ASSOCIATION OF MANITOBA MUNICIPALITIES
PRESENTATION TO
CANADA TRANSPORTATION ACT
REVIEW PANEL
OCTOBER 25, 2000.1
Introduction
Thank you for allowing the Association of Manitoba Municipalities the opportunity to
offer its views on the Canada Transportation Act Review. We welcome the chance to work with
the panel throughout the review process to offer suggestions on transportation matters affecting
Manitoba’s municipalities.
The Association of Manitoba Municipalities (AMM) was created in January 1, 1999,
following an amalgamation between the former Union of Manitoba Municipalities and the
Manitoba Association of Urban Municipalities. As a result, the AMM now represents all of
Manitoba’s 201 municipal corporations. Our presentation this morning will outline the AMM’s
position on a number of issues in the area of rail, road, and air transportation. In an earlier
submission to the review panel we dealt specifically with competitive rail access provisions such
as rail line transference and discontinuance (abandonment), competitive access, and the
harmonization of federal and provincial regulations. Additionally, that submission touched
briefly on several road issues that arise in the context of the discussion of rail line abandonment.
In a separate submission, the AMM plans to raise the issue of highways and roads in greater
detail, as well as issues related to air transportation.
To begin, the AMM would like to indicate its appreciation for the appointment of Glen
Findlay, former Minister of Highways and Transportation in Manitoba, as a member of the panel
conducting the CTA Review. We believe that Mr. Findlay’s extensive experience in the
transportation field and his familiarity with rural and agricultural issues will allow him to bring a
valuable and unique perspective to this review.
AMM Involvement in Transportation Issues
The AMM and its predecessors have appreciated the opportunity to have a significant
degree of input into the transportation reforms of the 1990s. Although the AMM is a municipal.2
rather than an agricultural organization, the issues of the reform of the grain transportation system
and rail line abandonment have had an impact on the rural road network, as well as the economic
viability of many of our member municipalities. The AMM made three presentations to the
Grain Review Secretariat at various stages of the process to highlight the concern on the part of
Manitoba’s municipalities over the reform of the grain transportation system, especially with
respect to the privatization of CN and the elimination of the Crow Benefit and WGTA.
We would like to express our appreciation to the federal government for announcing the
Prairie Grain Roads Program earlier this year in response to the recommendations of the Estey-Kroeger
Report. This program will bring $175 million in federal funding over the next five years
to address the impact of grain handling and transportation reforms on rural roads in the western
provinces, including $33 million for Manitoba. While we appreciate that this represents
recognition on the part of the federal government of the impact of grain handling and
transportation reforms in the 1990s, this is not sufficient to address the loss of approximately $2
billion in support payments from the agricultural sector in western Canada through the removal
of the Crow Benefit and the WGTA, and reducing the amount spent on research and
development. Even with the aid package for producers announced this spring by the federal and
provincial governments and the Prairie Grain Roads Program, this reduction in funding has not
been recovered. The Review of the CTA provides the federal government with an opportunity to
engage Canadians in a comprehensive discussion on the importance of our rail and road
infrastructure, and to begin the work of designing meaningful and effective measures to ensure
the continued viability of this critical element of our economy.
Rail Line Abandonment
The issue of rail line abandonment as well as competitive access and the harmonization of
regulations needs to be addressed within the context of Canada Transportation Act. In preparing.3
this submission, the AMM has worked closely with our sister organizations in other provinces, in
particular with the Saskatchewan Association of Rural Municipalities (SARM) and the
Federation of Canadian Municipalities (FCM) to ensure that these concerns are brought to the
panel’s attention. We believe that municipal involvement allows for grassroots participation in
identifying key issues of concern to local residents, and allows for recommendations to be made
by those closest to the real problems.
Rail line abandonment and the related issue of elevator closures has become one of the
greatest transportation issues faced by both producers and rural communities. Since the earliest
days of settlement on the Prairie, the railway has served as one of the primary modes of
transportation in many rural communities, and grain elevators have become the focal point of
local commerce, especially in the smallest communities. With the closure of grain elevators and
the loss of rail service, many of these communities are struggling to survive. In addition, local
producers are faced with longer truck hauls over an already stressed road infrastructure to bring
grain to the nearest elevator.
The AMM would like to express its appreciation to the federal government regarding
section 146.1 of the Act, which acknowledges the effect on roads incurred through the
abandonment of a grain dependent branch line and the resulting shift to trucking. This amounts
to $10,000 for each mile of line in the municipality. The AMM recommends that the evaluation
of costs of the effect of rail line abandonment be ongoing, and that the federal government
continue to provide compensation to municipal governments equivalent to the cost imposed on
local infrastructure.
In an evaluation of the relative merits of rail and truck transportation, the environmental
impact of each of these modes of transportation needs to be taken into consideration. According
to the figures published by the Transportation Climate Change Table, transport by truck results in.4
five times more greenhouse gas emissions than transport by rail. The cost of rail transport is also
more economically efficient, although this is not reflected in the cost to shippers because the
trucking industry does not directly pay for the cost of maintaining the roads, while the railways
are responsible for the maintenance of rail lines. Any change in policy that saw trucking
companies pay for road use would certainly make trucking rates look less attractive than is the
case at the present time. The trucking industry would argue that it already pays for maintaining
roads through the tax collected on fuel by the federal and provincial government, although very
little of the road use fuel tax collected by the federal government makes its way back to our road
infrastructure.
During the period 1977-1990, the federal government contributed $700 to $800 million to
the Prairie Branch Line Rehabilitation Program for the express purpose of maintaining the Prairie
branch line system for continued use by farmers. The Class I carriers have demonstrated that
they are no longer interested in operating many of these branch lines by abandoning them.
Creating a pro-competitive environment that would facilitate the purchase and operation of these
lines would allow for the continued use of the existing infrastructure, thereby maximizing the
return on the federal government’s investment and minimizing the damages to the already
overburdened publicly funded road system.
Promoting Rail Competition
The AMM is certainly aware of the economic factors that impact on the viability of many
branch lines. Producers have the ability to haul grain longer distances than was the case when
many of these rail lines were built early in the last century. The competitiveness of the railway
system obliges the railways to make a profit from their business, and we cannot expect them to
maintain uncompetitive lines in perpetuity. While it may not be possible or feasible to save every
branch line, our membership supports the AMM in promoting the economic feasibility of our.5
branch lines to short line operators and, potentially, regional railways, who may see an
opportunity in operating these lines. Therefore, our interest is in providing potential purchasers
of branch lines that have been designated for discontinuance with the greatest possible
opportunity to purchase such lines before they are abandoned and the track has been removed. In
our experience, once a rail line is removed, it is gone forever.
At the present time, there is no requirement to advertise the availability of a railway line
and subsequently offer the line to provincial governments or municipalities if no interest is
expressed, as long as the company has a purchaser willing to operate the line and the railway has
indicated its intention to transfer the line in its three-year plan. Neither the company nor the new
owner is required to show that the line will actually continue to be operated under new
ownership. If the new owner is either unable or unwilling to operate the line, service may
effectively be discontinued, while other potential operators are prevented from bidding on the
line and governments are prevented from obtaining the railway line at no more than net salvage
value.
The loss of railway branch lines and the increasing dependence on trucking raises
concerns about a lack of competition in the grain transportation sector. In areas that have a long
haul to mainlines, short lines offer a competitive alternative to trucking if the railway
infrastructure is still in place. Short line railways should be considered an essential component in
the grain transportation system and we believe that the federal government should require the
railways to abandon rail lines in packages that will assist short lines in becoming competitive and
economically viable.
To encourage the viability of short lines and regional railways, the AMM would
encourage the federal government to strengthen the current competitive measures within the
CTA. We believe that short lines should have access to the competitive line rate when accessing.6
rail lines. Short lines should also be offered expanded running rights to allow them to deliver
grain to points on CN or CP, depending on which was offering the best rates. Other existing
shipper protections such as Interswitching, joint running rights, and final offer arbitration need to
be maintained and even strengthened until there is sufficient competition in the system to provide
effective and demonstrable reduction of rates. We note that joint running rights have been put in
place in the eastern provinces, but this has only taken place in western Canada in a few specific
instances. The AMM recommends that the CTA Panel consider the benefits of joint running
rights in the western provinces, as has already been done in the east.
Harmonization of Federal-Provincial Regulations
Although railway legislation has traditionally been the sole responsibility of the federal
government, the emergence of short lines operating under provincial legislation has created a
significant role for provincial governments in this industry. The AMM has worked closely with
our provincial government over the last few years to ensure that the relevant provincial
legislation takes municipal concerns over rail line abandonment into consideration. During the
last session of the Manitoba Legislature, the government passed Bill 14, The Provincial Railways
Amendment Act, which encourages investment by preventing the removal of infrastructure before
allowing an opportunity for the continued operation of the line in the public interest.
Currently, short lines are not eligible for the federal Grade Crossing Improvement
Program or the proposed grade crossing consolidation program under Railway Safety Program
because they are provincially regulated. This results in significant costs to municipalities to
undertake rail-crossing improvements to enhance public safety. Therefore, the AMM
recommends that federal and provincial regulations be harmonized to ensure the access of short
lines to federal funding relating to grade crossing improvements and rail safety..7
NATIONAL TRANSPORTATION INVESTMENT STRATEGY (NTIS)
At the 2000 Transport Ministers meeting, the provincial and territorial ministers reached a
consensus position for immediate federal funding of a Canada-wide transportation strategy. The
federal government is projected to realize a cumulative surplus in excess of $20 billion from
taxes on the transportation sector over the next six years. As a result, the AMM believes that a
long-term, sustained federal funding commitment is now affordable and should be a priority for
the federal government.
The single most important component of any transportation strategy is financial assistance
for Canada’s beleaguered highway system. According to a study done for the provincial and
territorial Ministers of Transport, the cost of correcting all current deficiencies on the National
Highway System is $17.4 billion. In Manitoba alone, the cost of making only necessary upgrades
to the National Highway System is $768.2 million. While the second National Infrastructure
program will bring $600 million over 4 years ($150 million per year) starting in fiscal year 2002-
2003 through the Strategic Highway Infrastructure Program, this amount falls far short of the
$17.4 billion needed for the National Highways System.
The federal government currently receives approximately $4 billion annually from road
use fuel taxes, and proposes to spend only 2.5% of this revenue on provincial highway
infrastructure over the next six years. Manitoba highway users pay the federal government about
$145 million annually in road use fuel taxes, yet none of this federal revenue is reinvested in
Manitoba highways.
Over the past decade, provinces and territories have doubled their expenditures on the
national highway system to over $1.7 billion annually. Provinces and territories have sought an
initial federal commitment of at least $800 million annually to a NTIS. Although it would cost
$17.4 billion to bring Canada’s national highway system up to proper standards, such an initiative.8
would provide benefits valued in excess of $30 billion, save up to 247 lives per year, and reduce
injury accidents by up to 16,000 per year. An improved highway system can provide significant
productivity gains for industry and is critical to achieve a more productive and competitive
economy.
Canada is the only country in the developed world where the federal government does not
significantly participate in support major highway links to improve interjurisdictional trade and
travel. In the United States, our major economic competitor, the federal government commits an
average of $35 billion annually to highway trust fund projects, adding to their productivity
advantage over Canada and diverting travel related economic activity from Canadian to U.S.
routes.
For these reasons, the AMM urges the federal government to financially support a
National Transportation Investment Strategy by dedicating revenue from the federal fuel tax for
this purpose. In addition, we support the establishment of a federal/provincial/territorial
partnership to develop a national transportation vision, which would provide guidance for the
enhancement of Canada’s transportation system in the 21 st century.
Regional Airport Issues
The issue of airports is relatively new to the AMM. Concerns over the level of funding
available from the federal government and regulatory requirements were first brought to the
AMM Convention in November 1999. Many of these issues have arisen as a result of the
decision by the federal government to divest itself of the operation of local and regional airports
through the National Airports Policy. One component of this policy was to initiate the Airport
Capital Assistance Program (ACAP) to ensure that the municipalities operating these airports had
access to sufficient funding for the purpose of maintaining critical airport infrastructure. It now.9
appears that the federal government is being unnecessarily restrictive in the scope of eligible
projects and is jeopardizing the continued viability of these local and regional airports.
We were made aware of an example of this situation. A carrier withdrew its 737 airplane
service from The Pas Airport because it was not economically feasible to fly a plane this large
into The Pas at that time. As a result of this business decision by the carrier, Transport Canada
advised the municipality that they no longer needed to maintain their runway for a 737 airplane
and would therefore only qualify for funding under the Airport Capital Assistance Program
(ACAP) to build a shorter runway. A decision of this type by Transport Canada effectively
ensures that The Pas will never have 737 airplane service again. This jeopardizes future
economic development opportunities for the municipality since certain types of investments will
not be made if the municipality does not have a proper runway to accommodate a 737 airplane.
Since taking control of regional airports from the federal government, municipalities have
experienced serious financial difficulties in operating these airports. Transport Canada operated
most of these airports on a deficit basis for many years, but when the facilities were transferred to
local control it was expected that local authorities would be able to institute economies and
develop revenues sufficient to fund on-going operation, and ACAP would support their capital
needs. While many regional airports have taken such action, it is becoming apparent that it is not
practical to fully cover operating deficits by these means alone. If some form of on-going
support is not developed, then devolution will have amounted to the effective downloading of
essential public services to municipal government, which is less able to absorb such additional
responsibilities. Many regional airports will always operate at a deficit. But in these cases
deficits are incurred as investment in economic development, which benefit all levels of
government. Although the federal government provided transitional funding to these airports for
a few years after being transferred, that funding has been essentially exhausted. It is clear that the.10
terms under which these airports were transferred to local governments have resulted in many of
these facilities not being sustainable in the long term. For example, of the ten airports in this
category in Manitoba, five operate either in a break-even position or run a small deficit (under
$20,000), while five others run deficits of $150,000 or more per year.
At the same time that regional airports have been starved for funding, in 1999/2000 the
federal government accumulated a surplus of $91 million from the airports industry. On
revenues of $263 million (largely from rents from the large national airports), Transport Canada
spent only $172 million on airport programs and subsidies. This surplus is expected to reach
several hundred million dollars annually within a few years.
A number of regulatory issues also confront regional airports, such as the new emergency
response standard, CAR 308 (Aircraft Emergency Intervention Services). We agree that safety
must be an important consideration in the air transportation system, but unfortunately there has
been little in the way of risk analysis or cost-benefit analysis done to justify such an expensive
regulation with dubious safety benefits. In addition, there are legal liabilities if airports do not
comply with the regulation. Small airports believe it is important to spend funds allocated for
safety to address what are deemed to be the most likely eventualities in statistical terms. While
we are pleased that upgrades done to comply with CAR 308 will be ACAP eligible, we are
concerned that ACAP may not have sufficient funding available to assist with all of upgrades, in
addition to the programs it already funds.
When Transport Canada operated a federal airports system, there was a natural check on
unreasonable regulations. Now that this is gone, there are numerous anecdotes of Transport
Canada inspectors requiring airports to immediately correct – at large cost – things that had been
overlooked for many years when Transport Canada operated the airport. Some airports have
been asked to remove boulders or cut trees that were not a problem while Transport Canada was.11
operating the airport. Within the context of the review of the Canada Transportation Act, there
should be a review of the relationship between economic and safety regulations within a mode of
transport, and in particular, a risk analysis and cost benefit justification should be required for
proposed risk-mitigation regulations. Definition of the relationship between economic and safety
regulation in a new CTA would be useful, not just for air transport but also for all modes of
transportation.
This spring the AMM established a Manitoba Regional Airport Operators Committee to
represent the interests of those airports that have been devolved to local authorities. This
committee consists of representatives from the airports in Brandon, Dauphin, The Pas, Flin Flon,
Lynn Lake, Thompson, Gillam, Southport (Portage), the RM of St. Andrews, Swan River and
Winnipeg. The focus of the committee will be to examine the issues of mutual concern and
lobby the federal government on funding and regulatory issues on behalf of all of these regional
airports. We have sent a letter to the Minister of Transport as well as a number of industry
stakeholders to make them aware of this committee and its mandate. The AMM will continue to
work with regional airports to deal with these issues of increasing importance to many municipal
governments.
Conclusion
In conclusion, the AMM would like to restate the continued importance of rail, road, and
air transportation to communities across Manitoba. With respect to the competitiveness of the
rail transportation system, we need to recognize the important role trucking has come to play in
the transport of goods in Manitoba, and across the Prairies. More work needs to be done to study
the interrelationship between the elimination of the Crow Benefit and WGTA, the abandonment
of rail lines, and the emergence of a strong trucking industry. To develop sound public policy for.12
the future, we need to have an understanding of the effects of the major policy decisions of the
1980s and 1990s.
We believe that the Canada Transportation Act of 1996 focussed too much on the
viability of the carrier industry at the expense of the viability of short line operators and end users
of the rail service. The need for greater competition in the industry is becoming apparent, and
this review of the CTA provides an excellent opportunity for the federal government to make
improvements to the legislation that would balance the interests of all parties in this important
sector of the Canadian economy.
In the areas of road and air transportation, the most important factor has been an absence
(or in the case of regional airports, a withdrawal) of federal funding in the last few years. The
lack of federal involvement in support of Canada’s National Highway System has contributed to
the deterioration of this important link, and provincial governments do not have sufficient
resources to deal with this problem alone. In light of the fact that the federal government expects
to post a cumulative surplus in excess of $20 billion from taxes on the transportation sector over
the next six years, we believe that now is the time for the federal government to make a
significant investment in a National Transportation Investment Strategy, above and beyond the
$600 million made available through the National Infrastructure Program over the next four years
by dedicated federal fuel tax revenue for that purpose. This should be done in conjunction with
the establishment of a federal/provincial/territorial partnership to develop a national
transportation vision, which would provide guidance for the enhancement of Canada’s
transportation system in the 21 st century.
The devolution of regional airports to local authorities by the federal government has
resulted in a number of challenges for these airports and the municipalities that own them.
Although communities have taken the initiative to generate the additional revenue necessary to.13
operate airports on a break-even basis, many have been unable to do so. The transitional funding
from the federal government is now exhausted in all but a few communities, and municipalities
are faced with having to subsidize their airports out of general revenues, or lose an important link
to the global economy. In light of the federal government’s experience at running these airports
in a deficit position and Transport Canada’s surplus of $91 million in 1999/2000, municipalities
should not be forced into making such a choice. We believe that the eligibility requirements for
ACAP funding needs to be re-evaluated to take into consideration a broader range of
expenditures than is the case at the present time, and that sufficient funding needs to be in place
for ACAP to cover all of these different mandates. Regional airports are also faced with
expensive, onerous, and sometimes arbitrary regulatory issues without a risk analysis or cost-benefit
analysis being done to justify expensive regulations with questionable safety benefits.
The AMM will continue to work with the Manitoba Airport Operators Committee to
identify and address the funding and regulatory issues that affect our regional airports.
While we appreciate that this panel will be confronted with a significant number of
presentations and issues during the course of this review of the Canada Transportation Act, we
thank you for allowing us the opportunity to present the concerns of Manitoba’s municipalities to
you this morning.
Time permitting, I would be pleased to answer any questions the panel may have on the
material the AMM has presented as part of our presentation.