Why infrastructure funding is a top stimulus tool
“Last week, Prime Minister Justin Trudeau announced that the federal government is accelerating this year’s Gas Tax Fund payment to municipalities in order to help communities restart their local economics affected by the COVID pandemic.
The Gas Tax Fund is a permanent source of funding that typically delivers $2.2B per year to 3,600 communities across Canada through two payments per year — one in the summer and one later in the year. This year, funding will be delivered in a single payment this month. The Government is advancing the payment in an effort to help communities to quickly move forward with infrastructure projects while respecting public health guidelines.
Under the Gas Tax Fund, communities have the flexibility to spend the money they are allocated on projects that meet local needs, which can range from broadband projects to the creation of cycling and pedestrian paths.
Historically, infrastructure funding has been one of the government’s top tools to stimulate the economy because these projects create local, well-paying jobs and improve quality of life. Examples of past infrastructure spending include a $33 billion investment in 2007 and the 2014 New Building Canada Plan, which provides $53B over a 10-year period.
On a provincial level, several provinces have also announced they are moving forward with infrastructure programs to help restart the economy. For example, the Government of British Columbia is investing $50 million in its Northern Capital and Planning Grant to support major resource and economic development projects in Northern BC. Similarly, Manitoba is spending $500 million on its Restart Program to get money to local infrastructure projects, Saskatchewan is adding $2B to its now $7.5 billion two-year capital plan, and Nova Scotia is investing $230M in roads, bridges, and public building renovations. Quebec is moving up its planned infrastructure spending and will increase its total budget from $11 billion to $13.9 billion under this envelope.
In addition, Ontario is currently moving forward with an ask into the federal government to increase overall funding for municipalities.”