Transport Committee on June 2nd, 2015

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

Thank you, Mr. Chair.

I also want to thank the witnesses for participating in today's meeting, including those from Vancouver and the City of Montreal. I will begin with the City of Montreal.

Mr. Perez, you talked about some challenges—to say the least—in terms of public transportation. You also talked about the fund the government announced and pointed out some issues with it, including the fact that it is a PPP and will be awarded on merit. You are not the only one to have shared those concerns. In this committee's meetings, we have heard a number of municipal representatives complain about the lack of information on the terms and conditions of the allocated funds.

Have you obtained more information? What are your concerns when it comes to the way the funding will be allocated, for example to the City of Montreal, with the terms and conditions not yet being well-defined?

[Lionel Perez]

Thank you for the question.

As I pointed out during my presentation, that is indeed a concern. Experience shows that, in some situations, the fact that certain criteria are not established and debated beforehand creates gaps and complexities in the process. As the process moves forward, new things emerge. Therefore, we think that having all that information in advance will benefit not only Montreal, but also all municipalities.

In addition, this situation complicates the situation with the Government of Quebec, which we clearly have to go through. The negotiations are delaying the implementation of a number of potential programs. Additional funding is always welcome, but we believe that more flexibility and more elements known in advance will benefit everyone.

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

Yes, indeed. You talked about the complex cases you have had to contend with.

Do you have concrete examples of situations where the complex mechanisms caused delays or even derailed some of your projects?

[Lionel Perez]

I will get started on the issue, and Ms. Morissette could then provide concrete examples and more details.

I remember an example we had an opportunity to discuss. In one of our projects, we had to create four retention ponds. We were able to conclude an agreement before moving the project forward, but new situations arose and complicated everything.

I will ask Ms. Morissette to add some details.

[Chantal Morissette, Director, Water Service, City of Montreal]

Regarding those programs, we are talking about projects funded by the Building Canada Fund-Quebec. I am not sure whether it was the Large Urban Centres component or the Major Projects component. We have to come to an agreement with governments on funding protocols well in advance. There is very little information when the memoranda of understanding are signed, but as projects move forward, the estimates are revised.

With memoranda of agreement, there is sometimes not enough money to complete the project, even though the agreement was signed and estimates were provided, such as in 2005. The projects have not yet been completed, and, as a result, we are in a situation where, to carry out all the project activities, we have to either renegotiate the agreements or look for other sources of funding. That is a specific example of situations we are dealing with.

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

Okay. You are talking about a flexible approach, and I presume you prioritize the excise tax issue, or rather the mechanism.

Can you tell us about the investment? In your presentation, I believe you said that most of the funding was invested in waste water treatment when it came to the excise tax.

Do you think that it's still a necessity or that, on the contrary, the issue has been resolved and that you could invest in other areas?

Witnesses have also talked to us about culture. The mayor of Gatineau, for instance, mentioned that one of the areas where funding was lacking were libraries.

[Lionel Perez]

The City of Montreal definitely wants to prioritize the rehabilitation of important infrastructure, such as underground and road infrastructure, without leaving out public transportation and other municipal facilities. We do have a significant deficit in terms of assets in that area, and there are various reasons for that.

Since its establishment, the Building Canada Fund has been giving us significant amounts of money, so that we can invest and make up the deficit. Nevertheless, to date, our deficit in terms of water infrastructure, for example, is about $3 billion, and it is $750 million in terms of road infrastructure. We receive significant funding.

Through Montreal's capital works program, we plan to invest 75% in existing infrastructure and limit our investments in new facilities and infrastructure to 25%, so as to ensure a balance between adequately maintaining our existing infrastructure and making up the deficit.

In 2015, for the first time in modern history, the City of Montreal reduced its budget, which is almost $5 billion, to show that it is doing the work it needs to do.

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

Thank you.

[The Chair, Conservative, Larry Miller]

Mr. Leung, you have five minutes.

[Chungsen Leung, Conservative, Willowdale, ON]

Thank you, Chair.

You know, the federal government absolutely understands the importance of transit for its economic benefit, for its economic engine, for the fact as we move forward it will reduce pollution, and for the health of Canadians. In our budget 2015 we announced a public transit fund that addresses this issue. I think it's music to the ears of most municipalities when we say that when we put money into public transit, we are looking at the objective of sustainable, long-term funding.

However, let me point something out. Take the example of Vancouver, which I have some experience with. In 1986 I was on the team to help build the Expo Line. At that time, the average cost per kilometre was $25 million. I understand from my colleagues now that to build this new transit line, you're looking in the neighbourhood of about $300 million. This means over a 30-year period there was a 12-fold increase, or about a 400% increase per decade, 40% per year.

This clearly is something that is not sustainable. As we build more transit systems, our gas revenues, with hopefully reduced car use, will be decreasing, yet our expenses are increasing with public transit systems. I want to hear from the transit operators: in order to maintain that sustainability, what other models or other ways of funding do you have in mind?

I'll give you some example of what I'm thinking about. Are there changes to intensification? Are there changes to a transit property issuing debentures? Are there indications of transit stops with developers to leverage a higher value out of those development properties? I'd like to hear your opinion on how you are going to move forward with the new transit funding model and its respective sustainability.

[Dr. Penny Ballem]

Thank you very much, member.

First, I'll just address some of the latter things you mentioned, and then I'll turn to my colleague from TransLink to address the cost of construction.

First of all, we use a whole variety of different sources of funding. At this point in time, to fund transit in Vancouver and the region we use a combination of property taxes, and in Vancouver, developers' cost levies and negotiated contributions through development. Obviously, we use revenues. We use grants from other levels of government. Vancouver has a very active debenture program that we use to fund much of our infrastructure. Some of our utilities are funded through pay as you go, but that's not 100% by any stretch.

We have a variety. There's a parking tax that contributes to TransLink's revenues. I'll ask Mr. Cummings to expand on that.

As I said earlier, we believe that a good transit system that's coherent and integrated across our region benefits everybody, whether they ride it or not. It benefits people who move goods, because the roads are less congested. It also benefits the people who must take a car.

You mentioned the gas tax. We've really benefited from the gas tax fund and from its growth over the years that it's been in place. It has levelled off recently, in part due to the fact that just in Vancouver alone, we've reduced the number of cars going to the downtown because we have very effective public transit.

You can't depend on one source. The incentives and disincentives will create weaknesses in one source of funding over many years. So it is an array of sources that we use, and we believe that's appropriate for continuing sustained investment in transportation.

I'll pass it over to Mr. Cummings to give you a few more specifics.

[Fred Cummings, Vice-President, Infrastructure Management and Engineering, TransLink, City of Vancouver]

We're the beneficiary of a wide range of funding sources for our operation. We're probably the envy of many other jurisdictions. We do have, obviously, the fare-box recovery that we get a large amount of our funding from, but also we have access to property tax, fuel tax, a hydro levy, and also the property tax that Penny referred to. With any luck, within the next few weeks we'll find out that we'll get another 0.5% increase on the sales tax in the region to help fund our infrastructure.

In addition to that, we've benefited over the years from the infrastructure program that the federal government has contributed to our organization. We've realized upwards of $2.1 billion directly to our organization over the last 10 to 15 years that has helped us fund that infrastructure and has gone a long way to meet the deficit in the infrastructure funding.

If I could, I'll just address your first question around the increase in costs over time. There's no doubt construction costs have increased over time. We've seen that accelerated cost of civil structural work.

I can cite some current examples now from the Evergreen Line, where the per-kilometre cost is about $75 million to $80 million, and that includes stations. Including the tunnel work, it's upwards of about $110 million per kilometre. Comparing the $25 million to Evergreen Line is probably a more valid comparison over the years. Over a 30-year timeline, costs have escalated, absolutely, but probably not to the extent of the $300 million. The $300 million per kilometre that you referenced is probably the Vancouver Broadway extension, which is all in subway. The subway costs are very expensive. We all know tunnelling costs are expensive. It doesn't really matter if it's SkyTrain technology or LRT technology; if you get underground, it's expensive.

[Chungsen Leung, Conservative, Willowdale, ON]

I should—

[The Chair, Conservative, Larry Miller]

Mr. Leung, I'm sorry. You're out of time.

[Jerry Dobrovolny, Acting General Manager of Engineering, City of Vancouver]

I'd just add that the Broadway costs also include rolling stock for the entire network, additional SkyTrain cars for the entire SkyTrain system.

There are a couple of other things the city's doing. We've strategically purchased property along the line for all of the station locations that will be needed. The corridor is in the street right-of-way. Then where the Broadway line starts up, we've negotiated with the developer to provide land for staging and all the construction needs at the start of the project. We've been proactively securing the land and right-of-way so those don't become additional project costs. That will be our contribution to the project.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Mr. Kellway, for five minutes.

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

Witnesses, thank you for coming today.

I was struck by the statements of my colleague, Ms. Davies, about the lineups for buses. As a member of Parliament from Toronto, I know we have similar situations in our subway system. Where I live, one can stand on the platform and wait for a couple of trains to go by before space opens up, and then just enough to squeeze in quite uncomfortably.

With the need for transit being so immediate in Vancouver and other cities across the country, I'm wondering about your thoughts on the government's dedicated transit fund, where we will see no money this year, no money next year, $250 million in the third year, $500 million, and then we get to $1 billion around the time we're back into an election, assuming a majority government and usual cycle.

I was already struck by that and also in the context of the expense of these lines, like Evergreen and Broadway. Assuming, let's say, three years out we finally get some money out of the dedicated transit fund, $250 million on a national basis—I guess one doesn't know whether Vancouver would be the recipient of any of that funding, it still being a bit unclear about how that would be divvied up, but assume for the moment that you've got your share, whatever that may be—do you know how much of that would be for your system and what you could get, if I can put it in those terms, for that amount of money?

[Dr. Penny Ballem]

Thank you very much, member.

Well, the total cost of our project in current dollars is approximately $2 billion. As Mr. Dobrovolny indicated, that's all in. That includes rolling stock, construction, and all the associated infrastructure that goes with the expansion of the system. Usually our experience has been that it's a third, a third, and a third share among the federal government, the province, and the local region. I think the transportation fund is certainly a very welcome addition. There's still considerable uncertainty about how it's going to work, and what is indicated by officials in Transport Canada is that it is a financing fund, that it's not an actual fund fund. I think one of the most important things for municipalities is that the difference between financing and equity is really important. We have access to financing at very good rates through the city, so understanding what that actually means, what the impact will be on the city, and how to plan for that is critically important for us to know.

As the representative from Montreal indicated, there are many, many different pieces that we have to get into line to actually take a project and implement it and move it forward. Our plan is a 10-year plan, so we need certainty as quickly as possible about the amount of the funding, what the format for it is and what that will mean to the city, and how the contribution of the federal government will flow and what the profile is of that cash flow, in order for us to then understand what the province is going to do, whether it's a P3. That completely changes your procurement processes. It is enormously complex. I think all municipalities would agree that the more certainty and clarity, the simpler and more streamlined it is, the better the ability for us to map it out and realize how this is going to work, and then put it into our critical timelines.

You've seen the lineups on Broadway. They are there now. They have been there for some years. It's very critical, and some of the additions that are coming on stream will make that worse, if we don't get on with this project.

To put it as simply as possible, it's about clarity, certainty, simple processes, and really understanding what is the nature of this really important opportunity that the transportation fund appears to be presenting to us, so that we can then build that into our plans.

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

I looked at what $250 million might look like for Toronto and our TTC. I think I calculated, assuming that in the great lottery that will ensue under this program, that we would maybe get, if we got a fair share, $20 million three years from now to fund public transit in the city of Toronto. I appreciate your point, if I understand it correctly, that you simply don't know how all of this is going to work and can't put a dollar amount on it.

It's a shame Mayor Vrbanovic had to leave us. I thought he made a very important contribution to the discussion today, putting this kind of funding in a global context and allowing us to understand that what's at stake here is the future of very significant economic growth and development on a global scale and global implications such as the innovation corridor. In that kind of context, I look at the back-end funding proposed by the dedicated—

[The Chair, Conservative, Larry Miller]

Sorry, you're over time. Could you wind up, please.

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

Yes.

Thank you very much, Mr. Chair. I appreciate that.

Do you have any thoughts about Mr. Vrbanovic's contribution today and the global context in which he puts cities and the importance of infrastructure investment for the competitiveness of Canadian cities?

[Dr. Penny Ballem]

Thank you, member.

I think the FCM has done a good job providing that kind of information to the committee and to the federal government. Essentially municipalities own 60% of the infrastructure, and we have many business lines as you've heard today. We treat water, solid waste. We have all the transmissions systems involved in those kinds of things. In Vancouver we're separating all our sewers. That's a multi-year project where, without federal funding in the past, we were unable to keep up with the need to do that to meet statutory requirements.

We have a broad-based line of business and we very much need senior government investment and the ability to organize that so we can keep up with our infrastructure. You could go around the world and look at the transit infrastructure, and if you look at the transit infrastructure that is being proposed in many municipalities across Canada, the economic benefit of those investments is very clear. If you go to Asia, which is a major trading interest for Canada and certainly for British Columbia, they are, as you know, investing billions and billions of dollars at the national level in building transit infrastructure, because they know it's absolutely fundamental to their economy and to the success of their cities. The vast majority of the public will live in cities. It's important.

We look forward to understanding the specifics of the transportation fund and it certainly is an opportunity that Vancouver and our region and TransLink will be working to take full benefit from.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Mr. Komarnicki, you have five minutes.

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

I was struck when you said that the transit system is fundamental to your economy. I looked at one of your charts on trying to get motor vehicles off the road. It costs money to maintain roads. If you can get them off the roads that's a positive.

You were saying there's a growing demand to move people, workers and students, around. Like the program, you want it coherent, on time, and with a degree of certainty. We do have the technology that can tell us when the stops will be and how we can get there. We can almost instantly know where we are.

Fundamentally, the fact that you would have a fund dedicated to transit I expect you would say is a good thing, because it targets the very issue that you raise as a concern. The other aspect would be ensuring that you have that reliable, consistent, clear funding that you can bank on, leverage, and so on. If I heard you correctly, one of the lines was going to cost $2 billion, rolling stock, everything in; the third share, roughly $700 million, a little less.

[Dr. Penny Ballem]

That's correct.