Transport Committee on May 21st, 2013

[Brian Dijkema]

Yes. That is actually not what I said, but I appreciate the question.

What I said was that those who were qualified should not be disqualified because of their private choices. Ostensibly certain companies that are otherwise qualified to do the work, and in fact, do the work a municipal line away or in a different province, or what have you, are disqualified because of the choices their workers make.

So we're not actually advocating for Brian Dijkema Inc. who has two guys who have never plumbed before to set up the water treatment plant. But what I'm saying is that if you're a qualified contractor, if your workers are qualified to do the work, you should not be disqualified because of the choice that your workers make.

[The Chair, Conservative, Larry Miller]

Thank you, Mr. Sullivan.

Mr. Watson, you have five minutes.

[Jeff Watson, Conservative, Essex, ON]

Thank you, Mr. Chair.

Thank you to our witnesses for appearing today on what I think is an important study on how we can ensure or how competition can make infrastructure dollars go further. Obviously various levels of government deal with the reality that resources, being tax revenues, are not unlimited. Taxpayers expect value for the hard-earned money they pay out in taxes, whether it's property tax or provincial or federal income tax. I think this is a valuable study for us to be undertaking.

Mr. Buda, if I fairly summarize your position, you've been critical of any requirement in a federal-provincial agreement on infrastructure that would stipulate there must be open tendering, if you will, for infrastructure projects. You've said that such a requirement would increase costs on municipalities by an undefined amount. Do you have any sense of what it costs municipalities in Nova Scotia, for example, to comply with that? I understand that the Canada-Nova Scotia agreement in effect since 2007 stipulates, “The contract award process will be competitive, fair and transparent”. That rules out not only sole-source contracts but union-only processes.

Do you have a sense of what it costs municipalities there?

[Michael Buda]

No, I don't.

I wouldn't characterize my analysis as critical. I think I'd counsel caution that a one-size-fits-all national approach to this might end up costing everyone more money instead of maximizing benefits. So a province-by-province approach is certainly something we would advocate, primarily because procurement regulation and oversight falls within provincial jurisdiction.

I think the example you bring up in Nova Scotia is a perfect example of our understanding. It was the province alongside the federal government that was mainly interested in using this agreement to continue its own efforts to do exactly what it was doing. So a province-by-province, territory-by-territory approach is going to allow the kind of flexibility and context sensitivity to ensure that the new regulations are as streamlined as possible.

All I'm counselling is caution that a one-size-fits-all regulation at the national level might end up costing more than it needs to.

[Jeff Watson, Conservative, Essex, ON]

But you have no idea what it would cost. I'm not sure it's fair to suggest that it's going to increase costs without being able to demonstrate that it does increase costs. You've made the point I think, in contrast to Mr. Dijkema, that maybe his numbers are wrong where you've taken issue with some of his numbers. But at least he's come to the table with something that represents a range of potential increased costs relative to closed competition. I don't think it's fair to come to the committee and suggest that it will increase costs to make this a core element of how we negotiate infrastructure agreements.

[Michael Buda]

But I certainly expect Infrastructure Canada to be able to demonstrate that the cost of complying with any regulation, not just this one, outweighs the benefits that regulation will bring. That's all I'm suggesting.

[Jeff Watson, Conservative, Essex, ON]

You said it was overkill. That's pretty strong language, Mr. Buda. I would expect you to back that up with some numbers.

[Michael Buda]

I'm counselling caution so that doesn't end up being the case. But some of the approval processes for federal application-based funding programs can reach three or four years. That is a very real cost to capital. Every day that public funds sit in Ottawa, rather than being invested in economically productive infrastructure, produces an opportunity cost.

But you're right, I certainly don't have empirical evidence other than to point to the $6 billion in reprofiled money, in part because of extensive approval processes.

[Jeff Watson, Conservative, Essex, ON]

I'm merely pointing out you used the word “overkill” today, not me.

Mr. Dijkema, in your report to the committee, were this to become a core part of the negotiating strategy for the federal government with respect to the provinces, in Ontario, for example, that processes be open and fair and to insist on that as a condition of an infrastructure agreement, what percentage of municipalities would have to worry about whether or not they're captured under such a new system, if you will, of open competition?

[Brian Dijkema]

Thanks very much for that question.

I would say this transcends issues of municipal politics as well. I'd like to just note that again, there are major energy and other infrastructure projects that the federal government funds—

[Jeff Watson, Conservative, Essex, ON]

I'm focusing on municipalities because your report focuses on municipalities, so—

[Brian Dijkema]

Absolutely, and I'm just repeating my point. In terms of a percentage, what percentage of municipalities would be affected? It's a very small percentage of municipalities if you're looking just in terms of the number.

[Jeff Watson, Conservative, Essex, ON]

About 91%, I think, according to you, say that they don't have to worry at all about this because they're already open competition.

[Brian Dijkema]

Fair enough. But as I noted earlier if Waterloo goes forward, that's 28% of Ontario taxpayers so—

[Jeff Watson, Conservative, Essex, ON]

But it is only four municipalities—

[The Chair, Conservative, Larry Miller]

You're actually well out of time, if we can just let him finish.

[Brian Dijkema]

You're right, it's only four municipalities, but Toronto, Hamilton, Sault Ste. Marie, and the region of Waterloo are very populous municipalities. They're also centres of industrial and other economic action and therefore very strategic and important.

[The Chair, Conservative, Larry Miller]

Thank you.

We'll now move to Ms. Chow for five minutes.

[Olivia Chow, NDP, Trinity—Spadina, ON]

Can I go back to where we left off, Mr. Buda?

On the gas tax funding formula, you prefer a gas tax partially because it's predictable, long term, and it's direct. You don't have to get bogged down with all the red tape, the application forms, and the administrative trivia. The problem with some of the P3 screenings and the rest is that there are rural municipalities that feel if there's a block grant, often they get left out in the cold.

In your next round of negotiations, are you looking to pull a block of money to protect it so that the rural municipalities would have some form of assurance that their projects would be accepted, especially the water treatment programs that they so desperately need? Is that an area that FCM is focusing on?

[Michael Buda]

For sure. Our submission to Mr. Lebel, as part of his consultations into a long-term infrastructure plan, called for essentially a renewal or continuation of the existing small communities component of the building Canada fund, which essentially is a dedicated envelope of funds within the larger building Canada fund. It's a program that's designed specifically for access by smaller communities.

There are two important aspects to that. One is that small communities know that there's a dedicated envelope, so they know roughly how much money they think they can access. Second, and just as important, the programs have been designed with their needs in mind, so it's not a one-size-fits-all.

An application process that the City of Toronto can carry out is obviously going to be well in excess of what a small community can manage, so the program has actually been designed with much more streamlined application processes. They actually provide technical support in the form of federal and provincial officials to help municipalities carry out the application process, the reporting, and all the rest. So we would certainly advocate for a continuation of that kind of envelope.

[Olivia Chow, NDP, Trinity—Spadina, ON]

On affordable housing, for example—which doesn't quite fit into the infrastructure funds, and FCM has been pushing the importance of building affordable housing—perhaps you can take the opportunity to describe where you think that should land. For awhile, a few years back, municipalities were pushing to have affordable housing as part of the infrastructure block funding. Is that no longer the case?

Where are things at in terms of affordable housing?

[Michael Buda]

You're certainly right that at the local level many municipalities consider housing—especially publicly owned housing—as a form of infrastructure because indeed it is. It's a very large capital cost, especially for Ontario municipalities. But when it comes to translating municipal needs into the federal structure, we came to realize that it wasn't a great fit, primarily because the federal government delivers funding for housing and housing-related programs through CMHC and HRSDC, and funds for all other types of publicly owned infrastructure through Infrastructure Canada.

We suspected that trying to conflate the two would either lead to confusion or in fact it would lead to underinvestment, likely in both areas, because you'd end up with a confusing mix of objectives and a program that's run by one department or the other. So we really separated the two.

I think in some ways for administrative efficiency in terms of being able to interact with each department according to what its accountabilities are...but the needs are the same. Our position on the federal role in supporting municipal infrastructure or municipal housing needs are the same, but we're looking at the two different departments separately.

[Olivia Chow, NDP, Trinity—Spadina, ON]

Have you heard from the department, Infrastructure Canada, that the funding that is rolling forward in 2014 and 2015—because it's really from within an existing program.... As you said, much of the existing funding has been dedicated, has been committed. It's being spent. It just hasn't rolled out yet, because the receipts are just coming in.

Has there been an indication whether there is sufficient funding, or of what funding is left for application purposes? If the small municipalities are very confused with all these big numbers, what precisely are you folks telling them about what is available for them—I'm not talking about 2016—for 2014 and 2015?

The community infrastructure funds of $150 million are done; that's over. What is available for 2014 and 2015?

[Michael Buda]

The building Canada fund I think allocates $200 million in 2014, if I'm not mistaken. But that only speaks to the amount of money that Ottawa would expect to send out of Ottawa in the form of a cheque.

We believe that this is a vast overstatement of what will actually occur, and that very little will be spent in the first year. Even though our target would be that around $1 billion of projects would be approved in that first year—or more—it will take years for the receipts to actually make their way back to Ottawa.

What we're telling our members is that we believe the new building Canada fund is in fact increasing existing investment levels above the current building Canada plan, which of course is good news, and that the line item in the budget is really reflective more of Ottawa's accounting practices than of the objectives of the department.

As I said earlier, the investment plan by Infrastructure Canada will have to be.... We'll soon be advocating for a more transparent approach to their plans for how quickly they plan to invest each dollar. That means not looking at the cheques leaving Ottawa, but looking at how much they'll approve in projects each year, which is different.

Right now, we're telling our members that it should be full steam ahead, according to the past practices.

[The Chair, Conservative, Larry Miller]

Thank you.

Mr. Holder, you have five minutes.