This commentary is based on the Canada 2020 research paper ‘Crisis and Opportunity’
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Infrastructure is central to every aspect of life in Canada. It’s a key driver of productivity and growth in a modern economy and it contributes to the health and well-being of Canadian citizens. It is a method for enabling communication and sharing of information between citizens. It is a means for providing core services such as water, electricity and energy and is a shaper of how our communities grow and contribute to our collective social fabric.
On a daily basis across the country, Canadians are impacted by infrastructure that has failed to be maintained or that has not been built. This can be partly attributed to a major shift in infrastructure ownership and financing over the past 50 years. In 1955, the federal government owned 44 percent of public infrastructure. Today, that number is less than five percent.
Municipalities own over 50 percent of public infrastructure, but collect only eight cents of every tax dollar. On the other hand, the federal government has 50 percent of Canada’s fiscal capacity, but contributes only 12 percent of our infrastructure fund. Experts have noted that the federal government should be spending approximately two percent of GDP on infrastructure to enhance prosperity and maintain a high quality of life. The current level of investment is 0.37 percent of GDP.
In 2013, the Canadian Chamber of Commerce estimated that Canada’s infrastructure deficit could be as high as $570 billion. I’m sure you experience this backlog of investment each day— from potholes that damage cars and act as safety hazards while cyling, to the overcapacity of public transit systems and lack of affordable housing options for Canadians. We have a lot of work to do.
Equally concerning is the fact that our existing infrastructure is not equipped to deal with the reality of climate change and extreme weather. Prior to 1996, only three natural disasters exceeded $500 million in damages. Since 1996, Canada has averaged one $500 million or larger disaster almost every year. On average, each natural disaster lowers GDP by approximately two percent.
In a paper I co-authored with Evergreen CityWorks Executive Director John Brodhead and economist Sean Mullin for Canada 2020, we called for urgent federal attention to this issue. Countries that exhibit best practices for infrastructure investment have decision-making frameworks driven by a strong central government committed to innovation and economic development. Within these frameworks, projects move forward based on multi-year forecasting and planning, establishing a platform for innovation, resiliency and prosperity. In Canada there has been an absence of a national infrastructure strategy and long decline of federal involvement in infrastructure spending has exacerbated Canada’s infrastructure deficit.
This challenge also represents a key opportunity for Canada’s federal government, as the economic benefits of investing in public infrastructure are substantial. David Dodge, former Governor of the Bank of Canada, has called on government to take advantage of the historically low interest rates as a way to provide badly needed stimulative effects in the economy in the short-term, and contribute to higher productivity and a more competitive economy in the long run. The current market conditions create a window of opportunity for decisive action by an active and committed federal government.
In the paper, we argue that it is time for the federal government to play a strong role in the planning and funding of public infrastructure in Canada. A critical starting point would be the creation of a long-term National Infrastructure Plan. We outline several components of what this plan could look like, but a central feature would be a comprehensive multi-year plan that would prioritize infrastructure projects across a number of areas of national significance. This feature would include a 10-year project pipeline prioritized by status, updated at least once a year on a rolling basis to reflect the movement of the projects in the pipeline and changes in strategy or emphasis.
A National Infrastructure Plan, respecting provincial and municipal jurisdiction, would coordinate infrastructure efforts across Canada, take advantage of the federal government’s fiscal capacity, create clear, transparent rules for infrastructure programs, enhance transparency of infrastructure planning and prioritization and share best practices across Canada. Only the federal government has the ability, authority and fiscal capacity to play this role within Canada.
The state of Canada’s infrastructure represents both a crisis and opportunity for our country. Only by taking decisive action now, can the federal government ensure we collectively seize the latter and avoid the former.
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Jesse Darling is an Urban Project Designer at Evergreen CityWorks in Toronto.