Big-city mayors want more flexibility for infrastructure spending

Theglobeandmail.com
June 2, 2016
By Bill Curry

Big-city mayors say billions in promised infrastructure cash may not lead to much construction this year, as many questions remain over how the Liberal government’s programs will work.

Mayors made the comments in Winnipeg on Thursday as they prepared to meet with federal Infrastructure Minister Amarjeet Sohi. The meeting is part of the annual conference of the Federation of Canadian Municipalities, and Prime Minister Justin Trudeau is scheduled to address the group on Friday.

Municipal leaders are bristling at what they see is the possibility that federal officials may want to sign off on every infrastructure project, and are calling for more flexibility on how to spend the money. Examples of ongoing issues include the definition of “green” infrastructure and whether projects must reduce greenhouse-gas emissions in order to qualify for funding.

“I think there’s still the possibility for some dollars to flow this year,” Edmonton Mayor Don Iveson, who chairs the big-city mayor caucus, said in an interview. “In terms of major construction projects starting this year, that may be more challenging, but I certainly hold out hope.”

Winnipeg Mayor Brian Bowman told reporters Thursday that some of the timelines set by Ottawa for when projects must end are creating problems.

“We’d like to see increased flexibility so that we can have those funds fit the priorities and the timelines that we have here in Winnipeg,” he said. “We’re trying to get a better handle on ‘how rigid are these rules?’”

The mayors’ comments are in line with those expressed this week by Quebec’s minister responsible for Canadian relations, Jean-Marc Fournier, who told The Globe and Mail that any infrastructure spending in 2016 is likely to come from provincial, rather than federal, funds.

A face-to-face meeting between Mr. Trudeau and Quebec Premier Philippe Couillard is being planned in an effort to speed up the process of infrastructure decisions.

Federal officials insist talks are going well and a string of infrastructure announcements will be made across the country later this month.

The emerging timeline of putting federal money to work may be slower than what economic forecasters – including Bay Street economists, the Bank of Canada and Finance Canada - had assumed. Economists’ projections have included assumptions for stimulus in 2016 based on spending that was promised in the March 22 budget.

Finance Canada has estimated that 2016 budget measures would boost the level of gross domestic product by 0.5 per cent in the first year and 1 per cent in the second year.

Avery Shenfeld, chief economist for CIBC Capital Markets, notes that those projections of additional growth were based on more than just infrastructure spending. They also count on a jolt from income tax cuts that took effect Jan. 1 and new child benefit payments to parents that will start in July.

Mr. Shenfeld said that while a slower pace may lead forecasters to adjust their numbers, the impact of any additional infrastructure spending was always assumed to be small. He noted that most provincial governments are currently focused on spending restraint, which limits the influence of federal stimulus spending.

“We’re talking about decimal places on the growth rate, within the bounds of error and everything else in our forecasts,” he said.

Mr. Shenfeld added that “haste makes waste,” and it may be better to take the time required to ensure that infrastructure spending is as effective as possible.

“It’s not as if all the energy-sector workers will be back on the job in 2017, so we’ll still have slack in the economy to fill in next year,” he said. “Building a bunch of curling rinks and pretty gardens might not be the asset of choice. So the shovel-ready idea often conflicts with the second objective, which is to build the assets that have the best longer-term potential for driving growth.”