During the longest election campaign in Canadian history, Prime Minister-designate Justin Trudeau and the Liberal Party of Canada (Liberals) made significant promises for increased federal infrastructure spending over the next 10 years. Now that the votes have been counted and a Liberal majority will control the House of Commons, we wanted to highlight what some of those promises were and what they might mean for Canada’s infrastructure and construction industries.
INCREASED INFRASTRUCTURE SPENDING
Relative to spending commitments in the existing federal budget, the amounts promised by the Liberals for additional infrastructure are fairly significant. Although existing infrastructure commitments have been reported differently amongst the parties, the Liberals have stated that they will nearly double the federal infrastructure budget from C$65 billion to C$125 billion over the next decade. This increase includes plans to immediately double federal infrastructure spending to over C$10 billion per fiscal year during their first two years in office. New funding would be split evenly among three categories of infrastructure: public transit, social and green (each as described below). Each of these infrastructure categories is to receive approximately C$1.7 billion per fiscal year in new funding for the first two years, and C$1.2 billion in new funding for the following two fiscal years. Increased infrastructure spending and other new government spending would be paid for using deficits of up to C$10 billion per fiscal year during the first two years.
FOCUS ON PUBLIC TRANSIT, SOCIAL INFRASTRUCTURE AND GREEN PROJECTS
With the promise of increased federal infrastructure dollars available, stakeholders in the infrastructure and construction industries will want to know exactly where and how such funds are to be spent. Over the next four years, the Liberals have promised to dedicate nearly C$6 billion in additional infrastructure spending on public transit, a further C$6 billion on social infrastructure and another C$6 billion on green projects. If campaign promises are met (and the Liberals maintain their position in government), then each category of infrastructure is set to receive almost C$20 billion in additional federal dollars over the next decade (i.e. above existing budget commitments).
Although few details have been provided with respect to the specific transportation infrastructure projects set to receive increased federal funding, the Liberals have stated that they intend to “maximize the number of public transit projects built in Canada”, suggesting that the bulk of such additional funds may be spread out among a larger number of potentially smaller or mid-size projects. Promises to fund the building or extension of light rail transit in British Columbia, however, suggest that at least a few larger scale projects may be included in the mix. In addition, transportation infrastructure projects that support exporting industries may see funding through the existing New Building Canada Fund, which is set to be re-focussed on funding roads, transportation corridors, bridges, ports and border gateways. It is unclear whether the Liberals will be making any changes to the Public Transit Fund, announced as part of the 2015 federal budget, which had earmarked C$750 million per fiscal year in support of large transit projects, increasing to C$1 billion per year after 2018.
Social infrastructure projects slated to receive federal funding include new or re-furbished affordable housing units, seniors’ facilities, early learning and childcare facilities, and cultural or recreational infrastructure.
The third category of infrastructure spending articulated in the Liberal platform involves green infrastructure projects, which appear to relate to renewable energy and other environmentally friendly initiatives. Such projects may include water and wastewater facilities, “climate resilient infrastructure”, clean energy, improved storm water systems, flood prevention dams and projects to remediate contaminated sites to facilitate new construction.
PARTNERING WITH PROVINCES, TERRITORIES AND MUNICIPALITIES
The role of provinces, territories and municipalities in administering the increased federal infrastructure dollars remains unclear. Although specifics have not yet been articulated, the Liberal platform includes promises to provide funding in a manner that is “in full respect of provincial jurisdiction,” with plans to develop bilateral agreements with provinces and territories regarding long-term federal infrastructure funding. In addition, the Liberals have stated that any federal funds earmarked for infrastructure spending that have not been committed by the end of any fiscal year will be automatically transferred to municipalities, raising the possibility that municipalities may also have greater direct control over how such funds are spent.
ALTERNATIVE FINANCING MODELS AND PUBLIC-PRIVATE PARTNERSHIPS
In his November 2014 speech before the Canadian Council for Public-Private Partnerships, now Prime Minister-designate Trudeau acknowledged that private capital will be important in complementing federal infrastructure investments. He also stated that innovative financing models may be needed, and that the federal government should look to British Columbia and Ontario (and specifically Infrastructure Ontario) for inspiration on ways to move forward. Although the Liberal platform made no express reference to public-private partnerships, or the role of PPP Canada in new infrastructure spending, it appears likely that the public-private partnership model will continue to play an important role.
The Liberals have also promised to create a new entity, the Canada Infrastructure Bank, to specifically provide financing for infrastructure projects. The Canada Instructure Bank’s mandate would include providing loan guarantees and small capital contributions to assist provinces or municipal governments that lack sufficient capital to complete their infrastructure projects. In addition, the Liberal platform suggests that the Canada Infrastructure Bank may play a role in arranging financing, including by bundling small projects into larger investment offerings, reducing financing costs (possibly by taking on financing risk) and offering loan guarantees. The Canada Infrastructure Bank is also slated to issue “green bonds” (an alternative to the regular bonds currently issued by the federal government) that will allow investors to target their investments towards green infrastructure projects.
With the Liberal platform promising C$125 billion in federal infrastructure spending over the next decade, those in the infrastructure and construction industries are poised to participate in the development of new infrastructure projects across the country. However, the specifics of where and how these funds will be used, and the role of new federal agencies such as the Canadian Infrastructure Bank, remain to be seen. With many of the details yet to come, stakeholders in the infrastructure and construction industries may simply have to wait for further announcements and plans to emerge as Prime Minister-designate Trudeau builds his cabinet and develops more comprehensive plans.