Canada Strong, but it Ain’t for Free

After weeks of anxiety and rumours around a possible federal election, Prime Minister Mark Carney’s first budget has officially passed the House of Commons with four abstentions, winning by only the narrowest of margins – 170 to 168.

Even in an ordinary political cycle, the policy contents of a budget almost always play second fiddle to the narrative battle around the budget, but this year, the politics behind the budget were more transparently on display than ever before. With no party (sauf la Bloc Québecois) wanting an election, and with some concrete proposals for developing infrastructure in certain MP’s ridings, both the NDP and CPC had two MPs abstain, with both parties trying to subtly ensure the budget will pass.

For a budget to receive even tactic approval from opposition parties in this manner is a political event not seen in Canada in decades. So, what was in the Prime Minister’s ‘transformational’ budget that outweighed the opposition’s usual desire for an election? And more importantly, what concrete measures will the budget put in the ground for Canada’s municipalities?

At a high level, the budget makes a distinction between capital spending, i.e. built infrastructure and mega projects, versus operational spending, i.e. programs and day-to-day government work. The capital budget will run deficits as needed to fund growth, while the government says it will work toward balancing the operational budget. This division alone, done already in other countries like the United Kingdom, is intended to signal the government’s commitment to the themes of growth, infrastructure, and productive spending.

The current government plans to spend approximately $125.7 billion more over the next 5 years than the previous government had intended. The most significant part of that spending for local governments comes in the form of the Community Stream of the Build Strong Communities Fund (BSCF). This program is essentially an updated Canada-Community-Building Fund and is projected at $27.8 billion over the next 10 years, the program stream will provide funding for roads, bridges, community centres, water, wastewater, and transit systems, all intended to help support local economic and population growth. The BSCF’s medium-term time horizon of 10 years of guaranteed funding, along with the distant promise of $3 billion/year in the longer-term, is welcome news for Councils and administrations that need stability to plan effectively for their communities. The program links more broadly to the housing and “housing-enabling infrastructure” priorities of the federal government, indicating much of the new municipal infrastructure funded through the budget will need to have connections to federal housing objectives.

Local governments can also avail of approximately $6 billion in direct stream investments under the BSCF, designed to fund large building retrofits, climate adaptation, and community infrastructure, although private sector partnerships may be necessary to ensure competitiveness under this stream.

On the regulatory side, the budget lays out some requirements that provinces, territories, and municipalities will have to satisfy in order to receive federal funds. In order to receive their share of the BSCF funding, provinces and territories will be required to ensure that municipalities with development charges reduce them and that local governments don’t levy any new taxes that hinder housing supply. What those restrictions might look like is not clear; indeed, the list of taxes or levies that might be considered as interfering with an industry as complex as housing is quite long. It will be worth keeping an eye on any announcements relating to development charges as the Budget Implementation Act is tabled.

From the commitments in the budget, the key message from the federal order of government to the local is: “Godspeed”. The new approach from the federal government is to bet big on fast infrastructure construction being the engine that will drive economic development, spur growth, and support the country to diversify the economy as well as our trading partners. The Prime Minister is looking to local governments across Canada to take on yet another monumental, nation-building task. As long as the federal government remains responsive to the needs of local governments and stands ready to provide resources, municipalities will surely rise to the challenge. Put another way: to make Canada strong, it ain’t free.

What do you think of the federal budget? What elements do you think will help (or hurt) the most in your community? Email us your thoughts at tyler@strategicsteps.ca.