Thank you, Mr. Chair.
Thank you for inviting me. My apologies for being late. I actually thought we were over in the Parliament Buildings, so a comedy of errors. But anyway, all's well that ends well.
I speak to you today, really, as an individual. I'm an academic in the School of Public Policy and Administration at Carleton University. I have also run the Centre for Urban Research and Education, which focuses, amongst other things, on areas of infrastructure investment, particularly municipal infrastructure, and obviously, the way that relates to the federal role as well. We also deal with issues of procurement. I saw that some of the questions that the committee is dealing with would be relevant to that as well, so, if I can, I'd be happy to contribute to the discussion on that.
Recently, a colleague and I were in the process of writing a report on this very topic of infrastructure investment, and in particular with a focus on the federal role. I didn't get time to write detailed talking points, but I'm happy to send in the points that I've managed to put together.
Here are a couple of things just to clarify the assumptions.
When it comes to tackling the issue of what's the best way to invest in infrastructure, it really is a question of trade-offs between different criteria. Some of the criteria that we identified were efficiency, accountability, transparency, autonomy and flexibility at the local level, equity, ease of administration, financial sustainability—the stability of that funding, that is—the risk of politicization, displacement risk, in terms of certainly private-sector investments, and environmental sensitivity as well. Those are just some of the criteria that we're dealing with when we look at infrastructure.
In terms of a definition, I listened in the other day to the discussion. One of the questions was, “What do you mean by infrastructure?” I generally use this definition: the basic facility, services, and installations needed for the functioning of a community or society, such as transportation and communication systems, water and power lines, and public institutions, including schools, post offices, and prisons. Of course, there are other definitions that include other things as well, but certainly I wouldn't at this stage include social infrastructure, cultural infrastructure, even sports infrastructure, those kinds of things.
The first question we were asked to address was red tape reduction. I think the problem here that you're facing and that we're facing is that one person's red tape is another person's due diligence. As we all know, at the moment we're seeing the evidence come out of the Charbonneau commission. Sponsorship and other similar cases are still in the public mind as well. There's always, I think, the increased focus on trying to ensure value for money.
As well, if we want to think seriously about red tape reduction, then I, along with many others, would argue the best way to do that is to actually decentralize the system rather than centralize it, either at the provincial or in this case at the federal level. I'll get to this in my recommendations, but particularly for large cities, ideally I would like to see the federal government make increased tax room for municipalities for income tax or perhaps tax sharing. That would reduce transaction costs—so oversight and audit—which we find with all transfers between governments, and certainly it would increase local accountability. It would, in a sense, reduce the tendency for the politicization of infrastructure funding.
Also it would reduce municipal dependence on what is sometimes called “free money”, and has recently been described as the sort of crack cocaine of municipal governments. They keep reaching to other levels of government for a hit of financing, but it's temporary and wears off and it's never quite enough. So I really do think we have a problem in developing a dependency culture between the governments.
I know my colleague has spoken about P3s in depth so I'll spend a little bit more time just talking about the politicization issue. The KPMG report “The Changing Face of Infrastructure” from 2010 said that the politicization of stimulus spending presents a fundamental challenge for future programs, and that in a recent international survey undertaken by KPMG, senior public leaders identified government's tendency to view infrastructure too often through a political lens as the main barrier to sustained strategic investment in infrastructure. Significantly, they also identified increased transparency in project selection as the single-most important factor in depoliticizing government spending on infrastructure.
Here's another quote. I'll just give you one more by Lafleur that actually, I think, captures this idea quite well.
Instead of attempting to craft a national transit strategy, which will inevitably entail picking winners and losers, the federal government should download fiscal capacity. That is, after all, the crux of the problem. It is hard to imagine the federal government making better local infrastructure decisions than municipal politicians. But they can alleviate the revenue problem faced by virtually every municipality by transferring the entirety of fuel taxes to the municipalities on a per-capita basis. This would give cities access to a stable additional source of revenue. It would also end the ad hoc, hyper-politicized funding agreements that often cause municipalities to make inefficient transit decisions.
I think the key issue here is the extent to which you feel that the remit can go and how realistic it is to transform that. We do know of course that the Constitution is an issue, but on the other hand, municipalities, as you know, had their income tax powers taken away by the federal government and they were never returned. They were returned to the provinces, but not to municipalities. I would say that if you're seriously looking at the costs of these transactions, they are considerable, particularly if you're going to ensure oversight. As a default position, I would ask whether you need to be in this position of funding and whether you can decentralize this or devolve powers locally. The municipalities do have tools to do that. If they need further tools, those options can be explored further.
Regarding the specifics of red tape reduction, this is a serious problem, I know, particularly for smaller contractors who cannot bid for too many things until they know the results of competitions currently under way. The complaints I hear specifically have to do with there being a lot of screening and clearance needed from several government departments. So one wonders whether that is the issue that could be centralized.
When we did the research on the gas tax, they also pointed out that quite often there were delays in putting shovels in the ground in order to allow for ministerial or MP visits and photo opportunities. I think again those issues—the politicization and the efficiency—in a sense need to be seen together. In terms of ensuring increased competition, certainly a place to begin is with notification and perhaps the time and outreach that allow companies to know what is out there.
The second issue we hear about is the unbundling of contracts. As you know, particularly with P3s, there's a tendency to bundle the whole kit and caboodle together, which in a sense makes it less attractive or less feasible for smaller companies to bid, and we're left with the sort of usual suspects in terms of some of the key players in infrastructure and particularly P3s internationally.
The other concern we hear is with umbrella contracts that favour incumbents for future work. So for those of you who are familiar with that, there is something called an umbrella agreement, one of the disadvantages of which is that umbrella agreements can be used as guidelines to any future contractual choices. Umbrella agreements are not usually concerned with immediate contract terms and conditions but with those that may occur in the future. The guidelines will act as the principal rules when it comes to setting out future contracts.
If that's an issue I think it's been raised certainly at the municipal level.