Transport Committee on May 28th, 2015

[Brent Toderian]

I certainly do, and the key is to make that predictable and longer term.

There are two things I have observed. First is that usually cities have to constantly guess about what the next funding will be, which makes it very difficult to think long term, which cities try to do. Second is that there is already a federal directive being given with regard to the types of priorities, in keeping with the comment made by a previous questioner.

Regarding shovel-ready projects, in my experience, having responded to federal calls for shovel-ready projects, as soon as you say “shovel ready”, by definition that is telling municipalities what types of projects—and in some cases, what specific projects—they can and should put forward. To the suggestion that the federal government saying that smart projects should proceed is limiting local municipalities' flexibility, I would suggest that the federal government has already been limiting municipalities' flexibility, an example being by insisting that projects be shovel ready.

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

I think I've used up the 15 seconds, and I must be beyond that, Chair.

[The Chair, Conservative, Larry Miller]

I'm trying to be flexible, but we are on a timeline of seven minutes for questions and answers. Now we're moving to five minutes for questions and answers.

Mr. Mai.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Thank you, Mr. Chair.

I'd also like to thank the witnesses here today, as well as those joining us via videoconference.

My question is for Mr. Toderian.

You talked about the importance of public transit and about cycling and pedestrians. The federal government, however, is responsible for infrastructure. In the budget, the government earmarked future funding for public transit, but it isn't effective yet.

The P3 approach is another factor. We don't have a national plan or federal strategy for public transit.

From your experience and given what other countries have done, how would a national public transit plan help?

[Brent Toderian]

I think, to compare it to certain countries that are doing better than we are, it is the size of the funding, its predictability over the long term, and the fact that it's prioritized towards the kind of infrastructure that we know has bigger gains in terms of economic spinoffs, like mass transit. Walking and biking can sometimes be perceived as local issues, but I feel they should be bundled into active transport or other kinds of categories like that to suggest that they actually work together to help build what are called multimodal cities that give lots of options both for the economy and for people moving.

I've seen other examples in parts of the world that are actually doing worse than we are. If it gives us any comfort, there are places that are doing worse than we are. Australia, for example, at the federal level, only allows funding for roads. It doesn't even allow funding at the federal level for transit, which really puts local municipalities and states into a tough fix. But I think to say that we're better than Australia is faint praise.

The need for a national transit and transportation strategy is really about recognizing that every single city in Canada has recognized that mass transit is a critical component of the region's success and economy, in every way we measure success. Every single one is struggling with the funding.

Not only does the federal government need to provide at least a third and more, but it needs to provide probably more flexibility—in partnership with the provinces, of course—for municipalities to be able to raise funds. Right now municipalities are expected to pay too much of the capital costs, given their limited funding tools, and as has been stated, they are expected to do all the maintenance.

To the party who raised the issue of ownership, I would suggest that municipalities would probably be glad if other levels of government would take more ownership, if they would actually provide the maintenance, or municipalities would be glad to have the ownership and the maintenance if the federal government and provincial governments were willing to restructure the essential funding of where the tax dollars go to match ownership.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

You mentioned Australia. Could you give us an example of a country in the opposite situation, in other words, a federal government with a public transit plan?

[Brent Toderian]

Certainly throughout Europe and particularly in Asia, I would say, and even in new places like the Middle East, they are investing massively, by a multiplier of a hundred, in mass transit specifically, and these are parts of the world that until very recently were doubling down on car infrastructure. They've had an epiphany in a relatively short period of time about the smarter investment that public transit represents and they're putting their considerable funding power towards the new bet on public transit.

Then all over the world we see everything from.... Just recently the Government of Turkey announced that they were going to fund the providing of one million bicycles, which is a rather unusual example. I'm not suggesting that for the Canadian government, but it shows how federal governments all over the world are starting to think in the details about how to do more with less. These are countries that start off having less money than us, but frankly, we could learn a lot from their creative and frugal nature because no federal government has as much money as it would like to have.

[The Chair, Conservative, Larry Miller]

Thank you.

Mr. Braid, you have five minutes.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you very much, Mr. Chair.

As I only have five minutes, I want to go as quickly as I can here. I want to start with Industry Canada officials. Broadband and connectivity is also an eligible category under the new building Canada plan. I want to ask you if you could please help us understand how the two plans mesh, how the Infrastructure Canada plan and the Industry Canada plan with respect to broadband and connectivity mesh, or for example, how there may be one project where both programs are supporting it.

Could you help us understand that? That's the crux of the issue here.

[Éric Dagenais]

Sure. The connectivity programs are eligible. What we found in talking to Infrastructure Canada is that provinces tend to put forward other types of projects, so connectivity projects in this environment tend to be lower down the line. The other issue is in terms of the eligibility of funding connectivity projects that would be put forward by the private sector partner are only eligible for up to 25% of total funding, whereas under the connecting Canadians program in the rural areas it's up to 50% and in the northern and remote areas it's up to 75%. The terms I think are a little more conducive under the connecting Canadians program, so they tend to be coming in through this.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Understood. Are you aware of a project where both programs have been involved yet?

[Éric Dagenais]

No. I'd have to go back, but I'm not aware.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

That's fine. Okay.

It may come. It's a decade—

[Éric Dagenais]

There are other federal programs though that can make up, so in an instance where we're funding 50% there can be another 25% coming from other federal programs, be it the regional development agencies or Aboriginal Affairs. There are other federal programs that can supplement the money that would be funded through the connecting Canadians program.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you very much.

Professor Siemiatycki, with respect to P3s, you were talking about the transfer of a “construction risk” with P3s. What do you mean by construction risk?

[Prof. Matti Siemiatycki]

The risk of projects going over budget and of delays, basically. What happens is by bundling construction and design and then having finance there, what the government does is it transfers the risk of project cost overruns so that if something happens and the cost of that escalates, in theory the private sector is supposed to manage that risk.

We've seen a couple of examples of that here in Ontario where projects have had cost overruns. We had one, the Windsor-Essex parkway, where the private sector contractor put in a set of 300 girders that weren't up to Canadian standards. They negotiated. They had a discussion and a debate about it, and ultimately the private sector party had to pay to replace those and by all accounts—at least as far as what has been publicly reported—the government is not paying more for that. That's what I mean by risk transfer. There's also the risk of projects being delayed. Delay is a major issue too and the record is pretty good on that as well.

We are seeing some level of success there, of effective construction through these, and that's why I would advocate design-build-finance. I think that bundle is quite effective. The longer term operation and maintenance, that is where the real costs, especially of the finance, start to come in and government starts to lose flexibility.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Okay, understood.

I think you also went on to say that in some cases P3s can perhaps be more expensive to procure than if government has “effectively managed the risk”. Now that can be a big if, can it not?

[Prof. Matti Siemiatycki]

It's the ultimate if. It's the big question. There's been a view that government doesn't do a very good job on this, and I think we could all point to projects on which they haven't done well. What we don't know is how we do not just on the sort of high-profile projects that have had huge failures but over the whole portfolio of infrastructure. Off the top of our heads, we could all pick the projects that have had terrible cost overruns, but how do they do on the whole portfolio, and could government actually manage that better if they became more skilled contract managers themselves, and I guess, could the federal government play a role in doing that? The cost of transferring risk is very high. It's not that there's no value; it's just that it's really expensive to do that. Could we come up in-house with ways of managing those risks better to try to save some of that additional cost?

[The Chair, Conservative, Larry Miller]

You're out of time, sorry.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

I had one more really good question.

[The Chair, Conservative, Larry Miller]

I'm sure it's a very good one. You can save it.

Mr. Kellway, go ahead for five minutes.

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

Thank you.

It's wonderful to have another opportunity to ask some questions of our witnesses.

Mr. Watson, in his opportunity to ask questions, gave us a clinic on this government's failure to understand the importance of cities to the success—economically, socially, and ecologically—of Canada, and the implications for all Canadians, frankly, for us as a country, of failing to make investments in the infrastructure of our cities. When the government brought Infrastructure Canada to the committee to be witnesses, to talk to us about these things, we found out that the funding for infrastructure under the new building Canada fund is entirely without objectives, without policy, and without data to inform it.

I'm wondering, Mr. Toderian, especially given your experience with cities around the world, if you might suggest to us what kind of criteria ought to be attached at the federal level to infrastructure spending in municipalities in this country.

[Brent Toderian]

Well, it's a great question, and I wish I could give you a perfectly formed answer. It's actually something I've been thinking about for a while but haven't come to a resolution on. I think I would suggest a new relationship among the federal government, the provinces, and the cities to work together to come up with a series of criteria that I think would include the cities' definitions of success. Of course, given the constitutional nature of cities, the provinces have to be part of that conversation. I do believe that cities understand the success of cities better than any other level of government does, so I think the cities should take a lead through maybe the big city mayors' caucus or other things, in defining “success” in cities.

But I think it should also include strong criteria around return on investment in terms of spinoff effects for job creation, tax generation, and other things like that, but also things relating to social equity, public health, climate change, etc. I think a framework of that kind of smart infrastructure decision making could be made, with the cities in a leadership role.

My sense of the data that whizzes by my eyes every single day is that if that kind of exercise were done, public transit, walking, and biking would come out significantly ahead. We've seen that, in everything from return on investment to job creation, various pieces of studies that have yet to be pulled together into something comprehensive for our national conversation are suggesting that transit, walking, and biking projects outperform. The data is on the side of what I'm talking about, which is why I say this is not ideological. Frankly, there are a lot of people who support transit, walking, and biking for various reasons, including ideological reasons. I'm very much motivated by a pragmatic need for our city regions to succeed in every way that we define success.

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

Thank you very much.

Professor Siemiatycki, I'm wondering if you could take a crack at answering the same question. What criteria would you apply to federal funding for municipal infrastructure?

[Prof. Matti Siemiatycki]

I would echo a lot of what Mr. Toderian said. I think the role of the federal government is to support the priorities of our regions but also to have criteria to make sure that the projects that are being invested in are delivering a return on investment, at the very minimum a cost-benefit study of what the outcomes are, are likely to be, and the benefit of that project. I would probably frame it even more broadly in terms of a regional plan so that local governments were encouraged to at least develop regional plans at the outset and then the federal government would fund projects at the top of that list.

I would also encourage the funding not to be tied to a project delivery model. There are going to be cases where one model is effective. There are going to be other cases where it's not effective, and I think we have to leave that quite open-ended. I think it incurs risk when municipalities are told they can get money if they use this procurement model. The risks might not be allocated and they might be paying far higher prices than they have to, in certain circumstances.