular institutional set up, BC Transit, a provincial Crown corporation, and the South Coast British Columbia Transit Authority (the former Greater Vancouver Transit Authority) are eligible recipients under the PTF Agreement.
In Prince Edward Island, a not-for-profit corporation that provides specialized transit services is an eligible recipient. Similarly, in Nova Scotia, Community Transit Organizations are not-for-profit corporations that provide accessible public transportation services, are also eligible recipients.
Allocation formulas to eligible recipients vary in the different jurisdictions and include allocation based strictly on the share of total ridership, and a combination of a base amount and ridership share9.
The public transit eligible project categories are identical to those public transit categories captured under the GTF.
- Appendix 1, Table 3, Gas Tax Program Accountability and Reporting Framework Summary
- Appendix 2, Table 1, GTF, Allocation to the Provinces, Territories and First Nations
- Appendix 2, Table 2, GTF, Time Limits for Expenditures and/or Commitments
- Appendix 2, Table 3, GTF, Summary of Allocation Formulas
- Appendix 2, Table 4, GTF, Summary of Transfer Conditions of Gas Tax Funds to Local Governments
- Appendix 2, Table 5, PTF, Allocation of Funds to the Provinces and Territories
- In Quebec, the funds were within the GTF Agreement and no additional agreement was concluded.
- Appendix 2, Table 6, PTF, Summary of Allocation Formulas
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