The Federal-Municipal Gas Tax Fund

Why it’s so important, and how it could help save the day


By Shawn Menard
Wednesday, March 17th, 2021


Photo by Damien DUFOUR Photographie on Unsplash

The Federal Gas Tax Fund (GTF), what a name, both loved and loathed. 

It is, by far, the most important modern day Federal-Municipal transfer program.

Funnily enough, the fund has very little to do with the actual ‘gas tax’ and is completely decoupled from that federal excise collection. That matters because that collection is a lot more than the $2.2 billion currently allocated to municipalities through the GTF. 

All of that to say, its name is not what is important, but rather what it has accomplished for people in 3600 Canadian cities and communities, and why it’s needed now, more than ever. The Federation of Canadian Municipalities (FCM) has wisely called for increased investment under this stream of funding.

The GTF is a federal government fund which provides direct investment in municipal budgets. It’s so important for cities because it is guaranteed, can be planned against, and has broad discretion on what priorities it can be spent on. It’s fairly flexible. 

Traditionally, it has been spent on core infrastructure like transit, roads and bridges, but it has also changed and added more categories for its use towards many sustainable municipal investment lines. 

Every major federal political party in Canada has contributed towards its creation and continuity. It was established as part of the New Deal for Cities in the late Chrétien/Martin era in the early 2000’s. Jack Layton, a former President of the Federation of Canadian Municipalities, famously negotiated for its increase to stave off a federal election. The Conservatives doubled it, made it permanent, and indexed it at 2% annually under Harper. And Mr. Trudeau recently implemented a ‘one-time fiscal year doubling’ of the fund in response to calls from FCM for a permanent investment increase. 

Here’s how it could save the day: 

Right now, the federal government has established several well-endowed but complicated infrastructure funding arrangements - the bilateral agreements with the Provinces and Territories which contain several envelopes of funding, the private sector-focused Canadian Infrastructure Fund, and the National Housing Fund, amongst other smaller Federal-Municipal programs.

One of the problems Canada has experienced since before the pandemic, which is now exacerbated, is infrastructure funding has been slowed down, carved up, and inconsistently applied amongst the 13 different Provincial and Territorial jurisdictions. It is reliant on them to approve when the funding flows, which priorities are advanced, and pick winners and losers.  

This is not the case with the GTF. 

It is unique in that it is directly delivered to local governments, mostly based on population, whom deliver 90% of services to people. Its public administration is well established and lean, relatively long-standing, and well understood by federal Infrastructure Canada staff and city administrators. 

While we’ve seen a plethora of multi-billion-dollar programs enacted federally to battle Covid-19, some which have seemingly added greater value than others, there is a guarantee in value in the federal GTF. 

It could help fund municipal priorities like safer transit use, sustainable building retrofits, active transportation, local jobs, small business assistance through transformed streetscapes, expanded outdoor amenity spaces where physical distancing is possible and risk is lowered, and recreation facility enhancement - where many assessment centres are located and which will be well-used by communities for decades to come. 

If the federal government is serious about looking for long-term value for its money while responding to the pandemic, one of the best ways to achieve that would be with an expanded direct relationship with municipalities through the gas tax fund.


Shawn Menard is an Ottawa City Councillor, former Manager of Government Relations for FCM and former federal public servant. 

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