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1998 December Report of the Auditor General of Canada
December 1998 Report—Chapter 25
Appendix—Federal Highway Investment Programs
Highways are by far the busiest transportation system in Canada
Transport Canada reports that the majority of Canadians use highways to travel between cities. Similarly, most freight travels by road, with truck transport accounting for 72 percent of freight revenue. The vast majority of roads in Canada are owned and maintained by provincial or local governments. Roads under federal jurisdiction represent only a small proportion of the Canadian road network. Nevertheless, since 1919 the federal government has been providing financial contributions to provinces, territories and municipalities to help them in developing their road networks. For example, it contributed hundreds of millions of dollars in the 1950s and 60s to help build the Trans-Canada Highway. Since then, the federal government has contributed hundreds of millions more to help fund provincial and territorial highway construction, largely through bilateral cost-sharing agreements with individual provinces and territories (see Exhibit A.1) . Transport Canada has been the key federal department in administering such federal-provincial/territorial agreements. It is one of five federal entities investing in road infrastructure; however, it is the only one involved in bilateral highway investment programs.
Government establishes parameters for highway investment programs
The federal government establishes the broad parameters for highway investment programs, which includes setting funding levels by program and by province or territory. It also specifies program objectives and cost-sharing arrangements, which can vary significantly from program to program. For example, some provinces may share costs equally with the federal government. Others may contribute 30 or 50 percent, or the federal government may provide 100 percent of the funding for a particular program.As the federal government then directs, Transport Canada is responsible for setting up the highway investment programs and ensuring that negotiated federal-provincial/territorial agreements reflect both the direction and the fundamental principles that the government has approved under each program. Once negotiated, each agreement is administered by a federal-provincial management committee of two: one federal official and one provincial official. Nevertheless, Transport Canada still has overall responsibility for the programs under which these agreements exist.
Generally, these investment programs apply to one or more provinces and territories, and help fund various types of highway construction projects such as paving, resurfacing, adding additional lanes to existing highways and constructing new highways.
The objectives of all the programs are stated in similar broad terms - to support regional economic development, to improve highway safety and efficiency and, in a few cases, to create jobs. However, the federal government's reasons for creating each of the programs have varied considerably. They range from fulfilling constitutional obligations to eliminating ferry and transportation subsidies and other statutory programs, to stimulating Canada's economy by improving provincial and territorial highways. In the 1990s these programs involved extensions of the New Brunswick and Nova Scotia Highway Improvement Programs, first established in the 1980s; the 1990 Newfoundland Transportation Initiatives, earmarked for capital works projects on the province's Regional Trunk Roads and the Trans-Canada Highway; the Strategic Highway Improvement Program and the Strategic Transportation Improvement Program under the 1992 Strategic Capital Investment Initiative, which provided all provinces and territories with funding; the 1995 Atlantic Freight Transition Program, extending to the Maritime provinces as well as the province of Quebec; and the 1996 Fixed Link Highway Improvement Agreements with Prince Edward Island and New Brunswick (see Exhibit A.2) .
Although Transport Canada's investments have gone principally to help fund provincial and territorial highways, under one of the investment initiatives the government has provided some funding for works to be undertaken on federally owned infrastructure, such as highways in national parks.
Transport Canada investments do not give the federal government a proprietary interest in the infrastructure or segments of highways funded under any of the programs. Rather, the term "investment" is meant to reflect the broad benefits and savings to Canada flowing from the objectives the programs are intended to achieve. The investment programs are, in effect, contribution programs: federal funding is conditional on performance and on compliance with provisions of the applicable federal-provincial agreement (see Exhibit A.3) .