Finance Committee on Feb. 12th, 2009

[John McCallum, Liberal, Markham—Unionville, ON]

But I am delighted the minister is here.

Question number one concerns my understanding that the parliamentary budget officer is setting up a process by which to evaluate infrastructure spending, and other things, for the quarterly accountability reports. The first question is whether you intend to cooperate fully with his office on that issue.

Second, depending on how you measure it, my understanding is that you're hoping to get about three to five times as much money out the door next year for infrastructure as you actually got out the door in the last couple of years. Given the less than splendid record in this area, would you be planning to increase your staff in some commensurate way to deal with the extra workload to get that money out the door? If so, by how much will your staff be going up?

[John Baird, Conservative, Ottawa West—Nepean, ON]

You have asked me many, many questions.

[John McCallum, Liberal, Markham—Unionville, ON]

Two questions.

[John Baird, Conservative, Ottawa West—Nepean, ON]

You asked me a question about the parliamentary budget officer. I haven't see the specific nature of his request, but I would certainly entertain anything from the parliamentary budget officer.

Mr. Ignatieff has put the government on probation. You could be my probation officer.

[Some hon. members]

Oh, oh!

[An hon. member]

And you could end up in jail.

[John Baird, Conservative, Ottawa West—Nepean, ON]

On the third issue, I've said to the deputy that we'll certainly provide him with any resources that the department requires in the short term to assist us in getting this money out. I think one of the things that we are committed to do is to streamline the process.

[John McCallum, Liberal, Markham—Unionville, ON]

Can you be more specific about the percentage increase or increase in the number of person-hours in Infrastructure Canada in order to triple or quadruple the amount of money going out the door?

[John Baird, Conservative, Ottawa West—Nepean, ON]

Well, the first effort is to cut red tape, so that we will require less resources per dollar out the door. The deputy hasn't come forward with a specific amount, but we've certainly indicated that we'll provide any support needed.

Obviously there'll be a significant amount of work in the first six months to get projects approved and a significant amount of work in the last six months to close the files.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. McCallum.

Minister, thank you for your appearance here today. As you can see, there's a lot of interest from all members with respect to infrastructure and the need to get that spending out the door. Thank you for appearing before us. We certainly look forward to welcoming you back again.

Members, we will suspend for a couple of minutes and then we'll have the other witnesses come to the table.

Thank you.

[The Chair, Conservative, James Rajotte]

For the second hour of our morning session on the financial priorities of the federal government, focusing on infrastructure, we have three organizations before us. First, from the Federation of Canadian Municipalities, we have the president, Monsieur Jean Perrault, and the CEO, Mr. Brock Carlton; and we should have the director of policy and research, Mr. Michael Buda. From the Canadian Construction Association, we have the president, Mr. Michael Atkinson, and the director of government relations, Mr. Bill Ferreira. From the Association of Canadian Engineering Companies, we have Mr. Jeff Morrison, the president and COO.

Welcome to all of you, gentlemen. We will go in that order, and I would ask you to limit your opening comments to five minutes per organization. Then we will go immediately to questions from members.

So we'll start with the Federation of Canadian Municipalities. Monsieur Perrault.

[Jean Perrault, President, Federation of Canadian Municipalities]

Thank you, Mr. Chair.

I would like to thank the chair and this committee for the opportunity to speak today on how the federal and municipal governments can work together to help Canadians at this time.

FCM has been the national voice of municipal governments since 1901, and during those 108 years we have represented the interests of Canada's municipal governments to the federal government. I'm here today to continue

continue the tradition, while respecting provincial jurisdiction. The Federation has always worked in a manner that showed respect for areas of provincial and territorial jurisdiction.

FCM believes that Canada's quality of life and economic growth depend on healthy cities and communities.

To attract new talent and investment, improve productivity, and protect our environment, Canada must have strong, secure foundations at the local level.

One area where federal, provincial, territorial governments have worked together to strengthen those foundations is in infrastructure investments. Federal infrastructure programs have helped us provide safer roads and bridges, clean drinking water, modern sewage treatment, and improved public transit.

While a municipal infrastructure deficit remains a long-term challenge, that's not what we came here to talk about today. We are here because Canada is caught in a growing recession, caused by a global economic crisis. That recession is felt in cities and communities right across this country.

The recent federal budget provided powerful new tools for creating jobs and fighting the recession. Now we must put those tools to work. The budget committed new funding for infrastructure rehabilitation, recreation facilities, green investments, affordable housing and broadband Internet service. With a fast, flexible action plan, these commitments will produce tens of thousands of new jobs this year alone. They will also leave Canada better equipped to meet the social, economic, and environmental challenges of the future.

To prepare new projects for this year, municipal councils, project managers and contractors will all need to work progressively over the coming weeks and months. Before we can get started, municipalities need to know how much federal money they can access; how much they need to find in new matching funds; what projects are eligible; and when new funds will start to flow.

We know that Minister Baird and his officials are working hard to answer these questions. We also know that finding the answers will take some time. But the start of the construction season is little more than a month away, and there's no time to waste.

The FCM is ready to sit down with the federal government to develop and implement a plan that will transform budget promises into new jobs.

As a first step, FCM recommends that the following five principles guide federal action.

First of all, let money flow quickly to create jobs now. A significant number of new infrastructure projects must get under way during the 2009 construction season to create jobs in time to offset the recession. This must be the overriding policy objective of new infrastructure spending.

Second, there must be dedicated funding for municipal infrastructure. Municipalities own more than half of Canada's infrastructure and virtually all water, sewer, and public transit systems. To create jobs and improve local assets, we need to know that the federal government is going to invest significant new funds in municipal infrastructure.

Third, adopt a simple, predictable, and fast-moving application process. The sooner funding decisions are known, the sooner construction can proceed. The federal government must adopt an accountability model that allows upfront approvals to be made quickly in accordance with simple guidelines, while using follow-up reporting tools to ensure projects deliver value for taxpayers.

Fourth, work through cost-sharing challenges. By the time the federal budget is approved, thousands of municipalities across Canada will have finalized their 2009 capital budgets. Reopening those budgets to find matching funds will take time and in some cases simply won't be possible. The government can help by being flexible. Cost sharing must not become the sole determining factor in federal funding decisions.

Fifth, put new federal loans to good use. We applaud the federal government for helping communities that do not have the funds to meet cost-sharing provisions. Now we must ensure that these funds deliver on their promises. The federal government must sit down with FCM as soon as possible to develop a workable program that gets new money into the economy quickly.

The federal budget says infrastructure programs “will be structured to flow funding and get shovels in the ground quickly”. These five principles will make it possible to meet that objective.

In closing, let me reiterate that Budget 2009 makes important investments in cities and communities, and gives the country powerful tools for fighting the recession. It must be implemented fully, fairly and efficiently if it is to counter the recession and deliver long-term value for Canadians.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Perrault.

We'll have Mr. Atkinson next, please.

[Michael Atkinson, President, Canadian Construction Association]

Thank you, Mr. Chair.

The Canadian Construction Association welcomes this opportunity to appear before you today and share with you the views of our nearly 16,000 member firms across the country on the infrastructure measures contained in the recent federal budget. It probably comes as no surprise to you that since our industry builds that infrastructure, we very much welcome these measures. We certainly believe that investing in Canada's infrastructure provides the biggest bang for the stimulus buck in the short term, in terms of job creation and economic impact. For every $1 billion, according to an Informetrica Limited study, some 11,500 jobs are created, more than half of which are not created in the construction industry.

But perhaps more importantly, it is also our belief that investing in Canada's infrastructure is an absolute priority, not just for the short term but for the long term as well, in order to secure our country's future economic prosperity and social well-being.

Because of past neglect, our vital public infrastructure—our roads, bridges, sewer systems, hospitals, and schools—are in a critical state of disrepair. It has come to the point that, rather than providing a safe and healthy environment and quality of life for our citizens, our public infrastructure is beginning to threaten those basic, fundamental necessities. Instead of providing the tools by which to allow business and industry to compete, thrive, and remain productive, our crumbling public infrastructure adds to business costs, makes us less competitive, and inhibits productivity. We need to upgrade and maintain our public infrastructure so that it once again works for Canadians and works for Canadian business and Canadian industry, rather than against.

Some of you may have seen the University of Waterloo study of last year that was presented in the August publication of the Institute for Research on Public Policy. It concluded that not only had Canada's infrastructure deficit reached $200 billion, but that our failure to invest in our public infrastructure in any meaningful way during the 1990s was the primary reason for the productivity gap that exists between the manufacturing sectors in the United States and in Canada. In looking at aggregate investments on the part of governments in both the United States and Canada, it found that the U.S. managed to increase its productivity advantage over Canada by more than 20% in the past 10 years alone. During that period, Canadian investments in infrastructure declined by 3.5%, whereas in the United States they increased by more than 24%.

Why dwell on this? It is to make the point that a nation must not simply invest in its public infrastructure to create jobs in the short term or to kick-start an ailing economy, which it will do, but a nation must invest in its key strategic public infrastructure because it is the course of sanity. It is no coincidence that every nation in the world that has recently announced a stimulus package has, as a key cornerstone of that package, significant reinvestment in critical public infrastructure. Those nations understand that, yes, investments in infrastructure will provide the stimulus in the short term to help their stagnant economies along, but their governments also know that, much more importantly, those investments will ensure that they have the modern and efficient infrastructure in place to best position their nation to take advantage of the economic growth that will come when the global economy begins to recover.

Mr. Chair, this is why CCA strongly supports infrastructure renewal. But investing in infrastructure is also wise not only for tomorrow but also for today.

The landmark investment that budget 2009 makes in university and college infrastructure renewal is worth particular note. CCA has been a strong proponent of increased federal investment in college renewal. As most of our labour force comes through the college system, we know how stressed the situation is currently for colleges. Unfortunately, community colleges remain the poor cousins within the Canadian post-secondary educational family. Many of them were built 40 to 45 years ago and have been sorely neglected. Many community colleges of sizable enrolment have backlogs—for some colleges, a three-year wait for a construction trade program. The equipment is woefully outdated, there is no capacity, and yet college enrolments are on the climb. The downturn in the economy has only exacerbated these challenges as many displaced workers turn to colleges for retraining or upgrading of their skills.

A Canadian Federation of Independent Business study in 2006, in surveying their members as to where their new workforce was coming from, said that for every university graduate, they're going to need six college graduates in the future. Our college system just does not have the capacity and has been neglected for far too long. We certainly welcome the novel, first-time identification in a federal budget of the need to support community colleges. We would ask, however, that this committee consider providing for a better proportion of that program. Currently it's been established that 30% only of that program would go for college infrastructure. We'd like to see a much more equal situation.

In closing, I'd like to leave you with one thought. Quite frankly, our greatest fear is that infrastructure, having had its 15 minutes of fame as the stimulus solution to these recessionary times, will soon fade from sight, and that we in Canada will lapse back into our previous culture of design, build, and forget.

I look forward to your questions.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Atkinson.

Mr. Morrison, please.

[Jeff Morrison, President and Chief Operating Officer, Association of Canadian Engineering Companies]

Good morning, ladies and gentlemen.

For those unfamiliar with the Association of Canadian Engineering Companies, we represent the interests of over 500 companies in the consulting engineering industry. They collectively employ about 90,000 Canadians, generating over $15 billion in economic activity.

To echo Mr. Atkinson's point--this will probably come as no surprise, from a group that designs infrastructure--we too are very pleased with the infrastructure announcements in the 2009 budget. With this budget's announcements, which are on top of already planned federal investments from prior budgets, the federal government is taking strong steps to address the massive infrastructure debt facing the country. Although the stimulus package will indeed create and sustain employment in engineering firms, the real benefit, we feel, will lie in the long-term accrued benefits to all Canadians--greater economic competitiveness, quality of life, enhanced safety, more sustainable transportation, and other infrastructure solutions.

Let me also quell a misperception that's been discussed in the media and by some within this government about the capacity of the Canadian engineering workforce to perform the work that will be created by the infrastructure measures in the 2009 budget.

Just before Christmas, ACEC surveyed our full membership, inquiring as to their existing capacity levels and what they forecast in terms of workloads for 2009. Engineering firms were clear in their response. As a result of declines in primarily private sector work--namely, oil and gas resources, housing, manufacturing, and so forth--many engineering firms were already experiencing layoffs in late 2008. Many more are considering layoffs in 2009.

So the message for policy-makers is clear: engineering firms are ready, willing, and able to get to work on building and rebuilding our infrastructure.

As the government implements infrastructure projects announced in its budget, the Association of Canadian Engineering Companies wishes to recommend four principles that will guide the implementation of those measures.

These recommendations seek to maximize the stimulus effect of these projects on the economy and on the labour market. These measures seek to ensure that the projects accomplished will yield optimal value and that they will benefit from the very best that technology and innovation has to offer.

Firstly, infrastructure projects funded by the federal government should be awarded to the private sector. Too often, government uses its own internal resources for design and infrastructure projects. The stimulus effect of infrastructure programs can be maximized if these projects are achieved by private firms that can then hire the very best engineers and entrepreneurs. Government and other key players could deal with their own agendas internally and subsidize their own activities.

Second, in implementing projects, governments at all levels must seek to reduce red tape and duplication, and minimize approval processes, as the minister just described. To do so will require a concerted effort on the part of all governments to ensure that administrative processes are kept to a minimum.

Yes, due diligence and proper environmental assessments must be respected, but given the urgency being placed on quick implementation, processes such as procurement, contract negotiations, project identification, rezoning, and so forth should all be expedited by the responsible order.

Third, the selection of professional consultants for infrastructure projects should be based on the principles contained in InfraGuide's document on best practices to selecting a professional consultant. This InfraGuide document, released about two years ago, written by a team of third-party experts, recommends a process of what is known as qualifications-based selection, or QBS, for engineers. The principle is very simple: professional consultants should be selected based on their competencies rather than lowest price. It's akin to any of you hiring an employee for your office. Do you hire the best-qualified for the job or do you hire the cheapest?

Quebec recently became the first jurisdiction in the world outside of the United States to legislate the use of QBS in all government departments in that province. Such a policy was recommended by the Johnson commission, which reported on the collapse of the Laval overpass in 2006. We would recommend it to the federal government.

Last, we would urge governments not to compromise long-term strategic value for expediency. Although it will be important to identify and act on shovel-ready projects, other key considerations need to go into project selection. Economic competitiveness, enhancement of sustainability, improving quality of life, and protecting health and safety of Canadians need to be key litmus tests that go into project identification before the speed at which they can be implemented.

In closing, Mr. Chair, I want to reiterate our key message. Engineering firms across Canada are looking forward to working with federal, provincial, municipal governments, first nations, post-secondary institutions, airport authorities, and others to roll out infrastructure projects not just quickly but very strategically.

Thank you, Mr. Chair. Merci. I look forward to the discussion.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Morrison.

We'll go directly to questions from members.

Mr. Kennedy, you have seven minutes.

[Gerard Kennedy, Liberal, Parkdale—High Park, ON]

Thank you, Mr. Chair.

I thank all of you for your testimony.

I have specific questions regarding the economic stimulus fund on reconstruction and building renovation.

The government seems to be telling us that $2 billion will go for renovations in each of the next two years. Currently, if you look at the studies that are out there, only about 14% of infrastructure building is renovation. That suggests there may be a need. In other words, there's a lot of new build and not so much the other.

I wonder if you could tell us from your different expertises, the municipalities first, perhaps, what that looks like. You've put forward what I think is a very helpful list of $14 billion in shovel-ready projects. What proportion of those would fit the government's intent? It has a very narrow intent for that particular fund. I'm wondering how that lines up with your outlook, and then, to both of the associations, how we might look at that affecting capacity.

I accept from Mr. Morrison, certainly, the general assurance, and I'm sure Mr. Atkinson has something similar in the sense of why we're here. We know that 44,000 construction workers lost their jobs in December. We wish that this had happened then. We did something to try to bring this about.

We would really like to focus on some idea about that particular strategy and its implications, because I think the finance committee, as well as the trade and infrastructure committees, will want to have some understanding about implementation. Distinct from other years and other times, perhaps, we're all going to be very interested in how this will actually work on the ground. I'm wondering if you can comment on that focus and how it looks from the standpoint of your different perspectives.

[Jean Perrault]

Monsieur Kennedy, as for our point of view, are you talking about the $2 billion that will be invested in renovations and affordable housing?

[Gerard Kennedy, Liberal, Parkdale—High Park, ON]

No. It's different. The $2 billion in infrastructure, the stimulus fund, as we're told in briefings from the ministry, will be focused largely on reconstruction and renovation as opposed to new build.

I'm just wondering whether the association's been able to size that up in terms of what it means for its members. Does that fit the needs the members have and so on? What implications might there be?

[Jean Perrault]

From what I gather, we want to go fast, and projects in the long, long, long term are not the objective of that fund. We'll see about that in the procedures that will come, but there are so many projects we have on our table that don't need long planning and are ready to go. It could be recreation facilities, arenas, and all these subjects that we will be able to have access to for our members.

From what we gather from the minister, this has to be done very rapidly. We also want to be very rapid, so we urge the minister to cut the red tape, which is what he's saying all the time, and put the shovels in the ground. That's a really good message. We feel that we need to put these funds in rapidly so that we can have buildings to repair and projects that are ready to go. It's not long-term projects that we need. If we have an acknowledgment today, we have to make big plans, with

a lot of planning and environmental requirements, etc. We believe that money should flow quickly to municipal projects that are straightforward, such as road repair, sidewalk repair, waste water systems, and existing buildings. Members have already told us that there are infrastructure projects worth some $14 billion that are ready to start immediately.

The Montreal-Toronto train project is going to take longer than repairing houses that were flooded, a direct result of global warming. Those renovations are easy to accomplish, and do not require anything else than money. They do not require five or six-year planning.

We're very happy to see that there are a great number of projects for the next two years. They are ready to go. All we need is money.

[Gerard Kennedy, Liberal, Parkdale—High Park, ON]

With respect to capacity—

[Jeff Morrison]

I think your question was with regard to the mix between reconstruction and rebuild projects and new projects. I think from our perspective, we're happy and content with a mix of both. You mentioned, for example, the $2 billion for social housing. I don't think you have to walk too far from this very hall to find some social housing units in downtown Ottawa that are pretty decrepit and are in need of some very serious rebuilding and reconstruction. On the other hand, we also do need excess capacity. We need more capacity in social housing.

So long as governments take the approach of looking at what is best strategically and ensuring a mix of the two, I think from an engineering perspective we're comfortable and ready and willing to do both.

[Michael Atkinson]

I'll address the capacity concern, and it is a bit of a myth. There's no question that long term we're concerned about labour supply and labour capacity, in particular, because of demographics and the number of people who are going to be retiring. But certainly in the short term, as you mentioned, we've seen a decline in non-residential construction activity; as of December building permits were 31% lower than they were just the previous year. So certainly there is the capacity there.

When we talk about labour shortages, we're talking six to eight years out, because it takes four years to get an apprentice trained to be a journeyperson. That's why college infrastructure is so important for us, because we see a bit of a bottleneck occurring there. We're trying to attract more youth, aboriginal people, and under-represented groups such as women into our industry and we're reaching a bottleneck in the training area. So we're very concerned about that going long term, but short term, certainly, we have the capacity in our industry.

We are aware that infrastructure programs were being elevated in any event, even before this budget. Come April 1 of this year, the municipal Gas Tax Fund doubles. It was phased in for April 1, 2009; it goes to $2 billion and remains there, hopefully in perpetuity, as the minister mentioned.

So from a capacity point of view, we've been planning and we're ready.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Atkinson, and thank you, Mr. Kennedy.

We'll go to Monsieur Laforest.