Transport Committee on Feb. 23rd, 2021

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

Thank you.

We tried to get a message to the clerk, but thanks very much, Mr. Chair.

Maybe I'll start with Mr. Penner, because last time most of my questions were for Mr. Bain.

I'm probably not going to change your opinion on the benefits of private sector investment and some of the growth and project production costs, and you're probably not going to convince me.... We won't change each other's minds, but I'm hoping we can find one area of common ground, and that is that, if the government is going to allow for private sector involvement in these projects, would you not agree that risk and reward should go together? In other words, if the Canada Infrastructure Bank is going to operate in such a way as to guarantee financing to provide a backstop on the loans or lower borrowing costs to the benefit of corporations of private sector involvement in that, surely the risks should go with the reward. If we're going to allow these companies to earn profits off public infrastructure, they should bear the risk that comes along with that.

[Dylan Penner]

The problem is that they don't. What happens is the private sector gets the reward, and the communities bear the risk. What we've seen in our fundamentally unjust system is that, just to look at the pandemic, billionaires have gained $3.9 trillion, and workers have lost $3.7 trillion globally during the pandemic, and this historic transfer of wealth to the 1% is an indictment of this neo-liberal model that privatization is a key part of. More privatization isn't building back better; it's just building back more of the same that got us into these problems in the first place.

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

You and I will absolutely agree that the current Liberal government is certainly allowing a certain class of Canadian to benefit off the pandemic, and when you look at some of the information coming out of the Bank of Canada and where some of asset growth has been.... But we're kind of talking narrowly about the CIB, the Canada Infrastructure Bank, and its model. Again, I know you and I aren't going to agree on the fundamental principle of whether or not private sector corporations should be able to participate in these types of projects, but I'm hoping that you and I can agree that, even though we come from different perspectives philosophically, at the very least, if you're going to allow profits to be made on large-scale public infrastructure, the risks should come with that. The business model where the Canada Infrastructure Bank underwrites these types of projects, assuming the risks for taxpayers while guaranteeing profits for private sector.... In other words, if the private sector knows that, at the end of the day, the bank, and therefore Canadian taxpayers, will be on the hook, I'm hoping that you and I can find that common ground. Even though we might start from different philosophical positions, we might agree that, at the very least, risk and reward should go together.

[Dylan Penner]

I don't agree with the premise that the CIB continuing down the road of privatization and P3s is a foregone conclusion. When the idea was originally announced, it was rooted in public financing, and it could and should be again, as some of the evidence I shared today has highlighted, and there's plenty more out there from many reputable organizations. The Canadian Centre for Policy Alternatives has written in depth on this as well as the auditors general that I mentioned. We need to go in a different direction and not put communities on the hook for these problematic privatized projects.

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

Thank you very much.

Maybe I'll go back to Mr. Bain, then.

In your experience, based on the conversations you've had with your partners, your members and the people who you represent and work with, what has been the effect of the various lenses that the government has put into the infrastructure bank? When you look at a business model where they originally proposed that the bank was going to take on the risks of this financing, they were going to provide either reduced rates of borrowing or loan guarantees, that type of thing. You would imagine that the corporations would be tripping over themselves to take that deal—“Hey, if the government wants to assume all the risk, why not participate in this?”—and yet we just haven't seen that uptake. Only a handful of projects are even up on the government's website in terms of projects, even at the conception stage. I've heard feedback from various stakeholders that, in some cases, the various lenses that have been applied skew and filter out some of the projects that could perhaps be undertaken but don't meet the current criteria of this government. Can you speak to that at all?

[Derron Bain]

My understanding was that with the initial establishment of the CIB in 2017 there was a very strict filter and mandate around the projects and sectors it could invest in. But over time, and specifically through the growth plan announcement in October 2020, that mandate has perhaps broadened a little. In many cases the devil's in the details here. You have a series of project commitments the CIB has made that are only commitments around memorandums of understanding. It's very difficult at that stage to assess the success and the specific model in the financing approach of the CIB on the basis of an MOU.

Their ultimate measure, at the end of the day, is going to be the two-times multiple of CIB capital. To date, in the 10 or so projects that have been committed to, I don't see a measure of that two-times multiple of the CIB commitment. But, again, we have to recognize that these projects are in the development stage, the MOU stage, and perhaps over time those details will become apparent.

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

Hope springs eternal, I suppose.

[The Chair, Liberal, Vance Badawey]

Thank you, Mr. Scheer and Mr. Bain.

We're now going to move on to our next questioner. We're going to have Mr. Rogers from the Liberal Party for five minutes.

[Churence Rogers, Liberal, Bonavista—Burin—Trinity, NL]

Thanks, Chair.

Thank you to our witnesses today. We've seen very different perspectives on how we build infrastructure coming from both sides.

In my involvement in the municipal sector, as a board member of the Federation of Canadian Municipalities, I saw many discussions about P3 projects versus public funds for building infrastructure across the country.

Mr. Bain, what do see as the major barriers today in getting infrastructure projects financed or funded?

[Derron Bain]

As I alluded to in one of my recommendations, I think at the federal level it is around having an entity, an agency, mandated with the overall identification and coordination of major federal infrastructure projects. I think if you had that in place, that might generate significantly more opportunities than we're seeing today. It might also generate those types of opportunities that might lead directly to private-sector investment in infrastructure. It will help them meet that primary mandate of leveraging private-sector capital.

If you look at several of the recent major federal infrastructure projects, whether the CSEC facility in 2010, RCMP E Division Headquarters in B.C. in 2010, Iqaluit International Airport in 2013, the Champlain Bridge in 2015 or the Gordie Howe Bridge in 2016, each of those projects rely significantly on both federal and private-sector finance and investment. The only one on that list that's not truly a federal project, although the federal government provided significant financing to that project, is the Iqaluit airport, for obvious reasons.

[Churence Rogers, Liberal, Bonavista—Burin—Trinity, NL]

Thank you, Mr. Bain.

The Government of Canada is already investing in thousands of projects across the country, some large, some small, through the investing in Canada infrastructure program. In your opinion, what creative ways are there to make the most out of taxpayers' dollars?

Mr. Penner or Mr. Bain, I'd like both of you to comment on that, and particularly on the growth strategy, which is broadband. Broadband would not be happening in rural Newfoundland and Labrador and rural Canada without the support of the Government of Canada. That's where we've been investing major infrastructure dollars. Unlike Mr. Scheer who wanted to cut $18 billion, we've decided to invest in and support rural Canada.

[Dylan Penner]

I think the simple answer, in terms of how to make the most of public funds for infrastructure spending, is to stop engaging in P3s and privatization. As I outlined earlier, P3s and privatized projects cost billions of dollars more. If you want to save money, stop doing it.

[Derron Bain]

I would say on that point that the government has to reflect on its financial and fiscal position, particularly given the challenges we've just faced in the last 11 months with COVID-19, and whether it has the capacity on its own to invest in and deliver the public infrastructure that the country requires and that we are actually going to require in terms of improving long-term job prosperity, productivity and growth in our economy. I think there is a role for both, and given the situation we're in, private sector investment is going to be extremely important.

With respect to rural investment, it is absolutely critical, whether that's rural Newfoundland or rural Ontario or whether it's in Canada's north. These are areas of the country that have, in many cases, faced underinvestment in infrastructure over the last number of years, over the last decades, and addressing those deficiencies is critical moving forward.

[Churence Rogers, Liberal, Bonavista—Burin—Trinity, NL]

The CIB has laid out several priority investment areas.

Mr. Penner or Mr. Bain, or both, from your perspective, which areas do you think are most important and most promising? When we look at transit, clean power, broadband, trade and transport, and green infrastructure, what area do you consider to be the most important?

[The Chair, Liberal, Vance Badawey]

Mr. Rogers, was that for Mr. Bain or Mr. Penner?

[Churence Rogers, Liberal, Bonavista—Burin—Trinity, NL]

It is for both, for comment.

[The Chair, Liberal, Vance Badawey]

I'll go to one, quickly, because we're out of time here.

[Derron Bain]

Quickly, if you're asking my personal opinion, I would advocate for trade and transportation, given its impact on the country's economy going forward.

[The Chair, Liberal, Vance Badawey]

Thank you.

We'll now move on to the Bloc.

Mr. Barsalou-Duval, the floor is yours for two and a half minutes.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

Thank you, Mr. Chair. I will address Mr. Bain again.

Mr. Bain, you told us earlier about your experience, your expertise and your love of P3s. I understand that you see many business opportunities there. However, do you think there is a limit to the private sector's participation in infrastructure projects? Are there any projects the private sector should not participate in or for which the private sector's participation would not be in the public interest?

[Derron Bain]

I'm just trying to digest the question and put together a response.

Certainly in terms of the projects I have been involved in, it has been key that the private sector has been responsible for the delivery, the construction, the financing and the building management of the infrastructure. It has not moved into the operations of the public services that occur within those facilities.

From my personal perspective, that's an important delineation, whether it's a hospital P3 such as the B.C. Children's and B.C. Women's hospitals or whether it's a school in Saskatchewan or Alberta. We are not encroaching on the public services that are being delivered, rightly so, by the governments in those facilities.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

I was asking whether there is a limit, whether there are infrastructure projects for which the private sector's participation is not relevant.

[Derron Bain]

I'm not sure that it's a simple response that there's a certain class of projects for which it's not appropriate for the private sector to participate in. I think that was one of the reasons for the establishment of the CIB, to help support those projects that otherwise might not be supported by the private sector.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

I have one last question for you.

How much profit have you personally managed to make from P3s?

[Derron Bain]

How much have I personally made? I have personally made none, other than my salary.