Repair and Renewal Emerge in Infrastructure Spending Sustainability Incidental to Federal Turnaround Strategy
March, 2009

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By Barbara Carss

Federal budget allocations for infrastructure could prove to be less than the $12 billion the Minister of Finance, Jim Flaherty, pledged in late January since much of the promised spending is contingent on provincial and/or municipal governments kicking in a matching share. Nevertheless, potential beneficiaries commend the budget’s significant and largely novel focus on rehabilitating and upgrading existing infrastructure, as well as funding new construction projects.
 
“I think we need to very clearly acknowledge that this a precedent for the federal government,” says Keith Ward, the Commissioner of Human Services in the Greater Toronto Area’s Regional Municipality of Peel, who oversees one of Ontario’s larger municipally owned social housing portfolios. “This is the government recognizing that it needs to invest in protecting assets.”
 
Social housing, recreational and post-secondary education facilities have been collectively earmarked for up to $3.5 billion of federal funding for repairs, renovations and energy-efficiency upgrades, while another $570 million will go toward rejuvenation of federally owned buildings and laboratories. In the new construction category, big ticket promises include a $4-billion infrastructure stimulus fund, a $1-billion green infrastructure fund, and a $2-billion low-cost loan program for municipal infrastructure and neighbourhood regeneration projects. The schedule for previously announced multi-year federal infrastructure programs will also be accelerated so that up to $1 billion in funding is released between 2009 and 2011 rather than in the initially planned four-year period between 2011 and 2014.
 
“Overall, we’re looking at $13 billion in two years. That’s much more rapid funding than we’ve seen on the previous infrastructure programs, of which there have been several variations going back to about 1993,” says Casey Vander Ploeg, a Senior Policy Analyst with the public policy think-tank Canada West Foundation. “It’s tying one-third of the money into rehabilitating existing assets, which is a direction that Canada West Foundation supports.”
 
Potential recipients are now waiting to learn details of how money will be allocated and how they can apply. The budget gives priority to projects that are deemed ready to proceed quickly – a status that has come to be known as shovel-ready – and states that federal money will be channelled through existing agencies and federal-provincial agreements wherever possible to save time and eliminate red tape.

MATCHING FUNDS GOVERN PROJECT READINESS

Infrastructure, social housing and recreational projects will require a matching amount of money from provincial or possibly municipal sources. Post-secondary institutions are also expected to contribute 50% of the capital and/or find other funding partners to cover at least half of their rehabilitation and repair projects. The federal government’s $2-billion share will be administered by Industry Canada, which will disperse 70% of the funds to universities and the remaining 30% to community colleges.

On Ontario’s university campuses, about 65% of the infrastructure is more than 30 years old. The province’s 20 universities, which accommodate about 42% of Canada’s post-secondary students, collectively have a deferred maintenance backlog estimated at about $1.5-billion even after a $335-million influx of funds from the Ontario government in 2008. University administrators now expect to be well positioned to launch more rehabilitation projects since provincial officials have made it known that the required matching funds will be made available in the pending 2009 Ontario budget.
 
“Typically these kinds of projects don’t require environmental approvals or other regulatory hurdles so they can be quicker off the mark,” notes Paul Genest, President of the Council of Ontario Universities. “The federal budget and provincial matching commitments will provide a tremendous boost to addressing this backlog of deferred maintenance. Another benefit is that nearly half the projects involve a green or energy-saving component that will lower costs and lower our environmental impact for the longer term.”
 
Proponents in the recreational facilities sector also applaud the federal budget’s dedicated $500-million fund as a more surefire source than some current provincial/territorial infrastructure programs, in which sports/recreation facilities must compete with other types of infrastructure.

“Yes, recreation is eligible, but it has not typically been the chosen one,” reports John Milton, Chief Executive Officer of the Canadian Recreation Facilities Council and Chief Administrative Officer of the Ontario Recreation Facilities Association. “Plus, programs like Infrastructure Ontario are very specific to just municipalities, but this [federal] one seems to open up the door to community and sports agencies that might have an interest and a desire to be part of an application. If they’ve got the ability to put matching funds on the table and the municipality doesn’t, this could be an opportunity.”
 
Access to matching funds, or lack thereof, could be one of the most influential determinants of what is shovel-ready. Capital planners in municipalities, social housing agencies and post-secondary campuses across the country have no shortage of identified projects. Notably, the Federation of Canadian Municipalities has compiled a list of more than 1,000 projects with an estimated total value of $13.7 billion that could begin in the spring of 2009. However, some projects will be delayed if proponents must find other financiers beyond the federal government.
 
“It’s only good if the other partners can produce their 50%,” reflects Bob Pringle, a City Councillor in Saskatoon, Executive Director of Habitat for Humanity in that city, and Co-Chair of the Province of Saskatchewan’s 2008 Task Force on Housing Affordability. “I think Saskatchewan is in that position. We are shovel-ready because of the Provincial surplus, but many Provinces may not be in a position, with some of their financial challenges, to come up with the 50%.”

HASTE COLOURS DECISION MAKING

An emphasis on speed of deployment could overlook a project’s potential for economic stimulus, which is the federal budget’s stated ultimate goal. It could also push projects of lesser priority to the front of queue because they’re logistically easier and quicker to launch. “I think grants, in general, have the capacity to sometimes shift local decision making to projects that are sometimes less desirable,” Vander Ploeg cautions.

Other observers argue in favour of channelling money to burgeoning sectors where a current dearth of required skills could translate into new employment opportunities, while investment in capital improvements helps to achieve environmental goals for energy conservation and carbon emissions reductions. “This budget has been decoupled from any sort of green strategy,” says Clifford Maynes, Executive Director of Green Communities Canada, an umbrella group of 30 community-based organizations across the country that provide energy management/conservation programs, services and resources.
 
The Canada Green Building Council (CaGBC) will soon launch two new pilot programs as part of its LEED (Leadership in Energy and Environmental Design) Canada initiative and efforts to achieve a 50% reduction in energy and water consumption in 100,000 industrial/commercial/institutional (ICI) buildings by 2015 that could theoretically help inform spending decisions. Pilot projects for university campuses and ice arenas will augment the work CaGBC already has in progress with pilots focusing on existing commercial buildings, government office/administrative buildings and elementary and secondary school buildings.

However, results are unlikely to be ready in time to influence this particular round of infrastructure spending since the CaGBC study follows a methodical schedule of 1) benchmarking performance of all participating buildings, 2) analyzing and determining the differentiating factors of the best performing buildings, and 3) looking for ways to apply improved operational procedures, make the most effective retrofit investments and influence the behaviour of building users.

“I would argue that the [infrastructure] funding would be well spent focused on the development of these kinds of projects and programs that would generate metrics that can be used across the whole building stock,” asserts Ron Leal, Project Manager of the LEED Canada pilot project for government buildings.

“Improving the energy efficiency of buildings requires that you take a very serious look at what you’ve got so you know where your money is best spent,” concurs Thomas Mueller, the CaGBC’s President and Chief Executive Officer. “It would improve the building stock, reduce emissions and create jobs. We see this as part of the green economy and green jobs.”

The 2009 federal budget does pledge $1 billion over five years for a Green Infrastructure Fund, with $150 million going toward research and $850 million “for development and demonstration of promising technologies, including large-scale carbon capture and storage projects.” Projects incorporating proven energy-saving technology may still be able to take advantage of unallocated funds promised in previous federal budgets.

PROTRACTED SCHEDULES NORMAL FOR HOUSING PROGRAMS

The $1 billion for social housing upgrades is slated for renovations and energy retrofits of up to 200,000 units, but it is still unclear if energy efficiency will be a prerequisite or merely a preferred outcome. In the spring of 2008, for example, the Ontario government announced a $100-million one-time capital improvement fund for the province’s 47 local housing service providers and a $500-million loan fund through the Ontario Strategic Infrastructure Financing Authority (OSIFA) for repairs, renovations and energy retrofits in social housing, but there was no imperative that funds go toward energy efficiency.

The $100-million fund was meant to cover upgrades for about 4,000 units, but much of that announced funding has not yet been delivered to intended recipients. Housing providers speculate that it could now make up part of Ontario’s share of required matching funds.

There is also uncertainty about how funding is to be administered since it will be a new spending area for the federal government with no existing administrative structure in place. Meanwhile, federal-provincial agreements for recent new construction programs – known as the Canada-Ontario Affordable Housing Program in Ontario and by other names in other provinces – were not signed until more than a year after the program was first announced and funding has taken several years to flow through to project proponents.

“Both levels of government have a very poor track record in delivering these types of programs in a timely manner,” Keith Ward says. “If they follow the usual pattern, it will fall on its face.”

On the plus side, retrofits in existing buildings will not require the often lengthy and contentious approvals process that new development entails. Nor would it take long to find suitable projects. “We already have a lot on the books in terms of what’s identified in our capital plans now,” Ward says.

In addition to retrofit funding, the 2009 federal budget also promises $400 million for construction of new social housing for seniors, $400 million for new social housing and/or retrofit projects on First Nations reserves, and $75 million for construction of new social housing for occupants with disabilities.