Canada's Road Infrastructure

Issue:

The condition of our roads is deteriorating in many areas of Canada and is a growing concern for all levels of governments and all road users. This is particularly true in the Prairies where 52% of all the roads in Canada are located.

Improvement is particularly important for the National Highway System, a critical travel and trade artery in Canada. Highways provide basic transportation links between communities and are important for our trading economy. 75% of the value of all Canadian freight shipments move on roads (to domestic and international destinations).

The key issue is who should be responsible for improving the road system, and how it should be funded. Some say that the funding of the national road infrastructure is a federal responsibility. It has been suggested that the government dedicate fuel tax revenues towards road improvements, as is done in the US. Others maintain that federal spending priorities should continue to be on social programs or be directed to repaying the federal debt.

Resolution is complicated by the fact that the federal government has largely delegated responsibility for roads to provincial/territorial governments, which in turn have allocated responsibility to municipal
The National Highway System
The National Highway System (NHS) accounts for 25,000 km (<3%) of Canada’s 900,000 km road network, yet handles a quarter of all highway travel.

The National Highway Policy Study for Canada (1997) found:

• the state of the NHS had not improved since 1988, in spite of $8 billion in capital improvements and $3 billion invested in maintenance by governments;

• the estimated cost of correcting the current deficiencies of the NHS was $17.4 billion; and

• the benefits of the NHS investment program would exceed $30 billion, from: travel time savings; safety improvements resulting in fewer fatal accidents and injuries; and reduced vehicle operating costs.

The research showed that highway investments can provide returns to society of 10-40% of their costs each year.
governments ("local" undertakings under the Constitution Act). These governments, pressured by public demands for more services and lower taxes, do not have the financial resources to pay for the improvements on the scale some believe is required.
Current Status:

In the 2000 federal budget, $2.6 billion was set aside for a six-year infrastructure program (which includes, roads, sewers, transit, and water systems).

Of the four Western provinces, BC is investing $485 million in highways for the period 2000-01, Alberta is spending $670 million, Saskatchewan is investing $250 million for highway construction and maintenance (their largest highway budget in history) and Manitoba is investing $201 million for highway construction.

At the 2000 Annual Premiers Conference in Manitoba, there was agreement that development of a strong infrastructure base is a key component in supporting a competitive economy.
Roads are Important

Canada’s major trading partners and competitors – the United States, Europe, Australia, Japan, and China – have all made significant commitments to upgrading their transport systems.

Canada, however, has yet to determine who will pay, or where the money will come to enhance the infrastructure. Failure to address this question will seriously jeopardize the country’s ability to successfully compete in international trade. Exports will bear the extra costs associated with an inefficient infrastructure.
It was agreed that any new federal infrastructure program should be flexible, allowing the provinces/territories to invest in priority areas such as highways and municipal infrastructure. The Premiers also felt that the program should allow the provinces/territories to explore innovative funding initiatives, such as public/private partnerships.
Background:
Road transportation is the "number one mover" of people and goods, and supports the majority of domestic and international trade. Trucks carry virtually everything consumed in Canada today, and move 75% of the value of all Canadian freight shipments to domestic and international destinations.

Building and maintaining enough roads to link people and communities scattered over huge land areas is an expensive challenge for countries with a vast geography and small population, such as Canada. However, roads are proven to be vital for our economy and for our ability to compete internationally.
Over the past few years the federal government has largely delegated responsibility for roads to provincial/territorial governments, which in turn have allocated responsibility to municipal governments. More than $12 billion is spent each year to build and maintain roads in Canada. Provincial and municipal governments fund most of this, and the federal government, through Transport Canada, provides some funding support through various programs. However, spending on roads has not kept pace with the traffic growth in Canada (see chart). This has led to the deteriorating condition of Canada’s roads.

In 1987, the Council of Ministers Responsible for Transportation and Highway Safety commissioned a multi-year study on a national highway policy. The findings were published in four annual reports and included the following information;

Phase I: Criteria to identify the National Highway System.
Phase II: Documentation of the road use revenues and expenditures, both federally and provincially on the NHS.
Phase III: Stakeholder input and comparison of the situation with other industrialized countries.
Phase IV: Technical issues (priority setting, scheduling, maintenance and traffic control standards, funding) Contact WESTAC for copies of the reports.

Subsequently, there has been on-going discussion among the provincial/territorial and federal governments on a national highway program. In 1994, provincial and territorial governments agreed to commit funding for a national highway program from their existing budgets. All provinces (except Quebec) agreed to spend $4.3 billion from a reallocation of resources over five to ten years to fund a national highway program. Later in the year the federal government announced that it was not in a position to fund a national highway program due to severe budget restraints.

Alternative Funding Measures?

Dedicated Tax
The federal government collects approximately $4 billion a year in gasoline taxes and invests about 5% of this revenue back into highways. There have been calls for the federal government to dedicate more of this revenue to a national highway program, which would be placed in a Trust Fund. This fund would be allocated to the provinces and territories based upon a cost-sharing formula..

Public-Private Partnerships
There is interest in public-private-partnerships, notably due to the growth in the demand for infrastructure, limited public funds to meet current and future needs, and acceptance of a greater role for the private sector in the provision of infrastructure.

PPP’s feature:

• Transfer of a significant level of responsibility and risk from the public to the private sector;
• Contractual arrangements based on performance-based outcomes, rather than work activities; and
• Long-term contractual arrangement.

In addition, a PPP might involve: the financing of public infrastructure development "off-the-book" of governments; and implementation of tolls or other user fees to finance the project.
US Transportation Equity Act for the 21st Century (TEA-21)

TEA-21 was signed into law in 1998 and commits US$217 billion in funding for the transportation system. Approximately US$36 billion will be spent each year on transportation improvements and maintenance in the US for the fiscal years 1998-2004.

With the enactment of TEA-21, all federal gasoline tax revenues (approximately US$1.4 billion annually) go to a Highway Trust Fund and are directed to transportation spending.
For more information...
Transport Canada
BC Ministry of Transportation and Highways
Alberta Infrastructure
Saskatchewan Department of Highways and Transportation
Manitoba Department of Highways and Government Services