A bump in taxes won’t be how the City of Trail pays for a new Columbia River crossing.
Instead, if Trail residents give the city the go-ahead to borrow $4.9 million on the Aug. 23 by a popular vote, millions will be paid off through a federal grant program called the Gas Tax Fund (GTF).
“At this time and if the referendum is approved, council’s plan is to use the annual gas tax payment to offset the cost of borrowing,” confirmed David Perehudoff, Trail’s chief administrative officer. “Thereby eliminating any direct property tax impacts as a result of the project.”
The federal government collects about $5 billion per year in taxes on gasoline, diesel, and aviation fuel and approximately $1.6 billion per year from GST revenues on gasoline and diesel.
These taxes go into general (federal) coffers to fund a range of programs including the GTF.
Designed in 2005, federal gas tax revenue provides provinces and territories twice-a-year funding to flow into municipalities to support local infrastructure projects.
In 2013, the federal government announced an economic action plan that indexed the GTF at two per cent annually until 2024, beginning with a new provincial Community Works Funds (CWF) agreement effective this year.
Since the program’s inception, Trail’s annual gas tax payment has increased from $115,000 to almost $342,000, and under the terms of a new agreement, will net the city $4.4 million in the next 10 years.
Most recently, Trail used $2.64 million from the GTF to pay for the construction of the Coleman Street Reservoir and currently retains about $350,000 in the city’s gas tax account.
“If the referendum fails, other eligible projects will be considered in the future as part of the city’s capital plan,” Perehudoff noted.
For the first nine years, the federal funds could only be used for infrastructure improvements to drinking water and wastewater systems, solid waste management, community energy systems, public transit, local roads and capacity building.
Over the last several years, Warfield has used the GTF for sanitary sewer upgrades, and Montrose constructed a new chlorination facility with $200,000 from its gas tax reserves.
“We have used CWF money for debenture payments before,” said Montrose CAO Kevin Chartres, adding that debts can only be paid with GTF if the project meets the eligibility criteria.
“We have used about $6500 for 2014 expenditures to finalize our road upgrade and maintenance plan,” he explained. “The majority of our 2014 funds, $85,000, are going into a Community Works Fund (Gas Tax) reserve.”
In April, the government expanded GTF categories to provide municipalities further flexibility when choosing how to invest the money.
Now the list of eligible projects includes upgrades to local and regional airports, infrastructure that reduces or eliminates long-term impacts and risks associated with natural disasters, broadband connectivity, recreational facilities or networks, tourism and amateur sport infrastructure excluding facilities such as arenas.
The Union of BC Municipalities (UBCM) administers the gas tax funds under contract with the provincial government, and then each municipality enters into an agreement with the UBCM.
Civic year end reports are submitted back to the UBCM for review before the statements are forwarded to the province and finally to the federal government.
“Senior levels of government want to ensure these funds are being used in accordance with the intended purpose,” explained Perehudoff. “And providing tangible benefits in terms of projects including specifying if they would not have been possible to accomplish in the absence of receiving these funds.”