Gas Tax Agreement

Canada - Newfoundland and Labrador

Agreement On The Transfer Of Federal Gas Tax Revenues

2006-2015

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This Agreement made as of August 1, 2006,

PREAMBLE

WHEREAS this Agreement will engage governments and stakeholders in purposeful partnerships, foster sustainable cities and communities across Canada and enable all Canadians to achieve a higher quality of life and standard of living.

WHEREAS Canada and Newfoundland and Labrador have agreed to cooperate based on a long-term vision of sustainability and which integrates four interdependent dimensions: economic, environmental, social and cultural.

WHEREAS the Government of Canada's Budget 2005 outlined an intent to provide provinces and territories an amount equivalent to a portion of the federal excise tax on gasoline.

WHEREAS this Agreement includes the specific provisions on the Gas Tax for Environmentally Sustainable Municipal Infrastructure to primarily support environmental sustainability objectives.

WHEREAS Newfoundland and Labrador is committed to provide regional solutions to addressing waste management issues through the implementation of the Provincial Waste Management strategy.

WHEREAS this Agreement reflects the scope of expected areas of cooperation, and for which Canada and Newfoundland and Labrador may enter into separate agreements, including possible trilateral agreements, to support sustainability objectives.

AND WHEREAS the Lieutenant Governor in Council, by OIC 2006-313, has authorized the Minister of Municipal Affairs and Minister of Intergovernmental Affairs to enter into this Agreement on behalf of Newfoundland and Labrador.

PURPOSE

The purpose of this Agreement is to:

1. provide a joint framework for the transfer of Funds to Newfoundland and Labrador for investment in environmentally sustainable municipal infrastructure.
2. confirm that the Parties will continue to work together for the purpose of addressing, in partnership, other challenges facing Newfoundland and Labrador's communities.

PRINCIPLES

The Government of Canada and the Government of Newfoundland and Labrador acknowledge that this Agreement has been negotiated with the regard to the following principles:

Principle 1 - Respect for jurisdiction: The Government of Canada respects the jurisdiction of Newfoundland and Labrador over its municipal institutions. The Government of Newfoundland & Labrador recognizes Canada's contribution to cities and communities in Newfoundland and Labrador. The commitments of Canada and Newfoundland and Labrador demonstrate the merit of partnerships across all levels of government.

Principle 2 - A flexible approach: A flexible approach regarding the intra-jurisdictional allocation and the delivery mechanism to be used by Newfoundland and Labrador to flow money to municipalities and the nature of municipal involvement and the nature of the provincial contribution.

Principle 3 - Equity between provinces and territories: Ensuring that the inter-provincial allocation is as close as possible to a per capita basis while respecting the need to have an adjustment for the smallest jurisdictions.

Principle 4 - Promote long-term solutions: The principle that Canada is making a 5-year financial commitment with the gas tax but negotiating a 10-year gas-tax agreement subject to program evaluation, budget appropriation and ongoing federal commitment, with a clause for a review after four years.

Principle 5 - Transparency: The commitment to put in place an open and transparent governance process for the purposes of implementing this agreement and selecting projects for funding. This process will also include, among other things, a commitment to the development of performance indicators, evaluations and regular reporting.

Principle 6 - Regular reporting to Canadians: Canada will use federal mechanisms to report on outcomes. Newfoundland and Labrador will employ its own mechanism for reporting within its jurisdiction.

NOW THEREFORE, in accordance with the principles set out above, Canada and Newfoundland and Labrador hereby agree as follows.

1. INTERPRETATION

1.1 Definitions

A capitalized term has the meaning given to it in this section unless the context clearly dictates otherwise.

"Agreement" means this Canada - Newfoundland and Labrador Agreement on the Transfer of Gas Tax Funds.

"Annual Expenditure Report" means the annual report to be prepared and delivered by Newfoundland and Labrador to Canada, more particularly described in Schedule D.

"Audit Report" means an audit report prepared, at Newfoundland and Labrador's cost, by an external provincially licensed auditor, more particularly described in Schedule D.

"Base Amount" means the average annual expenditures budgeted for Municipal Infrastructure projects over the April 2001-March 2006 period, excluding amounts spent for the Multi-Year Capital Works Program and Canada Strategic Infrastructure Fund projects.

"Capacity Building Projects" means projects and activities that strengthen the ability of Local Governments to develop and implement integrated community sustainability plans, as more particularly described in Schedule A.

"Capital Investment Plan" means a public document supported through a resolution of Council, with approval from locally elected officials, providing a detailed understanding of anticipated investments into tangible capital assets that are considered "priorities" along with a rationale for their priorities.

"Environmentally Sustainable Municipal Infrastructure (ESMI) Projects" means Municipal Infrastructure projects that:

1. improve the quality of the environment and contribute to reduced greenhouse gas emissions, cleaner water or cleaner air; and
2. fall within the category of projects described in Schedule A hereto.

"Eligible Costs" means those costs described in Schedule B and incurred in respect of Eligible Projects.

"Eligible Projects" means Capacity Building Projects and ESMI Projects.

"Eligible Recipient" means:

1. a Local Government;
2. a non-municipal entity, on the condition that the Local Government where the proposed Eligible Project would be housed has indicated support for the Eligible Project through a formal resolution of the Local Government's council. A non-municipal entity includes:
   • for-profit organizations (such as P3), or
   • non-governmental organizations, or
   • not-for-profit organizations.
3. Any other entity that delivers core municipal services in Newfoundland and Labrador agreed to in a jurisdiction by Canada and that jurisdiction during the negotiation of the Agreement.
   
   
   Federal and provincial entities in the form of departments, corporations and agencies are not eligible recipients, except where a provincial department, Crown corporation or other entity provides core municipal services within the jurisdiction of the Local Government and the Local Government agrees that the province or the provincial department, Crown corporation or other entity should be the recipient of the funding for Eligible Project, except in the unincorporated areas of Newfoundland and Labrador.

"Eligible Recipient Requirement" means those requirements described in Schedule C hereto.

"Fiscal year" means the period beginning April 1 of a year and ending March 31 of the following year.

"Funding Agreement" means an agreement made between Newfoundland and Labrador and an Eligible Recipient pursuant to which Funds are paid to the Eligible Recipient.

"Funds" means the funds made available pursuant to this Agreement and includes any interest earned on the said Funds.

"GTF" means the Gas Tax Fund Transfer Payment Program, pursuant to which this Agreement is entered into.

"Infrastructure Programs" means Canada's infrastructure programs in existence at the time of the execution of this Agreement, including the Canada Strategic Infrastructure Fund, the Border Infrastructure Fund, the Municipal Rural Infrastructure Fund and the Infrastructure Canada Program.

"Integrated Community Sustainability Plans" means a long-term plan, developed in consultation with community members, that provides direction for the cities, towns and regions to realize sustainability objectives it has for the environmental, cultural, social and economic dimensions of its identity.

"Local Government" means a city, town or region pursuant to the Municipalities Act, 1999, R.S.N.L. 1999, c. M-24; the City of St. John's pursuant to the City of St. John's Act, R.S.N.L. 1990, c. C-17; the City of Corner Brook pursuant to the City of Corner Brook Act, R.S.N.L. 1990 c.C-15; the City of Mount Pearl pursuant to the City of Mount Pearl Act, R.S.N.L. 1990, c.C-16; a Regional Service Board pursuant to the Regional Service Boards Act, R.S.N.L. 1990 c.R-8.

"Ministers" means the federal Minister and the Newfoundland and Labrador Minister.

"Multi-Year Capital Works Program" means the Newfoundland and Labrador 50/50 provincial/municipal cost-shared program designed to assist municipalities in the construction of local infrastructure.

"Municipal Infrastructure" means tangible capital assets in Canada primarily for public use or benefit owned by an Eligible Recipient.

"Outcomes Report" means the report to be delivered by Newfoundland and Labrador to Canada and made available to the public, which reports on the outputs and outcomes of the use of the Funds, using the indicators set out in Schedule E.

"Parties" means Canada and Newfoundland and Labrador.

"Regional Waste Management" means the April 2002 Newfoundland and Labrador strategy to enhance existing waste management practices or introduce new modern waste management practices within major population or broad geographic areas in the Province of Newfoundland and Labrador.

"SIMSI" means Infrastructure Canada's Shared Information Management System for Infrastructure.

"Third Party" means any person, other than a party to this Agreement, that participates in the implementation of an Eligible Project.

1.2 Entire Agreement

This Agreement supersedes and invalidates all other commitments, representations and warranties relating to the subject matter hereof, which the Parties may have made either orally or in writing prior to the date hereof, and all of which will become null and void from the date this Agreement is signed.

1.3 Schedules

The following schedules are attached to form part of this Agreement:

Schedule A - Eligible Project Categories

Schedule B - Eligible Costs

Schedule C - Eligible Recipient Requirements

Schedule D - Reporting & Audits

Schedule E - Outcome Indicators

Schedule F - Communications Protocol

Schedule G - Allocation Model

1.4 Precedence

In the event of a conflict, the part of this Agreement that precedes the signatures of the Parties will take precedence over the Schedules.

1.5 Accounting Principles

All accounting terms not otherwise defined herein have the meanings assigned to them; all calculations will be made and all financial data to be submitted will be prepared, in accordance with the generally accepted accounting principles (GAAP) in effect in Canada and in Newfoundland and Labrador. GAAP will include, without limitation, those principles approved or recommended from time to time by the Canadian Institute of Chartered Accountants, or any successor institute, applied on a consistent basis.

2. COMMITMENTS BY THE PARTIES

2.1 Commitments by the Government of Canada:

Canada will:

1. honour any existing contribution agreement with Newfoundland and Labrador in respect of Infrastructure Programs, in accordance with its terms.
   
   
2. ensure that the funding under this Agreement provides additional funding for Local Governments rather than displacing other federal infrastructure funding; and intends to renew and extend the Canada Strategic Infrastructure Fund, the Border Infrastructure Fund and the Municipal Rural Infrastructure Fund as they expire.
   
   
3. discuss with Newfoundland and Labrador other proposals from Newfoundland and Labrador regarding cities and communities.
   
   
4. invest Gas Tax funding in First Nations on Reserve communities in Newfoundland and Labrador to address their infrastructure priorities in addition to the monies referred to in Section 4.1.
   
   
5. encourage inter-municipal and municipal-First Nations reserve collaborations on Eligible Projects.

2.2 Newfoundland and Labrador Commitments

Newfoundland and Labrador agrees that it will:

1. ensure that, over the period of April 1, 2006, to March 31, 2010, its average annual capital spending on Municipal Infrastructure, including the municipal contribution to cost share programs and excluding amounts spent for the Multi-Year Capital Works Program and Canada Strategic Infrastructure Fund projects, will not be less than the Base Amount;
   
   
2. not reduce, eliminate or clawback any Municipal Infrastructure funding which is currently being made available to Eligible Recipients by Newfoundland and Labrador. Funding for provincial programs is subject to legislated appropriations;
   
   
3. require through Funding Agreements that each Local Government complete, as per Section 5.2.2 of this Agreement, a Capital Investment Plan, and ensure that Funds cannot be used as the municipal contribution to any Multi-Year Capital Works Program project;
   
   
4. include the Eligible Recipient Requirements in any Funding Agreement, and enforce all terms and conditions of Funding Agreements in a diligent and timely manner and seek remedies from non-compliant Eligible Recipients;
   
   
5. over the life of the Agreement, require, through Funding Agreements, the development of Integrated Community Sustainability Plans at the municipal level appropriate to Newfoundland and Labrador;
   
   
6. ensure that prior to March 31, 2010, all Local Governments have adopted and use the accounting rules of the Public Sector Accounting Board;
   
   
7. ensure that Local Government contributions include net incremental infrastructure investments, a commitment not to reduce or clawback any capital infrastructure funding which is currently being made available for infrastructure, and commitments to complete Integrated Community Sustainability Plans and make them available to the public;
   
   
8. improve the efficiency of the delivery of provincial programs and services to Local Governments;
   
   
9. support Local Governments, by way of funding or other resources, in preparing Integrated Community Sustainability Plans.

3. OVERSIGHT COMMITTEE

3.1 Establishment and Duties

Upon execution of this Agreement, the Ministers shall promptly establish a Committee (the "Oversight Committee") to be co-chaired by two members— one of whom is to be appointed by the Federal Minister and designated as Federal Co-Chairperson, and one of whom is to be appointed by the Provincial Minister and designated as Provincial Co-Chairperson. This Committee shall:

1. in addition to the co-chairs, consist of two representatives from the Newfoundland and Labrador Federation of Municipalities and an additional representative from the provincial and federal governments;
   
   
2. monitor the overall strategic implementation of the Agreement;
   
   
3. co-ordinate the development of a plan for continued collaboration in Newfoundland and Labrador:
   1. developing further elements of the cities and communities agenda for Newfoundland and Labrador;
   2. encouraging inter-governmental cooperation in priority setting and program delivery;
   3. responding to sustainability planning outcomes.

The Oversight Committee may also choose to establish one or more technical or management committees and establish rules and procedures with respect to its meetings and those of any sub-committee it may create, including rules for the conduct of meetings and the making of decisions.

4. CONTRIBUTION PROVISIONS

4.1 Allocation to Newfoundland and Labrador

Canada's total contribution to Newfoundland and Labrador is as follows:

4.2 Payment

Provided there is no default under the terms of Section 7.2 of this Agreement, Canada's contribution will be paid in equal semi annual payments as follows:

1. The first payment will be made not later than July 1st of each Fiscal Year set out above in subsection 4.1; and
2. The second semi annual payment will be made not later that November 1 of each Fiscal Year.

In respect of the first Fiscal Year of this Agreement, payment of Canada's semi annual contributions shall be made as follows: $14,805,000 following the signing of this Agreement, and $4,935,000 by November 1st.

4.3 Appropriations

A payment due by Canada hereunder is conditional on a legislated appropriation for the GTF for the Fiscal Year in which the payment is due.

4.4 Limit on Canada's Financial Commitments

4.4.1 Eligible Recipients may use Funds to pay up to 100% of Eligible Costs of an Eligible Project. However, to the extent an Eligible Recipient is receiving money under an Infrastructure Program in respect of an Eligible Project to which the Eligible Recipient wishes to apply Funds, the maximum federal contribution limitation set out in any Infrastructure Program contribution agreement made in respect of that Eligible Project shall continue to apply.

4.4.2 Without prior written approval of Canada, Newfoundland and Labrador may not use the payment of Funds by Newfoundland and Labrador, once received from Canada, to an Eligible Recipient as the provincial contribution under contribution agreements under existing Infrastructure Programs.

4.5 Disposal of Eligible Projects

To the extent that Newfoundland and Labrador receives a repayment of all or a portion of a contribution pursuant to the operation of Paragraph 13 of Schedule C, Newfoundland and Labrador shall immediately pay the said amount to Canada.

4.6 Contracting

Newfoundland and Labrador agrees to require in the Funding Agreement that all Eligible Recipients award all contracts for the supply of services or materials to Eligible Projects in a way that is transparent, competitive and consistent with value-for-money principles.

5. ALLOCATION TO ELIGIBLE RECIPIENTS, DELIVERY MECHANISM AND USE OF FUNDS

5.1 Allocation to Eligible Recipients

Canada's contribution will be allocated, as more specifically shown in Schedule G, as follows:

• an amount of $21,883,764 will be allocated to Eligible Recipients based on criteria to be established by Newfoundland and Labrador, subject to Sections 5.2.8 and 5.2.9 of this Agreement, towards the implementation of the Regional Waste Management strategy;
• a base allocation of $6,036,624 (10%) will be equally divided between Local Governments, excluding Regional Service Boards;
• the remainder of $54,329,612 will be allocated on a per capita basis to all Local Governments, excluding Regional Services Boards, based on 2001 Statistics Canada Census populations.

5.1.1 Federal and Provincial Co-Chairs, after consulting with the Oversight Committee, may make adjustments to allocations to Local Governments which in the opinion of the Co-Chairs are necessary to reflect such events as the establishment of new Local Governments, the merging of two or more Local Governments, or other important changes in Local Governments.

5.1.2 Before determining Fund allocations to Local Governments, Newfoundland and Labrador may deduct from Canada's Fund contributions such amounts as Canada may approve for the purpose of paying Newfoundland and Labrador's administrative costs mentioned in Section 5.3.4 of this Agreement.

5.2 Use of Funds

5.2.1 Funds shall be used only for Eligible Projects identified in Schedule A and solely in respect of Eligible Costs identified in Schedule B.

How Eligible Recipients Access Funds

5.2.2 In order to receive its Funds after the 2006/07 Fiscal Year, an Eligible Recipient shall have submitted to Newfoundland and Labrador:

1. a Capital Investment Plan with respect to the use of Funds, which includes the following information:
   1. a summary description of Eligible Projects for which the Eligible Recipient intends to use Funds;
   2. the Infrastructure investment categories of the Eligible Projects;
   3. the Outcomes and outputs the Eligible Recipient expects will result from the use of Funds and the proposed method the Eligible Recipient will use for measuring the Outcomes; and
   4. a general description of how the use of Funds will contribute to environmental sustainability efforts and other sustainability efforts of the Eligible Recipient.
      
      
2. each year, an audited annual municipal expenditure report, which will allow Newfoundland and Labrador to fulfill its commitments under Schedule D of this Agreement.

5.2.3 If the Eligible Recipient formally adopts its Capital Investment Plan as meeting the eligibility requirements under this Agreement, and enters into a Funding Agreement with the Government of Newfoundland and Labrador with respect to the Eligible Recipient's Capital Investment Plan, the Eligible Recipient's annual allocation will be paid by the Government of Newfoundland and Labrador.

Each Eligible Recipient will agree in its Funding Agreement to use Funds that come available to it each Fiscal Year only for the purpose of paying for Eligible Costs incurred with respect to the Eligible Projects identified in its Funding Agreement with Newfoundland and Labrador.

Multi-Year Commitments

5.2.4 An Eligible Recipient may access all or any of the four years of its allocation of Funds under a single Capital Investment Plan submitted to and accepted by Newfoundland and Labrador; however, allocations will be paid by Newfoundland and Labrador to the Eligible Recipient in installments as Funds are made available each year by Canada to Newfoundland and Labrador and according to the terms and conditions of the Eligible Recipient's Funding Agreement.

Accumulation of Fund Allocations

5.2.5 An Eligible Recipient may accumulate its annual Funds allocations up until March 31, 2008, at which time, if a Capital Investment Plan has not been submitted by the Eligible Recipient, the Co-Chairs of the Oversight Committee may redirect the Eligible Recipient's allocation for use by other Eligible Recipients for Eligible Projects.

5.2.6 Funds accumulated by Local Governments are to be held in the account set up by Newfoundland and Labrador under this Agreement for the purpose of holding Funds, pending payment to Local Governments.

Funds for Regional Waste Management

5.2.7 Additionally, $21,883,764 will be directed towards the implementation of the Newfoundland and Labrador Regional Waste Management strategy, as published in April 2002 by the Government of Newfoundland and Labrador's Department of Environment. Newfoundland and Labrador will design criteria to be approved by the Oversight Committee that will define how Eligible Recipients can access Funds under the Regional Waste Management allocation. The criteria will be aimed at establishing the Regional Waste Management Systems and final waste disposal sites.

5.2.8 Funds which have not been distributed by Newfoundland and Labrador to Eligible Recipients for Regional Waste Management projects by March 31, 2009, may be redirected by the Oversight Committee to alternate uses by other Eligible Recipients.

5.3 Payment Installments and Adjustments

5.3.1 Newfoundland and Labrador agrees to pay each Eligible Recipient its 2006-07 fiscal year Fund allocation within:

1. ninety (90) days from the date a Funding Agreement is signed; or
   
   
2. ninety (90) days after Newfoundland and Labrador receives Funds from Canada, whichever is later.

A payment due by Newfoundland and Labrador hereunder is conditional upon it receiving Funds from Canada.

5.3.2 Subject to Section 5.2.2 2) of this Agreement and each Eligible Recipient meeting the terms and conditions of its Funding Agreement, Newfoundland and Labrador agrees to pay the Eligible Recipient its Funds allocation for each Fiscal Year beyond 2006-07 in two equal semi-annual payments, with each payment to be received by the Eligible Recipient no later than ninety (90) days upon which Newfoundland and Labrador receives Canada's semi annual Fund payments.

5.3.3 Funds that a Local Government is eligible to receive under this Agreement and that have not been triggered for payment by March 31, 2009, may be redirected by the Oversight Committee to alternate uses by other Local Governments.

5.3.4 All administration costs of Newfoundland and Labrador in respect of the implementation and management of this Agreement shall be for the account of Newfoundland and Labrador, provided that Funds may be used by Newfoundland and Labrador to pay the administrative costs incurred by Newfoundland and Labrador in the delivery of the Funds or in fulfilling the reporting and audit requirements set below in Section 6, provided Newfoundland and Labrador submits, in advance, for review and acceptance by Canada, a business case justifying such use of Funds.

5.3.5 Interest earned on Funds held by Newfoundland and Labrador shall be deposited to the account referred to in Section 5.2.6 and shall be used only for the purpose of making payments to Eligible Recipients or for paying administrative costs, as per Section 5.3.4 of this Agreement, incurred by Newfoundland and Labrador in the delivery of Funds or in fulfilling the reporting and audit requirements set out below in Section 6.

5.3.6 Newfoundland and Labrador may also allocate interest earned on the Funds to support the capacity building efforts of the Newfoundland and Labrador Association of Municipalities (NLFM) up to $75,000 per annum, provided the NLFM submits in advance, for review and acceptance by the Oversight Committee, a business case justifying such use of Funds. Funds shall be used only for Eligible Projects identified in Schedule A and solely in respect of Eligible Costs identified in Schedule B, and for the benefit of Eligible Recipients.

5.4 Agreement with Eligible Recipient

Newfoundland and Labrador agrees to include, in all Funding Agreements, the Eligible Recipient Requirements and agrees to enforce all terms and conditions of the Funding Agreements, including the Eligible Recipient Requirements.

6. REPORTING, AUDITS AND EVALUATION

6.1 Reporting

6.1.1 Newfoundland and Labrador, at its cost, will:

1. prepare and deliver to Canada no later than September 30 of each Fiscal Year, in respect of the prior Fiscal Year, an Annual Expenditure Report and make its best efforts to provide an interim, unaudited version of the Annual Expenditure Report by June 30 of each Fiscal Year; and
   
   
2. prepare, publish and disseminate to the public, by no later than September 30, 2009, and periodically thereafter, an Outcomes Report.

6.1.2 Canada may incorporate all or any part or parts of the said reports into any report that Canada may prepare for its own purposes, including any reports that may be made public.

6.2 Audits

6.2.1 Annual Expenditure Reports will be accompanied by an Audit Report.

6.2.2 Newfoundland and Labrador agrees to require through Funding Agreements that Eligible Recipients maintain proper and accurate accounts and records, including invoices, statements, receipts and vouchers in respect of all Eligible Projects that receive Funds, and that they are kept for at least three (3) years after termination of this Agreement, and will, upon reasonable notice, make them available or cause the Eligible Recipient to make them available to Canada for inspection or audit.

6.2.3 Canada may request and Newfoundland and Labrador agrees to request Eligible Recipients to complete, at their cost, and provide to Canada an audit of any one or more individual Eligible Projects. Municipal Funding Agreements will require Eligible Recipients to pay for these audit costs.

6.2.4 Newfoundland and Labrador will share with Canada the results of any compliance or performance audit that they may carry out beyond the Audit Report, which examines the use of Funds to a specific extent. In the event an Eligible Recipient is found by an external auditor to have not used the Funds on Eligible Projects or Eligible Costs, Newfoundland and Labrador will withhold future payments of Funds to the Eligible Recipient until the matter is deemed to be cured to the satisfaction of the Government of Canada.

6.3 Evaluation

6.3.1 No later than March 31, 2009, Canada and Newfoundland and Labrador shall complete a joint formative evaluation of the program set out in this Agreement, the results of which will be made public. The Parties shall seek the input of Eligible Recipients, or representatives thereof, as the Parties deem appropriate.

6.3.2 At a minimum, the evaluation will address the issues related to achievement of the objectives of this Agreement, the use of funding, the effectiveness of the funding approach described in Sections 4 and 5 of this Agreement, and the effectiveness of the Communications Protocol described in Schedule F.

6.3.3 The Parties agree to cooperate with respect to the above noted evaluation, the costs of which will be shared equally by the Parties. Canada agrees to consult with Newfoundland and Labrador on the design of the evaluation framework.

6.3.4 In addition to the foregoing, no later than June 30, 2009, Canada will complete, at its cost, a national evaluation incorporating the results of the joint bilateral evaluations described above. Canada will share the results of this national evaluation with Newfoundland and Labrador prior to its completion.

7. DISPUTE RESOLUTION, DEFAULT, REMEDIES AND INDEMNITY

7.1 Dispute Resolution

The Parties agree to keep each other informed of any disagreement or contentious issue. Disagreements or contentious issues that cannot be resolved at the bureaucratic level will be brought to the Oversight Committee for review, discussion and resolution. Any issue that cannot be resolved at the Oversight Committee will be submitted to the Ministers for resolution.

7.2 Events of Default

Canada may declare that an event of default has occurred if Newfoundland and Labrador has:

1. not complied with any condition, undertaking or material term in the Agreement; or
2. failed to deliver an Annual Expenditure Report, Audit Report or Outcomes Report;
3. delivered an Annual Expenditure Report or Audit Report that disclosed non-compliance by Newfoundland and Labrador or a Local Government.

Canada will not declare that an event of default has occurred unless it has consulted with Newfoundland and Labrador and given notice to it of the occurrence which, in Canada's opinion, constitutes an event of default. Newfoundland and Labrador, within 30 days of receipt of the notice, shall either correct the condition or event, or demonstrate to the satisfaction of Canada that it has taken such steps as are necessary to correct the condition.

7.3 Remedies

If Canada declares that an event of default has occurred, after 30 days of declaration, it may immediately exercise one or more of the following remedies:

1. in the case of a default under subsection 7.2 a) above, terminate or suspend its obligation to pay Funds. If Canada suspends payment it may pay suspended Funds if Canada is satisfied that the default has been cured;
2. in the case of any other default, suspend its obligation to pay Funds pending Canada's satisfaction that the default has been cured.

7.4 Indemnity

Newfoundland and Labrador agrees at all times to indemnify and save harmless Canada, its officers, servants, employees or agents from and against all claims and demands, losses, costs, damages, actions, suits or other proceedings by whomsoever brought or prosecuted in any manner based upon, or occasioned by any injury to persons, damage to or loss or destruction of property, economic loss or infringement of rights caused by or arising directly or indirectly from:

1. all Eligible Projects;
2. the performance of this Agreement or the breach of any term or condition of this Agreement by Newfoundland and Labrador, its officers, employees and agents, or by a Third Party, its officers, employees or agents;
3. the performance of a Funding Agreement or the breach of any term or condition of a Funding Agreement by an Eligible Recipient, its officers, employees and agents, or by a Third Party, its officers, employees or agents;
4. the design, construction, operation, maintenance and repair of any part of an Eligible Project; and
5. any omission or other wilful or negligent act of Newfoundland and Labrador, an Eligible Recipient or a Third Party and their respective employees, officers or agents;

except to the extent to which such claims and demands, losses, costs, damages, actions, suits, or other proceedings relate to the act or negligence of an officer, employee or agent of Canada in the performance of his or her duties.

8. TERMS OF AGREEMENT AND RENEWAL

8.1 Term

This Agreement shall commence on August 1, 2006, and shall expire on March 31, 2015 (10 years). Either Party may terminate this Agreement on two (2) years written notice.

8.2 Review

Following the completion of the evaluation described in subsection 6.3.1 above, the Parties may elect to amend the Agreement, as appropriate.

9. COMMUNICATIONS

The Parties hereby agree to follow the terms of the Communications Protocol set out in Schedule F hereto.

10. MISCELLANEOUS

10.1 Binding Obligations

Each Party declares to the other that the signing and execution of this Agreement was duly and validly authorized, and that each has incurred a legal and valid obligation in accordance with the terms and conditions of the Agreement.

10.2 Survival

The Parties' rights and obligations, set out in Section 6 and subsections 2.2 d), 4.4, 4.5, 5.4, 7.3, 7.4, 10.4 and Schedule C, will survive the expiry or early termination of this Agreement and any other Section or Schedule which is required to give effect to the termination or to its consequences shall survive the termination or early termination of this Agreement.

10.3 Governing law

This Agreement is governed by the laws applicable in Newfoundland and Labrador.

10.4 Debts Due to Canada

Any amount owed to Canada under this Agreement will constitute a debt due to Canada, which Newfoundland and Labrador will reimburse forthwith, on demand, to Canada.

10.5 No Benefit

No member of the House of Commons or of the Senate of Canada will be admitted to any share or part of any contract made pursuant to this Agreement or to any benefit arising therefrom.

10.6 No Agency

It is understood, recognized and agreed that no provision of this Agreement and no action by the Parties will establish or be deemed to establish a partnership, joint venture, principal-agent relationship, or employer-employee relationship in any way or for any purpose whatsoever between Canada and Newfoundland and Labrador, or between Canada, Newfoundland and Labrador and a Third Party.

10.7 No Authority to Represent

Nothing in this Agreement is to be construed as authorizing one Party to contract for or to incur any obligation on behalf of the other or to act as agent for the other. Nothing in this Agreement is to be construed as authorizing any Recipient or any Third Party to contract for or to incur any obligation on behalf of either Party or to act as agent for either Party, and Newfoundland and Labrador will take reasonable steps to ensure that all Funding Agreements contain provisions to that effect.

10.8 Counterpart Signature

This Agreement may be signed in counterpart, and the signed copies will, when attached, constitute an original Agreement.

10.9 Values and Ethics Code

No person governed by the post-employment, ethics and conflict of interest guidelines of Canada will derive a direct benefit from this Agreement unless that person complies with the applicable provisions.

10.10 Severability

If, for any reason, a provision of this Agreement that is not a fundamental term is found to be or becomes invalid or unenforceable, in whole or in part, it will be deemed to be severable and will be deleted from this Agreement, but all the other terms and conditions of this Agreement will continue to be valid and enforceable.

10.11 Waiver

A Party may waive any right under this Agreement only in writing; and any tolerance or indulgence demonstrated by that Party will not constitute waiver of such right. Unless a waiver is executed in writing, that Party will be entitled to seek any remedy that it may have under this Agreement or under the law.

10.12 Lobbyists and Agent Fees

Newfoundland and Labrador warrants that any person who lobbies or has lobbied on its behalf to obtain funding or any benefit under this Agreement, and who is subject to the Lobbyists Registration Act (Canada), is registered accordingly. Furthermore, Newfoundland and Labrador warrants that no remuneration based on a percentage of Canada's contribution will be paid to a lobbyist.

10.13 Amendments to the Agreement

If Canada concludes an agreement for similar purposes with any other province or territory of Canada, and that agreement, taken as a whole, is materially different from this Agreement, Newfoundland and Labrador may ask Canada to agree to amend this Agreement so that, taken as a whole, it affords similar treatment to Newfoundland and Labrador as the other agreement affords to the other province or territory.

Additionally, this Agreement may be amended from time to time on written agreement of the Ministers.

10.14 Notice

Any notice, information or document provided for under this Agreement will be effectively given if delivered or sent by letter, postage or other charges prepaid, or by facsimile or email. Any notice that is delivered will have been received on delivery; and any notice mailed will be deemed to have been received eight (8) calendar days after being mailed.

Any notice to Canada must be sent to:

Assistant Deputy Minister, Cities and Communities
Infrastructure Canada
90 Sparks Street
Ottawa, ON K1P 5B4
Facsimile: 613-941-7930
Email: laroche.yazmine@infrastructure.gc.ca

Any notice to Newfoundland and Labrador will be addressed to:

Baxter Rose, Assistant Deputy Minister
Engineering, Policy and Planning Branch
Department of Municipal and Provincial Affairs
P.O. Box 8700, St. John's, NL A1B 4J6
Facsimile: 709-729-4475
Email: brose@gov.nl.ca

Each Party may change the address that it has stipulated by notifying in writing the other Party of the new address.

SIGNATURES

This Agreement has been executed on behalf of Canada by the Minister of Transport, Infrastructure and Communities, and the on behalf of Newfoundland and Labrador by the Minister of Municipal Affairs and the Minister of Intergovernmental Affairs.

SCHEDULE A - Eligible Project Categories

1) ESMI Projects examples include the following:

1. Public transit, e.g.:
   1. Rapid Transit: tangible capital assets and rolling stock (includes light rail, heavy rail additions, subways, ferries, transit stations, park and ride facilities, grade separated bus lanes and rail lines);
   2. Transit Buses: bus rolling stock, transit bus stations;
      iii) Intelligent Transport System (ITS) and Transit Priority Capital Investments;
   3. ITS technologies to improve transit priority signalling, passenger and traffic information and transit operations;
   4. Capital investments, such as transit queue-jumpers and High Occupancy Vehicle (HOV) lanes.
      
      
2. Water, e.g.:
   
   Drinking water supply and storage systems; drinking water purification and treatment systems; drinking water distribution systems; water metering systems; regional systems and protection of water sources.
   
   
3. Wastewater, e.g.:
   
   Wastewater systems, including sanitary and combined sewer systems; separate storm water systems, including outfalls and wastewater treatment facilities; flood proofing infrastructure; wastewater and storm water collection and treatment systems, including infrastructure to prevent cross contamination in water supply systems.
   
   
4. Solid Waste, e.g.:
   
   Waste diversion; material recovery facilities; organics management; collection depots; waste disposal landfills; thermal treatment and landfill gas recuperation, regional waste management systems relating to items mentioned above, including waste transport, onsite equipment, transfer stations, etc.
   
   
5. Community Energy Systems, e.g.:
   1. cogeneration or combined heat and power projects (where heat and power are produced through a single process);
   2. district heating and cooling projects where heat (or cooling) is distributed to more than one building.
      
      
6. Active transportation infrastructure (e.g. bike lanes), local roads, arterial roads, regional roads and bridges that enhance sustainability outcomes, including construction, reconstruction, and rehabilitation of roads, bridges and other ancillary works, parks or sidewalks, lighting, traffic control, various signals, etc.

2) Capacity Building includes the following activities:

1. Collaboration: building partnerships and strategic alliances; participation; and consultation and outreach;
   
   
2. Knowledge: use of new technology; research; and monitoring and evaluation, including municipally-initiated or driven research into sustainable models for infrastructure such as regional water supply, regional sewage treatment, regional solid waste management and regional road systems, as well as water quality monitoring and evaluation, drinking water source protection, and training for operation and maintenance of infrastructure.
   
   
3. Integration: planning, policy development and implementation (e.g. environmental management systems, life cycle assessment). Integrated sustainability planning, policy development and implementation, e.g. environmental management systems, life cycle assessment, water supply system planning, wastewater system planning, solid waste management planning, watershed planning and land use planning.

SCHEDULE B - Eligible Costs

Eligible Costs

1 Project Costs

Eligible Costs, as specified in each agreement, will be all direct costs that are, in Canada's opinion, properly and reasonably incurred and paid by an Eligible Recipient under a contract for goods and services necessary for the implementation of an Eligible Project. Eligible costs may include only the following:

1. the capital costs of acquiring, constructing or renovating a tangible capital asset and any debt financing charges related thereto;
2. the fees paid to professionals, technical personnel, consultants and contractors specifically engaged to undertake the surveying, design, engineering, manufacturing or construction of a project infrastructure asset and related facilities and structures;
3. the costs of environmental assessments, monitoring and follow-up programs, as required by the Canadian Environmental Assessment Act or a provincial equivalent; and
4. the costs related to strengthening the ability of Local Governments to develop Integrated Community Sustainability Plans (ICSP). The fees paid to professionals, technical personnel, consultants, and contractors specifically engaged to undertake planning, management, research, monitoring, training, consultation, facilitation, policy development and program implementation relating to Municipal Capacity Building and ICSPs, including costs of regional planning initiatives.

1.1 Employee and Equipment Costs

In the case of Eligible Recipients that are remote, the out-of-pocket costs (not overhead) related to employees or equipment may be included in its Eligible Costs under the following conditions:

1. the provision of such works or services by anyone other than the Eligible Recipient would be unduly costly;
2. b) employees or equipment are employed directly in respect of the work that would have been the subject of the contract; and
   c) the arrangement is approved in advance and in writing by the Oversight Committee.

1.2 Administration costs

That portion of Funds representing interest earned may be used to pay for administration costs.

Ineligible Costs

Costs related to the following items are ineligible costs:

1. Eligible Project costs incurred before April 1, 2006;
2. services or works that are normally provided by the Eligible Recipient or a related party;
3. salaries and other employment benefits of any employees of the community applicant, except as indicated in Section 1.1;
4. an Eligible Recipient's overhead costs, its direct or indirect operating or administrative costs and, more specifically, its costs related to planning, engineering, architecture, supervision, management and other activities normally carried out by its applicant's staff;
5. costs of feasibility and planning studies for individual Eligible Projects;
6. taxes for which the Eligible Recipient is eligible for a tax rebate and all other costs eligible for rebates;
7. costs of land or any interest therein, and related costs;
8. cost of leasing of equipment by the Local Government, except as indicated in Section 1.1 above;
9. routine repair and maintenance costs;
10. legal fees;
11. administrative costs incurred as a result of implementing this Agreement, subject to 1.2 above; and
12. audit and evaluation costs.

SCHEDULE C - Eligible Recipient Requirements

Eligible Recipients shall:

1. complete, as per Section 5.2.2 of this Agreement, a Capital Investment Plan and ensure that Funds will not be used as the municipal contribution to any Multi-Year Capital Works Program project.
   
   
2. over the life of the Agreement, where the Eligible Recipient is a Local Government, develop an Integrated Community Sustainability Plan, either by itself or as part of some higher level of agglomeration.
   
   
3. prior to March 31, 2010, adopt and use the accounting rules of the Public Sector Accounting Board.
   
   
4. ensure that the Funds will result in net incremental capital spending on Municipal Infrastructure over the period of April 1, 2006, to March 31, 2010.
   
   
5. for the cities of St. John's, Mount Pearl and Corner Brook, ensure that over the period of April 1, 2006, to March 31, 2010, each Local Government's capital spending on Municipal Infrastructure, excluding amounts spent on the Multi-Year Capital Works Program and Canada Strategic Infrastructure Fund projects, does not fall below its Base Amount.
   
   
6. permit Canada reasonable access to all records relating to all Eligible Projects that have received Funds.
   
   
7. be responsible for the complete, diligent and timely implementation and completion of the Eligible Project.
   
   
8. acknowledge that Newfoundland and Labrador may holdback Funds if the Eligible Recipient is in default under the Funding Agreement.
   
   
9. comply, as necessary, with the Communications Protocol set out in Schedule F.
   
   
10. comply with all legislated environmental assessment requirements and agree that no funds will be committed to an Eligible Project until all required environmental assessment requirements have been satisfied.
    
    
11. implement all mitigation measures identified in any environmental assessment of the Eligible Project.
    
    
12. if Funds are paid by Newfoundland and Labrador to the Eligible Recipient in advance of the Eligible Recipient incurring and paying Eligible Costs, invest such Funds in accordance with Newfoundland Municipalities Act, 1999, City of St. John's Act, City of Corner Brook Act, City of Mount Pearl Act, and Regional Services Board Act.
    
    
13. (a) retain title to, and ownership of, the Municipal Infrastructure resulting from the Eligible Project for at least ten (10) years after Project completion;
    
    (b) if, at any time within ten (10) years from the date of completion of the Eligible Project, the Eligible Recipient sells, leases, encumbers or otherwise disposes of, directly or indirectly, any asset constructed, rehabilitated or improved, in whole or in part, with funds contributed by Canada under the terms of this Agreement, other than to Canada, Newfoundland and Labrador, a Local Government, or a Crown corporation of Newfoundland and Labrador that is the latter's agent for the purpose of implementing this agreement, the Eligible Recipient shall repay Newfoundland and Labrador on demand, a proportionate amount of the funds contributed by Canada, as follows:
    
    

    Where Eligible Project asset is sold, leased, encumbered or disposed of:	Repayment of contribution (in current dollars)
    Within 2 Years after Eligible Project completion	100%
    Between 2 and 5 Years after Eligible Project completion	55%
    Between 5 and 10 Years after Eligible Project completion	10%

    
    
14. a) award and manage all contracts for the supply of services and/or material to the Eligible Project ("Contracts") in accordance with the Newfoundland and Labrador Public Tender Act.
    
    b) award Contracts in a manner that is transparent, competitive and consistent with value-for-money principles.
    
    
15. indemnify and save harmless Canada and Newfoundland and Labrador, their officers, servants, employees or agents from and against all claims and demands, losses, costs, damages, actions, suits or other proceedings by whomsoever brought or prosecuted in any manner based upon, or occasioned by any injury to persons, damage to or loss or destruction of property, economic loss or infringement of rights caused by or arising directly or indirectly from:
    1. all Eligible Projects;
    2. the performance of this Agreement or the breach of any term or condition of this Agreement by the Parties, their officers, employees and agents, or by a Third Party and any of its officers, employees, servants or agents;
    3. the performance of a Funding Agreement or the breach of any term or condition of the Funding Agreement by the Parties, their officers, employees and agents, or by a Third Party and any of its officers, employees, servants or agents;
    4. the design, construction, operation, maintenance and repair of any part of an Eligible Project; and
    5. any omission or other wilful or negligent act of the Parties, Eligible Recipient or Third Party and their respective employees, officers, servants or agents.
       
       
16. acknowledge that they may use Funds to pay up to 100% of Eligible Costs of an Eligible Project, provided that to the extent it is receiving money under an Infrastructure Program in respect of an Eligible Project to which the Eligible Recipient wishes to apply Funds, the maximum federal contribution limitation set out in any Infrastructure Program contribution agreement made in respect of that Eligible Project shall continue to apply, and Funds paid to the Eligible Recipient shall be deemed to be a federal contribution under the said contribution agreement.

SCHEDULE D - Reporting and Audits

1. Reporting

Annual Expenditure Report

The Annual Expenditure Report will report on:

• the amounts received from Canada under this Agreement;
• the amounts paid to Eligible Recipients;
• the amounts received from Canada for future payments to Eligible Recipients;
• amounts paid by Eligible Recipients in aggregate for Eligible Projects;
• amounts held at year end by Eligible Recipients in aggregate to be paid for Eligible Projects.

The Annual Expenditure Report will also indicate, in a narrative, the progress that Newfoundland and Labrador has made in meeting its commitments and contributions, according to Section 2.2.

The Annual Expenditure Report will also include the following information:

A listing of all Eligible Projects indicating the location, investment category, amount and identity of all sources of funding, nature of the investment and expected outcomes, as identified in Schedule E.

In the case of Eligible Recipients with a year end other than March 31, and with the prior approval of the Oversight Committee, the Annual Report may include information in respect of Eligible Projects related to that Eligible Recipient to the year end of that Eligible Recipient.

Outcomes Report

The Outcomes Report will report on the cumulative investments made, including information on the degree to which these investments have actually contributed to the objectives of cleaner air, cleaner water and reduced GHG emissions.

2. Audit Report

The Audit Report, which includes the results of financial and compliance audits, will provide an opinion as to whether all of the information contained in the Annual Expenditure Report is complete and accurate, and whether Newfoundland and Labrador has complied with all material provisions of this Agreement.

Annual Expenditure Report -
Template Reporting Format for Funding Flows

SCHEDULE E - Outcome Indicators

The impact of the use of the Funds will be measured through a set of core indicators linked to the following outcomes and outputs:

Outcomes:

1. Cleaner Air: [DETERMINE INDICATOR]
2. Cleaner Water: [DETERMINE INDICATOR]
3. Lower GHGs: [DETERMINE INDICATOR]

Outputs:

1. Community Energy Systems: [DETERMINE INDICATOR]
2. Public Transit Infrastructure: [DETERMINE INDICATOR]
3. Water Infrastructure: [DETERMINE INDICATOR]
4. Wastewater Infrastructure: [DETERMINE INDICATOR]
5. Solid waste: [DETERMINE INDICATOR]
6. Local Roads and Bridges: [DETERMINE INDICATOR]
7. Capacity Building: [DETERMINE INDICATOR]

SCHEDULE F - Communications Protocol

Canada and Newfoundland and Labrador agree that Canadians have a right to transparency and public accountability, which is best served by full information about the benefits of the transfer of federal gas tax revenues.

This Communications Protocol establishes the principles and practices that will guide all announcements and events related to this Agreement and to the funding to Eligible Recipients under this Agreement. Communications activities may include, without limitation, major public events or announcements, or communications products such as speeches, press releases, websites, advertising, promotional material or signage.

The Parties agree that:

1. a public event will mark the signing of this Agreement. This event will be developed by communications officials from Canada and Newfoundland and Labrador, and will provide for municipal involvement and media participation.
   
   
2. in addition to joint communications activities, Canada and Newfoundland and Labrador may include messaging in their own communications products and activities, regarding other initiatives and investments in Cities and Towns.

The Government of Canada agrees that:

1. it will make periodic announcements, through public events, press releases and/or other mechanisms, of the transfer of federal gas tax revenues to Newfoundland and Labrador for allocation to Local Governments within its jurisdiction.
   
   
2. it will make regular announcements, in consultation with Newfoundland and Labrador and on a city, town or regional basis, of projects that have benefited from federal gas tax funds. Key milestones may be marked by public events, press releases and/or other mechanisms.
   
   
3. it will report regularly to the public on the outcomes of the investments entered into under this Agreement, including through the Treasury Board Secretariat Canada's Annual Performance Report, and through the National Evaluation described in Section 7 of this Agreement.

Newfoundland and Labrador agrees that:

1. all communications referring to projects funded under this Agreement will clearly acknowledge the contributions made by Canada.
   
   
2. all communications materials referring to the sharing of federal gas tax revenues with Eligible Recipients will recognize this initiative through the use of the Canada wordmark and of a tagline.
   
   
3. Newfoundland and Labrador's Funding Agreements will include the provisions included this Protocol, particularly that:
   1. all communications by the Eligible Recipient referring to projects funded under this Agreement will clearly recognize Canada's investments.
   2. Eligible Recipients will ensure permanent signage at the location of projects receiving investments under this Agreement, prominently identifying the Government of Canada's investment and including the Canada wordmark. Where there is no fixed location for signage, such as a transit vehicle, a prominent marker will recognize the Government of Canada's contribution. All signage/plaques will be located in such a way as to be clearly visible to users, visitors and/or passersby.

General

1. The timing of public events shall be sufficient to allow for all orders of government to plan their involvement. Either Party shall provide a minimum of 21 days notice of an event or announcement.
   
   
2. The Parties agree that they and Eligible Recipients will each receive appropriate recognition in joint communications materials.
   
   
3. Joint communications material and signage will reflect Government of Canada communications policy, including the Official Languages Act and federal-provincial/territorial identity graphics guidelines.

Assessment

Communication results will be assessed as part of the evaluation process set out in Section 6.3.2 of the Agreement.

SCHEDULE G - Allocation Model