Good afternoon, Mr. Chair, committee members. I'd like to thank the chair and committee members for inviting us here today.
My name is Jeff Moore and I'm the assistant deputy minister of policy and communications at Infrastructure Canada.
Joining me today is Stephanie Tanton, director of strategic policy, and Bogdan Makuc, acting director general for program operations.
In the context of this committee's study on infrastructure investment in Canada, I would like to take a few moments to provide you with an overview of the investment in provincial, territorial and municipal infrastructure that Infrastructure Canada has made over the past 15 years.
I would also like to provide you with a sense of what the impact of investment in public infrastructure from all levels of government has been, and how Canada's level of investment compares internationally.
Finally, I would like to give you an overview of the new building Canada plan and our progress in its implementation.
I would like to note that my remarks will be limited to federal investments in provincial, territorial, and municipal infrastructure. Infrastructure Canada transfer payment programs do not target federal assets.
The majority of Canada's core public infrastructure is owned by provinces, territories, and municipalities. ln fact, over 95% of public infrastructure, including highways, local roads and bridges, public transit systems, and water and waste water infrastructure is owned by provinces, territories, and municipalities.
If we look over the past 20 years, there's been a significant change in the approach of the Government of Canada toward investment in provincial, territorial, and municipal infrastructure. A chart which illustrates this change in federal support is contained in chapter 3.4 of budget 2015 on page 190. In case you don't have the budget with you today, we do have some charts that we could circulate or have been circulated for your information.
The mid to late 1990s marked a period of relative underinvestment in public infrastructure by all levels of government. ln fact, gross investments in public infrastructure were at their lowest—as a percentage of GDP—since the late 1940s. However, an improved economic situation laid the groundwork for a major turnaround in public infrastructure investment by the early 2000s by all levels of government.
lt aIso marked a new policy approach for the federal government in recognizing the essential role public infrastructure, including provincial, territorial, and municipal infrastructure, plays in supporting national goals of economic competitiveness, a cleaner environment, and strong communities.
ln the early 2000s, the Government of Canada created a number of infrastructure programs to support infrastructure across the country. The most significant of these programs included: $2.05 billion for urban and rural municipal infrastructure through the Infrastructure Canada program; $4.3 billion for large-scale infrastructure projects that support economic growth provided through the Canada strategic infrastructure fund; $1.2 billion in funding for smaller-scale municipal infrastructure projects, such as water and waste water treatment, and cultural and recreational projects, mainly for smaller municipalities and first nations communities through the municipal rural infrastructure fund; and $600 million in funding for infrastructure projects that help sustain and increase the long-term efficiency of the Canada-U.S. border through the border infrastructure fund.
In August 2002, the Government of Canada established Infrastructure Canada as a new department to provide a focal point for infrastructure issues and programs.
In 2005, the Government of Canada established the federal gas tax fund. This fund provided $5 billion over 5 years for municipal infrastructure including public transit, road, and water and wastewater infrastructure. The design of the gas tax fund included predictable upfront funding for municipalities, who were responsible for choosing projects based on their own priorities. Funds were allocated largely based on population.
In 2007, the Government of Canada created the seven-year, $33-billion Building Canada fund, composed of a suite of complementary funding programs, which included: $8.8 billion in targeted funding through the Building Canada fund for national and regional projects through a major infrastructure component and targeted funding for local projects through a communities component; $20 billion in base funding through the gas tax fund and the provincial-territorial base fund programs, and the GST rebate; over $3 billion in funding to support Canadian trade transportation infrastructure through the gateways and border crossings fund and the Asia-Pacific gateway and corridor initiative; and $1.25 billion for P3 projects through the P3 Canada fund.
Finally, announced in January 2009, as part of Canada's economic action plan, the $4-billion infrastructure stimulus fund supported over 4,000 projects as a short-term boost to the Canadian economy during a period of global recession. The infrastructure stimulus fund was one of a number of infrastructure programs created and delivered via economic action plan 2009.
Over the past 10 to 15 years, we have therefore seen a significant increase in federal support for provincial, territorial, and municipal infrastructure from $400 million in spending in 2002 to over $4.7 billion in spending in 2013.
In that context, though, it is important to bear in mind that the federal funding share of combined provincial, territorial, and municipal infrastructure investments continues to be small. Federal investments rose from a 1990s average of around 2.5% to close to 13% at the peak of stimulus funding in 2010-11 before falling.
Before talking to you about current infrastructure investments, I would like to tell you how Canada's investments compare with those of other G7 nations and share information on the average age of infrastructure across Canada.
How does Canada compare with other countries in terms of level of investment?
According to the Organisation for Economic Co-operation and Development, the OECD, from 2003 to 2013, Canada has significantly increased public sector capital investment in relation to the GDP. In fact, Canada has seen the most increase out of all of the G-7 countries, up 0.7 percentage points to 3.9% from 3.2%. At 3.9% of GDP, Canada ranks as one of the highest among the G-7 countries, second only to France.
While these numbers seem to be good news, there are some limitations. They do not take into account key national differences, including levels in public ownership and geography, nor do they provide any indication of the optimal level of investment needed to support a competitive and resilient economy. Furthermore, these numbers include a broad range of fixed capital investments, including buildings and equipment, assets outside of what we consider core public infrastructure in Canada.
In terms of average age of core public infrastructure, support from the Government of Canada has helped provincial, territorial, and municipal governments contribute to the ongoing renewal and improvement of Canada's core public infrastructure. Data on the average age of core public infrastructure over the past 10 years shows a decline of 2.8 years, from 17.5 years in 2003 to 14.7 years for 2013.
To break this down, from 2003 to 2013, data shows that the average age of road infrastructure has decreased from 16 years to 12.7 years; the average age of public transit infrastructure has decreased from 13.8 years to 11.4 years; the average age of waste water infrastructure has decreased from 17.7 years to 16.6 years; and the average age of drinking water infrastructure has decreased from 19.5 years to 15.6 years.
While this appears to show a positive trend, I would like to point out that there are limitations to the data. Most importantly, it does not tell us anything about whether infrastructure assets are meeting existing needs, will meet future demands, or satisfy broader policy objectives.
Now to current federal investments in infrastructure.
The success of the 2007 building Canada plan laid the foundation for the design of the new building Canada plan—a $53-billion, 10-year infrastructure plan announced in the 2013 economic action plan focused on supporting projects that enhance economic growth, job creation and productivity.
The new building Canada plan is made up of a number of funding programs with complementary objectives. The community improvement fund, which consists of the federal gas tax fund and the incremental goods and services tax rebate for municipalities, provides $32 billion in base funding to municipalities.
The gas tax fund was made permanent in the new plan to provide long-term, predictable infrastructure funding to Canadian municipalities. Furthermore, the fund was indexed at 2% per year to be applied in $100-million increments. This means the fund will grow by $1.8 billion over the next decade, providing a total of $21.8 billion for municipal infrastructure.
Finally, the number of eligible investment categories under the gas tax fund was expanded from six to 17, including sport, tourism, and culture, to increase flexibility for municipalities.
Next we have the $14-billion new building Canada fund, which consists of a national and a provincial-territorial envelope. The national infrastructure component, or NIC, allocates $4 billion for large, nationally significant infrastructure projects that result in positive economic activity.
Eligible investment categories include highways and major roads, public transit, disaster mitigation, and rail, airport and port infrastructure. There are no provincial or territorial allocations under the national infrastructure component; potential proponents apply directly to Infrastructure Canada for funding.
The provincial-territorial infrastructure component, or PTIC, is a $10-billion fund for national, regional and local projects that contribute to economic growth, a clean environment and stronger communities. Under this component, each province and territory receives an allocation that consists of $250 million in base funding and a per-capita allocation. Eligible investment categories are broader than under the national infrastructure component and include highways and major roads, public transit, connectivity and broadband, drinking water, wastewater, solid waste management and green energy.
The PTIC is separated into two specific envelopes, the national and regional projects component of $9 billion and the small communities fund of $1 billion for local projects in communities with populations under 100,000.
Finally, the new building Canada plan provided an additional $1.5 billion in funding for the P3—otherwise known as public-private partnerships—Canada fund, administered by PPP Canada, which provides support for provincial, territorial, municipal, and first nations public-private partnership infrastructure projects.
As you know, the new building Canada fund was launched just over a year ago, on March 28, 2014. Since that time, the focus of Infrastructure Canada has been to work with our provincial, territorial, and municipal partners to bring forward projects for funding consideration.
To date the Government of Canada has announced over $68 million in federal funding under the national infrastructure component for projects with total estimated project costs amounting to $207.5 million, as well as $1.06 billion in federal funding for national and regional projects under the provincial-territorial infrastructure component towards projects with total estimated project costs amounting to $5.79 billion.
Under the small communities fund, we have concluded 11 agreements with the provinces and territories, and all but two jurisdictions have begun the project selection process to date.
ln addition, the new gas tax fund agreements have been signed in all provinces and territories, and the $2-billion national allocation for 2014-15 has been transferred from the federal government to each province and territory. Notably, the new gas tax fund agreements contain commitments by provinces and territories to improve asset management in their respective jurisdictions.
Before I conclude I would like to mention that budget 2015 has proposed to provide PPP Canada with $750 million over two years starting in 2017-18, and $1 billion annually ongoing thereafter for a new public transit fund. The fund will provide support to projects that are delivered through alternative financing and funding mechanisms involving the private sector that demonstrate value for money for taxpayers, including public-private partnerships.
At Infrastructure Canada, our plan for the upcoming year will be to continue to work diligently to deliver the new building Canada plan.
I hope my remarks have been helpful for the committee, and my colleagues and I are happy to answer any questions you may have.
Thank you very much.