Infrastructure Investment Deficit

Recent research from various associations in Canada shows that there is a growing infrastructure investment deficit occurring in many sectors. This results in deteriorating infrastructure and escalating costs since the longer roads and buildings remain in a state of disrepair, the higher the costs to refurbish or replace.

The Canadian Council for Public-Private Partnerships believes that public-private partnerships are one proven method to begin addressing the infrastructure backlog and utilize the expertise and capital available from the private sector.

An Interview with Saeed Mirza, Professor Emeritus, Civil Engineering & Applied Mechanics, McGill University

CCPPP interviewed Dr. Mirza in February 2009 about his opinions on the progress on reducing the infrastructure deficit, and incidentally, how PPP may play a role in addressing the problems with conventional approaches to infrastructure development in Canada.

• View the interview with Dr. Saeed Mirza

FEDERAL INFRASTRUCTURE FUNDING

The 2009 Budget Implementation Act received Royal Assent on March 12, 2009. Many of the budget provisions were designed to infuse capital in infrastructure and other economic stimulus programs quickly, most within 2009 and 2010. While there were no significant new initiatives related specifically to P3, there were several infrastructure-related provisions that may impact P3 project funding in the next two years.

The 2009 Budget reiterated the existing funding for the Building Canada Fund ($8.8B), and Border Crossings Fund ($2.1B), Asia-Pacific Gateway and Corridor Initiative ($1B), and Public-Private Partnerships Fund ($1.26B). The 2009 Budget also noted that PPP Canada Inc., the Crown Corporation charged with administering the P3 Fund, is “planning an initial call for applications
to the fund in 2009–10.” For more information on the existing Building Canada Fund, Gateways & Border Crossings Fund and P3 Fund, go to: www.infc.gc.ca/ip-pi/bcip-picc/bcip-picc-eng.html. You can also view the Building Canada e-newsletter for current details.

CANADA'S TRANSPORTATION SYSTEM

At Council of the Federation meeting in August 2005, Canada's territorial and provincial premiers identified Canada's transportation system "as vital to promoting economic growth, international competitiveness and the best standard of living for all Canadians." The report stemming from the meeting outlined several policy recommendations that would foster better infrastructure development and management. It also highlighted a number of investment gaps in the sector:

• A federal/provincial/territorial task force on urban transportation estimated in 2005 that infrastructure investment needs for Canada's urban transit is at least $23 billion over the next few years. Investment needs for urban roads and bridges is much higher—$66 billion over 10 years. (1)

• As far back as 1998, the Council of Ministers of Transportation estimated that investment needs on the National Highway System were over $17 billion. Since that time, the NHS has been extended and costs have increased. (1)

• Using preliminary estimates, provinces and territories have identified the need for approximately $97 billion in capital investment in transportation priorities over the next 10 years. (1)

In the Spring of 2004, the Government of Ontario held consultation sessions to obtain feedback on its "Discussion Paper on Infrastructure Financing and Procurement". It was the Government's first step in developing a long-term plan to address Ontario's infrastructure deficit. In April 2004, CCPPP submitted a Position Paper to the Minister of Public Infrastructure Renewal, Hon. David Caplan, outlining the benefits of using public-private partnerships to deliver much-needed infrastructure in Ontario. In July 2004, the Ministry released "Building a Better Tomorrow - Infrastructure Planning, Financing and Procurement Framework for Ontario's Public Sector". Ogilvy Renault prepared a brief on the framework for CCPPP.

In May 2005, Minister Caplan announced the formation of the Ontario Infrastructure Projects Corporation, which will focus on "alternative financing and procurement". On May 25, 2005, the Ministry of Infrastructure Renewal issued its 5-Year Infrastructure Plan entitled "ReNew Ontario", which includes $2.3 billion in major alternative financing and procurement projects.

• CCPPP Submission to the Minister of Public Infrastructure Renewal - April 2004

• Summary of Speech by The Hon. David Caplan, Ontario Minister of Public Infrastructure Renewal re. Infrastructure to CCPPP - May 2004

• A Brief on the Government's Framework - prepared for CCPPP by Ogilvy Renault - August 2004

• Summary of Speech by The Hon. David Caplan re. Ontario Infrastructure Projects Corp. - May 9, 2005

• ReNew Ontario - A Five-Year Infrastructure Investment Plan - May 2005

For more information on the Government's Framework, go to the Ministry of Public Infrastructure Renewal website at: http://www.pir.gov.on.ca/english/aboutpir/publications/BBT-Framework_EN.pdf

SELECTED RESEARCH

Below are selected resources and statistics on Canada's infrastructure investment deficit.

• If the current level of infrastructure under-investment is allowed to continue in Canada, the deficit could balloon to $1 trillion in 60 years. (2)

• Deferring maintenance (or not performing repairs at all) leads to much higher rates of deterioration and repair bills that can equal the cost of the original asset. (2)

• The municipal infrastructure gap as a percentage of national GDP has grown from 2.7% in 1984 to 5.0% in 2002. (3)

• The municipal infrastructure gap is growing by $2 billion per year and the federal gas tax (when fully mature) will provide $2 billion per year. This only stabilizes the gap at roughly $60 billion. (3)

• More than 80% of foreign multinational executives surveyed indicated that the poor state of business infrastructure adversely affected Canada as a destination for foreign direct investment. One of the key concerns is the state of the country’s physical infrastructure. (4)

• Canada's infrastructure gap is estimated to be between $50 billion and $125 billion, which is 6-10 times the level of all current annual government infrastructure budgets combined.(5)

• Canada's large western cities (Vancouver, Edmonton, Calgary, Saskatoon, Regina, Edmonton, Winnipeg) reported an infrastructure deficit of $564 million in 2003. (6)

• The current cost estimate to rehabilitate Canada's civil infrastructure system at the municipal level is $57 billion, which only represents 70% of Canada's total civil infrastructure (7)

• We have already used 79% of our infrastructure's life expectancy (7)

(7)

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• $20.7 billion is required for transit system infrastructure for the period 2006-2010, with $9.1 billion (44%) of that required just to keep current systems in a state of good repair (8)

• The trends evident in comparing the infrastructure needs between 1999 and 2006 suggest transit infrastructure needs have increased 144% from $8.5 billion to $20.7 billion but are now stabilizing. (8)

• A recent study of 35 key Ontario municipalities found they needed to spend more than $700 million on road reconstruction while actual spending amounted to only $255 million (9)

• 45% of their roads required work, with 10% needing immediate repair (9)

• Drivers in Southern Ontario are now having to spend an average of almost $2,000 over the life of their vehicles in repairing damage to their cars caused by poor road conditions (10)