Finance Committee on May 18th, 2017

[Glenn Campbell, Assistant Deputy Minister, Canada Infrastructure Bank Transition Office, Office of Infrastructure of Canada]

Thank you, Mr. Chair and members.

Part 4, division 18 would establish the Canada infrastructure bank, announced first in the 2016 fall economic statement as well as in budget 2017. For reference, the proposed amendments are clauses 403 to 406, and can be found on pages 236 to 248 of the bill.

Please allow me to briefly provide some background and context around the proposed bank, and walk through the contents of the proposed legislation at a high level. Finally, I'm happy to get into questions and answers.

The Canada infrastructure bank is intended to provide innovative financing for new infrastructure projects and help more projects get built, including those transformative projects that would not have otherwise been built in Canada, by attracting private and institutional investment. The proposed bank is part of the government's overall $186-billion investment in the Canada infrastructure plan.

Federal support for infrastructure will continue to be delivered largely through the traditional infrastructure models, and the bank represents less than 10% of the total planned fiscal amount. The bank would be only one new tool that government partners, particularly municipal, provincial, territorial, and indigenous, could choose as an option to build more infrastructure projects.

The bank is a new partnership model to transform the way infrastructure is planned, funded, and delivered in Canada. Leveraging the expertise and capital of the private sector, the Canada infrastructure bank would allow public dollars to go further and to be used more strategically, with a focus on large, transformative projects such as regional transit plans, transportation networks, electricity grids, and interconnections.

The proposed Canada infrastructure bank act can be grouped into six main areas: incorporation, mandate, functions and powers, governance, funding, and accountability. I will address these in turn very quickly, Mr. Chair.

First, it would incorporate the bank as a crown corporation, effective on royal assent.

Second, the legislation would set the mandate and purpose of the bank, which would be to make investments in revenue-generating infrastructure projects that are in the public interest and seek to attract private sector and institutional investment to those types of projects.

Third, the proposed legislation describes the functions and powers of the bank to help it achieve its purpose. The bank would be able to make investments through a wide variety of financial tools, including debt and equity investments. The bank would make its investments directly in the infrastructure project, and its investments would be alongside private sector and institutional investors, as well as alongside other government investors. This would be a co-investment or a co-lending model in the project. Projects supported by the bank would be structured using conventional and robust legal agreements among partners, designed to protect the interests of Canadians. The bank also may make loan guarantees on an exceptional basis, with the approval of the Minister of Finance, where separate approval is consistent with the general requirement for all crown corporations. The bank also has important functions other than making investments, including acting as a centre of expertise and advising other governments on development of revenue-generating projects, and working to build capacity with all orders of government to collect and share better data to inform future investments in infrastructure over the long term.

Fourth, the proposed legislation sets out high-level governance of the bank. These provisions strike a balance between independence and accountability. The standard crown corporation governance requirements in the Financial Administration Act generally apply. Under the proposed legislation, board members and the CEO would be appointed by the government through the Governor in Council, and the board would play a role in the selection of the CEO. On May 8, the government launched an open and transparent merit-based selection process on an anticipatory basis, to identify the bank's senior leadership. Through these processes, the government would first select a chairperson of the board, followed by the remaining directors and the chief executive officer. Any appointments would only be effective if legislation establishing the bank is passed by Parliament and receives royal assent.

The fifth aspect of the proposed legislation allows the Minister of Finance to pay up to $35 billion in cash to the bank.

It is expected that the bank's assets, liabilities, revenues, and expenses would be fully consolidated in the Government of Canada's books. We expect capital—that is, cash provided to the institution—to be transferred to the bank only as needed to execute deals and to reduce cost and overhead.

While the cash amount would be $35 billion over time, the government has announced that the bank would be authorized to fiscally expense on an accrual basis only up to $15 billion over 11 years. That would be effectively federal support.

The sixth aspect of the legislation would allow the Governor in Council to designate the location of the bank and appoint a responsible minister.

The crown corporation would also be accountable to Parliament in a number of very important ways. It would be required to submit to Parliament a summary of its annual corporate plan, as well as its annual report. It would be subject to the Privacy Act and the Access to Information Act, although only commercially sensitive third-party information would be kept confidential—about the commercial partners, not the projects themselves. This is very routine. It would be subject to the highest standard of having its books audited by both the Auditor General of Canada and a private sector auditor working together, and a review of the bank's legislation would be conducted and tabled in Parliament every five years.

In conclusion, Mr. Chair, as announced in the budget, the goal would be to have the bank operational in late 2017. This would be approximately one year after the bank was first announced in the fall economic update and tabled in Parliament. The government has been discussing the proposed bank extensively with stakeholders and in the public domain, and I, personally, have been leading much of that effort.

As part of the overall investing in Canada plan, provinces, territories, and municipalities are currently engaged in long-term planning for how they will fund, finance, and deliver infrastructure. While the bank represents less than 10% of the overall investing in Canada plan, it provides an additional option for government partners to make their public dollars go further by using a new partnership model.

Those government partners have already indicated strong early interest in using the bank as a catalyst to move their infrastructure priorities ahead and deliver more infrastructure for their communities. This supports decision-making at the local level. Many of our partners already have in place, or are considering, other alternatives and revenue-generating models that would make their dollars go further and relieve the pressure on the public balance sheets. The proposed establishment of the bank would allow all of this planning for the short, medium, and long term to continue at a good pace.

The bank could also provide early value through its data function and as a centre of expertise, which will take time to develop, to help all governments make better evidence-based infrastructure investments.

To conclude, the proposed infrastructure bank would be only one new tool that our partners could use to build more infrastructure in communities across Canada.

We would be happy to take your questions.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Campbell.

Mr. Dusseault, go ahead.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you, Mr. Chair.

I have many questions. I would appreciate your indulgence with regard to the time I need. The first question is to provide context.

Mr. Campbell, you're familiar with the Advisory Council on Economic Growth's report. One of the recommendations is entitled “Unleashing Productivity through Infrastructure Growth”. The report describes in detail what an Infrastructure Bank should look like.

How much did the proposal presented use the report on the creation of the Infrastructure Bank, and how much did you rely on this report?

[Glenn Campbell]

First, to go back further, the government indicated that it was considering such a vehicle as an infrastructure bank as it came into office. Since that period, it has been working collaboratively on this concept with various ministries, including the Department of Finance and the Department of Infrastructure. It was a suggestion that came out of the growth council as a potential tool that could support growth and other policy objectives, and that fed into the government as one piece of advice as the government made its decision on the Canada infrastructure bank. That was only one of many extensive consultations that led to that particular announcement.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Okay.

I'll refer to a question I asked the Minister of Finance. He didn't give me a detailed answer.

The purpose and functions part contains section 6 of the Canada Infrastructure Bank Act, which establishes the Canada Infrastructure Bank. The section refers to infrastructure projects that will generate revenue. It's not clear to me how infrastructure can generate revenue.

Can you provide an example of how infrastructure, such as a bridge or road, generates revenue?

[Glenn Campbell]

I'd be pleased to.

There are a number of asset classes, under the category of infrastructure, that exist today in Canada that have various models of revenue generation or user pay: electricity grids have tariffs; water has meters and user fees; property development has land value uplift capture that is possible on revenue; and various roads, including in my home province, use tolls to pay for infrastructure. There are various types of revenue attached to various asset classes of infrastructure in Canada. It's a wide-breadth definition of what constitutes revenue in each of those classes that already exist in Canada today. Also, of course, there are fare boxes on transit.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Perhaps we can consider tolls as revenue generators. If money invested by the government, which comes from taxpayers, covers the cost of building infrastructure, and taxpayers are then also asked to pay to use the infrastructure, I think there's a major problem. The public funds the infrastructure, and continues to pay to use it later.

Another issue, which hasn't been clarified yet by the Minister of Finance, concerns the final decision on infrastructure projects. Sometimes, we hear that the minister or cabinet will make the final decision on whether a project will move forward. However, some say that the Infrastructure Bank is autonomous and completely independent, and that the government has no say in the decisions. Can you clarify who will make the final decision to accept or reject an infrastructure project?

[Glenn Campbell]

There were two main questions that I understood.

On the first one, I would disagree that under user-pay models the individual is paying twice. If you look at what's happening with a piece of infrastructure, when you bring in a revenue-generating model, you're building a piece of infrastructure that might not have otherwise been built, or if it had been built, it would have less government money into building that infrastructure than it otherwise would. So to suggest that someone is paying twice for the same infrastructure, I think is a flawed expression.

The objective here is to attract private-sector financing into that particular model and, to the extent to which there is not public funding into that model, there may be a user pay that is attached to it, and that is what the private sector is bearing the risk on. They're basically incented to ensure that asset is built and used, and that revenue receives value for money into the project.

Really, we would disagree strongly that they are paying twice and, quite frankly, whether it's tolls, or tariffs, or user charges, many of our provinces, territories, and municipalities, which I engage with personally, have them in place now and are already contemplating more. This is an opportunity to use this and build even more infrastructure than we otherwise would, and I think that's an attractive concept, but it will be something that will need to be decided at the local level.

On the second point, far be it from me to refine the wise words of the Minister of Finance, or the Minister of Infrastructure and Communities, but I can repeat what the minister did say, that there would be appropriate oversight of the crown and on the various projects, and that there will be room for an independent crown corporation to use its professional commercial abilities to structure a deal among many partners.

We call this a partnership model that includes not just the bank, or the Government of Canada through the bank, but also another order of government, as well as potential investors. It's quite clear: the objective would be that the bank would not be even searching to try to find financing for a project that was not already approved by one level of government. Our intent is that the discussions will come up through bilateral discussions between the province and the federal government. They would determine a list of their priority projects. The majority of those will be funded through the invest in Canada plan, through all those other envelopes.

The extent to which that partner says, “I think there's a revenue model they'd be willing to attach to that project, and would this be a candidate for the infrastructure bank?”... It's not obligatory to be funded by the bank. It goes on a pipeline list and then the bank deals with investors on a project that all governments are already aware is on the list—it's already there—and then at some point all the parties will need to come back as they start negotiating a deal. The debt investors have to go back to their credit committee. The equity investors will have to go back and make a decision. Whatever the municipality or province is, it will have to go back at some point. And the bank will have to go to its main shareholder and say, “We think we have a financing agreement on this asset; are we willing to go ahead?” Then the independent arm's-length bank goes ahead with all those parties and constructs a commercially very valid deal on that process.

In the partnership model there are partners doing the decision-making, and it won't be a surprise to anyone the projects that the bank is working on. It will be visible through the corporate plan tabled in Parliament, and they will be made available publicly by those provinces, which are saying, “Here are candidates”, because they'll be trying to sell it to investors, if they'd be interested in that project. It will be a very transparent process.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

I have another question related to this answer.

I understand from your response that cabinet has no say in decisions made by the bank, since the bank is an independent organization that makes its own decisions.

That said, you're asking Parliament to give $35 billion to the bank. This is taxpayer money. We're also told that private investors will invest up to four times the amount invested by the government. We're talking about possibly $140 billion, including $35 billion from the public. I'm worried that taxpayers, who will have paid $35 billion, won't have much input in decisions in comparison with investors, who will have allocated four times as much money. We're currently talking about spending public money.

This leads me to my question. To what extent should the public, or the government, be represented on the bank's board of directors? In the bill before us, there's no place on the board of directors for the government or a public representative who would advocate for the public interest. Can you tell me whether I understood the situation correctly? Would it be a good idea for the legislation to include a provision that would require the participation of a public representative on the board?

[Glenn Campbell]

There are a number of points there for me to unpack that are really worth discussing.

In the first instance, I hope I was clear. It may have been mischaracterized. Cabinet will have appropriate oversight of both the bank and the projects in which it invests. As I said earlier, through that federal-provincial discussion of priority setting, cabinets on both sides will be able to determine which projects are priorities, and the Government of Canada will have an obligation through cabinet to decide whether those projects on the priority list are worth being funded, either through bilateral funding or through the bank.

That public policy determination process will have been made. As I said, every project in the bank's pipeline would already have been through that screening in both orders of government. It will not be a surprise. That means the government and the cabinet will have a say to ensure those projects on the list meet its priorities.

In terms of the second point about the independence of the institution as it pertains to what the function is going to be, once a project is deemed to be something the bank may support, it can go try to find investors. The objective would be as little support as possible provided by the bank and a risk transfer deal that works for both parties to attract as much investment as possible. The bank would be the one in control of structuring that partner agreement, along with the public sponsor of that asset, and it would go out and bid for financial support from the private marketplace, either in debt or equity, to ensure a good dynamic.

The independence and role of the arm's-length entity is merely around making sure they have a good dynamic to structure the projects. They will not be asked to do public policy determination, because a project that is in the public interest will already have been predetermined, either by the government bringing it forward, or by the federal government saying that it's a project that taxpayers are going to fund at 100% and bear all the risk through the normal models. This is the case for all those projects that don't have a revenue-generating model.

However, for those exceptional cases where the governments say that there may be a revenue model that would allow a project to get built without as much government support as would otherwise be there, then it goes through, and the bank uses its tools.

The public interest will be reflected, as it is now, in the legislation. It will be reflected in the corporate plan.

The objective is to have an independent board of directors, representative of Canada, with no government interference on that board, so that you actually have them making sound financial risk, financial modelling, infrastructure, and legal due diligence. That's what we want the board to do. The board presides over the institution and gives direction to the CEO so that they can effectively run the arm's-length crown corporation to execute its mandate, which is the structuring of robust deals and managing that way.

To conclude, we will be reducing some of the overhead and financial costs of the institution by only providing cash to that bank as it needs it and as projects develop. You mentioned $35 billion. The government is being very transparent that it's a $15-billion profile, which it would have otherwise just transferred to other projects. It now wants to use that strategically to absorb some very strategic risk in a project and to ensure that more incremental projects get built than otherwise would. We think, collectively, that's in the public interest.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

It's too bad you don't think it's necessary to have a seat on the board of directors for a person who would advocate for the public interest. After all, the public has invested money. Whether it's $15 or $35 billion, someone should be on the board to ensure all public money is spent properly.

You indicated that it doesn't seem necessary to have someone on the board of directors whose role would be to protect the public interest. The board will have only representatives of private sector investors, who will have everything to gain by investing in projects that will generate 7% to 9% in revenue.

Perhaps I could speak later, Mr. Chair, because I have other questions. However, I also want to let my colleagues ask their questions.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Dusseault.

Mr. Liepert.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

I have a couple of lines of questioning.

I'm interested in the process of how this came before us. Who decided that it should be part of the budget bill?

[Glenn Campbell]

That is a government decision.

[The Chair, Liberal, Wayne Easter]

Yes, it is. It's a cabinet decision, correct?

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

In your view, is it appropriate for this to be part of this budget bill?

[The Chair, Liberal, Wayne Easter]

I really don't—

[Glenn Campbell]

I would say that it would be inappropriate for me to answer on a personal basis; however, I can express that this is a fiscal instrument, a fiscal support measure that sits inside the investing Canada plan that was framed inside budget 2017 and previously in the fall economic update. That's not an opinion, that's just fact.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

All right, so is there a plan B for this bank and the establishment of this bank in the event that...? We are already hearing strong indications from the Senate that this is something the Senate doesn't believe should be in the budget bill. Is there a plan B if the Senate doesn't approve this particular part of the budget bill?

[Glenn Campbell]

All of our planning to date, including as the senior official in charge of this project, is on an anticipatory, planning basis. Everything is subject to parliamentary approval, outside of some of the activities that we have been working on. Really it's for Parliament to decide the next steps or the future of this project.

[The Chair, Liberal, Wayne Easter]

Thank you.

With that, we have Ms. Faith McIntyre.

Mr. Campbell and your crew, you folks are okay at the table. We will suspend your testimony for a moment and we'll turn to part 4, division 12, which is the Department of Veterans Affairs.

Faith McIntyre, director general, policy and research division, comes to us from the great province of Prince Edward Island. You should have a picture of the Island behind you and not that concrete wall.

[Faith McIntyre, Director General, Policy and Research Division, Strategic Policy and Commemoration, Department of Veterans Affairs]

Thank you very much.

Mr. Chair and honourable members, it's certainly a privilege to be able to address you today. I have some very brief remarks just to situate the context of the changes that are being put forward for division 12 of the budget implementation act. I will be brief because I know there are some time constraints today.

We are here to discuss the budget implementation act that includes three of the eight budget 2017 initiatives that were provided for Veterans Affairs Canada. They include the veterans education and training benefit; a redesigned career transition services program; and the new caregiver recognition benefit; as well as a change in the name of the act and enhancements to simplify administration, all of which will come into place as of April 1, 2018 and total $624 million of investment over five years.

To begin, we are proposing to change the name of the act from the Canadian Forces Members and Veterans Re-establishment and Compensation Act to the Veterans Well-being Act. This change highlights the important link to our ultimate goal, which is the well-being of veterans.

As well, the family caregiver relief benefit will be replaced with the caregiver recognition benefit, a monthly payment of $1,000 tax free and indexed annually that will go directly to the caregiver. It will be provided in recognition of the valuable role that caregivers play in supporting seriously disabled veterans.

In addition to the supports for families and caregivers, we are doing more for veterans transitioning to their post-military life. We are introducing the veterans education and training benefit. It will cover up to $40,000 in tuition and other costs for veterans who have served at least six years and up to $80,000 for veterans who have served at least 12 years. Of this, $5,000 can be used towards professional and personal development courses such as pursuing a real estate licence.

We're also redesigning our career transition services so that more people can use them, including serving members of the armed forces, and the survivors, spouses and common-law partners of veterans.

Labour market information, career counselling and job search assistance services will be provided based on needs. The service providers will have access to job search assistance and counselling in order to work with veterans and employers to ensure success. The veterans will be guided by coaches who understand military life and culture.

We are also adding ways to help streamline program delivery. The act includes a more simplified application waiver that will enable the department to waive application for benefits and to make decisions if the department already has the necessary information on file. This change is being added to the general provisions, so it will apply to all programs.

In closing, the measures included in budget 2017 and the budget implementation act will go a long way to support veterans and their families as they transition out of the military and settle into civilian life. However, the job is not yet complete. There are additional measures that are currently being pursued that will be announced in the coming months. An example is the lifelong pension. The department is committed to continue the research and work to understand the needs of veterans and their families.

I thank you for the opportunity to speak briefly to you today in my remarks, and I am certainly available now to take your questions.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Ms. McIntyre.

We'll start the questioning with Mr. Liepert.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

We had members of the Equitas Society testifying as witnesses yesterday. There were two things that I recall they raised. Obviously, one is the lifelong pension, and you just mentioned that it would be announced in the coming months. Is there any particular reason it wasn't part of the budget?

[Faith McIntyre]

In the budget narrative for 2017, it did indicate that we wanted to ensure that we got it right, so we are continuing our consultation with stakeholders, our research and analysis into the monthly pension. The Government of Canada has committed to announce that in the fall.