Canada's construction participants and industry investors greeted the new Liberal government's multibillion-dollar infrastructure spending plan with a pat on the back, not wild cheering.

The much-anticipated first budget, released on March 22, offers up to a 30% hike in five-year spending in some infrastructure sectors over previous Conservative government totals, according to one analyst. But it is less than the Liberals promised during the 2015 campaign of Premier Justin Trudeau and omits some hoped-for provisions, say other industry participants and observers.

The Liberals were elected last fall on a platform that included, in the next decade, a significant infrastructure investment boost of up to $95 billion beyond previous levels to balance the country's struggling resource-based economy.

What's in the Budget?

The plan envisions an $8.6-billion burst of spending in the next five years, with rail and transit projects, particularly in Canada's largest cities, emerging as the biggest winners.

"Based on our calculations relative to last year’s commitments, there is an incremental $1.2 billion to $1.29 billion that will be added to [infrastructure] spending over the coming five years, implying a 20% to 30% increase," says Maxim Sytchev, managing director and head of research at Toronto investment firm Dundee Capital Markets.

But in an online report, attorneys Jennifer Chan and Catherine Doyle at Toronto law firm Blake, Cassels and Graydon, say the first-phase total is less than the estimated $12.8 billion proposed over four years in the Liberal's campaign platform.

Unlike the platform, "the 2016 budget does not evenly distribute new infrastructure funding among public transit infrastructure, social infrastructure and green infrastructure," the attorneys say. Phase-one spending "is, instead, focused specifically on modernizing and rehabilitating public transit, water and wastewater systems, providing affordable housing and protecting existing infrastructure from climate change."

Infrastructure funding also includes about $6.7 billion in existing "Building Canada" funds, allocated but not spent by the previous Conservative government.

In terms of policy and other changes, up to 50% of eligible project costs now can be federally funded, which is in contrast to prior formulas that required an equal share of provincial and municipal monies to support funds committed at the federal level, the attorneys explain.

Further, P3 Canada, the federal public-private-partnership agency managed by the Finance Ministry under the prior government, now will be under Infrastructure Canada jurisdiction, according to the budget, but the government will no longer mandate project screening for P3 project.

Industry groups also noted that the budget made no mention of a plan to create an infrastructure bank.

Government forecasters said the new investments, combined with other spending, will boost Canada's GDP by up to 1% in the next two fiscal years.

Overall, transit projects will get $2.5 billion over the next three years, while $1 billion is earmarked for public housing and $1.5 billion for wastewater treatment and other related projects, according to the budget.

According to Chan and Doyle, transit funding will flow to provinces based on public-transit ridership levels, with Ontario set to gain $1.1 billion, Quebec to receive $696 million, and British Columbia to get $347 million. But, according to a Bloomberg Canada report, smaller cities such as Winnipeg or Halifax will receive "barely anything" in transit funding.

Another $980 million will go toward projects for Canada's indigenous populations and $770 million for clean technology over the next four years, according to Bloomberg.

About $1.5 billion will be spent on new construction and upgrades to the country’s post-secondary educational institutions, said Michael Atkinson, president of the Canadian Construction Association. “This is very, very well received by us,” Atkinson said. “There have been problems with the capacity of the community colleges to provide the apprenticeship training we need. You will see a lot of that money go into brick-and-mortar, which is obviously good for our industry.”

More large-scale spending and projects details, however, await the budget's second phase, after 2019, when the next federal election is set.

Low-Hanging Fruit?

Sytchev says bridges, port infrastructure and other big-ticket items will have to wait, with work on major projects not likely to kick off until 2017, at the earliest.

Phase-two funding details are not set to be released until 2017, with project priorities dependent on "an extension of the current Liberal government’s mandate," says the Blake, Cassels and Graydon report.

“It will also take some time before we are going to see the news flow pertaining to spending, as there are no shovel-ready billion-dollar projects lying around,” Sytchev said. But he added, "The fiscal stimulus could not arrive at a better time."

After the budget announcement, Infrastructure Minister Amarjeet Sohi told Canadian media the two-phase approach will allow the national government and municipalities more time to agree on projects to be funded, rather than forcing local governments to accept federal mandates.

But Canadian unions took issue with the new privatization approach. "The Liberal government isn't forcing municipal governments into privatizing, like the Conservatives did, but they are still stacking the deck in favor of P3s," said Charles Fleury, national secretary-treasurer of the Canadian Union of Public Employees. "There are no assurances in this budget that the billions [of dollars] in funding promised will go into truly public infrastructure and services and not into P3 profits."

Share prices at Canadian engineering and construction giants such as SNC-Lavalin and Aecon Group posted a short-lived rise on March 22,before heading back down by the end of the week.

Investment firm Canaccord Genuity observes that, last fall, when investors posted their stock price projections, they likely took into account the extra government spending on infrastructure.

However, infrastructure spending is not a silver bullet. Analyst Sytchev says publicly traded firms in the construction sector have a 10% to 40% bottom-line exposure to infrastructure work and face a decline in projects in the highly profitable oil and commodity sectors.

“They are not only doing infrastructure. They are also doing commodity-related work,” Sytchev said. “Those markets are still very challenging. They are replacing high-margin work with bigger, lumpy projects with lower [net profit] margins.”

Vexatious Delays?

Industry participants and observers note that the budget has few incentives for the struggling resources sector, except for $1.5 billion over two years, starting in 2017, for a new low-carbon economy fund to help provinces and territories reduce greenhouse-gas emissions.

John Gamble, CEO of Canada's Association of Consulting Engineering Companies, says the budget is "positive for most of the consulting-engineering sector," but he is "disappointed that there was minimal assistance to the resource sector, which has carried Canada’s economy over many decades."

Gamble also is concerned about whether new "rigorous" project environmental rules "will be efficient and won’t encourage frivolous or vexatious delays to infrastructure and resource projects that are important to the economy."

He also termed as "unfortunate" the Liberals' deferral of tax relief for small businesses. A decrease in the small-business tax rate, to 9.5% by the end of 2019 from 11% last year, was not enacted. Now at 10.5% after a small cut in January, the rate will remain unchanged for the foreseeable future.

However, according to Canada's Globe & Mail newspaper, the government did agree to abandon an election pledge to tax stock options at a higher rate, a budget move that would have undermined the government's focus on innovation, critics said.

Canadian start-ups had argued that options are a key incentive used to attract employees, who accept lower salaries in exchange for shares that, hopefully, escalate in value once the business succeeds. With more heavily taxed option gains, new ventures warned they would struggle to recruit and keep staff innovators.

“I heard from many small firms and innovators that they use stock options as a legitimate form of compensation, so we decided not to put that in our budget,” Finance Minister Bill Morneau told media.

This story has been updated to reflect corrections to dollar figures cited.