Canada's crumbling infrastructure reaching critical point

Harsh critics of the state of U.S. infrastructure — roads, bridges, tunnels, rail systems, waterways, dams, power grid, relay towers, water facilities —  often use the adjective “crumbling” to describe this infrastructure. More polite critics use the adjective “aging.” It is the same in Canada. The U.S. neighbor to the north needs an estimated $200 billion investment in public infrastructure and getting it will help keep the country’s private sector competitive, according to a new study that warns the state of Canada’s infrastructure is reaching a critical stage. In a report titled “Infrastructure Investment: The Foundations of Canadian Competitiveness,” released by the Institute for Research on Public Policy, University of Waterloo economist James Brox analyzed the condition of Canada’s infrastructure and its impact on productivity, specifically within the manufacturing sector.

Canada’s competitiveness depends on a modern, efficient, and well-maintained public infrastructure network, his study says. Brox argues that Canada’s productivity is being stunted because of poor infrastructure. It can take part of the blame for the manufacturing sector’s woes in recent years, he said. “I think it’s becoming fairly critical,” Brox said about the infrastructure gap. “The manufacturing sector in Canada is losing competitiveness — there are a number of reasons for that, but the lack of proper infrastructure is clearly part of the problem.”

He found that spending on the country’s roads, highways, utilities, water systems, and other key infrastructure is a little more than half of what it was in the 1960s and the facilities built back then are now starting to crumble and services are deteriorating. To remedy what is referred to as the “infrastructure gap” by some and the “infrastructure deficit” by others, Brox says up to $200 billion must be injected into infrastructure projects — $72 billion for new ones and $123 billion to repair and maintain existing infrastructure.

According to his research, recent funding commitments from federal and provincial governments only total around $65 billion. “If they don’t increase that there’s a risk that the current infrastructure will deteriorate and will mean that in the future we’ll need to invest even more,” Brox said in an interview with the Ottawa Citizen. The manufacturing sector, particularly vital to Ontario and Quebec’s economies, has been hard hit by the strong Canadian dollar and has been shrinking in size over the last two decades. Its state of health has an effect on other industries, which is why it is important to focus on the link between infrastructure investment and manufacturing activity, Brox pointed out.

Companies need good water, power, transportation routes among other things to manufacture and deliver their goods across the country and abroad. Brox calculated that a 10 percent increase in annual infrastructure spending, over a sustained period, would cut manufacturers’ costs by five per cent. The reduction would mean increased productivity and therefore make them more competitive, he concluded. “Public infrastructure increases private sector productivity and we need more public capital to be competitive and we need to maintain, therefore, what we have,” said Brox.

One of the main reasons behind the infrastructure gap has been the shift in responsibility for infrastructure from the federal government to the provincial and territorial governments, who have in turn passed it on to the municipalities. Some say that the downloading is a logical practice because the regional levels of government know best what they need, but the question of who pays for it is still debated. “The problem is that while the senior governments have been happy to download jurisdiction for infrastructure, they’ve not been so ready to download revenue sources. So municipalities are stuck raising funds from property taxes, a fairly regressive form of taxation, and all infrastructure tends to fall on that unless the province or the federal government transfers funds for specific projects,” said Brox.

The federal government does seem to be picking up on the messages contained in Brox’s report and others like it such as one from the Federation of Canadian Municipalities that said 79 percent of the service life of Canadian roads, sewers and other key infrastructure had passed in 2007. But while the $33 billion promised by the Conservative government over seven years for infrastructure is a good step, Bronx says, it is not enough. “We need a long term stable source of revenue that the municipalities can count on in order to plan for this type of good maintenance of the infrastructure. And currently we don’t have that,” he said.