Transport Committee on Feb. 23rd, 2021

[The Chair, Liberal, Vance Badawey]

Welcome to meeting number 18 of the House of Commons Standing Committee on Transport, Infrastructure and Communities.

Today's meeting is taking place in a hybrid format, which is no different than the way we've been for some time now. This is pursuant to the House order of January 25, 2021. The proceedings will be made available via the House of Commons website. The webcast will always show the person speaking rather than the entirety of the committee.

To ensure an orderly meeting, I would like to outline a few points to follow. I don't like calling them rules. For lack of a better word, they're recommendations from the House.

Members and witnesses may speak in the official language of their choice. Interpretation services are available for this meeting. You have the choice, at the bottom of your screen, of either floor, English or French.

For members participating in person, proceed as you usually would when the whole committee is meeting in person in a committee room. Keep in mind the directives from the Board of Internal Economy regarding masking and health protocols.

Before speaking, please wait until I recognize you by name. If you are on the video conference, please click on the microphone icon to unmute yourself. To those in the room, your microphone will be controlled as normal by the proceedings and verification officer. As a reminder, all comments by members and witnesses should be addressed to the chair. When you are not speaking, your mike should be on mute.

With regard to a speaking list, as always, the committee clerk and I will do the best we can to maintain the order of speaking for all members, whether they are participating virtually or in person.

Members, pursuant to Standing Order 108(2) and the motion adopted by the committee on Thursday, October 29, 2020, the committee is meeting today to continue its study on the Canada Infrastructure Bank.

Now I would like to welcome our witnesses.

We have Concert Infrastructure, Derron Bain the managing director; as well as The Council of Canadians, Dylan Penner, climate and social justice campaigner.

Mr. Bain, you have five minutes, and the floor is yours.

[Derron Bain, Managing Director, Concert Infrastructure]

Good afternoon, Mr. Chair and committee members.

Thank you for the opportunity to be with you to contribute to your study of the Canada Infrastructure Bank.

Concert Infrastructure is an independent long-term investor, developer and manager of public infrastructure. Our foundation and strength include the backing of Canadians represented by the 10 unions, including building trades and management pension plans that are our shareholders.

Concert Infrastructure was created to invest in Canadian public-private partnership, P3, infrastructure projects, strengthening communities while providing stable and predictable financial returns for our shareholders.

This Canadian-centric infrastructure investment model seeks to secure the long-term financial future or retirement income of Canadians, while partnering with Canadian companies and employing Canadian building trade workers to deliver critical public infrastructure.

Through 10 direct infrastructure investments with an aggregate capitalization of almost $3 billion, including the Iqaluit International Airport, several school bundles and the BC Children's and BC Women's hospital projects, Concert has been a successful vehicle enabling pension plans access to Canadian infrastructure investments.

Infrastructure investment is critical to strengthening the economic and social fabric of Canadian communities. It is well understood that Canada, like most nations, faces a massive infrastructure deficit. Concert supports the government initiative to address this deficit through the Investing in Canada plan and its $180-billion financial commitment. We also agree with the government and CIB objective to leverage private sector investment in infrastructure to deliver more projects more quickly.

In late 2016 and early 2017, Concert engaged directly with the government on its CIB initiative. At the time, we were assured that the initiative would not impact the well-established, competitive and successful Canadian P3 model and sector.

Today our position and message to the committee on the CIB remains consistent. P3s have been successfully implemented across Canada for almost 20 years, including in British Columbia, Alberta, Saskatchewan, Ontario, Quebec and Nunavut. It is a model that delivers infrastructure in partnership with all levels of government and agencies on time and on budget. The Canadian P3 model is widely viewed as best in class, and many Canadian companies are now exporting the model to other countries.

Canada continues to underutilize the model and expertise, particularly the federal government. Too few federal government-led projects are brought to market. There is an abundance of private capital available for infrastructure investment in Canada but an undersupply of project opportunities. Canadian capital is available and waiting to invest in our infrastructure.

Canadian institutional investors, such as pension plans, have the experience, track record of success, as well as the capital available to invest in these projects. Similarly, the First Nations Finance Authority exists in Canada to provide third party financing to indigenous infrastructure projects.

The Canadian P3 market is competitive and mature, resulting in efficient pricing, development, delivery and management of public infrastructure projects, often led by Canadian institutional investors such as Concert.

A primary role of the CIB should be to expedite and package the wide range of sizable infrastructure projects in a way that is accessible and relies on these pools of private sector capital.

The activity of the CIB to date appears to crowd out opportunity for private sector equity and debt investment in infrastructure projects. The November 2020 “CIB Corporate Plan”, appendix I, page 80, lays out various infrastructure delivery models and structures, making it clear that the CIB intends to finance design-build-finance-maintain, DBFM, projects or design-build-finance-operate-maintain, DBFOM, projects that have been previously financed by Canadian institutional investors.

There are three main CIB priorities that Concert recommends this committee include in its final report.

First, leverage private sector investment, structuring projects to maximize private sector equity and debt. CIB should not be financing P3 DBFM or DBFOM projects. It should respect its mandate of supporting revenue/usage risk infrastructure projects.

Second, the CIB should be mandated to take a leadership role in the identification and implementation of major federal government infrastructure projects, while seeking to maximize private sector equity and debt investment. This activity will produce a greater pipeline of investable projects. An inventory of CIB projects and opportunities for private investment should be maintained and be transparent to the Canadian infrastructure market. A mandatory federal P3 screen of projects should be reinstated, supporting greater private sector investment in infrastructure.

Finally, the CIB should be separated from routine government decision-making, giving it a clear mandate to support the implementation and delivery of infrastructure projects. As you work to develop your report, we urge you to be mindful of the existing successful Canadian infrastructure investment market and how the CIB is impacting this market and ultimately the effective and efficient delivery of infrastructure in Canadian communities.

Thank you.

[The Chair, Liberal, Vance Badawey]

Thank you, Mr. Bain.

We will move on to our next speaker.

Mr. Penner, it's all yours.

[Dylan Penner, Climate and Social Justice Campaigner, Council of Canadians]

Thank you for the invitation to join this important discussion.

Using the Canada Infrastructure Bank to advance infrastructure privatization and public-private partnerships is deeply misguided and dangerous, and here's why. The CIB's current structure promotes a flawed financing model of public-private partnerships, inviting and subsidizing private interests to take control of critical infrastructure and services that should be kept in public hands. P3s are a tool that poorly invests public funds to further corporate interests while failing to support communities. The CIB could play a critical role in supporting a just recovery from the pandemic and support the transition to a low-carbon economy, but not if it remains fixated on privatization and P3s.

For infrastructure to truly be in the public interest, it must be publicly owned and operated. P3s eliminate jobs, lack transparency and exclude municipalities from the decision-making process. Given the failings of P3s, we should not be surprised that at least one CIB project was already cancelled before it even began. Last summer the Township of Mapleton called off its plans to privatize its water infrastructure with the CIB, because the privatization would have been too risky for the township.

P3s cost more. Canadians could benefit from the CIB if it were returned to its original mandate. A federal provider of low-cost public financing for infrastructure projects would help municipalities from coast to coast to coast. The current CIB model, however, which relies on private financing, often provides municipalities with loans with two to three times higher interest rates compared with public borrowing and requires financiers to provide a return on investment for their shareholders. This results in significantly higher project costs with no added benefit for municipalities.

Contrary to what some might view the situations as, in a review of 74 public-private partnerships in Ontario in 2014, the Auditor General concluded that they cost the province $8 billion more than if they had been procured publicly. A similar report by the B.C. Auditor General suggested the 16 P3 projects cost the province nearly twice as much compared with public financing. The Ontario and B.C. governments wasted billions of public dollars.

P3s deliver less, and this in a time when the climate crisis requires us to move quickly to decarbonize everything, including infrastructure. Publicly owned and operated infrastructure delivers more quickly than P3s, which are prone to failures and delays. In an attempt to cut corners and maximize profits, private companies operating P3s often try to reduce their workforce and avoid “unnecessary” investments in the public interest, delivering poorer quality. The business case for P3s often includes a significant risk transfer amount, presumably as the private sector takes on the risks associated with the project. However, the Ontario Auditor General has reported that this risk transfer factor in P3 projects is regularly inflated without evidence, often to favour the P3 option.

When it comes to essential services like water, sewage treatment, or transit, the community and municipality still bear the consequences, and higher costs, when things go wrong. P3s lack accountability and remove community control. Governments need the flexibility that comes with public infrastructure financing in order to enact strategic industrial policy. Hiding behind confidential contracts, the entire process of negotiating and procuring P3s is behind closed doors. The contract, once signed, takes away public control of the infrastructure and services, undermining that needed flexibility for several decades.

In March 2018, for example, Ottawa city councillors had only three weeks to review their P3 contract for stage two of the light rail transit here before signing. They did not learn until after the fact that the winning consortium failed to meet the minimum technical score.

[The Chair, Liberal, Vance Badawey]

Dylan, you have one minute.

[Dylan Penner]

Thank you.

In 2011 Berlin residents and citizen groups had to push for a referendum to publicize the contract for its privatized water services before ending up taking it back into public hands.

P3s were a poor model before the pandemic. Now that we have the opportunity to build back better, P3s should play no role in Canada's post-COVID recovery plan. Canadians need a just recovery plan that puts communities ahead of corporate profits.

Thank you.

[The Chair, Liberal, Vance Badawey]

Thank you, Mr. Penner and Mr. Bain.

We're now going to move on to our first round of questions.

Mr. Scheer, you have the floor for six minutes.

[Andrew Scheer, Conservative, Regina—Qu'Appelle, SK]

Thank you very much, Mr. Chair.

First, I'd like to thank our witnesses for two very articulate, if perhaps polar opposite, presentations but I certainly do appreciate both of you sharing your perspectives.

Mr. Bain, I was trying to take notes as you were speaking. Could you go over your first recommendation for the committee about leveraging private sector investment, and what you think the CIB needs to shift to accomplish that?

[Derron Bain]

The first recommendation was around a focus on doing as you've laid out: leveraging private sector investment in these infrastructure projects. I think that's been a clear and consistent mandate of the CIB since its inception in 2017 and confirmed a number of times over the last three years or so as it's gone through a series of major announcements and adjustments.

By that, I think the point I would be making with respect to this is, to date, I think the track record of the CIB and the announcements are around federal commitments to fund certain projects that are laid out on its website. Given that this is an actual performance metric that is laid out in the CIB's corporate plan, I think it's important going forward that some focus and emphasis be placed on the amount of private sector investment that these commitments are intended to raise alongside the government funding.

[Andrew Scheer, Conservative, Regina—Qu'Appelle, SK]

I think that's a key point, because this was the main thrust when the Infrastructure Bank was announced. The Prime Minister had attended some very fancy parties and had spoken to some very well-connected financiers around the world and he came back with this idea that all this untapped capital was waiting, just looking to invest in places, and if the government could provide just a little grease on the wheels or de-risk it a little, they would be tripping over each other to invest and build the types of infrastructure that communities need.

It was announced in 2016. It's been up and running now for almost four years. To date, they've completed no projects. In your view, as it currently exists, has the bank been successful in leveraging that private sector money?

[Derron Bain]

As I responded earlier, I think the thing to recognize about infrastructure is that it does take time to plan, procure, approve, finance and mobilize. Insofar as these commitments that have been made to date ultimately lead to a project, I think that's a positive thing in what we're trying to achieve and what countries want to achieve through infrastructure investment. But again, I think the CIB itself has laid out the objective a number of times, and as I said, it's going to be measured in its formal corporate plan. I think the corporate plan lays out a two-times multiple of CIB capital from the private sector, and I think it's fair to say at this point that I'm not sure any private capital has been committed alongside those project commitments.

[Andrew Scheer, Conservative, Regina—Qu'Appelle, SK]

That's fair enough. You referenced some of the previous government's P3 model, which was of course very successful. I have a project in my own riding. The commitment was made and the overpasses on the highway were built within a four-year time frame. So there certainly is a track record in the previous government of getting these types of projects built quickly through the P3 system.

Your second recommendation was that the CIB should do more in identifying large-scale projects where the federal government could play a role. Am I to understand what you mean by that is they should be more proactive? Until now, have they been too passive, waiting for applications to come onto their desk? Is the recommendation that they should work with other levels of government to identify potential projects that may not have reached the stage of a formal bid?

[Derron Bain]

It is my understanding that within the federal government there is no single agency that's responsible for the coordination, approval and implementation of federal infrastructure projects. Each federal department retains responsibility to deliver the projects on their own, within their department. I believe, as per my second recommendation, that if the CIB were given a mandate to screen, say, all federal government projects or capital commitments above $100 million, similar to the previous P3 screen that was in place prior to 2015, it could generate significant opportunities to attract private sector capital to the federal government's own stock of projects and infrastructure, whether that's first nations housing, building infrastructure, RCMP, DFO, Coast Guard, CBSA facilities, military housing and DND, government land, buildings and office space, government labs.... Again, it seems to me that that type of a private sector investment screen on major federal government commitments would generate more investment and more project opportunities.

[The Chair, Liberal, Vance Badawey]

Thank you, Mr. Bain, and thank you, Mr. Scheer.

We're now going to move on to the Liberal Party.

Mr. Sidhu, the floor is yours for six minutes.

[Maninder Sidhu, Liberal, Brampton East, ON]

Thank you, Chair, and thank you to our witnesses for joining us today.

Brampton is a growing and vibrant city, and advocating for a city where I grew up and am now raising my own children is extremely important to me. The recent $45 million Brampton transit investment will help our residents with more viable transport options while reducing our carbon footprint. The Brampton riverwalk project, which received close to $40 million from the disaster mitigation and adaptation fund, will help mitigate flooding while unlocking economic potential for great job opportunities. Now, as Brampton Liberal MPs continue to advocate for Brampton, I know sustainability is top of mind.

Mr. Bain, Canada is not the only country mobilizing the use of partnerships to sustainably finance critical infrastructure projects. For example, the Nordic Investment Bank and the European Investment Bank use similar models. I believe other countries, such as the U.K, are looking to create an infrastructure bank. Can you speak to some international best practices and what other creative financing options other countries are using to finance critical infrastructure projects?

[Derron Bain]

As you pointed out, there are a number of examples of jurisdictions pursuing models to invest, increase or leverage private sector investment in infrastructure. Most recently, I believe the U.K. is looking at a potential infrastructure bank to make its infrastructure investments. Obviously there's a significant track record of P3 models around the world, whether in Australia, the U.K., Canada or the United States.

What I would say on this point is that there is certainly no disagreement with the objective of investing in infrastructure and its impact on jobs, productivity and growth in a modern economy. The point that I've been making is that the CIB set out a specific mandate with respect to attracting private sector capital and leveraging private sector capital, and I think we just need to make sure that that remains a focus and that it delivers on that.

[Maninder Sidhu, Liberal, Brampton East, ON]

Mr. Bain, our government is committed to fighting climate change and exceeding our 2030 emissions targets. The Canada Infrastructure Bank growth plan is looking to support clean power, zero-emission buses and energy-efficient infrastructure. Can you speak to the types of infrastructure investments that will help accelerate these goals?

[Derron Bain]

There are a number of potential sectors that would help with that goal. I think it's important to note that with any infrastructure project that's been delivered in recent memory—in my experience through the P3 model—they all seek to maximize sustainability objectives and ensure they're considering climate change and those impacts. Obviously investments in renewable energy can help achieve that goal.

[Maninder Sidhu, Liberal, Brampton East, ON]

Thank you, Mr. Bain. I appreciate your insights.

The Canada Infrastructure Bank recently announced a partnership with the Government of Alberta to help build a modern irrigation system that will enhance crop production while providing water security and mitigating the impacts on the environment. Our government is committed to supporting innovative projects across the country, like the Alberta irrigation project, that will bring us into the future and provide significant returns on investment.

Can you speak to the new innovations that the Canada Infrastructure Bank should consider supporting? It's similar to my last question but more in depth.

[Derron Bain]

Can you maybe be a little more specific with what you're trying to get at?

[Maninder Sidhu, Liberal, Brampton East, ON]

The Canada Infrastructure Bank can be used for many different competitive projects. I'm just thinking of taking an innovative approach. What are your thoughts on that?

[Derron Bain]

If you look at the list of projects that it's committed to, whether it's the one you cite in terms of Alberta Irrigation, whether it's Lulu Island District Energy, the Oneida Energy Storage project, Pirate Harbour Wind Farm, that's a basket of projects, clearly, that lands in the renewable energy space. I think that's certainly a priority for this government and it's clearly a priority for many others, as we face the challenges of climate change.

[Maninder Sidhu, Liberal, Brampton East, ON]

Thank you for that.

Mr. Penner, I'll just come to you.

When we consider projects, and we talk about the broader impacts on the community that come with these projects, how do you think the government should approach this?

[The Chair, Liberal, Vance Badawey]

Mr. Penner.

[Dylan Penner]

Fundamentally, it comes back to the mandate of the bank itself, and the importance of returning it to build public financing and moving away from engaging in support for privatization and P3s.

As I outlined just some of the challenges with P3s earlier, I find it interesting that often folks who speak in favour of P3s use rhetoric that seems very detached from the evidence. There have been, as I mentioned, reports from attorneys general that outlined just how wildly these projects overspend and it's well documented how much longer they take, how much more they cost, and how local councils and local governments lose democratic oversight of the projects themselves, which would be there if they were public projects. In many ways it's not a question of individual projects, but it comes back down to the mandate needing to be for public projects, publicly funded and publicly financed and operated.