Copyright 2009, Blake, Cassels & Graydon LLP
Originally published in Blakes Bulletin on Infrastructure, January 2009
On January 27, 2009, Finance Minister Jim Flaherty tabled Canada's Economic Action Plan, the federal government's 2009 budget (the Budget), which aims, through deliberate short-term deficit, to provide an economic stimulus for Canada's economy and build long-term capacity. Amid an investment plan that intends to reduce taxes, enhance Employment Insurance, stimulate housing construction, strengthen Canada's financial system, and support Canadian businesses and communities, is the promise of almost C$12-billion in new infrastructure funding over two years. We outline some of the key features of this commitment to infrastructure growth.
Immediate Action to Build Infrastructure
In the midst of the current economic downturn, the two key benefits from the C$12-billion infrastructure stimulus funding are cited in the Budget as creating jobs across Canada in the construction, engineering and manufacturing sectors as well as generating significant economic spin-off activity, and helping Canada emerge from the current economic landscape with modern and greener infrastructure that will sustain long-term economic growth.
The following four kinds of infrastructure projects are targeted as the focus of the investment:
- Provincial, territorial and municipal infrastructure. The Budget includes a C$4-billion Infrastructure Stimulus Fund that will provide funding to renew public infra-structure such as roads and sewers. This funding will be available for two years for projects that commence construction during the 2009 and 2010 construction seasons. The Budget also provides C$1-billion over five years for a Green Infrastructure Fund, with funding to be allocated on merit to support the cost of green infrastructure projects that focus on creating sustainable energy and contribute to cleaner air, land and water.
- Federal infrastructure. The Budget allocates approximately C$1.5-billion to improve passenger rail services, bridges, highways, harbours and border crossings.
- Knowledge infrastructure. The Budget dedicates up to C$2-billion to help update facilities at post-secondary institutions (with preference given to university projects that can improve the quality of research and development), approximately C$1-billion over two years to build research infrastructure, C$225-million over three years to improve broadband services in rural communities, and C$500-million to Canada Health Infoway for projects to encourage use of electronic health records.
- First Nations infrastructure. The Budget invests C$515-million over the next two years in projects to improve schools, clean drinking water and First Nations community services such as health care and policing infrastructure.
The Budget also notes the government's concern to streamline the federal regulatory approval processes to enable certain identified major projects to commence in the upcoming construction season. The Budget outlines that efficiencies will be introduced through legislative amendments to the Navigable Waters Protection Act, and administrative and regulatory changes to streamline the application of the Fisheries Act and the Canadian Environmental Assessment Act. With such changes, it is expected that the federal approval process for major projects will be shortened by up to 12 months.
The federal government has now committed to the formalization of a public-private partnership (P3) Crown corporation, PPP Canada Inc., which will administer the Public-Private Partnerships Fund (the national infrastructure program introduced as part of the 2007 Budget) and encourage further development of the P3 market in Canada. PPP Canada Inc. is planning an initial call for applications to the P3 fund in 2009-2010.
PPP Canada Inc.'s CEO and Chairman were named last week by Finance Minister Jim Flaherty – John McBride (currently executive vice-president at the Canadian International Development Agency) and Greg Melchin (former Alberta Tory MLA), respectively.
To key players in the P3 space, one of the major effects of the current economic landscape has been the disruption of access to global credit markets. The Budget includes the provision of C$200-billion through the Extraordinary Financing Framework to improve access to financing for households and businesses. How this additional source of funding will impact the P3 market remains to be seen.
This is an optimistic Budget and, already, the market has expressed scepticism as to whether the stimulus funding will have effects powerful enough to restore surplus by 2013. What the Budget presents to infrastructure players, at least in the short term, is an opportunity to act in, and hopefully benefit from, a political environment of support for infrastructure growth.
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