Water Supply and Sanitation in Canada - Investment and Financing

Investment and Financing

Investment needs According to the National Round Table on the Environment and Economy, unmet water and wastewater infrastructure needs in Canada were CAN$38–49 billion in 1996, and capital costs for the following 20 years would be in the order of CAN$70–90 billion.

Financing It was estimated that in the late 1990s the total annual operating cost of water and sanitation services were greater than US $2.75 billions while the revenue generated from user fees is to the order of US $ 2.1 billions. The difference is made up from general municipal revenues (e.g., property taxes or subsidies from senior levels of government).

The greatest portion of investment in water and sanitation infrastructure and services has been financed by municipal governments from revenues derived from general property taxes or from water and sanitation charges which are increasingly moving to the state of full cost pricing. All Provinces and Territories provide funds via transfers to the municipal governments in their jurisdictions. The federal contribution, while significant in absolute terms (for example, in the period 1993 to 1998 the amount was in excess of US $1.4 billion), represents only a small proportion of total public investments in municipal infrastructure.

Provincial financing Provinces provide both conditional grants (more than 80%) and unconditional grants (less than 20%) to municipalities. Conditional grants can either be lump-sum payments (non-matching transfers) or matching grants. Matching grants provide a certain percentage of financing that varies among Provinces and programs, while requiring the balance to be paid by the municipality.

Federal financing Infrastructure Canada manages a number of federal funds financing investments in Canada’s infrastructure. None of these funds is dedicated exclusively to water supply and sanitation. The funds managed by the department include three funds under the Building Canada program:

• CAN$8.8 billion for the Building Canada Fund (BCF), which is being used for Core National Highway Systems, drinking water, wastewater, public transit and green energy, as well as other projects;
• CAN$25 million a year in base funding to each province and territory, for a total of $2.275 billion over seven years; and
• CAN$11.8 billion for the Gas Tax Fund, which invests in municipal infrastructure that contributes to cleaner air, cleaner water and reduced greenhouse gas emissions and supports better community planning.