Evidence of meeting #69 for Transport, Infrastructure and Communities in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was sabia.
A recording is available from Parliament.
11:40 a.m.
Liberal
The Chair Liberal Peter Schiefke
Thank you very much, Mr. Barsalou-Duval.
Next, we have Mr. Bachrach.
Mr. Bachrach, the floor is yours. You have six minutes.
11:40 a.m.
NDP
Taylor Bachrach NDP Skeena—Bulkley Valley, BC
Thank you, Mr. Chair.
Thank you to all of our witnesses for appearing today.
It's quite a picture that is being painted by the questioning not only today but at our last meeting. It seems that the Canada Infrastructure Bank is the nexus of this tangled web involving relatively few players, each of which plays multiple different roles at different times.
I think to an average Canadian watching this testimony and trying to understand how conflict of interest was avoided, they would be quite puzzled by how all of these different parties were able to get it coming and going when it comes to infrastructure investments in our country to the tune of billions of dollars.
My question is for Ms. Therrien.
What does she make of the testimony so far today? Should Canadians be concerned about the role that these different corporate players have been involved in when it comes to infrastructure investments in Canada?
11:40 a.m.
Senior Research Officer, Canadian Union of Public Employees
Again, I spoke about the overreliance on some of the advice provided by these multinational consulting firms. There are a couple of really good articles and books on it that detail the way that, particularly since the 1980s, there's been increasing involvement of these types of consultancies in ostensibly providing advice to governments. They very seldom will say to increase investment in public services.
I was part of Peterborough city council for eight years and saw some of the consulting firms—KPMG and others—come forward without fail with recommendations to privatize or outsource public services. That was a common theme I heard from municipal colleagues across the province. Sometimes the presentations seemed like they just replaced the city name when they were doing that.
I think there are always grounds for concern when it comes to trying to create something public, in this case a public infrastructure bank, but relying on the advice of folks who are entirely enveloped in the private sector and in profit-making. There are lots of articles out there about the additional contracts of these consulting companies. We can argue whether or not they're related, but the appearance is questionable.
Like I mentioned in my opening statement, CUPE put in an inquiry to the ministry and found out that KPMG, Ernst & Young and Deloitte had been hired as part of doing this five-year review of the CIB. Rather than have public players able to provide advice and feedback about what's worked or not worked for them, we're hiring external consultants who don't really understand the on-the-ground service delivery and what's really needed in communities.
It is a desperate situation. Mayor Brown mentioned that. I was formerly a mayor as well. We know that municipalities are running on fumes when it comes to our revenue generation ability. The reliance on senior levels of government to provide low-cost financing and funding to get these critical infrastructure pieces is very important.
I think that's what should be the crux of this conversation: How do we have this institution, the CIB, transformed or reoriented back towards its mandate, regardless of how we got here? If we want to talk about potential perceived conflicts of interest, then we could spend the next year delving into that. I think the ultimate question is how we ensure that those low-cost loans are making it to the municipalities that are in desperate need for funding into their failing infrastructure.
11:45 a.m.
NDP
Taylor Bachrach NDP Skeena—Bulkley Valley, BC
Thank you for that, Ms. Therrien.
Following up on that, there was a report. I believe it was from the Auditor General, that looked into the record of the Canada Infrastructure Bank and the number of projects that had been turned down. These are municipalities that desperately need infrastructure and applied to the bank—because they hear about all of the potential of this funding mechanism—with their vital infrastructure projects and didn't make the cut. One of the primary reasons for not making the cut was that they didn't have a private investor.
What story does this tell about the Infrastructure Bank's model?
11:45 a.m.
Senior Research Officer, Canadian Union of Public Employees
Again, I've stated that we strongly believe the model is flawed, and we submitted, back in 2020, recommendations for the five-year review. In March we submitted another paper with five recommendations as to how we can reorient this bank towards servicing the public good, because, again, having a requirement to bring in private finance, we've seen over the five years of this bank, has been a failure.
Moreover, there are numerous examples of P3s. Yes, sometimes they work and can be very good. Other times they provide a big headache and additional costs for municipalities that are already stretched beyond their fiscal means to be able to provide these things, particularly in provinces where we've seen provincial governments download what should be provincial responsibilities onto municipalities. I'm sure Mayor Brown can attest to that as well.
11:45 a.m.
NDP
Taylor Bachrach NDP Skeena—Bulkley Valley, BC
We've heard several times from proponents of public-private partnerships that some infrastructure projects lend themselves to private investment and others don't. I've been trying to get to the bottom of what distinguishes these two groups of infrastructure projects. From what I can tell, the private sector is essentially picking off the projects that have the potential to generate returns, leaving other projects to the public sector, those that don't lend themselves to privatization. Is that a fair assessment? How do you distinguish between those two groups of projects?
11:45 a.m.
Senior Research Officer, Canadian Union of Public Employees
I appreciate the question, and I think again over the last decade plus, we've seen a lot of that push towards the P3 public-private model. There are examples—I mentioned some of the public banks over primarily in Europe, northern Europe and other places—that place an emphasis on having public-public collaboration. Again we're seeing that the private sector isn't coming forward to invest in these projects. Again McKinsey and the others have the optimistic view of a 5:1 return. They're not even making a 1:1 return. That's really holding that piece up.
To reorient the bank towards providing those low-cost loans to municipalities without having the requirement to have a private partner as part of that is going to be one of the key pieces that will need to be addressed if this bank is to move forward in a good way.
11:50 a.m.
Liberal
The Chair Liberal Peter Schiefke
Thank you very much, Ms. Therrien.
Thank you, Mr. Bachrach.
Next we have Dr. Lewis.
Dr. Lewis, the floor is yours. You have five minutes.
11:50 a.m.
Conservative
Leslyn Lewis Conservative Haldimand—Norfolk, ON
Thank you, Mr. Chair. My next question will be for Mr. Sabia again.
Mr. Sabia, I imagine you worked fairly closely with Mr. Dominic Barton during the course of the advisory council work you did.
11:50 a.m.
Member, Advisory Council on Economic Growth
I did, along with the other members, yes.
11:50 a.m.
Conservative
Leslyn Lewis Conservative Haldimand—Norfolk, ON
You were chair of the Canada Infrastructure Bank from April 20 to December 20. Is that correct?
11:50 a.m.
Member, Advisory Council on Economic Growth
It was April 2020 to December 2020. That's correct.
11:50 a.m.
Conservative
Leslyn Lewis Conservative Haldimand—Norfolk, ON
I'm sorry. Yes, it was December 2020. Thank you for that correction.
The first thing you did was declare that the current management of the CIB was insufficient to create the strategic framework for the bank, so you needed a high-level, outside-in approach to assist you in creating that framework. Is that correct?
11:50 a.m.
Member, Advisory Council on Economic Growth
I'm sorry, but I have no recollection of what you just said.
11:50 a.m.
Conservative
Leslyn Lewis Conservative Haldimand—Norfolk, ON
Okay. I'm going to try to refresh your memory. I'm going to refer to a memo of April 19, 2020, that's called “Refreshing the CIB's strategic direction”. The memo is essentially to you and basically in the memo it says that you were unable to draw from the current management, so you would recommend a “high-level 'outside-in' approach to developing the strategic themes/vectors” of the bank. I can give you a direct quote from the memo if you like. Well, that is a direct quote.
That high-level, outside-in approach was actually hiring McKinsey, so you did hire McKinsey at the outset to help you with this outside-in approach. Is that correct?
11:50 a.m.
Member, Advisory Council on Economic Growth
Let's stand back. The minister of finance at the time, Minister Morneau, asked me to take over the chair of the Infrastructure Bank because its first three years had been, I would say, quite slow. He asked whether in working with the management of the bank and outside advisers we could accelerate the activity of the bank and, what was called at the time, the growth plan for the bank. That involved trying to bring some more focus and simplification to what the bank was doing and trying to accelerate its processes so that it could step up and turn the corner, as it has now, into a much higher-velocity organization.
Yes, you are correct that in order to do that in the quickest and most economical way, the decision taken at the time was to use some of the people from McKinsey who had been involved in the initial thinking around the Infrastructure Bank, to draw on their accumulated knowledge of this so that we wouldn't have to start from ground zero and would be able to move ahead quickly, which we were able to do. You can see the results now, which is a very substantial turnaround in the pace of activity of the bank.
11:50 a.m.
Conservative
Leslyn Lewis Conservative Haldimand—Norfolk, ON
Thank you for that answer.
You drew on McKinsey, and I also understand that you sought strategic advice about the Infrastructure Bank from Dominic Barton himself while he was ambassador to China.
11:50 a.m.
Member, Advisory Council on Economic Growth
That would have been quite informal conversations between me and Mr. Barton, just simply drawing on the work we had done on the growth council in the past.
11:50 a.m.
Conservative
Leslyn Lewis Conservative Haldimand—Norfolk, ON
You may not fully have a recollection of things that happened years ago, but I am going to just refresh your memory. On June 23, 2020, there was a meeting scheduled from 8 a.m. to 9:15 a.m. with you and Dominic Barton. It was not an informal meeting. I'm going to actually read from the memo scheduling it.
The memo from Zak Cutler at McKinsey to Annie Ropar at the bank, dated June 17, 2020, is to set up that meeting involving Dominic Barton, whom they call “Dom”:
Dom's calendar has been pretty tight, so [it] looks like this is the only time we could get him. Given he's by himself, we're hoping to limit attendance to a few people. Could we hold attendance at just you and John for this one? It's a bit delicate and [I] don't want to offend, but want to make sure Dom is able to speak freely. Let me know if any issues.
You and Dom were pretty close—weren't you?
11:55 a.m.
Member, Advisory Council on Economic Growth
I've worked with Dominic Barton over the years, both when he was at McKinsey and then when he was Canada's ambassador to China. It's someone I've known over the years.
11:55 a.m.
Liberal
The Chair Liberal Peter Schiefke
Thank you very much, Mr. Sabia, and thank you, Dr. Lewis.
Next we have Ms. O'Connell.
Ms. O'Connell, the floor is yours. You have five minutes.
11:55 a.m.
Liberal
Jennifer O'Connell Liberal Pickering—Uxbridge, ON
Thank you, Mr. Chair.
Thank you to all the witnesses for being here.
Mayor Brown, I want to start with you in regard to the investments the CIB has made in the city of Brampton. You spoke about the buses. I appreciate the amount of GHG emissions that this investment would actually reduce.
One thing I can say is that my colleagues here who represent your community talk often to us and Minister LeBlanc about the infrastructure needs in Brampton, in particular dealing with traffic and congestion. We sometimes joke that we will be on the same flight and I will get to my home in Pickering sooner than they do from Pearson to Brampton. That gives a picture of some of the challenges your community is facing.
An investment like this, of 450 zero-emission buses, is not only helping to get single-occupancy vehicles off the street to help relieve some of that congestion. It's also reducing GHG emissions by an equivalency of 1,200 cars. I imagine that is a pretty significant benefit to your community. In my previous life in municipal politics, $400 million would have been a significant property tax increase if you'd had to do it all on your own.
Do you have any calculations of how much that would have cost the city without the CIB, or how long it would have taken you to actually move forward with 450 zero-emission buses without the CIB?
11:55 a.m.
Mayor of Brampton, As an Individual
I think the short answer is that it would have been impossible. There's no way we would have had the lending capacity or borrowing capacity to afford 450 buses, and 450 buses is our entire fleet. We're doing this properly. We're going to have a fully electrified transit fleet. It's ambitious, but that's the only way we're going to hit our emission reduction targets.
This is a huge component of our goal to reduce greenhouse gas emissions by 80% by 2050. I would say that, for a lot of our climate sustainability plans, we don't have the financial capacities in the municipality to achieve them unless we have this type of collaboration with provincial and federal governments.
I'll just say that in Brampton, we're grateful that we have collaborations right now on the environment with both our federal and provincial partners.
11:55 a.m.
Liberal
Jennifer O'Connell Liberal Pickering—Uxbridge, ON
Thank you.
In creating this partnership and in working with the CIB, did you ever have any communications or contacts with McKinsey on this? Did you ever work with them? Did you ever consult with them? Did you have any interaction with McKinsey?
11:55 a.m.
Mayor of Brampton, As an Individual
I've never had any interaction with McKinsey in terms of Brampton Transit's partnership with the Canada Infrastructure Bank.
The only time I've ever met McKinsey was when Alykhan Velshi worked there. He worked for Prime Minister Harper, and then moved on to McKinsey. When I was in the provincial arena, we did some work with Alykhan Velshi. I wouldn't say I did not have a positive impression, and I would note he's gone on to work for Huawei and the Chinese government.
That's the only person from McKinsey I've ever met, and it had no relation to Brampton Transit.