Ottawa, provinces, municipalities confident of hitting infrastructure deadline but no deals yet

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Months after setting a deadline of March, 2018, "at the latest," the federal government has yet to reach long-term infrastructure deals with any of the provinces and territories.

At stake is $33-billion in spending over the next decade, representing the core element of the Liberal election promise to dramatically increase spending on infrastructure projects across the country. The bilateral deals will outline the terms of what Ottawa calls its second phase of infrastructure spending, which is expected to focus on larger projects, primarily for public transit and green infrastructure.

The program follows a first phase – worth $11.9-billion over five years – that paid for smaller projects such as repairs and planning studies.

Interviews with federal, provincial and municipal officials by The Globe and Mail found a general sense of optimism that the March deadline could still be met. However, key issues remain unresolved.

Specifically, the three levels of government have not agreed on a formula that would dictate the minimum percentage of spending they are expected to cover for each infrastructure project.

Ottawa has said it will cover "up to" 40 per cent of the cost of municipal projects. The Federation of Canadian Municipalities is calling on provinces and territories to match that amount, with cities covering the remaining 20 per cent. However no province has yet agreed to such a contribution.

A spokesperson for Quebec Finance Minister Carlos Leitao told The Globe and Mail that Quebec prefers the formula agreed to during the first phase, which saw Ottawa contributing 50 per cent, the provinces 33 per cent and municipalities 17 per cent.

Ottawa is also facing resistance over its criteria for dividing up the $33-billion, with provinces seeking flexibility to spend some of the money on other types of infrastructure.

In spite of these unresolved issues, federal Infrastructure Minister Amarjeet Sohi said negotiations are progressing and he's confident deals will be in place in time to have the money flowing by April 1, the start of Ottawa's next fiscal year.

"Things are going well," Mr. Sohi said in an interview. "We didn't expect any deals to be signed in 2017, because we want to give time to ourselves and to our partners to prepare. There's a lot of back-and-forth discussions behind the scenes that are going on, both at the political level and also the administrative level. That work has been happening over the last number of months and we are confident that as we start the official negotiations, sitting at the table, we will be able to get the agreements by the end of March."

Audrey Cloutier, a spokesperson for Quebec's Finance Minister, said that in addition to questions related to the percentage contributions, provinces want more flexibility over how the money is spent.

She noted that 60 per cent of Quebec's infrastructure needs are in areas that are not covered by the federal plan, such as hospitals, schools and provincial highways.

"The eligibility criteria for projects needs to be relaxed," she said in an e-mail.

That could be a challenge for Ottawa, which has historically been reluctant to spend federal infrastructure money is such areas. The federal position is generally that it already transfers billions to the provinces through the health and social transfers, as well as the gas tax, that can be used by provinces with a high level of autonomy.

On behalf of all provinces and territories, Ontario Infrastructure Minister Bob Chiarelli sent a letter to Mr. Sohi in September expressing concern that some provinces simply don't have the money to match the amounts on offer by Ottawa for projects.

"Federal funding should not result in additional fiscal pressure on provinces, territories and municipalities, including cost-matching," the letter stated. It also called for the federal funding to be "global," rather than project-by-project, to allow for money to be switched between programs.

Alex Benac, a spokesperson for Mr. Chiarelli, expressed hope the deadline will be met.

"From Ontario's perspective, negotiations on bilateral agreements for Phase Two infrastructure investments are going very well," he said. "We're actively working toward the March deadline and look forward to having more to announce in the coming weeks and months."

Jenny Gerbasi, the president of the Federation of Canadian Municipalities and deputy mayor of Winnipeg, said local councils are urging provinces to match Ottawa's spending plans.

"Across the country, we're all speaking with the same voice," she said. "We need full and fair cost-sharing or projects are going to stall. … We're eager to see the results happen and we don't want to see it take an inordinate amount of time."