In pre-election budget, Liberals look to speed up infrastructure spending by offing cash directly to cities

OTTAWA—A one-time $2.2-billion windfall in the federal budget to help Canadian cities improve roads, bridges, highways and water systems won’t become an annual tradition, Finance Minister Bill Morneau warned March 20, even in the face of what he acknowledged were problems getting the original projects off the ground.

The multibillion-dollar top-up announced March 19 will double the money cities receive through the federal gas-tax fund, which sends money directly to municipalities each year.

The spending blueprint says the Liberals have approved more than 33,000 projects worth about $19.9 billion in federal financing under new and existing infrastructure programs, but also acknowledges spending has been slower than anticipated, including “some jurisdictions being slower to prioritize projects.”

Morneau called out four provinces on March 19 in explaining the Liberals’ decision to use the gas-tax fund to kickstart more projects, naming Ontario, Saskatchewan, Manitoba, New Brunswick — provinces with conservative-minded governments that don’t always co-operate readily with the federal Liberals.

Topping up the fund was the appropriate response, Morneau said March 20 at a post-budget event in Toronto.

“We haven’t been able to do exactly what we expected and that was the reason for the municipal infrastructure top-up,” he said.

“What you shouldn’t do is take this as a conclusion on how we will go forward, but what it is, is an important way for us to move forward now in getting some projects that are stalled going.”

Federal infrastructure funding is regularly subject to delays because funds only flow once receipts are filed, which causes a lag between when work occurs and money is paid out.

An internal analysis of the Liberal program pointed to several issues to explain the pace of spending: too many low-value projects requiring the same detailed review as those much larger in size and delays in getting provincial and territorial project recommendations.

Elections in Ontario and New Brunswick last year paused provincial project approvals during the campaign. There are also delays in approvals when a new government is elected — as was the case in Ontario and New Brunswick — as new office holders learn their files and review government operations.

Even more spending will flow through funds managed by the Federation of Canadian Municipalities. The federation’s president, Mayor Vicki-May Hamm of Magog, Que., said the measures are a direct response to pleas from cities to modernize their relationship with Ottawa so they don’t have to rely solely on the provinces.

Under the federal Liberal government’s infrastructure program, federal spending will top $186 billion over the next decade.

How successful the plan has been to date is an area of contention between the Liberals and the parliamentary budget watchdog, who most recently questioned anew whether increases in federal spending have created the jobs promised by the government.

Other investments have, according to provinces, fallen short of what was required, particularly on rural broadband internet service. Provinces had asked the Liberals to find a way for the Canada Infrastructure Bank to finance work, and pressed for better co-ordination in spending to connect remote or rural communities.

The Liberals created the bank in 2017 to take $35 billion in federal financing and use it to leverage three to four times that from the private sector to help pay for major highways, bridges, and water and electrical systems. To get private money involved, projects needed to produce revenue streams — tolls, for instance. Fees for internet service are already typical, but serving remote, sparsely populated areas with high-speed lines is a financial challenge.

On March 19, the Liberals added a new component to the Crown agency, earmarking $1 billion over 10 years for rural broadband, but mandating the bank find at least $2 billion more in private capital for the initiative. It was part of a plan to deliver up to $6 billion over a decade to connect everyone in the country to high-speed internet by 2030.