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Natural
Capital:
A Critical Foundation of Our Economy
Protecting
natural capital in urban communities
Summary
This third set of recommendations focuses
on the important role fiscal policy can play in establishing
a leadership role for the federal government in protecting
urban environmental quality – that is, in ensuring that
Canada’s urban centres (a key component of our produced
capital) function as effectively as possible and with minimal
adverse impacts on natural capital (such as surrounding agricultural
lands and air quality). These recommendations are designed
to help enhance the well-being of urban residents and to ensure
that cities remain attractive, stable centres for business
and talented workers.
The recommendations stem from two recent NRTEE
reports: Environmental Quality in Canadian Cities: The
Federal Role (released in May 2003) and Cleaning
Up the Past, Building the Future: A National Brownfield Redevelopment
Strategy for Canada (released in February 2003). The
second report was requested by the federal government in its
2001 budget.
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The first report focused on the need for the
federal government to adopt a coherent approach in using fiscal
levers to improve urban environmental quality. One of the key themes
of the report was the need for greater horizontal and vertical integration
of fiscal policies that affect urban decision making. It also suggested
specific measures to promote various aspects of urban environmental
quality, including:
- funding and encouraging the use of urban transit;
- promoting energy-efficient buildings and community
energy systems;
- supporting sustainable urban development patterns
(or urban form); and
- promoting sustainable municipal infrastructure.
The second report, on the NRTEE’s National Brownfield
Redevelopment Strategy, included recommendations in three areas:
- the need for strategic public investment –
tax incentives, loans, grants and mortgage guarantees –
to overcome market reluctance to provide capital to finance the
early stages of brownfield redevelopment;
- the need for all levels of government to work
together to improve the regulatory environment for brownfield
redevelopment by introducing predictability and consistency with
regard to the liability regime and the post-remediation evaluation
process; and
- the need to raise stakeholder awareness of the
benefits of brownfield redevelopment and increase brownfield redevelopment
capacity by promoting innovation in the area of remediation technology.
Most of the fiscal recommendations in this submission
address the first area: the lack of available capital, which is
one of the main barriers to brownfield redevelopment. In many cases,
federal tax and other laws provide incentives for greenfield development
that are unavailable for comparable brownfield projects.
Recommendation 10: That $1
billion a year be invested for 10 years to create a stable, long-term
urban transit fund. The fund should include contributions to both
capital and operating costs. Such a stable source of funding would
allow cities to make long-term plans for their urban transit systems.
The NRTEE also recommends that the federal government
adopt sustainability criteria for current and future transit programs
to ensure that the funds dedicated to improving urban transit also
promote sustainable urban growth.
Recommendation 11: That, to promote
the use of urban transit, the Income Tax Act be amended
to make employer-provided transit passes a tax-exempt benefit.
Recommendation 12: That, to promote
investment in community energy systems, Class 43.1 of the Income
Tax Act regulations be amended to allow all capital investments
related to a community energy system to be eligible for an accelerated
capital cost allowance.
Recommendation 13: That the
Excise Tax Act be amended to extend the GST rebate currently
available on the sale of new homes to renovations on existing homes
that improve their energy efficiency. This should be accompanied
by a “premium energy performance” labelling program,
which identifies the top energy-efficient products in each category
eligible for the GST rebate.
As well, the Excise Tax Act should provide
a rebate of 36% of the GST incurred for costs associated with renovations
to create a self-contained apartment unit in an existing house.
Recommendation 14: That the
existing 36% new housing GST rebate be increased to 50% for R-2000
homes. This additional rebate would represent 25% to 50% of the
estimated R-2000 cost premium.
Recommendation 15: That the GST rebate
for eligible green infrastructure projects be increased to 100%.
This action would underline the federal government’s commitment
to investing in green infrastructure.
Recommendation 16: That practical,
performance-based criteria be adopted for current and future infrastructure
programs that ensure that federal funds dedicated to improving urban
infrastructure also promote urban environmental quality.
Recommendation 17: That the
Canada Mortgage and Housing Corporation conduct research on the
potential contribution of eco-efficient mortgages (including location-efficient
mortgages and green mortgages) to the more efficient use of land
in Canada. If research results warrant, this would lead to a pilot
project. Then, if pilot project results warrant, a wider eco-efficient
mortgage program involving the financial sector would be pursued.
Recommendation 18: That, in
recognition of the significant upfront costs associated with brownfield
remediation, sections 18 and 20(1) of the Income Tax Act be
amended to allow remediation expenses to be treated as a deductible
expense or a capital cost in computing income in the year the cost
is incurred.
Recommendation 19: That a
brownfield redevelopment current deduction and investment tax credit
be established, which would be similar to the Scientific Research
and Experimental Deduction Program’s credit provision provided
in sections 37 and 127 of the Income Tax Act.
Recommendation 20: That federal
liens and tax arrears be removed from qualifying brownfield sites.
The federal government should also work with the provincial governments
to develop criteria for removing Crown liens against brownfield
properties.
Recommendation 21: That the Canada
Mortgage and Housing Corporation be provided with funds to, under
its current mandate, offer mortgage guarantees for brownfield redevelopment
projects providing housing. The federal government should also expand
the mandate of the Canada Mortgage and Housing Corporation to allow
the corporation to provide mortgage insurance for residential, commercial
and industrial development for qualifying brownfield sites.
Recommendation 22: That the federal
government endow a $250 million revolving brownfield redevelopment
fund to make low-interest loans available for certain brownfield
redevelopment projects. Repayment proceeds from initial loans should
be provided to other projects.
The revolving loan fund program could be administered
by the Federation of Canadian Municipalities, Canada Mortgage and
Housing Corporation, Business Development Bank of Canada, or specific
qualifying provincial or municipal agencies.
Recommendation 23: That the
federal government work with provincial and municipal governments
to provide comprehensive grant funding for qualifying brownfield
redevelopment projects. Only municipalities and not-for-profit agencies
seeking to redevelop a brownfield should be eligible for the program.
Recommendation 24: That $5 million
a year be provided to Technology Partnerships Canada to extend the
program to include funding for the demonstration of remediation
technologies on designated brownfield sites in Canada.
(Details
and Table of Recommended Measures)
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Complete document -- 
Investing in Canada's Natural Capital