Thank you, Chair Easter, vice-chairs, and members of this committee.
My name is Andy Manahan. I am the executive director of the Residential and Civil Construction Alliance of Ontario, and I have been in that position for about 11 years.
Obviously, we are a provincial association so this is a rare opportunity for me to speak in Ottawa and I really appreciate it.
One of the things that's different about our organization is that we're a labour management organization. I'm not aware of any other across Canada that has both contractor associations and construction unions, so our members will be the ones who will be building some of the projects through the Canadian infrastructure investment agency or other infrastructure funding programs that are already in existence or may exist in the future.
I should say right off the top that we did commission a report independently, about 2009, and it did recommend an infrastructure bank but it didn't flesh it out, so when we heard in 2015 that the government in Ottawa was contemplating an infrastructure bank we decided to commission a report, and we actually used the “infrastructure bank” phrase. That particular report resulted in a round table where the deputy infrastructure minister and an assistant deputy minister from Ontario and many other bright lights, including Ben and others, participated in that round table to hash it out.
I should say there was certainly not a unanimous position that this is the way to go, but overall we thought that if it were done correctly the bank or agency would have a lot of merit.
As a result of that round table we commissioned Matti Siemiatycki, who will be here later this afternoon to talk about and provide more detailed recommendations on how this organization could be operationalized. I'll let Matti talk in more detail about that.
I want to keep it very simple in terms of what our organization and I think are some of the key roles of this agency. I think project evaluation, as we've heard from Ben, is a critical function.
I just got the KPMG report yesterday that talked about various things like the infrastructure funding gap or the deficit across Canada, and to my mind... You know, some people are still using the $123-billion deficit, even though that figure is about 10 years old. Some of the infrastructure modelling work that we have done is agent-based modelling, and it looks at it from a different perspective. Rather than how deep the hole is, what are we spending on infrastructure in relation to the GDP? Currently across Canada we're at 3.1% GDP. An optimal point from a macroeconomic point of view would be 5%, so it's an aspirational target.
I think where you want to get into what the dollar amounts are is when you get to local or regional-level budgets, but I find that using those sorts of assumptions in terms of engineering, full replacements, or other aspects like that, is not very helpful. I would suggest that the big boy kind of management consulting firms get off that track of talking about how big the deficit is, because it doesn't really help us.
While there exists a large infrastructure gap, there is likely a long list of projects that meet criteria, such as of social and environmental importance, but how do we determine the best sequence of projects among so many worthy projects? I think we could probably, all across your ridings, come up with projects that are really good right now, but I think it's critical that we also look at projects that have a positive ROI, return on investment, from a variety of perspectives.
Secondly, I want to talk about revenues. I think Matti will get into this as well, but it's really important that projects generate revenues. I know this is sometimes politically toxic in terms of things like road pricing, or tolling, but gas tax revenues are declining. We've seen that in the U.S. with respect to the highway trust funds, both federally and locally. It's probably not as severe in Canada, but we're heading in the same direction because cars are becoming more fuel efficient and there are more electric vehicles, so there has to be a transition.
I think May of 2016 was when I heard the finance minister talk about bold ideas and policy approaches. I'm thinking now that we're getting into an era of connected vehicles, autonomous vehicles, and more electric vehicles, and I think that's really going to link together very nicely with road pricing.
What's happening in the States—and I just found out about this on Friday at a conference I was attending—is that there are 14 western U.S. states that are looking at how to transition from gas taxes to road pricing. It's an experiment without any real dollars—it's like a Monopoly money game—but they have over 5,000 participants in this voluntary program and they're trying to figure out what's going to happen. The results aren't out yet, but I think this is something we need to watch in terms of the Smart Cities initiatives that are happening in the U.S., and now here in Canada.
I want to mention that one of the reasons Ben made some of the points that he did about the independence is that sometimes politicians do things that can send out really negative signals.
To my mind, during the 2015 campaign, when a decision was made that the Champlain Bridge was not going to be tolled, that sent out a negative signal regarding whether or not we could count on revenues in the future. I can give you many other examples, but the one I want to highlight is the Scarborough subway extension. The agencies that did the business case analysis for that alignment looked at it and said light rail transit was the way to go. Because of former Mayor Ford of Toronto and the popularity of that gentleman and the premier of the day and then the connection of Ford to former Prime Minister Harper and Finance Minister Flaherty, all of a sudden a political decision was made, despite the best evidence, that we needed to build a subway, which has now turned into a one-stop subway. Our members are probably going to build that and we're going to benefit, but, quite frankly, if you have an LRT with more stops, at each stop you're going to have residential construction. How would you do an innovative finance on that? Value capture. There are a lot of creative things that get hurt when there's that kind of negative political interference. I'm not saying it's across the board, but I just want to provide those examples.
With respect to governance, that's probably the overarching important issue out of all of this. Metrolinx had a situation in which its president and CEO, I think, was put in a position of conflict, because he had to report both to the Metrolinx board of directors and to his political masters at Queen's Park. If he had had that independence, he probably would have been more forceful in saying LRT, light rail transit, was the way to go.
I won't belabour that, but I think you get where I'm coming from. Is this an extreme example? No. I think even with further evidence that you've probably all heard, that ridership numbers are not as high as they should be and that costs continue to rise and are exorbitant, there seems to be no course correction on this particular thing.
I think as the agency evolves, there should be not a go-slow approach but an approach that looks at specific sectors. Should it be trade and transportation or transit? Should we look at water in the future for those communities that have full-cost pricing or conservation-oriented pricing? Yes. Do we need to look at green energy transmission? Yes.
There are lots of different ideas, but to ensure that we're successful as we roll this program out, we need to take those sort of evolutionary steps.
I'll end it at that. Thank you very much.