On Canada's Infrastructure Gap

It's not enough to be shovel-ready…Projects need to be shovel-worthy, as well.

Infrastructure Minister Amarjeet Sohi

Canada’s Infrastructure Gap has been on the radar for at least the past 20 years.

Throughout this time, community groups have continuously (and unscientifically) noted the crumbling state of local roads, sewers, aging hospitals and government buildings. The large-scale infrastructure evaluations rolled in during the early 2000s, they say, need to be addressed.  The first Canadian Infrastructure Report Card appeared in 2012. The Report, generated from surveys of more than 100 municipalities representing 20 million Canadians, found that 30 per cent of municipal infrastructure ranked as less than ‘fair’ quality. The replacement cost for these assets was tallied at just over $170 billion nationally.

 


Four years later, the conversation shifted towards “crisis” dialogue. The recently-released 2016 Report Card revealed that the figures changed from 30 per cent to 60 per cent; just under two-thirds of Canada’s core public infrastructure is in fair, poor, or very poor condition. Bridges, roads, transit lines, water structures and government buildings are either in need of repair, or will be in the near future.

Economic Considerations

The Report Card appears just as the Liberal government prepares its spring budget. Among other things, they ran their campaign on the promise to double federal infrastructure investment over 10 years to nearly $125 billion. It would be the largest new investment in Canadian history, promotional literature claimed.
 


The scale of this investment was praised by both policymakers and economists. Besides the positive social impact of improved roads, water systems and other critical infrastructure, the economic impact would be tangible: short-term job creation would improve the decelerated trade sector, stall boomer retirement, and increase competition and private business growth in the long-term.

A recent Conference Board of Canada report examined the impact of the earmarked infrastructure funds on job creation. It found that every billion spent would support approximately 16,700 jobs for a year, plus spillover for tertiary industry at 18,000 jobs, according to Infrastructure Minister Amarjeet Sohi. It could boost the Canadian GDP by about $1.14 billion, a multiplier of 1.14 that appears conservative to other estimates as high as 1.78.

Currently, spending makes sense; historically low interest rates, the need for stimulative economic policy and the infrastructure deficit are all fiscally sound reasons to put money towards critical projects right now.

The problem lies in the shovels. “If the government can’t find enough ‘shovel-ready’ projects,” says David Madani of Capital Economics, “that money may not end up being spent until 2017 or later.” This could delay stimulus for years, but the need is immediate. Commodity prices have nosedived, the dollar continues to slide and unemployment hovers at seven per cent. Canada is still trailing behind pre-recession numbers for growth and economic activity.

Project readiness could add years for Canadians to feel the effect of spending. To remedy this, infrastructure dollars may be allocated to speedy, small-scale projects that can be started immediately.

Spending Legacy

The G8 “legacy infrastructure fund” spending scandal still sits in the cultural memory, especially for those in Toronto during the summit protests. A $100,000 newly built gazebo, located an hour’s drive from where the actual summit took place, was the epitome of irresponsible and unnecessary government spending.

Beautification projects don’t have the same economic and social impact as critical infrastructure improvements. And if dollars are earmarked to fill a need that isn’t quite ready, Canadians and economists are worried about oversight in the actual infrastructure deficit. Spending could possibly be allocated to the wrong projects.

The Plan

The government, to its credit, seems to be addressing these concerns. In late January,

Infrastructure Minister Amarjeet Sohi announced the first spending phase would deal with a “deferred maintenance backlog”. During his speech, Sohi explained, “It's not enough to be shovel-ready…Projects need to be shovel-worthy, as well."

Municipalities own more than 50 per cent of infrastructure assets, and receive about eight cents for every tax dollar. Municipal spending is critical - but few projects in the GTA and Ontario are quite ready to begin.

Premier Kathleen Wynne made Ontario’s priority projects clear; those of “key importance” include upgrades and new construction along GO Transit corridors Lakeshore West and Lakeshore East, Kitchener and Barrie, as well as signal upgrades to the Union Station rail corridor. The cost will be just over $3.9 billion. The Scarborough subway extension and Ring of Fire development projects are also high priority.

The TTC announced that their main priority is maintenance. Their signalling system is from the 1950s, stations are lacking in minimal accommodations (such as elevators) and the bus fleet has been neglected. In a meeting between Toronto Mayor John Tory and Prime Minister Justin Trudeau in mid-January, the newly elected Prime Minister pledged $2.6 billion for the $8 billion SmartTrack expansion plan – a project that isn’t slated to begin until 2017.
 


While the infrastructure need is critical, how any allocated funds will affect the GTA is far from clear. We’ll know more when the spring budget is released and as federal politicians make their media rounds. Still, with solid planning and municipal input for project selection, there is hope for a shrinking infrastructure gap, and for Toronto to reap the positive economic benefits in the short- and long-term.