TIAC Budget 2009 Analysis
A Review of the Tourism Specific Measures

Five main elements of the budget

1. Improving Access to Financing and Strengthening Canada's Financial System
   • Up to $200 billion through the Extraordinary Financing Framework to improve access to financing for consumers and allow businesses to obtain the financing they need to invest, grow and create jobs
2. Action to Help Canadians and Stimulate Spending
   • $8.3 billion for the Canadian Skills and Transition Strategy
   • $20 billion in personal income tax relief over 2008-09 and the next five fiscal years (includes the Working Income Tax Benefit)
3. Action to Stimulate Housing Construction
   • $7.8 billion to build quality housing, to stimulate construction and enhance energy efficiency
4. Immediate Action to Build Infrastructure
   • Accelerating and expanding recent historic investments in infrastructure with almost $12 billion in new infrastructure funding over two years for the construction and repair of roads, bridges, small craft harbours, broadband internet access, electronic health records, laboratories and border crossings across the country
5. Action to Support Businesses and Communities
   • Addressing short-term economic challenges facing sectors, regions and communities as a result of the global economic crisis and helping sectors position themselves for long-term competitiveness

Improved Access to Financing:

The Government is providing up to $200 billion through the Extraordinary Financing Framework (EFF) to improve access to financing for Canadian households and businesses (a combination of past programs and new endeavours)

Initiatives:

• $13 billion in additional financing by increasing the flexibility and capacities of the financial Crown corporations, the Canada Mortgage and Housing Corporation, Export Development Canada, and the Business Development Bank of Canada à This includes at least $5 billion in new financing to be delivered through enhanced cooperation between these financial Crown corporations and private sector financial institutions under the new Business Credit Availability Program
  • Goal is make loans to businesses whose access to working capital/financing would otherwise be restricted
  • This program will improve access to financing for Canadian businesses during this period of economic uncertainty through enhanced cooperation between private sector financial institutions and the financial Crown corporations
  • Through this program, EDC and BDC will provide at least $5 billion in additional loans and other forms of credit support to businesses for working capital/financing
  • The credit limit of the BDC has now been extended an addition $1.5 billion, enabling them to lend à this could mean an immediate injection of funds for over 3700 small and medium-sized businesses, with an average loan amount totaling about $400 000.  This recent measure follows the $350-million capital investment announced in November 2008.
  • By working in close cooperation with private sector financial institutions, this program will fill gaps in market access and lever additional lending by private sector institutions
  • Terms and conditions will be available April 1, 2009
• Increasing the maximum eligible loan amount a small business can access under the Canada Small Business Financing Program
  • For small businesses, Ottawa will increase the maximum eligible loan amount under the Canadian Small Business Financing Program after March 31 to $350,000 from $250,000, and to $500,000 for loans for acquiring real property
• Creating the Canadian Secured Credit Facility, which will buy up to $12 billion in term asset-backed securities backed by loans and leases on vehicles and equipment for consumers and businesses, large and small à goal is to free up credit
  • According to Scotiabank Economist Derek Holt, "All the business credit measures are short term and so in a sense it is not going to be compatible in getting longer term, longer tail capital projects off the ground"
  • Catherine Swift, president of the Canadian Federation of Independent Business said the first priority for small business was to see signs of stability that would build confidence

Other Measures that Impact Businesses:

Initiatives:

• $10 million for the Canadian Youth Business Foundation
• $30 million over two years for the Canadian Business Network
• Increase the amount of income eligible for the small-business federal tax rate of 11% to $500,000 from $400,000
• Temporary 100% capital cost allowance rate for computers bought before Feb 1, 2011

Infrastructure:

The Government has budgeted $12 billion over 2 years

• $6.2 billion in 2009, $5.6 billion in 2010

Initiatives:

• Infrastructure stimulus fund - $4 billion over 2 years
  • The federal government will approve provincial, territorial and municipal project plans and will cover up to 50% of eligible project costs
• Recreational infrastructure Canada - $500 million over 2 years
  • To support construction of new community recreational facilities and upgrades to existing facilities
  • The initiative will be delivered nationally through the three regional development agencies, with transitional measures for newly created agencies, will allocation on the basis of project merit and readiness
• Funding for Transport Canada - $44 million over five years for rail safety initiatives
• Trans-Canada Highway
  • $130 million on a cash basis to Parks Canada to twin the TCH in Banff National Park
  • Other possible funding projects (if the provinces agree)
• Federal bridges
  • $150 million for improving the safety and longevity of federal bridges (including Blue Water Bridge in Sarnia and the Peace Bridge in Fort Erie)
• accelerate the roll-out of anticipated infrastructure projects from the Build Canada Fund, for example:
  • Fundy Trail Parkway in New Brunswick
  • Union Station revitalization in Toronto, Ontario
  • Telus World of Science in Calgary, Alberta
  • Evergreen transit line in Vancouver, British Columbia
  • Piqqusilirivvik cultural facility in Clyde River, Nunavut

Air Travel and Transportation:

Initiatives:

• Aviation security
  • $282 million over the next 2 years for measures that will support the development of aviation security plans, improve the operations of the Canadian Air Transportation Security Authority (CATSA) and implement a new passenger assessment system
  • Government remains committed to the principle of balancing ATSC revenues and expenses for air travel security over time à new funding for air travel security that is proposed for 2009-2010 will not be financed through increased ATSC rates
    • TIAC became aware in the week leading up to the budget that there was a possibility that the ATSC tariff would be increased.  We wrote a letter to tourism Minister Ablonczy expressing our concern.  To our relief, the Budget contained no such measure.  We indicated to Government and they appear to have accepted that this would have been an extraordinarily inopportune time to be raising taxes on the air traveler.
• Arrivals duty-free
  • The government will undertake consultations will stakeholders and provinces on the desirability and feasibility of implementing an Arrivals Duty-Free program and Canada's international airports
• An improved rail system
  • $407 million on a cash basis to VIA Rail Canada
    • To undertake infrastructure and other capital improvements
    • Particular emphasis on the corridor between Toronto and Montreal, shortening the duration of Express Train trip times by 30 minutes
  • Support for remote passenger rail - $7.9 million for new capital projects of two First Nations railways

TIAC and other aviation modal associations were disappointed that the budget did not uphold an earlier promise of a 2 cents/litre reduction in aviation fuel excise taxes

Tourism, Culture and Sport:

"The Government currently supports the tourism sector through a number of programs and services.  There is a need and opportunity to bring greater coherence to these activities.  To improve the effectiveness of the Government's support in this area, the Minister of State for Small Business and Tourism, will lead the development of a National Tourism Strategy that guide future investments."  This will result in further anticipated support for the growth and competitiveness of the Canadian tourism sector.

Initiatives:

• $60 million over 2 years to support infrastructure-related costs for local and community cultural and heritage institutions such as local theatres, libraries and small museums
• $40 million to the CTC over 2 years to support marketing activities such as the Vancouver 2010 Olympic and Paralympic Games
  • $20 million for domestic travel promotion/advertising campaign with CTC national partners to promote travel within Canada
  • $20 million for new activities in priority international markets
  • Brings Government support for Special Olympics Canada to $1.5 million in 2009-10
• $12 million per year in 2011-12 and 2012-13 for infrastructure to promote international cruise ship tourism along the St. Lawrence and Saguenay Rivers
• Providing $100 million over 2 years for marquee festivals and events that promote tourism
• Parks Canada receives $150 million over 2 years
  • Supporting Canada's parks with $75 million over 2 years for improvements and enhancements to Parks Canada's visitor facilities, such as campgrounds and visitor centres
  • Providing an additional $75 million to Parks Canada for upgrades to National Historic Sites, including a number of sites connected with the 200th anniversary of the War of 1812
• National Recreation Trails Coalition receives $25 million in 2009-10
  • To create, upgrade and sustain snow mobile and all-terrain vehicle trials throughout the country
  • The Government's contribution will be matched by the Coalition and its partners
• Manege Militaire in Quebec City
  • $2 million to Public Works to develop a plan for the future restoration of this historic site (destroyed by fire)

Strengthening Northern Economic Development:

The Government is providing a total of $140 million in Budget 2009 to aid in establishing a new regional agency for the economic development of the North ($50 million) and is providing a further $90 million over five years to Indian and Northern Affairs Canada to make strategic investments in Northern Economic Development.  We have been informed that the tourism sector is likely to be the second largest beneficiary of this new funding after resource extraction.

Separate Austerity Measures:

The government announced that it will freeze spending on travel, conferences and hospitality at 2008/09 levels for the next two years.  Where possible, departments will be encouraged to explore less costly options such as teleconferencing.  Additionally business class travel will no longer be allowed on any flight that is less than two hours for Ministers, their staff and senior public servants.

Prognosis for Budget:

Liberal Leader Michael Ignatieff has indicated that he will refrain from defeating the budget now but instead will require regular reports to Parliament on the budget's implementation and its cost — one in March, one in June and one in December.  Each of these will be a de facto vote of confidence on the government's fiscal/expenditure plans outlined yesterday.  This, despite the opposition of the NDP and the Bloc, ensures the survival of the Harper government for the time being.

Conclusion:

We estimate the total value of tourism, transportation, border, infrastructure and other related investments to be in the range of $1 billion dollars for our sector.