Finance Committee on Oct. 20th, 2014

[Michael Mahar]

Yes, I agree 100%. Certainly there's a lot of evidence out there that shows that when they're developing light-rail systems, as an example, and there's a station, they start building communities around those stations now and those property values increase. Calgary is a good example. It used to be if you were beside a public utility, it would have a negative impact on property. All those things need to be kept in mind when they develop. Certainly, when currently the vast majority of the funding is determined through municipalities, the political will will depend on whether a project gets changed or not midstream and the negative impacts that could have on the cost. A Canadian framework for sustainable funding would be a great asset.

[Chungsen Leung, Conservative, Willowdale, ON]

Let me come back, then, and ask you what action or position the federal government should take to bridge that gap, because these are clearly provincial and municipal jurisdictions.

[Michael Mahar]

They are currently. Obviously when a player is putting funds into it, then I think it increases their stake in determining where something will be built and how it will be built. A public policy with respect to transportation would add some stability to all of the areas, I think.

[Chungsen Leung, Conservative, Willowdale, ON]

Okay.

Mr. Mattina, prior to entering politics, I was also on the other side, where I tried to bid on many federal contracts. I found that there were tremendous barriers to entry because of size, because of how certain contracts were framed or prepared. As a new entrant into this—I appreciate your policy of open competition—should we also allow international competition to enter into these competitions so that we do in fact get the best price?

[Domenic Mattina]

Merit Canada's philosophy is based on merit, on best value at the lowest cost. If that involves international competition, then my answer would be yes.

[Chungsen Leung, Conservative, Willowdale, ON]

So you favour international competition. If someone comes in and bids and builds a transit system for a cheaper price than what we can do, should we entertain that idea?

[Domenic Mattina]

We believe in fairness, openness, and transparency. With the free trade agreement, that will happen regardless.

[The Vice-Chair, NDP, Nathan Cullen]

Thank you, Mr. Leung.

Mr. Van Kesteren, you have up to five minutes, please.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you all for coming here.

Mr. Johal, thank you for your presentation. I loved the graphs.

In figure 1, I was intrigued to see the rapid decline in public investment. I was sitting here thinking, how in the world did that ever happen? Correct me if I'm wrong, but I think I have the answer. At that time, governments began to invest heavily in social projects—am I right to say that?—possibly not in terms of CPP, because CPP is self-paid, but in public pensions, in health. Thinking of Ontario, it will soon be 60% of their budget, but we do transfers, so the feds are now transferring enormous amounts of money in those areas.

Just going through where, in my mind, most of our spending has taken place, I'm wondering if you would agree on what happened. I'm looking at that figure; it started about 1967 and then it dropped off in about 1978. It popped up a little bit and then it just kind of stayed there. Then we had that spike, which I'll get to in just a second. Is it a fair assessment that we as a society decided that we were going to put our eggs in another basket?

[Sunil Johal]

I don't know exactly the answer to that, to be honest with you. I would have to do some more research on—

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Could you do that for us? Maybe you could even get us some explanation as to what the federal government...because I think I'm right in my assessment, but it's very important that we know those things. It certainly does paint a different picture.

In your graph it spikes in about 2006, and it spikes heavily in 2009. Again, that infrastructure might...because it looks like a good thing. I don't think anybody here recognizes that we ought not to spend more money in infrastructure, but would you agree, too, that the money was borrowed to spend that as well?

[Sunil Johal]

A large amount of that money was certainly borrowed and that's not necessarily a bad thing. The IMF released a report this month basically saying that advanced economies have a golden opportunity right now, with interest rates at historic lows and an economic slack fairly significant in advanced economies, to actually borrow—

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

I would agree with that, but if those interest rates spike, a lot of people and a whole lot of countries, including Canada, will be in a whole lot of trouble.

[Sunil Johal]

With a lot of the infrastructure funding, governments can lock in rates for a longer term, so I don't think that would be a significant issue.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Can you provide this committee with a little bit more information as to what happened in 1967 and why that dropped off? I'd really like to see that.

Mr. Roschlau, your third recommendation is a good one, I believe. You're talking about investment in research with manufacturers, universities, and private...and I'm a big advocate of those sorts of projects. If we indeed have something that we can point to and say, there's a result, can you share with this committee some examples of where that's happening, and where we've seen success, so that we're not going to just plow this money into a project and not get something in return? Can you maybe share that with us?

[Michael Roschlau]

Absolutely. That's a great question, too.

We've done our homework on this and we've looked around in terms of other models of research consortia that have worked well in the past. We're modelling this one on a very successful one in Quebec called Consortium for Research and Innovation in Aerospace in Québec, CRIAQ. We have a huge aviation cluster in Quebec that is competitive worldwide, and we know that the transit sector is also competitive internationally. Looking at that and the way in which they've approached it and grown it over the years, and working together on pre-competitive research and innovation, that's the model we're designing this on, because we've seen it succeed and we know that this is generating significant returns in terms of debt investment.

[The Vice-Chair, NDP, Nathan Cullen]

You're just about done. There are a few more seconds, if anyone had to follow in.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Again, I need a little more time, so thank you both.

[The Vice-Chair, NDP, Nathan Cullen]

Thank you, Mr. Van Kesteren.

I'll wrap up with a few extra questions at the end.

Ms. Reynolds, in your presentation, you talked about the new Building Canada fund and the concern that infrastructure projects that were recreational would not be able to apply. Could you be more clear on that? The government claims that this is not the case and that this is open to infrastructure funding going towards recreation projects. Could you explain the contradiction?

[Jennifer Reynolds]

Mr. Chair, my understanding is that in the current program announced in April of this year, sport and recreation projects aren't one of the eligible categories. They had been previously in the previous Building Canada fund. That's my understanding. I can certainly provide additional information to substantiate that understanding.

[The Vice-Chair, NDP, Nathan Cullen]

Great, thank you.

Mr. Roschlau, over to you. We talked a bit about the buy American policy moving from 60% to 100%. Is it just rolling stock that was in the U.S.? Is that the restriction that would be placed on it through the buy American policy?

[Michael Roschlau]

Yes, it's primarily any federally funded transit procurement in the United States, and most of that is rolling stock.

[The Vice-Chair, NDP, Nathan Cullen]

Has CUTA done any type of assessment over what the impact would be on Canadian manufacturing if such a move were to be made by Washington?

[Michael Roschlau]

Not a systematic one, but we've certainly been told anecdotally that any significant change, any significant increase in U.S. content requirements, could be enough to tip the balance so that the existing Canadian manufacturers would leave and move their production entirely to the U.S. They already have a fair bit in the U.S. obviously to comply with the existing regulations, but we have some very significant clusters of manufacturing in Manitoba, Ontario, and Quebec that are really at risk in terms of, I would say, the thousands of jobs that are there, both among the OEMs and their supply chains.

[The Vice-Chair, NDP, Nathan Cullen]

It would be helpful to this committee, if CUTA does arrive at any analysis of what the impact might be, to forward that kind of information to this pre-budget consultation.

Mr. Johal, I have a question for you. We heard from Canadian Manufacturers & Exporters recently at this committee that upwards of 700,000 manufacturing jobs have been lost in Canada within the last decade. Ontario has gone from 16% of the labour force in manufacturing down to just a little north of 10%. Do you have any suggestions to this committee as to what a federal budget might do to reverse this trend, or help alleviate the loss of jobs in manufacturing?