OTTAWA - Canadian cities are calling on Ottawa to extend its stimulus deadline in response to a report showing up to half a billion dollars of infrastructure funds could go unspent, or dropped on municipalities' laps.
The Parliamentary Budget Officer, Kevin Page, says many projects in the government's heavily hyped $4-billion Infrastructure Stimulus Fund were slow getting off the mark and many are dragging on longer than expected.
When Ottawa cuts off its funding on March 31, 2011, the worst-case scenario is that $500.5-million in federal money will not have been claimed because of the delays, the report says.
In an interview, Page said delays are typical with infrastructure programs, noting that in the past governments simply rolled unspent funds into future years.
"What's different about this program is that the government said right in the 2009 budget, you either spend it or lose it," he said. "If you don't have these projects complete by March 31, 2011, you (municipalities) are on the hook for it."
That would transfer the cost to the level of government least able to pay for it, said Brock Carlton, chief executive of the Federation of Canadian Municipalities.
"All municipalities are strapped for cash," he said. "If the delays are beyond the control of municipalities, it isn't fair and that's why we're calling for flexibility."
Carlton said the situation is particularly acute in Saskatchewan, where heavy rains this spring and summer stalled work.
The government has given few indications it is prepared to extend the March 31 deadline, drawing a blast from Liberal critic Gerard Kennedy, who noted that the Conservatives have often maintained there is only one taxpayer.
"How does the government not understand that (municipalities) can't control the weather, they can't control that the federal government took almost one year to get approvals out the door, and it's not fair to stick property tax payers holding the bag," he said.
It's the first time the PBO has made such projections. The report cautions that Page's analysts are working with somewhat incomplete, stale data and are forecasting based on assumptions.
In the best-case scenario, the PBO says contractors will keep working full out between now and next March, and have all 2,902 stimulus projects finished on time. All $4 billion of the federal money will be disbursed as planned.
But that scenario probably won't happen, the report says.
"The trends in the PBO planned spending profiles and the progress benchmarks suggest that not all ISF projects will be complete by the March 31, 2011 deadline and that a lapse of federal funds is likely."
The worst-case scenario, based on data on work done until March 31, 2010, is that almost half the funded projects will be still unfinished by next spring, the report says.
In this case, about $500.5 million of federal money won't be allocated, or about 13.7 per cent of the total cash earmarked for the projects.
A mid-case scenario -- which is the budget officer's best guess at what is most probable -- suggests about 24 per cent of projects would not be completed before the deadline, leading to a $293-million lapse in federal funding.
For now, with data for half the stimulus program available, Page's office finds that just 24.47 per cent of projects were completed by March 2010, using up $165 million of federal money.
But the report also shows that the pace of work was to pick up rapidly over the summer, and that all levels of government are most likely spending about $850 million a month during July and August. Claims for that spending won't be known for several months.
The report does not say how the government's expectations for job creation and growth would be affected as a result of a smaller federal stimulus program, nor does it examine what would happen to municipal finances if they're left picking up the tab at the end of the day.
Still, the budget officer says the delays are "material" and suggests that MPs should ask the federal government to allow some flexibility.
"Bearing in mind the data limitations, it is evident from the forecast model that there is some risk of a material lapse under the ISF program," the report says.
"Parliament may wish to seek further information from the government in regards to risk mitigation strategies of ISF projects being incomplete by the March 31, 2011 deadline and the impact on program spending, output and employment."
Besides from weather, municipalities say some work has been slowed by elections, acquisition of permits, availability of materials and local decision-making.
If Ottawa doesn't examine delays and make allowances on a case-by-case basis, municipalities fear they will be left footing 100 per cent of the bill for work done after next March -- instead of the 33 per cent for which they signed on.
So some municipalities are taking extreme measures: adding clauses in their contracts that force contractors to absorb the extra costs; or cutting corners in their work to finish on time; or telling contractors to work around the clock to get the job done, no matter what their overtime bill.
The Parliamentary Budget Officer has been tracking only the Infrastructure Stimulus Fund -- the biggest pot of the federal government's $16-billion in stimulus funds.
At first, Page had great difficulty obtaining enough information to monitor the flow of money and assess the impacts. Now, Infrastructure Canada is providing a steady flow of raw data, albeit at a three-month lag.
Still, there is no way for anyone to track at a national level how many jobs and how much economic growth are being generated by the stimulus funding. Ottawa did not request that the recipients provide such information.
The PBO is trying to collect that information on its own. It has launched a large poll of municipal and provincial governments, asking them about the effects of stimulus. The results will be released in the fall.
