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Philip Landon
View Philip Landon Profile
Philip Landon
2020-08-14 14:16
Thank you very much.
Thanks for the invitation, and thanks for conducting this study and for the extraordinary work that all parliamentarians are doing during this very challenging time.
Universities Canada represents Canada's 95 universities nationally. Taken as a whole, our universities are a $38-billion enterprise and are significant drivers of economic prosperity. They provide employment for over 300,000 people, and they are anchor institutions in the communities and often the largest employer in the communities, all of this while more than half of their revenues derive from non-governmental sources.
Canada’s universities are an integral part of the team Canada approach to the COVID-19 pandemic, from mitigating the risk to finding a cure and accelerating Canada’s economy into recovery. We appreciate the challenge now facing the government, and all of us—that of restarting the Canadian economy while continuing the health measures necessary to keep COVID-19 at bay.
We have also greatly appreciated the steps the government has taken to date, including the $9 billion in support measures announced for students, flexible rules for applicants to the post-graduation work permit program and funding to restart on-campus laboratories.
While these measures are essential to helping young people and universities through the pandemic, I want to highlight three key areas today. The first is around international students; the second is around infrastructure; and the third is around research and innovation that will be vital to supporting Canada through the pandemic and beyond.
International students are part of the rich and diverse fabric of institutions and their communities. They're also one of the biggest sources of revenue for Canadian universities and their communities. They contribute $22 billion to the Canadian economy, more than softwood, more than wheat and more than auto parts. This includes $6 billion in tuition revenue. With the closed borders and with the pandemic, we can anticipate significantly lower international student enrolment this fall. This loss will directly impact all students and the ability of universities to meet the needs of Canadian students. We've been working very closely with federal officials to develop supports for international students to study either online or in person, and we continue to emphasize the need to ensure that international students can continue their studies, stabilize university operations and contribute to economic recovery. We're very keen to send a strong signal to the international community that Canada is open to international students.
I should also highlight the need for federal assistance should institutions see a significant loss in revenue as a result of the drop. A direct federal transfer will help universities bridge their operations until borders are open. Furthermore, federal investments in regaining Canada's market share in key source markets and international students, along with diversifying source markets, will be important for stabilization and recovery of the sector.
Around infrastructure, and looking forward to our recovery from COVID, Canada's universities can be partners in accelerating our economic rebound.
Canadian universities have $7 billion in shovel-ready infrastructure projects, the majority of them focused on building green, digitally enabled and accessible campuses that will reduce the country's carbon emissions.
Investments in digital infrastructure in particular will rapidly expand access to post-secondary education, upskilling and re-skilling even as the country reopens. These investments will also ensure that students can attend regardless of disability, physical distancing, or work or family requirements.
Then finally around research and innovation, a huge opportunity for economic recovery is investing in our universities in research and innovation. The time is right now to harness the co-operation of the last five months to build a comprehensive idea-to-innovation strategy. Such a strategy would leverage existing investments in research into concrete solutions for emerging national and local challenges in a post-pandemic Canada. It would include support for institutional knowledge mobilization strategies and regional innovation adoption hubs to connect university research with local needs across the country.
We appreciate the work of all the members of this committee to help Canada recover from COVID-19. Thank you very much for having us here today.
View Tracy Gray Profile
CPC (BC)
Thank you, Madam Chair.
I'll start my questions with Mr. Landon from Universities Canada.
Since COVID-19 is taking most students out of their physical classrooms, have you heard, with all the universities that you represent, if they're looking at increasing their class sizes due to the fact that they might have been restricted previously because of classroom physical limitations?
Philip Landon
View Philip Landon Profile
Philip Landon
2020-08-14 15:06
That's a very good question.
I would say that I actually haven't heard that, but that's very interesting. Perhaps some of my colleagues have, but I have not heard that at all.
View Brian Masse Profile
NDP (ON)
View Brian Masse Profile
2020-08-14 15:19
Thank you, Madam Chair.
I want to continue, if I could, with Mr. Landon, to get an overall sense of where universities are with regard to critical needs for infrastructure and a green economy. The other thing, too, is housing. Is there an inventory list? With perhaps not as many students returning....
My daughter is actually at NSCAD, and she's staying there because she doesn't want to fly back and so on, a series of other decisions, just to be safer there. I know that some of her classmates are staying. Some will be coming back, but they will be fewer.
Is there any opportunity here? For example, maybe older residences and other living accommodations that may not have a high standard could be enhanced—greenhouse gas emissions reductions or safer living quarters designed for future challenges like this one. Obviously, we could have this extended further, or we could have a similar scenario evolve that we don't expect.
Is there an opportunity here, with a reduced population, to perhaps seize that and do some bold, innovative improvements for our universities, on campus or just around campus with facilities?
Philip Landon
View Philip Landon Profile
Philip Landon
2020-08-14 15:21
Yes, there absolutely is. I think I referenced in my opening remarks that our universities have $7 billion in shovel-ready projects. The last time there was an infrastructure fund, a few years ago, we were able to build the infrastructure—green infrastructure—in three years, in a timely manner and in a manner that helped upgrade our universities.
It would be helpful now as we go digital and as we think about older buildings that have suffered from deferred maintenance. Now would be a very good time to invest in these for energy efficiency, for refurbishing and for green infrastructure.
Our universities are very much ready and need this funding to be able to move further into the 21st century.
View Pierre Poilievre Profile
CPC (ON)
Thank you, Auditor General Hogan, and congratulations on your new role.
For the investing in Canada audit, were you planning to do a financial audit or a performance audit?
Karen Hogan
View Karen Hogan Profile
Karen Hogan
2020-06-22 12:13
Our intention is to do a performance audit. We will be looking at the outcomes of the plan, as well as trying to look at the complete list and the nature of the projects within the plan.
View Pierre Poilievre Profile
CPC (ON)
All right. That's great.
As we know, the Parliamentary Budget Officer has shown that the so-called federal increases in infrastructure spending have not resulted in incremental construction of infrastructure assets across the country, because the money does not actually make it through all three levels of government and then onto the pavement. It gets gobbled up along the way down. The actual increased infrastructure that results from this federal spending is negligible at best and, in some cases, may even be negative, because the lower levels of government are pulling back more than the federal government is putting in, with one cancelling the other out.
It will be interesting to see whether your audit finds that there was any real material increase in the infrastructure that Canadians enjoy as a result of the monstrous increase in costs. Can you complete this work by January?
Karen Hogan
View Karen Hogan Profile
Karen Hogan
2020-06-22 12:14
Obviously, I think it's fair to say that we'll expect some delays. COVID has impacted not only us but also the departments we audit. While we have begun, I do expect that there will be some delays in being able to complete a full audit from start to finish.
Our best is that we are trying to get something to you in the early part of the new year. It might not be the full audit. As I mentioned in my opening statement, we're exploring ways we could perhaps provide some insights into all of the projects and then perhaps deal with outcomes at a later date. We're trying to tackle this so that we can get some information to Parliament, because of the importance of the spending and the attention.
View Pierre Poilievre Profile
CPC (ON)
All right. I think Parliament does want answers quickly, but we want you to have the time to do a thorough job. We encourage you to tell us what kind of flexibility you need on time frames in order to get a complete job done for Parliament. I think we gave a deadline to the previous AG of January. That said, we understand the work overload and the funding deprivation that you're dealing with. What we really want is a quality job, a complete job, so we encourage you to work with us to tell us whether or not some flexibility might be required on the exact time frame of the final reports.
Secondly, when can you tell us what funding you will need? This committee has shown a desire to give you whatever you ask for, basically, which is a tremendous amount of trust, but can you get us a dollar figure soon so that we can push the government to deliver those dollars to your office?
Karen Hogan
View Karen Hogan Profile
Karen Hogan
2020-06-22 12:16
Thank you for the offer on flexibility. I appreciate that. As you can recall, most of our audits take about 12 to 18 months to complete, and with the little delays with the pandemic, some flexibility is always greatly appreciated. Let me take that back and look at it.
As far as it comes to funding, as I mentioned, today is probably day 11 since my nomination, so we've been working hard over the last couple of weeks in looking at the historical ask and then refreshing it and amending it for all that's happened since then. We're working closely with the Department of Finance, so I would imagine that it would be a couple of weeks before we give them a new figure for our ask. I really would like to see that process work its way through. While I think it's not a perfect process, it's the process we have, and we'd like to work through that to see if we get the funding we need.
As I mentioned, if we feel that we have some issues, in the fall we'll gladly come back to Parliament and let you know if we run into any roadblocks on that front.
View Gabriel Ste-Marie Profile
BQ (QC)
Thank you, Mr. Chair.
Ms. Hogan, right after your testimony, we will hear from the Canada Infrastructure Bank. You mentioned that you were currently studying the invest in Canada plan, an important infrastructure program that has some issues. For instance, money is not coming out or it is not coming out fast enough. Do you have the mandate to study and audit what the Infrastructure Bank is doing?
In that regard, are you worried that the information on the success or failure of infrastructure programs that are confined to a non-government entity, such as the Infrastructure Bank, is more difficult to obtain?
Karen Hogan
View Karen Hogan Profile
Karen Hogan
2020-06-22 13:13
Yes, we have the mandate to study and audit what the Canada Infrastructure Bank does in two ways.
We just completed the third audit of the Infrastructure Bank's financial statements. I don't think that last year's financial statements have been made public yet, but I know that we approved the Auditor General's report a few days ago.
We also have the mandate to audit performance in terms of everything that goes through that entity.
I don't expect it to be difficult to obtain information, although it is always more complicated when money is transferred to another level of government. However, we expect the federal entity to keep its documentation and to at least have information to give us on the progress of all the investments, even if some of them occurred at the municipal or provincial level.
View Gabriel Ste-Marie Profile
BQ (QC)
Okay, thank you.
Mr. Hayes, you also have the mandate to study what the Canada Infrastructure Bank does. Are things going well?
Andrew Hayes
View Andrew Hayes Profile
Andrew Hayes
2020-06-22 13:15
Yes. As Ms. Hogan said, we have that mandate, but I would add that it is one of the mandates for which we have not received additional funding to carry out our audits.
View Peter Julian Profile
NDP (BC)
Thanks very much, Mr. Chair.
I have a brief comment replying to Ms. Dzerowicz. The Library of Parliament information that we've received, in terms of funding, clearly shows that the peak for funding for the Auditor General was 2011. It was a minority government going into a majority government. It was $95 million, and it's fallen to $87.9 million. You don't need to be an auditor general to know that $95 million is considerably more than $87.9 million. That's in current dollars. In constant dollars, the difference between what the Auditor General should be getting and what it is getting is even greater.
Again, Liberals and Conservatives have been finger-pointing. They've both been awful and they both should be ashamed of themselves, but a minority Parliament will restore the appropriate funding, and hopefully, Ms. Hogan will be able to get that independent funding mechanism. That's vitally important.
I have a couple of questions for Mr. Hayes, and one for you, Ms. Hogan.
The issues of the infrastructure bank, I assume, will include what has been flagged by a number of people, the executive bonuses that have been part of the infrastructure bank and the massive staff turnover. That's my question for you.
Mr. Hayes, in terms of the commissioner of the environment, when will a permanent person be chosen? As I understand it, you continue to be an interim commissioner. On July 8, will any reports be released by the commissioner of the environment and sustainable development?
Finally, on subsidies for oil and gas—
Karen Hogan
View Karen Hogan Profile
Karen Hogan
2020-06-22 13:17
In the interest of time, I'll probably answer two of those and then I'll leave the last one for Andrew.
When it comes to executive compensation, that is absolutely one of the areas we look at during every financial audit, and if we had any concerns with executive compensation at the bank, we would have raised them with its board of directors throughout our financial audit.
When it comes to the interim commissioner and when there might be a permanent one, that is also something I am responsible for, which would be to appoint a permanent commissioner of the environment.
As Mr. Hayes mentioned earlier, there isn't a lot of room right now for the commissioner to do things that I'm sure a brand new commissioner would love to wrap his or her teeth around. I'm using the opportunity right now to get a process ready so that I can hire a permanent commissioner in the coming months, but it isn't much of a priority right now as we're all turning our minds and focusing on COVID-19. I would imagine that in a few months we'll get that launched so that we can find a permanent commissioner.
Andrew, I'll leave the last question to you.
Annie Ropar
View Annie Ropar Profile
Annie Ropar
2020-06-22 13:38
Mr. Chair and members of the committee, good afternoon.
My name is Annie Ropar. I am the chief financial officer and chief administrative officer of the Canada Infrastructure Bank. I am glad to be speaking to you today. I am joined by my colleagues John Casola, chief investment officer, and David Morley, group head of corporate affairs, policy and communications.
Thank you for giving me the opportunity to discuss the importance of investing in infrastructure and the role of the Canada Infrastructure Bank, the CIB. At the CIB, we know that new infrastructure is a powerful lever for recovering productivity and growth, now more than ever. New infrastructure can generate considerable economic, social and environmental benefits over time.
Fortunately, Canada has a great deal of experience in infrastructure projects carried out through public-private partnerships. We also have a solid ecosystem of companies that support investment in infrastructure. Those companies include construction and consulting engineering companies, as well as financial institutions. Cooperation with public sector partners is at the heart of the CIB's actions. We have discussions periodically with federal, provincial and territorial governments, as well as indigenous communities on their needs and their priorities in infrastructure.
Although we bring to projects a thorough knowledge of industry and investment capital, it is public sponsors—in other words, governments of all levels—that generally have the assets and manage projects. Those are our clients. We have announced our participation in 10 new projects. Those projects are located in different regions of Canada and involve various investment sectors.
We have announced participation in 10 new projects. They are in different regions and in various sectors.
We are helping bring to life projects that are priorities for governments. A key rationale for creating the Canada Infrastructure Bank was that governments alone could not underwrite all the required investment in infrastructure. That was the view before the pandemic struck. Public budgets will be even more strained in the near term. Expanded partnerships with the private sector are needed to spark activity and get new assets built. That’s where we come in. The CIB acts as a catalyst to encourage new financing approaches.
CIB was established by legislation in 2017 and became operational in 2018. It has a mandate to invest $35 billion dollars as one element of the government’s investing in Canada plan. Our objective is to advance a new partnership model and transform the way infrastructure is planned, financed and delivered in Canada. We focus on revenue-generating projects. Projects must be linked to national, provincial or local priorities. Our current priority sectors are green infrastructure, public transit, trade and transportation, and broadband infrastructure.
In those sectors, we have three key roles.
First, we advise governments across Canada, at all levels, on revenue-generating infrastructure projects and innovative investment options. We offer specialized expertise in structuring financial instruments and provide financial advisory and project structuring. Second, we invest in projects and seek to attract private and institutional capital to co-invest alongside us. To be clear, we do not provide grants or traditional government funding. Rather, we can extend loans, take equity positions in a project, or use other innovative tools to help get a project built. Third, with partners, we develop and share infrastructure knowledge and research.
Our activities and efforts have yielded results. We have, so far, announced participation in 10 projects across Canada, with more to come.
Infrastructure is a long-term asset class. The capital costs of transformational projects can range from hundreds of millions to billions of dollars. Projects often entail complex design and analysis work, with dozens of expert parties involved.
In some projects, we act as early-stage advisers to governments. In cases where projects are more advanced, we are investors. With our public and private partners, we work to understand infrastructure problems and create financial solutions that are tailored to each project. That is a unique feature and a net benefit for us being a federal organization that adapts to the needs of our partners.
Good ideas for necessary and valuable infrastructure can stall, for many reasons. There might be a lack of public funding or an inability to attract private capital. At the CIB, we play an active role to identify and address the gaps, thereby supporting projects that would likely otherwise not proceed without our involvement.
As mentioned before, we do not provide grants, but we also need to ensure that we don’t crowd out private capital, meaning that we don’t invest where there is otherwise institutional financing available. A few examples can demonstrate our positive impact.
We announced a $300-million facility to build the Contrecoeur port terminal in Montreal. This expansion will increase container-handling capacity and meet forecast demand from international shippers, as well as Canadian exporters and importers.
We are advising on the proposed Kivalliq Hydro-Fibre Link. It involves the construction of a new, 1,200-kilometre, 150-megawatt transmission line from Manitoba to Nunavut. The project would deliver renewable and reliable hydroelectricity and broadband infrastructure to the Kivalliq region.
In Richmond, B.C., we are working with the municipality’s Lulu Island Energy Company to expand the city’s existing district energy system, and this month we were pleased to announce our first partnership with the Government of Alberta, on the Calgary-Banff rail project. This rail link would support Alberta’s economy by connecting the Calgary International Airport to the city’s downtown and Banff National Park.
Our advisory and investments team has deep knowledge in our priority sectors. My colleague John, for example, despite his very youthful appearance, has more than 20 years of experience advising on project finance and transactions. His senior team has the experience and knowledge to work with the public sector, mobilize private capital, and manage risks.
At any given time, the team is evaluating a long list of ideas and confidential proposals. These come from governments or public agencies, as well as from the private sector. In the most recent fiscal year, we assessed 172 potential projects. The proposals covered all provinces and territories. There is a great supply of creative ideas on how to successfully align private and public interests in delivering infrastructure.
View Pierre Poilievre Profile
CPC (ON)
Thank you very much.
My question for Ms. Ropar deals with the methods of financing that the Infrastructure Bank provides.
Ms. Ropar, you said that you don't do grants. That said, discounts on interest rates for a project are effectively grants. They have a commercial value to them. They transfer public funds to a project. Giving loan guarantees and then having those guarantees cashed in, in the event of a project cost overrun, is effectively a grant. When you guarantee a project and that guarantee is called, then you're granting funds. Do you not worry that what you're effectively doing is providing grants in the most complicated manner and therefore making it actually more difficult for the public to follow what cost the bank is absorbing and what benefit they're getting in return?
As a supplementary to that, is it not just simpler to give a grant and say, “This is what we're contributing, and this is what we're getting”? Taxpayers can be the judge as to whether or not it is a worthy transaction.
Thank you.
Annie Ropar
View Annie Ropar Profile
Annie Ropar
2020-06-22 13:51
Certainly, I'm not sure if I would agree with it being easier to give a grant. I don't think.... Depending on the situation, it may not be the best route to take in terms of leveraging taxpayer dollars available.
As I said, we don't give grants. The big difference is that we actually structure our transactions with the anticipation, the diligence, to get that capital back. Once you get that capital back, you can then redeploy it into other transformational projects. That's going to be the big difference, obviously, between ordinary government grants, which are done in a different process and absolutely have a place, versus what we're doing, which is filling a different gap in the market.
View Pierre Poilievre Profile
CPC (ON)
But if you were going to get the money back, then we wouldn't need you to do it in the first place. There would be a private financial facility to do that. We have extremely advanced and highly sophisticated capital markets that have trillions of dollars available and love to lend to large-scale projects with predictable payout schedules. We wouldn't need the Infrastructure Bank to put up public money if it was all going to be paid back. That's why we have pension funds and other institutional investors to do it.
Obviously, the reason the federal government has funded a bank to do this is that either the risks are too high or the returns are too low for the private sector, in which case we are in fact subsidizing the project, which is in reality—as complicated as we might like to make it—a grant. I'm worried that whenever you complicate things, rather than just having a simple statement of what the government is doing, those who have the most sophisticated methods, the most political influence and the best lobbyists and consultants tend to profit, and then the public, who is paying for it, tends to lose, because they don't have the time, energy or resources to figure out what's going on with these extremely complicated transactions.
Second, I want to move on to some of these projects that you are involved with, such as a port terminal, a wind farm and some hydroelectricity projects. These are all projects that are supposed to generate their own revenue through user fees. They all have the capacity to charge user fees, and that's why they are typically funded privately. Why is the government getting involved in these? Your bank was set up to attract private funds to public projects. In these cases, it sounds like what you're doing is the opposite. You're taking public funds into what would otherwise be private projects. You're going in the opposite direction of what your bank was set up to do.
John Casola
View John Casola Profile
John Casola
2020-06-22 13:54
Perfect. Thank you, Annie. I'd be happy to take that question.
I must say it's a bit of a peculiar way to look at things to say that complexity, if I'm understanding you correctly, is making a case for being less disciplined and less rigorous about the way to spend Canadian taxpayers' money. Not a day goes by, not a meeting we have, not a paper we write...none of that gets done without the very acute responsibility we have that we're investing taxpayer money.
If you take the REM investment of almost $1.3 billion, in Montreal, that was originally thought to be structured potentially as a grant, and in the very early days of the CIB, before any of us were there, they structured it as a loan. Look, we can talk about that for a very long time. At the end of the day, as a result of that intervention and as a result of the CIB's participation, taxpayers are now getting back $1.3 billion, where they wouldn't have before. If—
View Pierre Poilievre Profile
CPC (ON)
Well, that's not quite true, because taxpayers—
John Casola
View John Casola Profile
John Casola
2020-06-22 13:55
Thank you.
The CIB won't enter into any deal not expecting to get its capital back. Of course, it is a lender. It is an equity investor. We can participate in all different facets of the capital structure of any particular deal.
You're quite right when you state that a below-market loan is potentially the equivalent of a subsidy.
Hon. Pierre Poilievre: Yes.
Mr. John Casola: I think that's quite an accurate statement, but I want to really stress, though, that where we do get involved, it's to fill some gap that the private sector won't take and that exists in the project and prevents it from coming to market. It's not that we're displacing private capital. It's quite the opposite. We believe in the vast majority of these projects. Those projects would never actually get to market to allow the private sector to participate without us there.
View Pierre Poilievre Profile
CPC (ON)
First of all, it's not true that taxpayers are getting money from the discounted loan. The taxpayers are providing the discounted loan. They're the ones paying the full cost of any discount of basis points on the financing. The Infrastructure Bank is a taxpayer-funded institution, so any discount you're providing the project is paid for by taxpayers, which is effectively a grant, a very complicated grant, and a hard one for the average taxpayer to figure out. In fact, most people on our committee wouldn't be able to figure out what the actual cost is to taxpayers. You're basically wrapping up a grant in a much more complicated delivery vehicle, making it even more difficult for us to know whether we're getting value for money.
The other thing I would point out is that there are some large-scale projects that should not happen. Large-scale projects that don't pay for themselves and ultimately cost vastly more than they produce in benefit are actually a reduction in the value of our economy. You can look at, for example, the subsidies that went to wind and solar in Ontario: about nine cents of subsidy for every one penny of electricity. Well, a project like that should not happen, because it costs more to the people than it benefits them.
The more complicated you make your subsidy schemes, the more likely it is that taxpayers get ripped off, and the more likely it is that some very sophisticated players, who have the right consultants and lobbyists, walk off with a big fortune.
I guess my question is, if a project is not viable, then why would we want to fund it, and if a project is viable, then why would we need to fund it?
John Casola
View John Casola Profile
John Casola
2020-06-22 13:58
Let me give you an example. Look, none of us would disagree with your statement that there are projects that ought not to proceed. I think what you see is a very experienced and disciplined group of people on the investment team who conduct exactly that analysis and that due diligence to see whether it makes sense.
I'll give you an example. There are risks inherent to certain projects that the lending community simply will not take. An example of that is—
John Casola
View John Casola Profile
John Casola
2020-06-22 13:59
No, not for good reason. In some cases it's for good reason, but if you'll let me explain the example.... In the Port of Montreal—or in any port, for that matter—it requires significant capital to build additional capacity in order to enhance Canada's trade position and contribute to Canada's GDP and to all the good things that enhanced trade does. A lender will not come to the table until that capacity has proven itself out, so one of the positions, one of the things—
John Casola
View John Casola Profile
John Casola
2020-06-22 13:59
We know it's going to take some time to ramp up to that steady state. You can't attract that capital until it gets to steady state—
John Casola
View John Casola Profile
John Casola
2020-06-22 13:59
It is absolutely true.
John Casola
View John Casola Profile
John Casola
2020-06-22 13:59
We have a team of experienced investment professionals who can provide you with many examples where that is the case. A ramp-up risk is simply one example.
Another example is if there is a much-needed service, such as broadband or electricity transmission, to communities where the end-user base simply won't support the cost. That would be a perfectly good role, for necessary and needed infrastructure, for the bank to make up that difference.
Those are just a couple of examples of when valid risks exist and we think we fill a very important and needed role.
View Peter Fragiskatos Profile
Lib. (ON)
Thank you, Mr. Chair.
Thank you, Ms. Ropar and Mr. Casola, for coming today.
I always appreciate the interventions of my colleague Mr. Poilievre, as you know, Mr. Chair, but I wonder where his passion was, in terms of getting infrastructure built. I wonder where Stephen Harper's passion was, when it came to getting infrastructure built. We all know that hardly any infrastructure was built in Canada between 2006 and 2015, and perhaps if that passion and interest had been there, we wouldn't need the Canada Infrastructure Bank, but there is a dearth of infrastructure in Canada when it comes to large-scale projects. Our government has taken action on that, and that's why we moved in the direction that we did in 2017.
I have a related point. It's about timing.
In August 2019, Jim Leech—who, as I'm sure you know, is the former head of the Ontario Teachers' Pension Plan, which has a large amount of investment in infrastructure globally—said the following:
It took Teachers’ [the pension plan] more than three years to invest the amount CIB has already committed [in its first year, which is more than $3 billion]—and that was by purchasing complete projects, not building from scratch. Startup projects take considerably more due diligence and analysis. Putting money out the door is never a challenge—investing wisely for the betterment of Canadians takes time and talent.
Mr. Casola or Ms. Ropar, can you speak to the point I think Mr. Leech has made here, which is that transformational change takes time? When you introduce a new way of doing things, seeing the sort of transformational change that's intended does take time.
That's what I take from this comment, but I'm happy to hear what you think.
Annie Ropar
View Annie Ropar Profile
Annie Ropar
2020-06-22 14:03
I think what would be useful here is an example of all the work that's involved before you can get an investment to a funding-ready stage.
John Casola
View John Casola Profile
John Casola
2020-06-22 14:03
Thanks. I am happy to provide that.
I think the question states the truth of large, transformational infrastructure projects. Infrastructure is complicated. If you take the Port of Montreal, for example—which has come up already a couple of times, so I may as well stick to that—they started planning for that expansion in 2013.
These are very long-term projects. It takes time to complete engineering studies and engage in procurement processes to get the right kind of expertise on board—legal, technical and financial—to create business cases that are going to validate—or not, as the case may be—the need for additional infrastructure and the spending of taxpayer and port money.
Look at the Calgary-Banff rail line announcement last week. That didn't happen after a phone call to Alberta. We've been engaged with the Province of Alberta in a very constructive and collaborative way for over a year on that project already, and what needs to be done to bring it to the next level involves planning a route, hiring engineers to plan that route and consulting all the groups that are affected on that route. It involves negotiating agreements with other rights holders on that route. It involves assessing the technology: electrification, potentially hydrogen, in the interest of being more green.
The complexity inherent in these projects is tremendous, and the suggestion that projects could get out the door the day after we were established is doing precisely the opposite of what was intended by our creation, which is to invest money in a more accountable, transparent and intelligent way.
View Peter Fragiskatos Profile
Lib. (ON)
Ms. Ropar, in your opening statement you said that the CIB is involved in 10 projects. Are you able to tell us how many projects the CIB is actively considering?
Annie Ropar
View Annie Ropar Profile
Annie Ropar
2020-06-22 14:05
There are a number of projects that the CIB has in its current pipeline. I'd say they're all at various stages of assessment. I could give you a hard number, but it's a blend of different deals that are at different stages at this time point in time. There are certainly many.
View Peter Fragiskatos Profile
Lib. (ON)
I'm wondering if you could also speak to broadband. I know this is a key focus, as it should be. I can't tell you the number of times this committee has heard about broadband. Mr. Chair, I think you would definitely second this—he's waving his arms, I see. No doubt in P.E.I. broadband is a concern. In rural and remote parts of the country, broadband remains a concern as well. It's great to see that the CIB has, through the government of course, prioritized this as an issue to move forward.
Where are we at in terms of the CIB's focus on broadband? Are there any thoughts or comments on that? Even though I represent an urban riding, I know that in our country we are really held back because of the lack of access that so many Canadians, particularly in rural and remote areas, have to broadband Internet.
John Casola
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John Casola
2020-06-22 14:06
I'm happy to answer that question.
You're absolutely right that broadband was always important. We were engaged even before COVID, but I'm sure for all of us here today and everywhere else, without exception, COVID has really underscored the incredible importance of broadband.
We have been engaged in meetings with representatives from the Inuit in the north. They have told us that one of their huge challenges is that, without a broadband connection, they can't get students to finish their high school education there. A proper broadband connection at school enables them to finish their education and not have to leave home at such an early age. That has all sorts of incredibly important and positive social spinoffs.
Broadband is a key sector for us. We are engaged very actively with the folks at ISED, who have the technology and mapping capability and have run programs like connect to innovate in the past. There is also their universal broadband fund, which is yet to come. I think Minister Monsef said it will be released later this summer.
We are also engaged with the CRTC to have a good, hard look into how we can participate in their programs and leverage their programs with CIB money to have even more of an impact. We're in discussions about creating additional and complementary programs that we would work on with the CRTC in order to have a significant impact across the country and connect homes in ways that matter, ways that are much quicker than the original target of 2030, which was ambitious. I think the COVID situation has created a greater awareness that speed is definitely of the essence.
View Gabriel Ste-Marie Profile
BQ (QC)
Thank you, Mr. Chair.
Ms. Ropar, Mr. Morley and Mr. Casola, thank you for joining us this afternoon.
I would first like to properly understand the operation of the Canada Infrastructure Bank, or the CIB. I will say what I have understood and you will correct me if needed.
Currently, 10 projects have been announced, including the REM and the Contrecoeur port terminal, which Ms. Ropar talked about. The CIB will fund a portion of those projects. That is the equivalent of a loan. As far as the REM goes, for instance, the Caisse de dépôt et placement du Québec will take the money, carry out the project and refund the money with interest. That means that the Infrastructure Bank does not own part of the project; it is just providing the funding. That is the first portion.
If I have understood your presentation correctly, Ms. Ropar, the money provided by the CIB comes from the private sector or institutional funds. Therefore, you share the amount of money in your portfolio with investors, so that they would invest money with the CIB, which would then fund projects. That is guaranteed by the state. This way, the money you are loaning to us does not come from the government, but rather from private or institutional investors, as you mentioned in your presentation.
Is that correct?
Annie Ropar
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Annie Ropar
2020-06-22 14:10
To clarify, if I'm understanding the question correctly, we would provide a part of the financing, whether it's structured as a loan or equity with interest, but then private sector investors would invest alongside us. They may come in at a different level, and obviously potentially it could be at a different amount or at a different rate, but all those monies collectively, generally from a structural perspective, would go into a special purpose entity that's been established to ring-fence a specific project in order to ensure that all the returns and economics are captured. Obviously, it's important to do that from a control and governance perspective around the delivery of a project.
I'm not sure if that answers the question. Hopefully I understood it correctly.
View Gabriel Ste-Marie Profile
BQ (QC)
I will clarify my questions, as there were several of them in my statement.
For example, does the CIB money that will fund, for instance, the Montreal Metropolitan Express Network, come from government coffers, or is it rather money you got from the private sector?
Annie Ropar
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Annie Ropar
2020-06-22 14:12
I understand. Our portion of the financing, whatever CIB is participating in, does come from government, and it does come from the taxpayer. Any funds provided by third party investors are done through those institutions. Again, generally those funds are then collectively put into a special structure or financing vehicle to deliver the project.
View Gabriel Ste-Marie Profile
BQ (QC)
Thank you.
In this case, it is hard for me to understand the CIB's value added. Why wouldn't the government fund the REM project directly instead of the Infrastructure Bank, which takes money from the government to fund the REM network? What value added do you bring to this transaction?
Annie Ropar
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Annie Ropar
2020-06-22 14:13
I can start. John, if you want to, jump in at any time.
We need to make sure we articulate well the idea of risk transfer. A big part of bringing in private sector capital is that they take on a number of the risks associated with any given project, as a result of taking on this financing. A perfect example in a project could be taking revenue risk out of that project and taking that on directly in exchange for getting a return on their investment.
John Casola
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John Casola
2020-06-22 14:13
If I could, I'll just add to that.
Just to illustrate Annie's point numerically, if the cost of a project is $100, you're quite right to say that the government could fund 100%. If it's 100% in the case of the REM, private sector capital would not come in because there are too many risks inherent in that project, but if the CIB, after looking at it and doing all its financial due diligence and structuring, suggests that we would be in for 40% of the $100, or 35% of the $100, that may be enough. It's that sweet spot we're looking for to fill that gap. That may be enough to entice the private sector to then come in with 65% or 60%.
What you have at the end of the day is the very same project. In the first scenario, it gets built with 100% taxpayer money. In the second scenario, that very same value-added project gets built with 35% or 40% taxpayer money. That's the magic of crowding in private capital. If we're not there for any amount, they won't be either, so it's about getting that balance right, and that's what the team of investment professionals does on a regular basis.
View Wayne Easter Profile
Lib. (PE)
I'll go back to Mr. Ste-Marie for one final question.
Would it not be true that the Canada Infrastructure Bank also takes the politics out of it? If it's strictly government, you might have some politics in it, where it's good politics in a certain area to do something. You look at it from a risk and long-term needs point of view. Would that be fair?
Annie Ropar
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Annie Ropar
2020-06-22 14:15
Yes, that is a fair point. I can walk through the independence of our investment process if the committee would like to hear about that.
View Gabriel Ste-Marie Profile
BQ (QC)
Thank you, Mr. Chair.
Thank you for your answers.
Mr. Casola, I really liked your example of 100%. The CIB is funding 45% of a project and is launching a call for funding at 55% through the private sector. In my opinion, the government could have done that. According to our committee's chair, that depoliticizes the process. However, the government does spend a tremendous amount of money on infrastructure every year. In any case, that is one argument.
If the government was funding at 45%, and if the CIB did not exist, the private sector could still provide 55% of the funding. Therefore, your value added is to network with institutional investors and the private sector, which the government is less skilled at doing.
So those are the two arguments for the CIB's value added. Is that correct?
John Casola
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John Casola
2020-06-22 14:17
Thank you for the follow-up question.
No, it's not correct to say the banks would have been there anyway, so why are we bothering because they would have come in? To say the government could have done it, absolutely, the government could have done it all. We think the beauty and the magic of the bank's mission is to take either 100 to build one REM, or to employ the methodology we're using by filling whatever minimum gap there is to crowd in private capital for the rest, and now all of a sudden we can build two or three REMs with that very same hundred.
It really is a question of spending taxpayer money more responsibly, of leveraging that $35 billion that we have to create some multiple of that. Because of all the private sector capital, we're able to crowd in financing and really expand the reach of building new and needed infrastructure across the country.
View Peter Julian Profile
NDP (BC)
Thanks, Mr. Chair, and thanks, Ms. Ropar, Mr. Casola, and Mr. Morley for being here today. We hope your families are safe and healthy.
I want to start by asking a very simple question. How much money has the Infrastructure Bank received from the federal government to date, over the length of its existence, and what have been the operational expenses?
Annie Ropar
View Annie Ropar Profile
Annie Ropar
2020-06-22 14:18
I can take that question.
We can divide up the appropriations between two parts. There are capital appropriations, which are amounts that are funded for investments. As of the end of Q3 of the 2019-20 fiscal year, which is the last set of financials we have published, that totals just over a billion dollars. Obviously, that was in support of the REM transaction.
In terms of operating costs and expenses, the most recent fiscal quarter, this would be December 31, 2019, the total operating costs are roughly about $16.6 million on that front.
I want to point out that obviously that is the cost side of the equation, but there is also a revenue side to the equation. As of the end of Q3 of that same period, we roughly have about $9.7 million in accrued interest revenue on our transactions.
Annie Ropar
View Annie Ropar Profile
Annie Ropar
2020-06-22 14:20
I'm sorry, that's just for the year-to-date fiscal Q3, December 2019. Last year, our full year fiscal expenses were about $11.4 million, the last fiscal year ending March 2019.
View Peter Julian Profile
NDP (BC)
Pierre Lavallée stepped down after 24 months at the Infrastructure Bank. Can you confirm that he received a bonus of $720,000 when he stepped down in April?
Annie Ropar
View Annie Ropar Profile
Annie Ropar
2020-06-22 14:20
Just to back up on that question, it's important to note to the committee that our CEO's base salary is disclosed via the OIC appointment, and that is disclosed on the OIC website.
In addition, to give people the colour around our transparency, we do disclose in our annual report, under our key management personnel notes to the financials on an aggregate basis, total compensation paid to the executive team as well as the board of directors.
Unfortunately, I cannot comment on a specific individual's payments or terms, as these are subject to confidentiality, obviously, of their employment agreement.
View Peter Julian Profile
NDP (BC)
François Lecavalier stepped down after 12 months in December. Nicholas Hann stepped down after nine months about 11 months ago. Could you confirm that bonuses were paid in their departures as well?
Annie Ropar
View Annie Ropar Profile
Annie Ropar
2020-06-22 14:21
Again, all of our disclosures around compensation appear in our notes to the financial statements, but I cannot comment on the specific terms of any one individual's employment agreement.
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