Federal Government launches historic CA$30B public transit infrastructure investment

July 26, 2024

On July 17, 2024, Prime Minister Justin Trudeau announced the launch of the Canada Public Transit Fund (the Fund). Through the Fund, the federal government will commit CA$30 billion over 10 years destined to Canadian public transit infrastructure which, if realized, would make it the largest public transit program in Canadian history. The program will strive to expand and improve public transit infrastructure across the country. Investment via the Fund will be available to local governments and public transit agencies, starting in 2026, through three streams: Metro-Region agreements, Baseline Funding and Targeted Funding.

1. Metro-Region agreements (CA$20 billion):

The Metro-Region agreements (MRA) will provide a new source of funding for metropolitan regions with complex public transit networks, as of 2026. This funding stream will support 10-year partnerships between provinces and large urban areas such as Toronto, Montréal, Vancouver and Calgary. The funds will be dedicated to encouraging long-term planning between governments and public transit agencies and will support a wide variety of projects such as subway and bus line extensions, as well as maintaining existing transit systems.

To access MRA funding, provincial governments, municipalities or public transit agencies will first need to submit an expression of interest to Housing, Infrastructure and Communities Canada. Following the successful assessment of the expression of interest, provincial governments, municipalities and public transit agencies will need to collaborate to establish Integrated Regional Plans. The Integrated Regional Plan will outline how capital investment, over a 10-year period, will achieve core objectives for the Fund. These core objectives include transit use, housing supply and affordability, climate resilience and social equity. The MRA would then be established between provincial governments, municipalities, public transit agencies and the federal government as a long-term funding commitment.

2. Baseline Funding (CA$5 billion)

The Baseline Funding stream of the Fund will deliver predictable funding to communities with existing transit infrastructure. Such funding will be allocated based on population and ridership and will primarily focus on system expansion, lifecycle extension, performance upgrades and investments in the state of good repair of their fleets. Such initiatives may include expanding bus fleets, retrofitting subway stations or constructing new tram lines.

Baseline Funding will be allocated to provincial governments, municipalities and transit agencies. To apply for such funding, transit agencies and asset owners must submit an expression of interest to Housing, Infrastructure and Communities Canada. Applicants will then be invited to submit a multi-year Capital Plan Application that will outline their planned use of the allocation.

In order to qualify for funding under both MRAs or Baseline Funding, municipalities will need to take specific housing measures. These required measures are part of the federal government's response to the Canadian housing crisis and are intended to apply pressure on provincial governments to implement certain initiatives, such as allowing high-density housing in designated areas, in order to address housing concerns. When applying for funding, municipalities will need to complete all of the following:

• Eliminate all mandatory minimum parking requirements within 800 metres of a high-frequency transit line.
• Allow high-density housing within 800 metres of a high-frequency transit line.
• Allow high-density housing within 800 metres of post-secondary institutions.
• Complete a housing needs assessment for all communities with a population greater than 30,000.

3. Targeted Funding (CA$5 billion)

The third funding stream of the Fund will be available to initiatives that support meaningful transit, school transportation and active transportation. These include active transportation such as walking or bike paths, rural and remote transit, investment in Indigenous communities and electrification of public transit and school transportation. This targeted funding stream will address federal priorities such as net-zero emissions, thereby strengthening Canada's climate plan: A Healthy Environment and a Healthy Economy. Funding will be delivered on a project-by-project basis that will allow the Government of Canada to adapt the stream to evolving needs.

Although investments via the Fund will only begin in 2026, calls for applications for the MRAs and the Baseline Funding have already begun. The first call for applications under the Targeted Funding stream has yet to be announced.

4. Recent criticism

The Fund has already faced certain criticisms from public transit advocates, some of whom have maintained that investments in infrastructure upgrades and electrification projects ignore the critical need for enhanced daily public transit operational support. The Fund's announcement comes at a time when many transit agencies are grappling with severe budget shortfalls exacerbated by the Covid-19 pandemic, leading to fare hikes and service cuts. Some critics of the Fund have argued that investments should be used instead to cover day-to-day costs such as hiring more drivers, which will in turn help increase ridership and minimize operating deficits.

Moreover, as referenced above, federal government funding will be made available with a significant caveat: when accessing funds through the MRA or Baseline Funding streams, municipalities must comply with specific imposed housing measures. This has been criticized by certain provinces as interference in a matter of provincial jurisdiction by effectively leveraging the Fund in order to pursue federal priorities.

Conclusion

The Canada Public Transit Fund marks the largest public transit investment announcement in Canadian history, with a CA$30 billion commitment over 10 years. This funding, which will be provided through three streams, will aim to enhance and expand transit networks throughout the country. Calls for applications have already begun for the MRA and Baseline Funding streams and will remain open until September 16, 2024.

Should you have any questions about the Fund or other issues related to public infrastructure or public-private partnerships, please do not hesitate to contact any member of Dentons' Infrastructure and Public-Private Partnerships practice group.¹

1. The authors of this insight are Ilan Dunsky, Charles Bardou, Lampros Stougiannos and Anoosh Loertscher. Ilan and Charles are partners and Anoosh is an associate in Dentons' Infrastructure and Public-Private Partnership group based in Montréal. Lampos Stougiannos, also a partner in the same group, is based in Ottawa. The authors would like to thank, Nicolas Tawfik, Dentons summer student in Montréal, for his contributions to this insight. ↩