Is action enough?

March 2011

With 20 months to go before the 2011 deadline to complete stimulus-funded projects, is the plan working the way the federal government had hoped? Some participants said that municipalities have already been given leeway. Will there be 
a flexible deadline or new conditions?

John Baird: I understand that the municipalities want maximum flexibility, but this is a job creation program to stimulate the economy and we want to stimulate it in 2009 and 2010, not in 2012 or 2015. Municipalities across the country have come forward with 3,000 projects they say can be done by 2011. We’ll take them at their word and hold them accountable.

Ric Robertshaw: I’m happy to hear Minister Baird recognizes that we need to now move into an action phase.

Andy Robinson: The current program has rolled out more than it appears. Many projects on the list aren’t brand new but weren’t planned to be put in place in the next few years—they’re being brought forward. Operations and maintenance is another story and it has been a major issue for a long time. You can build it, but you have to be able to maintain it.

Mike Atkinson: “Funds aren’t flowing quickly enough.” Anyone who makes that statement as their opening line in talking about the trilateral infrastructure funding process does not know what he or she is talking about. It’s the municipalities that have to do all the heavy lifting. They have to bring the bids in and manage and administer projects. The feds don’t pay anything until the bills start coming in.

"Not just action, but policy decisions are required from the government." — Chantal Guay

Right or Wrong

There are 3,000 potential projects 
that could receive stimulus funding, 
but are they the “right” projects?

JB: You can’t spend six months or a year looking at everything ten times over. It’s not up to the federal government to go over 100 different considerations—we can’t micromanage every project, that’s a recipe for disaster.

AM: A lot of projects are being called “shovel-ready,” but if something is really a priority it should already be part of a long-term plan. In terms of job creation, some of the projects being funded will not really stimulate the economy.

Mario Iacobacci: Are these the right projects? The reality is, we don’t know. Maintenance is a no-brainer, but in terms of new projects, you need a cost-benefit analysis and few projects have been subjected to one.

Gerard Kennedy: There are some safe projects out there that will provide a benefit to the public […] action isn’t enough to say whether a project is the right project.

"Are these the right projects? The reality is, we don't know." — Mario Iacobacci

Life-Cycle Costing

The capital investment in infrastructure is a small percentage of the total costs to repair and maintain that infrastructure. Some figures show it’s as little as five to ten per cent of the total cost of infrastructure. Will municipalities asking for funding through federal programs have the capacity to operate and maintain an asset once they acquire it?

Reg Andres: Right now the major change is introducing life-cycle costing into the management of infrastructure. We won’t recognize its significance for another 10 or 15 years when we complete the change—we’re only now making traction.

RR: The National Asset Management Working Group is a strong proponent of the fact that municipalities need to be reviewing the infrastructure they have and programming the types of improvements needed in a very methodical way.

GK: The industry needs to be advised of the fact that it’s not just a bunch of money out there—in fact, that’s probably the worst part of the program, because that’s what the public is seeing right now. They’re not seeing the need for their children and grandchildren not to be paying for our shortcomings.

Custodianship

Who owns and is responsible 
for critical infrastructure?

MA: There’s a role for all levels of government; the same goes for funding. Lower-level governments don’t have the wherewithal or the tax base to properly maintain the amount of infrastructure that’s been downloaded to them.

GK: Many municipalities don’t have the capacity to manage new projects, and should be able to work with the province and the federal governments. That said, if you’re the custodian of an asset, you need to maintain the asset and show a plan for amortizing its upkeep. Anything else is utterly unsustainable.

JB: The constitution assigns different responsibilities to different levels of government and we [the federal government] respect that. We don’t do operations funding for different levels of government. We’ve got to be realistic: we’re running a $50-billion deficit this year to help stimulate the economy. We’re not cutting transfers to municipalities. In fact, we’re doubling them. But in the end, municipalities have to balance their budgets.

"For two years, the Building Canada money pretty much stayed on the shelf. Only five per cent of the funds actually made it out the door. Now this need to announce everything could undermine the infrastructure program’s sustainability." — Gerard Kennedy

Long-Term

Funding over the next two years 
is guaranteed. What about the 
next ten years?

MA: The focus should really be the future—what comes after 2011, after Building Canada. Currently the only permanent federal program is the Gas Tax Fund.

MI: What’s the impact of this infrastructure spending beyond stimulus and job creation? Stimulus is only one objective when dealing with assets that are this long-lived. What’s at stake is Canada’s productivity growth.

Chantal Guay: There’s an incredible opportunity for innovation and technology if we take an intelligent approach to infrastructure renewal in Canada. But we have to make it happen. Throwing money at it is a start, but we have to approach it in other ways and administer a long-term approach.

Casey Vander Ploeg: One problem with current stimulus funding is that it’s being rolled out in response to a short-term crisis. I don’t think it’s ever been or ever will be a funding issue—it’s about asset management. We have to stop this cycle of build-and-forget.

GK: We need to have funding, but the risks today are feast and famine. There is money committed, but you need a formula for how it will be sustainable. For the two years prior, the Building Canada money pretty much stayed on the shelf. Only five per cent of the funds in the 2007 budget actually made it out the door. Now this need to announce everything could undermine some of the principles that should be sought in terms of a sustainable infrastructure program.

You can build it, but you have to be able to maintain it." — Andy Robinson

Cookie Cutter Canada?

The need for more national standards.

JB: I’m not going to micromanage their [municipal] projects. Municipalities operate differently in every province. The municipality needs to decide [what project to prioritize].

Andy Manahan: RCCAO did a study a few years ago on bridges in Ontario, and one of the things we found is that quite a number of municipalities weren’t even meeting the legislated two-year review. There’s a need for upper orders of government to have some involvement in asset management, because this clearly points to the fact that many municipalities don’t have the capacity to properly manage their assets.

MA: It would be far-fetched to suggest that someone in Ottawa would know better than someone in Vancouver what’s best for Vancouver.

GK: Municipalities could have used some help in managing how to make that trade-off [between jobs and good-value projects] work when they only have a certain amount of staff and resources during the application process [for stimulus funding]. There’s a constitutional limitation on the federal government with some healthy aspects, but I think we have to be able to act.

MI: Solutions are varied and they don’t all require standardization. For example, municipal water authorities need to look at life-cycle management and full-cost recovery. That doesn’t require the cooperation of all three levels of government; it requires good management and better water rates.

The Gap

Is all this funding—the $33-billion 
Building Canada Fund and $4-billion stimulus funding—shrinking the infrastructure deficit?

JB: It’s going to make a major difference. But I don’t imagine any area of government where you make an investment and the deficit is eliminated.

CVP: Some say the total government infrastructure deficit is $400 billion—growth of that backlog is much higher than anticipated. It’s now at upwards of $10 billion per year. To solve this problem in the long term we would have to go much further than we have before, which is beyond what our three levels of government can afford. We need to explore alternative financing models.

Mario Iacobacci, Centre for Transportation Infrastructure, Conference Board of Canada; Michael Atkinson, President, Canadian Construction Association (CCA); Ric Robertshaw, P.Eng, Canadian Public Works Association and Co-chair of the National Round Table on Sustainable Infrastructure (NRTSI); Chantal Guay, P. Eng., M.Env., Chief Executive Officer, Engineers Canada; Andy Manahan, Executive Director, Residential and Civil Construction Alliance of Ontario (RCCAO); Andy Robinson, P. Eng., Chair, Association of Canadian Engineering Companies; Reg Andres, P.Eng, Canadian Society for Civil Engineering and Co-chair of NRTSI

Closing Shots

Soundbites, buzzwords and 
bottom lines.

JB: My biggest priority is just to make things happen in infrastructure. Governments have been too slow in the last 20 years on infrastructure and we’re working to speed that up. Our mandate is action.

CG: We need to look at the long-term so we don’t recreate the problems of the past. Not just action, but policy decisions are required from the government.

MI: The government responsible for maintaining an asset should be responsible for financing it. Eventually we should move to self-financing assets—user pay.

RA: I hope stimulus funding will address some of the backlog [in infrastructure funding], but I also hope when we come out of this we’ll have a very different way of managing infrastructure.