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.
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 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.
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?
I think the short version is that, as I mentioned, the council recognized the very serious risks, some of which I highlighted, when it comes to P3s. In the end, they opted to go public.
I want to put this in context, too, because while Mapleton is one important example and very connected to the CIB, this is happening in the context where there is a global movement, which at the council we're proud to be a part of, that is aimed at taking back public control of water. That now consists of 267 municipalities in 37 countries, so it's not just Mapleton. This is a widespread move to “remunicipalization” that is happening, because people, communities and councils are recognizing just how bad water P3s are for their communities.
Another really important example to look at is Hamilton, Ontario, which signed a 10-year P3 deal in 1998 for its water system. Soon after, residents woke up to 135 million litres of raw sewage spilling into the harbour and flooded basements and businesses. Hamilton's water service workforce had been cut in half, which I think is just one of many examples that highlight why P3s aren't about job creation and actually lead to job cuts. Project costs ballooned, and the water contract changed hands four times.
There's a lot to look at in terms of why going down this road is a very bad idea.
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.
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?
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.
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.
I think the conversation in which we all come together in agreement is about the objective, when we build infrastructure, being to maximize value for the Canadian people.
Value can be measured many ways. Much of this discussion has been about monetary value and trying to get the best bang for the buck, so to speak. Of course, though, there are many other things that we value, some of which are more difficult to put a price on.
I'd like to ask Mr. Penner to talk about the ability of P3s—or the lack of ability of P3 projects—to account for some of those non-monetary social, community and environmental values that are also important, when we look at the overall picture.
Insofar as it's able to advance and deliver infrastructure projects or have these projects advance to the market and be built, it certainly will have an impact. It's about jobs.
Obviously, how long these projects take to get to the point of shovels in the ground is an important consideration, but insofar as they do that, it's going to lead to jobs. It's going to lead to improved productivity and ultimately economic growth for the country. It's critical in terms of those priorities and objectives.
I think the consideration is really around timing here. It's maybe a little bit naive to think that these major projects, given the stage they're in, are going to have any immediate impact in six to 12 months. If we're talking 12 to 18 months, then in the medium term, I think that's a reasonable assumption.
I know Mr. Rogers made an accusation about the Conservative plan.
I think it's important to highlight that under existing Liberal programs a significant percentage of project funding is being lapsed. They're very good at making the announcements and not so good at following through on them.
I think the CIB is a perfect example of that. This wasn't just a pilot project that was developed. This wasn't just a trial run where they were going to see if they could incubate something and grow it up. This was a marquee announcement. This was the result of very high-level meetings. When you go back and read the media reports about the inception of this bank, you see this was the cream of the cream. These are all the people who get invited to the World Economic Forum. These are people whose cufflinks cost more than my car, probably. They all got together and convinced the that this was going to unleash an avalanche of private sector money into projects.
I understand from your perspective there have been a couple of different resets. They've shuffled the deck a couple of times with different personnel. They have rejigged their mandate and done almost a complete overhaul. I understand where you might want to say, well, perhaps this will bear fruit.
Given that this wasn't just a trial run, this was supposed to be set up to accomplish a very measurable.... You used the term “two-times” investment, that the threshold for success.... They said they were going to double the private sector investment in relation to public money. They haven't done that. I understand where you might want to reserve judgment until this current plan....
Would you say it's fair to say that up until this point it has completely failed in its objectives?
I wouldn't necessarily conclude that it has failed in its objectives. Is it delayed in its objectives? I think that's probably fair.
As they lay out...for themselves in their corporate plan, there are very objective measures in terms of performance. I think it's important that government and Canadians hold the organization to account for its performance against those objectives.
As I've also suggested, I think there is a gestation period for major infrastructure projects. You just don't flip the switch on and suddenly the shovels are in the ground. These take time to plan, lay out and procure.
There is a reasonable period of time that one might assume that would take. If you look at other procurement agencies around the country, you see it certainly didn't take Partnerships B.C. or Infrastructure Ontario three years to advance major infrastructure projects to shovel-ready.
It took less time. Okay, that's fair enough.
You are right. Nobody expects that announcements are made and then within a week or two something is up and operational.
I can certainly point to the P3 model that I'm most familiar with, and that is for the overpasses built as part of the Regina bypass in my home riding. I have the information here. The RFP, the request for proposals, was August 2014. The contract was signed in July 2015. The first phase was completed in 2017, two years from the contract being signed. The full project was completed in 2019. We're looking at a four-year timeline from contract being signed to being completed.
We're coming up on the four-year mark here, and there's no evidence that we're going to hit any of those project completions in the short term.
My question will be for Mr. Penner.
When I went over the Canada Infrastructure Bank's annual report, I was surprised to see there was no information on the salaries of executives or on the bonuses paid out. After all, public money is invested in the Canada Infrastructure Bank. In addition, the departure of the Infrastructure Bank's former CEO made headlines when we learned he had received a bonus, the amount of which the bank refused to disclose, while he was earning an annual salary of about $600,000.
Do you think this constitutes a lack of transparency by the Canada Infrastructure Bank? For comparison's sake, if I read the annual report of any other of Canada's major banks, which are private companies, I can see all that information.
I have another question for you. References are being made to the fact that businesses interested in investing in infrastructure projects are seeking returns of 7% to 8%, which are high returns for a portfolio, you will agree.
Yet the government, when it seeks investments, obtains returns that are often lower, but the borrowing rate is much lower than this.
How can the supposed effectiveness of the private sector compensate for the difference in return, while the government often borrows at rates of 1%, 2%, 3%? There is a large gap between the two. How can we find a way to benefit?
Thank you to the witnesses for their testimony tonight.
Just off the top, I want to clarify. The timelines of P3 projects of this scale—Mr. Bain is quite right. They're enormous projects with very long planning and construction horizons. I worked on Boston's Big Dig as a city planner many years ago, and that was a project fully 30 years from inception to completion. We have to allow these projects to take the time they need.
Asking whether a P3 agreement is good is like asking how long is a piece of string. It's all about the way they're crafted and I think early on in the P3 experience some were crafted less well than others and now they're quite sophisticated in protecting the public interest.
This government is involved in a $180-billion infrastructure investment program that is based on cost-sharing with provinces and municipalities, but we know that cost-sharing is not always within reach of municipalities and organizations that need infrastructure built, especially now in the pandemic, where municipalities have been impoverished. More than ever, the additional $35 billion from the Infrastructure Bank is important.
Today, I spoke to a rural transit provider, a company interested in clean power in the north and the Canadian Nurses Association, which is interested in broadband across the country for telehealth so everybody can access it. In each of those three cases: transit for people who need help getting around, clean power in the north and telehealth, there was not sufficient money available to build those things without things like the Infrastructure Bank.
Mr. Penner, when I look at your bio, you're fighting for a livable climate, a just transition, indigenous rights. That's exactly what we're doing here. We are making vast sums of money available so people can get the infrastructure they need in the communities, at a time in a pandemic when municipalities are impoverished, for projects that otherwise will go undone. It seems to me you agree with Mr. Scheer's position, which is that we should be slashing about $18 billion from an infrastructure program at a time when Canadians need it the most.
Mr. Bain, with the pandemic, with municipalities impoverished, with the climate emergency, does this seem like the right time to be talking about removing funding from communities through infrastructure investment?
Again, I think you have to recognize my earlier comment around the fact that the CIB itself is not ultimately responsible for the delivery of these projects, right? They're relying on their partners, whether they be provincial or municipal, for the actual procurement and delivery of the projects. Presumably, it's those entities that are ultimately responsible for the contracts and the project documents.
Having said that, I would say there are a lot of examples. Again, as you have alluded to, within Canada, we're now probably 20 years on from the Nova Scotia P3 schools. We've certainly advanced our thinking, our approaches and our contracts. That said, you could look to the Government of British Columbia today, which is ensuring that there are community benefit agreements and provisions included in their infrastructure contracts.
It's absolutely a matter of priority and interest in terms of what those protections are that you're seeking, but there certainly are mechanisms available. There are a lot of precedents for ensuring the public interest ultimately is protected through the delivery of these projects.
It's the second time I've heard a Liberal try to make that point. Just for the record, it's the current Liberal government that has seen billions of dollars lapse. I know they like to make accusations of cuts, but it's our party that has a record of delivering on infrastructure. The current government has allowed billions of dollars' worth of infrastructure spending to lapse—that means to not be spent. I think the Infrastructure Bank is the perfect example of that, because it was launched with $35 billion and has completed zero projects. I think this is the context in which this study is being conducted.
The study is supposed to get at the root of the problem. Why has this bank proven to be so ineffective, and what can we do advise the government? For any viewers watching this, for Canadians at home who are tuning into this, it's very important to understand this. From internal audits at the infrastructure department to the Parliamentary Budget Officer to—soon—an Auditor General's report, we see that it's the current programs that have been so incapable of getting money out the door and getting projects built.
I want to go back to something Mr. Penner has said repeatedly. In his opinion, are there ever examples of government wasting money?
First, before I get to the questions, allow me to quote Alberta Premier Jason Kenney, who called the bank's recent irrigation investment in Alberta:
...a great expression of confidence in the future of agriculture and indeed Alberta's future. It's the first project developed under the Canada Infrastructure Bank's recently announced $10 billion growth plan. We are proud to be the first project out of the gate.
Here's what else Premier Kenney said:
...this investment today is not just good for jobs in the economy and not just good for farmers and food processors, it's also good for the environment because we're going to be taking open-air irrigation canals and burying them in pipes that will improve water retention and conservation.
I just want to remind Mr. Scheer about the first project that Premier Jason Kenney is applauding.
The question I have for Mr. Bain is the following. The COVID-19 pandemic has impacted all sectors of the economy. In response, the created the COVID-19 resilience stream, which is already creating hundreds of jobs and supporting critical projects such as hospitals and schools, which are normally provincial in nature.
Mr. Bain, can you speak to ways in which the Canada Infrastructure Bank can help create even more well-paying union jobs during the economic recovery?
Mr. Penner can follow up with a comment afterwards, if he wishes.
I think it's a very simple answer. Advance projects such that they are shovel-ready. As soon as they are shovel-ready that is how you are going to generate the jobs and employment that the infrastructure can support.
I think you're absolutely right, as we move forward and I think as I've said, if we're talking about a COVID-19 fund that's outside the CIB mandate, I think perhaps that can be delivered and result in those funds moving into the economy or moving to municipalities or provinces much quicker than the 10 or so major projects that we're talking about here with respect to the CIB. As I've spoken to earlier this afternoon, these projects, if advanced to the procurement and the delivery phase, will absolutely have a material impact on jobs and the economy and the productivity of our economy moving forward.
As we are today, you have the Canadian Building Trades Union as recently as today in The Globe and Mail indicating that their construction jobs are currently down about 10% compared to before COVID. That varies depending on what jurisdiction you're in. I think if you're in Alberta or Newfoundland you're obviously seeing the trades and construction work more adversely impacted as a result of the oil and gas downturn. It's maybe less so in some other jurisdictions, but, as of today, the building trades themselves are saying they are about 10% off pre-COVID employment.