Transport Committee on May 28th, 2013

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Thanks for being here, gentlemen.

The question of municipal revenues is an interesting one. Stats Canada data demonstrate that municipal revenues have grown by 70% in the 10 years from 2001 to 2011. In the same time, inflation and population growth have totalled 30% combined. In other words, revenues from municipalities have vastly outpaced the need over a 10-year period. A similar trend, though not as pronounced, was present in the previous 10 years. So over the last 20 years, municipal revenues have been growing vastly, more quickly than has the need, as evidenced by inflation and population growth.

On top of that, the federal government has uploaded municipal costs by becoming a major funder of capital projects. In the early nineties and before, there was no federal funding for municipal infrastructure, zero. Municipalities provided that service without any help from the federal taxpayer. Arguably, according to municipalities, they had fewer traffic problems and shortfalls then than they do now.

Why do you think this massive growth in municipal revenue has failed to satiate the demands of municipal leaders?

[Dan Kelly]

Thank you for that question. We've shared similar concerns over this issue for some time.

Municipal revenues have been growing vastly more than is needed. I would argue that municipalities have been one of the most effective lobbying groups in Canada over the last decade. That eight-cent figure they claim—hey get eight cents of every tax dollar—does not factor into the fact that they get giant amounts of revenue shared with them by provincial, and now federal, governments. That needs to be taken into consideration.

Municipalities have access to growth forms of revenue. Those growth forms of revenue are the transfers they get from the federal and provincial governments. We're not suggesting the federal and provincial governments have zero role in municipal infrastructure, but we think they have gone far enough. Before additional dollars are dedicated, we want to make sure municipal spending is held to a higher account.

That started to happen at the federal level. Some provinces are getting on board. Much more needs to be done at the federal and provincial levels, but very few leaves have been overturned in terms of the gap that exists between levels of municipal wages and benefits and those for similar occupations in the private sector. Much more of their staffing is at the junior level where there are direct comparators that exist in the private sector, and the wage scales, benefit scales, and in particular, pension scales, are not even on the same planet.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

If I could add to that, the research I have done through Stats Canada has shown that there has been, as you say, a corresponding increase in the cost of personnel at municipalities, which has also grown at twice the combined rate of inflation and population growth over the decade.

It is potentially the explanation for the outcome of all of the tax money that is going into this field.

Mr. Gregory Thomas, do you have anything to add on this?

[Gregory Thomas]

The Canadian Taxpayers Federation takes a slightly harder line than our colleagues do. We believe that the federal government's involvement in funding municipal infrastructure has been bad for the country.

The United States has been held up as an example. Since the financial meltdown in 2008, the United States has borrowed 50 times as much money at the federal level as the Canadian federal government has—50 times. Over $6 trillion in public debt has been added and squandered at the federal level by the Government of the United States.

At the federal level in Canada, the corrosive effect of federal infrastructure funding is that voters receive goods they're not paying for. They're being paid for with borrowed money. There is no cost benefit to that new sewer pipe, the new curling rink roof, all the stuff that federal pork-barrelling is paying for. The net effect of it is that voters, ratepayers at a municipal level, are no longer able to give credit or assess blame for well-managed and poorly managed infrastructure projects, because every sign has the federal flag, the province's flag, and the city's coat of arms. Every time you dig a ditch in this country, there's an MP, an MPP or an MLA, a city councillor, and a mayor standing there, and everyone is taking the credit.

It's an unconstitutional way of doing business. The federal government is using its spending power Trudeau-style to invade an area in which they have no specific expertise. Instead of focusing your attention on federal transportation issues like the St. Lawrence Seaway, oceans, military procurement, replacing the air force, and so forth, you're mucking around in areas where the feds have no specific expertise and nothing to add.

[The Chair, Conservative, Larry Miller]

Thank you. We're way over the time.

Mr. Adler, you have the last five minutes.

[Mark Adler, Conservative, York Centre, ON]

Thanks so much, Chair.

Thank you, gentlemen, for being here this afternoon.

This is a very fascinating discussion. As you know, we've been holding these hearings now for a few weeks, and we've heard some very interesting things over that period of time.

I want to begin with Mr. Thomas. Right at the beginning of your talk you mentioned what the Canadian Taxpayers Federation stands for. Could you please repeat those few things?

[Gregory Thomas]

We stand for lower taxes, less waste, and accountable government.

[Mark Adler, Conservative, York Centre, ON]

That's interesting. It's pretty much the antithesis of whatever the NDP stands for.

Mr. Hollands, you talked about procurement habituation. Could you please expand upon that? I found that to be very interesting. It seems to me a lot of what you're saying is that purchasing decisions are based on old information, and it's largely a result of this closed-shop process that cities are facing, and that leads perhaps to more being spent on process and perhaps labour, and as a result the product that is used is inferior.

Is that what you were getting at, or is it a possibility?

[Bruce Hollands]

It's not the process that's more expensive. It's that the process lacks the ability to ferret out all the products that exist in the marketplace to help spur a truly competitive process. For instance, in our case, in the water and sewer industry, the engineer determines which piping materials are allowed to be included in the bidding process. For instance, in Montreal they exclude PVC. In other cities in the country and in the United States, that's done with ductile iron, for instance.

[Mark Adler, Conservative, York Centre, ON]

Why would that be? I understand that in Montreal some of the piping is still wood.

[Bruce Hollands]

They're no longer making wood. It was just never replaced.

[Mark Adler, Conservative, York Centre, ON]

It was never replaced. So when it is replaced, why would PVC not be considered to be an option if it has a 100-year to 110-year lifespan?

[Bruce Hollands]

I think Montreal is a special case. I think there are inquiries and arrests that are taking place, which helps to explain what's going on there.

The concept of habituation is that we've always done it this way and we're going to continue doing it this way. That's what the U.S. Conference of Mayors' report has pointed out. They're continuing to buy, for instance, ductile iron piping. Before that it was cast iron, and now it's ductile, but the ductile iron is thinner walled so it lasts for a shorter period of time underground. People think it's strong because it's iron, you see. They continue to limit the specifications to exclude modern materials like PVC. That's procurement habituation.

[Mark Adler, Conservative, York Centre, ON]

For Canada's three largest cities, Montreal, Toronto, and Vancouver, how would you rate the below-grade infrastructure in terms of adequacy at the moment?

[Bruce Hollands]

I'm not familiar as much with Vancouver. I'm very familiar with Montreal. Montreal would have to be the worst of the three, and probably Toronto would be the best, along with Vancouver. I know that Vancouver has certain limitations in the city proper. I think it only allows iron piping, which tends to not perform as well. Toronto might be ahead of Vancouver, but they might be even.

[Mark Adler, Conservative, York Centre, ON]

What grade would you give Toronto's below-grade infrastructure?

[Bruce Hollands]

It's difficult to say. I'm more familiar with U.S. figures right now. It's certainly not an A-plus grade; maybe a B grade. Their procurement policies have been improved, but as well it's been a long time that they've been following a more restricted procurement in many areas.

[Mark Adler, Conservative, York Centre, ON]

Thank you.

Mr. Kelly, regarding the underfunded pension levels in municipalities, we see every year, especially in Ontario, where they publish the names of people who are making $100,000 or more. That book seems to be getting thicker and thicker every single year. It doesn't matter who seems to be in power at the provincial and municipal levels.

How does that affect the underfunded pension levels? As a result, how does that affect the adequacy of municipal infrastructure?

[Dan Kelly]

This is a larger point. That is, we feel that senior levels of governments are getting played. They are backfilling for decisions that municipalities make to pay excessive wages to government staff. Therefore, they have that option. They won't reform their own houses so long as they have access to push the problem up. Unfortunately, both the federal government and the provincial governments have been showering more and more money to the municipalities for infrastructure so they don't have to themselves, and they can use operating money to pay for wages and benefits.

This is a big problem that needs to be addressed. Again, we don't have a position on whether the federal government should be out of it altogether. Certainly, if you are going to be playing a role, you should be ensuring that it's done fairly and that it's not simply just displacing other municipal dollars to allow them to spend in whatever way they'd like.

[The Chair, Conservative, Larry Miller]

Thank you very much. We are out of time.

I want to thank Mr. Kelly, Mr. Thomas, and Mr. Hollands for being here. We apologize for the disruption today, but that was out of our control.

The meeting is adjourned.