Evaluation Report

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Executive Summary

Overview of the gas tax fund (GTF) and the public transit fund (PTF) programs

The Government of Canada established The Gas Tax Fund (GTF) and the Public Transit Fund (PTF) in 2005 as a response to the expressed infrastructure needs of local governments. Under both funds monies are transferred up-front to the provinces and territories, the City of Toronto, and in the case of British Columbia and Ontario, the initial recipients are the Union of British Columbia Municipalities (UBCM) and the Association of Municipalities of Ontario, respectively.  These initial recipients then flow the money to municipalities and other eligible recipients. Unlike other infrastructure programs, the Government of Canada has no role in the selection or approval of projects under these programs which are best categorized under Other Transfer Payments by policies established by the Treasury Board of Canada Secretariat (TBS). In some cases, the initial recipients have a role in approving capital plans and projects, while in others the municipal recipients assume sole responsibility for selecting projects.

The GTF program was designed to provide $5 billion in predictable funding over five years (2005-2010) to nearly all municipalities to support environmentally sustainable municipal infrastructure that will contribute to the Government of Canada’s environmental objectives of cleaner air, cleaner water, and reduced greenhouse gas (GHG) emissions. Long-term planning and collaboration were also key objectives of the GTF program.

To address identified infrastructure needs of the First Nations, a portion of the GTF was set aside and administered through the First Nations Infrastructure Fund (FNIF) and managed by Indian and Northern Affairs Canada (INAC). In the Northwest Territories, Nunavut and the Yukon Territory GTF funding is also available for indigenous First Nations where there are no treaty-established Reserve lands.

The Government of Canada has announced that $8 billion of additional funding under the GTF will be provided for the period extending to March 31, 2014. Budget 2008 announced that the GTF will be extended beyond 2014 and become a permanent $2 billion per year program.
The PTF program was designed as an exceptional measure to address the specific need for improved public transit services. When it was first announced in 2005, the PTF was planned to be a two-year program, however, it was subsequently reduced to one year ($400 million), and the funds that were to be provided for the second year were transferred to the provinces and territories as part of the Public Transit Capital Trusts.

Evaluation Methodologies

The GTF and PTF Agreements provide that joint evaluations of the programs shall be carried out no later than March 31, 2009, and address at a minimum the issues related to achievement of the objectives of these Agreements, the use of funding, the effectiveness of the funding approach and the effectiveness of the communications protocol. These joint evaluations must seek the input of eligible recipients or their representatives and the results are to be made public.

Thirteen joint evaluations have been completed, covering all signatories of the Agreements save for Québec since there was no provision for a joint evaluation under the Canada-Québec Agreement. These evaluations have received the input of 60 provincial or territorial representatives, and 202 municipal or municipal association representatives, via interviews. Municipal input was also obtained through mail or web-based surveys: 693 survey responses were received and analyzed. In addition, 108 case studies of GTF or PTF projects completed or under way were submitted. For Canada, fourteen different federal representatives participated in these joint evaluations.

Under the Agreements, Canada must complete a national summative evaluation incorporating the results of the joint evaluations no later than June 30, 2009. Following the national evaluation the parties may elect to amend the Agreements, as appropriate.
This National Summative Evaluation builds on the results of the thirteen joint evaluations and adds an overall examination of results and progress to date. Since the PTF program was only a one-year program, emphasis is on the GTF program particularly in view of the extension of GTF funding to 2014.

The 13 joint evaluations were carried out with a common evaluation matrix¹ that was adapted to the specific circumstances in each jurisdiction: six consultants were tasked with these evaluations. Methodologies varied slightly but were based on four essential components:

1. Review of documents, files, evaluations, and other literature;
2. Key informant interviews, either individually or in focus groups, and in 10 of 13 evaluations, mail or web-based surveys of eligible recipients;
3. Analysis of findings according to key evaluation questions;
4. Case studies of both GTF and PTF funded projects either completed or underway.

The National Summative Evaluation adds quantitative analyses on the use of funds, program management and delivery, and capital spending commitments. A detailed analysis of the GTF Agreements both with Canada and between the provinces, territories, associations and eligible recipients was also undertaken. All projects were considered in the analysis of the use of funds in relation to allocation, project categories, as well as that of expected outcomes.

Given the program design, the data pertaining to allocation to recipients, commitments and expenditures are provided by the signatories in the audited Annual Expenditure Reports. Signatories also provide the list of projects and project categories, as well as expected outcomes with the Annual Expenditure Reports. Realized outcomes are reported in the Outcomes Report to be published by the signatories for their citizens.

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Findings

The majority of GTF and PTF stakeholders that were interviewed or responded to a survey in the thirteen joint evaluations expressed overall satisfaction with the programs’ scope, delivery and management. The programs are viewed as providing needed funding for infrastructure projects consistent with the objectives of the provinces and territories, the City of Toronto, municipalities and other eligible recipients. The joint evaluations identify flexibility, predictable funding, up-front funding, and collaboration as the most valued assets of the GTF Program.

The GTF and PTF programs address a demonstrable and continued need

The GTF and PTF programs respond to a demonstrable need for investment in key municipal infrastructure: water, wastewater, public transit, solid waste, local roads and bridges that enhance sustainable outcomes, as well as community energy systems.
The high level of uptake and the long-range data on GTF and PTF municipal capital expenditures also demonstrate the relevance of the GTF and PTF project categories, as does the increased funding from provinces and territories provided either through their programs or their funding allocations.

The joint evaluations each stressed the need for continued investment in GTF and PTF project categories.

The GTF and PTF program objectives are aligned with federal, provincial, territorial, and municipal investment priorities

The GTF and PTF program objectives are relevant in that they align with federal, provincial, territorial, and municipal investment priorities. The joint evaluation reports concur with this and most stakeholders agree that the GTF and PTF programs have contributed to provincial, territorial, and municipal infrastructure and sustainability objectives. The joint evaluations have indicated that overall the program objectives, and specifically eligible project categories, are in line with provincial and territorial objectives. The programs address a demonstrable need for funding in the GTF and PTF project categories.

Some have voiced the desire for additional project categories. Recognizing that eligible recipients are voicing legitimate needs, other project categories could be considered insofar as they satisfy the program’s objectives. Other programs such as the Communities Component of the Building Canada Fund are addressing some of these needs as are provincial and territorial funding programs.

Program flexibility is valued as an asset by all stakeholders

Flexibility, as demonstrated by the many variations in the GTF and PTF Agreements and the distinctive features such as banking, pooling, and leveraging of funds, have been identified in the joint evaluations as key factors considered beneficial by all parties.

Funding predictability is a key component for sustainable infrastructure investment

Funding predictability is a distinctive feature of the GTF program. All joint evaluations have pointed to predictability as a key factor contributing to increased capacities to plan and undertake relevant projects.

Intergovernmental collaboration has been fostered

Both the GTF and PTF programs were designed to promote purposeful partnerships between stakeholders and foster collaboration and cooperation. Transparency in a spirit of collaboration is one of the six principles included in the Agreements.

Intergovernmental collaboration has been fostered at all levels and the joint evaluations have pointed out that: there is an appreciation for the support and collaboration between Infrastructure Canada and the Signatories; new opportunities for collaboration between the Signatories and local governments; collaboration between local governments, particularly where pooling of funds and regional initiatives have been encouraged; and collaboration, albeit limited, between local governments and First Nations.

Benefits of information-sharing have been identified by the joint evaluations between the provinces, territories and associations fostered through workshops and technical committees.

Progress toward meeting the capital spending commitments has been made

Under the GTF and PTF programs, Canada’s contribution was designed to be used in addition to the funds already allocated for municipal infrastructure. In order to meet this requirement, both programs include commitments by Canada, the provinces and territories, and municipalities not to reduce or clawback their recent and current capital spending on municipal infrastructure.

The capital spending commitments are to be honoured over the first five years of the agreements, i.e. by March 31, 2010. The review of Canada’s commitments and of those of the provinces and territories, and Statistics Canada data for the first three years of the GTF program, indicate that capital funding for municipal infrastructure has been not only maintained, but increased. If there are no significant reductions in funding for 2008 and 2009, it would appear likely that the commitments not to clawback infrastructure funding will be met.

Statistics Canada data analyzed show net municipal capital expenditures, i.e. net of all special-purpose transfers, have increased from 2005 to 2008, in comparison to the prior period, from 2000 to 2004. If there are no significant reductions for 2009, it would appear likely that in aggregate municipalities will have at the least maintained their own-source capital spending over the term of the Agreements.

The GTF program has contributed to improve municipal planning capacity

One of the objectives in the GTF program design was to increase the capacity of communities to undertake long-term planning and thus make better, sustainable, infrastructure investment decisions. All planning related requirements were to be fulfilled over the lifetime of the Agreements. Three requirements that support the objective of better long-term investment decisions are the following: development of Integrated Community Sustainability Plans or Planning (ICSP), development of Capital Investment Plans, compliance with the Public Sector Account Board (PSAB) standards for reporting on tangible capital assets. Funding for capacity building initiatives also supports this objective.

Information collected for this report and the joint evaluations suggest that these requirements will be met and that support for municipal planning capacity was, and continues to be, relevant. The joint evaluations have in many cases highlighted the benefit of funding from the GTF program to improve municipal planning capacity. For smaller jurisdictions, the funds available for capacity building have also been identified as a benefit of the GTF program.

Communication of the program’s results needs to be improved

The high volume of projects funded through the GTF, very limited federal communications capacity relative to potential workload, some partner capacity issues, and the program business model create challenges for communicating program results. Progress has been made with the adoption of communication strategies between Infrastructure Canada and initial recipients, and an increase in news releases and events in the third year of the program has been noted. Still, more than half of the joint evaluations indicated that while the GTF program was considered successful, communications could be improved to increase public awareness.

Progress has been made toward measuring ultimate outcomes but reports on these will be limited in 2009

The qualitative information provided in the joint evaluations and the analysis of the project mix to date lead to the conclusion that the expected outcomes of cleaner air, cleaner water, and reduced GHG emissions are likely to materialize. The development of quantifiable measures has been completed and progress is being made in the collection of data. The Outcomes Reports are due, in most cases, by September, 2009, save for British Columbia and New Brunswick where these reports are due by December 31, 2009. It is expected that Outcomes Reports will include measurable results for projects completed to date.

Under the Terms and Conditions for the Program, provinces and territories compile the data to assist in tracking performance and the achievements for GTF are reported in the INFC Departmental Performance Report. The framework documented in the federal/provincial/territorial agreements preserves the accountability of the Minister to Parliament for the spending of the funding.

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Up-front funding has been efficient

Up-front funding has been an efficient means to enable eligible recipients to undertake sustainable municipal infrastructure projects. In the first 3 years, 93% of program funds reached eligible recipients and a further 91% of these funds were spent or committed to infrastructure projects. Regarding the PTF, 62% of all funds were spent on eligible projects by March 31, 2008.

Shared responsibility and accountability is appropriate

Based on the information reviewed, and on the joint evaluation reports, it can be concluded that the reporting and accountability framework has been supportive of efficient program management and delivery. The requirements under the Agreements with Canada have been clarified and almost all jurisdictions have demonstrated compliance.

Reporting and auditing issues have been raised by eligible recipients and these are linked to the Agreements between initial recipients and eligible recipients. Different models of reporting and auditing requirements implemented under these Agreements reflect attempts to balance compliance to reporting and auditing requirements set out in the Agreements with Canada and the risks linked to the profile of the eligible recipient and the amount of funding.

It appears there is sufficient flexibility under the funding Agreements with Canada to allow for adaptation to specific circumstances, such as those of small eligible recipients. However, there is an increased burden on the provinces and territories that have chosen to upload part of the reporting responsibility, as noted in the case of Saskatchewan, where higher future costs may result for provinces and territories along with the increases in funding.

Administration of the programs has been cost-effective

Program management and delivery has been efficient and cost-effective. Total administration costs as reported by Canada, seven of the signatories and by eligible recipients, as of March 31, 2008, represented only 0.6% of the total allocated funds for the 2005-2008 period, while 91% of the GTF funds allocated were either spent or committed, and 62% of PTF funds were spent.

Only four signatories have not declared administration expenses for this program, however, it is unlikely that the costs incurred would affect the evaluated cost-effectiveness of program management and delivery.

The joint evaluations have pointed out that with the increase in funding and the consequent increase in number of projects, some jurisdictions may require additional funding for administration costs. Additional funding may also be required by these jurisdictions in order to offer better support to smaller recipients faced with capacity issues.

Conclusions

Based on the joint evaluation reports and on the findings of this National Summative Evaluation, the following conclusions can be drawn:

1. The GTF and PTF programs are relevant:
   1. They have responded to a demonstrable and continued need.
   2. The program objectives align with federal, provincial, territorial, and municipal investment priorities.
   3. The shared responsibility and the accountability framework align with federal, provincial, territorial, and municipal roles and responsibilities.
   4. Program flexibility is a valued asset for all stakeholders.
   5. Funding predictability is a key component for sustainable infrastructure investment.
2. The GTF and PTF programs have demonstrated effectiveness in achieving expected outcomes:
   1. Intergovernmental collaboration has been fostered through the GTF program.
   2. Capital spending commitments by all parties are likely to be met.
   3. The GTF program has contributed to improve municipal planning capacity.
   4. Communications of the programs’ results needs to be improved.
3. Management of the GTF and PTF programs has been efficient:
   1. Up-front funding objectives have been met.
   2. Administration of the programs has been cost-effective.

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Recommendations

The recommendations pertain exclusively to the GTF since the PTF is a sunsetting program. Recommendations focus on continuing improvements and adapting to circumstances with a view to enhance the success of this program. The findings submitted have shown that issues that have arisen in the course of the joint evaluations could be addressed in the extension, within the existing terms and conditions for the program.

1. Facilitate sharing of best practices to address the capacity issues of smaller recipients
   
   Over 2,900 GTF recipients have a population of less than 5,000 inhabitants. To address the capacity issues raised, some of the existing program design features could be put to greater use, such as banking, leveraging, and pooling of funds. Some jurisdictions have built in provisions in their agreements, either dedicated funds for regional initiatives or required use of funds for regional initiatives, and these could be included in other agreements with Canada. Another impact of these provisions is to promote increased collaboration between local governments, and local governments and First Nations, wherever deemed applicable. Some jurisdictions have set a base or floor amount for GTF funding for smaller recipients to ensure that significant projects could be put in place and this could be a venue to consider in the extension of the agreements with Canada.
   
   Specific support toward capacity building initiatives through a dedicated portion of the funds could be included in the extension agreements or through amendments, such as those approved for Newfoundland and Labrador, Nova Scotia, and Prince Edward Island.
   The reporting and auditing review has also identified different models put in place to address the specific circumstances, in particular that of smaller-scale recipients: a risk-based approach to auditing could be further explored at the provincial and territorial levels as well as the issues linked to the scarce auditing resources in some areas. Canada should pursue its support for these initiatives as it has in the past.
   
   Canada should facilitate information sharing amongst the provinces and territories so that they may adapt their delivery mechanisms and reporting schemes to address the capacity issues of smaller recipients.
2. Continue to support outcomes reporting
   
   The GTF program is not just about funding municipal infrastructure. It is about funding sustainable municipal infrastructure that will contribute to cleaner air, cleaner water, and reduced GHG emissions. Outcomes’ reporting is essential to demonstrate that completed projects are producing the expected results. Though there have been many activities and initiatives to develop the Performance Measurement Framework and its associated indicators, collecting relevant data remains a challenge that will require continued efforts.
   
   Under the present agreements, the signatories have committed to one Outcomes Report in 2009 and to report "periodically thereafter." This condition should be reviewed and clarified in light of the expected program extension to 2014.
3. Continue to support long-term sustainable municipal planning
   
   Many features of the existing GTF program focus on long-term sustainable municipal planning. Specifically, most agreements require that an Integrated Community Sustainability Plan be completed within the lifetime of an agreement. This condition will have to be reviewed in the context of the extension, while taking into consideration provincial and territorial legislation and initiatives.
4. Review and simplify the requirements for capital spending commitments
   
   Reporting on capital spending commitments under the Agreements should be reviewed in order to clarify and simplify this requirement. The extension of the Agreements offers an opportunity to review the mechanisms for accounting and reporting on capital spending commitments.
5. Improve communications of the program’s results
   
   Infrastructure Canada has already begun to address this issue and should pursue the implementation of its GTF awareness strategy in conjunction with the signatories to the agreements.
   
   Publication of an Annual GTF Report should be pursued as a means of communicating the program’s results. The communications protocol should continue to be reviewed in light of the evaluation findings. Specifically, Infrastructure Canada should address the objectives and expectations for communications in order to ensure that appropriate resources are available to satisfy these.
   
   The role of the communications delivery partners’ network should be examined and reinforced as a means of fostering increased communications of the GTF program results.

¹ Appendix 1, Figures 1 and 2, Logic Models, Table 2, Evaluation Matrix