Government Policies - Infrastructure - Canada

Government Policies –

Infrastructure - Canada

By: Paul Young, CPA, CGA

Agenda• What is infrastructure• Images of Infrastructure• How is infrastructure funding?• Infrastructure Funding – Gas Tax• Infrastructure Funding – Build Canada Fund• Analyzing capital budgeting decisions• How to provinces qualified for federal infrastructure funding• Infrastructure gaps• Trends• Issues facing Infrastructure Funding

What is infrastructure• is the basic physical systems of a business or nation;

transportation, communication, sewage, water and electric systems are all examples of infrastructure. These systems tend to be high-cost investments; however, they are vital to a country's economic development and prosperity. Projects related to infrastructure improvements may be funded publicly, privately or through public-private partnerships. Source - http://www.investopedia.com/terms/i/infrastructure.asp

Images of Infrastructure

How is infrastructure funded

• 100% by public sector• P3 (Private Public Partner Ship)• Private Sector

Infrastructure Funding – Gas Tax Funding

the federal GTF provides $2 billion annually, and is legislated as a permanent source of federal infrastructure funding for municipalities. As announced in Economic Action Plan 2013, the renewed federal GTF is being indexed at two per cent per year, to be applied in $100 million increments, which means that it will grow by $1.8 billion over the next decade.

Funding is provided up front, twice-a-year, to provinces and territories, who in turn flow this funding to their municipalities to support local infrastructure priorities. Municipalities can pool, bank and borrow against this funding, providing significant financial flexibility.

Communities are able to use the renewed GTF towards a wide range of projects, which means they have more flexibility than ever in the types of projects they fund. Communities are able to use the federal GTF towards

Source: Government of Canada

Infrastructure Funding – Build Canada Fund

How are Capital evaluated

• In Finance the following things are undertaken when it comes to capital budgeting• Value of the project – Cash Outlay• Inflows

• Revenue – Tolls/Fees• GDP Growth/Retail Sales (i.e. consumer spending, exports)• Operational savings

• Maintenance costs• Opportunity Costs

How do Provinces qualified for funding?

• The New Building Canada Fund was officially launched on March 28, 2014. The Minister of Infrastructure, Communities, and Intergovernmental Affairs has also provided provinces and territories with the information required to start identifying priority projects and apply for funding — including detailed program guides, which are available below.

• The National Infrastructure Component and the Provincial-Territorial Infrastructure Component have different processes.

• Source - http://www.infrastructure.gc.ca/plan/apply-application-eng.html

What is infrastructure gap?

Government and infrastructure gap

Spending on Infrastructure

Municipal government revenue

Issues facing municipalities

• Arbitration• Pension Funding• Lower development fees (scarcity of land)• Downloading of services (provincial)

Example / City of Mississauga

Analysis of Infrastructure

How do you maximize infrastructure funding

• Involving Pensions Funds as part of investing in profitable infrastructure projects (Transits and Toll Roads)

• Fixing the arbitration process as well as costing issues (OPP)

• Open and transparent procurement process• More P3• Speeding up environmental assessment process for

infrastructure projects

Government / Comments• Quotes “he federal government has yet to sign infrastructure funding agreements with five provinces and two

territories—agreements that are a key step before any federal cash can flow to projects underway across the country. Ontario, Saskatchewan, Alberta, Nova Scotia, New Brunswick, Nunavut and Northwest Territories have yet to sign funding deals. Federal officials had expected to have agreements signed before the midway point of the summer construction season, but it has taken larger provinces longer than first thought to finalize the list of projects eligible for federal cash and negotiate the fine print of the plan, including timelines for when projects need to be completed. For Saskatchewan, the deadline of finishing new construction or expansion projects by March 2018 has raised concerns that municipalities may rush the due diligence needed to prepare funding proposals, or may not be able to complete projects on time, said Jay Teneycke, a spokesman for Saskatchewan Government Relations Minister Jim Reiter. The delays in signing deals hasn’t had a major effect on the pace of projects in provinces like Alberta, but municipal officials say there is anecdotal evidence of delays for some work while cities wait to make sure that their projects will land federal cash. Federal officials expect deals to be done the end of the month. Six agreements have been signed so far, including with British Columbia and Quebec, two of the most lucrative.

• Source http://www.canadianmanufacturing.com/regulation/billions-dollars-infrastructure-spending-yet-start-flowing-173930/

Additional information

• For additional information contact:• Paul Young, CPA, CGA

• Paul_Young_CGA@Hotmail.com