Transport Committee on May 28th, 2015

[The Chair, Conservative, Larry Miller]

I call our meeting to order. Thank you to all of our witnesses.

We have two witnesses by video conference, Mr. Siemiatycki and Mr. Toderian.

With us here, from the Department of Industry, are Mr. Dagenais and Ms. Charette. Thank you to both of you.

We're going to start with our video conference witnesses first, in case of technical problems.

Mr. Siemiatycki, you have 10 minutes or less, please.

[Professor Matti Siemiatycki, Associate Professor, University of Toronto, As an Individual]

Thanks for the invitation to speak with you.

Infrastructure seems to be having a real moment here in Canada as well as abroad. It seems to be on the lips of media and political leaders, as well as getting policy and public attention. There's a lot of interest in this.

When it comes to infrastructure for government, government really has two main decision points. One is which projects to build, and the second point is how they should be procured. I want to touch upon both of these topics briefly within my 10 minutes.

With respect to which projects to build, we have a vast need for infrastructure right across this country. We're going to be spending billions and billions of dollars over the next decade. I think the key—and maybe this doesn't even bear saying, but I'll say it anyway—is that we need to be picking the right projects.

There's this sense that building any infrastructure is valuable, but really, to get the top social value and the top community value from these projects, we have to have mechanisms to pick the right projects. Investing in projects that don't deliver, that aren't the highest priorities, can lead to wasted public money. The project has to be maintained over decades. Also, there's a potential for loss of public confidence in our leaders to actually solve problems.

So we first pick the right projects, and second, focus not only on new projects but also on operations and maintenance. Once you build these things, they're in our communities for decades to come. They need to be maintained. That costs money. I've heard some estimates that the cost of construction is just 20% of the total life-cycle cost of a project. There could be as much as 80% future costs just in terms of operating and maintaining these. These are big dollars. We have to have the money available to actually keep these projects running and in good order. Once you let them wear down, the costs really spiral to keep them up and running.

Let me shift now to talk about how we procure projects. In this vein, I want to speak specifically about public-private partnerships, which has been the majority of my research.

Public-private partnerships make up generally a small fraction of all infrastructure in the country. They're generally best for very large projects. Maybe 10% to 15% of all infrastructure investment goes through public-private partnerships, but these are also the biggest, highest-profile, costliest projects in our country. Generally the numbers are $50 million to $100 million and up. These are big projects, and there's also a lot of attention on these projects. This topic, then, has become one of great interest in terms of how we can deliver these big projects effectively.

Public-private partnerships have been used right across the country. There have been about 200 of them, maybe a little bit more, that are either done or are in the procurement process.

P3s means a lot of different things, but basically it contains three components. One is the parts of the process you are bundling and providing to the private sector. The private sector can take on anything from design, build, finance, operate, and maintain. That's one aspect, and the various components can vary. As the private sector takes on more functions, it also takes on more responsibility for delivering the project.

The second component of a public-private partnership is risk, and which risks in particular the private sector is going to take on. The big risks are construction risks, potential for cost overruns and delays; availability risk, that the facility is going to work as expected once it's opened; and then finally, demand risk, that the revenues are going to be there as was predicted. These are the types of risks, and they can vary on public-private partnerships.

The final point is the repayment mechanism. With what mechanism are they being repaid? There are only really two. They get repaid either through user fees and direct tolls, or they get repaid through availability payments, and that's direct payments from government. In our country, most projects are the availability payment type of deals, where the government pays them back entirely over the course of the project. What that means, importantly, is that public-private partnerships are not new money.

One of the motivations for using public-private partnerships historically has been to bring in new money. The public sector can tap private money to pay for infrastructure. It turns out that, the way we're doing these projects now—mostly as availability payment-type deals—these are not new money.

Then what are the other reasons you might do this? Really, this is about value for money. Can we leverage the private sector to deliver better projects than government would deliver on its own? That can be things such as innovation being brought forward, or life-cycle maintenance, that you have money actually ring-fenced in the contract to maintain the projects. That's another aspect that's very important. But there's also risk transfer, that the risks of major cost overruns are transferred from government to the private sector. That's another area where public-private partnerships are seen as a real opportunity.

In terms of how these projects have performed, the record on public-private partnerships here in Canada, I would divide public-private partnerships between the first projects that took place up until probably the end of the nineties, early 2000s, and this most recent generation over the last decade or so. In the most recent generation the projects have tended to be built on time and on budget, which is positive, so there's cost certainty. Once the projects are operational we haven't seen any major failures, any major contract renegotiations, or bankruptcies. That's been a concern about public-private partnerships and we haven't seen that.

If I were to try to identify why we're having some level of success with P3s, or public-private partnerships, so far, we tend not to transfer demand risk, which is very hard for the private sector to control. That's better maintained by government. We seek to strategically use private sector finance, so government has recognized that they should use private finance to transfer risk but not as a way to raise new money. Government is ultimately, for most projects, going to pay back almost the entire shot by themselves, so this is not new money.

We tended not to transfer operations to the private sector. These are mostly for design, build, finance, and some of the maintenance of the hard asset. We're not transferring the operations of this service, so this has maintained government flexibility, which I think has been a positive and has meant that our deals are not quite as inflexible or quite as prone to controversy and tensions as in other countries. Finally, we're counting these projects on the books, so this is on-balance sheet investment. This is not an accounting mirage.

While we're seeing successes in public-private partnerships here in Canada, I think there are some points and some outstanding issues we need to consider.

Public-private partnerships are not a cheap way to deliver infrastructure. In fact, up front they're quite expensive. They have higher construction costs. They have higher transaction costs. These are for the lawyers, the accountants, and the advisers to structure these deals. They also have much higher project finance costs. The private sector borrows money at much more expensive rates than what government can borrow at, so they have considerably higher costs. The Office of the Auditor General in Ontario did a study. It found that doing P3s was $8 billion more expensive than if government had delivered the projects directly and effectively managed the risk. That's the key point, to effectively manage risk, then they could have saved $8 billion. That's a real open question, but there is potential for savings there.

On the construction side, studies in Europe have found that public-private partnerships cost up to 25% more in terms of their upfront capital costs, so you're paying a premium. It's like buying an insurance policy against future risks. You're really paying a premium. The problem is that we don't have good data on whether that premium is actually value or not. There's not the evidence on what risks have happened on past projects. There's not the detailed studies of that. I think that's really problematic because, while we can say that public-private partnerships are delivered on time and on budget for the most part, we don't know what that's compared to. How much are we paying for that insurance premium and how much value is that giving? Could government actually deliver that project more effectively and manage the risk, instead of trying to transfer it, because risk transfer comes at a high cost?

There are a few other issues to raise. One is loss of policy flexibility. When you have these long-term contracts, it can pose real problems for government, who needs to make changes to how the facility is used or the rates that are being charged. There are all sorts of other issues. We can lose flexibility. That's caused tension on international projects. We're fairly early on in our experience with public-private partnerships, and so far so good, but we'll have to see down the road how that issue of flexibility comes up.

Another issue I want to talk about quickly is “the only game in town”. Public-private partnerships are one option, but we have to be very careful that we're not setting up structures that make this the only option that's available for, especially, municipalities to access senior-level government funding. This poses the potential issue that we're not using public-private partnerships because they deliver value but really just because we can access money. That can lead to real problems in terms of the incentives and projects being used that are not necessarily the best value. I think it's very important, then, that when we have funding models for delivering money to municipalities, especially, but also provinces, that these are not tied to a specific model. Public-private partnerships are one option for delivering infrastructure, but they need to be used in the ideal setting. We shouldn't be choosing in advance so that governments can access money. That can really lead to potentials of not carrying out accurate studies on the incentives and why we're using public-private partnerships.

A final point is around innovation and design, because we've heard a lot about how these projects are structured and that they drive innovation. The questions are what types of innovation, and innovation for whom. The types of innovation we tend to find are those around construction means and methods, innovations around finding ways to shrink the building, to make them so that they still provide the service but in smaller sizes and lower costs. These are really cost-saving innovations.

When it comes to architecture design and those types of issues for public-private partnerships, the observation is that they tended to be fairly average buildings and not necessarily great architecture or great design. That's not necessarily true in all cases but is a general observation. They haven't won a lot of major architecture awards. They're not necessarily the signature buildings in your community.

Not every building has to be a signature building, necessarily, but these facilities are public infrastructure that's going to be in our communities for decades to come. We need to make sure that the quality of these buildings in terms of architecture and design is there and is at the highest level possible. That's another area—a flag to raise—that we should pay attention to.

To wrap up very quickly, I have a few recommendations. I think we need to be carrying out studies of risk. We need to understand what the value of that risk transfer is. We're paying high premiums up front to transfer risk to the private sector, especially for construction. We don't know if we're getting value for that. Cost certainty is important, but not necessarily at all costs. Government might be able to manage risk rather than just transfer it and thus save money for taxpayers and citizens.

We need to develop a bureaucracy that has the skills to analyze and take part in these projects. These are complicated projects. As part of that, I think we need to be focusing on infrastructure broadly and not necessarily just on public-private partnerships. To that point, I would would say with respect to PPP Canada that I think the organization should be rebranded and made broader. It should be made “Infrastructure Delivery Canada”.

We should be focusing on effectively delivering all infrastructure projects, not necessarily just public-private partnerships, and on having funding mechanisms that focus on effective procurement, not necessarily just on incentivizing public-private partnerships. There are all sorts of innovative types of procurement models that might deliver value for Canadians. We need an agency that pushes effective and innovative procurement, not necessarily just public-private partnerships.

The final point I want to make is that we need to be leveraging information and becoming analytical organizations. Infrastructure and public-private partnerships have a lot of data that come out of them. We should be using that data to systematically evaluate how our projects are performing and to come up with new mechanisms and new tools to make sure the projects we build are performing and that in the future we come up with the mechanisms that are the most effective to deliver projects successfully.

Thank you. I'll leave it there.

[The Chair, Conservative, Larry Miller]

Thank you very much.

We'll now move to you, Mr. Toderian, for 10 minutes, please.

[Brent Toderian, TODERIAN UrbanWORKS]

Thank you, Mr. Chairman. I really do appreciate the invitation to present to you. I'm very pleased to be participating in what is a very critical and timely conversation.

My name is Brent Toderian. I have been a practising city planning, city-maker, and urbanist for 23 years in five provinces and one territory. I spent about six years as Vancouver's chief planner, and about six years in key planning roles in Calgary as well. I also advise cities all over the world, as far away as Auckland, New Zealand, and Medellin, Colombia, on issues relating to transportation and infrastructure in particular, but I'm actually a generalist. I look at all issues of city-making.

I'm going to start my comments by saying it's my observation and the observation of the organization that I'm the founding president of, the Council for Canadian Urbanism, that Canada is badly in need of a cohesive and comprehensive national urban strategy, which would address a number of national issues, including affordable housing, urban infrastructure, and urban transportation. I'm going to focus my comments today specifically on urban transportation.

I'm sure I don't need to quote to this committee, Mr. Chairman, the many studies that have been done to quantify the massive costs to the economy, both local economies in our city regions and the national economy, of traffic congestion. In my opinion, the billions of dollars often cited in those studies don't take into account the full cost of traffic congestion to our economy, including the ripple effects around public health care costs, social inequity, and climate change.

In short, no matter who's doing the math, the math is probably bigger than we think and the consequences of the status quo are massive, in the billions of dollars, at both the local level and the national level.

A national transportation strategy should include, in my opinion, smart, significant, stable, and predictable funding for urban infrastructure projects for municipalities and city regions around Canada. Given that municipalities receive about 8¢ of every tax dollar in Canada, I think the tendency to expect local governments to fund a third of such projects, which is a typical expectation, when they don't come close to collecting a third of the actual tax revenue, really fundamentally needs to be rethought. We're seeing that notion play out in the incredible tensions in metro Vancouver right now, as our transit plebiscite is going on at the behest of the provincial government.

It's also critically important that we rethink what we're spending our infrastructure money on. As the previous speaker suggested, what are often called shovel-ready projects, the idea that anything is smart spending, really needs to be replaced with a focus towards prioritized smart projects that have a demonstrated track record of success in achieving our stated goals and particularly in terms of return on investment.

Cities like Vancouver, which I formerly planned for, and smart cities around the world that I'm working with now have shown clearly and irrefutably through data and analysis that continuing to fund and prioritize car-oriented road projects is very expensive. They provide less of a return on investment in everything from tax revenue generated to job creation, and most importantly, they actually don't work to solve the problem of traffic congestion.

We've understood for decades that because of what we call induced demand or the law of congestion, new road projects just fill up with new drivers and new trips as people change their behaviour in reaction to the new capacity. New development projects are built based on the anticipation of that car capacity, often referred to as sprawl in the suburban context. Studies have shown that anywhere between four and eight to ten years after construction, the lanes all just fill back up again.

It's a never-ending process of public spending, building, failing, spending, building, failing, and it just keeps going and keeps going. We've known this from way back in the 1950s. A very famous city expert, Lewis Mumford, said back in 1955 that building new roads to solve traffic congestion is like loosening your belt to solve obesity. We know it doesn't work. It just induces more people to drive.

Vancouver and other progressive cities around the world have shown that the combination of smart land-use decisions, which is of course a local government role... We often say in Vancouver the best transportation plan is a great land-use plan. If you get your land use right, it does an awful lot of the work for you, in combination with smart, prioritized funding for walking, biking, and public transit—and particularly in the context of this conversation, public transit. That infrastructure prioritized over car infrastructure spending is the only thing in Canada that has proven to be successful in actually achieving the many definitions of success that we as city planners and city-makers set for ourselves in terms of mobility. Lower commute times and fewer vehicle miles travelled are the things that traffic engineers and city planners around Canada say we want to achieve, but the only city that has actually achieved them is Vancouver.

We achieved lower commute times and lower vehicle miles travelled by first of all saying no to freeways in the 1960s and early 1970s and by prioritizing walking, biking, and public transit infrastructure. For example, we never had to have the debate that Toronto and Montreal have been having lately about tearing down their freeway infrastructure, because we never built it in the first place. In doing that, and in doing smart land use combined with prioritized transit, walking, and biking spending, we actually made it easier for everyone in the city to get around, and for goods movement and economic activity to occur, with fewer actual cars in the city.

It's very important to say that everything I'm saying is not an anti-car message. We know, and the facts show, that if you design cities for cars, it fails for everyone, including drivers. But if you design a multimodal city that actually prioritizes transit, walking, and biking, it works better for everyone. It works better for the economy, because more economic activity can move in less space and with lower costs. It works better for everyone, including drivers. I'm going to repeat that: including drivers. It shows that this is not a war on the car. That's a bit of lazy political message that happens sometimes in some sensationalist and irresponsible media. The facts and the data show a much more interesting storyline about the potential success of our cities.

Based on the successes of Canadian and international best practices, Canada should be prioritizing infrastructure spending that makes transit, walking, and biking more inviting. This is not for ideological reasons, and not because voters are increasingly liking public transit and increasingly liking bikes, for example. It's for very pragmatic reasons. It's because it costs less, because it takes up less physical space in cities and city regions, and because it generates more spinoff effects in taxes generated and in job creation. The data shows that. Perhaps most importantly, it's because it actually works in improving the traffic congestion picture and addressing the economic consequences of traffic congestion on our economies.

This isn't a right or a left issue politically. This isn't about political ideology. This is about smart or dumb. It's about successful or unsuccessful. It's about more expensive or less expensive. Continuing to prioritize car-oriented infrastructure in shovel-ready projects or in any other way we prioritize Canadian infrastructure, despite all the data and evidence to show it's more expensive, takes up more space, has less spinoff benefits, and doesn't work, really has to be considered ideological.

I'll end with some good news, Mr. Chairman. The good news is that demographically speaking, we in Canada have a huge opportunity that we can either seize or squander. The millennial demographic group is predisposed, we know, towards urban choices, towards putting off getting their driver’s licences and owning new cars. They're choosing transit, walking, and biking where they invest, where they live, and where they bring their creative talents if the infrastructure is there to support that choice for them.

At the same time, their parents, the baby boomers, are also aging and are also increasingly choosing the same things. The Wall Street Journal even coined the phrase “broken hipsters”, because as they age, the baby boomer generation is starting to behave and make the same kinds of choices as their so-called hipster children.

That's a huge demographic tailwind. It says that the two largest demographic groups in human history are predisposed towards different priorities in infrastructure in transit, walking, and biking. It's just that our infrastructure decision-making hasn't caught up to that kind of thinking. If we do, our cities in Canada, and our nation as a country, will succeed against very smart global competition.

Many of the cities that are our competition I'm actually advising and working with around the world, and I can tell you that they're very smart. They're making smart, strategic decisions on what they want to spend their money on. If we don't smarten up, they will outdo us. But if we do smarten up, then we can beat the competition in terms of attracting the talent, the creativity, and the capital and investment. We won't just continue to be stuck in traffic.

Thank you very much, Mr. Chairman. I'll stop there. I look forward to your questions.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Ms. Charette, go ahead.

[Corinne Charette, Senior Assistant Deputy Minister, Spectrum, Information Technologies and Telecommunications, Department of Industry]

Thank you, Mr. Chairman.

I am here today to present on Industry Canada's work in regard to broadband infrastructure.

In the context of your review of infrastructure investment in Canada, I would like to provide an overview of the federal government's historical involvement in funding broadband infrastructure and an overview of the current broadband program, Connecting Canadians.

High-speed Internet access is essential infrastructure for today's digital economy. Along with other telecommunications services, Internet access contributes to the productivity and growth of the Canadian economy. High-speed Internet enables Canadians, businesses, and institutions to access information services and opportunities that otherwise would be out of reach.

Due to rapidly changing technologies and ever-increasing demand from consumers and businesses, telecommunications infrastructure requires continuous investment and innovation. The government's policy approach to telecom, including broadband Internet, has been to encourage competition and investment, protect consumers, and ensure access for all Canadians.

In Canada, private sector competition is driving investment in upgrades to broadband infrastructure. In particular, urban areas enjoy strong coverage, increasing speeds, and high-quality networks. However, rural and remote areas present a challenge that requires targeted government investment. Often, there simply isn't a business case for the private sector to build their networks in these areas, due to low population density and geographical challenges. The need for government funding is supported by a wide variety of studies and discussions with stakeholders.

My remarks today will focus specifically on rural and remote broadband. Broadband infrastructure encompasses the cables, towers, satellites and other equipment used to provide Internet access to households, businesses and institutions across Canada. As is common in many peer countries, the Canadian government has made targeted investments in rural broadband.

In 2000, the federal government created the national broadband task force to provide recommendations to address the digital divide and connect Canadians. Out of those recommendations, several programs were launched, including the broadband for rural and northern development pilot, or BRAND, and the national satellite initiative, which Industry Canada administered.

BRAND was a $105-million cost-matching program to help address the lack of broadband access in first nations, Inuit, Métis, northern, rural, and remote communities. BRAND initially provided financial support to community-level plans for demand aggregation and network deployment.

In 2009, Industry Canada conducted a comprehensive study to identify areas in Canada where broadband Internet was unavailable or not easily available. As part of Canada's 2009 economic action plan, $225 million was allocated over three years to extend broadband service to unserved and underserved households at speeds of at least 1.5 megabits per second. By the program's close in 2012, the government had invested in 84 projects to expand service to 218,000 previously unserved or underserved households. The delivery of broadband service to these communities has encouraged economic development, spurred innovation, and improved the quality of life in hundreds of communities across Canada.

Over the past decade, select broadband projects have also been supported by Infrastructure Canada, Aboriginal Affairs and Northern Development Canada, and regional development agencies and initiatives.

The federal government has also invested in CANARIE, an ultra-high speed optical backbone network that enables the transfer of large amounts of data generated by leading-edge research and big science from across Canada and around the world.

One million researchers, scientists and students at over 2000 Canadian institutions, including universities, colleges, research institutes, hospitals and government laboratories, have access to the CANARIE network.

Budget 2015 demonstrated Canada's continued support for CANARIE with renewed funding of $105 million over the next 5 years.

Economic action plan 2014 provided $36 million over 4 years to renew the Computers for Schools program, with an additional $2 million over 2 years announced in economic action plan 2015, to expand the program and include not-for-profit organizations that support low-income Canadians, new Canadians and other disadvantaged groups.

Computers for Schools helps young Canadians develop computer literacy skills and will give them better access to computers and communications technology equipment.

Significant progress has been made through a competitive marketplace driving private sector investment and through targeted government investment.

According to the CRTC “Communications Monitoring Report”, broadband coverage in Canada at basic speeds of 1.5 megabits per second was available to over 99% of households in 2012. Coverage at 5 megabits per second was available to 94% of households, which is in line with other peer countries. This is comparable to that of the United States and ahead of many European countries.

Coverage of Canadian next-generation networks is comparable to that of the United States and ahead of most European countries. Coverage at 30 megabits per second and in advanced LTE mobile networks fares very well internationally.

However, rural areas continue to lag in terms of coverage, available speeds, prices and service quality. Satellite-dependent communities in the north have the added challenge that their satellite capacity is on short-term leases, which prevents long-term planning.

Following the completion of the Broadband Canada program, Industry Canada and the CRTC worked together to identify gaps in service. Based on this work, the Connecting Canadians program was developed and announced in economic action plan 2014.

In April 2014, the Minister of Industry, the Honourable James Moore, released Digital Canada 150, a plan to advance Canada's efforts to being a global leader as a digital economy, setting out clear goals for what we can achieve by the time we celebrate our 150th anniversary in 2017. Digital Canada 150 is built on 5 pillars: connecting Canadians; protecting Canadians; economic opportunities; digital government; and Canadian content.

Under the connecting Canadians pillar, I would like to highlight the new connecting Canadians program, which provides $305 million over five years to extend and enhance access to high-speed broadband networks at a target speed of at least 5 megabits per second. Connecting Canadians sets an objective to expand affordable access to high-quality broadband services to an additional 280,000 households in rural and remote areas of Canada by providing one-time, non-repayable federal contributions to Internet service providers to expand or upgrade broadband infrastructure.

The $50 million northern component of connecting Canadians, we expect, will support connectivity at a target speed of 3 to 5 megabits per second for approximately 12,000 households in Nunavut and the Nunavik region of northern Quebec. These regions are among the most difficult to serve in Canada. Expensive satellites that cover the north are the only practical option to reach them.

The target speed of 5 Mbps was chosen based on a variety of factors, including deployment costs, the needs of end-users and upgrading service to a fairly broad number of households across Canada. It provides a meaningful improvement over the previous target of 1.5 Mbps.

These speeds will allow users to have better access to applications such as cloud computing, distance learning, e-health applications and high-definition video streaming. Partnerships are a key element of the Connecting Canadians program in order to build on past and previous investments, as well as to complement investments made by the provinces and territories.

Industry Canada undertook an extensive consultation process with Canadians, Internet service providers, provinces, and territories during the design and after the launch of the program. This included a call for Canadians and Internet service providers to provide feedback over the summer of 2014 to update national broadband coverage maps, which allowed us to identify underserved communities.

After updating the national coverage maps, a call for applications to connecting Canadians was launched on October 15, 2014. Submissions were due by January 12, 2015.

Industry Canada received over 300 applications from small and large Internet service providers from coast to coast. Then projects underwent a competitive national assessment process.

Applications were first assessed for essential criteria, and then those that met the essential criteria were further assessed on a number of comparative criteria, for example, the project's cost per household, the proposed number of households, sustainability and the scalability of the technology.

The purpose of the assessment was to identify projects that offer the greatest value for Canadians in terms of extending robust, affordable broadband service to rural and remote households without access at 5 Mbps.

The program is committed to working with partners to leverage funds. For example, British Columbia committed up to $10 million to cofund projects in their province's 2015 budget.

[The Chair, Conservative, Larry Miller]

Ms. Charette, there is quite a bit left in your presentation but everybody has a copy of it and we're over the time, so we're going to go to questioning. I'm sorry about that.

[Corinne Charette]

That's very good.

[The Chair, Conservative, Larry Miller]

Could I just remind members that we have some committee business at the end? I'm going to be very strict today. There will be seven minutes for questions and answers.

Mr. Kellway, you have the floor for seven minutes.

[Matthew Kellway, NDP, Beaches—East York, ON]

Thank you to the witnesses for making time for us today and for sharing your thoughts and expertise with us on this important issue of infrastructure in Canada. As you commented, it is a very timely issue. We're all abuzz about infrastructure these days.

Professor Siemiatycki, you mentioned an interesting point about the cost share between actual capital or construction costs for infrastructure and operations and maintenance, it being a 20-80 split respectively. This study is meant to take a retrospective view of investment and infrastructure in Canada, and I think the timing is 20 years.

The timing doesn't really matter. The data we've seen shows that there's been a slowing of infrastructure spending as a percentage of GDP in this country since the late 1950s or something like that, leading to a low point in the late 1990s where there was a net depreciation of infrastructure in Canada. While the funds look bigger now, we've had a Parliamentary Budget Officer study also on the infrastructure funds under our current government showing significant lapses in funding, so continuing underinvestment in infrastructure funding in Canada.

Can you tell us whether this underinvestment in infrastructure, given that so much of the funding should be going to operations and maintenance, is costing us money? Is it more economical to provide stable, predictable funding to maintain operations and maintenance of built infrastructure in this country?

[Prof. Matti Siemiatycki]

Thanks for the question.

The issue of operations and maintenance is key. We all like new shiny things. Politically we like cutting ribbons. You don't see a lot of ribbon cutting when a building gets rehabilitated or when it gets maintained, but this is really critical. It's just like your house. If you take a year or two off, maybe the first year you don't notice anything, then the second year you start to see issues. If this continues over an extended period of time, the cost multiplies in terms of small things that then become major and need rehabilitation, and not just things that regular maintenance would pick up but serious rehabilitation and replacement, so the predictability of the funding is critical.

Part of the challenge is that operations and maintenance are often funded locally. If we think of transit, it gets provincial and federal funding for the capital costs, and then the operation and maintenance comes from the fare box. It comes from local government subsidies, and in some cases it comes from ad hoc contributions from different levels of government.

We need to make this much more predictable and ongoing. The numbers I cited around 20-80 are anecdotes that I hear when I go out to speak to infrastructure folks. It would be interesting to do a quantitative study over the long term. These things multiply. One of the points about public-private partnerships that is worth keeping in mind is that they do generally ring-fence money for operations and maintenance, so when you talk to senior government officials about them, they say they know they're paying more for this up front, but one of the things they do is put operations and maintenance, the life cycle of these assets, on the books for their whole life.

I don't think we necessarily need to be using public-private partnerships to lock that in. We, as a government, need to become much more sensible. If we're building assets new, we have to recognize that significant operation and maintenance costs are going to be predictable and are going to be there every year, because if we don't, it's going to add up and it's going to start to cost us in the long run.

[Matthew Kellway, NDP, Beaches—East York, ON]

Are there actually any quantitative studies of the cost of underinvestment in infrastructure? Do you know of any?

[Prof. Matti Siemiatycki]

You know, in preparing for today, I looked. I didn't see any. But if you looked through engineering studies, which is not my home discipline, I'm sure you'd find stuff on the cost of operation and maintenance.

[Matthew Kellway, NDP, Beaches—East York, ON]

Right.

But assuming that there are, Mr. Toderian, I'd like to ask you a question. You mentioned the inequity of a third, a third, and a third being split between different levels of government. Also, you'll probably be aware that the dedicated transit fund announced recently in the budget, because it's administered through PPP Canada, actually only makes a 25% contribution from the federal government.

If Professor Siemiatycki's numbers are right, that you have P3s adding 25% to the cost of the project, then you have a 42% burden of these transit projects falling on cities, and then you have the cost of underinvestment in infrastructure—and those costs fall locally—this seems to be becoming a bit of a nightmare for municipal governments across Canada. I don't know if you want to comment.

[Brent Toderian]

Well, I agree with your math and your assessment of the situation. I was perhaps being generous by referencing a third, a third, and a third. Also, the requirement for it to be P3 is quite a thing to saddle local municipalities with in return for that 25%, as you say.

You have to remember that, while year after year local cities and regions are being saddled with more and more financial responsibilities, at the same time they're not able gather more municipal taxes. Also, we've seen what happens when they try to implement new tax forms, like with our Vancouver transit plebiscite. Even in a place as transit-friendly as the Vancouver region, the transit plebiscite has been a nightmare both politically and practically.

I think you're describing the problem well. But it's even worse in the sense of how much of what used to be provincial and federal responsibilities through tax incentives for rental housing, or various programs for daycare operations, and such, has been downloaded to municipalities over the years. I used to say that municipalities were being squeezed economically. Now I say they're being crushed.

[Matthew Kellway, NDP, Beaches—East York, ON]

Thank you.

[The Chair, Conservative, Larry Miller]

You have three seconds left, so you're pretty well out of time.

[Matthew Kellway, NDP, Beaches—East York, ON]

Okay, I'll take another crack at it next time.

[The Chair, Conservative, Larry Miller]

Okay.

Mr. McGuinty, you have seven minutes.

[David McGuinty, Liberal, Ottawa South, ON]

Thanks, Mr. Chair.

I'd like to turn to our witnesses from the department, Madame Charette and Monsieur Dagenais.

Madame Charette, in your remarks you listed for Canadians a number of different programs and gave an update on things. You talk about partnerships on page 6 of your written brief. I want to read a quote. The bullet point says, “Partnerships are a key element of the Connecting Canadians program in order to build on past and previous investments”.

I want to talk about a past and previous investment, and I want to ask why, in your brief, you don't refer at all to the community access program? Why is it not listed here?

[Corinne Charette]

I think it certainly is an important program and the department is very proud of this program. Probably, in trying to focus on the broadband connectivity element, that was an oversight on our part, but it's an important program.

[David McGuinty, Liberal, Ottawa South, ON]

It was a program that started in 1995, and it was a program that Mr. Moore eliminated in April of 2012, correct?

[Corinne Charette]

I would have to double-check on that.

[David McGuinty, Liberal, Ottawa South, ON]

Okay. That would be good.

Now, it was cancelled on a Thursday night before a long weekend. It affected thousands and thousands of libraries and community centres that were partners with Industry Canada, the kinds of partnerships that you're referring to and that the government likes to point to. Its purpose was to provide a free or low-cost Internet access to the public, with technical support as well. Is that correct?

[Corinne Charette]

Yes, but that program has now been superceded by the computers for schools program. That program has, in fact, been designed to provide the device portion of connectivity, because the connectivity to most of those organizations was well advanced after a certain period of time.