Canada s New Infrastructure Plan Phase 2 Programming/Funding SUBMISSION TO INFRASTRUCTURE CANADA FROM THE UNION OF BC MUNICIPALITIES

Transcription

1 Canada s New Infrastructure Plan Phase 2 Programming/Funding SUBMISSION TO INFRASTRUCTURE CANADA FROM THE UNION OF BC MUNICIPALITIES September, 2016

2 INTRODUCTION The Union of British Columbia Municipalities (UBCM) was formed to provide a common voice for local governments in British Columbia. UBCM s vision is to effectively represent and serve all local government in BC. Guided by our values, the purpose of UBCM is to: represent and serve all local government in BC; be the recognized advocate for local government in BC; and meet our members common needs through a process of continuous improvement. On March 22, 2016, the Government of Canada announced the 2016 Budget Growing the Middle Class that included Canada s New Infrastructure Plan. The Plan identified two phases, with $11.9 billion Phase (Phase 1) to be delivered within the next 2-4 years. This included the Public Transit Infrastructure Fund Agreement valued at $920 million and the Clean Water & Wastewater Fund, yet to be formally announced in BC, valued at $450 million. As part of the 2016 Budget, the Government of Canada maintained its election promise of providing $60 billion towards infrastructure investment. The 2016 Budget identified that Phase 2 funding/programming would be announced in conjunction with Budget Phase 2 represents approximately $48.1 billion in future funding. Local governments own, operate and maintain per cent of Canada s core public infrastructure. This includes the infrastructure required to provide services such as safe drinking water, wastewater management, transportation networks (roads and bridges), storm/rain water management, culture, tourism, sports, recreation and protective services. However, local governments have limited financial tools, with access to only 8-10 cents of every tax dollar. This creates a genuine challenge to meet increasing community service demands, provide new services once provided by other levels of government, satisfy new regulatory standards, and finally, address renewal and replacement of infrastructure needed to provide existing community services. Solutions to this challenge will require a collaborative approach, with all three levels of government recognizing a shared responsibility in meeting our community s infrastructure needs, now and in the future. Page 2 of 14

3 This submission highlights four key guiding principles to support Phase 2 investments, approved by the UBCM Executive. They are: 1. Provision of Effective Funding and Programming 2. Development of Fair and Equitable Governance 3. Commitment by Federal and Provincial Government 4. Commitment by Local Government Recommendations are identified for each key guiding principle. This submission is intended to inform Phase 2 funding and program design. Page 3 of 14

4 KEY GUIDING PRINCIPLES A. Effective Funding and Programming to Address Local Government Infrastructure Needs a. Focus on local government infrastructure and the services local governments provide b. Flexibility as local governments have localized infrastructure requirements and programming should maximize eligible infrastructure categories c. Development of streamlined programming that addresses stated goals and objectives B. Fair and Equitable Governance a. Funding/programming that has clear, stated goals and objectives that guide decision making b. As active participants in funding programs/projects, local governments (UBCM) should be actively involved in the development of agreements and supporting program materials c. As active participants in funding programs/projects, local governments (UBCM) should be involved in the appropriate level of decision making, oversight and administration of funding programs C. Commitment by the Government of Canada and the Province of British Columbia a. Programming must recognize local government infrastructure challenges regarding: i. Meeting senior government regulatory standards and increasing services (EG: Drinking water, wastewater, flood mitigation) ii. Reducing local governments infrastructure deficit (gap) b. Commit to a cost-sharing approach for Phase 2 infrastructure funding that maintains 50% federal contributions and a formal requirement for at least 33% provincial contributions towards eligible costs for local government projects c. Commit to long-term, dedicated funding for local government D. Commitment by BC Local Government a. Commit to a dedicated, maximum 17% (local government) contribution towards eligible costs for local government projects b. Commit to developing, implementing, and improving best management practices that support sustainability of service delivery and infrastructure such as asset management practices All four (4) principles are inherently linked, and therefore, no single principle should undermine, or negatively impact another principle in being realized/achieved. Page 4 of 14

5 A. EFFECTIVE FUNDING AND PROGRAMMING TO ADDRESS LOCAL GOVERNMENT INFRASTRUCTURE NEEDS a) Focus on local government infrastructure and the services local governments provide Across Canada, local governments own, operate and maintain 60-65% of the core infrastructure required to provide services such as safe drinking water, wastewater management, transportation networks (roads and bridges), storm/rain water management, culture, tourism, sports and recreation. Local governments have additional community service needs that require significant infrastructure as examples, protective services (fire and police) and social services are areas that have increasing service and infrastructure requirements. According to the 2016 Canadian Infrastructure Report Card, the total value of core Canadian local government infrastructure assets is estimated at $1.1 trillion. The Report Card also rates the condition of this core infrastructure, finding that one-third of local government infrastructure is in fair, poor or very poor condition. Approximately 10% of all assets measured in the Report Card are rated at poor or very poor. Poor or very poor condition indicates that immediate action is required to renovate and/or replace the infrastructure in question. In British Columbia, it is estimated that local governments infrastructure assets are valued at $200 billion 1 (Asset Management BC). Extrapolating information from the Report Card, BC local governments have an immediate $20 billion requirement for infrastructure investment. Although provincial/territorial infrastructure is also critical to the economy and the well being of our communities, with 65% of Canada s infrastructure in local government hands, it is simply not reasonable that they compete with provincial and territorial governments for scarce federal infrastructure resources. Phase 2 funding should maximize funding opportunities for local government infrastructure that meet local government service needs 1 Data analysis from the 2012 LGDE (502 Statement of Non-Financial Assets, MCSCD) indicates that local governments, collectively, own approx. $200 B of infrastructure assets (Current Replacement Costs, excluding land values) Page 5 of 14

6 b) Flexibility as local governments have localized infrastructure requirements and funding/programming should maximize eligible infrastructure categories While all BC s local governments are working towards economic growth, climate change, and/or human and environmental health and safety objectives, the specific infrastructure needs and priorities in each of these communities may be quite different. Some communities will be focused on projects to meet the new wastewater regulations in the short to medium term; others will focus on water infrastructure or transportation and transit investments as the key to unlocking economic potential in their communities; and still others, particularly in some of BC s small and rural jurisdictions, will find climate adaptation or protective services infrastructure to be their most critical need. It is also important to understand infrastructure intensity as it pertains to the diversity of services delivered by local governments. Infrastructure intensity is the current replacement value of owned tangible capital assets to current total revenues (estimated), represented as a ratio. Asset Management BC analyzed a sample of local governments in BC and estimated a value of 10:1 this is in comparison to the estimated value for federal (1:1) and provincial (2:1). This illustrates how local government services are much more dependent on infrastructure than other levels of government. Further, as funding priorities are established, it is also important to consider the dynamic between new infrastructure and infrastructure renewal. All orders of government have become increasingly aware that scarce resources can often be most efficiently used by preserving the infrastructure that is already in place; in essence, by extending the life of the infrastructure through renewal or rehabilitation projects. Consequently, it will be important to ensure that funding programs do not inadvertently encourage the development of new infrastructure at the expense of rehabilitation or renewal of existing infrastructure, where that is the most sensible alternative. Given the range and scale of local government needs, Phase 2 funding and programming should be flexible in supporting a broad range of project categories, as well as supporting both new infrastructure and renewal/rehabilitation of existing infrastructure Page 6 of 14

7 c) Development of streamlined programming that addresses stated goals and objectives Funding programs can be complex and confusing to the applicant. This is exacerbated when there is a multitude of programs available, and/or program criteria change over time. Many local governments, particularly smaller local governments, have limited capacity and resources, negatively impacting their ability to participate successfully in these programs. Multiple programs, focused on specific infrastructure project categories, administrated by different government agencies, all with different administrative processes, increase the chances for confusion, and can negatively impact meeting desired program goals and objectives. Local governments may no longer need to prioritize projects. However, having a single program, offering multiple infrastructure project categories can result in administrative complexity and further also negatively impact desired program goals and objectives. It is often difficult to evaluate different infrastructure project categories against each other, resulting in an infrastructure project category bias. Clearly a balance is necessary where programming should maximize effective and efficient delivery, both from a local government perspective (clear and simple application processes, effective communication, realistic timelines, clearly stated program criteria and program outcomes), and from a program administration perspective. The delivery under the current Gas Tax Fund in BC could provide a useful alternative model: where a portion of the funding is allocated directly to local governments so that they make local choices about which eligible infrastructure projects to fund, in keeping with local priorities; while other funding is delivered through application-based programs, which are able to support infrastructure investments that are larger than could be accommodated with funding allocated on a per capita basis. This model has been successful in meeting both program objectives and community needs, and is therefore worth considering. Phase 2 funding programs should be developed in a manner that supports a streamlined, effective and efficient administration process, both for local governments and program administrators Page 7 of 14

8 B. FAIR AND EQUITABLE GOVERNANCE a. Funding/programming that has clearly stated goals and objectives that guide decision making As described in A.c), Development of streamlined programming that addresses stated goals and objectives, program streamlining can support effective and efficient administration, while also ensuring that program funding investments maximize the ability of a program to meet stated goals and objectives. With a streamlined approach, it is also important to articulate clearly stated goals and objectives, and further ensure that these guide decision-making. As local governments evaluate program criteria, and then determine and prioritize projects that are best suited for a particular program, it is increasingly important that programs clearly identify program goals and objectives into all program administration documents (program guides, applications, evaluation criteria, project approval criteria, reporting and program performance measurement). This ensures that local governments understand and therefore, prioritize projects that best fit the program. This provides value from a local government perspective, maximizing benefit while managing limited resources. From a program perspective, this also maximizes outcomes (goals and objectives) from a cost-benefit perspective. Programs state clear and defined goals and objectives that guide program administration, including decision-making b) As active participants in funding programs/projects, local governments (UBCM) should be actively involved in the development of agreements and supporting program materials. UBCM, as the advocate for BC local governments, has participated as a partner with the federal and the province governments in the development of program framework agreements. Both the Province and the UBCM should be actively involved in the creation of framework agreements that directly impact local governments. The fundamental rational for this is that those parties that are making financial contributions should be actively involved in program development and administration, which ultimately adds value to the program. Page 8 of 14

9 Historically, federal/provincial programs such as the Canada/BC Infrastructure Program and the Municipal Rural Infrastructure Fund were developed under a partnership framework, whereby the Province and UBCM worked collaboratively with the federal government in the development of a framework agreement that best met the needs of British Columbia, and further, in the administration of the program itself development of program materials such as program guides, application forms, evaluation processes, reporting, and performance measurement. In BC, these programs were considered highly successful, and were the basis of building a strong working relationship between the partners. Currently, the Gas Tax Fund in BC exemplifies the value of this type of partnership. The Administrative Agreement on the Federal Gas Tax Fund in British Columbia is an example of a partnership between all three levels of government in the development of an agreement that met the collective needs of all three partners. Under the Agreement, administration is also delivered in a partnership model, requiring active participation and input from the partners. It is an example of an effective, efficient and transparent program. This partnership also adds value to program communications, building general program awareness and understanding amongst local governments. UBCM is responsible for the development and delivery of various funding programs for local government, through partnership with both the federal and provincial governments. UBCM has developed both experience and expertise in this area, and is an effective administrator of funding programs. A model that involves all three levels of government, whereby all three levels of government are contributing financially, supports the principles of partnership, transparency, equitability, accountability and ownership. UBCM, on behalf of BC local government, should be active participants in the development of program agreements and administration of programs where local governments are funding recipients Page 9 of 14

10 c) As active participants in funding programs/projects, local governments (UBCM) should be involved in the appropriate level of decision making, oversight and administration of funding programs Supported by B.b) As active participants in funding programs/projects, local governments (UBCM) should be actively involved in the development of agreements and supporting program materials, and as a participant that is contributing financially, UBCM believes that local government should be represented at the governance level of program administration, and that includes involvement at the appropriate level of decision making, oversight and administration of funding programs. This supports a program model that is transparent, actively involves all three partners, and ultimately, adds value to funding programs. UBCM, on behalf of BC local government, should be represented at the governance level of program administration, and that includes involvement at the appropriate level of decision-making, oversight and administration of funding programs where local governments are funding recipients Page 10 of 14

11 C. COMMITMENT BY THE GOVERNMENT OF CANADA AND PROVINCE OF BRITISH COLUMBIA a) Programming must recognize local government infrastructure challenges While recognizing the local government s broad challenges identified in A. Effective Funding & Programming To Address Local Government Infrastructure Needs, Phase 2 funding must consider and prioritize programming to; Meet federal and provincial regulatory standards such as, but not limited to, drinking water and wastewater, and Reduce local government s infrastructure debt. Local governments recognize the importance of regulatory frameworks that support the protection of public health, environmental health and public safety. Local governments also recognize that a regulatory framework needs to be changed and updated to meet accepted best practices and based on current science. However, the challenge for most local governments is the timing in which these new regulatory standards are introduced, coupled by the impact they have on infrastructure required to meet the new level of service (standard). Local governments simply do not have the financial resources or capacity to address these changes in the short, medium, and in some cases, long term. The actual impact these regulatory standards have on individual local government is varied, but the need for financial support is required. In addition, there is significant research and analysis that has been completed in the current state of local government infrastructure assets in Canada. According to the Infrastructure Report Card, the total value of core Canadian local government infrastructure assets is estimated at $1.1 trillion. The Report Card also rates the condition of this core infrastructure, finding that one-third of our local government infrastructure is in fair, poor or very poor condition. Approximately 10% of all assets measured in the Report Card are rated at poor or very poor. Poor or very poor condition indicates that immediate action is required to renovate and/or replace the infrastructure in question. Phase 2 funding must recognize key local government infrastructure challenges Page 11 of 14

12 b) Commit to a cost-sharing approach for Phase 2 infrastructure funding that maintains 50% federal contributions and a formal requirement for at least 33% provincial contributions towards eligible costs for local government projects Local governments recognize that they have a responsibility to financially participate in new and renewal infrastructure projects, and are prepared to do so. However, UBCM has considered the following regarding the request for the federal government to maintain its 50% funding share commitment and the provincial requirement to commit to a minimum 33% funding share: 1. All levels of government understand that a significant infrastructure gap exists. An estimate identifies an immediate $20 billion infrastructure deficit for local governments in BC 2. In addition, considerable infrastructure pressures have been realized in recent years through both federal and provincial legislation that include; drinking water, wastewater, solid waste, dams/dykes and protective services all services provided by local governments 3. Appropriate federal and provincial participation will leverage these funding programs to build/renew more infrastructure, further reducing the deficit and addressing federal and provincial legislation 4. While this increased commitment may be time-limited to Phase 2, a focus on addressing points #1 & #2 will support local government in moving towards sustainable service delivery It has also been established that local governments have access to only 8-10% of the tax base while providing services that are more infrastructure intensive than provincial and federal government services. A significant concern is local government s capacity to fund the required infrastructure, limited by local government s revenue generation and borrowing ability. This real concern is heightened by the short-term nature of recent funding programs. By maximizing the federal and provincial investment, we can: Address our infrastructure challenges faster Reduce the infrastructure deficit Reduce the occurrence of failing infrastructure, and Improve compliance in meeting provincial and federal legislative standards Further, considerable research has identified how senior government investment in infrastructure benefits the economy. Every $100 million invested in infrastructure will grow the economy by $114 million and generate up to 1,670 jobs for one year. 2 The same report identifies that governments 2 The Conference Board of Canada, 2013 Page 12 of 14

13 recover 30-35% of every dollar spent on public infrastructure through taxation, and this only includes the benefits for the construction phase of the investment. To conclude, a continued commitment by the federal government to support a 50% contribution, and a required commitment by the provincial government to support a minimum 33% contribution benefits all levels of government by growing the economy, creating jobs, protecting the environment, protecting public health and protecting public safety. It also supports local governments in their efforts in addressing requirements for renewal, replacement, new infrastructure, meeting existing service demands and achieving new regulatory standards. Under Phase 2, a commitment by the federal government to maintain a 50% contribution commitment and a formal requirement for at least 33% provincial contributions towards eligible costs for local government projects c) Commit to long-term, dedicated funding/programming for local government Long-term, predictable funding dedicated to local government infrastructure is critical to planning for and managing that infrastructure. Short-term funding programming, whereby local governments react to a short intake or program, undermine some of the best practices that these programs are trying to support namely long-term planning and asset management. An increasing number of local governments are planning their infrastructure needs well into the future, with 10-year capital plans and 20+ year asset management plans. These plans will be most effective in delivering on infrastructure priorities if federal infrastructure investments over these same time periods are made. Phase 2 funding should include a commitment to longer-term, dedicated funding for local governments Page 13 of 14

14 D. COMMITMENT BY LOCAL GOVERNMENT a) Commit to a dedicated, maximum 17% contribution towards eligible costs for local government projects Refer to C.b) - Commit to a cost-sharing approach for Phase 2 infrastructure funding that maintains 50% federal contributions and a formal requirement for at least 33% provincial contributions towards eligible costs for local government projects For Phase 2, BC local governments commit to a dedicated, maximum 17% contribution towards eligible costs for local government projects b) Commit to developing, implementing and improving best management practices that support sustainability of service delivery and infrastructure such as asset management practices and water conservation. Local governments have become extremely aware of costs, and cost drivers that impact the costs of providing services, both internal and external. One area which has recently been integrated into the Gas Tax Agreement is asset management. Local governments and UBCM are actively moving forward with the development and implementation of asset management practices that support effective and strategic infrastructure investment by: Providing real and reliable information Understanding long-term costs Understanding cost-benefit Understanding risks Asset management practices will improve long-term financial sustainability while managing the infrastructure and the services that local governments provide. Local governments understand the need to integrate long-term planning, based on implementation of best practices, into infrastructure decision-making. This includes asset management, long-term financial planning, long-term infrastructure plans, integrated sustainability plans, water conservation and others. BC local governments commit to developing, implementing and improving best management practices that support sustainability of service delivery and infrastructure. Page 14 of 14