Finance Committee on Oct. 8th, 2014

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Beatty.

I will now yield the floor to Mr. Coulombe for five minutes.

[Robert Coulombe, Board Member, Mayor of Maniwaki, Union of Quebec Municipalities]

Mr. Chair, Vice-Chair, ladies and gentlemen members of Parliament, thank you.

The UMQ, or Union des municipalités du Québec, was happy to accept your invitation to take part in the work of the committee. This is a priority for all the municipalities of Quebec that are pursuing the efforts they undertook in the past few years.

Since its inception in 1919, the UMQ has represented municipalities of all sizes, from all regions of Quebec. Its mission is to exercise leadership at the national level to promote effective and independent local governments, as well as support the fundamental role played by municipal elected representatives.

Our members, who represent more than 80% of the population of Quebec, are grouped together in affinity caucuses, that is to say local municipalities, central ones, regional cities, large cities and metropolitan municipalities.

We consider the infrastructure to be a tripartite responsibility. Whether to stimulate our economy in the short term, lay the foundation for a long-term sustainable economy or create attractive living environments, investments in infrastructure are important levers to ensure our prosperity.

In that sense, the efforts made over the past few years must be maintained and remain a priority. That priority must be upheld and sustained by the three orders of government, since it is in everyone's interest that we offer proper conditions to further a strong and sustainable economy.

Over the past few years the UMQ has done a lot of work on municipal infrastructures, and the starting point was an exhaustive study carried out in 2012 by Deloitte and E&B Data, a study that allowed us to assess municipal infrastructure needs.

The findings were very clear: municipal infrastructure as a whole is an imposing heritage consisting of assets that total more than $200 billion in value, but the municipal infrastructure deficit today has reached $34 billion. So, the needs are great. In order to rehabilitate and maintain these assets in good condition, the three orders of government must increase their tripartite investment by $3 billion, even though we are currently investing $4.3 billion annually. In fact, the municipalities are bearing an unfair burden, since they shoulder 76% of the net cost of financing municipal infrastructure.

This diagnosis shows the extent of the challenge we face to renew our public infrastructure, in a context where the state of public finances makes our decisions all the more difficult.

The study also showed that government infrastructure programs had an important impact on slowing the growth of the deficit, as of 2008. Whereas the deficit was increasing by more than 5% a year up till 2007, the programs put in place as of 2008 stabilized the deficit and reduced its annual growth, which is now around 1.5%.

These programs give results and consolidate our partnership, but we still have a long way to go and we must all maintain the pace. In that sense, the federal government's new long-term infrastructure plan is an important measure, since it will allow us to maintain our efforts and continue the catch-up work begun over these last years.

However, the investments are not on a par with what is required. That is why the sunset clause in the New Building Canada Plan which provides for a reassessment of the situation in five years is an excellent one.

The level set out in the new long-term plan must be considered a floor and not a ceiling.

[The Chair, Conservative, James Rajotte]

You have one minute left.

[Robert Coulombe]

Let's talk about needs and projects. The study presents an analysis of the municipal infrastructures, which had not been done for many years, neither at the municipal level nor by the government.

It demonstrates how great the needs are. It presents the need to continue to seriously invest in municipal infrastructures to ensure they are modern and safe, while contributing to job creation, the GDP and sustainable development in Canada.

Municipalities will continue to invest significant amounts in infrastructure because the needs are so great, but now more than ever, we need the other levels of government to maintain and even increase their contribution.

However, some components of the building Canada fund have not yet been implemented in Quebec because there is no agreement between Ottawa and Quebec. Among other things, the communities component—for municipalities of 100,000 inhabitants or less—are delayed in being rolled out, so that no municipal projects can be undertaken right now.

In this context, the UMQ is reminding governments of the importance of moving forward now with the many projects that have been unduly delayed and invites them to come to an agreement quickly.

In conclusion, in the context of the federal-provincial-municipal partnership, we have taken on an important challenge in the last few years which is to rehabilitate our infrastructures in order to support our economy and build desirable places to live.

Serious efforts have been made, but we can't lose sight of all the work that still needs to be done. Let's stay the course over the long term and maintain our strong partnership.

Thank you for your attention.

[The Chair, Conservative, James Rajotte]

Thank you very much.

We'll now go to Mr. Shapcott for his presentation.

[Michael Shapcott, Director, Housing and Innovation, Wellesley Institute]

Thank you very much.

My name is Michael Shapcott. I'm with the Wellesley Institute. Thank you for the opportunity to speak with you today.

I want to speak about another dimension of Canada's infrastructure, our housing infrastructure. I recognize that when housing is raised as an issue, there often tends to be a focus on house prices. As do members of this committee, I do talk regularly to various economists. I'm sure we could assemble a panel and have a lively discussion on whether or not there's a bubble and whether or not it's bursting, but I think that misses some important issues around the rest of Canada's housing infrastructure and some of the very serious issues being faced by Canadians because of housing challenges.

For instance, the latest national household survey reports that 3.3 million Canadian households spend 30% or more of their income on shelter, which is the threshold at which people, when they start to pay that much for shelter, have less money for food, medicine, child care, transportation, and other necessities. We know from the national household survey that 982,200 households, or about 7% of all households in Canada, are living in housing that's substandard, that's not fit for human habitation. We know that 6% of all households in Canada, 793,585 households, live in overcrowded housing, housing that is dangerous for the people living in it because of overcrowding.

Of course, housing is one of the most important factors for individuals in terms of their personal health and well-being. We know that. The research confirms that. It's also very important for the health and safety of communities and for the economic health of communities to have a good and diverse supply of housing.

The federal government was very helpful a couple of years ago in pointing out that affordable housing investments are actually one of the smartest investments a government could make. In the 2009 stimulus budget, when the federal government put in two years' worth of housing funding—$2 billion over two years—and then tracked that spending, they noted that the economic multiplier from that housing investment was as high as or higher than just about any of the other federal investments that were made. Roughly speaking, for every dollar the federal government invested, it achieved $1.50 in economic return.

For all sorts of good reasons, housing is a very important issue and needs to be part of the infrastructure discussion.

The observations we put in our written brief in the summer, when we submitted our brief to this committee, do note that the federal government has not been paying attention to the current needs of Canadians, in terms of the deteriorating housing infrastructure, especially since the recession of 2008. We've seen a flatlining of federal housing and homelessness investments, starting with the 2013 budget, when the federal government announced a five-year extension of both the federal homelessness program and the housing investment program but froze that spending at a time when, of course, we actually need more.

We've seen in the background that federal housing investments have been sharply declining since the 1990s—since 1996. Indeed, there have been some very dramatic reports from Canada Mortgage and Housing Corporation, which reports that federal housing program expenses reached a peak of $3 billion in 2010, when the federal stimulus budget was fully implemented, but by 2018 they're projected to be down by more than $1 billion to $1.9 billion. That's not just money that is being lost, but the decline in federal investments in housing means that the estimated number of households assisted by federal housing programs will also shrink at a time when there are growing housing needs across the country.

In 2010 the federal government reported that it was supporting 613,500 households. By 2018 the federal government says it will be supporting 452,300 households. That's a loss of 161,200 households, or a reduction of 26% in all federally funded affordable housing.

[The Chair, Conservative, James Rajotte]

You have one minute.

[Michael Shapcott]

Thank you.

In more recent information since our brief was prepared, Canada Mortgage and Housing Corporation reports that the number of new non-profit homes funded by the federal government in 2013 was 546, which is the lowest since records were started in 1978, and the number of new housing co-ops funded by the federal government in 2013 was 0, which is the same number it's been since 1994.

Our brief does set out what we think are practical ways that the federal government can begin to reverse some of these issues: make sensible investments in terms of housing infrastructure; and deliver the benefits directly to Canadians, who on a personal basis will benefit from good housing while the community and indeed the economy will also benefit from these investments.

I'd be happy to answer any questions. Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

Colleagues, we will do five-minute rounds, and I am hoping I can get consent to go about 20 minutes into the bells. Is that reasonable?

[Some hon. members]

Agreed.

[The Chair, Conservative, James Rajotte]

Okay, thank you very much.

We'll start with Mr. Cullen, please.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Thank you.

Thank you to all our panellists.

Mr. Beatty, I want to start with you. You're listed as a partner of KPMG. I may have missed it in your presentation, but are you specifically interested in infrastructure spending, or is it a broader? What capacity do you hold? I want to make my question specific.

[Stephen Beatty]

I have spent the last 30 years in infrastructure. I ran the Canadian business for 10 years and today I run KPMG's infrastructure business in the Americas and India.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Who has primary financial responsibility for much of the infrastructure that you referenced in your presentation? Who holds the primary responsibility for the infrastructure, the deficit that you're talking about? Which level of government is that?

[Stephen Beatty]

I think it's all three levels. It boils down—and this is entirely consistent with trends around the world—to the problem that the three levels of government, or the two levels of government depending upon where you are, struggle to find the projects they want to invest in and to invest in together. One of the great challenges is to get that consensus on what to invest in, where to invest, and when to invest.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

I don't want to put words in your mouth, but your description around the infrastructure deficit that we're running right now in this country is perhaps near or at a past crisis level in terms of cost and scale. Is that a fair description, or are we not quite there yet?

You didn't paint the rosiest picture of our infrastructure situation.

[Stephen Beatty]

Again, there are two parts to it. If you think about infrastructure and the great boom in infrastructure that began in the late 1940s, early 1950s and into the 1960s, all of that infrastructure is now middle-aged.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

It's coming due.

[Stephen Beatty]

You didn't have to spend a lot of money. Again, people don't consume a lot when they're young. As things age, they begin to wear out. We are into that stage. Yes, we haven't maintained it so well, and we're now entering that phase in the life of our infrastructure.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Right. My colleagues across the way will say they have promised lots of money for infrastructure, not mentioning that almost of all of it is back-loaded into the eighth, ninth, and tenth years of the program. That doesn't suggest the type of urgency that may be required for aging and not-well-kept-up infrastructure.

A concern I have is the so-called downloading to the cities in particular, which have requirements under law not to run deficits and also have the most limited ability to raise revenues. Are we not coming to a pinch point here where long-away promises are not going to meet the needs of today?

[Stephen Beatty]

The real challenge is to determine when that occurs, and one of the great challenges that municipalities face, provincial governments face, and federal governments face is actually knowing the condition of the assets. One of the things I would urge all of the municipalities present and within earshot to do is to make sure they really understand the physical condition of their assets.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Is there a role for the federal government in helping them to understand that?

[Stephen Beatty]

There can be. Again, part of this is figuring out what the assets are, where they are, and their condition. They should be known and knowable. We can all make sure we do a better job.

The problem with infrastructure assets that are installed is that everything feels good until it breaks. It's a bit like a car running out of oil: everything feels good until the thing seizes. There is a pinch point. Is it today? Is it tomorrow? Is it 10 years from now—

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

We know it's coming.

[Stephen Beatty]

I'm not technically competent to say that, but we are entering that phase where expenditures are necessary.