Wednesday
Jan062016

The messy necessity of infrastructure

Expect to hear a lot about infrastructure in 2016.  And with good reason. Canada, its provinces and municipalities are facing an infrastructure crisis on several levels.  Some of the challenges include identifying the need for new infrastructure projects, finding the money to repair the current inventory of built infrastructure, and determining how to finance new infrastructure projects.  Politically, the infrastructure plight has not gone unnoticed.  In their 2015 provincial budget, the Ontario Government announced a $130
billion 10 year infrastructure plan and during the 2015 election campaign, the Trudeau Government pledged $10 billion in deficit spending over the next three years on infrastructure projects.  

While we wait to see how those promises will be fulfilled, there’s no doubt that the condition of our built infrastructure of roads, highways, sewers, bridges, rail, ports and land border crossings has an impact on the ability of businesses in every corner of the province from -Peterborough to Ottawa to Thunder Bay, Sarnia and the GTA- to get their goods to market.  The business perspective on this issue is straight forward: solid infrastructure in our communities, across our provinces and at our border crossings is imperative to a successful economy.  

The Peterborough Chamber of Commerce and about a dozen other Ontario Chambers, led by the London Chamber of Commerce, took this issue to the national stage at the Canadian Chamber Annual General Meeting.  There over 300 delegates representing chambers of commerce, boards of trade and the business community across the country voted in favour of expressing, with one united voice, the significance
of infrastructure investment to the business community and the everyday lives of Canadians.

The research that went into building a case for a long term, stable commitment to infrastructures gives us a good overview of the infrastructure deficit in Canada:

 

  • Infrastructure spending in Canada as a percentage of GDP declined annually from 3% in 1960 to 1.5% by 2004
  • Around the world the average long run expenditure on infrastructure is 3.8% of GDP per year (just to maintain the current infrastructure inventory in Canada would require 2.9% of GDP per year)
  • A recent Mowat Centre study shows the federal share of spending on infrastructure has declined from 31% to 10% over the last 50 years

 

The result is a dramatic shift of infrastructure responsibility to municipalities.  According to the Mowat Centre municipalities now account for 67% of all infrastructure spending, which is up 38% from 1961.  The impact is shocking and very real as Peterborough County Warden J. Murray Jones pointed out in his speech to the Rotary Club this week,“With only so much money in the coffer and numerous roads and bridges in need of repair, Jones said it's hard to make that money stretch” (Peterborough Examiner, January 5, 2016.)  The County
estimates that over the next 10 years $135 million will be needed to maintain existing road and bridge infrastructure.  And while municipalities seek federal and/or provincial funding, they still have to come up with matching grants, or half the funding. 

The Canadian Centre for Policy Alternatives (CCPA) says the cumulative effect of underinvestment over the past 50 years means Canada is missing out on $145 billion of infrastructure.  

Current programs designed to mitigate the pressure of infrastructure needs include the Building Canada Fund, the Green Infrastructure Fund, the GST rebate for municipalities, and the permanent Gas Tax Fund, which is indexed at two percent.  However, even with provincial programs on top of the aforementioned federal programs, a funding divide still exists.  

To bridge that divide the business community is asking that the federal government:

 

  1. Increase, by at least 20 percent, the funds allocated through the 10-year Building Canada Plan.
  2. Review global best practices in public infrastructure financing, and investigate the feasibility of introducing new public and private financing tools that deliver value for the money invested.
  3. Ensure that investments in public infrastructure are targeted to projects that result in the largest net gains for the economy, and must include strategic investments in Canada’s major economic hubs, gateways, and public transit systems.
  4. Validate the effectiveness of P3 projects to ensure that all parties are able to efficiently manage those projects so that they result in a quality product that is delivered in a timely manner with a reasonable return on investment.
  5. Provide stable, predictable and equitable financing in all projects, including advance notice of available funds, criteria and application process to ensure the projects needed have access to the funds available in a timely manner. 

 

The suggested revenue tools and long term strategy in the recommendations are geared to creating a Canada that is competitive, focussed and reaping the greatest economic benefit for all of its communities. Infrastructure is messy, it’s not very flashy, not cut and dry. Repairs and the building of infrastructure can cause inconvenience to communities and businesses, but in the end, that same infrastructure allows our businesses to thrive, it creates jobs and moves communities forward.

Comment through the "Peterborough Chamber" group of LinkedIn. 

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