BP-465E
A NATIONAL HIGHWAY SYSTEM
Prepared by:
John Christopher
Science and Technology Division
September 1998
TABLE OF CONTENTS
INTRODUCTION
PRINCIPAL
FINDINGS AND RECOMMENDATIONS OF THE NHP STUDY
A. Phase One - Identification of a National Highway System
B. Phase Two - Costs of Upgrading the National Highway
System
C. Phase Three - Solicitation of Public Comment and Review
of International Experience
D. Phase Four - Funding and Cost Sharing
DEVELOPMENTS
1992-1995
THE 1997
REPORT OF THE HOUSE OF COMMONS STANDING COMMITTEE ON TRANSPORT
A. Status Quo
B. A Dedicated Tax
C. Public-Private Partnerships
CONCLUSION
A NATIONAL HIGHWAY SYSTEM
INTRODUCTION
In 1987, the
Board of Directors of the Transportation Association of Canada (TAC) recommended that the
10 provinces and two territories join with the Government of Canada in examining the
establishment of a national highway policy for a designated national highway network.
Later that same year, the Council of Ministers Responsible for Transportation and Highway
Safety agreed to create and sponsor a National Highway Policy (NHP) Study for Canada which
would :
establish future needs and
define standards for the Canadian primary highway system;
establish the benefits and
costs of meeting these needs; and
establish funding
alternatives for meeting those costs with a view towards recommending adoption of the
Policy by their governments.
Three broad
objectives for the National Highway Policy Study were established as follows:
to ensure that all regions
of Canada are provided with adequate and equal levels of service, safety and efficiency in
highway transportation in order to serve inter-provincial and international trade and
travel and enhance Canadian economic competitiveness;
to bring cohesiveness,
prestige and uniformity of standards to the major highway transportation linkages of
national significance in Canada; and
to provide emphasis and
support by all levels of government for a highway network of national significance at a
time of growing regional transportation needs. To achieve these broad policy objectives,
three principal goals for a multi-phased study were established as follows:
criteria for identifying
highways that serve national transportation needs;
minimum standards of design,
operation and service that these highways should provide; and
a funding mechanism(s) for
ensuring that the needs of a national highway transportation system are met.
PRINCIPAL FINDINGS AND RECOMMENDATIONS OF
THE NHP STUDY
The study,
which was divided into four phases, took place over the period 1988-1992.
A. Phase One - Identification of a
National Highway System
Criteria
for identifying a national system of highways were adopted as follows:
another major provincial
population/commercial centre,
another major
population/commercial centre in an adjacent province or territory,
a major port of exit/entry
to the United States, or
another transportation mode
directly served by the highway mode (e.g., ferry terminal).
These criteria
were used to identify a national system of 25,000 kilometres which would provide for the
safe and efficient movement of people and goods from region to region in Canada.
This phase
also established minimum acceptable design and operational standards for this system as
follows:
geometric design standard -
two-lane rural arterial, undivided with full shoulders and a minimum of 0.8m paved
shoulder and a design speed of 100km-h;
geometric design maximum -
four-lane rural divided arterial (full access control) with a design speed of 130km-h;
serviceability - a minimum
operating speed of 90km-h;
structural adequacy -
capable of providing all-weather service (no seasonal load restrictions) and capable of
carrying the national standards for vehicle weights and dimensions; and
comfort - provision of a
riding comfort index of 6.0 or greater or the equivalent rating under other measurement
systems.
The
application of these criteria revealed that 38% of the system is deficient. In addition,
75% of the identified national highway system consists of two-lane paved highway and 790
of the 3,534 bridges are in need of major strengthening or rehabilitation.
B. Phase Two - Costs of Upgrading the
National Highway System
The second
phase of the study assessed the cost of achieving the established highway design and
operation standards. The assessment considered two options.
Option A
consisted of correcting the identified deficiencies and upgrading, where necessary, to a
minimum of a two-lane paved highway and a maximum of a four-lane divided highway. The cost
was estimated to be $13 billion.
Option B
consisted of Option A plus completion of a continuous four-lane divided highway across
Canada. The cost was estimated to be $18 billion.
An analysis
was also carried out of highway revenues and expenditures over the period 1983 to 1988.
The results were as follows:
federal, provincial and
territorial expenditures on highways totalled $24.4 billion;
road-related revenues
totalled $32.9 billion;
federal and provincial fuel
taxes accounted for 90% of road-related revenues;
provincial fuel tax revenues
remained relatively constant over the five-year period;
annual capital expenditures
on the system remained constant at $600 million; and
annual maintenance costs of
the system averaged $280 million.
In addition,
studies estimated the economic impacts of a capital works program to correct the
deficiencies, the benefits to highway users of upgrading the system, and the expected
environmental impacts of the work. The major findings of these studies were as follows:
employment in construction
and related sectors would be expected to increase by between 146,000 person-years (Option
A) and 205,000 person-years (Option B) during a 10-year program;
growth in the economy;
improved market
accessibility and trade competitiveness for Canadian industry in both east-west and
north-south corridors;
increased tourist travel;
benefits to highway users in
all regions of the country, including a reduction in vehicle operating costs of $360
million annually, a reduction in travel time of 46 million person hours annually, a 4%
(160) reduction in current annual traffic fatalities, and a reduction in annual personal
injury accidents of 2,300; and
minimal social and natural
environmental impacts since construction would primarily take place on existing highway
alignments.
C. Phase Three - Solicitation of Public
Comment and Review of International Experience
In
general, there was a strong expression of support for a National Highway Policy from users
and stakeholders; the estimated impacts and benefits of an improved system were judged to
be reasonable or understated. In addition, the concept of user pay was generally
supported, provided that all existing road-use taxes were applied to road needs and any
new road-use taxes were dedicated to the system.
A review of
international experience revealed that Canada is the only federal state without a national
highway policy or program for major highway links and is virtually alone in not having
national government support for a national highway transportation infrastructure. Other
findings of the review included:
Canada trails all other
federal states (U.S., Germany and Australia) in the percentage of road-related revenues
spent in support of a national road system;
Canadas level of
capital and maintenance investment in highway infrastructure is among the lowest of OECD
countries; and
Canadas annual
expenditures per kilometre of the system are among the lowest of the developed countries
examined. In the context of North American trade, the United States has historically been
spending about six times more per kilometre than Canada on its interstate system.
D. Phase Four - Funding and Cost Sharing
This phase
concentrated on appropriate and sustainable means of funding the national highway system
and an appropriate cost-sharing formula for the contributions of the federal and
provincial/territorial governments to this project. It was recommended that:
the federal government
establish a national highway system fund based on an amount equal to the revenue generated
nationally by two cents per litre of fuel consumed for road use nationally;
the fund be allocated in two
components;
base allocation - 80% of the
fund to be made available to provinces and territories in proportion to the percentage of
national road-use fuel consumed in each jurisdiction; (The annual allocation of these
funds would remain available for up to four years, after which they would be transferred
to the pool allocation.)
pool allocation - 20% of the
fund to be made available for projects proposed by jurisdictions, after their base
allocation was exhausted.
projects undertaken with
federal funding from the base allocation be subject to a 65% federal and 35%
provincial/territorial cost-sharing formula;
projects undertaken with
federal funding from the pool allocation be subject to a 90% federal and 10%
provincial/territorial cost-sharing formula; and
an amount equal to one-half
of one percent of the total cost of capital works funded under the base allocation program
be dedicated to cooperative research projects on enhancing the quality of design,
construction, maintenance and operation of the system.
In addition,
during this fourth phase consensus was sought on a number of technical issues associated
with the initiation of a cooperative national policy and program. The agreements reached
included:
establishment of a framework
for setting priorities among the identified needs of the system according to key criteria
of safety, highway strength, highway service and economic development, competitiveness and
productivity;
detailed design and
maintenance standards for routes on the system, covering such aspects as geometric design,
bridges and overpasses, traffic control devices, and rest areas; and
detailed development of
expenditure types that should be eligible for a cost-sharing program based on
federal-provincial/territorial cost sharing of capital works and associated costs but with
right-of-way acquisition and maintenance costs borne by the provinces and territories.
DEVELOPMENTS 1992-1995
The National
Highway Policy Study laid the foundation for a remarkable federal-provincial consensus on
various aspects of the roads that make up the national highway system, including their
condition, the requirements for bringing them up to the agreed minimum standard of
efficiency, the costs of doing so, and the resulting benefits. The only (admittedly major)
question left to be agreed upon was how the system would be funded and the cost-sharing
formula to be applied by the federal government and the provinces/territories.
Discussions
followed between the Minister of Transport and the provinces/territories for reaching an
agreement on these two issues. These were overshadowed, however, by the need for the
federal government and provinces to put their fiscal houses in order. After concentrated
negotiations during the fall of 1994, the federal government concluded in December of that
year that there was not a sufficient consensus to go ahead with a national highway program
as proposed by the National Highway Policy Study.
In March 1995,
Transport Canada launched the Special Infrastructure Project to assess the economic
competitiveness and productivity impacts of the Canadian highway system and investigate
the economic rationale for federal highway policy and involvement in highway
infrastructure. In other words, the Project simply updated the findings of the National
Highway Policy Study.
In August
1995, at their annual Conference, the Premiers "urged the federal government to enter
into negotiations with the provinces and territories with a view to implementing a
coordinated National Highway Policy as soon as possible, with an appropriate level of
federal funding to be provided within existing fiscal frameworks."
In September
1995, the Coalition to Renew Canadas Infrastructure urged the Minister of Finance to
include in the 1996 Budget a fuel tax increase to be dedicated to the funding of a
national highway program.
THE 1997 REPORT OF THE HOUSE OF COMMONS
STANDING COMMITTEE ON TRANSPORT
In the
spring of 1996, the Standing Committee on Transport (SCOT) undertook a study on the
renewal of the national highway system. After reviewing all the investigations that had
taken place over the previous few years, it concluded, in its report of February 1997,
that the issue was not whether we need to renew our highways we do; the critical
issue was how to pay for doing so. SCOT examined three funding options: the status quo, a
dedicated tax, and the application of public-private partnerships.
A. Status Quo
The Committee
was of the opinion that the status quo, whereby the federal government funds highway
upgrading through a series of ad hoc, piecemeal, bilateral federal-provincial
agreements, does not provide coherent national planning for the rebuilding of our
highways. Thus, the Committee did not believe that the status quo was a viable option.
B. A Dedicated Tax
Another option
for funding highway renewal, one supported by many, is to establish from existing gasoline
tax revenues a dedicated tax to be placed in a highway trust fund. Against this solution
are the fiscal debt issue and the reluctance of finance ministers to impose dedicated
taxes. The Committee did note, however, that, once the debt situation is under control,
dedicated long-term funding might prove to be a more workable option.
C. Public-Private Partnerships
Given the
drawbacks of the other options, the Committee looked at alternative funding mechanisms. It
felt it had to "look outside the box" of the traditional approach and think in
terms of how the private sector builds an asset and uses it over its full lifecycle. The
view was that public-private partnerships could be a key component of a national highway
renewal strategy.
The
public-private partnership model allows a range of funding options based upon upfront
government investment, explicit tolls and the UK "shadow toll" model whereby the
government pays the private sector partner a sum based upon the number of vehicles using
the highway. The critical factor in the success of these partnerships is the way in which
the risk is allocated and managed between the public and private partners. The British
policy is to optimize the transfer of risk to the private sector and to demonstrate to the
public and to its own auditors that this solution is clearly superior to the public
approach.
In order to do
this, the British have developed an analytical method of risk assessment through the
Public Sector Comparator Model. Under this model, a comparison is made between the cost to
government of delivering the project and the estimated cost to government of "shadow
tolls" paid to the private partner over the life of the project. To date, the British
experience has demonstrated that such involvement of the private sector has resulted in an
overall reduction in road infrastructure costs of approximately 25%.
Because
public-private partnerships are relatively new in Canada, there are no uniform national
guidelines for their application. SCOT stated that a framework of standard practices,
terms, clauses and methodologies is needed to carry out cost-benefit calculations,
priority setting and risk evaluation; within this, public-private partnerships would be
able to develop and succeed. The Committee also emphasized that for public-private
partnerships to be implemented successfully, the federal government must make a long-term,
secure, sustainable funding commitment to the rebuilding and maintenance of the national
highway system.
To this end,
SCOT recommended that the federal government make such a long-term commitment to a
national highway renewal program. It also recommended that the federal government, in
cooperation with the provinces and territories, encourage public-private partnerships and
appoint a public-private partnership panel to develop a model for rebuilding and
maintaining our highway infrastructure.
CONCLUSION
Historically,
and especially in the first half of this century, the federal government has played a role
in assisting the development and construction of parts of Canadas highway system
through assistance to the provinces. The TransCanada Highway was constructed originally on
a 50%-50% cost shared basis between the federal and provincial governments, revised to
allow a higher federal share in parts of Atlantic Canada and British Columbia. Not since
the completion of the Highway in 1971 has the federal government taken a role in the
provision of national highway networks. Since that time, the federal government has
provided limited assistance in particular regions of Canada for highway programs falling
under various federal and provincial economic regional development agreements and
cost-shared highway programs. These agreements and programs have usually been small in
scale and of short duration.
Canada needs a
National Highway Policy for the 21st century in order to rebuild and maintain our
highways. The question is, how is this to be paid for. SCOT reported evidence of a growing
consensus among stakeholders that the best and most realistic approach to this question
would be through the implementation of public-private partnerships and federal government
leadership in providing a long-term, secure source of funds.
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