Former BoC governor says Ottawa should pump money into Toronto, Montreal and Vancouver, despite political risk of alienating other areas
OTTAWA—With the Liberal government set to unveil blueprints for a massive infrastructure program in Tuesday’s budget, a man who has given a lot of thought—and advice—on the subject is highlighting key elements Ottawa should consider.
For starters, former Bank of Canada governor David Dodge recommends Ottawa take potential political risks by placing particular focus on the needs of the biggest cities, even though cash for the program is collected across the country.
And then there’s what Dodge calls his favourite suggestion: user fees or tolls on major roads and bridges to help support the infrastructure over the long haul.
“It takes some political stickhandling—I just think that the time has come,” Dodge said of user fees in a recent interview.
“Why do we charge for the use of buses and subways and give away the roads, quote, free, unquote? Obviously, it leads to a misallocation of resources.”
Selling the idea to rural Canada that funnelling a larger proportion of public cash into Toronto, Montreal and Vancouver would likely present another challenge for Ottawa, he said.
But Dodge believes enhancing urban infrastructure like public transit would be in the best interests of the economy overall, enabling the cities to compete globally for high-quality employers and workers.
“From a pure economic standpoint, our big infrastructure problems are ports, are major urban areas and major transportation corridors,” said Dodge, who has advised the Ontario and Alberta governments on infrastructure.
“The last thing we need is to cook up a bunch of painting projects or whatever that really are not going to help very much in the rural communities.”
Dodge’s remarks about Ottawa’s multibillion-dollar infrastructure plan come as the Liberals prepare to release further details of the program in their first budget.
On Thursday, Prime Minister Justin Trudeau told a Bloomberg interviewer in New York that the first two years of the government’s decade-long infrastructure program will focus on “unsexy” things that governments hate to announce.
He then listed off items like recapitalization, deferred maintenance, upgrades and restoring signals on subways.
Trudeau also acknowledged that he doubts ramping up these types of early investments will boost Canada’s weak productivity.
Instead, he said, after the initial phase Ottawa will focus government spending on larger, more-detailed projects aimed at increasing long-term growth and guiding Canada toward a low-carbon economy.
“What we’re looking at is not so much trying to jolt the economy into life, as trying to lay the groundwork and the foundation for better growth, better productivity over the long term—and not just an instant influx of cash,” Trudeau said.
“I think the challenge when you’re trying to shovel money out the door is that it doesn’t always get spent on the right things.”
Looking at the rural-urban divide, it remains to be seen how the government will divvy up the infrastructure funding.
The president of the Federation of Canadian Municipalities said federal infrastructure investments are particularly important for small communities in rural and northern regions because they have such limited financial capacity.
“The government needs to be forward-looking—we know that there’s a migration of people into our more-urban centres and the government needs to be responsive to that trend,” said Raymond Louie, who is also a veteran Vancouver city councillor.
But Louie noted that rural Canada still holds a significant proportion of the population. In 2011, Statistics Canada estimated about 20 per cent of Canadians lived in rural areas.
“We can’t forget the small communities as part of the situation as well,” Louie said. “It is a challenging task for the government.”