Transport Committee on May 7th, 2015

[John McBride]

The P3 Canada fund is a fund to help encourage learning about P3s. As the P3 Canada fund it only funds P3s, so that's certainly true.

[Mike Sullivan, NDP, York South—Weston, ON]

That was my point.

[John McBride]

There is the building Canada fund and it's $1 billion out of $55 billion. It's about helping people to learn. The federal government is helping to teach new ways of doing infrastructure while they're continuing to support with $54 billion of other funding. There are lots of opportunities for people to do projects in a non-P3 way, and there are opportunities that the federal government is doing to help people to learn about how to use P3s. There are alternative funding sources for non-P3s.

[Mike Sullivan, NDP, York South—Weston, ON]

It's not just an educational program. It does have real infrastructure money. It's not just about learning. It's about the spending of money.

[John McBride]

You can learn theoretically, but to a certain extent you have to learn by doing as well. You have to experience the process to know the benefits. You can have a presentation, but I would argue you need to learn by doing as well.

[The Vice-Chair, NDP, Hoang Mai]

Thank you very much, Mr. Sullivan.

Ms. Young, for five minutes.

[Wai Young, Conservative, Vancouver South, BC]

Thank you, gentlemen, for being here and for the quite diverse testimony that we're hearing today.

I'm from Vancouver. We have built many things there and a very successful Canada Line. I want to ask about this whole notion of ownership of infrastructure and how you set rates. What we're hearing is that 95% of infrastructure is owned locally or by the province, right? The federal government does not own most of the infrastructure that we fund. Therefore, how do you go about...is there a working group on this at the Federation of Canadian Municipalities, etc., where you determine the development permit costs and people who buy land and develop or whatever, who help with these public buildings...? How does that all come together in terms of your rate setting and your taxes, etc.?

Perhaps I'll address that to the mayor.

[Maxime Pedneaud-Jobin]

I'm sorry, but I'm not sure I understand the question.

[Wai Young, Conservative, Vancouver South, BC]

What I'm trying to say is, you were saying that you find it difficult developing or coming up with enough funds to fund your own infrastructure or even to fund the maintenance of it. I'm trying to ask if there is a set formula or if these things are shared between cities. Does one city charge more and another city charges less? I know even locally here between Ottawa and Gatineau, for example, the price of property and the property taxes are different. Can you explain in a step-by-step way how that is for this study?

[Maxime Pedneaud-Jobin]

I'll do it in French.

The taxation is different in each city. Every city makes choices with regard to the construction of infrastructure. Essentially, all cities have the same mandate, which is to build roads, waterworks, sewers, parks and sports centres. Their municipal mandate was given to them when the Canadian Constitution was agreed upon. At that time, it was determined that those would be the roles cities would play.

Unfortunately, taxation has not followed suit. The taxation regime is two centuries old. At that time, almost 100% of the services provided by cities were property services such as waterworks, sewers, asphalt and roads. Today, cites organize leisure activities and are the main disseminators of culture. They try to fight the isolation of seniors and organize activities for them. Cities are the ones that offer sports and leisure.

The cities have developed these services for residents, but their taxation has not changed. You have identified a major problem. Can the cities have access to part of the taxes, either the GST or the QST? May they have access to a part of income tax revenues? Such solutions would be appropriate in order to offset the fact that they now offer more essential services. May I remind you that municipal governments do not fund anything frivolous. In my opinion, we are facing an emergency. We have to change municipal taxation as it is no longer adapted to today's needs.

The decision could be made to tell cities to no longer offer leisure or cultural activities. Libraries have been a municipal responsibility forever. Cities have to invest in them, but they no longer have the means to do so, particularly because infrastructure is weighing too heavily on their finances.

I don't know if I answered your question.

[Wai Young, Conservative, Vancouver South, BC]

Thank you for that, Mr. Mayor. Let me just say that what I'm hearing from you, and correct me if I'm wrong, is that the cities of course have the opportunity to tax and from that tax base they are able to build infrastructure, such as sewers, water treatment plants, and those sorts of things. But in the more current reality, they are funding other things. I know that the City of Vancouver funds festivals, cultural things, all kinds of things. At the same time, the cities come to the federal government here and say that they have no money for infrastructure, yet they are funding other things. Obviously and clearly, the cities have choices locally in terms of what they have the capacity to fund.

[Maxime Pedneaud-Jobin]

For years now, upper levels of government have been giving us responsibilities. We did not use to have responsibilities regarding housing but we have some now. Gatineau is the 17^th largest city in Canada, and in the area of social development we must now intervene with the homeless. We have a role to play with homeless people now through our police services.

In Gatineau alone for the past 12 years, 40% of new jobs have been for firemen or police officers we have been forced to hire because the Government of Quebec requires that we respect more stringent standards. We have no real choice in the matter, obviously, in that regard, whether we are talking about homelessness, housing or a multitude of other areas. The other governments ask us to broaden our field of action, but our tax revenue does not increase for all that. However, 87% of our income comes from real estate taxes. So the cities are trapped in a dead end.

Let me repeat that we are not talking about superfluous, expendable activities. In light of the income at our disposal currently, how are we going to fund infrastructure? Are we going to close soccer fields or arenas, stop snow removal, or clean less? The municipal governments deal with essential needs. Our leeway is quite limited as compared to provincial and federal governments. For instance, 8% of the taxes paid by all Canadians go to municipalities, whereas provincial and federal governments get 92%. However, we manage 58% of infrastructure.

I don't want to shut down roads or a water treatment plant. It is in that sense that the cities are trapped in dead ends.

[The Vice-Chair, NDP, Hoang Mai]

Thank you, Ms. Young.

If my colleagues don't mind, I'll take the next round.

Thank you very much.

Mr. Mayor, you talked about the challenges you are facing with taxation. The government replies that measures involving infrastructure have already been brought in. I think it would be interesting for us to hear about the concrete aspects of all that, for instance your experience with the various funds that are accessible.

What challenges have you had to face? Have you managed to obtain funding? And what are the problems to be expected, generally speaking?

[Maxime Pedneaud-Jobin]

The governments don't like to hear that, but as I said earlier, the fewer criteria there are the better off we are. That is what I would say for the time being, but I will add some nuances afterwards.

According to the cities, the fewer criteria there are the better it is. It is not because we want to be free to do any old thing, but because cities are extremely different one from the other. That is why the Gas Tax Fund, or Building Canada—excuse me, I confuse them—are interesting.

There are not many strings attached.

That is interesting for us.

[The Vice-Chair, NDP, Hoang Mai]

The Building Canada Fund for instance, was for certain types of infrastructure.

[Maxime Pedneaud-Jobin]

In the beginning, it involved water-related infrastructure. Everything was included in that. Certain cities solve these issues faster than others, but even without very specific criteria, the infrastructure needs are so great that not a penny will be spent unnecessarily by the cities. None of them are going to build useless infrastructure. We only have to maintain what we already have. We are talking about essential priorities such as preventing roofs from leaking.

[The Vice-Chair, NDP, Hoang Mai]

Mr. Carpentier, you have the floor.

[Gilles Carpentier, City Councillor, City of Gatineau]

I will give you an example in the same vein as what Mr. Leclerc said earlier.

I think it would be a mistake to put the Public Transit Fund in a silo. For instance, if we want to create a public transit lane, when we do the work to open up the road, we may discover that the ground underneath it needs to be rebuilt. When the contractor and the equipment are on site, the project has to be sufficiently flexible to allow the cities not only to invest in public transit, but also to take advantage of the fact that a construction project is going on to modernize the underlay, for instance the sewers, the pipes, and other things. This type of flexibility means we can avoid working in a stanchion or a silo.

[The Vice-Chair, NDP, Hoang Mai]

The last budget refers to the Public Transit Fund. Have you had the opportunity of studying that matter given that some criteria require that projects take the form of P3s, for instance? What is your position on that?

[Maxime Pedneaud-Jobin]

First of all, we are not entirely familiar with these.

Yesterday, I was at a meeting of some of the members of the Big City Mayors' Caucus of Canada. They have certain serious concerns, for instance with regard to the size of projects.

Gatineau is the 17th largest city in Canada. If we are talking about very large projects, it could mean that only five or six cities in Canada will be able to benefit from that fund. We do not often have projects of more than $100 million. However, we have some important problems to solve. There are also the criteria to be considered. What is a P3? As a previous speaker said very well, the definition of the P3 is quite vague.

In principle, each of the projects will be studied. If we can obtain a contribution from the private sector, in whatever form, we are going to consider it. This isn't an ideological question, but what we know so far does not allow us to offer a very specific opinion on the substance.

We are pleased that there is a fund. We are talking about $1 billion a year for public transit. Right now, we have to seek funds from the Building Canada Fund to invest in public transit.

The amount of money available is interesting, but we have some serious reservations about the mechanics of it all. We really fear that only five or six large cities in Canada are going to be able to have access to it. As someone said before, the criteria apply to large complex projects, and we don't do that very often. This will not be happening in Gatineau.

[The Vice-Chair, NDP, Hoang Mai]

The analysts may correct me if I am mistaken, but I think that behind that fund, there is the idea of grouping several small projects in a single bid.

What are the advantages and disadvantages of proceeding in that way?

[Maxime Pedneaud-Jobin]

Once again, a certain number of projects have to be ready to go at the same time, and have to be compatible, in order to realize real savings. So this is a case where you have to understand the mechanics in order to have an opinion that is more positive than the one I am expressing right now.

[The Vice-Chair, NDP, Hoang Mai]

I see. Thank you very much. My time has expired.

Mr. Yurdiga, you have five minutes.

[David Yurdiga, Conservative, Fort McMurray—Athabasca, AB]

Thank you to all the witnesses for being here today.

I have some questions regarding P3.

I had a very positive experience with P3 applications. The nice thing is that when we were determining whether we should go to P3 or not, we looked at risk. We wanted to know how much we were going to end up paying for the whole project. Risk was eliminated. We knew what it was going to cost us, and that was it.

We did horizontal drilling to get a water line. I think it was 80 kilometres. We mitigated the environmental issues, wetland disruption, and even property being destroyed, such as going through farmers' fields or destroying trees to have an open trench. I think the biggest positive about P3s is the certainty. We did other projects where we didn't have certainty; we had cost overruns and stuff was improperly done. The risk was all back on us and it cost us dearly. This project came in on time and within budget. There was no [Inaudible—Editor] dollars, but everything went perfectly.

What types of projects have you been involved in, Mr. McBride, that didn't go well? Are there certain aspects of P3s that should never be entertained?

[John McBride]

Well, I haven't been in one yet that's gone badly, but I know of ones that have gone badly, that people thought were P3s. I guess that goes a bit to the definition. If you have a properly structured thought-through P3, what does it mean to go badly? If you had a problem, the private sector might have to pay more, but I think that's not a problem for me as long as I know what I'm paying and they don't pay more. I'm not actually in this to see the private sector make money. I'm in this to make sure the public sector gets best value for taxpayers.

I can give you an example of things that people trot out as failures. The Government of the Northwest Territories entered into an arrangement with the private sector to build a bridge. The private sector was going to provide the financing, but the government promptly turned around and guaranteed all their financing. What happened to the risk transfer? Where's their money on the line? When the contractor couldn't build the bridge and walked away from it, the Government of the Northwest Territories was sitting having guaranteed all the debt. I wouldn't call that a P3, because the private sector didn't put up their financing.

If you think you're doing a P3, but you don't understand clearly the concepts or you don't contractually translate into the legal documentation the idea of wanting them to take that risk, and if in fact the financing doesn't actually get lost.... There are lots of ways in the process for the value for money to leak away if you don't know what you're doing.

That's why governments, led by the Government of British Columbia, started creating agencies like Partnerships BC, with expertise to make sure the public sector was getting good value out of those deals. The whole country learned from British Columbia, and then the whole country learned from Ontario and what it's done through Infrastructure Ontario. I'm a beneficiary of what those two provinces started, and now we're sharing it with the rest of the country. Saskatchewan has created SaskBuilds.

You need to be very careful when you're doing these things. Can you negotiate yourself a bad deal? Absolutely you can. Do we do a lot of hard work to make sure we don't? Absolutely we do, but if you make sure their money is at risk, it's almost impossible to have a “bad deal”. It might end up being a bad deal for them, because they may lose their shirts, but that doesn't bother me too much.