Backgrounder - Funding the Plan

November 6, 2007

Funding the Building Canada Plan

The Government of Canada understands that for Canada to continue to grow and prosper, it needs world-class, modern infrastructure. That is why the Government of Canada is working with provinces, territories, municipalities and various stakeholders to implement Building Canada, the Government’s unprecedented, $33-billion infrastructure plan that will provide funding to meet the nation’s pressing public infrastructure needs.

A) Base Funding for Provinces and Territories

The Building Canada plan provides $25 million in base funding annually to each province and territory over seven years, for a total of $175 million for each jurisdiction.  This represents an expenditure of $2.275 billion over the full period. Jurisdictions with smaller populations and less fiscal capacity will derive the greatest benefit from this investment because it is not tied to a per capita distribution formula.

This Provincial-Territorial Base Funding will support all of the categories under the Building Canada Fund as well as non-core National Highway System infrastructure and the safety-related rehabilitation of infrastructure in all eligible categories.

This initiative will provide flexible, predictable, long-term funding. Infrastructure initiatives funded through the Provincial-Territorial Base Funding will be cost-shared with provinces and territories to maximize investment by all levels of government. The federal funding will be provided up-front and on a regular basis, and provinces and territories will be able to bank and pool funds, which provides additional flexibility.

B) Base Funding for Municipalities

Under the Building Canada plan, over $17.6 billion will be provided to municipalities through the Gas Tax Fund and the Goods and Services Tax Rebate over the next seven years. This represents over half of total funding under the plan.

This stable, predictable and flexible funding allows Canadian municipalities to plan for the longer term, using a dedicated source of funds to address their ongoing infrastructure needs.

Gas Tax Fund

Budget 2007 extended the Gas Tax Fund from 2010 to 2014 at $2 billion per year. Over the next seven years, municipalities will receive $11.8 billion through this mechanism, with amounts to reflect communities’ population size.

The Gas Tax Fund is focused on supporting environmentally sustainable municipal infrastructure such as public transit, water and wastewater infrastructure, community energy systems, the management of solid waste, and local roads and bridges that enhance sustainability outcomes.

The Gax Tax Fund 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.

Municipalities can pool, bank and borrow against this funding, providing significant additional financial flexibility. To ensure accountability to Canadians, communities report on their use of the fund on an annual basis.

The Gas Tax Fund is complemented by the Goods and Services Tax Rebate, which returns 100 per cent of the Goods and Services Tax paid by municipalities. Over the next seven years, this initiative is expected to provide communities with over $5.8 billion in 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 municipal taxpayers for this funding. Separate reporting is not required by the Government of Canada.

C) Building Canada Fund

Provinces, territories and municipalities will also be able to access funding from the Building Canada Fund. This fund is the Government of Canada’s new flagship infrastructure program. It complements the other funding programs by providing a balanced response to addressing local and regional infrastructure needs, while advancing national priorities that are important to all Canadians.

Funding will be used to support public infrastructure owned by provincial, territorial and municipal governments and entities, as well as private industry and the non-profit sector. Funding will be allocated for projects in each province and territory based on its population. In the territories, this funding will be added to and administered through their Territorial Base Funding, described above.

The Building Canada Fund will total $8.8 billion over seven years, and will deliver results in three areas of national importance: a growing economy, a clean environment, and strong and prosperous communities.

The program will operate through two components:

The Major Infrastructure Component (MIC) and the Communities Component.

1. Building Canada Fund ― Major Infrastructure Component

The Major Infrastructure Component will target larger, strategic projects of national and regional significance. Under the MIC, two-thirds of funding, on a national basis, will be targeted to the national priorities of drinking water, wastewater, the core National Highway System, public transit and green energy.  This will be of particular interest to larger cities – those with populations over 100,000. All projects will be cost shared, with the maximum federal contribution to any single project being 50 per cent or one-third of funding when municipalities are involved in project funding.  For projects where the asset is owned by a private entity, the maximum federal contribution will be 25 per cent.

Under the Major Infrastructure Component, projects will be selected through federal-provincial discussions to establish priority investments, and with municipalities and the private sector, where appropriate. All projects will be subject to due diligence review to evaluate the extent to which they meet economic and environmental criteria.

2. Building Canada Fund ― Communities Component

Smaller communities have unique challenges. To help them, the Communities Component focuses on projects in communities with populations of fewer than 100,000. This funding will help them address infrastructure pressures and will serve as a complement to the Gas Tax Fund funding. 

Community projects will be financed among the federal and provincial governments, and municipalities, with each contributing one-third.

Funding from the Building Canada Fund complements the Gas Tax Fund funding and the Goods and Services Tax rebate which is available to all communities, big and small.

Under the Communities Component, projects will be selected through an application-based process and assessed against the funding criteria.

D) Gateways and Border Crossings Fund

Guided by the National Policy Framework for Strategic Gateways and Trade Corridors, the $2.1-billion Gateways and Border Crossings Fund will focus on strategic corridors linking to international gateways. Eligible projects will include improvements to core National Highway System routes impacted by international trade volumes; inter-modal connectors and facilities; international bridges and tunnels; rail/road grade separations; short-line railways; short-sea shipping and marine ports; intelligent transportation systems; as well as transportation planning studies, research and development, trade promotion and gateway marketing strategies.

To date, the Government of Canada has signed two Memoranda of Understanding with six provincial governments. These agreements commit the Government to a study of strategic ports and commercial corridors in Central and Atlantic Canada.

At least $400 million from this fund will be devoted to the construction of the new access road linking Highway 401 to the new bridge crossing between Windsor and Detroit, the busiest gateway for Canada-United States trade, and one of the most significant commercial trade corridors in the world.

The Asia-Pacific Gateway and Corridor Initiative is Canada’s most advanced gateway strategy, and was significantly enriched through the Building Canada plan. This $1 billion initiative will advance infrastructure improvements, as well as policy, governance, technology and marketing measures.

E) Public-Private Partnerships (P3s)

The Government of Canada recognizes that private capital and expertise can make a significant contribution to building infrastructure projects. The benefits of using P3s include: access to private-sector capital and expertise, more projects being funded, and faster completion of projects. Successful Canadian P3s infrastructure projects include the Confederation Bridge linking Prince Edward Island and New Brunswick, and the Canada Line transit project in British Columbia.

To help foster the use of P3s, the Government has created the $1.25-billion Public-Private Partnerships Fund. This fund will support innovative projects that provide an alternative to traditional government infrastructure procurement.

The Government of Canada is also 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 the identification of P3 opportunities at the federal level. The Minister of Transport, Infrastructure and Communities and the Minister of Finance are working collaboratively on the details of the P3 Office and the P3 Fund.

The Building Canada plan also encourages the development and use of P3s by requiring that this option be considered in larger infrastructure projects funded through the Gateways and Border Crossings Fund and the Building Canada Fund. All projects seeking $50 million or more in federal contributions will be required to be assessed and considered for the viability of the P3 option.

Next Steps

The Government of Canada is moving quickly to finalize agreements with provinces and territories.

While the Government finalizes agreements, funds continue to flow to communities across Canada through the existing Gas Tax Fund, the Public Transit Fund, the Public Transit Capital Trust, and earlier infrastructure funding initiatives.

For more information on the Asia-Pacific Gateway and Corridor Initiative, please visit www.tc.gc.ca/canadasgateways/apgci/index.html.

For more information about the Ontario–Québec Continental Gateway and Trade Corridor, please visit: www.continentalgateway.ca/index2.html.