Government Expenditures and Revenues from Transportation

All three levels of government in Canada provide funds to and collect revenues from the transportation sector. This chapter highlights key public expenditures and revenues as they pertain to transportation.

5.1 Introduction

Transportation funding is shared across all three levels of government. Generally, federal funding pertains to interprovincial or international transportation, provincial funding pertains to intra-provincial transportation and municipal funding pertains to local transportation. Of course, exceptions do exist; Addendum tables G1 to G7 provide a detailed breakdown of government expenditures and revenues in transportation.

Government expenditures in transportation

	Selected expenditures (million dollars)	Level of government			Total
		Federal (2011–12)	Provincial (2010–11)	Municipal (2010–11)
Air	CATSA	515.0	n/a	n/a	515.0
	Subsidies	39.5	n/a	n/a	39.5
	Airport	35.6	n/a	n/a	35.6
	Other	283.6	50.9	n/a	334.5
	Sub-Total	873.7	50.9	n/a	924.6
Marine	Coast Guard	689.0	n/a	n/a	689.0
	Ferry Subsidies	290.8	n/a	n/a	290.8
	Ports	175.0	n/a	n/a	175.0
	Other	218.1	232.8	n/a	450.9
	Sub-Total	1,372.9	232.8	n/a	1,605.7
Rail	Subsidy to VIA Rail Canada	493.8	n/a	n/a	493.8
	Grade Crossing improvement	14.6	n/a	n/a	14.6
	Other	9.2	74.1	n/a	83.3
	Sub-Total	517.6	74.1	n/a	591.7
Road and transit	Infrastructure Canada	670.7	n/a	n/a	670.7
	Other federal departments	284.0	n/a	n/a	284.0
	Bridges	156.6	n/a	n/a	156.6
	Transit	24.1	4,156.1	2,693.5	6,873.7
	Other	23.0	11,855.5	11,644.7	23,523.1
	Sub-Total	1,158.4	16,011.6	14,338.2	32,008.1
Other and Multimodal		631.0	378.0	468.5	1,477.5
Total		4,553.6	16,747.4	14,806.7	36,107.7
Please see Addendum Tables G1, G2, G3 and G5 for more details

5.2 Air Expenditures

The National Airport System ( NAS ) was created as a result of the National Airports Policy of 1994, and comprises 26 airports, which are operated by local, non-profit, airport authorities. However, Transport Canada still owns land and infrastructures at 17 non-National Airport System ( NAS )¹ airports across the country as well as one water aerodrome (see table A31).

In 2010–11, Transport Canada's actual costs to operate these airports were $15.5 million, plus $15.0 million for capital projects. In the same period, Transport Canada also collected approximately $8.1 million in revenues. In 2011–12, the estimated costs for operating these airports are $15.5 million plus $25.2 million for capital projects. For 2011–12, total projected revenues are $8.9 million.

The National Airports Policy² also created the Airport Capital Assistance Program ( ACAP )³ in 1995 to help eligible airports with safety-related capital projects. To be eligible, an airport must receive year-round regular scheduled passenger service that generates minimum traffic of 1,000 passengers per year; meet airport certification requirements; and not be owned by the federal government.

In 2011–12, ACAP funded 29 new safety-related projects at 23 airports at a total estimated cost of more than $21 million. These projects included rehabilitation of runways and airside manoeuvring surfaces, purchasing of heavy airside mobile equipment and installation of wildlife fencing. Since its inception in 1995, ACAP has funded 680 safety-related projects at 171 airports for a total of over $559 million (see Map 11 on ACAP projects). For the 2007–2011 period alone, ACAP investments reached $152.2 million across the country, broken down by province⁴ as shown on the table to the right (see Tables 5.1 and A4).

Table 5.1
ACAP Investments 2007–2011

Province	Amount ($M)
British Columbia	21.0
Alberta	14.1
Saskatchewan	0.9
Manitoba	20.5
Ontario	41.9
Quebec	25.5
New Brunswick	2.0
Nova Scotia	1.1
Newfoundland and Labrador	2.7
Nunavut	16.1
Northwest Territories	4.6
Yukon Territory	1.6
Total	152.2
Source: Transport Canada, ACAP program

Most provinces and territories also own a number of airports and aerodromes across the country, usually in remote or northern areas. For example, Newfoundland and Labrador owns and operates 21 airports⁵, Quebec 27 (in addition to seven heliports), Ontario 29, Manitoba 23, Saskatchewan 17, the Northwest Territories 27 and the Yukon 29. The three Territories own and operate their respective capital's airports. The remainder of Canada's airports, particularly those with commercial services, are generally owned and operated by the community they serve.

Both federal and provincial governments also invest regularly in major airports to maintain or improve infrastructure and help those airports to remain competitive. In 2011, the federal government committed $52.9 million from the Gateways and Border Crossings Fund ( GBCF ) to assist seven Eastern Canadian Airport Authorities, and much of this funding was matched by contributions from other levels of government. This $52.9 million in funding was shared by Quebec City for a runway upgrade ($21.6 million), Fredericton for runway and lighting upgrades ($5.4 million), Moncton for a runway extension ($4 million), Charlottetown for a terminal expansion ($1.2 million), Halifax for a runway extension ($9 million), Gander for a runway upgrade ($3.3 million) and St. John's for a new instrument landing system ($8.6 million). These projects also benefited from $24.7 million in provincial funding.

While the Government of Canada does not directly subsidize air transport, some provinces have established programs to attract new air services, maintain existing airport assets, or help passengers from remote areas access more affordable fares. Examples include:

• Taking Flight: An Air Access Strategy for Newfoundland and Labrador, introduced in October 2010 to enhance air access to, from and within the province. The five-year strategy is currently funded at $5 million in the form of two rebate programs: one for provincial airport authorities' business development initiatives and another for air carriers' route development and advertising.
• In New Brunswick, the province is also contributing $500,000 towards runway rehabilitation and lighting and navigational system upgrades at the Miramichi airport. In addition, some airports qualify for provincial property tax exemptions, and international carriers that refuel in the province may qualify for a fuel tax rebate of 2.5 cents/litre.
• In Quebec, the Air Transportation Assistance Program, created in 2006 and renewed in 2011, is providing $1 million per year for a three-year period ending in 2014. The program aims to share financial risk related to the start-up of new air services or the resumption of an abandoned service. It will also contribute to market studies for the implementation of new services or find methods and procedures more respectful of the environment. The program also co-funds infrastructure projects that improve access to airports. Finally, the province's Airfare Reduction Program, which provided $932,000 in 2011, allows residents of remote and isolated regions to travel at a reduced cost for personal reasons or when accompanying a patient who requires healthcare services, through a partial refund of their airfare.
• The Ontario Ministry of Transportation, through its Remote Airport Program, owns and operates 29 remote airports and provides subsidies for basic infrastructure and other capital works.
• The Manitoba Airport Assistance Program ( MAAP ), which has been in place for about four decades, provides operational and maintenance grants to airports that do not receive scheduled services. Grants are $1,200 for airports with unpaved runways and $2,400 for airports with paved runways. MAAP funding totals $87,000 annually. Manitoba owns and operates 23 airports in the northern part of the province, at an annual expense approaching $11 million. These airports mostly serve First Nations communities with no other year-round transportation connection to the outside world. As well, Manitoba exempts (by refund) international cargo flights from the provincial aviation fuel tax. Domestic cargo flights pay a reduced rate of provincial aviation fuel tax.
• The Saskatchewan Ministry of Highways and Infrastructure has maintained its Community Airport Partnership ( CAP ) program since 2007–08. It provides capital contributions on a 50/50 cost-shared basis to rehabilitate and upgrade strategic regional community airports. This program was funded at $700,000 in 2011. Saskatchewan also offers the Airport Assistance Program, which focuses on operations and maintenance assistance to community airports. This program has been in place since 1988, and in 2011 provided $110,000.
• Alberta's Strategic Transportation Infrastructure Grant—Community Airport Program provides funding assistance to community-owned, public-use airports for their rehabilitation and construction projects. Approximately $2.7 million in projects was approved in 2010. In addition, municipalities may choose to fund projects that support the infrastructure needs of regional and community airports under Alberta's Municipal Sustainability Initiative ( MSI ). Municipalities have committed $9.58 million towards capital and operating projects for airports under MSI since the program's launch in 2007. As for provincial fuel taxes, international flights have enjoyed an exemption from having to pay them since 2004.
• British Columbia, through its Transportation Partnerships Program ( TPP ) and various federal/provincial infrastructure programs, has contributed $65.4 million to projects at 36 community airports since 2003. The TPP does not have a budget allocation in the current year. In addition, the province has a number of travel support programs, such as the Air Ambulance Program, Medical Transportation Supplement, Crime Victim Assistance Program and Travel Assistance Program, all of which can assist residents with associated travel costs, including aviation. On another note, in early 2012, British Columbia eliminated its provincial fuel tax on all international flights.

Safety

On the safety front, Canada has been active in the International Civil Aviation Organisation ( ICAO )'s technical cooperation initiatives in the Asia-Pacific Region since 2003. Specifically, Canada participates in the Cooperative Development of Operational Safety and Continuing Airworthiness Program ( COSCAP ) for North Asia, which provides assistance to the People's Republic of China, the Democratic People's Republic of Korea, Mongolia, and the Republic of Korea.

The program aims to enhance the safety and efficiency of air transport by strengthening the flight safety oversight in these countries. It establishes a regional core of highly qualified flight operations and airworthiness inspectors to perform the full range of flight safety inspection and certification functions.

Transport Canada's overall contribution to COSCAP takes two forms: grants and in-kind contributions. Through grants, the department contributes up to $130,000 a year to the project. The last contribution was in 2009 for $130,000. Transport Canada will also make a contribution in 2012 for a similar amount. In-kind contributions include:

• participation in Steering Committee meetings for the North Asia program;
• provision of technical expertise, including a Transport Canada technical expert who serves as the head of the North Asia program;
• provision of subject matter experts to provide training courses as training needs are identified; and
• provision of other technical assistance as requested.

Through ICAO , Transport Canada also supports the operation and financing of facilities and services provided by Denmark (Greenland) and Iceland for aircraft flying across the North Atlantic. In 2011, Canada contributed approximately $50,000 to these countries to support these services.

Security

Finally, on the security front, the Airport Policing Contribution Program ( APCP ) was instituted in April 2002 during a time of significant financial difficulty for airports following the terrorist events of 9/11. The aim of the contribution program was to provide funding to help airports manage in an environment of increased security costs. The program currently helps smaller airport operators pay for a portion of the overall cost of enhanced aviation security policing. Until March 2008, the program was managed by the Canadian Air Transport Security Authority ( CATSA )—the agency responsible for screening people and baggage at Canadian airports. Since then, it has been managed by Transport Canada. In 2011, the four recipients of the contribution program were Kelowna International Airport, Hamilton International Airport, Greater London International Airport, and Victoria International Airport.

The 2010 federal budget allocated CATSA and Transport Canada $1.5 billion over five years to make Canada's domestic air transportation system less vulnerable to terrorist attacks and improve the security of all air travellers. In addition, that budget allocated $95.7 million over five years for air cargo security, as well as $17.6 million per year in ongoing funding.

The Government of Canada budgeted $21 million over five years to upgrade elements of CATSA 's checked baggage screening equipment that are reaching their end of life. As these upgrades are completed at airports, air travellers flying from Canadian airports with U.S. pre-clearance facilities will no longer be required to have their baggage re-screened if connecting at a U.S. airport, making connections through U.S. cities easier and reducing the risk of bags not being placed on connecting flights. While these changes will make Canada-U.S. air travel more convenient, they will also maintain a high level of security.

In 2011, CATSA also improved its service delivery model—which involves third-party screening contractors—by creating a new, four-region contracting model. Reducing the number of regions from six to four, and the number of contracts from 17 to four, has increased CATSA 's operational and management efficiency. The new contracts came into force on November 1, 2011 and expire March 31, 2017, with an option to extend for up to an additional five years. These contracts are worth up to $2 billion over the 2011–2017 period. Table A31 shows the companies now responsible for delivering screening services at designated airports in Canada.

5.3 Marine Expenditures

Ferries

Ferry services often act as an extension of the road network, providing linkages where bridge construction would be technically and economically unfeasible. Through the Ferries Services Contribution Program, Transport Canada is responsible for ensuring that federally owned ferry assets contribute to a safe and reliable transportation system, and supports three interprovincial ferry services in Eastern Canada:

• between Cap-aux-Meules, Îles-de-la-Madeleine, QC and Souris, PEI, operated by CTMA Traversier Ltée (CTMA) since 1971;
• between Saint John, NB and Digby, NS, operated by Bay Ferries Ltd ( BFL ); and
• between Wood Islands, PEI and Caribou, NS operated by Northumberland Ferries Ltd. ( NFL ) since 1941.

In support of these services, Transport Canada owns four ferry vessels and six shore facilities—leased to operators for a nominal amount—as well as the ferry terminal in Yarmouth, NS.

In 2010–11 Transport Canada spent $31 million on the Ferry Services Contribution Program; the amount for 2011–12 is projected to be approximately $33.4 million. In 2011 the federal government began working with the provinces and local communities to develop a long-term approach to these services; that collaboration continues into 2012.

In 2010, the federal government provided an additional $76.4 million for these ferry services: $31.7 million in Budget 2010 and $44.7 million announced in November 2010. The latter was part of a three-year extension of ferry services to March 31, 2014.

On the west coast, British Columbia has had sole responsibility for its coastal ferry services since 1977, when the governments of Canada and British Columbia entered into an agreement whereby BC would assume sole responsibility for ferry and coastal services in return for an ongoing indexed grant. The initial amount of the grant was $8 million per year; in 2011–12, it was $27.5 million.

Provincial governments also provide important funding for ferry services. Their contributions include:

• $1.3 million in Newfoundland and Labrador for Labrador Marine to provide ferry service between the west coast of Newfoundland and Blanc Sablon, Quebec. In 2011–12, Newfoundland and Labrador estimates spending $110 million on its marine operations, including $39.3 million for the construction of ferry vessels.
• $1 million from each of the provinces of New Brunswick and Nova Scotia to support the Saint John, NB to Digby, NS ferry service operated by Bay Ferries Ltd., in addition to the federal contribution received by the operator. Nova Scotia's contribution is part of the $8.3 million it estimates it will have spent on ferries in 2011–12.
• Operation of four cable and three self-propelled ferries by the government of New Brunswick. Of the 14 mostly year-round ferry services in New Brunswick, 11 are provided by the province's 15 vessels and are free of charge. These carried 4.5 million passengers in 2010–11. The province spent $45 million to build a new ferry—the MS Grand Manan Adventure, linking North Head on Grand Manan Island and Blacks Harbour, NB—and covers operating costs of the ferry.
• A subsidy from Quebec's Ministry of Transportation for five year-round ferry services and eight contracted-out seasonal or long-haul services operated by the provincial Crown corporation Société des traversiers du Québec. In 2010–11, the amount of that subsidy was $82.3 million.
• Operation of six ferries on five routes in the northern part of Manitoba by the provincial government that carried 98,305 vehicles in 2010–11.
• Operation of 13 seasonal ferry services—12 of which are free of charge—by the Saskatchewan Ministry of Highways and Transportation. In 2010–11, the Saskatchewan government spent $3.4 million on this service.
• Operation of seven ferries by Alberta Transportation as part of its highway network, at a cost of $1.1 million in 2010–11.
• A $153-million grant from the province of British Columbia in 2010–11 for BC Ferries' operation of its 25 routes and 35 vessels in addition to the province's indexed federal grant.

Transport Canada ports

Under the National Marine Policy framework, the Port Divestiture Program was established to transfer ownership and operation of regional/local ports from Transport Canada to other federal departments, provincial/territorial governments, or local interests, including municipalities. In 2007, the Port Divestiture Program was renewed for five years, ending in March 2012. The department received $61 million to transfer ports and $51 million to operate and maintain non-divested ports.

All ports divested with an operating agreement receive contribution funding, which is used to operate and maintain the existing port property in compliance with safety and operating standards.

In 2010–11, two ports were divested: Port Stanley in Ontario, with a contribution of $13.4 million, and Bamfield East in British Columbia, with a contribution of $620,000. As well, six parcels of land in Victoria Harbour were sold, generating $1.44 million in revenues. Additional divestitures are expected to be completed before March 31, 2012.

In 2010–11, actual operating costs for Transport Canada's remaining 69 ports was $18.5 million plus $7.6 million for capital projects. Transport Canada also collected approximately $10.5 million in revenues. Projected costs for Transport Canada to operate its remaining 67 ports in 2011–12 are $12.7 million plus $12 million for capital projects, while anticipated revenues are approximately $10.2 million.

Boating safety

Historically, the federal government has leveraged the support of a wide-reaching network of volunteer-based organizations to promote boating safety. In June 2008, Transport Canada established the five-year Boating Safety Class Contribution Program, with a maximum funding level of $1.75 million until March 31, 2013. The program's overall goal is to promote boating safety in Canada by providing financial contributions for projects that raise boating safety awareness and focus on safe boating practices.

Most of the projects are undertaken by not-for-profit organizations dispersed across Canada. Since 2009, a total of 26 projects have received funding. The program's targeted approach involves ranking proposals as per Transport Canada's priorities, based on the Canadian Red Cross report, Boating Immersion and Trauma Deaths in Canada: 18 Years of Research.⁶

Training assets

The Divestiture of Marine Training Assets program was established in 2006 to formalize the ending of the Simulated Electronic Navigation ( SEN ) and Marine Emergency Duties ( MED ) training programs. The objective of the program is to transfer ownership of SEN and MED training equipment and facilities from Transport Canada to seven provincial governments that provide marine training and certification through provincial marine training institutes. The program has enabled the transfer of eight marine training simulators, with contributions, between 2007 and 2010 to British Columbia, Ontario, Nova Scotia and Newfoundland and Labrador. In 2011, the remaining two Transport Canada-owned simulators were transferred to Quebec through a contribution agreement valued at $1.45 million, which concluded all simulator transfers. Over the next few years, Transport Canada will divest itself of its last MED training facility at Port Colborne, Ontario, as well as other miscellaneous MED training assets at provincial marine training institutes.

5.4 Rail Expenditures

Passenger rail

The federal government provided $481.6 million in funding to VIA Rail in 2011. Of this, $264.8 million was used for operations and $216.8 million for capital investment. Operating revenues totalled $287.2 million in 2011 and expenses were $552 million.

The capital expenditure is part of a $923-million contribution that runs from 2007 to 2014. The goals of this program are to ensure VIA Rail's equipment, stations and other capital assets are in a good state of repair, to improve safety and accessibility, and to improve passenger service, with particular emphasis on the Quebec–Windsor Corridor, which accounts for the bulk of VIA Rail's ridership.

For rolling stock, this program will:

• rebuild the F40 locomotive fleet used nationally and the Light Rapid and Comfortable ( LRC ) fleet used in the Quebec–Windsor Corridor;
• refurbish and rebuild part of the fleet of cars used on the western transcontinental train;
• rebuild the Rail Diesel Cars ( RDC ) used on VIA Rail's regional and remote services; and
• make accessibility, safety and operational enhancements to the Renaissance cars used on the Montreal–Halifax route and the Quebec City–Windsor Corridor.

In 2011, VIA spent $70.3 million on the projects listed above. Total costs for these projects will be $288.5 million. Infrastructure improvements are being made in the Montreal–Ottawa–Toronto triangle and in southwestern Ontario on the Georgetown–Kitchener–London and Chatham–Windsor route segments. Improvements include the installation of additional main line track and sidings, new and upgraded signalling to control train movements, upgraded road crossing protection, and new fencing and bridge repairs on VIA-owned tracks. In 2011, VIA Rail spent $123.7 million on these infrastructure projects; the total cost of the project will be $474.5 million.

VIA Rail is also undertaking a major program to upgrade its stations. In 2011, a new station was completed in Smiths Falls, Ontario and major repairs were completed in Vancouver and Winnipeg. Construction began on station improvement in Belleville, Oshawa, Cobourg and Windsor. In 2011, VIA Rail spent $7.3 million on stations. The total cost of the project will be $60 million.

The Government of Canada also contributes financially to four regional and remote passenger rail services through its Regional and Remote Passenger Rail Services Class Contribution Program ( RRPRSCCP ). The program supports two Aboriginal-owned remote passenger rail services: the Keewatin Railway Company, located in northern Manitoba between The Pas and Pukatawagan; and Tshiuetin Rail Transportation, located in northeastern Quebec and western Labrador between Sept-Iles and Schefferville. A third remote passenger service, the Algoma Central Railway, owned by CN Rail and located in northwestern Ontario between Sault Ste. Marie and Hearst also receives support under this program. Remote rail services provide access to the national transportation system for communities with no other year-round surface transportation options. The fourth remote service, Ontario Northland, is a provincial Crown agency of the Province of Ontario and also receives funding from the provincial government.

Under the RRPRSCCP , the federal government directed $14.9 million in 2011 to four shortline railways as shown on Table 5.2: Keewatin Railway Company (Manitoba), $2.0 million; Ontario Northland Transportation Commission (Ontario), $2.5 million; Algoma Central Railway (Ontario), $2.2 million; and Tshiuetin Rail Trans­portation (Quebec and Labrador), $8.2 million. Com­­bined, these four carriers transported 67,725 passengers in 2011: Keewatin Railway Company, 4,687 passengers; Ontario Northland Transportation Commission, 39,579 passengers; Algoma Central railway, 5,666 passengers; and Tshiuetin Rail Transportation, 17,793 passengers.

Federal funding provided under the RRPRSCCP aims to ensure the continuation of safe, reliable and sustainable regional and remote passenger rail services and provides funding necessary to ensure the continuation of non-VIA remote and regional passenger rail services. For three of the four proponents, the federal government is the only government that contributes to the railways.

Rail safety

Several public funding initiatives are aimed at improving rail safety. As part of Canada's Economic Action Plan, Budget 2009 allocated a total of $72 million for rail safety over five years, plus an additional $15 million on an ongoing basis. Also allocated was $44 million over five years for rail safety initiatives that enhance regulatory oversight and enforcement capacity, and for research and development projects to advance new rail safety technologies, as well as $28 million over five years for the Grade Crossing Improvement Program that aims to improve safety at public grade crossings across Canada.

Grade Crossing Improvement Program

The Grade Crossing Improvement Program ( GCIP ), funded under section 12 of the Railway Safety Act⁷ ( RSA ), is designed to cover up to 80% of the costs of a crossing improvement project. Funding for construction costs applies to safety improvements only, and does not include future maintenance costs. The authorities involved (usually road authorities and railways) negotiate responsibility for the remaining costs. Examples of eligible expenditures include the:

• installation of flashing lights, bells and gates;
• addition of gates or extra lights to existing signal systems;
• interconnection of crossing signals to nearby highway traffic signals; and
• modification of nearby intersections, including the addition of traffic control signals.

In 2011–12, Transport Canada approved funding for 810 projects across Canada, with total funding of nearly $14 million. The number of projects increased significantly from previous years due to a renewed focus on replacement of incandescent lights with LEDs, as encouraged by Transport Canada to meet the new standard.

Table 5.2 Statistics for Passenger Regional and Remote Rail Services for 2011

Length of Railway (owned, leased)	Number of Passengers–2011	Operating Revenues1	Revenue-Tonne Kilometres2	Employees–2011	Federal Subsidy
627 miles owned 5052 miles leased	67,725	$11,440,429	229,460	65 full-time 76 seasonal	$14,900,000
1 Revenues generated by the four recipients. The majority of the recipients reported an operating deficit. 2 Applicable for only two recipients.

Grade Crossing Closure Program

Funded under section 12.1 of the Railway Safety Act, the Grade Crossing Closure Program ( GCCP ) is designed to provide a maximum investment of $5,000 for closing a restricted crossing, and $20,000 for closing an unrestricted crossing. Eligible crossings include those where a safety concern or hazard exists, or where closing the crossing will divert users to an adjacent crossing that has a higher level of safety.

In 2011–12, Transport Canada approved funding for 44 projects across Canada, with total funding of approximately $250,000.

Operation Lifesaver

Operation Lifesaver promotes public awareness to help save lives and reduce suffering from injuries incurred at highway/railway crossings and from trespassing on railway property. In 2011–12, Transport Canada provided a contribution of $300,000 to the Railway Association of Canada to support this project's objectives.

5.5 Road Expenditures

Road infrastructure funding is shared between all three levels of government, with most coming from provincial/territorial and municipal governments, because they own and operate the majority of Canada's road network. The federal government, in addition to providing road funding, also owns some key infrastructure and regulates interprovincial and international trucking.

Federal government's role in road infrastructure

The Constitution Act assigned jurisdiction over infrastructure works such as highways, roads and streets to provincial and territorial governments, with the exception of international or interprovincial structures. Nevertheless, in order to promote and maintain efficient transportation of goods and people, the federal government provides significant funding for key strategic road infrastructure.

Launched in 2007, the Building Canada Plan focuses on building a stronger, safer and better Canada through modern, world-class public infrastructure. This seven-year plan supports projects that contribute to cleaner air and water, safer roads, shorter commutes, and better communities. In addition, Canada's Economic Action Plan announced in Budget 2009 was designed to fight the effects of the global recession by providing significant infrastructure-related stimuli across the country.

The federal government delivers a broad range of infrastructure programs, providing flexible funding support for public infrastructure projects together with provincial, territorial, municipal, not-for-profit and private sector infrastructure partners. Funding activities are broadly grouped as follows:

1. Building Canada Plan: $33 billion in programs (announced in Budget 2007).
2. Economic Action Plan: $5.5 billion in programs (announced in Budget 2009).
3. Other programs: over $6 billion in programs that are winding down, including Canada Strategic Infrastructure Fund, Border Infrastructure Fund and Gateways and Border Crossings Fund.

Federal investments made under these programs support infrastructure projects, including those that align with the National Highway System ( NHS ) and public transit properties.

With respect to the NHS alone, the 2009 report from the Council of Ministers Responsible for Transportation and Highway Safety indicated that investments in the NHS grew from $2.3 billion in 2006 to $4.6 billion in 2009. Of that amount, $547 million came from the federal government.

Significant federal investments in infrastructure over the past decade, together with leveraged investments from funding partners, have contributed to the ongoing renewal and improvement of Canada's core public infrastructure.⁸ The age of infrastructure is often used as an indication of its current state; the average age of Canada's core public infrastructure peaked in 2001 at 17.0 years. Between 2001 and 2010, this average age has fallen to 14.7 years—including a drop of a full year between 2008 and 2010. Unprecedented infrastructure investments made across the country by all orders of government—including those made in the context of Canada's Economic Action Plan—are likely to contribute to a further decline in the average age of Canada's public infrastructure in the years to come.

Federal bridges

The federal government has an inventory of some 500 highway-related bridges open to the public, which represent a very small subset of all bridges in Canada (approximately 1%). These bridge assets fall within four federal departments/agencies: Public Works and Government Services Canada, Parks Canada, the National Capital Commission, and Transport Canada. The first three own and operate the structures themselves, while Transport Canada's portfolio of bridges is managed by Crown corporations or shared governance regimes (such as Federal Bridge Corporation Limited, Blue Water Bridge Canada, Buffalo and Fort Erie Public Bridge Authority [Peace Bridge Authority] and the St. Lawrence Seaway Management Corporation).

The Federal Bridge Corporation Limited and its three subsidiaries—Jacques Cartier and Champlain Bridges Incorporated, Seaway International Bridge Corporation, Ltd., and St. Mary's River Bridge Company—together own, manage and operate several significant bridges in Ontario and Quebec. In 2011–12 the Corporation was responsible for more than $216 million in operating and capital funding. The corporation also looks after major multi-year projects, including:

• customs plaza rehabilitation in Sault Ste. Marie;
• new low-level North Channel Bridge in Cornwall;
• rehabilitation of Honoré Mercier Bridge in Montreal;
• major repair of the Champlain Bridge in Montreal; and
• safety repair and asset preservation program in Montreal for Highway 15, the Bonaventure Expressway, the Jacques Cartier Bridge, the Honoré Mercier Bridge, the Melocheville Tunnel and the Champlain Bridge Ice Control Structure.

Public transit

Public transit is primarily a municipal responsibility in Canada. However, in some cases, provinces play an important role, either in providing operational or capital funding or in supporting long-term planning, since municipalities are a provincial responsibility. Provincial involvement is closely tied to the concentration of urban populations, as public transit is a more prevalent means of transportation in large metropolitan areas.

Several examples of provincial government involvement in transit systems are described below.

Direct operating and capital funding

Prince Edward Island's 2011 budget set aside $342,000 to enhance public transit in Charlottetown, Stratford and Cornwall and to operate the ‘7-5-3' transit line between Summerside and Charlottetown. The province of Quebec's transit policy has eight programs that provided $800 million between 2007 and 2011. These programs helped finance the purchase of new equipment, making buses and taxis accessible, promoting transit and absorbing Montreal's subway deficit. The Ontario government budgeted $125 million in 2011 in transit operating funding. Manitoba provided $44 million in its 2011 budget to support transit, with $41 million allocated to Winnipeg alone. In Saskatchewan's 2011 budget, the province provided $2.9 million in operating funds and $275,000 in capital funds through its Transit Assistance for People with Disabilities program. British Columbia provided $6.9 million to Translink to support the U-Pass program, which offers transit passes to students at Vancouver's two universities, Simon Fraser and the University of British Columbia.

Provincial agencies as transit operators

In Quebec, the Metropolitan Transportation Agency (Agence métropolitaine de transport [ AMT ]) plans metropolitan transit in the greater Montreal area. It operates the region's commuter rail network and coordinates various express bus services as well a metropolitan-wide payment structure. AMT is financed by clients, the municipalities it serves and the provincial government, which was expected to contribute $7.1 million to AMT through one of its eight transit funding programs.⁹ In Ontario, Metrolinx coordinates and integrates all modes of transportation in the Greater Toronto and Hamilton Area. Metrolinx launched The Big Move: Transforming Transportation in the Greater Toronto and Hamilton Area in September 2008. Metrolinx has three operating divisions: GO Transit (trains and buses), Air Rail Link, and Presto (electronic regional fare card). Metrolinx received $68 million in direct grants from the Ontario government in 2009–10. On the west coast, BC Transit is the provincial agency responsible for transit outside the Greater Vancouver Regional District, and is financed by the province ($114.1 million) and the 58 communities it serves ($55.4 million from all communities). BC Transit contracts out operations of its 1,028 vehicles to 38 different companies or agencies.

Dedicated taxation

Some provinces have chosen to redirect part of specific tax or transport-related fee revenues directly to public transit. In Quebec, for example, AMT received $56.1 million from vehicle registrations and $102.5 million from Quebec's gas tax, including an additional tax levy on gasoline sold in the Montreal metropolitan area and whose proceeds go towards AMT 's transit system. Ontario's 2011 budget called for a transfer of $311 million in gas tax revenues to transit, while BC's budget transferred $323 million in gas taxes to Translink.

Capital funding for large projects

Some provinces provide funding for large transit-related infrastructure projects that could not be financed by municipalities and commuters alone. For example, in Montreal, expansion of subway and commuter train networks is financed by the province, as is the purchase of new subway cars. In Ontario, the new $8.2-billion Eglinton-Scarborough Crosstown rapid transit link will be financed entirely by the provincial government, through Metrolinx. In the Vancouver area, the province will contribute $583 million to the new $1.4-billion Evergreen Skytrain line between Burnaby and Coquitlam (see Section 9.4).

General funding

Provinces also transfer funds to municipalities for general purposes; public transit services, when offered to municipalities, can be one ‘general purpose' that benefits from such funds.

Public transit, by definition, entails some form of public cost-sharing participation. Usually, major capital projects are fully or mostly financed by various levels of government while transit passenger fares usually cover a share of the operating costs, the balance being financed by different levels of government or dedicated taxes. Figure RO23 and Table RO23A shows the sources of operating funding at a national level and for selected transit companies across the country. For transit authorities in Table RO23A, outside of Southern Ontario, fares cover between a third to half of the transit company's operating costs. Southern Ontario—particularly Metrolinx, the Ontario Government agency responsible for GO Transit—has some of the highest cost recovery ratios, with close to 86% of operating expenses being covered by fare and other revenues. Dedicated taxes, such as a gas tax, represent a relatively small amount of revenues, if any, with the exception of Translink, which draws from a diversified, dedicated tax base from property, fuel, and parking taxes as well as power levies.

Federal Public Transit Tax Credit

This tax credit became effective July 1, 2006 and was designed to ease the financial barrier preventing greater utilization of mass transit for transportation in urban areas. The program initially allowed individuals to claim a non-refundable tax credit for the cost of monthly public transit passes or passes of a longer duration. The tax credit has since been extended to electronic fare cards and weekly passes used on an ongoing basis. The program aimed to increase transit use by making it more affordable, reducing traffic congestion in urban areas, and lessening environmental impacts of urban transportation.

Intercity bus

Intercity bus transit does not generally receive direct public funding. Its model in Canada is usually based on provincial governments allowing companies to operate a monopoly for certain key “trunk routes”, with profits cross-subsidizing less-travelled regional routes. One exception is in Manitoba, where the provincial government subsidizes Greyhound Canada's services; in 2011–12, this subsidy was valued at $3.9 million, and at $3.12 million for 2010–11.

Road safety funding

The provinces and territories spend over $100 million per year for road safety. Through a multi-year contribution program, Transport Canada shares in the cost of advancing national consistency, harmonization and implementation of the National Safety Code. The contribution program, which runs from 2009 to 2015, will enable $26.7 million to be transferred from the federal government to the provinces and territories.

In the context of the National Safety Code ( NSC ), in 2011, the federal government executed multi-year contribution agreements (2009–10 to 2014–15) with each of the provinces and territories to share in the costs to advance national consistency and harmonization and to work towards establishing a national regulatory framework for motor carriers. The program will help ensure that all jurisdictions build a harmonized safety fitness framework that provides for the safe transportation of passengers and goods while minimizing compliance and regulatory costs. This approach to the regulation of motor carriers represents Canada's consensus choice as the most efficient and effective approach for the safe regulation of motor carriers. The NSC program contributes towards Canada's economic growth and social development, as well as ensuring high standards for a safe transportation system.

Canada executed a multi-year contribution agreement (2009–10 to 2014–15) with the Canadian Council of Motor Transport Administrators ( CCMTA ) to help develop and maintain Canadian motor vehicle instructor, inspector and commercial vehicle driver training materials. The uniformity and quality of inspections are essential to the fair and equitable treatment of motor carriers under federal jurisdiction, which is a key part of Transport Canada's mandate under the Motor Vehicle Transport Act. Annual funding provided for this activity is up to a maximum of $50,000 per year. In addition, since 2006, the Canadian National Road Safety Vision 2010 ( RSV 2010) cost-shared contribution program has supported related research and outreach activities. The contribution program was designed to support RSV 2010 and to provide a focal point to leverage partner funds to help make Canadian roads safer. The program was renewed for one year in 2011–12 and funded an additional eight projects. Over the life of the program, it successfully provided seed money of $1.3 million and leveraged $1.9 million, or approximately 60% of total funds, in partner monies to advance road safety research and outreach programs.

Intelligent transportation systems

Under the Strategic Highway Infrastructure Program ( SHIP ), Transport Canada invested $131,327, matched by public partners, on two Intelligent Transportation Systems ( ITS ) projects. In collaboration with British Columbia, the first project involved a research project related to Freight Security. The second project, in collaboration with the Agence Métropolitaine de Transport de Montréal, funded a system to deliver traveller information (e.g. train delays) to customers via their personal digital devices.

Technology at the border

Under the Security and Prosperity Partnership ( SPP ) initiative, Transport Canada has contributed $2.3 million to the total $4.6-million cost for the installation of border wait-time measurement systems at four Canada-U.S. border crossings (Aldergrove and Sumas in British Columbia, and the Peace Bridge and Queenston-Lewiston Bridges in Niagara Falls, Ontario). Up-to-the-minute wait-time information will be made available to border and transportation agencies to better manage their resources, and to drivers to make informed decisions about when and where to cross the border.

Also under the SPP , Transport Canada spent $1.1 million, which was matched by public partners. This includes a project with Whatcom County in Washington State to develop a shared Canada-U.S. database to collect and disseminate border-related information to improve cross-border movements. Transport Canada's spending also includes work with New Brunswick to create a regional ITS border architecture to optimize the planning and deployment of advanced technology on cross-border routes.

Environment and road transportation

Federal programs to promote sustainable road transportation

The federal government invested $463 million between 2007 and 2011 into programs promoting sustainable transportation, mainly in the road mode.

ecoAUTO Rebate Program

The ecoAUTO Rebate Program was designed to promote greater adoption of fuel-efficient vehicles by providing financial incentives toward their purchase. The program, administered by Transport Canada and delivered in partnership with Service Canada, offered Canadians a cash incentive—in the form of a $1,000 to $2,000 rebate—by buying or leasing a more fuel-efficient vehicle. The program issued more than 169,200 rebates, totalling $264 million between 2007 and 2011.

ecoENERGY for Personal Vehicles Program

The ecoENERGY for Personal Vehicles Program was designed to assist Canadians with buying, driving, and maintaining their vehicles in a manner that reduces fuel consumption and greenhouse gas emissions. Several information-based initiatives were created, including a Fuel Consumption Guide, a training curriculum for novice drivers, and awareness campaigns for experienced drivers that focused on idle reduction, tire inflation, and ecoDriving (improved driving habits). Resulting information products of these initiatives are available on the program's website.¹⁰ Between 2007 and 2011, $21 million was spent on program efforts.

ecoMOBILITY

The ecoMOBILITY Program was designed to address the financial and informational barriers preventing municipal stakeholders from implementing transportation demand management initiatives aimed at shifting personal automobile travel to other modes, reducing the number and length of car trips, and shifting trips to less congested times and routes. The program offers financial support to municipalities in their efforts to steer residents towards less polluting forms of transportation, providing financial assistance with transportation demand management ( TDM ) projects that reduce emissions. ecoMOBILITY is also helping build national capacity to implement TDM measures through research, training, professional development, and the development of materials and resources. Between 2007 and 2011, $9.3 million was invested in ecoMOBILITY.

Information about the program's conclusion in 2012 and the projects it supported is available on the ecoMOBILITY website.¹¹

Moving On Sustainable Transportation

Transport Canada established the Moving On Sustainable Transportation ( MOST ) Program to financially support educational awareness and analytical projects that stimulate the development of innovative tools, approaches and practices aimed at making sustainable transportation a reality. The program is slated to end in 2012; information about the program and the funded projects is available on the MOST website.¹²

Retire Your Ride

Retire your Ride is a national vehicle scrapping program created for Canadians as an incentive to retire their older, more polluting vehicles (model year 1995 and older). Eligible individuals receive a free annual transit pass, membership in a car-sharing program, a rebate on the purchase of a newer vehicle (model year 2004 and later), or $300 cash. The primary goals of the program were to reduce smog-forming emissions and GHG emissions by promoting sustainable transportation alternatives.

The program was delivered by a national not-for-profit organization and a network of provincial delivery organizations. Announced in Budget 2007 and ended on March 31, 2011, the program spent a total of $92 million. Detailed program results can be found on the Retire Your Ride website.¹³

5.6 Multimodal Expenditures

Reducing the environmental footprint of transportation

The Government of Canada has committed, by the year 2020, to reduce national GHG emissions by 17% from their 2005 levels. Additionally, the government is working to reduce air pollutant emissions, including nitrogen oxides ( NO_x ), sulphur oxides ( SO_x ), particulate matter ( PM _2.5), volatile organic compounds ( VOC s), and carbon monoxide ( CO ).

In Budget 2011, the government announced the allocation of $48 million over two years to develop transportation sector regulations and next-generation clean transportation initiatives.

The ecoFreight program

Transport Canada's ecoFREIGHT program engaged the freight transportation industry in a greater uptake of technologies and practices that reduce fuel consumption, air contaminants, and GHG emissions. The program came into effect in April 2007 and ended in March 2011. The program included six initiatives, described in Table G8.

Supporting transportation research

Research and development ( R&D ) is essential to support innovation, and provides key science-based inputs into policy and regulatory decision making. To undertake R&D and share financial and project risks, Transport Canada partners with other government departments, academia, and the private sector. These partnerships invigorate the innovation process for the overall public good, while also taking into consideration various stakeholder needs. R&D alliances also allow Transport Canada to leverage at least two dollars in R&D support for each dollar it invests.

Over the past few years, Transport Canada maintained a number of socio-economic research ( SER ) inventories. This enabled the department to identify areas of socio-economic research underway or planned for the upcoming fiscal year in an effort to determine synergies and opportunities for collaboration. To this end, the inventory assists in planning and coordination and in showcasing socio-economic research initiatives (both in-house and external). More importantly, it serves as a valuable tool to ensure research spending is efficient and effective.

In 2009–10, Transport Canada spent approximately $250,000 on five SER studies. During 2010–11, Transport Canada spent approximately $537,900 on 12 different SER studies, and in the 2011–12 year, the department spent approximately $94,300 on five SER studies.

The Railway Research Advisory Board ( RRAB ) has been an advisory body to Transport Canada and, since 1996, has been almost exclusively concerned with safety-related research and development ( R&D ) in line with the mandate accorded to it by Transport Canada, reflecting the department's priority.

For 2010–11, the RRAB had a $1.7-million budget and $700,000 in kind, with Transport Canada contributing $1.2 million and $69,000 in kind. Thirty three projects were underway during the course of 2010–11. Technical work on 11 projects was completed and reports describing the work performed and results achieved are undergoing the publication process. Summaries of these reports are currently being prepared by the RRAB Technical Committee in order to identify results of research in a timely fashion. Complete reports will be available for download at a future date from an RRAB website currently in development. In 2010–11, the RRAB worked to successfully establish a Canadian Rail Research Laboratory focusing on Ground Hazards and Winter Operations at the University of Alberta, which could become part of the Association of American Railroads ( AAR ) Affiliated Laboratory Program with three American universities.

In the area of dangerous goods, Transport Canada was involved in several research projects in 2011, including:

• Investigation of Multiple Tank Car Rollover Derailments Related to Double Shelf Couplers and its Solutions, where Transport Canada worked with the National Research Council of Canada to better understand tank car domino rollover derailments.
• Assessing the Toxicity of the Transport of Petroleum Sour Crude Oil, which provides Transport Canada with important data and information regarding proper classification, safety marking and methods of containment selection for petroleum crude oil during transport. The objective is to correlate the hydrogen sulphide concentration in petroleum sour crude oil to the toxic vapours it generates during transportation in highway tanks.

On the international stage, Canada is an active participant at the International Transportation Forum/Organisation for Economic Cooperation and Development's Joint Transportation Research Center ( JTRC ). It contributes €40,000 a year to the International Transportation Forum to support the JTRC 's program of work.

5.7 Government Revenues from Transportation

Transportation activities generate revenues for governments in Canada (see table G4). The most significant source of revenues is taxes applied on motor fuels—gasoline and diesel fuel as primary sources of energy powering transportation vehicles in Canada. Taxes are levied by the federal, provincial and territorial governments. Tax applied to motor fuel sold to consumers generates revenue for governments and differs based on the type of fuel, the province/territory/region and the date of purchase.

Government revenues from transportation

	Selected expenditures (million dollars)	Level of government		Total
		Federal (2011–12)	Provincial (2010–11)
Air	Air Travellers Security Charge	618.1	n/a	618.1
	Airport ground lease (est.)	256.2	n/a	256.2
	Aircraft services	36.1	n/a	36.1
	Other	21.6	n/a	21.6
	Sub-Total	932.0	n/a	932.0
Marine	Coast Guard services	39.7	n/a	39.7
	Returns from Port Authorities	15.7	n/a	15.7
	Harbour fees	10.0	n/a	10.0
	Other	8.1	n/a	8.1
	Sub-Total	73.6	n/a	73.6
Rail	Leases of hopper cars	14.4	n/a	14.4
	Sub-Total	14.4	n/a	14.4
Road	Road fuel taxes (2010–11)	4,574.2	7,256.4	11,830,6
	Road safety fees	4.9	n/a	4.9
	PWGSC Bridges	0.3	n/a	0.3
	Sub-Total	4,579.5	7,256.2	11,835.9
Multimodal	Other fuel taxes (2010–11)	213.0	n/a	213.0
	Licenses	n/a	3,693.3	3,693.3
	Sales tax equivalent	n/a	1,352.3	1,352.3
	Other revenues	12.0	n/a	12.0
	Sub-Total	225.0	5,045.5	5,270.5
Total		5,824.4	12,301.9	18,126.4
Please see Addendum Table G4 for more details

Like most countries, Canada has excise taxes on gasoline and diesel motor fuels (propane, natural gas, ethanol and biodiesel are exempt). The federal excise tax is fixed—10¢/litre on gasoline and 4¢/litre on diesel fuel. Therefore, the share of the pump price attributable to the tax fluctuates. In addition, a federal sales tax ( GST ) of 5% is added across the country.

Provinces and territories in Canada also place excise taxes on these motor fuels and in some provinces, a provincial sales tax ( PST ), which may be combined with the GST into a single harmonized sales tax ( HST in the Atlantic region, Ontario and British Columbia) is added as well.¹⁴ Quebec calculates its fuels sales tax after the GST . Within some provinces, the fuel tax is applied at a different rate in metropolitan areas (e.g. Montreal, Greater Vancouver, Victoria) or certain bordering regions with another Canadian province. Across Canada, total motor fuel taxes vary greatly, from 17.0¢/litre in the Yukon to 41.01¢/litre in Greater Vancouver.

The Government of Canada collects about $5 billion per year in excise taxes on gasoline, diesel, and aviation fuel, as well as approximately $1.6 billion per year from GST revenues on gasoline and diesel (net of input tax credits). Provinces and territories gather more than $8 billion annually in fuel tax revenues.

Fuel tax exemptions exist for international transportation. For example, the federal fuel excise tax does not apply to international flights, nor do most provincial fuel sale taxes, except in Ontario. In February 2012, British Columbia eliminated provincial fuel taxes on fuel used by international flights. For road and rail, a distance-based formula is used to allocate fuel taxes to jurisdictions within which transportation occurs, rather than the jurisdiction in which the vehicle was fuelled.

The second most important source of government revenues from transportation activities is licensing and registration fees tied to the issuance of drivers' licences and vehicle registration/licences. As with fuel taxes, significant variations in these fees can be found across the country, especially in annual fees for drivers' licences. Provinces and territories collect $3.5 billion annually in licences and fees.

Various other sources of transportation-related proceeds generate roughly $800 million annually at the federal level—$370 million from different Transport Canada levies and $430 million from other federal department fees and charges. Of these other sources, two are most significant: the Air Travellers Security Charge ( ATS C ) and the airport lease.

The ATS C came into effect in April 2002 to fund the air travel security system, which includes the Canadian Air Transport Security Authority ( CATSA )—the federal authority responsible for the security screening of air passengers and their baggage. In addition to CATSA , the air travel security system includes Transport Canada regulations and oversight as well as the placement of Royal Canadian Mounted Police officers on selected domestic and international flights. The ATS C is payable by air travellers who principally and directly benefit from the Canadian air travel security system. ATS C rates have been adjusted several times, since proceeds must ensure revenues roughly equivalent to expenses over time. ATS C revenues include any applicable GST or the federal portion of the HST . The ATS C applies to flights between 89 designated airports in Canada where passenger pre-boarding screening is conducted by CATSA . For transborder and international travel, the ATS C generally applies only to flights departing from Canada; foreign governments may impose similar security charges on return travel. ATS C rates were increased in 2010. Annual proceeds from the ATS C are approximately $400 million.

Airport leases yield an annual sum of approximately $250 million, which is calculated through a formula that applies an escalating rate to an airport's gross revenues. Canadian airports are federal assets developed and paid for by taxpayers. Rents therefore constitute a return on assets paid for by all Canadians. Under the government's airport operations commercialization policy, airports were leased to non-government entities. Four airports—Vancouver, Calgary, Edmonton and Montreal—were transferred to local airport authorities ( LAA s) in 1992. In 1994, the National Airport Policy permitted the establishment of Canadian Airport Authorities on different principles than the LAA s.

 

 

1. More information on the NAS available at http://www.tc.gc.ca/eng/programs/airports-policy-nas-1129.htm
2. See http://www.tc.gc.ca/eng/programs/airports-policy-menu-71.htm
3. See http://www.tc.gc.ca/eng/programs/airports-acap-menu-327.htm
4. There is no funding for Prince Edward Island, as the only passenger airport in that province—in Charlottetown—is a Transport Canada-owned airport and thus ineligible for ACAP funding.
5. Eight on the island of Newfoundland and 13 on the Labrador coast.
6. See http://www.redcross.ca/cmslib/general/2011_boating_fnl.pdf [912 kb, PDF Version]
7. See http://www.tc.gc.ca/eng/acts-regulations/acts-1985s4-32.htm
8. Statistics Canada defines “core public infrastructure” as comprising the following asset categories: bridges, roads, water, wastewater, public transit, and cultural and recreational facilities.
9. AMT 's financing comes from the Programme d'aide gouvernementale à l'amélioration des services en transport en commun.
10. See http://oee.nrcan.gc.ca/transportation/personal/17604
11. See http://www.tc.gc.ca/eng/programs/environment-ecomobility-menu-eng-144.htm
12. See http://www.tc.gc.ca/eng/programs/environment-most-menu-711.htm
13. See http://www.retireyourride.ca/home.aspx
14. HST , GST , or GST + PST , where applicable, are calculated on the retail price that includes excise taxes, and are applied after manufacturers' and retailers' costs and profit margins. Unlike excise taxes, since these sales tax are a percentage of the retail price, the amount collected will vary proportionally to the price, even though the rate itself is fixed.