 2003). Local government capital spending has been on a downward trend for the past two decades (Vander Ploeg, 2003). Charges for some water services do not cover the costs of municipal water and wastewater services, such that use is being subsidised with only half of the operation and maintenance costs being INFRASTRUCTURE TO 2030: TELECOM, LAND TRANSPORT, WATER AND ELECTRICITY - ISBN 92-64-02398-4 © OECD 2006 5. THE IMPACTS OF CHANGE ON THE LONG-TERM FUTURE DEMAND FOR WATER SECTOR INFRASTRUCTURE recovered in some communities. The tightly controlled fiscal framework limits the ways in which municipal authorities can raise funds and increase revenues. This has contributed to the increasing infrastructure deficit and has led to a growing preoccupation with how to finance infrastructure (FCM, 2001; Infrastructure Canada, 2004a; Vander Ploeg, 2004). However, in western cities the water and wastewater infrastructure is often in a better position, ascribed to the relative youth of those cities. Also, such services are more frequently paid from user fees, making the financing of infrastructure improvements easier than it would be if it depended on the municipal tax base (FCM, 2001). Under Canada's Constitution Act (1867), responsibility for water is divided between the federal and provincial governments. Provinces are the "owners" of water resources, while the federal government has specific responsibilities with respect to such matters as fisheries and navigation. The 1970 Canada Water Act entrusted the federal government with providing national leadership in freshwater management. Since 1987 the Federal Water Policy has provided a framework for water-related activities of all federal departments. Contributing to the complexity of water governance is the fact that local agencies such as municipalities and water management agencies also play an important role, but are creatures of provincial governments. Overall, provincial governments are responsible for long-term as well as day-to-day management of water resources. T