Transport Committee on May 16th, 2017

[The Vice-Chair, NDP, Robert Aubin]

Good morning everyone.

I would like to know whether there is unanimous consent to hear at least one of the witnesses' presentations. That would save us time later. If you would prefer that we suspend in order to go vote and come back, that's an option as well.

I am ready to hear your suggestions.

I propose that we hear from at least one of the witnesses before we break for the vote.

I take your silence to mean that there are no objections. Let's go ahead, then.

On that note, I will turn the floor over to Mr. Marchi, first.

[Sergio Marchi, President and Chief Executive Officer, Canadian Electricity Association]

Good morning, Mr. Chair and committee members.

My name is Sergio Marchi, and I am the president and CEO of the Canadian Electricity Association, the national voice of electricity since 1891. On behalf of our members, our submission offers 10 recommendations that we hope will be helpful to your deliberations.

Reliable electricity has become indispensable to a competitive national economy and a high quality of life. However, many of our infrastructure assets are reaching the end of their life cycles. This means that Canada needs to heavily renew its electricity systems. Specifically, the Conference Board estimated that until 2030, we will need to invest some $350 billion. Accordingly, our members have been investing aggressively, nearly $20 billion a year. Indeed, at least three of the top five largest infrastructure projects for the last decade have come from our sector, according to ReNew Canada magazine. This year, seven of Canada's 10 largest builds will be electricity-related. However, the current rate of projects is not enough, as we also need to adapt to new technologies, changing generation sources, and shifting customer demands.

CEA supports the creation of the CIB, the Canada infrastructure bank. If well designed and well implemented, the bank could be a strong enabler of electricity sector investments, as well as those in other key industries that are critical in sustaining our economic prosperity and future. In this regard, CEA makes the following recommendations.

First, the CIB should prioritize projects that align with Canada's clean energy future to help bolster transformational projects such as grid modernization, distributed energy, electrification of transportation, and emissions-free generation. This should also include green infrastructure projects, which reduce Canada's carbon footprint and make us more climate resilient.

Second, full and equal consideration should be given to the varied corporate structures of our sector participants: public, private, and hybrids.

Third, a bank board position should be reserved for an individual with experience in the electricity sector, given its economic criticality.

Fourth, all financing strategies, revenue streams, and de-risking mechanisms should be considered to ensure the greatest return with the least impact to the taxpayer. This will include equity, direct investments, and loan guarantees.

Fifth, early and ongoing consultations with stakeholders is key. This includes creating an advisory committee with industry representation, undertaking the first review before the five-year threshold, and codifying a transparent and efficient application process.

Sixth, the CIB should serve as a one-stop focal point within the federal government for speeding up approval processes.

Seventh, projects should be sought from all parts of Canada, thus ensuring regional balance. This is crucial to addressing, for example, the economic uniqueness of northern Canada and the participation of Canada's indigenous peoples.

Eighth, new innovative technologies should also be a factor because facilitating innovative projects is important, even if they may mean lower returns in the short term. After all, true innovation takes time, but good innovation pays off.

Ninth, cross-border infrastructure projects, such as transmission lines to the United States, should be eligible for funding, as they deepen our export revenues and continental GHG reductions.

Tenth, best-in-class examples of other like-minded banks should be studied and their practices emulated.

In closing, throughout our history, Canadians have well-understood the importance of looking ahead. Think of the great railroads of the 19th century, the highway, seaway, and broadcasting systems of the 20th, or the Canadian arm that extended mankind's reach into space. This has all been part of national infrastructure building, otherwise known as nation-building. Each time we did, it was transformative, uniting our country and laying the foundation for economic prosperity for generations to come.

Because the work of that nation-building never ends, CEA is hopeful that the Canada infrastructure bank will become another national instrument with which to help build a better and cleaner tomorrow for all Canadians.

Thank you, Mr. Chairman. This was a quick summary of a much lengthier submission around those 10 recommendations.

[The Vice-Chair, NDP, Robert Aubin]

It is I who thanks you. You are clearly experienced here. You have the clock in mind. Wonderful.

Unfortunately, I'm going to have to ask our two other witnesses to be patient. Duty calls in the House. As soon as the vote is over, we will be back to carry on this discussion with the whole gang.

[Vance Badawey, Liberal, Niagara Centre, ON]

I wish to put a motion to suspend, Mr. Chairman.

[The Vice-Chair, NDP, Robert Aubin]

Yes.

We will now suspend.

[The Chair (Hon. Judy A. Sgro (Humber River—Black Creek, Lib.)), Liberal, Judy Sgro]

I call the meeting back to order.

Thank you, Mr. Aubin. I understand you convened the meeting and got it going. To remind you, it has been the decision of the committee that when the bells ring, the committee does not sit. It's the reason I did not come back to start it. Anyway, Mr. Aubin, you had unanimous consent. That's great. Mr. Marchi had a chance to give his presentation.

We have some time constraints, and we have three witnesses. Mr. Marchi has already spoken, but we certainly need to hear from the other two witnesses.

Mr. Khan, we'll open it up with you, and then Ms. Ryan. From there, we will go to the officials.

The floor is yours.

[Azfar Ali Khan, Director, Performance, Institute of Fiscal Studies and Democracy]

Thank you, Chair, vice-chairs, and members of the House of Commons Standing Committee on Transport, Infrastructure and Communities. It is an honour to be with you today.

I will briefly comment on Bill C-44 as it relates to Canada's essential infrastructure.

The Institute of Fiscal Studies and Democracy, of which I am the director of performance, recently published a piece on assessing the risks and opportunities associated with the Canada infrastructure bank. The key premise underlying our piece is that a national infrastructure plan and strategy supported by evidence is required. This should be the first priority.

Through our work, we identified three core elements that must inform the first steps needed to build a work plan and national strategy around essential infrastructure.

First, a thorough assessment of our current infrastructure stock needs to be performed. Specifically, is this stock delivering or on track to deliver the benefits expected from them at the time they were approved?

A report by the U.K.'s National Audit Office highlighted the costs and challenges of delivering major projects in government, with a number of recurring issues affecting performance. Of the 149 major projects in the U.K. as of June 2015, with the total life-cycle cost of 511 billion pounds, successful delivery of 34% was considered to be in doubt or unachievable unless action was taken. Infrastructure investments alone are not a guarantee of infrastructure outcomes.

The second step is to conduct a strategic analysis of Canada's future infrastructure needs.

This analysis would identify the economic, social, and environmental benefits expected of infrastructure investments. It would consider factors such as demographic trends, population growth, current and projected economic activity, trade corridors and future drivers of economic growth, the environment, and any significant regional variations and need.

Finally, by understanding the condition of our current infrastructure stock and our future needs, we can identify what our infrastructure gap is relative to the future needs. This is the evidence base, at a minimum, that we feel is needed to develop a national infrastructure plan and strategy.

Currently, estimates of the national infrastructure gap in Canada range from zero to $1 trillion. While estimates always come with some uncertainty, this is a wide range by any measure, and not one on which to build a national infrastructure strategy.

Understanding where we are and where we are going is paramount. Only then can we map out the way to arrive at our destination.

In fairness, budget 2017 does identify an ambitious data initiative on Canadian infrastructure to provide the intelligence to better direct infrastructure investments. Further, the budget implementation act does identify the collection and dissemination of data to monitor and assess the state of infrastructure in Canada as one of the functions of the Canada infrastructure bank.

In our view, this initiative identified in budget 2017 and this function of the bank are precisely what is required, first and foremost, to have an evidence-based national infrastructure plan and strategy. Details on this initiative are to be announced in the coming months, and we are very much looking forward to understanding the details and timelines expected of this initiative.

Let us develop the plan first, and then put in place the right strategies and instruments, such as the bank, that are tailored to best achieve that plan.

Unfortunately, these initiatives are in the wrong order; we are putting the cart before the horse.

Thank you for your time and the opportunity to speak with you today. I look forward to answering any questions you may have.

[The Chair, Liberal, Judy Sgro]

Thank you.

Go ahead, Ms. Ryan.

[Sarah Ryan, Senior Research Officer, Canadian Union of Public Employees]

Hi, my name is Sarah Ryan and I'm a senior research officer at CUPE. Thank you very much for inviting CUPE to present our concerns regarding the Canada infrastructure bank today.

The Canadian Union of Public Employees, or CUPE, is Canada's largest union, representing 643,000 workers across Canada. CUPE members work in health care, education, municipalities, libraries, universities, social services, public utilities, emergency services, transportation, and airlines.

As more details about the Canada infrastructure bank have emerged, CUPE members have expressed strong concerns that the bank is essentially a bank of privatization. They are deeply concerned that the bank could lead to the privatization of airports, ports, public transit, roads, highways, bridges, water and waste-water systems, hydroelectric utilities, and transmission grids. These are all key services that the Canadian public depends upon every day.

Bill C-44 states that infrastructure projects financed by the bank must generate revenue and promote the public interest. Revenues can only be generated in two ways: by charging high interest rates on loans, and by introducing tolls and user fees on new infrastructure projects or existing infrastructure assets.

The mandate of the bank is fundamentally contradictory. Private investors will be the clear winners, since revenues from projects financed by the bank will fall into their pockets. Canadians who depend every day on infrastructure to heat their homes, to get them from place to place, and to ensure they have safe drinking water will be the losers. The public will shoulder the costs of the bank's high interest rates and will be hit hard by added costs of living that will result from new tolls and fees.

Bill C-44 will also allow infrastructure projects to be privately pitched through unsolicited bids. This puts private investors in the driver's seat and allows them to set priorities on what gets built.

The bank gives investors unprecedented control over how infrastructure is built, operated, and structured. Infrastructure projects developed by private investors will be tailored to profit the projects' backers and risk being totally out of touch with the public's needs and interests. This eliminates the capacity of governments and citizens to decide what infrastructure their communities need and how it should be built and paid for. It severely limits the public's capacity to influence decision-making on infrastructure investments.

Minister Morneau said that cabinet will have the final say on what gets built, but to sustain a private investment in the bank, CUPE members are not confident that cabinet will be willing or able to deny investors' proposals. Furthermore, the private sector will still play a key role in shaping the project structure to maximize profits.

When governments propose, design, finance, and build infrastructure projects, the public can hold them to account. However, Bill C-44 limits the bank's public transparency and accountability requirements. It allows project information and investor deals to be kept secret from the public. This means that information about how community infrastructure is being funded, who is involved in projects, and how much investors are profiting will not be available to the public. This is bad news for Canadians who have a right to know how public monies, which will partially fund the bank, are being spent and how public infrastructure is being built.

In conclusion, CUPE offers the following recommendations.

First, the government should establish a public infrastructure bank that provides low-cost financing for new infrastructure projects, and that means public financing. There is no shortage of financing available for the federal government to borrow at low interest rates right now. If this is done through a public bank and lending institution, similar to the Business Development Bank of Canada, CMHC, or EDC, then its investments in borrowing wouldn't need to increase the deficit or net debt any more than the current proposal.

Second, the government should ensure there's stronger accountability, transparency, and review by auditors general over the bank and its projects. The bank should be mandated to provide full public disclosure of all business deals, value-for-money assessments, and contracts. The bank should also have public officials on its board to ensure that it acts in the public interest. Public infrastructure projects must remain public and not turn into secret deals with private corporations.

Finally, the government should not allow private corporations to determine infrastructure priorities, including through unsolicited bids. Instead, it should establish a public and transparent process using evidence-based analysis for truly objective planning of priority infrastructure projects.

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Ms. Ryan. I know there are a lot of questions, so I don't want to use up the time.

As a suggestion to the committee, given the time pressures, would you like to have one round to each party with these witnesses, and then have the departmental officials here? Would that be satisfactory?

Mr. Poilievre.

[Pierre Poilievre, Conservative, Carleton, ON]

Would it be possible to hear the officials, and then just have a large panel? That way, members can decide whom they want to question.

[The Chair, Liberal, Judy Sgro]

Is the committee okay with that? Would it be all right to bring up the officials?

Monsieur Aubin.

[Robert Aubin, NDP, Trois-Rivières, QC]

It's okay.

[The Chair, Liberal, Judy Sgro]

All right. Could we get the officials to join us at the table?

Do we want a presentation from the officials as well, or are they just strictly answering questions?

Okay, the committee members want a short presentation from the officials.

Mr. Campbell, we'll turn the floor over to you. Please introduce yourself.

[Glenn Campbell, Executive Director, Canada Infrastructure Bank Transition Office, Office of Infrastructure of Canada]

Good afternoon. I'm Glenn Campbell, assistant deputy minister at Infrastructure Canada. I'm joined by Niko Fleming, a chief at Finance Canada.

Division 18 of part 4 would establish the Canada infrastructure bank, announced first in the 2016 fall economic statement, as well as in budget 2017. For reference, the proposed amendments are clauses 403 to 406, which can be found on pages 236 to 248 of Bill C-44.

Please allow me to begin by providing some background and context around the proposed bank. Then I'll walk through the contents of the proposed legislation at a high level, and finally, we'd be happy to answer any questions.

The Canada infrastructure bank is intended to provide innovative financing for new infrastructure projects and help more projects get built, including those transformative projects that would not have otherwise been built in Canada, by attracting private and institutional investment. The proposed bank is part of the government's overall “Investing in Canada” infrastructure plan of more than $180 billion. Federal support for infrastructure would continue to be delivered largely through traditional infrastructure models. The Canada infrastructure bank represents less than 10% of the total planned amount.

The bank would be one tool that government partners, particularly municipal, provincial, and territorial, could choose as an option to build more infrastructure projects. The bank is a new partnership model to transform the way infrastructure is planned, funded, and delivered in Canada. Leveraging the expertise and capital of the private sector, the bank would allow public dollars to go farther and be used more strategically, with the focus on large transformative projects such as regional transit plans, transportation networks, and electricity grid connections, just as examples.

This is a review of the legislation. The legislation proposes the Canada infrastructure bank act and can be grouped into six main areas, including incorporation, mandate, function and powers, governance, funding, and accountability. I will address each of these in turn.

I had prepared a rather lengthy response to cover the contents of the bill, so it's up to you whether....

[The Chair, Liberal, Judy Sgro]

Perhaps you can cover off the key points so we ensure that the committee has the opportunity to ask their questions.

[Glenn Campbell]

I understand.

First, it would incorporate the bank as a crown corporation effective on royal assent.

Second, the legislation would set the mandate and purpose of the bank, which would be to make investments in revenue-generating infrastructure projects that are in the public interest and to seek to attract private sector and institutional investment to those types of projects.

Third, regarding functions and powers of the bank to help achieve its purpose, the bank would be able to make investments through a wide variety of financial tools, including debt and equity investments and others. The bank would make its investments directly in the infrastructure project, and its investments would be alongside the private and institutional investors as well as any other government investor. This would be a co-investment or co-lending model. The bank may also make loan guarantees with the separate approval of the Minister of Finance, and this separate approval is consistent with the general requirement for crown corporations.

The bank also has functions other than making investments, including acting as a centre of expertise in advising all governments on revenue-generating projects and working with all levels of government to collect and share data for future investments.

Fourth, around governance, it sets out the high-level parameters in the bank. By and large, the Financial Administration Act applies regarding crown corporations. Under the proposed legislation, with respect to the board, members and the CEO would be appointed by the government through the Governor in Council, and the board would play a role in the selection of the CEO.

On May 8, the government, on an anticipatory basis, launched an open, transparent, and merit-based selection process to identify the bank's senior leadership. Through these processes, the government would first select a chairperson of the board followed by the remaining directors and a chief executive officer. Any appointments would only be effective if legislation establishing the bank is passed by Parliament and receives royal assent.

The fifth aspect—and I'm nearing the end, Madam Chair—is a proposal to allow the Minister of Finance to pay up to $35 billion to the bank. It is expected that the bank's asset and liabilities and revenues and expenses will be fully consolidated in the Government of Canada's books. We expect capital only to be transferred to the bank as needed to reduce treasury function, so it would only get parts of that money over time, and while the cash amount would be $35 billion, the government has announced that the bank would be authorized to fiscally expense, on an accrual basis, up to $15 billion over 11 years.

Going quickly, Madam Chair, the crown corporation would be accountable to Parliament in a number of important ways and required to submit a summary of its annual corporate plan as well as an annual report to Parliament. It will be subject to the Privacy Act and the Access to Information Act. The only exception is that commercially sensitive third-party information would be kept confidential, which is about the commercial partner, not the transaction. It will be subject to the highest standard of having its books audited by both the Auditor General of Canada as well as a private sector auditor. Parliament would have authority to review the bank's legislation every five years on its operation.

In conclusion, the bank will be one more tool for partners to use, if they choose, in addition to traditional infrastructure funding programs. The government supports local decision-making, including supporting municipalities, provinces, and territories as they set the infrastructure priorities that best meet the needs in their communities.

Projects supported by the bank will be structured using conventional and robust legal arrangements among partners designed to protect the interests of Canadians. Government and officials have been working collaboratively with both the infrastructure and finance departments, and we have consulted extensively and widely.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Campbell.

[Glenn Campbell]

That was the end.

[The Chair, Liberal, Judy Sgro]

Good timing.

Mr. Rayes.

[Alain Rayes, Conservative, Richmond—Arthabaska, QC]

Thank you, Madam Chair.

Before I get to my questions, I would like to ask my fellow members something.

This is our only opportunity to dig into the very important matter of the Canada Infrastructure Bank. Since we had to leave for a vote in the House, would it be possible to extend the meeting by 15 to 20 minutes, rather than ending on time at 1 o'clock? Everyone would still be able to make it to the House in time for statements by members and oral questions.

I'm not sure whether we can come to some friendly arrangement, without jumping through any procedural hoops or resorting to a motion.

[The Chair, Liberal, Judy Sgro]

Do we have unanimous consent to continue?

Yes.

Please go ahead.

[Alain Rayes, Conservative, Richmond—Arthabaska, QC]

Thank you, Madam Chair. Thank you everyone.

I'd like to thank the witnesses for being here. We apologize for the delay.

My first question is for you, Mr. Ali Kahn.

In the paper you co-authored, I believe, with Kevin Page and other members of your institute, you say that the case for the Canada Infrastructure Bank is weak. You also say that the government has no real idea whether the bank will meet its objectives or not, since there appears to be no comparable model elsewhere in the world. The bank's structure will seemingly be based on a transfer of public assets to the private sector.

In light of the new information you now have, do you still stand behind what you wrote in your paper?

[Azfar Ali Khan]

Our main point behind saying that the value proposition is weak is that it's really just a matter of the sequencing. We feel that we're putting the cart before the horse.

We think the very first priority for the government really should be to develop that long-term national infrastructure plan, with clear priorities, concrete objectives, and specific performance measures. Once you have that, I think the value proposition for the bank will be very self-evident and clear, but absent that, the value proposition is weak.

[Alain Rayes, Conservative, Richmond—Arthabaska, QC]

In other words, the creation of the bank is premature.