Paved with money
Free-flowing infrastructure funds are tempting targets for cash-strapped cities
By Ellen Russell
Photography by Reuters: Shaun Best
Virtuous causes make great cover: if you want to perpetuate a boondoggle, there is nowhere better to hide than behind a legitimate public concern. With a heavy heart, I'm beginning to wonder if Canada's infrastructure deficit is being exploited to conceal some rather unseemly political manoeuvring.
Undeniably, Canada's infrastructure is hurting. All those years of federal, provincial and municipal tax cuts and budget tightening have set the stage for chronic under-investment in crucial things like roads, bridges, waterworks, recreational centres, and public transit. The Federation of Canadian Municipalities estimated it would cost an additional $123 billion as of 2007 to keep our current infrastructure in working order.
But while cities are on the front lines of this infrastructure mess, they don't have the fiscal capacity to fix it. According to the FCM, municipalities receive 8 cents out of every tax dollar. Provincial governments receive 42 cents and the feds take 50 cents. Understandably, impoverished municipalities scrap new construction and postpone essential maintenance, which exacerbates the problem. Streets really are paved with money: if cities don't have the cash to keep them up, roads start to crumble.
Obviously, this infrastructure problem has unacceptable human, economic and environmental consequences. (Just try reducing greenhouse gases if the public transportation system is a mess.) Everyone seems to agree that something must be done.
That's why new mechanisms are proliferating to transfer federal and provincial money to rebuild municipal infrastructure. For example, the federal gas tax is now a permanent source of revenue for municipal infrastructure that "enhances the environment and quality of life." Provinces and territories have additional pots of infrastructure money. Some cities even have municipal levys intended to pay for local infrastructure.
Undoubtedly, money — a lot of it — is urgently needed. But how will Canadians know that this cash is really used to build the infrastructure we need? When lots of money is flying around from lots of sources it doesn't always find its way to its intended destination.
Consider our country's fair capital, Ottawa, which is an interesting case study in municipal infrastructure funding.
City politics in Ottawa can get pretty spicy. The mayor, Larry O'Brien, is currently facing two criminal charges alleging that he offered to secure a federal appointment for rival candidate Terry Kilrea if he would drop out of the mayoralty race.
With Kilrea gone, OÔBrien's main electoral rival was progressive candidate Alex Munter. O'Brien's campaign showcased his promise of no tax increases for four years. Munter was both knowledgeable and honest enough to recognize this promise as fiscal science fiction. Munter admitted that city finances could not be balanced without some increase in taxes.
Once elected, O'Brien tried to keep his zero tax increase promise by cancelling services, including a proposed expansion of public transit. But as budget reality overwhelmed his antitax rhetoric, O'Brien tried to keep the necessary tax increase to under 5 percent.
And then the snow started falling. Since city hall had skimped on the snow removal budget, Ottawa's huge snowfall in 2007/08 made a bad municipal budget situation worse.
The solution? Raid infrastructure money. It seems that Ottawa's own municipal levy for infrastructure has been dispatched to keep the tax increase at 4.9 percent, and Ontario's Minister of Municipal Affairs and Housing started asking unpleasant questions about how city council used a $14.6million provincial infrastructure grant. Just how creative the accounting got is still unclear. But this lack of clarity is exactly the point. The City of Ottawa is only one municipality among the hundreds across Canada that may be tempted to use infrastructure funds to plug budget leaks elsewhere.
High standards of transparency and accountability are needed to ensure that we get what we pay for. With so many infrastructure funding mechanisms and so many municipalities and so many P3's (public private partnerships) lined up in search of lucrative contracts to provide municipal infrastructure, it's getting difficult to track where the money is actually going. If taxpayers don't have a clue where money comes from and what it is used for, it is almost impossible to know if we are getting value for our infrastructure dollars.
Infrastructure funding must not become a fiscal piñata. Without adequate transparency and accountability, there is an overwhelming temptation for cash-strapped cities to raid infrastructure money to patch up other budget problems or fund unwise contracts. If all of these dollars are going to translate to the infrastructure we so badly need, we must make sure that politicians are putting our money where — quite literally — the rubber meets the road.
