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Ottawa fast-tracks infrastructure spending as program faces criticism for delays

Ottawa fast-tracks infrastructure spending as program faces criticism for delays
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OTTAWA — The federal government is expanding a program that will allow Canadian cities and towns to spend more on infrastructure, signalling an acknowledgement by Ottawa that its $190-billion spending program has been slow to reach municipalities.

In his fourth budget, Finance Minister Bill Morneau on Tuesday proposed doubling the federal Gas Tax Fund to $4.3 billion in 2019, up from the current annual rate of around $2.2 billion.

The proposed spending hike effectively functions like a shortcut to get infrastructure dollars directly to Canadian cities, just as Ottawa’s sprawling spending program faces criticism for delays in breaking ground on new projects. Already, Ottawa has been forced to push back billions worth of planned spending on roads, bridges, telecoms lines, clean tech facilities and other projects.

“What we’ve seen is we’ve not been able to get as many projects in some places… done as we’d like,” Morneau told reporters on Tuesday.

The $2.2 billion boost will increase the overall cost of Prime Minister Justin Trudeau’s plan to roughly $190 billion, expanding what was already one of the largest infrastructure spending programs in Canadian history.

The program was a central piece of Trudeau’s 2015 campaign promise, in which he laid out plans to boost the faltering economy through infrastructure spending, funded in part by budget deficits.

The Gas Tax Fund is a long-standing program that funnels a portion of diesel and gasoline sales across Canada into a pool that funds municipal infrastructure projects.

Expanding the program for a single year could fail to appease Canadian municipalities, who have been lobbying Ottawa for years to permanently expand the program. Municipal lobby groups argue that such a move would give them a more steady supply of infrastructure dollars that is free from political influence, allowing them to plan projects further in advance.

Ottawa on Tuesday justified the plan by acknowledging that “too often, money that had been budgeted for investment in communities was left unspent and unallocated — shortchanging cities and towns that needed those funds for important projects. ”Officials in the federal infrastructure ministry, meanwhile, have said the program has gradually caught up with its scheduled rollout.

Unlike previous budgets, the government on Tuesday did not push any planned infrastructure spending to future years.

Even so, Ottawa has yet to complete even the first phase of its spending plan, which was meant to be rolled out in the first 18 months of the program. It has now been 36 months since the program was first announced.

Ottawa has so far spent $13.3 billion of the $14.4 billion planned under Phase 1, according to Tuesday’s budget. At least part of that lag has been blamed on reporting gaps from several federal departments, according to officials at the federal infrastructure ministry.

Overall, the government has now spent $19 billion of the total $190 billion planned over 12 years, which includes both Phase 1 and Phase 2 spending.

Also on Tuesday, the federal government hinted that the nascent Canada Infrastructure Bank (CIB) is mulling investments in hydropower and electrical transmission projects, saying it “has identified” such areas as key to its future spending plans.

“This includes projects that improve interconnections between provincial electricity grids,” it said.

The bank has already been criticized for making investment decisions that appear to be politically motivated, after it announced a $1.28 billion loan for a Montreal light rail project last year, marking its first expenditure. In its mandate for the bank, the Liberal government pointed specifically to the Montreal project as a potential place that it could invest.

The 2019 budget comes amid fresh fears of a weakening Canadian economy, after the country posted poor economic results in the last quarter of 2018.

Ottawa on Tuesday maintained that its infrastructure spending program could boost the economy by 0.4 per cent by 2020-21, equal to an earlier estimate it made in 2016 that the plan would grow the economy 0.4 per cent in fiscal year 2017-18.

Instead, according to a 2018 report by the PBO, economic growth resulting from the program only reached between 1.13 and 1.16 per cent over that period, a fraction of its intended target.

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