Shovelling cash into infrastructure
Regina and Saskatoon’s city councils have proposed property tax increases of at least seven per cent. Both have said a portion of the increase will be dedicated to the infrastructure deficit, especially rebuilding neighbourhood roads.
Across Saskatchewan, the infrastructure deficit — that is, the amount needed to repair existing infrastructure for which there is no funding — amounts to $2 billion. This does not include K-12 infrastructure, which is also funded by property taxes.
Canadian municipalities own and operate 63 per cent of the nation’s infrastructure, paid for through property taxes and utility payments. With a total infrastructure deficit of well over $130 billion, it is apparent that property taxes alone aren’t sufficient to keep roads, treatment plants and community facilities in good repair and provide new infrastructure for growth.
The comment is often made “there is only one taxpayer.” While true, there is more than one type of tax. Municipalities have only one option — the property tax. But the federal and provincial governments have a much longer menu of taxes to choose from, including sales, income, corporate and consumption taxes plus resource royalties.
In the early years of this century municipalities convinced senior governments to share in their revenue flexibility and contribute to local infrastructure needs.
During the Jean Chretien/Paul Martin years, federal funds were announced on a year-to-year basis, often targeted at specific needs like “green” infrastructure.
In 2006, newly-elected Prime Minister Stephen Harper announced the Building Canada Fund, providing federal money, matched by provincial funds, for the years 2007-13. This met a key criteria for municipalities — long-term, predictable funding.
Lost in last summer’s debate on funding Regina’s wastewater treatment plant — to P3 or not to P3 — was the question: “Why was no federal infrastructure money available for such an important project?”
The economic collapse of 2008 will be remembered for the phrase “shovel-ready”. Government intervention was needed to boost the economy. Municipalities said “we have the need, our engineers have done the drawings, and we are ready to invest in new infrastructure and stimulate the economy.”
During 2009 and 2010, infrastructure projects across Canada proceeded at a greatly accelerated pace, using money brought forward from future years of the 2007-2013 fund.
But by 2011, federal-provincial investment in municipal infrastructure slowed to a trickle and nothing remained in 2013 to help Regina.
Finance Minister Jim Flaherty has announced that tomorrow’s federal budget will see a new Building Canada Fund. While that is good news for municipalities, some outstanding questions remain to be answered:
■ Will funding be increased to account for inflation and the demands of growth? Certainly in Saskatchewan, where a very robust economy has created both growing communities and shortages in skilled labour and some materials, the cost of infrastructure work has increased at a pace far outstripping the inflation rate. Ideally, more funds will be provided.
■ What will be the priorities of the new fund? Train accidents have some municipal leaders calling for the removal of rail lines from urban centres. Extreme flooding events have others calling for investment in storm water infrastructure. Expensive wastewater treatment plant upgrades are needed everywhere. Local councils must have discretion to set local priorities.
■ Will projects be run through a “P3 screen,” meaning some might not be eligible unless there is private sector ownership? In Saskatchewan, where our smaller communities will be proposing projects too small to attract the attention of P3 investors, this is an unrealistic requirement.
Last week, Saskatchewan Premier Brad Wall said he is considering using the education property tax to fund provincial infrastructure projects, beyond what is needed for the school system.
The demands on the property tax already far outstrip its capacity to pay for local infrastructure. Instead, the premier should be looking at ways to help local councils overcome their infrastructure deficit, perhaps by an augmented contribution to the Building Canada Fund.
As for his own infrastructure needs, he has the tax flexibility, for example oil royalties, to raise the money he needs.