Our analysis of the 2019 federal budget

Jeff Mackey

Budget 2019 announces one-time increase to Gas Tax Fund

The federal government has provided a one-time injection of $2.2 billion into the municipal sector and transit is an eligible category for funding. The government’s budget, titled Investing in the Middle Class, laid out its financial plans for the coming year and sets the stage for the upcoming federal election—anticipated on or before October 21, 2019.

With a projected $19.8 billion deficit, the budget contains $22.8 billion in new spending over the next five years. The main themes of the budget were housing affordability, skills and training and pharmacare, as well as seniors and secure retirement.

Gas Tax Fund

The most relevant announcement for the transit industry was that the federal government will double its commitment to municipal infrastructure through its Gas Tax Fund (GTF). This money is meant to help municipalities address their serious infrastructure deficits and to address short-term priorities.

The flow of funds to municipalities through the GTF will grow from $2.2 billion to $4.4 billion in 2018-2019. This a one-time increase to the fund, after which the GTF will return to distributing $2.2 billion (indexed to inflation at 2%) to municipalities and First Nations annually.

The GTF is an invaluable tool for municipalities that provides flexible investments in infrastructure, including transit. This funding will be critical in ensuring that the priorities of Canadian communities are met, including improved sustainability and urban mobility.

Transit is not the sole eligible asset class for this new funding. Eligible categories include:

This funding is seriously needed in the transit sector. CUTA’s most recent Infrastructure Needs Report has found that transit systems need more than $133.3 billion in capital investments over the next ten years to realize planned infrastructure projects, and $58.8 billion of those needs remain unfunded by governments. Historically, many municipalities have put a large portion of their GTF allocation into transit and this trend must continue for Canadian communities to support an increase in transit ridership that will help meet traffic congestion and GHG emission reduction targets.

Unlike other federal infrastructure programs, the GTF has no ceiling for federal cost share, meaning projects can be 100% funded by a community’s GTF transfer.

Other infrastructure investments

The budget did not provide any substantive updates on the Public Transit Infrastructure Fund, a Phase 1 infrastructure program that is winding down its funding, nor the 10-year Public Transit Stream, which is a Phase 2 program that is winding up its funding.

 The government did update its total infrastructure spending projections, which can be seen below.

CUTA had hoped that the government would use this budget as an opportunity to streamline its transit investments, but this was not the case. The government did acknowledge there was a problem with getting infrastructure funds out of Ottawa and provided the following statement:

“… the pace of spending under the Investing in Canada Plan has been slower than originally anticipated, for reasons that include delays between construction activity and receipt by the Government of claims for payment, and by some jurisdictions being slower to prioritize projects than expected.

The Government is currently working with the provinces and territories to accelerate projects under their bilateral agreements to ensure momentum continues. The Government is taking steps to streamline the process for the provinces and territories to prioritize projects for funding, and to improve financial reporting so that it is clear when project costs are incurred, and when federal funds will flow to recipients.”

Though the federal government did not put forward streamlining measures in Budget 2019, it announced a series of measures toward this end on February 21, 2019 in a news release. These measures include the launch of an online portal for project applications that will facilitate easier submissions (IRIS), and the set up of a dedicated team of officials to shepherd large project proposals through approvals.

Electric vehicles and supporting infrastructure

Budget 2019 contained many commitments regarding the electrification of private vehicles. To support businesses’ adoption of zero-emission vehicles, this budget included a full tax write-off, deductible up to $55,000 plus sales tax, for qualifying vehicles. Eligible vehicles will include battery electric, plug-in hybrid or hydrogen fuel cell vehicles, notably for transit this includes heavy-duty vehicles. This program will apply to vehicles purchased from March 19, 2019 and before January 1, 2024.

For individuals looking to buy electric vehicles, a new federal purchase incentive will provide $300 million over three years, starting in 2019–20, worth up to $5,000 to consumers of electric battery or hydrogen fuel cell vehicles with a retail price of less than $45,000.

Among other measures supporting electrification, the budget also provided Natural Resources Canada with $130 million over five years, starting in 2019–20, to deploy new recharging and refuelling stations.

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