Transport Committee on April 25th, 2013

[Jean-François Larose, NDP, Repentigny, QC]

Thank you, Mr. Chair.

Are any other witnesses scheduled to appear?

I was just joking.

I thank our witnesses for being here. I am very happy to meet you.

I had the privilege of sitting on the Standing Committee on Government Operations and Estimates. In fact, our report was released recently. We did a study on public-private partnerships. and I see now that the same questions are coming up again. Unfortunately, the solutions we proposed were not taken into account.

One of the points raised was transparency. People also said that we had to consider P3s as a solution because there was a lack of expertise. That was one of the points that was raised. However, if we go off in every direction with P3s, the result is that we lose our expertise completely and have no more control over everything that happens in the field.

Mr. Moist, can you give us some further details about the situation in the United Kingdom? I find this interesting because at the Standing Committee on Government Operations and Estimates, we made some comparisons. We were told that the P3s in Canada were something completely new, but that we had learned our lesson and were not going to find ourselves in the same situation. However, I am under the impression that the United Kingdom is still used as an example. Can you give us some further details?

[Paul Moist]

Thank you. Through the chair, the United Kingdom's a crystal clear example of what the lack of transparency or open discussion at the front end can lead to. When you build a hospital and you can't afford to run it, whether you're a provincial government or a U.K. government, the only way to reduce costs in a hospital is to close wards and close beds. Most of the private finance initiative hospitals in the United Kingdom are operating with less than 60% of the space in the hospital being used because they can't afford to run them.

You must make the leasing payments to the consortium and there's no money left to run the health-care system. When a Conservative health minister says they're on the brink of financial collapse, and they're not entering into any more arrangements of the kind that were entered into 10 to 15 years ago, there's a lesson to be learned there.

One of the witnesses before the Standing Committee on Government Operations and Estimates—I can't say his last name—Matti Siemiatycki, a professor from the University of Toronto, told your committee that this is a bit of an accounting mirage. There's so much evidence since 2008 around the world that if people tell you it's too complicated for you to understand, that's when you should be asking more questions.

[Jean-François Larose, NDP, Repentigny, QC]

We end up a little bit in the situation where I am a little worried about what's to come. I don't have the feeling the right questions are being asked, and when we have the right witnesses, bringing up the red flags, nothing's being done per se.

If we were to do a projection with the direction we're taking right now with the P3s and the obligation it seems we're putting on the municipalities to go in that direction, where they have no say, what would the projection be? Are we going towards the same bubble as what happened in the U.K.? Is that the feeling?

[Paul Moist]

Time will tell. I think it's a very imperfect way to deal with.... The history of Canada is to try government cooperation. There's not going to be a constitutional...as Professor Stoney says. I don't see a solution to the real grievance of municipalities. We're stuck with one another to cooperate, to come up with federal, provincial, municipal arrangements to build infrastructure.

What I hope we don't see is what we saw in Abbotsford in 2011. The community needed $65 million to do water treatment. Some money would be available from the federal government if it came from the P3 Canada fund. An election was fought over the issue and in B.C. you can put a plebiscite question before the people. The people of Abbotsford were given a question: do you want a P3 water treatment plant? And 75% voted no. They kicked out the mayor who had been in office for two terms. The issue was water.

So that's not a good way to do infrastructure in Abbotsford. They need the support of the federal government. They need the support of the B.C. government. The mayors we talked to are not ideological on the question, they're quite prepared to consider forms of P3s. There are forms of P3 that CUPE has no issue with.

Marrying together design and build makes a lot of sense, instead of having separate companies, where one does the design, the other does the build. That's a P3.

[Jean-François Larose, NDP, Repentigny, QC]

The solutions that were proposed at the Standing Committee on Government Operations and Estimates concerned the need for an audit body that would oversee contracts and ensure that things were done properly. But we are still talking about solutions.

Thank you, Mr. Stoney. Unfortunately, you were not with us at the committee, but I find some of the points you have raised interesting. They constitute potential solutions. Do you have any others to suggest to us? I think that is what we are looking for.

We aren't against P3s, but we realize there are some problems that remain to be solved in that area. Unfortunately, they have been cropping up for several years. There are a lot of examples throughout the world that show that these problems are quite real.

Mr. Stoney, do you have any other comments to make on this topic?

[Dr. Christopher Stoney]

I do. My position on P3s is that they're not inherently bad by any means. I think the rules of engagement are key. If you can have the framework for engagement play to a degree of transparency, then that's a huge start.

If you look on our own doorstep, we recently had the Lansdowne development in which public engagement was legitimate and yet it was essentially cut short to push something through that was sole-sourced and was also unsolicited. It seems to me that if we enter into projects like that, then the mistrust of P3s will continue. Of course a degree of commercial confidentiality is required, but we're putting in agreements here that go on for 20 or 30 years and don't come up for renewal every four years at the electoral cycle. I couldn't believe that we allowed something like Lansdowne to go ahead in a capital city that is supposedly in one of the best countries in terms of governance. Yet we've allowed that to go through.

I was looking for a quote. This is something that—if I can find it. It's essentially the Asian investment bank that says under no circumstances.... This is advice given to Pakistan and Afghanistan, that on no account should you allow a sole-sourced public-private partnership. They are absolutely streng verboten, yet that's exactly what we've allowed to happen.

I was pleased to see there are lots of examples whereby provincial governments are trying to firm up this framework so that P3s can be seen as trustworthy, transparent, and so on. With legislation, they've asked for clear and concise transparency from P3s and accountability-focused situations. In particular they ask the P3 to conduct a detailed risk and value for money analysis to determine if a P3 arrangement provides the best value for money, again something that was not done here in the city.

Consult with the public prior to initiating the bidding process. That's the key—not after the bidding process. Appoint an independent, external fairness monitor to oversee and review the bidding process. Publicly report the terms of the P3 contract. Obviously we shouldn't have to say these things, yet we do.

[The Chair, Conservative, Larry Miller]

I have to cut you off, Mr. Stoney. The time allowed is for the question and the answer. I've been very generous.

Mr. Coderre, you have seven minutes.

[Denis Coderre, Liberal, Bourassa, QC]

Does that mean you'll be generous with me too? Thank you.

[The Chair, Conservative, Larry Miller]

I'm always generous with you, Mr. Mayor.

[Denis Coderre, Liberal, Bourassa, QC]

I feel great.

Good afternoon, gentlemen.

Mr. Stoney, I always have problems when we talk about politicizing. To govern is to choose, that's part of our democratic institution. That's part of the accountability. I'd like your reaction to that because in a way you don't want to depend on the system, but you don't want the system depending on you. The issue is more a matter of the attitude of individuals instead of the system itself. If we had the right checks and balances—maybe it's obvious to say that—don't we think that's how we should work, instead of saying we should depoliticize. If I go to my riding, my city, or my province and say it's important to have that bridge. If you don't have the political will to do it, it won't grow by itself. How can you manage what you've been saying versus what I've just said?

[Dr. Christopher Stoney]

I actually think probably the hybrid framework of the gas tax comes pretty close to that because it does allow some degree of local autonomy. They essentially get to decide, within some constraints, what kinds of projects they want locally, rather than circumventing local priorities, which is what I think happened under stimulus. We know that stimulus was in place for a different set of criteria. This is not a criticism of that. But I think the gas-tax system, if we are going to have funds flowing from federal to local, is a damn good policy, actually. Certainly, the municipalities like it. The oversight is good and essentially now that it's in place it's less of a burden for them.

I'm not going to pull any punches here. One of the problems for a federal government is to ask how we can get our political capital out of the money that's going there. I understand that governments need to show value for money or presence around these projects, but I think that's different. Signage and so on I think is a legitimate thing to do. But I think you have to draw the line at direct political intervention into what the local priorities are that will be funded. I think that's what I mean and what these guys mean.

[Denis Coderre, Liberal, Bourassa, QC]

So it is a kind of localization: think global, act local.

[Dr. Christopher Stoney]

Yes, I think that's right. Once the terms of the funding are made clear, then I don't think those boundaries should be crossed with undue political—

[Denis Coderre, Liberal, Bourassa, QC]

So should we talk about coherence? We don't necessarily all the time have to decentralize because you don't want to create all those little kingdoms, and then after that you cannot govern at all. Where's the balance?

[Dr. Christopher Stoney]

Again, that's a question of perspective. From my point of view, again, I think that the best kind of accountability is local accountability. I have a huge problem with the issue of free money where one level of government is spending money that it has not raised. All the problems of attribution and shared accountability, they're classic in terms of the problems that we see.

[Denis Coderre, Liberal, Bourassa, QC]

So we agree we need more due diligence, we need more checks and balances, and we need less red tape, of course. Can we manage that through smart regulations?

[Dr. Christopher Stoney]

Yes, and again, this is where the tension is. The efficiency and the speed at which these things go through is obviously crucial. By “red tape” I mean bureaucracy that adds very little to the process.

[Denis Coderre, Liberal, Bourassa, QC]

Or it might be the right hand that doesn't know what the left hand—

[Dr. Christopher Stoney]

What the left hand is doing. But let me use the example of Lansdowne again, because I think we're all familiar with it in this room. The Lansdowne process did completely away with due diligence. It went against its own procurement policies. It went against the actual law that's set out. It was essentially a flagrant abuse of the system, and that was done in the name of expediency with the developers saying, if there's a competition here, we walk. That should send up red flags. Cutting that kind of due diligence I think is really a mistake.

[Denis Coderre, Liberal, Bourassa, QC]

Mr. Moist, frankly, and I'll be honest, when I hear you it's a bit dogmatic. Do you believe that public is good and private is bad, or we can have a pragmatic approach? The issue is not that P3 is bad. The issue is with whom you're dealing and if you don't have the checks and balances. But, of course, it's always the same pocket that's paying. Is there a way where it's acceptable?

[Paul Moist]

I don't think we can be dogmatic on these things. The private sector builds public sector infrastructure, almost universally across Canada. It is not a role for the public sector to build a hospital or build a superhighway. Public employees are in a maintenance function when it comes to highways and roads. The capital works are done by the private sector.

Where we get into trouble is when we're trying to stretch dollars. We have a multibillion-dollar infrastructure deficit and we want to do more projects, so we're mortgaging debt. This is where I believe governments, maybe municipal governments, get a little too exuberant. I think you have to separate the P3 proponents from the sober, independent assessment of P3s. It can't be in the same office. I'm not saying people aren't honest and don't work hard, but you have to separate those functions.

I think Manitoba may be onto something right with its legislation, which is not dogmatic. It requires independent objective analysis up front, and it requires transparency. There is also a public hearing requirement, something absent from Lansdowne.

[Denis Coderre, Liberal, Bourassa, QC]

Gentlemen, here's my last question. I know that I only have about 25 seconds. Do we believe that for public policy matters we should have dedicated funds instead of putting everything in the same pot? If we want to make sure where the money is going, should we have, from now on, those dedicated funds instead of putting everything in the same pot? If you have transport, the way that the federal government should partner with the other—

[Paul Moist]

I won't speak for the FCM, but apparently they're coming here, and I think they would say that we need a transportation plan, that we need a number of different...that it's not all one pot. I think they are very appreciative of a former federal government giving them an exemption on GST purchases, then the introduction of the gas tax, and then the current government indexing the gas tax. These are incrementally very positive moves.

Where things fall apart is when junior levels of government are directed, “Thou shalt do it this way”. That's a decision to be made at the local level, between the residents of Moncton and their council.

[The Chair, Conservative, Larry Miller]

Thank you. Your clock is running much more slowly than my clerk's.

[Voices]

Oh, oh!