Transport Committee on June 2nd, 2015

[Dr. Penny Ballem]

Thank you very much.

At the end of the day, if you look at an investment in public transit, first of all, it's a very inexpensive way for people to travel to work. If it's properly done in an integrated way with city planning, it's a very positive place for developers to build density, and it's well suited to that because you have ready access to transportation that's accessible, very affordable, and has very high capacity.

As I said, if I refer to the report we included in this presentation, the American Public Transportation Association has done a lot of work on measuring the development that comes when you actually drive transit through. For those of you who might have come to Vancouver and ridden on the Canada Line, the Canada Line was an example of where we didn't have the density. We had nodes of density at either end, certainly in our downtown core, which is a very dense urban environment, and out at the airport, but over the last few years we have developed. There's an incredible amount of development going on that's mixed development, in some cases commercial development, the commercial nodes.

As we look at the Broadway corridor, that's already a well-developed corridor, but we know that if there's public transit available, there's already a huge amount of interest to increase the density there, to create more job space, and to enhance those tech jobs that are already there. It's just part of the cycle of economic growth.

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

Great. Thank you very much.

Mayor Vrbanovic, thank you very much for being here this afternoon by video conference. Do you have any thoughts to elaborate on this important linkage between investments in infrastructure and impact on economic growth?

[Berry Vrbanovic]

Absolutely, and thank you, again, Mr. Braid, for the opportunity to join you and your colleagues.

I'll look at it, really, from two fronts: some general comments, and then specifically in terms of the two-way all-day GO transit proposal I spoke of.

From a general front, we know that investments in infrastructure are key for both job growth and sustainable economic development. As an example, coming right from the Conference Board of Canada, we know that every dollar invested in infrastructure generates $1.20 in annual GDP growth. We think that is very positive and demonstrates how the government, how the nation, can benefit from these investments. We saw that, quite frankly, during the economic stimulus program that the late Minister Flaherty brought forward, which helped us see some progress on that front and put Canadians to work.

We also know anecdotally that by improving our road infrastructure and so on we're going to keep people and goods moving, which ultimately adds to quality of life and improves the economy as well.

When I look specifically, for example, at the two-way all-day GO proposal I spoke of in my presentation, there are a number of examples of economic growth attached to that. Part of our proposal is based on looking at the San Francisco to San Jose geography, which essentially has a population of 4.3 million and almost 400,000 tech workers, and comparing it to the Toronto to Waterloo region what we're calling the tech supercorridor, which has a population of 6.2 million but only 205,000 tech workers. By looking at how we grow that area, we believe that we can ultimately connect up to 13,000 companies, attract 3,000 innovation start-ups, and create 40,000 new jobs in the innovation sector, which will ultimately generate another $547 million in annual personal income taxes for provincial and federal governments. That kind of economic growth and all its spinoffs, obviously, would be significant for both Ontario and the country.

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

Right. Thank you.

Mayor Vrbanovic, in response to a question, you said you'd like to see as many dollars going to infrastructure as possible. What trend have you seen over the last decade with respect to federal government investments in infrastructure?

[Berry Vrbanovic]

Certainly I think, as you're aware, the gas tax fund was a program started under the previous government around the 2005 period, and was continued with significant investments from your government over the past decade. In our own municipality, we've seen that amount that we receive annually. We're in a two-tier structure here in the Kitchener and Waterloo region, where certain responsibilities lie with the lower tier municipalities and certain ones with the region. In our case, in the early years of that program, we went from where we were receiving essentially several hundred thousand dollars a year, to now receiving over $6 million annually, and as you know, that amount is now indexed as a result of the work between the federal government and the FCM to see those kinds of enhancements.

More recently, the commitment to investment that occurred in the budget in terms of a national transit infrastructure strategy has certainly been beneficial to the municipal sector. It's something we were looking for and have asked about. Certainly some questions still need to be resolved: Who's eligible? What's the federal share going to be? How do P3s factor into this?

I would encourage as much dialogue as possible with the FCM to resolve those issues. Ultimately, if this program is only available to the few, the very largest municipalities, it probably won't achieve the ultimate benefit it could if it's a little broader in scope.

[The Chair, Conservative, Larry Miller]

Thank you, Mr. Braid. Your time has expired.

Mr. Watson, you have seven minutes.

[Jeff Watson, Conservative, Essex, ON]

Thank you to our witnesses for their contributions here today to our ongoing look at infrastructure in Canada.

Looking at needs and investments, a chart is available in our budget. It looks at federal spending on provincial, territorial, and municipal infrastructure. I'm sure you don't have it in front of you, but as I'm holding it up here, it charts from 1990 out to about 2022-23, showing a significant drop in funding between 1995 and 2005, and then an onward trend. It even shows the stimulus period where there was an additional injection of federal funding. It shows, I think accurately in the graph, the federal divestiture of ports infrastructure, for example, in the 1990s, the offloading of the national airports system, privatization of rail. There were a number of policies at the time whereby there was significant offloading by the federal government, perhaps to help balance federal budgets in the 1990s. It's not exactly what we could term a “partnership”, I think, as both of our witnesses today and the FCM earlier were talking about.

I think you made reference, Mr. Vrbanovic, that federal investments are signalling the beginning of a broader partnership with the federal government. I think, Dr. Ballem, you referred to it as a renewed partnership. I think we can all agree that it's an important and necessary partnership for us to have.

One of the foundational ways we've embarked on this...Mr. Vrbanovic, you referred to the gas tax fund, which is now permanent and indexed and gives some real clarity in baseline funding. Mr. Vrbanovic, Kitchener's allocation is how much in gas tax funding a year, about $6 million-plus? Is that correct?

[Berry Vrbanovic]

That's correct. That's the city's share. We have six other municipalities in the region, two urban centres, four rural, and they would obviously get smaller amounts, and the region itself, because we split it on a 50-50 basis, gets about $15 million.

[Jeff Watson, Conservative, Essex, ON]

That's about what I understood Waterloo region to get.

How is Kitchener, the city proper, allocating its gas tax fund? I'll ask about Waterloo region in a moment.

[Berry Vrbanovic]

From a city perspective, it's getting allocated and prioritized into a variety of infrastructure projects.

As a municipality, a number of years ago we took what I think was a responsible view on the pending infrastructure deficit and developed an accelerated infrastructure program. We were certainly making some of our own investments into that and then taking the additional dollars coming from the feds and the province and putting that into roads, sewer pipe enhancements, water pipe enhancements, bridges, and so on, that kind of core infrastructure.

[Jeff Watson, Conservative, Essex, ON]

Did you do an asset management plan for the City of Kitchener to evaluate where your strengths and your weaknesses are to quantify potentially what infrastructure renewal would look like for the community and therefore how funds such as the gas tax fund—or maybe the prioritization of seeking out other funding arrangements, such as grants from other levels of government—would fit into asset renewal?

[Berry Vrbanovic]

Yes, absolutely. We felt that it was important. In fact, as we know, due to changes in accounting practices, municipalities were required to have a better sense of where they sit with their assets over the last number of years. We certainly have that in place.

We know that as a municipality we're sitting in the range of approaching a billion dollars in terms of assets, and we have a plan over the next number of decades to address that, but we can't do it on our own. We certainly require the partnership with the provincial and federal governments.

[Jeff Watson, Conservative, Essex, ON]

Asset management is a key part of understanding what your needs are. In the town of LaSalle in my riding, we just celebrated the ribbon cutting for a new municipal building, which involved gas tax funding in the neighbourhood of about a million dollars. I asked the mayor what the oldest asset is in the town of LaSalle now, with this brand new facility, and he said it is a recreation complex built in 2005. They began years ago with an asset management plan and have consistently sought out opportunities, both from prioritizing their existing tax base and from seeking out leverage opportunities in order to renew their assets. That's critical.

Ms. Ballem, you mentioned that some of the important indicators in the relationship are that the funding be clear, long term, and offer predictability and a streamlined process. I remember that in the early days—I have a little bit of experience now, being at this for 11 years—we had the original building Canada plan, which was a seven-year plan of about $34 billion when you put all of the elements together.

We then renewed with the new building Canada plan, and it's a 10-year plan with $75 billion. Now there's a new public transit fund that looks out at five years at this particular point. CUTA was here to explain how the number was arrived at in defining a federal share over five years, ramping up with the timing of projects coming on stream from communities.

Additionally, I would add that probably the criteria I heard Mr. Vrbanovic refer to, at least implicitly, is flexibility in how priorities are determined. The federal government is not telling you what the priority is for Vancouver versus Kitchener, for example. Is that a welcome direction now? Is that the type of partnership...? Of course, it's something that can be built on over time as well.

[Dr. Penny Ballem]

Yes, I think that as you look at the availability of the funds that have come on stream.... The gas tax was mentioned. That was a huge opportunity for us. In fact, in our region, we've actually dedicated all the regional gas tax money to TransLink with the view that we needed to continue to invest in our regional transit system. That was a good source.

With regard to the rest of the funds, certainly we very much welcome the incremental increase in the availability of money for infrastructure. I think Mayor Vrbanovic has signalled that at the municipal level we deal with regional responsibilities. We are part of a local region. We have our provincial priorities, the federal priorities, and then the P3 lenses that things are often put through in British Columbia. It's standard that if you have a project and you wish the province to participate, you have to put it through a P3 business case.

I would say, having come from being the deputy of health to running a city, that cities don't have the same kind of capacity to deal with all of the complexities of these different arrangements and business cases on a frequent basis. We're developing those platforms. The more they can be simplified and, as I said, have clarity.... When we look at the transportation fund, we're very excited about that. We'd like to have more opportunity to understand how that's going to work. That will be a really value-added opportunity for us for these kinds of projects.

[Jeff Watson, Conservative, Essex, ON]

Well, we consider the FCM to be a very valuable partner in those discussions.

[The Chair, Conservative, Larry Miller]

Thank you. You're out of time.

Mr. Vrbanovic, I want to thank you for joining us. I think you gave very valuable input.

[Berry Vrbanovic]

Thank you very much, Mr. Miller and members of the committee.

[The Chair, Conservative, Larry Miller]

We're going to suspend for a couple of minutes, and witnesses from Montreal are going to join us.

[The Chair, Conservative, Larry Miller]

Could we have members back at the table, please.

To our witnesses from Montreal, can you hear me? It's Larry Miller, the chair.

[Lionel Perez, City Councillor, Member of the Executive Committee, City of Montreal]

Yes, I can hear you, Mr. Chairman. I'm Lionel Perez.

[The Chair, Conservative, Larry Miller]

Okay.

Thank you very much, all three of you, for joining us. We're going to resume and start off by allowing you to make your presentation. You have 10 minutes or so.

Mr. Perez, are you leading off?

[Lionel Perez]

Yes, I am, Mr. Chair. I will be making my presentation in French, and I will be available for questions both in French and in English.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Go ahead.

[Lionel Perez]

Mr. Chair, members of the committee, the City of Montreal was delighted by your invitation to participate in the study Updating Infrastructure in Canada: An examination of needs of investments being undertaken by the Standing Committee on Transport, Infrastructure and Communities.

Mayor Denis Coderre is unable to join us today and asked me, as head of infrastructure of the City of Montreal's executive committee, to participate in the work of the committee on his behalf.

As mayor of the second-largest city in Canada—and former vice-chair of the committee during the first session of the 41st Parliament—Mr. Coderre strongly believes in what you are doing.

The committee's mandate is substantial: to review the federal government's investments in federal, provincial and municipal infrastructure in Canada over the past 20 years; federal spending as a percentage of gross domestic product in Canada and in the G7; the average age of public infrastructure in Canada; and progress on the implementation of the new Building Canada plan. I would like to talk about certain issues that relate more specifically to Montreal's situation.

I would now like to introduce the individuals joining me today: Benoit Champagne, Interim Transportation Director of the Infrastructures, Roads and Transportation Department, and Chantal Morissette, Director of the Water Department.

The City of Montreal is Quebec's largest metropolis and the second-largest city in Canada. It has a population of 1.6 million, representing 87% of the population of the Island of Montreal, 43% of residents in the census metropolitan area, and 21% of the population of Quebec. Since 2011, we have seen an increased densification of the population resulting from, among other factors, immigration and positive natural increase that is being maintained year after year.

The City of Montreal also has a massive infrastructure network with a replacement value of more than $40 billion: its water supply network includes over 4,370 kilometres of pipes and its sewer system over 4,900 kilometres of pipes. For its part, Montreal's road network includes over 4,000 kilometres of streets, over 6,500 kilometres of sidewalks, and some 600 bridges, tunnels and related structures.

Founded in 1642, the City of Montreal will celebrate its 375th anniversary in 2017. It is therefore one of the oldest cities in North America, and the condition of its infrastructure, particularly its underground infrastructure, testifies to this: its oldest known water main still in service was installed in 1862, five years before Canadian Confederation. As you can easily imagine, this reality requires very exacting maintenance efforts.

With this aging of the infrastructure, investment needs are greater than they were 20 or 30 years ago. Very fortunately, awareness of these needs has also improved greatly since then. After careful study of these requirements, we have been able to precisely ascertain the necessary investments. Today, they total $2.1 billion annually, which represents a gap of almost $800 million annually between assessed needs and the investments that have been planned.

A major upgrading is required. This necessarily involves a considerable increase in investments to ensure the sustainability of infrastructure, buildings and equipment, but also to add new ones, as warranted. Thus, the City of Montreal has started to intervene more and has increased investment through concrete measures such as larger cash payments and temporarily increasing our borrowing. Over the next decade, Montreal's capital works program will allow the City of Montreal to make investments of $2.1 billion in 2024.

This new investment planning approach demonstrates our administration's commitment to delivering the services that Montrealers are entitled to expect. However, this commitment cannot be achieved without the support of other levels of government.

A study by Deloitte and E&B Data commissioned by the Union of Quebec Municipalities—UMQ—in 2012 emphasized that, taking into account tax revenues, municipalities assume more than 76% of the costs related to these infrastructures, while the Government of Quebec assumes 14%, and the federal government about 10%.

However, aging is no longer the only reason to invest in our infrastructure. Legislative choices and policy decisions also have an impact on our spending. For example, we estimate that $1 billion is required for us to comply with new regulations related to the treatment of waste water. This is while the city is working on the installation of an ozone disinfection system estimated to cost more than $200 million that should, we believe, meet requirements regarding the quality of the effluent from our treatment plant.

It goes without saying that any additional responsibility delegated to municipalities should be accompanied by corresponding financial assistance. We hope, in the future, that new programs are established to meet these needs.

Finally, one cannot ignore Montreal's considerable needs in the area of public transportation. Our road transportation networks are saturated, and congestion is imposing considerable losses, estimated at nearly $1.8 billion annually, for the Montreal metropolitan region. Investment in the maintenance and development of public transportation is essential. By 2031, the combination of population and job growth will result in an increase of nearly one million daily trips in the region. The Montreal Metropolitan Community, which has exhaustively studied the issue, estimates that, in this regard, the priority needs for greater Montreal total $14.5 billion.

Last April, the City of Montreal welcomed the government's intention to add a $1-billion recurrent fund dedicated to public transportation projects, starting in 2019. However, we are concerned about the planned terms and conditions, including the fact that the projects will have to be made in public-private partnerships through PPP-Canada and will be awarded on merit without us knowing the exact details in advance. The City of Montreal would like to reiterate the importance of having a flexible and inclusive approach in the establishment of assistance programs. It is essential that projects implemented in partnership with the Caisse de dépôt et placement du Québec be eligible for this program. Also, these funds should be awarded based on ridership.

Since 2006, tripartite federal funds have certainly served Montrealers. In total, the City of Montreal received nearly $512 million in federal subsidies between 2006 and 2014. This includes support received under Building Canada Fund programs and the excise tax on gasoline. The vast majority of this money has been used for water infrastructure. The Montreal Transit Corporation received $340 million during the same period.

Though appreciated, federal assistance has proved difficult to obtain in some cases. On the one hand, this difficulty is due to the slowness of the process leading to the signing of an agreement between federal and provincial authorities. Without blaming one or the other, we wish to point out that this situation penalizes Quebec municipalities such as Montreal, which, while waiting, cannot proceed with executing the desired work. The City of Montreal, as well as the UMQ, has deplored the situation on many occasions. We are taking advantage of this forum to reiterate our appeal that future agreements be signed quickly.

Furthermore, it is also important to highlight operational difficulties with some previous programs. For example, the Canada Strategic Infrastructure Fund and the Canada-Quebec Building Fund required that a program be developed in advance. However, real-life situations have often made this difficult, requiring modifications to the initial schedule and adding delays and complexity to already complex mechanisms.

However, the gasoline tax fund—which, in Quebec, operates through the gas tax and Quebec contribution program—is permanent and indexed. It provides a predictable long-term investment and has clear and flexible guidelines. We believe this model should guide the operation of other federal aid funds for municipalities.

In conclusion, I would like to reiterate the importance of a partnership between the federal government, the provincial government and the City of Montreal in implementing infrastructure projects. Montreal must be able to play its role as an economic metropolis. This role requires effective and safe infrastructure, and an efficient public transportation system.

It is essential that the federal government continue to support our actions by establishing flexible, predictable and long-term support programs. By investing in Quebec's largest city, all of Canada will emerge a winner.

Thank you for your attention.

[The Chair, Conservative, Larry Miller]

Thank you, Mr. Perez.

We'll now go to Mr. Mai, for five minutes.