Good afternoon, and thank you, Mr. Chair, members of the committee, the clerk, and staff for inviting me to speak with you today.
The Canadian Council for Public-Private Partnerships is a non-partisan, not-for-profit organization, with more than 400 members from government and the private sector right across Canada and further afield. It promotes innovative infrastructure and public services delivery solutions through the use of public-private partnerships. We provide the venue, the research, and the expertise to assist representatives at all levels of government to make smart public policy choices when procuring infrastructure. We seek to build awareness, acceptance, and adoption of P3s and we encourage all interested committee members to engage with us if you want to learn more about this particular sector.
Among our various activities across Canada and internationally, our signature event is our annual national P3 conference. This will be held in Toronto on November 2 and 3 and will be our 23rd annual event. It attracts more than 1,200 delegates from around the world. It's the largest conference of its kind and is recognized as the premier gathering of the P3 community across the world. It's a symbol of the success that P3s have had across Canada.
We take considerable pride in advancing the research agenda, promoting the next generation of talent among youth and women, and exporting Canadian expertise in the P3 sector. There are plenty of opportunities for the government to collaborate with us on these efforts.
If we were to look back at the last 20 years of infrastructure development in Canada, I would say we have come a long way, but there is more work to be done.
At the federal level, the last 10 years under successive building Canada plans have seen put in place the largest federal investments in infrastructure in Canadian history. The latest, a 10-year, $70-billion investment, including a second $1.25 billion over five years for the P3 Canada fund, has provided long-term certainty around future federal investments. In turn, we have witnessed provinces stepping up to the plate with their own long-term plans. Not to be outdone, the Province of Ontario unveiled its own 10-year plan, investing $130 billion. Action at the two senior levels of government has also given more certainty to municipalities as they develop their own long-term plans.
The recent budget 2015 announcement of an annual $1-billion public transit fund is yet another important investment that shows the federal government’s commitment to infrastructure renewal and expansion across the country.
Could more be done? Always; we know the infrastructure deficit is in the hundreds of billions of dollars, but let’s take a moment to remember where we were 20 years ago. In the early to mid-1990s, governments at all levels were faced with deficits, mounting debt, and underinvestment in infrastructure. In many ways the country was at a crisis point. Fiscal prudence since the mid to late 1990s by successive governments allowed Canada to invest heavily in infrastructure during the 2008 global financial crisis, taking on modest debt but ultimately coming out ahead of its G-7 partners.
One of the successful moves of the 1990s in Canada was a slow shift in the way government procures its infrastructure. Many realized that government alone cannot manage multiple major infrastructure projects. Tired of overbudget projects running well past their expected completion dates, governments simply could not afford the status quo.
The emergence of public-private partnerships, P3s, became an increasingly attractive option for governments. The partnering of the public and private sectors and the sharing of risk based on who is best able to manage it has led to an impeccable record of on-time, on-budget, high-quality infrastructure projects across the country.
The Confederation Bridge was one of Canada’s first P3 projects, and though it is still a huge national success story, there are now, in part because the P3 market in Canada has come a long way, 224 projects operational, under construction, or in procurement across the country. The value of the projects that have reached financial close exceeds $72 billion.
In an independent economic impact assessment of P3 projects undertaken over the 10 years between 2003 and 2012, we found that over 290,000 direct FTE jobs were created, adding $25.1 billion to the Canadian GDP, bringing in $7.5 billion in tax revenues for federal and provincial governments, and saving taxpayers $9.9 billion. These are very compelling outcomes.
Going forward, the future for P3s in Canada looks bright with new jurisdictions coming on board, including provinces, territories, municipalities, and first nations communities, and new sectors achieving prominence, including urban transit, water and waste water, social housing, energy, broadband, resource development, and government services.
We also know that P3s share widespread support among the Canadian public. In a recent survey by Nanos Research, 62% of Canadians supported the use of P3s. That support grows when they are familiar with a project in their own backyard. For example, residents in Sault Ste. Marie had support for P3s climb to over 70% with the recognition the hospital there was built under this model. In fact, the vast majority believed that without the help of the private sector, the hospital would never have been built.
We have also recently conducted across Canada focus groups and elite level surveys with municipal and aboriginal leaders that show further strong support for the use of P3s Those results will be published in the near future.
There are two important facts about P3s that I believe need to be emphasized.
First, P3s are not privatization. Government always owns the asset. The private sector simply designs, builds, finances, maintains, and in some cases operates the asset for a set period of time, but the government always owns it, controls it, and is accountable for it.
Second, P3s are not a panacea. P3s make up roughly 10% to 15% of projects across Canada. This is because they are only done where there is value for money in using the model and where risk can be appropriately transferred to the private sector. Where these conditions are not met, we will be the first to say, “Do not use public-private partnerships”.
What do we need to do to build upon the successful use of P3s in the future in order to help fight the infrastructure deficit? Municipalities and aboriginal communities face the biggest infrastructure challenges in Canada while having the lowest capacity to raise revenues. Awareness of P3s is still low among these jurisdictions and many myths still exist. Less than 25% of Canada’s P3 projects are done at the municipal level, and even more notably, only one first nations project has qualified for funding from the P3 Canada fund.
What is needed? First is capacity building at the municipal and aboriginal level. Second is streamlining the model for smaller projects that would involve less paperwork, fewer upfront costs, and easy to access technical services. Third is removing the P3 funding disincentive. Currently communities are only eligible for 25% of the costs under the P3 Canada fund, while they can receive 33% under the building Canada fund.
Our organization is also in the midst of a new research project that will look at what barriers exist to successfully procuring P3 projects in aboriginal communities. The need is clearly there, but certain barriers exist that prevent its wider use. It is our hope the research will provide a road map for government, aboriginals, and the private sector to capitalize on the success of P3s.
The new public transit fund is addressing a sector in need of better infrastructure. The Canada Line in Vancouver is a perfect example of a light rail transit project done as a design, build, finance, operate, and maintain. The provincial government has saved over $90 million compared to projects delivered this way using more traditional methods. It is now providing a direct link from the Vancouver airport to downtown.
Transit projects in Edmonton, Winnipeg, Kitchener-Waterloo, York, Toronto, and Ottawa are now under way using P3s, but we know much more needs to be done. In Toronto, a downtown subway relief line is needed, as is funding for Mayor John Tory’s SmartTrack proposal. Ottawa has plans for phase two of its LRT, and there's a need for at least two new lines in the greater Vancouver region. These are just a few examples of the needed projects across the country.
Another area to which the government can turn its attention in the same way it has for transit is water and waste water. With stringent new regulations coming into force, and given the direct health and safety impact of having safe, clean drinking water, many municipalities and first nations will need to invest in new infrastructure in these sectors.
The 2011 national assessment of water and waste-water facilities on reserves showed over $1 billion in immediate investments were needed and over $4 billion in investments were needed over the next 10 years.
P3s have a track record of success in this sector. The new Regina waste-water facility will save the city over $130 million and provide a state-of-the-art facility. Smaller towns like Goderich, Ontario, have also been able to use this model successfully, despite some who say it is only applicable to very large projects.
The last point I'd like to make to the committee has to do with Canada having taken major steps at addressing the infrastructure deficit in this country while maintaining a strong fiscal position. Furthermore, we have developed a P3 approach that is recognized globally as best in class, and Canadian industry has acquired the experience and expertise to successfully compete on the international stage.
Now is not the time to take our foot off the gas pedal. We have seen the damage of the past because of underinvestment in infrastructure, and it will be future generations that will pay the price. As the fiscal situation improves, the government should ensure that a significant portion of future surpluses is spent on infrastructure renewal. To ensure that money is stretched further, and ensure high-quality, well-maintained infrastructure that is delivered on time and on budget, I would suggest to you that public-private partnerships are a proven procurement tool at the disposal of government.
Thank you. I look forward to the discussion that will follow.