The federal government is revisiting how $167 million in federal gas-tax funding will be distributed in Manitoba, easing tensions between the city and Ottawa, at least temporarily.

The Federal government is giving the money to each province to dole out to municipalities. Early last month, Minister Scott Smith said it wold be divided per capita, which angered the City of Winnipeg which felt it deserved more than that.

Manitoba's senior MP Reg Alcock said yesterday the province's decision was premature. He strongly indicated he will grant the City of Winnipeg's request to set aside some of the money — as much as 25 per cent — for public transit.

"I've spoken with the premier and his minister got a little bit out in front of him," Alcock said of Smith. "He thought he was dong what was consistent with what we wanted but we've agreed to sit back down and work through it again," Alcock said.

A spokeswoman for Smith said yesterday the province made a quick decision so the money could flow as fast as possible but said Ottawa wants the matter reopened and because it's federal cash, the province agreed.

Winnipeg Mayor Sam Katz was highly critical of Ottawa and the province for the whole gas-tax plan, saying the gas-tax deal was initiated by and for big cities, not smaller, rural municipalities.

He had been counting on about $50 million a year to add to the city's annual infrastructure budget to repair Winnipeg's crumbling streets and bridges.

"There alway was discussion right from Day 1 to disperse a portion of it based on per capita and a portion of it for transit," Katz said. "If transit came into play and gave us a larger share I would be ecstatic."

Manitoba municipalities will get about $167 million over the next five years, and $67 million a year after that.

Under strict per-capita division, Winnipeg will get about $12 million this year and $40 million a year by 2009.

If 25 per cent is portioned off for transit, which would be shared by Winnipeg, Brandon and Thompson, Winnipeg would get another $2 million to $3 million more.

Alcock said he wants to build a model which is effective, and said per capita doesn't make perfect sense.

"If you just do it on a per-capita basis you get down to the point in some of the smaller communities there is so little money it's just not worth it," he said.

Alcock, federal cities minister John Godfrey, and Finance Minister Ralph Goodale are hosting a news event this morning, related to the recent federal budget and its impact on Canadian cities. And Alcock and Godfrey will be meeting with Katz, provincial officials and the Association of Manitoba Municipalities to talk about the gas tax.

But Alcock said there will not be a decision today.

Ottawa wants the money to go at least partly to green infrastructure projects, and investing in public transit fits with that goal. The city would have to use the funding for capital projects, either boosting the existing public transit or building new rapid transit.

Association of Manitoba Municipalities President Ron Bell said he had heard nothing about giving a portion to public transit, and wouldn't comment until he speaks to Alcock today. But he said the AMM still firmly believes a per-capita portioning is the only fair way to divide the money.