Budgets, Growth, and Infrastructure

It doesn’t matter which jurisdiction you live in, nationally, provincially, and municipally, there are more and more pressures put on those developing and implementing the budgets. According the Frazier Institute, the provinces and municipalities have the fastest growing revenues; to the see the original post click here. I have a lot of respect for the Frazier Institute and have been reading their site for a long time.

120715 prov spending chart1

Government Spending Comparison, Frazier Institute

The reason I am writing about this particular post is because they make an observation without providing an understanding of why? Why are provincial and municipal budgets growing faster than the national budget? I would suggest there are a couple of factors that are overlooked. I will be focusing on municipal issues.

  • the federal government’s focus on restricting spending has¬†restricted municipalities to effectively and efficiently manage our infrastructure deficit/asset cost recovery,
    • historically building new infrastructure has been equally shared by the three levels of government.
      • now municipalities have to pay a larger share of infrastructure and even more if there is no provincial help;
    • a significant amount of infrastructure, about two thirds, is owned, repaired, maintained, and replaced at municipal expense while only collecting 8 cents of every tax dollar collected in Canada.
    • in most communities, including Kindersley, new infrastructure such as water, sewer, gutter, curb, sidewalk, and pavement is paid for by the developer who then passes the cost on to the purchaser.
      • historically that type of infrastructure has been built and paid for by municipalities.
        • as a result new homeowners are paying for more of their home and neighbourhood than earlier generations
    • many municipalities, such as Moose Jaw have seen current problems result due to deferred maintenance. Here is a quote from the Moose Jaw Times.
      • “We all know our water main pipes in this city are in need of replacement. It’s an expensive project and one that is imperative. Previous city councils ignoring such a huge undertaking for decades is the reason why this project carries such a hefty price tag.” The original is here.
        • Granted that not all municipalities make appropriate decisions and need to accept responsibility for their decisions and actions/inaction, it is incumbent upon other levels of government to contribute their share towards the infrastructure everyone uses.
  • Canada has grown significantly in the past 25 years; in fact between 1991 and 2015 our population has grown 21%.
Historical Population Stats

Canadian Population by Year, StatsCan

  • GDP has grown since 1991 but the question I have and needs to be asked is if investment infrastructure has matched GDP growth.
Historical GDP Stats

Historical GDP, World Bank

 

  • In the 1960s and early 1970s infrastructure investment was around 12% and since the 1990s it has slid to around 4%
DecliningInfrastructureInvestment

Declining Infrastructure Investment, Canada2020

  • This would suggest that there has been significant deferred investment by many levels of government in infrastructure.
    • During the recent New Build Canada Fund for infrastructure Sasktachewan’s share was $43 million (not all of it was allocated); the application process yielded $1.5 billion of applications.
    • The gap between what was made available and what is being offered is significant; the $43 million is almost 3% of what was asked for.
      • a quick note: some applications didn’t meet the criteria but it is an indicator of the type of pressures Councils and Administrations are facing to address their infrastructure challenges.
    • Municipalities are paying more and more for infrastructure.

The Frazier Institute makes a good observation about the trends in revenue gathering activities by all levels of government. A variety of organizations such as the Taxpayers Federation and Chambers of Commerce ask if tax increases are necessary.

Anecdotally: some municipalities have water restrictions, others have pavement turning to gravel, more have facilities that could be safer and operated more efficiently, a few have trouble delivering water to homes, and the list goes on. I wrestle with these stories and the level of taxation: What is the appropriate investment needed to ensure that our infrastructure does what it is intended to do at a reasonable cost?

When the Frazier Institute makes great observations it should be followed up with the ‘why’ question. When the Taxpayers Federation and others discuss tax levels it should be centered around infrastructure needs and levels of service, and when our Chambers of Commerce ask about revenue collection by government it should be around the appropriate investment to build sustainable and dynamic communities. Taxation levels address a myriad number of issues and only one is about the hand in my pocketbook.