Feds consider changing funding formula for infrastructure spending: Minister
Published Sunday, January 17, 2016 8:55AM EST
Last Updated Sunday, January 17, 2016 12:13PM EST
The Liberal government says it is aiming to listen to partners – cities and provinces – when it comes to a new approach on infrastructure spending, while Conservative Finance Critic Lisa Raitt warns that it’s time for more effort on the hard-hit Alberta economy.
Infrastructure and Communities Minister Amarjeet Sohi told CTV’s Question Period that he has been instructed by Prime Minister Justin Trudeau to take a different approach to infrastructure spending, in an effort to build stronger relationships with municipal and provincial partners.
“My approach is not going to be top heavy approach where we tell other partners what our expectations are. We are going to work with them very closely to understand where the capacity gaps are, whether we change the funding formula that will be done in consultations with them,” said Sohi.
During the election campaign, the Liberals promised to spend $60-billion over the next decade on infrastructure in an attempt to boost the sluggish economy. But less than half that money -- $17.4 billion – is slated to be spent during the Liberals' first mandate.
In the past, federal, provincial and municipal governments have split the cost of infrastructure projects three ways. Sohi did not specify how the government will change the funding formula, but indicated that Ottawa will take more cues from its partners when deciding how to disperse that money.
“We want to understand what their local capacity is for municipal and provincial and territorial support, and how we can be meaningful partners to build the kind of communities that we all desire to live.”
Big cities need flexibility on funding model
But with the provinces and municipalities strapped for cash, mayors of Canada’s big cities are calling for more flexibility from the government on its infrastructure spending formula.
“All those agreements between the federal and provincial, we don’t want to be held as hostages. The cities are players now. You have to work with us. We’re part of the solution,” Montreal Mayor Denis Coderre told Question Period.
While Halifax Mayor Mike Savage acknowledged the federal government’s concern about deficits, he said cities are dealing with a different kind of deficit of their own.
“We all have concerns about deficits,” said Savage. “But we also have infrastructure deficits and social deficits that have built up.”
Savage said that cities want to see the federal government balance the books as quickly as possible, but don’t want to see that done at the expense of key infrastructure needs, such as housing and transit.
Vancouver Mayor Gregor Robertson said municipalities need infrastructure funding as soon as possible, so cities like his can address long-standing problems
“We’re going to see an economic payback that comes with easing homelessness, with solving traffic gridlock. We’re going to see benefits to the economy accrue beyond the jobs created,” said Robertson.
Opposition warning: Watch the deficit size
As the government prepares to pour billions into infrastructure spending amidst a suffering economy, the Official Opposition is warning against larger deficits.
“I say yes to infrastructure spending, but I still think that the government has to keep a very watchful eye on how big that deficit is going to get,” said Conservative Finance critic Lisa Raitt.
The Trudeau government has already acknowledged that its first budget could include a deficit beyond the $10-billion a year the Liberals promised during the election. But economists told the Globe and Mail that Ottawa should consider a deficit as large as $30 billion.
Liberal MP Steve MacKinnon refused to say how large the deficit could get.
“We have below $30 oil. We have a dollar that obviously is suffering the effects of a commodity slump and lack of demand elsewhere in the world. Clearly adjustments are going to have to be made,” said MacKinnon.
The NDP’s Murray Rankin said his party is also in favour of infrastructure spending to kick-start the economy, but would like to see the government consider the “other side of the ledger.”
“The Liberals seem to be refusing to raise corporate taxes, which could provide several billion dollars of additional revenue, and so far I’ve seen no evidence that they’re keen on people who are putting their money in tax havens, which could be several billions of dollars more.”
Raitt said she is particularly concerned about the government’s lack of “energy and effort” towards the Alberta economy, which has been hit hard by plummeting oil prices.
“This is a knock on effect across the country and it has to be dealt with now.”
That’s why Raitt will join Opposition Leader Rona Ambrose next week for country-wide consultations ahead of the federal budget. Finance Minister Bill Morneau is currently travelling across Canada for the government’s pre-budget consultations.
Bank of Canada Governor Stephen Poloz will also make an interest rate announcement next Wednesday. Further cuts to the record-low rates would be more bad news for the Canadian economy.
With files from the Canadian Press