Funding Under the Building Canada Plan 2007-2014 (In Billions of Dollars)
Programs	Lead Department	Funding
Municipal GST Rebate	Finance Canada	5.80
Gas Tax Fund	Infrastructure Canada	11.80
Building Canada Fund	Infrastructure Canada	8.80
Public-Private Partnerships Fund	Finance Canada	1.25
Gateways and Border Crossings Fund	Transport Canada	2.10
Asia-Pacific Gateway and Corridor Initiative	Transport Canada	1.00
Provincial-Territorial Base Funding	Infrastructure Canada	2.28
Total		33.0

Source: Infrastructure Canada, 2007, Building Canada: Modern Infrastructure for a Strong Canada, page 24.

 

i) The Gas Tax Fund 

Budget 2007 extended the Gas Tax Fund (GTF) from 2010 to 2014 at $2 billion per year. In the next seven years, municipalities will receive $11.8 billion through this mechanism. They will be able to pool, bank and borrow against this funding, thereby acquiring significant additional financial flexibility.  Eligible categories of investment under this funding initiative include public transit, water and wastewater infrastructure, community energy systems, solid waste management projects and local roads and bridges that enhance sustainability outcomes.  In addition, funding for planning capacity is complemented by a requirement for communities to develop Integrated Community Sustainability Plans, which will help to improve sustainability outcomes in Canada’s communities. To ensure accountability to Canadians, communities will report on their use of the funds on an annual basis.

 

ii) The Goods and Services Tax Rebate 

Complementing the GTF, is the Goods and Services Tax Rebate (GSTR) 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.
 

5. Base Funding for Provinces and Territories 

The Building Canada Plan also provides $25 million annually to each province and territory over a seven years period, for a total of $175 million for each jurisdiction. This represents expenditures of $2.275 billion over the full period. This base funding will support all of the categories listed below under the Building Canada Fund (BCF), as well as non-core national Highway System infrastructure and eligible safety-related rehabilitation of infrastructures. 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 on a regular basis, and does not have to be utilized in the year in which it was provided. This provides the provinces and territories with additional financial flexibility in providing infrastructure to smaller jurisdictions that have lower population densities.

 

6. Other Instruments 

To complete its approach to Canadian infrastructure renewal, the federal government created three national infrastructure programs.  The Gateways and Border Crossings Fund and the Public-Private Partnerships Fund (P3 Fund), are each targeted investment programs, focused on addressing specific national priorities.  The third is the Building Canada Fund, which is the main infrastructure program of the government of Canada. This later program is expected to 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.

 

i)The Gateways and Border Crossings Fund 

The National Policy Framework for Strategic Gateways and Trade Corridors is designed to guide the development of a limited number of new gateway and corridor strategies.  It 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.  Federal funding will be cost-shared to generate additional investment in this critical infrastructure.

 

ii) Public-Private Partnerships Fund 

The federal government believes that private capital and expertise can make a significant contribution to building infrastructure projects faster and at a lower cost to taxpayers. It also believes that the private sector is often better placed to assume many of the risks associated with the construction, financing, and operation of infrastructure projects.  While Canada has made some progress in the use of P3 projects, the government would like to facilitate greater use of this approach.  For this reason it has created the $1.25 billion Public Private Partnerships Fund. This program will support innovative projects that provide an alternative to traditional government infrastructure procurement. It will provide incentives to attract investments from the private sector, and increase knowledge and expertise in alternative financing.  The government of Canada will also commit $25 million over five years to establish a federal P3 office.  Furthermore, government policy will require that all projects seeking $50 million or more in federal contributions be assessed and considered for their viability as a P3 option.

 

iii) The Building Canada Fund 

The Building Canada fund (BCF) will total $8.8 billion over seven years. It will focus on projects that deliver economic, environmental and social benefits to all Canadians. The priority funding categories for the fund were reviewed above under the Building Canada Plan.  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). It will operate through the Major Infrastructure Component (MIC), which will target larger, strategic projects of national and regional significance, and the Communities Component, which is focused on projects in communities with populations of fewer than 100,000. 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 Office of Infrastructure Canada will also continue to deliver several existing  programs:

·         Public Transit Fund (PTF): to provide funding to initiatives to improve public transit services;

·         Canada Strategic Infrastructure Fund (CSIF), directed to projects of major federal and regional significance in areas that are important to promote economic growth and quality of life of the population;

·         Border Infrastructure Fund (BIF), to improve facilities at major border crossings and related highway approaches to handle greater volume of traffic and trade, and contributing better security and safety of the population;

·         Municipal Rural Infrastructure Fund (MRIF), to improve and increase scale of core municipal infrastructure in areas such as water and wastewater treatment, or cultural and recreation.  Also to select projects that aim to improve quality of life and economic prospects for small communities and First Nations;

·         Infrastructure Canada Program (ICP), created in 2000 to improve infrastructure in urban and rural communities to protect the environment and improve prospects for economic growth.  Almost all program funding has been committed; and

·         First Nations Infrastructure Fund (FNIF), enables access to infrastructure financing for eligible communities by combining three funds:  the First Nations component of Infrastructure Canada’s Municipal Rural Infrastructure, the Gas Tax Fund, as well as contributions from Indian and Northern Affairs Canada (INAC) Capital Facilities and Maintenance Program. 

According to Mr. Taki Sarantakis, Director General, Policy and Priorities, Policy and Communications Branch, Infrastructure Canada, “every program, with the exception of the Gas Tax Fund, which has become permanent under Budget 2008, has sunsetting features”[10].

 

b)  The Program Delivery System 

The programs of the Office of Infrastructure Canada are delivered in collaboration with a number of partners.  The Department acts as coordinator and funding agent and is responsible for project review, selection and approval, and negotiation of contribution agreements.  The monitoring and oversight of projects are shared between Infrastructure Canada and federal delivery partners.   

For each funded project, there are three partners: 

·         Office of Infrastructure Canada (OIC):  acts as funding agent for the projects, negotiates agreements with each of the funding partners and project proponent; 

·         An implementing department has the project specific knowledge related to each project.  Infrastructure Canada’s relationship with each implementing department (e.g.: Atlantic Canada Opportunities Agency (ACOA), Canada Economic Development for the Regions of Quebec (CEDQ), Industry Canada (FedNor), Transport Canada, Western Economic Diversification (WD) and Indian and Northern Affairs Canada (INAC) varies with the capacities and responsibilities, which are negotiated for each strategic infrastructure project; 

·         Funding partners may be provincial, territorial or local governments, First Nations communities, private partners or a combination.  Once a project is selected, the funding partners enter into contribution agreement negotiations with Infrastructure Canada. 

Community based infrastructure programs are implemented by the appropriate regional agency.  Provinces and municipalities are the managers of the project.  Under these funds, Infrastructure Canada provides national coordination among partners in the implementation of the projects.  The relationship between the federal government and each province is governed by an Infrastructure Framework Agreement (IFA).

 

1) The Infrastructure Framework Agreements[11] 

The Infrastructure Framework Agreements (IFA) between the federal government and each province spell out how the BCP will be implemented in the respective province.  Each agreement is essentially identical in structure and content to all of the others, except for the amounts of funding allocated to specific provinces.  They set out the objectives that the two orders of government will attempt to achieve and the funding that will be available in the province under the Building Canada Fund, the Base Funding Initiative and the Gas Tax Funds. 

The IFA creates the Infrastructure Framework Committee (IFC), which is charged with the oversight of the implementation of the Agreement.  This committee is composed of a federally nominated Co-chair and a provincially nominated Co-chair.  The Co-chairs have equal powers and are the only voting members of the IFC.  Quorum requires that both be present to make a decision.  Representatives of other interested parties may be invited as observers.  The Agreement also contains provisions for a dispute resolution process and a communication protocol to guide dealings with the media regarding announcements of project funding and status. 

Each agreement has a Schedule A, which provides a definition of eligible recipients of assistance under the Building Canada Fund and under the Base Funding Initiative in the province.  The schedule also lists the national and local priority categories for project selection decisions. 

An interesting feature of the agreements is the requirement that each province develop a “Provincial Infrastructure Plan” covering a period of 5-10 years.  The required elements of this provincial plan are spelled out in Schedule B—Guidelines for the Provincial/Territorial Infrastructure Plan.  A partial list of these required elements include:

•           The province’s infrastructure strategy;

•           The approach to identifying needs for new infrastructure;

•           The process for evaluating and managing current infrastructure assets;

•           The identification of the current state of provincial infrastructure; and,

•           A measure of the potential infrastructure gap in the province over the planning period. 

Unfortunately, the committee was unable to review any of these provincial infrastructure plans.  It certainly would be interesting to determine the extent of differences that might exist in the infrastructure needs of Canadians. 

Finally, each agreement has a Schedule C—Communication Protocol to guide joint communications activities.  This ensures that all partners receive appropriate acknowledgement for their role in renewing the infrastructure facilities and that there not be any contradictions in statements released by each partner during the projects life. 

The list of signed agreements and the amount of assistance available under the Build Canada Fund, the Base Funding Initiative, and the Gas Tax Fund is provided in Table II, below.   

TABLE II 

INFRASTRUCTURE FRAMEWORK AGREEMENTS SIGNED TO DATE In millions of dollars
Government	Date Signed	BCF	BFI	GTF	TOTAL
British Columbia	6 November 2007	1039.960	175.000	1002.788	2217.748
New Brunswick	7 December 2007	188.090	175.000	178.532	541.622
Newfoundland and Labrador	17 December 2007	131.330	175.000	124.664	430.994
Northwest Territories	21 February 2008	10.800	175.000	60.000	245.800
Nova Scotia	9 November 2007	235.680	175.000	223.704	634.384
Nunavut	8 February 2008	7.680	175.000	60.000	242.680
Prince Edward Island	21 May 2008	35.250	175.000	60.000	270.250
Saskatchewan	11 April 2008	236.220	175.000	224.220	635.440
Yukon	17 March 2008	7.910	175.000	60.000	242.910
Total		1892.920	1575.000	1993.908	5461.828

 Source: Infrastructure Canada 

 

2) Spending Estimates 

According to the 2008-2009 Main Estimates, the Office of Infrastructure of Canada is expecting to receive $2.45 billion in appropriations for the current fiscal year, representing about 22 percent increase vis-à-vis last year’s allocation of $2.02 billion. Of the 2008-2009 budgetary allocation, a little over 98 percent ($2.41 billion) of this year’s budget is in the form of contributions and other transfer payments.   

During its discussions of the Building Canada Plan, the Committee learned that a portion of the $33 billion was for PPP Canada Inc (P3), a Crown corporation that will formally report to the Minister of Finance. This is an initiative is not part of Infrastructure Canada's responsibilities. However, the Public-Private Partnerships Fund, or P3 Fund, which will be administered by the P3 Office, is part of the Building Canada plan.  Some Senators wondered why money and programs that should fall under the mandate of OIC will be administered by the P3 Office. 

Mr. Sarantakis acknowledged that while there are many programs that fall under the Building Canada Plan not all will be administered by Infrastructure Canada. Most of those are the responsibility of Infrastructure Canada, but some like the Gateways and Border Crossings Fund is the responsibility of Transport Canada. The P3 Fund is a $1.26 billion program that will deal exclusively with public-private partnerships.  In spite of Mr. Sarantakis’ explanations, the Committee wondered why it was necessary, with eight different infrastructure programs since 2000, to create another entity. 

With so many programs and participants, the Committee inquired about the coordinating function between these different elements of the $33 billion Building Canada Plan.  Mr. Sarantakis explained that coordination happens back and forth, not only within the Infrastructure Canada portfolio, which includes Transport Canada, but also with all of the regional development agencies. He noted that “one of the goals of the Government of Canada when it started in infrastructure was to not replicate existing administrative resources”.  Consequently, OIC was created as an organization that was designed not to replicate what is done in other federal departments and agencies.  At the outset, a decision was made to work closely with existing organizations to streamline the administrative delivery of the programs.  As to supervision of the implementation, each of the programs has slightly different administrative features to reflect what the government of the day wanted to do with respect to that funding. 

Infrastructure Canada needs to reach an agreement with individual provinces before delivering its assistance. The Committee was interested in the nature of these agreements and the lack of agreement in several provinces.  Ms. Jocelyne St. Jean, Director General, Intergovernmental Operations, Program Operations Branch, Infrastructure Canada, explained the elements of an agreement.   

In negotiating an agreement, a province identifies which of its priorities it wants to designate as the highest priority in the categories set out in the program. The Building Canada Fund has 17 categories. A province may decide that they want to target maybe five of those categories. For example, water or waste water might be most important for their communities, which they would then address. 

Before any funding actually goes out to the prospective recipients of assistance there may be some conditions that have to be met.  For instance, British Columbia has a signed a framework agreement, but no money will flow out to potential recipients for the Community Component of the program until the Province has spent all of its Municipal Rural Infrastructure Fund money.  This requirement is actually a common feature of all the Framework Agreements.  The Province has just finished awarding 58 projects under that program early in the year and that money is still going out.   

Once a province is ready to allocate funds, a joint secretariat is put together involving the province and Infrastructure Canada’s federal partners, who deliver the program on its behalf.  This joint secretariat receives and examines the applications to ensure that they meet all of the criteria for eligibility and that they meet the needs of that community as well as the performance targets that were identified in the agreement.  This might include a limit on the number of projects to be accepted for funding in order to reduce the administrative burden to a manageable number.  In such cases, additional allocation may be made at a later date.

 

D. A BRIEF HISTORY OF REGIONAL DEVELOPMENT IN CANADA 

Ever since the beginning of Confederation, Canadian governments have been promoting economic growth and regional development through a variety of policy instruments.  During the 1960s, the federal government established a number of specific regional development programs to assist economically depressed areas.  These efforts eventually led to the creation of the Department of Regional Economic Expansion (DREE) which, in turn, was later merged into the Department of Regional Industrial Expansion (DRIE) in 1982. 

Beginning in1987, DRIE was integrated with the Department of Industry, Science and Technology and its regional development responsibilities were transferred to a number of autonomous and regionally based organizations – the Atlantic Canada Opportunities Agency (ACOA), Western Economic Diversification Canada (WD), the Federal Organization for Regional Development–Québec (FORD-Q) and within Industry Canada the Federal Northern Ontario Initiative (FedNor).  These entities have over the years evolved into the current departments and agencies that are concerned with regional development activities and initiatives in Canada:  ACOA in the East; WD in the West; the Canada Economic Development Agency for the Regions of Quebec (CEDQ); FedNor for Northern Ontario, and Indian and Northern Affairs Canada (INAC) for the First Nations and for all territories (Northwest Territory, Nunavut and Yukon).

All these agencies have been mandated to promote employment growth and economic development in their respective regions through business expansion and community development.  To achieve these aims, the agencies dispose of a wide range of support services such as access to capital, business advisory or counselling services, information gathering and dissemination, skills and training services, trade and tourism promotion, market research and policy analysis, and project coordination services.  The agencies deliver their own programs and also implement a number of initiatives in co-operation with various federal departments and agencies, provincial governments and a multitude of local and regional stakeholders.  These services are targeted to small and medium sized enterprises, non-profit organizations, universities, associations, local governments, and other organizations. 

In addition, the agencies have an advocacy function where the region’s interests are represented to the federal government. 

 

E. THE REGIONAL DEVELOPMENT AGENCIES 

a) Atlantic Canada Opportunities Agency (ACOA)[12] 

i)        Mandate and Role 

ACOA is mandated through the Atlantic Canada Opportunities Agency Act to “increase opportunity for economic development in Atlantic Canada and to enhance the growth of earned incomes and employment opportunities in that region.”   In its view, new employment is the direct result of business growth, particularly among small and medium-sized enterprises (SMEs).  Hence, ACOA seeks to provide people with encouragement, advice and information, and the capital and technology they need to start and expand their own businesses.  The agency is headquartered in Moncton, New Brunswick and currently has 32 regional and field offices in cities and towns located across the four Atlantic Provinces.   

While ACOA has changed since its inception in June of 1987, its mandate has remained constant. Modifications have been made to its financial support programs for SMEs but, essentially, its vision for Atlantic Canada in terms of increased self-sufficiency and increased earned incomes is still at the heart of Agency operations.

 

ii)      Activities 

ACOA’s activities are divided into three major areas: 

Enterprise Development – seeks to improve growth prospects and competitiveness of small and medium sized enterprises.   

Community Development – seeks to improve the region’s physical infrastructure and capacity to generate economic growth.   

Policy, Advocacy and Co-ordination - research in policies that affect the region’s development, promote its interests; and facilitates the co-ordination of federal programs delivered in the region.    

The financial assistance of the agency is predominantly delivered in the form of contribution agreements (e.g.: repayable, provisionally repayable, and non-repayable contribution agreements) to private businesses, to non-profit organizations, or other government organizations.  Business organizations receiving financial assistance are usually expected to repay it.  Funding assistance going to not-for-profit organizations or other government organizations is in the form of non-repayable contributions.

 

iii)    Infrastructure Programming 

Under the “Community Development” strategic outcome is found the Infrastructure Programming activity – where ACOA is responsible for the delivery of community based infrastructure programs for the Atlantic Canada region.   According to the Agency’s 2006-2007 Departmental Performance Report, the majority of infrastructure projects in the region were funded by Infrastructure Canada through the Municipal Rural Infrastructure Fund (MRIF), which totalled $59.8 million in fiscal year 2006-2007.  MRIF is directed to improve and increase public infrastructure in areas such as water and wastewater systems, cultural and recreational projects.   

Under such programs, ACOA acts as the implementation agency related to the project.  Infrastructure Canada acts as funding agent for the projects, negotiates agreements with each of the funding partners and project proponent.  Funding partners can include provincial or local governments, First Nations communities, private organizations or a combination thereof.  Ms. Sherril Minns, Vice-President of Finance and Corporate Services, Atlantic Canada Opportunities Agency confirmed that the Agency remains the delivery agent and the expertise it developed with regards to the evaluation of infrastructure projects is still within its offices.

Mr. Robert Smith, Director General, Community Development, Atlantic Canada Opportunities Agency, added that in spite of the changes brought in by the new Building Canada Program the agency still has an important role to play in the implementation of the program. Specifically, as concerns the Communities Component of the Building Canada Fund, the agency works jointly with Infrastructure Canada, provincial governments in each province and the local communities in order to deliver the programming.  He explained that there is a joint secretariat staffed by ACOA and provincial officials, which determines whether or not new applications for assistance are eligible and if they meet the terms and conditions set out in the agreements and whether they address national priorities. They are then assigned a numeric rating by this joint secretariat, and ACOA is involved in that.  Ms. Minns elaborated further by saying that “ACOA is involved in the due diligence process and the evaluation of the proposals, in the recommendations going forward for approval and then, after the projects have been approved, in the monitoring and in the claim payment process as well.”[13] 

Ms. Minns explained that each program has a certain funding formula associated with it. For example, there is the Communities Component of the Building Canada Fund. A set amount of money is allocated to each province, and part of the formula also involves a per capita funding element. The formula determines how much money flows through to each of the various provinces.  The joint secretariat, after evaluating each application may make a recommendation for approval.  Funding of up to $250,000 may be approved by the minister responsible for ACOA. Funding for projects above $250,000 goes to the minister responsible for Infrastructure Canada for approval.

 

iv)    Spending Estimates 

According to the 2008-2009 Main Estimates, ACOA was expecting to receive $328.2 million in appropriations for the current fiscal year, representing about a 10.4 percent decline[14] vis-à-vis last year’s allocation of $366.3 million. Of the 2008-2009 budgetary allocation, a little over 72.6 percent ($238.3 million) of this year’s budget is in the form of contributions and grants payments.   

Senators are well aware that the improvement of Canada's economic physical infrastructure is absolutely essential to the country’s competitive success in the world. Current conditions suggest that Canada has a lot of catching up to do in this regard.  However, it struck some honourable senators that the federal infrastructure programs for Atlantic Canada seem to lack some strategic coherence.  Of course such a strategy implies that there will be priorities.  It seemed to these senators, that ACOA, as the federal agency mandated to develop an overall federal economic development strategy for Atlantic Canada should have developed an infrastructure strategy and priorities for the region and that these should guide the programs in Atlantic Canada. 

The committee recognizes that economic performance and infrastructure planning are intrinsically linked.  Hence the role of regional development agencies in planning and prioritizing infrastructure projects should be affirmed and expressed clearly in federal policy. 

 

b) Canadian Economic Development for the Regions of Québec (CEDQ)[15] 

i)                    Mission 

In October 2005, the federal government passed the Economic Development Agency of Canada for the Regions of Quebec Act creating an autonomous agency on the same basis as the other regional development agencies like ACOA and WD.  As the Canada Economic Development Agency for the Regions of Quebec, the Agency is responsible for the co-ordination of federal economic development initiatives in the province.[16]  The Agency has a network of 14 business offices across Quebec, an office in Gatineau which handles liaison with the federal government, and a head office in Montreal.

The object of the Agency is to promote the long-term economic development of the regions of Quebec by giving special attention to those where slow economic growth is prevalent or opportunities for productive employment are inadequate. In carrying out its object, the Agency takes such measures as will promote cooperation and complements the activities and initiatives of the Province of Quebec and communities in Quebec.

 

The Agency’s policy development, representation and cooperation efforts aim to enable Quebec regions and communities to benefit from federal policies, programs and initiatives that take government priorities and the realities of the regions of Quebec into account and provide an opportunity to increase the consistency and added value of federal regional development activities.

 

ii)                  Activities 

It encourages and supports development through:

·         Activities that provide information about and promote Agency programs and services;

·         Guidance, development and advisory activities;

·         Financial assistance activities; and

·         Production support and knowledge enhancement activities. 

The Agency works closely with enterprises (especially SMEs), non-profit organizations (NPOs), and communities through its 14 business offices, advisory committees and through a network of development organizations deployed throughout Quebec, including:

·         Local development organizations supporting communities;

·         Regional or sectoral organizations offering general and specialized services to business, in particular in exports and innovation; and

·         Knowledge institutions (research centres, college technology transfer centres and universities).

 

iii)                Major Programs 

The Agency has several programs and services whereby it makes both repayable and non-repayable contributions and, in exceptional cases, grants to its clientele, comprising SME s, agencies which assist small enterprises, and communities.  In all of its programs, the Agency advocates an approach aimed at the attainment of tangible and measurable results. 

·         The Community Diversification Program helps Quebec regions maintain and develop their economic activity base. This program is in effect from April 1, 2007 to March 31, 2012.

·         The Business and Regional Growth Program reinforces the conditions conducive to the sustainable development of regions and SMEs. This program is in effect from April 1, 2007 to March 31, 2012.

·         The Community Futures Program supports local economic development and strengthens the ability of communities to realize their full potential in a sustainable way.

 

iv)                Infrastructure Programming 

In 2000, the Canada-Quebec Infrastructure Agreement was signed for the implementation of the Infrastructure Canada Program (ICP) within the province.  In July 2005, the agreement was amended to postpone the expiration date for the ICP and reflect the implementation of the Municipal Rural Infrastructure Fund (MRIF).  The Agency also manages some projects under the Canada Strategic Infrastructure Fund (CSIF).   

CEDQ is fully responsible for the management of the ICP.  As to the MRIF and the CSIF projects, the Agency acts as the agent for Transport, Infrastructure and Communities Canada, the department responsible for the funds.   

The ICP targets the renovation, replacement or construction of water, transportation infrastructure and projects with urban and regional economic impacts. 

The Canada-Quebec Infrastructure Works Program is jointly administered by CEDQ and Quebec's Ministère des Affaires municipales et des régions for water-related projects and those of importance to the urban or regional economy, while Quebec's Ministère des Transports oversees road and highway projects. The Government of Quebec is the program's lead player.  

Through this partnership between the Government of Canada and Government of Quebec, the program funds municipal, urban and rural infrastructure projects.  Financial assistance from the two levels of government accounts for roughly 66 2/3% of a project's eligible costs.  Total infrastructure investment in Quebec will amount to $1.5 billion.  The Program will currently terminate on 31 March 2009, unless renewed.  Its total budget allocation is $515 million allocated as follows:

·         $204 million for municipal infrastructure (drinking water and wastewater);

·         $205 million for local transportation infrastructure; and

·         $101.5 million for projects of importance to the urban or regional economy. 

Some Senators were interested in how strategic plans were determined and specifically how the infrastructure priorities were set.  Ms. Manon Brassard, vice-présidente, Opérations, Développement économique Canada explained that in the case of the Infrastructure Canada Program (ICP) and the Municipal and Rural Infrastructure Fund (MRIF), the government of Quebec takes the lead in determining their orientation.  A strategic plan is established via negotiation when Infrastructure Canada and the government of Quebec negotiate a framework agreement.  Under MRIF, Infrastructure Canada instructs delivery agencies to adhere to national program priorities but does allow certain flexibility in terms of execution.  According to Mr. Gilles Pelletier, directeur général, Développement d'affaires et Infrastructures, Développement économique Canada whenever agreements are reached between Infrastructure Canada and a province, the priorities of the program are set out in an annex to the agreement. 

Ms. Brassard explained that in Québec, the process for selecting a project begins with a municipality making an application.  It will first be looked at by the Quebec government’s regional ministry.  If it seems appropriate and the province wishes to prioritize the project it will be selected for presentation to joint committee for consideration.  This committee, which has a federal co-chair and a provincial co-chair, will look at it to ensure conformity to the program, and if it is, it will be submitted to the appropriate ministers for approval. 

 

v)                  Spending Estimates 

According to the 2008-2009 Main Estimates, CEDQ is expecting to receive $287.4 million in appropriations for the current fiscal year, representing about a 27.2 percent decline[17] vis-à-vis last year’s allocation of $394.7 million. Of the 2008-2009 budgetary allocation, a little over 82.8 percent ($238.0 million) of this year’s budget is in the form of contributions and grants payments.   

While the overall responsibility for the programs lies with Infrastructure Canada—they are the ones negotiating the framework agreements with the provinces, CEDQ is the delivery partner.   Ms. Brassard explained that for the programs that CEDQ is responsible for delivering, it receives the application for Quebec and conducts a first analysis to determine its admissibility.  For instance the agency will look into any environmental issues that may arise.  Once a project has been selected, CEDQ will monitor it throughout its life cycle to ensure compliance with the agreement.  It ensures that the money allocated to the project is being spent as agreed by the federal, provincial and municipal governments.  Half way through a programs life, the agency conducts a program evaluation to ensure that the aims or policy objectives of the program are actually met.  The agency also conducts annual independent audits to ensure the processes that are in place are followed and that there is accountability for the money at each step of the way. 

 

c) Indian and Northern Affairs Canada (INAC)[18] 

i)                    Mission 

While Infrastructure Canada plays the leading role in the development and maintenance of partnerships and working relationships with the provinces, territories, municipalities, stakeholder organizations and First Nations, INAC serves as the partner to deliver infrastructure programs to First Nations and in the three Canadian territories: Northwest Territories, Nunavut and Yukon.

 

ii)                  Programs 

INAC is involved in a number of initiatives with Infrastructure Canada.  On September 15, 2006, Infrastructure Canada signed a number of Memoranda of Understanding with INAC to deliver Canada Strategic Infrastructure Fund (CSIF) for Nunavut, Northwest Territories and the Yukon Territories.^[19]   

INAC also administers the First Nations Infrastructure Fund (FNIF), which allows First Nations with the opportunity to access funds to improve capacity for community planning and skills development, and for municipal infrastructure projects involving energy systems, solid waste treatment, and roads and bridges.[20]  With a total program funding of $131M, over five years (from 2007-2011), the FNIF represents a combination of funds from existing federal funding sources, including:

·         The First Nations component of the Municipal Rural Infrastructure Fund (MRIF);

·         The First Nations component of the Gas Tax Fund; and

·         The Capital Facilities and Maintenance Program. 

The Capital Facilities and Maintenance (CFM) is an INAC program that supports the provision of funding for the acquisition, construction, operation and maintenance of community facilities, such as water and wastewater systems, education facilities, on-reserve housing, roads and bridges, administration offices, and the remediation of on-reserve contaminated sites.  The program invests approximately $1 billion per annum in First Nation infrastructure, with one-third of this amount allocated for infrastructure operation and maintenance.   Funding is also provided for training and capacity building. Examples include: training for water and wastewater treatment plant operators, training related to housing, fire protection, physical development plans/capital plans, and infrastructure components of comprehensive community plans.  

Mr. Marc Brooks, Director General, Community Development Branch, Socio-Economic Policy and Regional Operations, Indian and Northern Affairs Canada, explained that  there were some organizational difference with respect to the infrastructure programs in the northern territories.  With the establishment of the Municipal Rural Infrastructure Fund in 2004, approximately $57.5 million over seven years was identified in total for the three territories.  He noted that these funds, and overall responsibility for the program, were established with Infrastructure Canada. However, like the approach taken with regional development agencies elsewhere in Canada, full responsibility for the federal delivery of the program was transferred to the Northern Affairs organization in November 2007.

Under this arrangement, the Northern Affairs organization is now the federal co-chair for the Municipal Rural Infrastructure Fund management committees in each of the three territories.  On recommendation of the management committee, funding decisions are made both by the territorial minister and the Minister of Indian Affairs and Northern Development.  Proposals for federal funding over $5 million require the decision of the Minister of Transport, Infrastructure Canada and Communities; and proposals for amounts over $15 million require a decision from Treasury Board. 

 

d) Industry Canada (FEDNOR) 

i)                    Mission 

The Federal Economic Development Initiative in Northern Ontario (FedNor) was set up in July 1987 to promote economic growth and community development in Northern and rural Ontario.[21] FedNor was created to administer the Northern Ontario Development Fund. The $55 million fund evolved into an organization that delivers regional development programs across Ontario.[22]  While playing a role similar to the regional economic development agencies (ACOA, CEDQ, and WD) that operate in other parts of Canada, FedNor is directly administered by Industry Canada, and its assistance is delivered through the department’s Operations Sector – Economic Development Program Activity. 

FedNor provides advice and funding support to encourage new business and socio-economic development opportunities in Northern and rural communities in Ontario.  The financial assistance accorded to most projects is under the form of contribution agreements between the recipient and the department.  These can be repayable or non-repayable contribution agreements.  From program inception to March 31, 1995, the vast majority of FedNor contributions were non-repayable.   In the 1995 Budget, the federal government announced that assistance to firms would be provided primarily through loans and repayable contributions instead of direct subsidies.^[23]  Since April 1, 1995, the FedNor Secretariat has required that all FedNor contributions to business be repayable. 

 

ii)                  Programs 

FedNor delivers three major community development programs:  

The Community Futures Program (CFP): supports a network of 61 Community Futures Development Corporations, or CFDCs - 24 located in Northern Ontario and 37 in rural Southern Ontario.  CFDCs are incorporated, not-for-profit, community-based development organizations that are governed by local boards composed of volunteer that serve all rural areas in the province.  Through CFDCs, FedNor provides repayable financing for small businesses and social enterprises and strategic community planning and socio-economic development including community based projects. 

The Northern Ontario Development Program (NODP):  an ongoing program, created in 1996, to promote regional economic growth, diversification, job creation and sustainable communities in Northern Ontario.   

The Eastern Ontario Development Program (EODP):  promotes socio-economic development in Eastern Ontario.  FedNor is expected to conduct an evaluation of the program and determine a longer term strategy for EODP beyond March 31, 2008.

 

iii)                Infrastructure Programming 

While Industry Canada remains the delivery agency for infrastructure programs and projects located in Ontario FedNor is involved in delivery of programs in its region of interest.  It is involved in the Canada-Ontario Infrastructure Program (COIP), which is an eight-year, $680.7 million federal investment in partnership with the Province of Ontario.  The program’s purpose is to invest in urban and rural municipal infrastructure in Ontario.  The investments range from “green” municipal infrastructure, culture, tourism and transportation projects. It is expected to stimulate more than $2 billion in capital investment.  

COIP covers two federal initiatives: the Canada Strategic Infrastructure Fund (CSIF) and the Border Infrastructure Fund (BIF).  It is also linked to three government of Ontario municipal infrastructure initiatives: the Ontario Small Town and Rural (OSTAR) Development Initiative, the Sports, Culture and Tourism Partnership (SCTP) Initiative, and the Millennium Partnerships Initiative.  Applications to any of these programs are also considered for COIP funding. 

Industry Canada delivers the Ontario component of the $1 billion national Municipal Rural Infrastructure Fund (MRIF).   

Mr. Jeff Moore, Director General, Sector Governance and infrastructure Programs, Industry Canada reviewed in greater detail the operations of the three programs in Ontario. First, there is the Canada Ontario Infrastructure Program, (COIP), which started in 2000.  The governance around that program involves a management committee with federal and provincial co-chairs.  The management committee determines on the basis of input from ministers and departments, what the priorities will be for that program.  In the case of COIP, the priorities are green infrastructure—potable water, waste water treatment, solid waste disposal and so on.  As a second priority, the committee looks at things like culture, recreational infrastructure, tourism, telecommunications, high-speed Internet and so on.  COIP is more broadly based than some of the other programs. 

Under COIP, applications are submitted to the federal government through the Ontario government.  The province does its own due diligence exercise and then proposes or submits those projects it likes to the federal government for its consideration.  The federal agency then goes through its own due diligence exercise to consider the proposal is eligible for federal assistance.   

The second program was the Canada Ontario Municipal Rural Infrastructure Fund, (COMRIF), which was launched in 2005.  It was managed in a similar fashion as COIP, with a co-chaired management committee.  The priorities of this program were potable water, waste water treatment, solid waste disposal, roads and bridges maintenance.  That was the framework under which the program was operating.  However, unlike COIP, this program operated with a joint secretariat that did the due diligence jointly and made recommendations to the management committee.  All the funds under this program have been allocated.   

The third program supported by Industry Canada is the Canada Strategic Infrastructure Fund.  This again is a little different in the sense that Infrastructure Canada will actually conduct negotiations with the recipient municipality, and the department will develop a submission that will go to Treasury Board for approval.  While FedNor will be consulted through the process, Industry Canada is the federal delivery partner that monitors the agreement and ensures that when claims come in they are paid on time. 

 

e) Western Economic Diversification (WD)[24] 

i)                    Mandate and Role 

Western Economic Diversification is mandated under the Western Economic Diversification Act to promote the development and diversification of the economy of Western Canada and to advance the interests of the Western provinces in national economic policy by supporting a wide range of initiatives targeting three inter-related strategic priorities—innovation, entrepreneurship and community economic development.  

 

ii)                  Major Programs 

The WD’s main activities consist of providing funding assistance in the form of grants and contributions to projects that advances the agency’s strategic outcomes.  WD targets small- and medium-sized enterprises but provides this funding assistance indirectly through industry groups, business organizations and other entities such as the Western Canada Business Services Network (WCBSN).  The funding beneficiaries in turn, work with their respective communities, each other, and with other organizations to ensure that SMEs have access to information and capital. 

The Western Diversification Program invests in projects that support WD's strategic priorities of innovation, entrepreneurship and community economic development, including a number of partnership programs undertaken with other levels of government. 

The Loan and Investment Program allows financial institutions to supply loan capital to clients to whom it would not otherwise make loans. 

The Western Canada Business Service Network is a group of several independent organizations that receive funding from WD to provide a range of services to help create and build small businesses across the West. 

The Western Economic Partnership Agreements (WEPA) are multi-year funding commitments that seek to strengthen economic activity and improve quality of life in western communities. WEPAs are cost-shared equally with each of the four western provinces, with a total of $200 million allocated to initiatives identified as federal and provincial priorities. 

The Urban Development Agreements are partnerships of federal, provincial and municipal governments working in collaboration on broad issues such as inner city revitalization, strengthened innovation or sustainable economic development. 

The Canada-Saskatchewan Northern Development Agreement is a five-year $20 million agreement that will help northern Canadians improve regional economic infrastructure, employment prospects, educational and business expertise.  

The Urban Aboriginal Strategy (UAS), funded by Indian and Northern Affairs Canada, aims to reduce the level of disparity that urban Aboriginal people currently face by tailoring government programs to address the local needs and priorities of Aboriginal people living in cities.

 

iii)                Infrastructure Programs 

WD also delivers a number of federal government programs: 

The Municipal Rural Infrastructure Fund (MRIF) will invest $278 million in the West to improve and increase the stock of core public infrastructure in areas such as water, wastewater, solid waste management, culture and recreation. Delivered by WD in the West, the source of funding for this program is Transport, Infrastructure and Communities. 

The Infrastructure Canada Program (ICP) is a six-year program that has invested over $543 million in more than 1,600 projects that are improving the environment, supporting long-term economic growth and enhancing community infrastructure across the West.  

The Canada Strategic Infrastructure Fund (CSIF) which addresses infrastructure programs that are regional priorities but exceed the scope and capacity of the other infrastructure programs.

 

iv)                Spending Estimates 

According to the 2008-2009 Main Estimates, WD is expecting to receive $269.3 million in appropriations for the current fiscal year, representing about a 6.4 percent increase vis-à-vis last year’s allocation of $253.2 million. Of the 2008-2009 budgetary allocation, a little over 79.9 percent ($215.3 million) of this year’s budget is in the form of contributions and grants payments. 

In speaking about the operating format for WD’s infrastructure initiatives, Marilyn Kapitany, Assistant Deputy Minister, Manitoba Region, Western Economic Diversification Canada explained that there are secretariats across the four western provinces, and in her own province, this is a joint federal-provincial secretariat.  Applications for projects in Manitoba for instance, are received by e-mail because they operate a web-based process.  The communities and municipalities will apply, and then the joint secretariat assesses whether or not the applications are eligible under the criteria of the program.  Eligible applications are then put through a system for determining where the priorities lie in terms of which projects will be funded. That determination is based on the eligible categories, as described by Infrastructure Canada. Then there is a process where representatives of communities will be consulted to ensure that there is geographic dispersion and to look at the biggest priority areas. 

The involvement of WD in a secretariat could vary by program.  Under the Municipal Rural Infrastructure Fund program, WD was a direct member of the management committee.   She explained that the “secretariat would look at the applications, and there would be municipal involvement in how projects would be prioritized. They would be brought to the secretariat, to a management committee meeting for recommendation and then jointly, federally and provincially” it would be assessed for recommendation to ministers.  “If it was, we would then recommend it to our minister in WED, they would recommend it to the ministers in the province, and it would be the ministers who would make the final decision”. 

Now under the Canada Strategic Infrastructure Fund, she indicated that it was basically Infrastructure Canada that made those decisions. Under the Building Canada Fund, she expects that there will be some joint accountability.  The federal partners are currently working on the details now, but there is likely to be a delegation of responsibility to WD for some of the funds. In the case of larger projects, the Minister of Infrastructure Canada will likely be the final approving authority. 

 She also indicated that when framework agreements are being negotiated with the provinces, WD is not present.  There is only one federal agent at the table and that is Infrastructure Canada.  The local federal officials for WD will be asked to comment on certain aspect of the proposed framework agreement as negotiations proceed, but they are not present at the table.

 

 

F. CONCLUDING COMMENTS AND RECOMMENDATIONS 

The Committee heard that it may cost as much as $123 billion to bring Canada’s  infrastructure facilities up-to-date.  There is a serious risk of a breakdown in essential infrastructure that supports the country’s economic activities, that protect the health of its citizens and that contribute to the higher quality of life that Canadians have come to expect.  Bridges, roads, water systems, waste treatment centres—the lists goes on, have all shown signs of deterioration and potential failure.  The responsibility for their upkeep and renewal is dispersed to all orders of government.  Unfortunately, the cost of repair and replacement of infrastructure has long surpassed the ability of municipal governments to carry out the required renovations of the facilities under their care.  At the very least the elimination of the infrastructure gap will necessitate the cooperation and coordination of planning and spending activities among all orders of government.  If municipalities are to be effective partners in the renewal of infrastructure they will need to increase their fiscal capacity to provide these services.  Equally important is recognition that it will take a relatively long time to completely eliminate the infrastructure deficit.  Hence, the revenues sources necessary to address this problem must be stable and available over the long-term. 

The Building Canada Plan is a beginning in that some of its elements deal with the fiscal capacity issues faced by the different orders of governments.  Making the availability of the new tax revenues a permanent feature of municipal fiscal capacity is clearly welcomed.  The establishment of the Federal Gas Tax Fund provides a crucial increase in the overall level of federal infrastructure funding and provide municipalities with more flexibility to plan their infrastructure investments. However, the effectiveness of that assistance may weaken over time as even low levels of inflation are experienced in the economy.  There is concern among municipalities that without an allowance for an escalator provision to protect the value of the transfer in future years the GTF will decline in real value. 

The Committee shares this concern, about the potential erosion of the GTF, with the municipalities.  Therefore, the committee recommends:

 

Recommendation 1 

That the federal government consider introducing in its Gas Tax Fund an escalator provision to protect the purchasing power of this critical investment against inflation and growing needs. 

If municipalities are to undertake the renewal of their facilities they will need to know that the funding is there over the long-term.  Most infrastructure renewal projects extend over several years.  The permanency of the GTF is one way to assist municipalities over the long-term.  Another is to ensure that application based programs extend over longer periods.  This would provide greater certainty, facilitate long term planning and reduce delays created by repeated negotiations sessions on new programs.  The committee therefore recommends:

 

Recommendation 2 

That in the future, the federal government consider using longer terms on its application-based infrastructure programs.