Results of Gas Tax Fund Consultations

Over the past year, UBCM has engaged with B.C. local governments in preparation for discussions with the federal and provincial governments to renew the Gas Tax Fund. With the engagement process now concluded, we are sharing the key themes expressed by our members. These themes will provide the basis for UBCM's advocacy throughout renewal discussions.

BACKGROUND

The Gas Tax Fund (GTF) delivered $1.6 billion in federal funding to BC local governments from 2005 to 2013 to support their infrastructure and capacity building investments. The GTF is delivered in BC through the Canada – British Columbia – UBCM Gas Tax Transfer Agreement, and UBCM administers the Funds. Canada's final distribution of funding under that agreement took place in November, 2013.

Following mention of a permanent GTF in several successive federal budgets, the federal government passed legislation in 2011 making the fund permanent. In 2012, the federal government led a dialogue on a Long-Term Infrastructure Plan (LTIP), intended to inform federal infrastructure programming after the 2014 expiry of the Building Canada Plan, including both the GTF and the Building Canada Fund (BCF).

Canada provided further details of the new Building Canada Plan, including the renewed GTF, in Budget 2013. Our Future Infrastructure Programs website page provides a summary of the various new Building Canada Plan programs.

In order to implement a renewed GTF, the federal government will need to sign new agreements with each of the provinces/territories, and Canada has indicated it would like to have those agreements in place early in 2014. In BC, UBCM will be included in those discussions, given our partnership role in the current agreement, and our role in administering the funds.

MEMBER CONSULTATION PROGRAM

In order to prepare for discussion with the federal and provincial governments on the renewed GTF agreement, UBCM undertook a member consultation program, which began in 2012 and wrapped up last week.

The 2012 component of the consultation program focused on the LTIP dialogue, and as such considered both the renewed GTF and a renewed BCF. UBCM provided input into the process through both the President's participation at a round table and a written submission to Infrastructure Canada. Both the participation in the round table and the written submission were based on existing UBCM policy and the results of a July 2012 survey of the membership.

In 2013, UBCM engaged the membership in the following specific GTF consultations:

  • A joint Metro Vancouver/UBCM workshop targeted towards elements of the current GTF specific to Metro Vancouver and its member municipalities, including eligible project categories and pooling of funds;
  • Individual dialogues with each of the Tier 2 regions, targeted towards discussion of the Regionally Significant Projects (RSP) fund, followed by a survey of each of these regions. This consultation concluded with a webinar open to all Tier 2 regions; and
  • A province-wide survey on elements of the renewed GTF that affect all local governments, focused on scope of eligible projects, pooling and direct allocations, capacity building and reporting and compliance requirements.

These 2013 GTF consultations were intended to supplement the consultation results from the LTIP process, essentially refining those results in relation to matters specifically related to the GTF.

Members also provided their views, either verbally or in writing, outside of these formal consultation opportunities. Elements addressed in these discussions included: transparency and accountability in program administration; fairness, equity, and decision-making processes for application-based programs; and approaches to determining populations for the purposes of per-capita funding allocations. Where relevant to one of the key elements coming out of the consultation program, these views have been included in the results of the consultation program below.

CONSULTATION PROGRAM RESULTS: KEY THEMES

A number of key themes can be drawn from the consultation program, as noted below. These, in combination with existing policy developed through the annual resolutions process, will form the basis of UBCM's advocacy in relation to the renewed GTF.

Funding Commitment

  • Build on the success of the GTF by providing at least 15 year funding commitments, with 5 year reviews (LTIP recommendation)
  • Ensure that LTIP funds are not eroded over time, and are able to maintain their current value, by implementing an indexation factor (LTIP recommendation
  • Ensure that all LTIP programs separately designate funding for all local governments regardless of population (LTIP recommendation)

Scope of Eligible Projects

  • Ensure all local government infrastructure is eligible for funding (LTIP recommendation; province-wide survey)
  • Expand the range of eligible project categories available to Metro Vancouver and its members (Metro Vancouver workshop)
  • Ensure that programs recognize and support infrastructure preservation, including rehabilitation and renewal of existing infrastructure (LTIP recommendation)

Outcomes

  • Expand the range of outcomes (i.e., beyond current GTF required outcomes of reduced greenhouse gas emissions, cleaner air or cleaner water); OR move to a more general ‘benefit' approach which focuses on community benefit of infrastructure investment (province-wide survey)

Local Government Autonomy

  • Ensure funding programs remain neutral with respect to project delivery through P3 of not, in order to support local choices based on sound business cases (LTIP recommendation)
  • Provide greater regional autonomy to decide which eligible projects to fund under RSP and Metro Vancouver SPF programs (Tier 2 consultations; Metro Vancouver workshop; correspondence received)

Recognize Local Government Capacity and Support Capacity Building

  • Provide funding, tools and other support to build local government capacity to develop, deliver and maintain infrastructure that is efficient and cost effective (LTIP recommendation; province-wide survey)
  • Streamline program requirements to ensure a minimum of bureaucracy and with accountabilities that consider local government capacity (LTIP recommendation)

Delivery Mechanisms; Allocated and Pooled Funding

  • Maintain the ability for local governments to choose what eligible projects to fund with allocated funding programs under the permanent GTF, while retaining some ability to pool funding (LTIP recommendation; province-wide survey)
  • Retain the funding floor for allocated funding at about the same level (province-wide survey).  See further details of program delivery consultation results below.

CONSULTATION PROGRAM RESULTS: Delivery Mechanisms

Members' views about BC's program delivery model were expressed through all consultation opportunities; in the Tier 2 and Metro Vancouver discussions, because they were focused on these issues, but also through questions in the province-wide survey.

Tier 2 consultations brought out widely varying views about the RSP program, with some regions considering it to be highly successful and wanting it retained, others identifying some merits and some challenges, and still others considering it to be an unworkable program of no benefit, and arguing for it to be eliminated. Given this range of views, UBCM staff proposed, and Tier 2 regions supported, a change to the RSP program to:

  • allow regions to opt-out of the RSP program for a 5 or 10 year period, in which case funds would be delivered through CWF instead; and
  • make RSP program changes to provide more regional autonomy, to both design development processes and determine what projects will be funded.

Tier 3 consultations with Metro Vancouver and its member municipalities resulted in the Metro Vancouver Board indicating its preferred approach for distribution of funding. Key themes that can be drawn from the Metro Vancouver Board decision are a desire of the Board to:

  • eliminate the region's participation in the current province-wide application based Innovations Fund;
  • provide for the delivery of funding to individual local governments, with project selection determined by the individual local governments; and
  • pooling of the remaining funding allocated to the region, with project selection determined by the Metro Vancouver Board.

The province-wide survey asked about delivery mechanisms, including what priorities respondents had for pooled funds, and whether the current balance between pooled and allocated funds was appropriate, or if not, how these should be rebalanced.

Although not statistically reliable given the small number of responses, results of the province-wide survey showed a slight preference for providing more funding through allocation based funding programs (i.e, CWF), with 54% of Tier 1 and 60% of Tier 2 indicating this, 40% of respondents from both tiers indicating the balance between allocated and pooled programs was about right, and 7% of Tier 1 respondents indicating that more should be delivered through pooled programs. These results don't support a wholesale change, but they do indicate a potential need to readjust the balance.

The proposed Tier 2 RSP recommendation would see the balance shift towards allocated funds as Tier 2 regions opt-out of RSP. Similarly, the Metro Vancouver recommendations would also see the balance shift slightly toward allocated, through delivery of some funding directly to Metro Vancouver and its member municipalities. However, these two changes do not affect Tier 1 local governments, a slight majority of which sought increased allocated funding.

The balance could be further shifted by decreasing the percentage of funding going into either of the application based programs: General Strategic Priorities Fund/GSPF (currently 25% from Tiers 1 and 2) or Innovations Fund/IF (currently 5% from all tiers).

IF has been criticized on two fronts: Metro Vancouver has argued that it did not receive its fair share; and Tier 1 and 2 local governments argued that maintaining two application-based programs with similar objects (IF and GSPF) was confusing and administratively inefficient, since applications needed to be developed with an eye to the differences in the two programs, and ranked under both programs.

Survey respondents ranked the following types of projects as their priorities for pooled funding (in this order): (1) large scale/high cost; (2) regional; and (3) innovative. Given the low priority for pooling for innovative projects, the objections to the IF that have been raised, and the local government interest in shifting the balance between pooled and allocated funding, an approach that collapsed the IF in the renewed agreement might be appropriate.

This would have the effect of slightly increasing amounts going into both the allocated program and GSPF, and would also eliminate Metro Vancouver's participation in an application-based program, thereby resolving their concerns about not getting their share. Innovation could still be encouraged in the remainder of the province through inclusion of innovation as a criterion for evaluating GSPF applications.

There is always a balance to be struck between pooling and allocation based programs. Allocations based primarily on per capita amounts are easy to understand, provide greater certainty, and are inherently considered to be a fair distribution of funding. However, per capita amounts are often insufficient to undertake larger projects, and they don't necessarily provide an incentive to use funding towards regional priorities. Members have said they see a need for pooled funding, but that they want the balance to change, and they want more autonomy over how those pooled funds are used.

Consequently, our analysis of the results of the consultation program relating to delivery mechanisms support the following changes to meet local government interests:

  • improve local autonomy, by allowing regional boards to make choices about which projects to fund under both the RSP program and the Metro Vancouver pooled funding program, and allowing Tier 2 regions to make choices about whether or not to participate in the RSP program; and
  • rebalance funding between pooled and allocated programs and simplify program models, by eliminating the IF program (thereby providing slightly more funding into the allocated CWF program, and streamlining programming by eliminating one of the five funding programs).

NEXT STEPS AND TIMELINES

The federal government has recently indicated it is ready to commence discussions on renewed GTF agreements. Initial discussions amongst the federal and provincial governments and UBCM took place on December 11, and follow-up discussions are contemplated before the end of December. The first meeting set a positive tone for the discussions, and UBCM anticipates being in a position to report on progress early in 2014. It is our hope that an agreement can be struck in sufficient time that the next CWF payment can be made to qualifying local governments in the summer of 2014.

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