Speeches

Notes for an address
by the Honourable John Godfrey, P.C., M.P.
Minister of State (Infrastructure and Communities)

to the Infrastructure Renewal and Financing Conference

Toronto, Ontario
February 28, 2005

Check Against Delivery

''Role of the Governement of Canada in Financing Infrastructure Renewal''

Thank you very much for that introduction.  Yes, I was once an academic and now I am a politician.

But I maintain an historian’s perspective.  So I would like to begin my remarks today by saying that I believe we are currently living through a time of historical significance as far as our cities and communities are concerned. It is a time characterized by the coming together of three public policy agendas into one. The three are: the infrastructure agenda, the cities and communities agenda, and the sustainability agenda. 

As future historians look back on these times, I believe they will recognize that these three agendas were merging into one now.

As public policy issues, each of these issues have been popular at one time or another.  Today, however, all three – infrastructure, communities and sustainability – have never been higher on the government’s priority list than they are now.

Let’s take the first two – the infrastructure agenda and the urban agenda – and look at how we have dealt with them in earlier times in this country. 

First: Infrastructure. I think it’s fair to say that as far as the federal government is concerned the 1970s and ‘80s were not times of big infrastructure investments in Canada. For a more heroic period you would have to go back to the building of the railways or the building of the canals or in more recent times the building of the St. Lawrence Seaway or the building of the Trans-Canada Pipeline in the 1950s.

What’s interesting about these kind of large scale projects is that many of them were in effect public-private partnerships.  As a small country with limited public sector resources, we had to combine public and private interests to do projects like these.

So, a look at the history of infrastructure in this country, beyond the obvious things associated with the federal government like wharves and post offices and that sort of thing, shows there are many examples of government collaboration with the private sector on infrastructure projects. Today we call them P3s, but it’s really just a new name for something we have always done. 

Looking at the second aspect of this triple agenda – the urban agenda – we can see that urban issues have ebbed and flowed as priorities of the federal government over time.

In the past, the federal government typically got involved with cities and communities on housing issues.  For example, after the First World War it was the crisis caused by the homecoming of troops that caused the federal government to be interested in housing. Another example was the Halifax explosion which required government participation in the rebuilding of homes in Halifax after the First World War.  And it was a housing crisis which resulted in the 1970s creation of the Urban Affairs ministry under Pierre Trudeau, a ministry that lived for a few years but that was wound down in 1979 partly because of the political climate of the day. 

More recently, the federal government became involved once again in investing in municipal infrastructure. Over the past decade, the Government of Canada has committed some $12 billion in partnership funds for infrastructure projects in every part of Canada.  These federal funds will lever more than $30 billion in total funding through partnerships with provincial and municipal governments, as well as the private sector.

So now here we are in a very interesting time in which infrastructure investment from the federal point of view has revived and where it has now become the point of entry into the larger urban debate.

But these infrastructure investments are also related to the sustainability agenda and the implementation of Kyoto, that sort of thing. 

Which brings me to the third element of the tri-partite agenda I described at the beginning of my remarks.

To me infrastructure investment, by definition, must be about sustainability. It’s about long term planning, such as we are doing through a project in Halifax where we are investing federal funds in a large scale project with a 100-year time horizon. Or in Manitoba where we’re investing in an expanded Winnipeg floodway project which has an even longer time horizon.

Thus, when we invest in infrastructure we are investing for long periods of time. We are also investing in projects that will improve the quality of life of Canadians as well as have an impact on the climate change agenda.

So no matter how we come at these issues, from the perspective of infrastructure issues, from the perspective of the urban agenda, or from the perspective of the sustainability agenda, we are at this interesting historical juncture of the three agendas coming together.

And it is this combination of issues that underlies the New Deal for Cities and Communities (NDCC) that is now one of our government’s highest priorities.

As a government we have been building towards this New Deal for some time. It began with the commitment to infrastructure renewal which started in 1994. It continued with work such as Judy Sgro did with her Task Force (and that Andy Manahan referenced in his speech). And it is being led now by Prime Minister Paul Martin and his government.

The recent Budget speech is a good example.  Among other things, the Budget sets out our government’s plan to share gas tax revenues with Canada’s municipalities. It means that $5 billion in federal funds will flow to municipalities over the next five years, and that federal funds will continue to flow at the rate of $2 billion a year thereafter.  I note too that this last budget builds on previous budgets. Last year we provided a 100% rebate of federal GST to municipalities. And all this is in addition to the $12 billion in federal funds committed in past budgets and that will result in some $30 billion in overall project funding for local and regional infrastructure projects.

More money is clearly good news for Canada’s municipalities and I am encouraged by the good reviews that the budget is receiving (for example, the review in the National Post this morning and positive comments from others like Mayor David Miller of Toronto or Ann MacLean, President of the Federation of Canadian Municipalities).

It’s clear that the money the New Deal brings is welcome. But I want to emphasize that as welcome as this good news is, the New Deal is not simply about money and it’s not simply about infrastructure.

Part of this New Deal is also about things like respect and building new relationships among the stakeholders who have an interest in our tripartite agenda.

Let me give you an example. It has to do with a meeting that took place following the Speech from the Throne last October.  Now, it’s no secret that some of Canada’s municipal leaders have been quite vocal in calling on Ottawa for more federal funds for infrastructure investment.  But the mayors were not just asking for money, they also wanted to participate in the policy process, to be respected and to gain a place at the table. 

Well they got that place at the table on Throne Speech night when the Prime Minister invited a group of mayors to 24 Sussex and where we literally sat around the dining room table.  The Prime Minister said, “I’ll tell you what we’re up to and where we’re going.  And I want to get your advice.”

This was a significant development. And I am pleased to report that from now on Canada’s municipalities will be at the table and they will be a respected part of the work to implement the New Deal.

Another point has to do with what I see as an urban myth that some are spreading about the New Deal having been diluted to include smaller communities instead of just the big cities. The Toronto Star, for example, has run stories along these lines. 

But the New Deal was always about cities and communities. If you go back to the Federation of Canadian Municipalities speech when the then finance minister first talked about a “new deal”, he emphasized the importance of communities of all sizes. 

I don’t think we should look at cities in isolation. There is a vital dynamic that exists between urban centres and smaller communities. I call it the hydraulics of the urban-rural relationship. It reflects the reality that there is an ongoing and interactive flow of goods and services, of people and traffic, and of trade and investment that takes place between communities both large and small, urban and rural.

We need to recognize this and we need to understand the implications of these hydraulics for both urban and rural communities.  One implication I would suggest is that it means the whole will be greater than the sum of its parts.

Just this morning I saw an obituary in the Globe and Mail that reminded me of this. It was for a man named Karl Renner whose grandfather was chancellor of Austria after the First World War.  The obituary referred to the fact that at the height of its glory Vienna was the capital of an empire – the Austro-Hungarian empire – which contained 16 different races and about 50 million people.  The city’s scale reflected its importance. 

After the Treaty of Versailles, however, Vienna was still the capital of Austria, but it was now the capital of a country of only three million people.  Vienna today is still a great place to visit, but it in no way has the significant position it once did.

My point is that cities take their size not simply from their own position but from their relationship with their economic hinterland if you like.  If there isn’t a big economic space, or a big political space in which they are the centre, then they cease to be important. 

So the idea that a city can thrive without its economic hinterland to me is suspect.  

Take the various banks with head offices in Toronto, for example. Would the Toronto head offices show the same profits if they didn’t have a branch system generating business right across the country?  The banks happen to pay their taxes from a Toronto address but they are based on activities throughout the country.

To use another example, some of Toronto’s head offices depend on the activities of natural resource companies, say forest companies or mines, whose production operations are far outside the Greater Toronto Area. 

In cases like these, the profits are recorded in Toronto, and the taxes are paid from Toronto addresses, but the scope of the profits and the scale of the head office operations depend directly on activities that take place in small communities and rural areas throughout the country. 

In a country like ours, governments both provincial and municipal should keep in mind that they do not exist in isolation. I’m thinking of the $23 billion myth in the Government of Ontario or the $9 billion myth of the government of Toronto, which somehow suggest these entities exist by themselves. 

It’s important to remember that great cities exist because they’ve got great countries to be part of and they’re part of the bigger economic space.

In some ways, we’ve got two Canada’s on the go here.

We’ve got large and growing centres like Vancouver, Calgary, Toronto, and Montréal and others that are experiencing special pressures – pressures of urban growth, of accommodating and integrating immigrants, of affordable housing, of traffic congestion, and so on.

But then we have another Canada – the Canada of smaller towns and smaller cities and resource communities which are under reverse pressure where the immigrants aren’t going, where the population is declining and where they’re suffering their own community crises. 

Remember if small and rural communities fail, their people will head for the big cities. If we don’t want our cities to be overrun with the populations of collapsing communities elsewhere then we better pay attention to the hydraulics that exist between our urban and rural communities.  

The bottom line is that our communities large and small need each other to thrive and government policy must reflect that.

That’s why our New Deal is a new deal for all of Canada’s cities and communities.

And that’s why we are offering to share federal gas tax revenues in a way that can benefit all sizes of municipalities in this country.

Which leads me back to the recent budget and what it means to our municipalities.

I would like to begin by addressing what some call the infrastructure gap. That is a difference between what we now have and are able to finance and what some observers say we should have. (An earlier presentation referred to this issue.)

There are many estimates on the size of this so-called gap. Some look at a fairly narrow definition of traditional hard infrastructure like roads and sewers and so on. Others look more broadly and include things like recreation centres and parks and that sort of thing.

But no matter how you measure it, there is no question that communities throughout the country have substantial infrastructure investment needs.

If we’re going to bridge the gap it seems to me that it’s not simply about money, although money’s always good.  It will only happen with the right kind of partnerships and cooperation first between the three orders of government – federal, provincial and municipal, but also by working with the private sector. 

It’s got to be a team effort and we will all have a role to play.

The first thing we have to do is set priorities.

Let me tell you what mine are. 

My immediate priority is to get moving on this gas tax.  And I am doing that by working with my colleagues in the provincial and territorial governments and with representatives of municipal governments.

Our first challenge was to figure out how to take $5 billion over a five-year period and divide it fairly across Canada. 

This is not as easy as you might think.

There are those who want us to focus on the big cities (we heard reference to that here earlier today).  Others say no, it’s a form of equalization, so you really ought to focus on the little guys.  A classic Canadian debate.

At the end of the day we produced a classic Canadian formula – one that is transparent and clear and that will essentially distribute the money on a per capita basis. The formula also recognizes there are four jurisdictions, notably the three territories and PEI where a per capita basis simply doesn’t work.

The next stage was to develop a schedule to begin transferring the funds. The Minister of Finance set this out in his Budget speech.  It is $600 millions this year and next $800 millions in years three and four.  And rising to $2 billion per year by 2009-10. 

But the Finance Minister also said the $2 billion per year would continue indefinitely thereafter. The words “continue indefinitely thereafter” are very important. They mean that once we hit the running rate of $2 billion in five years, then it’s $2 billion every year thereafter.  That means the first five-year period is a total of five billion.  The next five-year period (from year six through 10) is $10 billion. 

To put that in perspective, the current infrastructure programs – not including our Border Infrastructure Fund or Infrastructure Fund or Infrastructure Canada Program - are our strategic funds at $2 billion each and the new Municipal Rural Infrastructure Fund of $1 billion, amount to total of five billion.

So this new gas tax revenue is a significant addition to that.

With the money now in the Budget, my next task is to do a series of bilateral deals with each of the provinces and territories.  My officials and I are now hard at work with our government colleagues across the country to do this.

Typically, some negotiations are going more smoothly than others. Here in Ontario for example the challenge will be to produce a fair deal that recognizes the needs of the smaller communities (I’m thinking of a place like Wawa, for example) as well as the big cities. 

We’re willing to work with all the stakeholders, including municipal groups to make sure that we come up with fair and workable solutions for the disbursement of these federal funds.

We want to achieve some basic outcomes with these funds. They include curbing urban sprawl and promoting densification and reducing green house gases. They can also include encouraging greenbelt legislation such as Ontario is doing. But the agreements must work for all sizes of communities.

My number one priority is to get these provincial and territorial agreements in place.

And to do that in a way that will allow us to build effective long term working relationships with the other stakeholders who are concerned about the future of Canada’s communities, and that includes local governments.

Because for our New Deal to be truly effective, it is clear to me that another of our priorities must be to improve our working relationship with mayors and councils across the country.

We have got the ball rolling on this. Over the past year, I have met with mayors of communities large and small in all parts of the country.  The Prime Minister sat down with several mayors following the Throne Speech. And the Minister of Finance has said that municipal representatives will have a place at the table in future budget discussions.

The key now is to build on this momentum. For example, I think we could use our experience with infrastructure agreements to work towards broader comprehensive urban development agreements that encompass a variety of federal activities at the local level.

These are the kind of issues the advisory council set up by the Prime Minister to provide us with advice on a long term vision for sustainable communities in Canada is looking at. 

The committee is headed up by Mike Harcourt a former mayor of Vancouver. It includes people like David Pecault and Ratna Omidvar of Toronto.  The group’s job is to look at the whole range of issues impacting Canada’s cities and communities and to come up with a long term vision – sort of a thirty or even fifty year plan – for where we should be going.

Some of the questions they are looking at include: How do we reduce the urban burden on the environment?  How do we create more pleasant livable cities? How do we reinforce initiatives like the Ontario government’s green belt legislation, or its Places to Grow report?  This is a great task. As a general comment, I would say we haven’t paid enough attention to these kind of long term planning or quality of urban life issues.  We haven’t figured out what the new urbanism actually means.  The External Advisory Committee on Cities and Communities will help us do that.

But that is not to say, we are not already moving ahead on some interesting individual cases.

A good example is the work being done by one of the Crown corporations that reports to me – Downsview Park.  This large tract of land in north Toronto has great potential as an urban park.  As I see it, the challenge is not simply to make a great urban park but also a great urban surround so that we can get the kind of quality that drove say the park process of Regent’s Park in London or Central Park in New York.  Those are typical of the great planning challenges we are now dealing with and which will influence our vision of what the New Deal could accomplish over the long term.

So, in addition to money, the New Deal is about vision and building new relationships.

But of course, it’s money that seems to get most of the attention. So let me go back to what we are doing on the financing side and give you a sketch of some things we have done and where we are going. 

I already mentioned the billions in gas tax revenue that we will begin to transfer as soon as the necessary agreements are in place, as well as the billions the government of Canada is investing as a partner in literally thousands of infrastructure projects large and small across the country.

I also mentioned that in our previous budget – Budget 2004 – we delivered a first installment of $7 billion over 10 years in GST rebates to all municipalities.

While we didn’t tie the GST rebate money to infrastructure, we expected that if there was indeed a huge infrastructure gap as municipalities claim, then they would want to reinvest that money in infrastructure.  It seems that many have done so.  But others did not.  Which makes me wonder about some of the earlier claims about an infrastructure gap in the first place.

I can tell you that the new gas tax money is tied to clear objectives, such as investing in  infrastructure and building sustainable communities.  

Every province and territory will sign a contribution agreement with specific terms and conditions.  And they will be accountable for meeting them.

We are going to absolutely monitor them and insist that there be no clawbacks by the provinces.  We’re also going to require municipalities to give an account every year as to how the new funds are being used. We’re interested in two things: first, how these funds are being used to make incremental investments – that is investments they would not otherwise have been able to make without the gas tax money; and second how the projects are going and what the outcomes are.

We are looking for specific outcomes. For example:  Do we have cleaner air and water?  Do we have measurable reductions of greenhouse gases?  How are these investments promoting sustainability?

An earlier presentation today talked about Environmentally Sustainable Municipal Infrastructure or ESMI.  This is a concept that is key to our approach to infrastructure funding.  Our investments will be 100 percent supportive of sustainability, such as the major emphasis we’re putting on urban transit.  We want to focus on a couple of big themes where we can really be effective.  We believe that the multiple benefits of public transit justify putting most of our federal investment there.  That’s where we have been going anyway.  For example, we have invested in a billion-dollar project with GO Transit, as well as another billion dollar project with the Toronto Transit Commission (TTC).  And we are putting up a third of the $150 million for a new rapid transit system in York Region. 

So we are not interested in sending money down a black hole, as some are suggesting. We are investing in targeted, sustainable objectives and the contribution agreements with our partners on the gas tax will make that clear.

I am coming to the end of my allotted time, so I would like to wind up by going back to my opening remarks about the three different agendas coming together in my infrastructure and communities portfolio.  They are the infrastructure part, the urban and communities part and the sustainability part.

There are a couple of other points I want to make concerning sustainability. 

The first is that sustainability is and will be fundamental to everything we do in my portfolio. It is our “raison d’être” so to speak.

Second is when I talk about sustainability, I am talking about four elements of sustainability.  The first three are well known – that is to say, environmental, economic and social sustainability. But when it comes to communities, I add another element – cultural sustainability – because it is culture and creativity that makes cities unique and distinctive. If we neglect the cultural element, then we will have generic cities, not real places where people want to live.

It’s not that one of the four elements trumps the others but rather that they all reinforce each other.  This means the kinds of choices we make about infrastructure – for example how we deal with land use and planning – will also have implications for the social well-being of our communities. 

A new study from the Ontario College of Family Physicians illustrates this.  The study draws links between suburban life, urban sprawl and bad health outcomes. It prompts us to look at the connections between the urban landscape and health and to understand their inter-relationships.

I bring this same approach to looking at the involvement of the federal government in our communities.  There are departments like National Defence which has armouries and other facilities and is a major employer in several Canadian cities, or Fisheries and Oceans which is vitally important in our port cities, or Human Resources and Skills Development, or the regional development agencies, or any number of federal departments that are active in communities throughout the country.   Because we are everywhere, I see great potential to assess the impact of our activities at the local level. I would like to know what we might do on a community by community, or city by city, or region by region basis to work within the federal family to meet a community’s sustainability objectives.

If we can work together as a federal group, we will be in a much better position to work with our partners at the provincial and municipal levels and the business communities to meet combined objectives. 

We’ve got some very useful experience doing this through the partnerships we have created to deliver our infrastructure investment programs. The next step is to build on this experience in a horizontal way.

For example, if my department is going to be part of, let’s say, the Regent Park revival here in Toronto, we also want to make sure that other federal ministries, such as immigration, or skills development or housing are involved too.  This way, you get a very rich kind of project which addresses needs that go beyond just infrastructure and physical rebuilding. 

Of course when we do this, we must be entirely respectful of provincial jurisdictions – and we are. I’m not trying to do an end-run around the provinces, I want very much to work with them and with other partners to meet the very real needs that are out there.

I also see a role for the private sector in meeting the country’s infrastructure needs. We are already seeing a great deal of interest in public-private partnerships, or P3s, in different parts of the country. Given Canada’s positive historical experience with public-private partnerships as I mentioned earlier, and given the scope of the challenges we face today, I think the P3 approach makes sense.

Three provinces have already signaled their intention to use P3s, so we’re, in fact, already involved in some projects that include some form of private sector participation. 

By its very nature, my department is really the first up to bat in looking at contributions to P3 infrastructure projects at the federal level.  In fact, we are already working on a few that have been brought to us by our provincial partners.  One that comes to mind is the Richmond-Airport-Vancouver urban transit project – the so-called RAV line – in British Columbia. It’s a classic P3 model.  The ownership and direction will be in the public sector with the operations being carried out by a private sector contractor who also shares the project risk. 

This is just one example, we are currently working on several others.  And since Ontario, Quebec, and BC are all on the record in favour of P3s, I expect we will see more.  

My colleague John Mackay, Parliamentary Secretary to the Minister of Finance is doing a lot of work in this area.  His work is very helpful to us, especially as my department continues to build its capacity as a centre of expertise in the federal government for the use of P3s for infrastructure.

So I want you to know that we are open for business on P3s.  We think private sector partnerships can offer a pragmatic approach to meeting some of the country’s  infrastructure needs, especially for large scale projects.  The caveat of course, is that they must be structured so that protection of the public interest is paramount.

At the other end of the project scale, I also see a need to address the need to build the capacity of our smaller communities to manage their local infrastructure and community development issues.  In many cases small communities, often run by part-time volunteers, don’t have the capacity to implement solutions to renew and restore their infrastructure facilities. 

The new $1 billion Municipal Rural Infrastructure Fund, or MRIF, that we are just now starting to roll out will be able to do that.  This new fund is targeted to smaller scale projects in smaller communities.  It has a big focus on water projects, particularly after Walkerton.  And it includes a provision to devote one percent of the billion dollars for capacity building for smaller communities.

To sum up, our New Deal for Cities and Communities is multi-dimensional.  

It includes money – in fact we are already delivering on our promise to provide long-term, stable, predictable financing to our communities to invest in infrastructure – but it goes well beyond that.

The New Deal is also about developing new ways to look at community issues. 

That means creating a new vision of what our cities and communities can and should look like in the future, as well as being open to building the kinds of new relationships and partnerships that will get us there.

Let me end by saying that while my point of entry into today’s discussion is through infrastructure, my interests go well beyond that. They include the broad range of urban and community planning issues, as well as the nation’s sustainability agenda.

Indeed, the New Deal is fundamentally about sustainability. It will cut across almost every federal government department. I see my department as a kind of central agency within the Government of Canada to implement the New Deal.  

We have made substantial progress on this file, but we still have some big challenges ahead. And I look forward to continuing to work with like-minded colleagues in both the public and private sector to make sure that Canada’s communities will always be great places to live, work, do business and raise our families.

Thank you.

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