Building Canada - Modern Infrastructure for a Strong Canada - Building Canada: A New Approach

Building Canada: A New Approach

The tools of the Building Canada plan include a number of flexible initiatives and targeted programs that balance regional needs with national priorities. Sustained base funding will allow governments to plan for the longer-term and provide flexibility, while distributed program and nationally-targeted funding balance national, regional and local infrastructure priorities.

Base Funding for Municipalities

Over half of the funding under the Building Canada plan will be provided as base funding for municipalities. In total, over $17.6 billion over seven years will be provided through the Gas Tax Fund and the GST Rebate. This funding is stable, predictable, and flexible. It allows Canadian municipalities to plan for the longer-term, using a dedicated source of funds to address their ongoing infrastructure needs.

$33B Infrastructure Plan - 2007-2014

Program	Amount
Municipal GST Rebate	$5.8B
Gas Tax Fund	$11.8B
Building Canada Fund	$8.8B
Public-Private Partnerships Fund	$1.25B
Gateways and Border Crossings Fund	$2.1B
Asia-Pacific Gateway and Corridor Initiative	$1B
Provincial-Territorial Base Funding	$2.275B
Total	$33B

Gas Tax Fund

Budget 2007 extended the Gas Tax Fund (GTF) from 2010 to 2014 at $2 billion per year. As a result, over the next seven years, municipalities will receive $11.8 billion through this mechanism. Municipalities can pool, bank and borrow against this funding, providing significant additional financial flexibility. The GTF supports environmentally sustainable municipal infrastructure that contributes to cleaner air, cleaner water and reduced GHG emissions. Eligible categories of investment include public transit, water and wastewater infrastructure, community energy systems, the management of solid waste, and local roads and bridges that enhance sustainability outcomes. The GTF also provides funding to increase the capacity of communities to undertake long-term planning. Funding for planning capacity is complemented by a requirement for communities to develop Integrated Community Sustainability Plans (ICSPs), which are long-term plans aimed at improving sustainability outcomes in Canada's communities. To ensure accountability to Canadians, communities report on their use of the funds activities on an annual basis.

Goods and Services Tax Rebate

The GTF is complemented by the GST Rebate, which is a 100 percent rebate of the GST paid by municipalities. Over the next seven years, the maintenance of the increase in this rebate from 57 percent to 100 percent is expected to provide communities with over $5.8 billion in additional flexible funding to address their highest priorities, from new infrastructure assets to the maintenance and operation of existing public infrastructure and facilities. Municipalities are accountable directly to their municipal taxpayers in respect of this funding and separate reporting is not required by the Government of Canada.

Base Funding for Provinces and Territories

Building Canada also provides a total of $175 million to each province and territory for core infrastructure priorities. This represents an expenditure of $2.275 billion. This Provincial/Territorial Base Funding will support projects in all of the categories noted below under the Building Canada Fund (BCF), all Highway System infrastructure projects, and the safety-related rehabilitation of infrastructure in all BCF eligible categories. Federal funding will be cost-shared with provinces and territories to maximize investment by all orders of government but, similar to the GTF, federal funding will be provided up-front and does not have to be utilized in the year in which it was provided. This ensures additional financial flexibility to provinces and territories as part of Building Canada. All provinces and territories will benefit from this investment in modern public infrastructure, especially smaller jurisdictions, which generally have lower population densities.

Balancing Needs and Priorities

The Building Canada plan also includes three new national infrastructure programs. The Gateways and Border Crossings Fund and the Public-Private Partnerships Fund (P3s Fund) are targeted investment programs, focused on addressing specific national priorities. The third new program, the Building Canada Fund, is the new flagship infrastructure program of the Government of Canada. It complements the other funding programs by providing a balanced response to addressing local and regional infrastructure needs, while always advancing national priorities that are important to all Canadians.

Gateways and Border Crossings Fund

The National Policy Framework for Strategic Gateways and Trade Corridors will guide the development of a limited number of new gateway and corridor strategies and will help determine the projects to be funded by the Gateways and Border Crossings Fund. This $2.1 billion fund will focus on strategic trade corridors linking to international gateways. Eligible projects will include core National Highway System (NHS) facilities impacted by increased trade flows, inter-modal connectors and facilities, international bridges and tunnels, rail/road grade separations, short-line rail, short-sea shipping and intelligent transportation systems. At least $400 million from this fund will be devoted to the construction of an access road for the new Windsor-Detroit crossing—the busiest border point for Canada-United States trade— and one of the most significant commercial trade corridors in the world. Projects will be assessed on the basis of merit. Federal funding will be cost-shared to generate additional investment in this critical infrastructure.

The activities under the Gateways and Border Crossings Fund build on the Asia-Pacific Gateway and Corridor Initiative, which was significantly enriched through the Building Canada plan. Investments from this $1 billion initiative are already producing results on policy, governance and operational issues, including strategic infrastructure projects to enhance marine, rail and road connections, and system capacity.

Public-Private Partnerships

Private capital and expertise can make a significant contribution to building infrastructure projects faster and at a lower cost to taxpayers. The private sector is also often better placed to assume many of the risks associated with the construction, financing, and operation of infrastructure projects. As a result, the use of public-private partnerships (P3s) around the world has been expanding rapidly, with many countries taking practical steps toward the development of programs aimed at fostering stronger P3 markets. While Canada has made some progress in the use of P3s with the development of some high profile projects (including the Confederation Bridge linking Prince Edward Island and New Brunswick, and the Canada Line transit project in British Columbia), when measured against comparable western jurisdictions such as the United Kingdom or Australia, Canada generally lags behind in the use of P3s. In fact, Canadian pension funds are often investing in public infrastructure projects in other countries as a result of a lack of P3 opportunities to be found within Canada.

The Government of Canada will take a leadership role in developing P3 opportunities within Canada through two initiatives. The first is the $1.25 billion Public Private Partnerships Fund. This program will support innovative projects that provide an alternative to traditional government infrastructure procurement. The P3 Fund will help expand infrastructure financing alternatives in Canada, provide incentives to attract investments from the private sector, and increase knowledge and expertise in alternative financing.

In addition, the Government of Canada is committing $25 million over five years to establish a federal P3 Office. The P3 Office will facilitate a broader use of P3s in Canadian infrastructure projects, including through the identification of P3 opportunities at the federal level. The Building Canada plan also encourages the development and use of P3 best practices by requiring that P3s be given consideration in larger infrastructure projects funded through the Gateways and Border Crossings Fund and by the Building Canada Fund. Specifically, all projects seeking $50 million or more in federal contributions will be required to assess and consider the viability of a P3 option.

Building Canada Fund

The Building Canada Fund (BCF) will total $8.8 billion over seven years. The BCF will focus on projects that deliver economic, environmental, and social benefits to all Canadians. The priority funding categories for the fund will be Core National Highway System (NHS) Routes, Drinking Water, Wastewater, Public Transit and Green Energy. Other eligible investment priority areas include environmental projects (Solid Waste Management), projects that support economic growth and development (Short-line Rail and Short-sea Shipping, Connectivity and Broadband, Tourism and Regional and Local Airports), as well as projects that contribute to the ongoing development of safe and strong communities (Disaster Mitigation, Culture, Sport, Local Roads and Bridges, and Brownfield Redevelopment). Funding will be used to support public infrastructure owned by provincial, territorial and municipal governments and entities, as well as private industry, in certain cases.

Funding will be allocated for projects in the various provinces and territories based on their population (as of the 2006 Census). The program will operate through two components: the Major Infrastructure Component (MIC) and the Communities Component. All projects will be cost shared, with the maximum federal contribution to any single project being 50 percent. However, generally speaking, municipal infrastructure projects will be cost-shared on a one-third basis. For projects where the asset is owned by a private entity, the maximum federal contribution will be 25 percent.

The MIC will target larger, strategic projects of national and regional significance. Under the MIC two-thirds of funding, on a national basis, will be directed to the above-mentioned National Priorities. Projects under the MIC will be selected on the basis of merit through a federal-provincial/territorial negotiation process and all projects will be required to meet criteria targeting environmental, economic and quality of life objectives—regardless of the category. Innovative technologies and partnerships will also be emphasized.

The Communities Component is focused on projects in communities with populations of less than 100,000. Projects will be selected through an application-based process and, like projects under the MIC, will be evaluated on the extent to which they meet environmental, economic and quality of life objectives. This will significantly help smaller communities address their infrastructure pressures and serve as a complementary instrument to GTF funding.

A New Approach

The Building Canada plan is about more than just funding. Through Building Canada, the Government of Canada will work with its partners to promote knowledge, research, best practices, long-term planning, and capacity building. Capital infrastructure funding will therefore be complemented by support for research, planning, and capacity building. Up to 1 percent of funding under the Major Infrastructure Component and the Communities Component of the Building Canada Fund in each jurisdiction can be used for cost-shared projects in these areas. In addition, a separate $45 million program to support research, planning and feasibility studies will be implemented at the national level. These investments will help support provinces, territories, communities and the Government of Canada, to increase the knowledge base available to support policy development and decision making. Better knowledge will help us reduce the cost of future infrastructure capital investments across Canada, and this is often one of the most cost effective ways of dealing with future infrastructure challenges.

In addition, the Building Canada plan will also create a new framework for different orders of government to come together to assess infrastructure needs and priorities on a regular basis and to plan investments to meet these needs. Through Framework Agreements signed with each province and territory, the Government of Canada will work in partnership to address infrastructure issues in a consistent and coherent manner, which takes into account long-term planning. As a result, not only will we address our immediate needs, but we will also ensure that we are looking towards our long term priorities and objectives in a coherent and systematic way.