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Back to National Funding of Road Infrastructure

Under Canada’s Constitution Act, the provinces and territories have exclusive jurisdiction over the building and maintenance of national highways.  Local and municipal roads are under the jurisdiction of municipal governments.  The federal government administers a number of federal funds to assist with road infrastructure projects, many of which are structured through bilateral cost-sharing agreements with specific provinces, territories or municipal governments for specific projects.  Most of the monies for these various funds come from consolidated revenue, which is then allocated through a budgetary process.  However, part of the federal gas tax revenue is earmarked for municipal infrastructure projects under the Federal Gas Tax Fund.

Provincially, the general practice is not to tie fuel taxes to highway or road infrastructure projects.  In most provinces, expenditure on highway infrastructure projects is allocated under a government budget from the general revenue rather than from a particular tax source.  Public-private partnerships have also been utilized to fund major road infrastructure projects.

I.  Introduction

Under the Constitution Act, 1867, the provinces and territories of Canada are exclusively responsible for enacting legislation on “Local Works and Undertakings,” which includes highways.[1]  According to Transport Canada, provincial and territorial governments are responsible for the “planning, design, construction, operation, maintenance and financing of highways within their jurisdiction.”[2]  Nonetheless, the federal government contributes to funding for highway or road construction projects under specific legislation or programs of departments and agencies.[3]  Local road infrastructure is largely under the jurisdiction of local municipalities, which receive a large portion of their revenue through property taxes.  However, they also receive funding assistance, typically through tax transfer agreements, from both the federal and provincial governments.

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II. National Road Infrastructure Funding

A. Federal Funding

Canada’s approach to federal government assistance for highway infrastructure funding has historically been described as ad hoc as opposed to long-term.[4]  There does not appear to be a dedicated federal tax that only supports building and/or maintenance of national highways or roads.

As noted above, although “highways are the responsibility of the provinces and territories, the federal government has a long history of providing assistance for highway construction in Canada.”[5]  Federal taxes, including the excise tax on gasoline and diesel fuel, go into the general coffers and help sustain a number of federal programs.  Federally funded infrastructure programs that assist in funding highways and roads, as detailed below, are primarily structured through bilateral cost-sharing agreements with specific provinces and territories.  The majority of these infrastructure funds are administered by Infrastructure Canada.

In 2007, the federal government of Canada launched a Building Canada Plan, which aimed to provide “$33 billion in stable, flexible and predictable funding to provinces, territories and municipalities, allowing them to plan for the longer-term and address their ongoing infrastructure needs.”[6]  Some of the funds created under the Plan that are still accepting applications and are not set to wind down include the Federal Gas Tax Fund, Building Canada Fund, and Provincial-Territorial Base Fund.

1. Federal Gas Tax Fund

Two billion[7] of the approximately five billion[8] dollars in revenue the federal government receives annually from the Federal Gas Tax is allocated to the Federal Gas Tax Fund.  The Fund supports municipal infrastructure projects, which can include building and maintaining local municipal roads.  According to Infrastructure Canada,

[e]very municipality in Canada receives a portion of the Fund.  The funding allocation is determined at the provincial or territorial level based on population.  Funding is provided up front, twice a year to provincial and territorial governments or to the municipal associations which deliver this funding within a province, as well as to Toronto.  Projects are chosen locally and prioritized according to the infrastructure needs of each community.  Municipalities can pool, bank and borrow against this funding, providing significant financial flexibility.[9]

2.     Building Canada Fund

The Building Canada Fund works by “making investments in public infrastructure owned by provincial, territorial and municipal governments, and in certain cases, private sector and non-profit organizations.  Funding is allocated to each province and territory based on population.”[10] The Building Canada Fund is a cost-shared contribution program with a “maximum federal contribution to any single project being 50 per cent.”[11]  The Fund’s aim is to “build a stronger Canadian economy by investing in infrastructure projects that contribute to increased trade, efficient movement of goods and people, and economic growth.”[12]  One of the categories of investments that support economic growth includes the National Highway System.[13]

3.  Provincial-Territorial Base Fund

The Provincial-Territorial Base Fund is a Can$2.275 billion fund that “provides predictable funding to provinces and territories to address core infrastructure priorities.”[14]  It also requires the recipient to “sign a Provincial-Territorial Base Fund Agreement with the Government of Canada.”[15]  According to Infrastructure Canada, “[t]o receive funding, provinces and territories must submit a capital plan containing a list of initiatives for federal cost-sharing.  The plan includes a brief description of each initiative, the eligible category of investment and the total eligible cost.  The federal government will contribute up to 50 per cent of the plan’s eligible costs for provinces and up to 75 per cent for territories.”[16]

4.  Other Funds

The following funds have stopped accepting applications and will be winding down in the next few years.

a.  Canada Strategic Infrastructure Fund

The Canada Strategic Infrastructure Fund (CSIF) is a cost-shared contribution program for large-scale infrastructure projects, which comprises five categories of investments.  Highway infrastructure is included in the investment category that supports “large-scale projects that facilitate the movement of goods and people on Canada’s National Highway System – or highways that connect to the system.”[17]  The projects are said to be “[in] support of sustaining the economic growth and enhancing the quality of life for Canadians.”[18]  The federal government can contribute up to a maximum of 50% of the total eligible costs of the projects.  Projects are typically “chosen according to regional and national infrastructure priorities,”[19] in consultation with provinces, territories, and municipal governments as well as the private sector.[20]  Moreover, funding is delivered through negotiated agreements with provincial, territorial or local governments as well as nongovernmental organizations, private companies and individuals.[21]  The CSIF was established under the Canada Strategic Infrastructure Fund Act.[22]

b.  Border Infrastructure Fund

The Border Infrastructure Fund (BIF) is also a cost-shared contribution program that funds “infrastructure projects that help sustain and increase the long-term efficiency of the Canada-US border.”[23]  The focus is on projects at or near the busiest Canada-US border crossings.  The Canadian government has contributed up to a maximum of 50% of total eligible costs.

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III.  Provincial Road Infrastructure Funding

It appears that provincial-level fuel taxes and other road-related fees (including motor vehicle licensing and registry fees) and fines contribute to covering a large portion of highway-related construction and maintenance costs.  However, in most provincial jurisdictions the fuel taxes flow into the general revenues and highway infrastructure funding is not necessarily tied to any specific revenue source.  Nova Scotia is an exception, as under the Public Highways Act all revenue from its provincial gas tax and from fees and fines that are to be paid to the Department of Transportation is dedicated to a provincial highway fund.[24]  In addition, in Ontario, “[p]rovince-wide, fuel taxes and other fees cover between 70 and 90 per cent of annual road construction, maintenance and policing costs.”[25]

Historically, Canada has not made significant use of tolls/congestion charges and other road pricing mechanisms.  However, there is increasing recognition that the gas tax base is shrinking, and major municipal governments like Vancouver are increasingly considering various road-pricing mechanisms to help fund transportation infrastructure projects.[26]

No information was found concerning usage of vehicle kilometers traveled (VKT) taxes or charges at the federal or provincial level.  However, some reports indicate that VKT charges are being proposed at the municipal level, to help fund transportation and transit projects.[27]

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IV.  Public-Private Partnership Funding

Canada appears to heavily utilize public-private partnerships (P3s) to fund major infrastructure projects, including roads and highways.  According to a report by the Fraser Institute, “[c]umulatively, Canada has planned, underway, or completed the sixth greatest number of transportation P3 projects in the OECD from 1985 to 2013 (as of Jan. 30).”[28]  Moreover, “on a cost basis, Canada’s cumulative transportation P3s total ninth highest.  Of the various types of transportation, including roads, rail, airports, and seaports, transportation P3s in Canada are most concentrated in roads, both in terms of number and cost.”[29]  Early  examples of the use of P3s at the provincial level is the building of Highway 104 project[30] and Ontario Highway 407.[31]

In February 2009, the federal government of Canada established PPP Canada, a federal Crown corporation, whose mandate is to “improve the delivery of public infrastructure by achieving better value, timeliness and accountability to taxpayers, through P3s.”[32]  More specifically PPP Canada provides “expertise and advice in assessing and executing P3 opportunities at the federal level.”[33]

PPP Canada also manages a $1.2 billion P3 Canada fund, which provides funding on a merit-basis for infrastructure projects that are procured by public authorities (including provincial, territorial, and municipal governments) through P3s.[34]

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Tariq Ahmad
Legal Research Analyst
March 2014
 


[1] Constitution Act, 1867, 30 & 31 Vict., c. 3, § 92, http://www.canlii.org/en/ca/const/const1867.html.

[2] Highways, Transport Canada, http://www.tc.gc.ca/eng/policy/acg-acgd-menu-highways-2141.htm (last updated Jan. 4, 2010).

[3] Allison Padova, Library of Parliament, Economics Division, Federal Participation in Highway Construction and Policy in Canada (Feb. 2006), PRB 05-69E, http://www.parl.gc.ca/content/lop/researchpublications/prb0569-e.htm

[4] Id.

[5] Id.

[6] Building Canada Plan, Infrastructure Canada, http://www.infrastructure.gc.ca/prog/bcp-pcc-eng.html (last updated Oct. 26, 2011).  The current exchange rate is Can$1 to US$0.90.  Daily Currency Coverter, Bank of Canada, http://www.bankofcanada.ca/rates/exchange/daily-converter/.  For purposes of this report, all references to “dollars” are to Canadian dollars unless otherwise specified.  

[7] Gas Tax Fund, Infrastructure Canada, http://www.infrastructure.gc.ca/prog/gtf-fte-eng.html (last updated Nov. 22, 2013).  Also according to the Infrastructure Canada website, “[t]he federal Gas Tax Fund represents a $13 billion investment from 2005 to 2014.  On April 1, 2009, Gas Tax Fund payments doubled to $2 billion annually.  Agreements for this funding are in place until 2014.  In 2011, legislation was passed to make the Gas Tax Fund permanent at $2 billion per year.  Municipalities across the country will continue to receive stable, annual funding for their long-term infrastructure priorities.”  Id

[8]  Camila Vammalle, OECD, Public Investment across Levels of Government: The Case of British Columbia, Canada 11 (2012),  https://www1.oecd.org/gov/regional-policy/British%20Columbia_edited.pdf.

[9] Id.

[10] Building Canada Fund, Infrastructure Canada, http://www.infrastructure.gc.ca/prog/bcf-fcc-eng.html (last updated Oct. 26, 2011).

[11] Id.

[12] Building Canada Fund - Funding Categories, Infrastructure Canada, http://www.infrastructure.gc.ca/ prog/bcf-fcc-categ-eng.html.

[13] Id.

[14] Provincial-Territorial Base Fund, Infrastructure Canada, http://www.infrastructure.gc.ca/prog/ptbase-finbasept-eng.html (last updated Oct. 26, 2011).

[15] Id.

[16] Id.

[17] Canada Strategic Infrastructure Fund (CSIF), Canada-Manitoba Infrastructure Secretariat http://www.infrastructure.mb.ca/csif.html.

[18] Other Programs, Infrastructure Canada, http://www.infrastructure.gc.ca/prog/other-autres-eng.html#csif-fcis (last updated Oct. 26, 2011).

[19] Id.

[20] Id.

[21] Canada Strategic Infrastructure Fund, Treasury Board of Canada Secretariat, http://www.tbs-sct.gc.ca/hidb-bdih/initiative-eng.aspx?Hi=53 (last updated June 14, 2013).

[22] Canada Strategic Infrastructure Fund Act 2002, S.C., c. 9, http://laws-lois.justice.gc.ca/eng/acts/C-10.3/FullText.html.

[23] Other Programs, supra note 18.

[24] Public Highways Act, R.S., c. 371, § 9(1), http://nslegislature.ca/legc/statutes/pubhighw.htm.

[25] Majority of Ontario Road Infrastructure Costs Paid by Motorists, Conference Board Of Canada (Oct. 17, 2013), http://www.conferenceboard.ca/press/newsrelease/13-10-17/majority_of_ontario_road_infra structure_costs_paid_by_motorists.aspx.

[26] Jeff Nagel, Road Pricing Viable but Tricky in Metro Vancouver: Experts, Abbotsford News (Oct. 18, 2012), http://www.abbynews.com/news/174802561.html?mobile=true.

[27] Robert Mackenzie, 11 Ways to Pay for Transit? Metrolinx Proposes Taxes, Tolls and Fees, Transit Toronto (Apr. 23, 2013), http://transit.toronto.on.ca/archives/weblog/2013/04/23-11_ways_to.shtml.  

[28] Charles Lammam et al., Fraser Institute, Using Public-Private Partnerships to Improve Transportation Infrastructure in Canada 43 (Studies in Economic Prosperity, May 2013), http://www.p3canada.ca/_files/file/Information%20and%20Resources/using-public-private-partnerships-to-improve-transportation-infrastructure-in-canada.pdf.

[29] Id.

[30] Conference Board of Canada, Dispelling the Myths: A Pan-Canadian Assessment of Public-Private Partnerships for Infrastructure Investments 6 (Jan. 2010), http://www.pwfinance.net/document/research_ reports/12% 20pan%20canadian.pdf

[31] History, 407 ETR, http://www.407etr.com/about/background-information1.html (last visited Feb. 4, 2014).

[32] Corporate Profile, PPP Canada, http://www.p3canada.ca/about-ppp-canada-overview.php (last visited Feb. 4, 2014).

[33] Id.

[34] Overview, P3 Canada Fund, http://www.p3canada.ca/p3-canada-fund-overview.php (last visited Feb. 4, 2014).

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Last Updated: 04/28/2014