TRAN Committee Meeting

     Good afternoon, everyone. Welcome to the Standing Committee on Transport, Infrastructure and Communities, meeting number four.

    Our orders of the day, pursuant to Standing Order 108(2), are for a study of the national public transit strategy.

    Joining us today, from the Federation of Canadian Municipalities, is Mr. Brock Carlton, chief executive officer, and Adam Thompson, policy adviser.

    Welcome to the committee. I'm sure you've been following a little bit of what's been going on. I know you've been here often enough to know how the process works.

    I'll open the floor to you and then we'll move to questions.

    Great. Thank you.

    Of course we're always interested in anything related to infrastructure, so we really appreciate being invited here today.

    I should say that our president, Berry Vrbanovic, a councillor from Kitchener, was not able to be here today. He has a council meeting about some important issues, and local democracy is really important to him and to our folks.

    FCM has been the voice of municipal government since 1901. Our members represent 90% of the Canadian population. We have approximately 2,000 members across the country.

    Public transit is key to a strong economy, and must be part of a new federal long-term infrastructure plan. To compete globally and protect our quality of life, Canada will need cities and communities with fast, efficient transportation networks that connect companies to customers, workers to jobs, and communities to markets.

    In a country that needs to increase its economic productivity, traffic gridlock is choking the economy, slowing the movements of goods, services, and people to a standstill.

    A recent Statistics Canada report indicates that Canadians spend approximately 32 days per year on the road, commuting to and from work. That amounts to an average of over 75 minutes per day in Canada's biggest cities. In Toronto, going to and from work takes an average of 81 minutes.

    Every hour Canadians spend on the road is an hour not spent at home, at work or at school.

    The Canadian Chamber of Commerce estimates that road congestion costs the greater Toronto area's economy $5 billion a year in lost productivity. Nationally, that number is much higher.

    During these difficult economic times, lost productivity undermines investments made by all governments to help Canada emerge from the recession and improve our economic competitiveness. Gridlock is on the rise in our cities because of Canada's municipal infrastructure deficit. Repairs and construction on our communities' most fundamental asset are being pushed back.

    For 25 years Canadians watched the symptoms of infrastructure deficit grow: rusting bridges, crumbling roads, crowded buses and subways, and health warnings to boil local drinking water. However, after decades of underinvestment, Canada has started to confront its municipal infrastructure deficit. Recent investments by federal, provincial-territorial, and municipal governments have helped Canada fight the global recession and rebuild thousands of aging roads, bridges, water systems, and other essential infrastructure.

    Ottawa's growing collaboration with municipalities has produced policies and programs that deliver better value for Canadians. The Building Canada plan and the permanent gas tax fund are examples of long-term funding tools the country needs to properly maintain infrastructure over 30-year, 50-year, even 70-year lifespans.

    We must protect and build on recent investments to build a country that can support families and businesses. The long-term infrastructure plan promised in the last federal budget is critical to repairing our aging infrastructure. It must include transit investment and solutions to fight gridlock, cut commute times, and connect communities to growing markets and new opportunities.

    The permanent federal gas tax invests in public transit, but the high cost of building modern transportation systems requires dedicated funding. Canada's only national source of dedicated transit funding, the Public Transit Capital Trust, expired in 2010. Canadian cities do not have the tools to build and repair modern transit systems on their own while also building roads and bridges, providing policing and fire protection, and carrying out new responsibilities, including many downloaded by other governments.

    Without a share of the income and the sales taxes generated by new growth, communities have been forced to raise property taxes, cut core services, and, most often, put off infrastructure repairs. The resulting infrastructure deficit is bad for families, business, and our economy.

    A quick tour around the world--New York, London, Singapore--shows that cities with great transit systems aren't forced to rely on property taxes to build them.

    All governments must work together, as well as with the private sector, to identify the challenges facing Canada's infrastructure. They must make investments immediately to build the quality roads, water systems, community facilities and public transit that Canada needs to support families, businesses and our future economic growth.

     Moving people efficiently requires commonsense cooperation among all governments. In the end, ensuring that Canadians have the capacity and opportunity to move efficiently in our cities and communities will help us address all of our objectives in the service of Canadians.

    We'd like to thank you again for taking the time to invite us and for listening to the comments I've just made. We're prepared, Mr. Chair, to answer any questions. I might add, just before doing that, that with me is Adam Thompson, who is a policy analyst in our shop and focused on these issues, so he's also here to help with any questions you may have.

    Thank you, Mr. Carlton.

    Mr. Nicholls, seven minutes.

    Given that governments present and past have had difficulties in improving productivity in our economy, do you think a national transit strategy would strengthen Canada's economy in terms of productivity, and how?

    We believe very strongly that infrastructure generally is an essential foundation for the economic competitiveness of our country. Within that framework of infrastructure and the discussions of the commitments of the government to long-term infrastructure planning, it's really clear to us that transit is a critical component of that larger question. We believe very strongly that an approach to urban transit that is national, that is based on some key principles and backed up with financial resources from all three areas of government, and where there is possible leveraging private sector interest is going to strengthen the economic competitiveness of this country.

    What are some of the challenges of municipalities both small and large in implementing efficient transit systems?

    Let's start with....

    Sorry, it's a big question.

    Yes, it's a big question, but let's start with the reality that municipalities are really strapped for cash. If you look at the tax dollars collected in this country by different orders of government, the municipalities collect eight cents out of that tax pie, and that is simply not sufficient to do all the things that municipalities are expected to do, whether it's transit or whether it's roads and bridges or policing and community safety, and in some provinces it's social housing. But the bottom line is that the financial resources are not there for municipalities to deliver all the things they are expected to deliver on.

    But the government has made permanent the gas tax funding. Is this not sufficient to answer communities' needs?

    The permanent gas tax is an enormously important financial support for municipalities in this country. It is not indexed, so as inflation carries on into the future the value of that gas tax will diminish.

    Secondly, the gas tax, while invaluable and predictable, which is a really important feature, is not sufficient for the size of investments required to bring our urban transit systems up to what I think we would consider modern, 21st century, competitive cities in a global context.

    Do you think federal agencies such as the Canada Housing and Mortgage Corporation could assist municipalities in implementing things like transit-oriented development?

    Federal leadership in urban transit is critical. Any time we have a national challenge that challenges us as a country socially, environmentally, or economically, we think there's a really important role to play for the federal government. The federal government and its agencies can take a leadership role in considering national principles and national-level policy or national-level resource allocation that will leverage resources from other orders of government and other actors. But the bottom line in terms of your question is we believe that the federal government and its agencies have a really important leadership role to play, not on its own, but playing a leadership role can really focus the energies of our country in ways that make us a better place in which to live and make us more economically competitive.

    I think that's all, Mr. Chair.

    Do you want to share it with anyone?

    I'll share my time with Mr. Sullivan.

    You have four minutes.

    Thank you.

    You said the gas tax is not indexed and that's a problem. I'm trying to come to grips in my own mind. I think I know what the order of magnitude is of the difference between what the gas tax provides and what is necessary for infrastructure, but maybe you could enlighten the rest of us.

    For example, the “Big Move” project proposed by Metrolinx in Toronto is estimated to be worth about $50 billion over 15 years. The gas tax is a small fraction of that for the City of Toronto, so where is the rest of the money going to come from, and is that typical of big municipalities across Canada?

     I can't give you an order of magnitude in terms of a figure. What I can say is that in the particular case of urban transit, exactly because of the scenario you're painting, dedicated transit funding is essential. Municipalities simply can't live on the gas tax and the property tax.

    Part of your question was on what other avenues there are to span that gap between the gas tax and the needs, and the property tax is the most significant one.

    In comparison globally, Canadian municipalities rely on the property tax for significantly more than other OECD countries. In Canada the property tax makes up roughly 60% of municipal revenues. In the United States, for example, it's about 20% to 25%, and in OECD countries the standard is closer to 30%. We rely heavily on the property tax; it is the other major source of revenue. So the only option is to increase the property tax, which increases the tax burden on Canadians on where they live.

    We think that if there's dedicated transit funding in the context of a longer-term infrastructure plan, you're going to complement the gas tax with the kinds of resources over the long term that will be needed for these kinds of challenges.

    The gas tax is intended to cover all kinds of infrastructure, is it not? It's not just for transit. Some cities have said they are going to use it for transit, but if you have no transit system you can still get your share of the gas tax and put it into water and sewers and recreation centres. Is that fair to the cities that need more?

    The gas tax was always set up to be the funding envelope from the federal government that was long-term, predictable, and, importantly, flexible for the needs of local communities.

    You've identified correctly that in smaller municipalities large public-transit-specific projects aren't required. In that case, through local democracy, the issues are chosen, like water systems, waste-water facilities, roads and bridges, and other municipal needs.

    On the appropriateness of the gas tax, again it's a very significant portion of what is ideally a federal commitment around municipal infrastructure to provide long-term and predictable funding streams. So in that sense the gas tax, in the way it's administered and designed now, is appropriate for the various and diverse needs of municipalities. But as Brock indicated before, it is not indexed, so protecting its purchasing power in the years ahead is something FCM is looking for.

    Thank you.

    Mr. Coderre, you have the floor.

    Thank you, Mr. Chair.

    Welcome to our witnesses. It is not the first time that we have had the opportunity to discuss these issues.

    This is all rather confusing. We are talking about a national public transit strategy, but infrastructure and funding are related realities. Do you favour a comprehensive approach rather than a strategy that is strictly limited to public transit? Should we not instead find a new way to manage the relationships between municipalities and the other levels of government? We are talking about the first approach here.

    Regarding the second approach, I recognize that the needs are primarily in municipalities. We must think very seriously about an indexed gas tax fund. However, regarding the money that will come later, for example from the Government of Canada, do you favour a dedicated fund or a consolidated fund? If a dedicated fund is created, you will have to invest solely in an agreed area. If we opt for a consolidated fund, it will once again come down to the relationship between municipalities and the government, regarding the money paid by the government.

    In everything we are discussing and will eventually discuss, I have the impression there is a problem of governance—the relationships between levels of government—and the way we ensure accountability.

    I would first like to know what approach you prefer. Then I will have other more specific questions.

    We believe it is essential to have a fund for public transit within the context of overall infrastructure issues.

    Municipalities have different challenges. Some of those challenges have to do with public transit, and others have to do with infrastructure that is not related to public transit.

    In our opinion, it is essential to take a comprehensive view of infrastructure issues. We are talking about a long-term infrastructure plan, one crucial part of which, we believe, deals with public transit.

    Obviously, without basic infrastructure, there can be no public transit.

    As you mentioned and as we can see for ourselves—whether it be the Champlain Bridge or other bridges or highways—we have created a problem over time. We have neglected our infrastructure because we did not know how to secure adequate funding.

    In Quebec, we took out the toll booths. At the time, the money was put directly into infrastructure in the various jurisdictions. Because of the relationship between the Federation of Canadian Municipalities and the Canadian government, we found a solution. It began when Prime Minister Paul Martin was in office. When the current government came into power, the charges became permanent. How should we deal with issue of funding?

    You talked about relationships with the private sector. We have to think of new sources of financing. For instance, would you be in favour of seeking new ways to obtain funding, through toll booths, for instance?

    Should we do as they do in the United States, when, in some cases, payment is made electronically, a bit like Highway 407 in Toronto? All of this requires a very clear relationship between the federal government and the municipalities. However, we must accept that, under the Constitution, you are a creature of the provinces. We do not like to say so, but it is the reality. How do you go about redefining the role of municipalities in order to have a national public transit strategy?

    First of all, despite what is in the Constitution, the government has for several years decided to work with the municipalities and it is going very well. But it does not operate outside the relationship with the provinces and territories.

    There is a link between the federal government and the municipalities. Municipalities are important for Canada and for our economic growth. We do not get into details like toll booths. We are saying that infrastructure is vitally important; it underpins our economy and our social and environmental well-being.

    In terms of infrastructure, it is quite important that we target public transit issues. We should focus all of the discussions on long-term infrastructure planning. The municipalities and the federal government, along with the provinces and territories, must find a way to work together in order to meet the needs of Canadians.

    We need a long term plan, a plan for resources, either an indexed gas tax, a program such as the Building Canada Fund, or something else. We have to find a way to put the resources on the table so that we can deal with long-term infrastructure issues. This is not a matter that can be dealt with in a few hours.

    But we still must be specific. Earlier, you talked about traffic jams. This is a reality.

    We can philosophize as long as we like, but I am trying to understand what specifically is meant by a national public transit strategy. The relationship between the federal government and the municipalities is not bilateral. The provinces are involved as well.

    Anyway, how are we to implement a national strategy when we want standards? We cannot establish national standards. You talked about Toronto. In Montreal, it must take 95 minutes to get back and forth to work, what with all the holes you have to drive around.

    Do you think that we can really look to a national strategy to deal with problems such as traffic jams? Aren't you really saying:

“Give us the money and we'll take care of it”?

    I think that the strategy is not necessarily the most important aspect; the principles are. If we have strong global principles, we can get strong local results. So that means that we base the strategy on principles, and long-term planning and funding. That is an important principle.

    The second aspect is predictability. If we want to finance infrastructure or public transit, we need to have a long-term, predictable funding process, like a gas tax. We know that a gas tax is predictable.

    Yes, you know what to expect.

    The third principle is that there must be some flexibility so that we can have national principles and a national perspective, but also the flexibility that lets us have different solutions for Toronto and Vancouver. We can try to obtain results at the local level, but within the context of national principles.

    Thank you.

    Mr. Poilievre, it is your turn.

     Thank you very much for appearing before us today.

    I can tell you the percentage of GDP that the federal government represents. It's between 13% and 15%. The variation is due to the economic action plan, which was a 2% increase in federal government spending on a temporary basis, but now that that has lapsed we're back in the neighbourhood of 13% of GDP. What is the present percentage of GDP that is constituted by municipal government spending?

    I can't give you a percentage; I don't have that figure. But in a general sense, procurement at the municipal level is about $100 million per year.

    Not procurement. Spending.

    I don't know. I don't have the answer to that question.

    Can you commit to getting it for us?

    I think we can probably get it, yes.

    What is the per capita spending of the average municipality in Canada?

    I don't know. We'll get that for you as well.

    Has the spending of local governments increased or decreased over the last number of years?

    Spending of local governments would have increased, I would imagine, as the costs increase for delivering of services, the upgrading or maintenance of infrastructure, and the downloading of responsibilities that have meant that municipalities have had to put more resources into things that were not the original intentions of the property tax.

    The statistics I have acquired from the Library of Parliament indicate that revenues of local governments per capita have risen from $1,947 in 1985 to $3,881 in 2010. I'd be interested to ascertain the impact of inflation there, but we do know that revenues for municipalities have grown dramatically. They've grown because of the unprecedented contribution of the gas tax rebate to the municipalities and because of increases in municipal tax rates, which typically have outstripped inflation.

    We also know that the federal contribution to overall infrastructure is now at a record high. So I'm just curious as to why the financial crunch. If revenues have exploded, how is it that municipalities are in such dire straits?

    I don't have the figures you have. I would also question the percentage increase in revenues of the federal and provincial governments and how those increases are seen in proportion to the increase in the municipal revenues. I believe we could probably get that figure as well, but I can't respond to the figures you're putting on the table.

    With respect to the question, it is evident to everyone that the demands on municipalities for infrastructure, for policing and community safety, for housing, etc., continue to go up, if one wants to put financial value on it, at a rate that is larger than the revenues they have and increasing at a rate that is faster than that of the revenues you say are increasing over time.

     I'm curious how that's possible. You mentioned just roads and policing. Fair enough. But roads and policing existed in 1985, so you had to pay for them then. I'm not sure why policing is more expensive today than it was in 1985. Why are roads more expensive today, other than inflation, which is accounted for by property tax increases? All of the infrastructure you've just mentioned had to be financed in 1985. So why do you say there's an inordinate increase in the cost?

    Adam will answer part of that, but I would say that it is not fair to say that costs have increased on roads, etc., at around inflation rate and property tax has increased by inflation. The demand on the property tax has increased more than inflation, because more things have been downloaded onto municipalities as their responsibility. So the property tax is now serving a lot more services and expectations of the citizen than was the case when it was originally conceived or was the case in 1985.

    For example, if you take a look at a report we did a year or so ago about the social safety net in Canada, you'll see there are a lot of issues in that report that are about municipalities delivering services that are now part of the social safety net, which were never conceived of to be part of the property tax base. So there is an expanding demand on the property tax base.

    It's true, there has been some downloading by provincial governments. The federal government has more than provided its share, even an absence of federal downloading.

    I'm not going to get into who's downloading on what, because you're right: there's a lot of downloading from the provinces. My comment is more that the property tax is being stretched farther for more things now than it was in 1985.

    Do you want to...?

    Yes.

     I apologize, because our latest data is a little out of date, based on 2008 data, but what we found was that from 1996 to 2006, through that 10-year period, the full suite of municipal revenues grew at about 17%, whereas federal revenues grew at about 29% and provincial and territorial revenues at about 34%, I believe. That shows a big increase, although at the same time economic expansion and inflation grew by about 30%.

    What it shows is that as a total figure, municipal revenues grew during that time. But when you match it against the rate at which the economy was expanding and the population was growing, it actually grew less. We lost some spending power. And then, in addition, the services that were—

    I get a lot of complaints about property tax. Even though I'm a federal MP, people complain about it to me. What they say is that consistently, for as long as they can remember, property taxes have gone up faster than inflation. Population growth should pay for itself, because there are development fees paid by the builder, and then every time there's a new house built there's a new property taxpayer sending a cheque to city hall. Then on top of that, you've had the gas tax transfer, which is a brand-new contribution. It's been in place now for about six years, roughly. That's a whole new revenue stream that didn't exist before. And then there were record contributions to infrastructure by the federal government on top of that. And then when we discuss the state of municipal finances, we're told that they're still not paying the bill, not able to meet the obligation. That's the overall question we're getting.

    As we said before, the degree of downloading since 1985, the date you mentioned earlier, is a significant burden on the municipalities. It stretches the property tax beyond what it was intended to do and stretches the municipal coffers so they can't continue to provide the kinds of services and the range of services that Canadians expect--and deserve, frankly. As I said before, I'm not casting stones at one order of government or another with respect to downloading, and I'm not wanting to diminish the value of the gas tax or the value of the economic action plan, but the downloading has been significant.

     Mr. Albas.

    Thank you, Mr. Chair.

    I appreciate the presentation today. I was a former municipal councillor in Penticton, British Columbia, so I certainly can understand some of the pressure cities are under. At the same time, I know that usually it's political decisions that put them under those pressures.

    Getting on to your presentation today, the FCM has said that Canada is the only G-8 country without a national public transit strategy. Do other G-8 countries have a legislated strategy, as proposed by the NDP? If so, do those federations have similar constitutional divisions of powers, as Canada does?

    I'm sorry, what was the last part of the question?

    If so, if those strategies are legislated ones, as proposed by the NDP, are they in federations that have a similar constitutional structure, with divisions of power, as we have here in Canada?

    Whether they're legislated or not, I couldn't go through each country and say yes or no. What's important for us is that there is a need for a long-term view on the transit question and the broader question of infrastructure. There is a need for the kinds of principles I laid out earlier as part of a strategy and a long-term plan for infrastructure planning and investment. These things, if put in place, over time will bring Canada to the standards of the OECD, whether there's a legislated strategy or not. What's more important for us is the long-term view, the kinds of principles we talked about, and really, a national effort to focus on these issues.

    You're not aware of any other countries in the G-8 that actually have a legislated strategy, correct?

    I don't have a list of them with me, no.

    Thank you.

    We'll move to Mr. Sullivan.

    Thank you, Mr. Chair.

     Figures were thrown out a little while ago of the dollars per capita municipalities spend. I just did a little bit of Internet research, and I apologize, because I don't have any actual numbers, but it would appear that the per capita amounts taken by municipalities are actually less than inflation over the 25-year period that was being talked about. It's only a little bit less, but it's less than inflation. At the same time, at least in Ontario--I'm not certain about other municipalities--the province was strapped, and it downloaded a whole lot of responsibilities onto municipalities and has not taken them back. So I can well understand how municipalities are crying uncle, because they can't actually continue to provide all the services they provided before.

    We're now entering a period in which the rest of the world has moved dramatically forward with public transit. We have very, very little real public transit in this country, from my perspective. In terms of rail-based public transit, in particular, there is very, very little in this country.

    Other countries are leaping ahead of us. In China, the building program for subways and for rapid rail and for inter-urban rail is moving at an astonishing pace. Spain has built in its major cities. France and England, we know, have had better public transit systems than most of Canada for a long time, partly because they were building post-war.

    What I'm wrestling with is the notion that there is a federal responsibility here. That's really what we're debating. It's not just whether there is a strategy but whether there is a responsibility. We on this side of the table believe that there should be responsibility for a portion of it. I don't think the funding mechanisms that have happened so far are too far wrong. It's been about a third, a third, and a third. It has just not been regular. We get funding in Toronto for a subway, but not for light rail. We get some funding for some rail infrastructure for heavy rail, but not a lot of it.

    I guess I'm asking if a national strategy would help, even if the amount of money isn't tremendous, in making it at least appear that we're moving forward into better public transit in the bigger municipalities.

     Absolutely. What's important for us and our members is the understanding of the critical nature of infrastructure in this country, the importance of urban transit within that broader question in the larger and medium-sized communities, and the negative economic impacts of the lack of effective urban transit, or transport en commun.

    It is really important to have leadership from the federal government that focuses on the infrastructure question and the transit within it, focuses on the principles of a national approach to these questions, and then puts some resources on the table that leverage other resources. The federal government plays a hugely important role in this country in bringing leadership to a question, and then bringing the nation to focus on how to advance our country with respect to that question.

     As in cases like the economic action plan--or go all the way back to the railway that was built across the prairies by Sir John A. Macdonald's gang--we're saying that with infrastructure and the subset question of urban transit, the focus of federal leadership brings attention to the issue that allows us to overcome national challenges.

    Is it another benefit of a national strategy that once there's an agreement among the provinces, the municipalities, and the federal government on a system by which public transit will be implemented--maybe not agreement on the funding, but at least on what will be implemented--it takes away the tendency to make transit infrastructure decisions for political purposes?

     I think back to the early nineties, when we had a big hole on Eglinton Avenue in Toronto that somebody decided to fill in at a cost of $100 million. Now we're digging the hole again.

     So we have what was clearly, to the public anyway, a very political decision to stop a transit project and start a different one that was in a riding more friendly to the government at that time. It baffles people to understand how that happens. But would a national strategy at least curb some of that, or at least make it less likely to be so obvious?

    Part of the question is what are the principles that are going to guide the national effort? I named a couple of principles earlier, but one of them is accountability at all orders of government so Canadians understand that what's going on is transparent, and the folks who are making the decisions are accountable for those decisions.

    Thank you.

    Mr. Leung.

    Thank you, Mr. Chair.

    Brock, I would like you to share with us, starting from about 1970 to the present--if we look at all the urban transit properties, such as in Vancouver, Calgary, Toronto, and Montreal, where capital infrastructure was put in for urban transportation that is rail-based--what the federal component was in contributions, versus provincial and municipal.

    That leads to my next question. I believe the federal government has substantial investment in these properties. Certainly in my past working experience I was involved in building some of these properties.

    I can't give you the figure you asked for in the first part of your question. We don't have that kind of data, and we don't have that historical analysis.

    I would certainly say that there has been significant federal investment in specific projects and specific locations over time, up to the recent public transit capital trust of $400 million a year, which expired in 2010. So there's no question the federal government has played a role, and there's no question it has been beneficial.

     What we're putting on the table is that these are individual incidents that have happened in specific places for specific reasons at a certain time. We believe what's really important here is that we step above the one-off projects, look at the national picture, and develop the principles and approaches. Then we can go forward in this question with a sense of national purpose applied locally in its respective relevance, depending on the specificities of the place.

     In a way I share some of that thought, but we need to be a little more focused.

    There is urban transit within a city, there is inter-city transport, and then there is a national transport strategy. We've been talking about a Windsor to Quebec City high-speed corridor for as long as I've been involved in urban transportation.

    Yes.

    And there have been wonderful studies, but all talk.

    You mentioned that the federal government should take some leadership. Urban transportation is germane to each municipality. I would submit to you that it is the municipalities' responsibility to give us a proposal on an urban transit strategy because from the federal point of view it doesn't make sense for us to have a national strategy that fits every community across Canada.

    I even bring this fact.... And I understand you've lived in China--

    Yes.

    And I've assisted with some of the initial feasibility planning for transportation in China. We discovered we could not have a national strategy. If you look at Beijing, Shanghai, Hangzhou, Chongqing, they each have their own urban transit strategy. And it's all pertinent to the locality.

    And even if one looks at Hong Kong, Taipei, Singapore, and Kuala Lumpur, they're all very different.

    So I think the Federation of Canadian Municipalities should be taking the lead in this area.

    In some ways we have been, in that we worked very closely with the government on the economic action plan. I think we played a leadership role in helping to shape that with Minister Baird and his office and with your government.

    As we talk about fulfilling the commitment in the federal budget about a long-term infrastructure plan, we expect to play a significant role as a partner with the federal government in thinking this through. And certainly we're not suggesting that we lie here prone, waiting for the plan to guide us all to some nirvana. We certainly have a role to play with this in terms of the thinking and in terms of the resources. And certainly, as you've indicated, each place has its local particularities that require certain leadership and certain specificity about responding to local challenges. So I don't disagree with all of that.

    All we're saying is that in the context of a national challenge that we have as a country around economic competitiveness and the role of infrastructure and urban transit, within that challenge we think the federal government has a role. And it's indicated in its budget it's planning to play that role. And we're going to come to the table ready to play our role in the leadership of a dialogue around how to make this country more effective with respect to infrastructure and within that with respect to urban transit.

    I have to stop you there.

    We're going to Ms. Morin.

    Thank you for your presentation.

    In answering one of my questions last week, Minister Lebel told me that the people in the cities and provinces are much more knowledgeable about their people's needs. In his opinion, it is not up to Ottawa to tell Montreal, Quebec City, Toronto and Vancouver what is good for the municipalities.

    I would like to understand how you see the role of the federal government with respect to this potential public transit initiative.

    I would agree that it is not the role of the federal government to tell municipalities to do something. That is why we feel it is important that the federal government play a leadership role at the national level and establish, further to consultation, certain principles to guide everything that's being done in terms of the programs and resources earmarked for infrastructure and public transit.

    Against that background, the principles can enable us to respond appropriately at the local level. We do not think that it is the role of the federal government to tell the municipalities what to do, but with this national perspective, we need to develop principles, play a leadership role and establish a Canada-wide vision in order to achieve what needs to be done locally.

    Last week, officials from Infrastructure Canada who appeared before this committee said that a national transportation strategy and a federal fund earmarked for public transit would exclude communities that do not currently have a public transit network.

    Could you tell me whether, in your opinion, the public transit development fund would be preferable to a federal fund which municipalities could tap into for their own infrastructure initiatives? Would that, in your opinion, be applicable to all communities?

    Should there be a long-term infrastructure plan and should there be some resources earmarked for such a plan—whether it be a program, indexation of the gas tax or something else—specific resources could be allocated to the municipalities that need them for public transit. However, it is important for us to adopt a more comprehensive perspective that is not restricted to public transit alone. We are talking about municipal infrastructure, a national program and national principles enabling us to do what needs to be achieved locally.

    Fine.

     You have two minutes left, Ms. Liu, if you'd like to take the time.

    Sure. Thank you, Mr. Chair.

    Thanks for your presentation.

    Can you talk about how a national public transit strategy could help municipalities in terms of long-term planning?

    As we have said, the important thing is that if there is an infrastructure plan with certain principles and resources in place, then municipalities can see long term. The beauty of the gas tax is that municipalities have a stable, predictable resource outside of the property tax, so they can finance using it and they can predict and plan for the future using that.

    What we are saying is that it doesn't have to be the gas tax, but if some of those principles are in place for an infrastructure program that is long term, then the municipalities have the capacity to see the future financially, understand the future in terms of their needs because of their own analyses of their communities and the expected growth, etc. Because the programming is predictable and long term, they can marry resources with plans. Without a longer-term perspective, without the programs or financing and planning that is based on our principles or others that may be consistent with those principles, municipalities can't predict the long term and they can't say they can borrow based on the future gas tax revenues, because if those aren't predictable and long term, then they can't marry the needs with their long-term financing requirements.

    I have to stop you there.

    Mr. Watson.

    Thank you, Mr. Chair.

    Thank you to our witnesses. It's good to have you back at our committee once again.

    I have a lot of questions and very little time to ask them, so I'll try to be as brief as I can.

    You want the answers to be brief as well.

    I'll try to phrase my questions briefly.

    First, very definitively, is the FCM calling for a national public transit strategy, or something along that line?

    The FCM is calling for a long-term infrastructure plan in which transit is an important element and in which there are guiding principles that are national in nature.

    That is interesting.

    In consideration of structuring such funding, let me just make sure I understand this. Are you asking for a dedicated amount within an omnibus infrastructure program, or do you want something separate entirely for transit so that large municipalities have access not only to an omnibus program but in addition to a transit funding stream?

    That's a very good question.

    No, we're looking for, as you put it, “omnibus”. We are talking about a long-term infrastructure plan with a financing element to it, into which—

    How long would be the timeframe for such an infrastructure program that would help you on planning your transit needs?

    If you think of all the challenges, if you're looking at something like a 20-year plan, then you have time to—

     The Building Canada fund was seven years, which is usually pretty long—

    I know. We will get to this kind of question in the dialogue with the feds about the details of a long-term plan, but these are long-term projects and we're not pretending that the fix is there on a short term. We understand the magnitude of the issue we're trying to engage in here.

     On the question of cost-sharing, how much for each level of government? Is there a role for the private sector? What should their contribution be to it?

    There is a role for the private sector. I wouldn't put a percentage on it because it would depend on specific situations. The tradition has been a third, a third, and a third. I would say that when it's a third, a third, a third, the municipalities end up paying more than a third, just because there are all kinds of costs that are implied in the exercise. And there are limits to the capacity of municipalities to finance one-third, one-third, one-third.

    Okay.

    With respect to the federal government participation in funding, would it be limited to capital expenditure only, or operational expenditure? The last time I checked, we don't flow money for the operation of waste water treatment systems or arena management, but....

    Right.

    Traditionally, the federal government has been in the financing game for capital. It creates challenges. If you look at last year, in the city of Toronto, the financing available for the TTC through provincial-federal transfers and through the fare box was not sufficient to maintain the growth. So the city itself ended up with a deficit challenge of about $17 million, I believe, only because of the growth and because transfers from other orders of government were not helping with operating costs.

    Should federal funding be incremental, for new construction, or are you advocating that it should also include the capacity to fund maintaining existing systems?

    No. The infrastructure stock in this country is extensive and out of date, so we would be arguing that it needs to be not just for new infrastructure, because there's so much out there that needs to be repaired.

    The structure of FCM--you'll have to forgive me, I haven't looked at the list of all the municipalities involved--that includes rural municipalities, as well?

    Yes, our smallest member has a population of five.

    What do they think of an urban transit strategy? Are they supportive of additional moneys being put toward large municipalities? Have you asked your membership of the smaller communities how they feel about that?

    Absolutely. They're represented around the board table just as the big cities are, and they're understanding a couple of things. One is that the conversation is about a perspective on infrastructure that is global in nature, so their issues would be in that long-term infrastructure planning and acknowledging that the big cities have certain needs, as do the small municipalities, so within the context of a broad infrastructure plan and an infrastructure program of some nature.

    Very good. I have nothing further.

    With that, I'm going to suspend this portion of the meeting, and we'll bring our next guests to the table.

    Thank you again. As always, the input that you give us I think helps us make better decisions into the future, so we appreciate your time.

    Thank you for your time. There are a few questions that were asked. We'll be providing some follow-up information.

    Yes, if you would, through the chair or through the clerk, and we'll distribute.

    Okay, thank you.

    We're going to suspend for three minutes and bring our next guests to the table.

    Welcome back.

    Joining us now at the table are the Canadian Urban Transit Association, CUTA: Patrick Leclerc, director of public affairs, and Christopher Norris, director of technical services.

    Welcome.

    You've seen how the show runs, so please make your presentation and then we'll move to questions.

    Mr. Chair, members of the committee, my name is Patrick Leclerc and I am the Director of Public Affairs at the Canadian Urban Transit Association. Today I am accompanied by my colleague, Christopher Norris, who is the Director of Technical Services.

    First of all, I would like to take this opportunity to thank you for inviting us to testify before your committee about a possible national policy on public transit. We would like to congratulate you for undertaking a study on public transit and on the role that the federal government plays in a key sector of the economy and community development.

     The Canadian Urban Transit Association, or CUTA, represents the public transit sector in Canada. Our mission is to promote the contribution of public transit to the quality of life, the environment, health, mobility and, as well, the economic development of our Canadian communities.

    The public transit sector in Canada is doing well. For example, just last year, ridership increased by 4.1% nationally compared to the previous year, which represents an unprecedented peak of 1.9 billion trips.

     Public transport is also an important economic driver of our communities. Strategic investment in public transit boosts Canada's productivity and economic growth. Indeed, the economic impact of transit investment in Canada is worth over $11.5 billion annually, making the cost-benefit ratio of transit investment well in excess of two to one.

    The transit industry directly employs nearly 50,000 Canadians and indirectly creates an additional 25,000 jobs. Investing in public transit also reduces vehicle upgrading costs for Canadian households by about $5 billion every year.

    On the other hand, lack of investment in sustainable mobility options, such as public transit, also has an impact on the economy. With nearly 80% of the population living in urban centres, commute times and traffic congestion represent a real burden for Canadian workers and businesses.

    Every year, gridlock costs Canada billions in lost productivity. At a time when employment growth is increasingly concentrated in knowledge-based sectors, creating dynamic urban environments is a central part of Canada's competitive advantage. This is why an increasing number of investors and boards of trade are urging governments to work together in developing a strong and comprehensive approach to public transit.

    The challenges related to mobility affect communities as a whole. In smaller municipalities, public transit plays a significant socio-economic role by allowing people to travel cheaply and to have access to jobs, educational institutions and social services. In these smaller communities, public transit uses buses, bus taxis or organized carpooling more extensively.

    It is important to note the progress that has been achieved over the past decade. Thanks to contributions by all levels of government and the hard work of decision-makers and parliamentarians from all political parties, investments in public transit have significantly increased since the turn of the millennium. We want to take this opportunity to note the exceptional contribution by the federal government over the past decade. Whereas the Government of Canada's participation in public transit was non-existent approximately 10 years ago, that participation is now approximately $1 billion annually.

    If we are here today, it is thanks to you. All the parties represented in the House have helped to push public transit forward and we are very grateful for this. Now, the question we must ask ourselves is the following one: what does the future hold, what should we do today to meet the challenges of tomorrow? That is the question we have attempted to answer in developing Vision 2040, a vision that takes into consideration the contribution of public transit to quality of life, predictable changes in our communities between now and 2040, the impact those changes will have on urban transportation, and the strategic goals that can ensure maximum impact of public transit on quality of life.

    Among the major and predictable changes that will affect our society and our economy, we can note, among others, economic growth, the aging of the population, increasing concentration of the population in urban centres. To meet those challenges, we must propose ambitious plans and policies to ensure the smooth movement of goods and individuals and provide quality public transit services.

    One of the core elements of Transit Vision 2040, which is the very first strategic direction of the vision, is the development of an overarching and comprehensive Canadian transit policy framework. All orders of government should work together in developing a framework of national transit policies that are integrated and mutually supportive. Such a framework should clarify jurisdictional roles, responsibilities, and priorities. It should highlight goals for transit and identify synergies among the objectives of different stakeholders. It is essential to establish a collaborative process, with each involved jurisdiction taking responsibility for developing, approving, and implementing its own policies.

    Some of you may wonder what the impact of such a framework would be. After all, the federal government already contributes nearly $1 billion in transit every year without any national strategy or policy framework. It may even look like the ideal situation: money with no guidelines, no directions, no goals, and no strings attached. Such an analysis would not reflect the nature of the transit industry and the complexity and necessity of long-term planning.

    Let's take a look at a recent study by Statistics Canada entitled “Commuting to Work: Results of the 2010 General Social Survey” to try to better understand why a clear, ambitious, and long-term approach to public transit is needed. The report showed that the daily commute to work was on average longer by public transit than by car. Without going into the details of the study, the report points out, and I quote, that “many buses use the same road lanes as private cars”. The report goes on to say, “the use of bus lanes and underground rail lines can speed up public transit commutes and even make them shorter than automobile commutes”.

    Without realizing it, the authors of the report touched on something that is well understood in our industry. The future of the sector lies in rapid transit and in better integration of public transit and urban design. Rapid transit, whether it is light-rail transit or bus rapid transit using dedicated corridors, takes years to plan and build. These modes of transportation are highly efficient, but they require major investment and close collaboration among all orders of government. In order to get the approval to launch rapid transit projects, local authorities need to have the assurance that all orders of government will be present and will be partners from the beginning until the end of the project.

    For some, the question of developing such a policy framework is essentially tied to areas of jurisdiction. Is it the role of the federal government to undertake that initiative? On this point, we must consider the contribution of public transit in its entirety and not just as a conventional means of transportation.

    For example, by reducing the number of cars on the roads in urban centres, we are reducing the number of problems related to road congestion and we are promoting the smoother flow of goods and services, which will have a positive impact on productivity and economic growth. Consequently, our communities will be more competitive within North America, which will attract greater investments and benefit the economy of the country as whole.

    This is also part of the federal government's desire to make economic growth a priority. Furthermore, the goal of the Government of Canada to improve the gateways to promote international trade goes hand in hand with an urban transportation strategy. What is the point of improving gateways if goods remain stuck in traffic and cannot reach the nerve centres efficiently?

    Public transit also has an impact on air quality and greenhouse gas emission. It goes without saying that air pollution crosses provincial borders. Reducing air pollution would improve air quality and have a beneficial effect on health, thereby cutting health care costs related to respiratory diseases.

    Improving quality of life is not the responsibility of just one specific jurisdiction, but rather, it must be a central consideration for all levels of government.

     For us, there is no doubt that the federal government should work with all provinces, territories, and municipalities to develop a comprehensive Canadian transit policy framework.

    We will be pleased to answer any questions you may have.

    Thank you, Mr. Chair.

    Thank you very much.

    Mr. Nicholls.

    Thank you, Mr. Chair.

    My first question is quite a simple one on public safety. We've seen that the Montreal Metro is now planning to offer wireless service. Given that we live in an information economy, is it safer for people to use information technologies in an automobile, or in a bus or subway? I'm looking for a simple answer on what your opinion would be.

     I'll take this one. Obviously that's what we're saying, and that's what was demonstrated by the report from StatsCan. While you're driving, even if it takes you less time to go to work, you're basically stuck behind a wheel and drive. When you're on public transit you can work, take a nap, or do other things.

    Thank you.

    We know that public transit systems often have difficulty making ends meet solely from user contributions. Could you talk about the economic benefits of public transit that could compensate for such losses?

    At present, the proportion of revenues coming from fare boxes is approximately 60% in Canada. This percentage is one of the highest among the OECD countries; in some cases, that percentage goes as high as 80%.

    Public transit networks use a number of initiatives to generate revenues. It can be advertising within subway cars and buses or through the participation of the private sector in the network operating plan. We see this in particular in the north and south lines in the Montreal region, and in Toronto in the York region. At present, there are a number of initiatives allowing for the implementation of an increase in user and municipality-paid costs.

    How can public transit facilitate road trade? What role does it play in economic productivity?

    It plays a major role. It is no coincidence if we see increasing numbers of chambers of commerce say that an integrated approach by all levels of government in the area of public transit is essential. This is the case of the Toronto Board of Trade and the Board of Trade of Metropolitan Montreal.

    In short, according to the chambers of commerce, the Montreal region lost $1.4 billion per year in 2009 and previously. Now, I imagine that things are different. In Toronto, we are talking about approximately $6 billion. According to the chambers of commerce, their members are losing money. People need to use the roads for trade, be it business representatives or for the transportation of goods. People who don't need to use their car—what we call solo driving—should be able to use efficient public transit systems, which would clearly stimulate national productivity.

    Could you provide more details about the ways in which public transit is creating jobs?

    That is a fairly interesting point. There are different ways. We know—we have already talked about the future of public transit and rapid transit systems—it takes years to develop and implement a rapid bus service or light rail service. A number of high quality jobs are then created.

    As I was saying, the public transit sector represents approximately 50,000 direct jobs or 25,000 indirect jobs. There are also many in the area of network construction.

    There is another aspect that is extremely important to consider. We see what is happening in the United States with the Buy America Act. This is one example. Jobs in the public transit manufacturing sector are very good jobs. At present, in the United States, there is a problem with job creation. There is already a minimum standard of 60% American content for public transit equipment, and there are discussions underway proposing to increase that to 100%.

    We see the growth in the public transit sector. Last year, we talked about approximately 4.1% growth. Growth is occurring throughout Canada, the United States and the world. It is generating many jobs, and it is an industry of the future.

    Manufacturing jobs are therefore extremely good jobs, and we know that this will continue to grow in the future.

    I have one final question to ask, if I have the time.

     Do you think a national transit strategy would help promote the economic elements we've mentioned? Do you think the strategy would play a role in helping Canada's economy?

    It will surely help to make sure that with all the plans we're putting in place in the economy, like the gateways, we can really integrate transit and make it part of that. What we're really talking about is a policy framework, and not really a strategy.

    We've just conducted a study, and we were looking at about 30 elements of what could be a framework. Obviously you need to make sure it fits with the local, provincial, and national priorities. For instance, we know that the federal government has a plan on the economy. They have a plan on the gateways. They will be looking at innovation in the next few years, with the Jenkins report being one of the core elements.

    When considering all of that we need to make sure we have all the partners around the table to look at how public transit will fit into this broad spectrum. To do that you need to know where you're going and why you're investing $1 billion a year in transit.

    Thank you.

    Mr. Coderre, you have the floor.

    Mr. Chair, I want to say that it would be important for committee members to have a copy of the document entitled Vision 2040 that they prepared. This document is somewhat similar to a strategy. There were a number of consultations, particularly with the Canadian Federation of Municipalities. We spoke to experts, we met with people from all regions.

    This could give us an idea of what a strategic plan could look like, at the very least. In your document, you say that this vision is intended to strengthen public transit, revolutionize services, give priority to clients, guarantee a greener public transit system and ensure financial health. We are starting to see a strategic framework. This could therefore be a good way to help us develop a strategy. I think that it could be useful, in practice.

    However, I must play devil's advocate. The problem is that we want a national strategy and our country is extremely vast. There is a rural reality and an urban reality. There is also an issue of flexibility that comes into play, if someone works at three in the morning, if they are self-employed or if they have to think about going to pick up their kids at the day care. There is a reality in this regard and an issue of accessibility.

    First of all, how can we have a national strategy given what I would almost describe as the geographic nature of the country in which we live? Then, how can you tie that to a constitutional reality? There is no way out. Minister Lebel said on August 22 that all three levels of government would need to work together. I agree with him.

    How can we do that in concrete terms? Do you believe that we should hold a federal-provincial-territorial conference—involving the three levels of government? Since we have already spent $1 billion per year and we currently have no strategy, it is possible to wonder if we really need a strategy. Should we rethink the tax incentive and finally say that, perhaps, a targeted fund and incentive could be sufficient, and we will let the municipalities reach agreement amongst themselves? What is your opinion about all this?

    Then, I will come back with other questions.

    Thank you for your question.

    It is due to, among other things, this country's diversity that we need to sit down around the table to clarify each participant's role and to find the goal.

    For example, the Gas Tax Fund is determined on a per capita basis. The smaller communities will tell you that it is difficult for them. We are still talking about public transit—in English it is called transit. The first thing that we see are buses, subways and light rail. In smaller communities, there is still mobility and the population is aging. We see that workers and young people head to the major centres, but they come back to these smaller communities to retire. So, it is more difficult in terms of revenues.

    How can we ensure mobility of individuals with functional limitations, for example? This need exists. How can we make sure that the transfers and the measures implemented by the federal and provincial governments will be able to respond to these mobility challenges so that we are where we need to be in 2030 and 2040? That is the first element.

    The second element is to make sure that the different policies that already exist in this country fit together. Let me give you the following example. For years now, CUTA has been holding discussions with the federal government to get a tax exemption for transit passes provided by employers to their employees. This measure has existed in Quebec since 2007 and costs the Quebec nation very little—pardon me, the Province of Quebec.

    The Quebec nation is fine, there is no problem.

    It is not a very expensive measure. Federally, however, this has not been done. Quebec workers do not pay tax on the transit allowance they receive from their employers. This measure does not exist federally. It exists in the United States, in France and in England. We think other provinces would be interested. Ontario has already discussed it. In some municipalities, transit companies already offer this measure; transit allowances, however, are not tax-exempt.

    A national strategy requires coordination with certain tax policies that could have a direct effect on the viability of this strategy.

    We will hold summits on tax policies, urban transit development plans, long-term visions, goals and economic development plans.

    A federal-provincial-territorial meeting would certainly be one avenue. We think all the partners should sit down around a table to discuss what they want to do about public transit.

    Often, for that to work, it is preferable to use a bilateral approach before everyone sits down around one table. In that case, would it not be better to work with those who are already ready and adjust everything afterward? Must the same thing be heard?

    In fact, that is already being done. The FCM has said that it is open to dialogue. The provinces are one example. The intergovernmental task force on urban transportation of the Council of Deputy Ministers Responsible for Transportation and Highway Safety is already discussing these options. The provinces and the federal government are discussing transportation plans. The task force is discussing urban transportation more specifically. There are already discussions. We are in contact with similar groups.

    One of the problems is that we cannot just ask the federal government to establish a public transit strategy, given our crumbling infrastructure. We have to renew our infrastructure. In any case, when we want to announce something, like the Champlain Bridge, we talk about light rail and implementing a public transit strategy.

    Do you think we should have an infrastructure fund and that within it there should be a section for public transit, something like what the Federation of Canadian Municipalities is calling for?

    After all, it comes out of the same pocket.

    It could be that.

    In fact, we would have to ensure that regarding transportation planning—

    The money will really have to be reserved for the ends to which it was allocated.

    Complementary planning, that is between cars and public transit, is important. We really have to study everything that is happening.

     Thank you.

    Mr. Leung.

    Thank you, Mr. Chair.

    And thank you, Mr. Leclerc and Mr. Norris, for your presentation.

    I have followed the initial study, Transport 2000, and I saw it again as Transport 2020, and now for the first time I'm hearing you say Transport 2040. It seems we are great at writing reports, but there is total inaction in this area.

    What I'd like you to do is share with us what concrete methods or procedures we can follow in order to take some action. In the last 40 years, the four urban transit planning reports that have been submitted and studied have certainly not served the national interests.

    Thank you for your question.

    Going forward to 2040, the transit systems that are members of CUTA are already implementing many of these elements. For instance, one point of the vision is ensuring accessibility to as many Canadians as possible.

    We know already that if you look at the transit system in Whitehorse, for instance, you will see Whitehorse has a fleet that is 100% accessible, which is phenomenal for a transit system of that size. They are already doing that.

    People say we need more real-time information and we need to increase our customer service to really make it more attractive for users to use public transit. It was mentioned a bit earlier that now some buses or some systems have Wi-Fi and also real-time information. Intelligent transportation systems are already in place and they are in many cities in Canada, so action is happening. What we're seeing is that we've made huge progress.

    There is a lot to be done, and what's described in “Transit Vision 2040”.... You are correct to say that there have been many visions, but when you look at them you will see they are pretty much the same, constat. They are looking at what will happen in the next 10, 20, or 30 years and what we need to do to improve our transit systems in Canada.

    You have the same thing in the U.S. The UITP, which is the International Association of Public Transport, also has a long-term vision.

    So we know what we need to do and we're already doing that, so action is taking place, it's not only reports. But we need to make sure we'll have the right mechanisms in place to implement all of these.

     Thank you.

    I'd also appreciate your thoughts on this. During the 1970s and 1980s, I was involved in conducting a study regarding mobility transit, wheel-trans, for the Toronto Transit Commission. I see in metropolitan Toronto many public transit vehicles with a bike rack in front. I wish to suggest that I think those are 90% inefficiently used. I think we're spending a lot of money in certain sectors where it doesn't really benefit the broader public service we're intending to provide.

    How do you see that?

    As part of the national transit framework, we see accountability as one of the important things. That would be a part of that, so the money being dedicated to it is spent according to objectives that are outlined and that there's follow-up and such after the fact that the expenditures were properly made and based on the public need.

    Okay. Also, when you address the issue of urban transportation, I think we need to be a little more focused. We're really looking at passengers per hour per direction. If we cannot achieve 30,000 per hour per direction for heavy rail, that makes it very hard for any funding formula to propose a Cadillac urban transit system.

    What I'd like to know is, if you look at the broad spectrum of Canadian municipalities in metropolitan centres, does that require a change in our concept of urban design for increased density? What is your proposal in how we go about doing that?

    I think you're very right, in that public transit and land use planning go hand in hand. Density is very important, generating not only transit trips, but trips within themselves. That being said, when investing or looking at higher-order transits, the association isn't proposing any one type of solution. The retained solution is up to the local authorities, be it heavy rail, commuter rail, bus rapid transit.

    We would expect, through accountability and process, that the retained solution would be what would most benefit the community in the short and medium term. That would accompany land use changes to support that higher-order transit that would be implemented so it could bear fruit.

    One last question, sir. Public funding for transit is a very important issue for all transit properties around the world. You're probably more experienced than I am in this area. Could you tell me of any transit systems around the world, any properties, that are self-funded, in that they're a totally private system that has worked successfully in an urban centre?

    Hong Kong comes to mind; MTR is there. But it's very, very densely populated and the cost of ownership of a private automobile is disproportionate to what it is here.

    Hong Kong actually started out as a publicly funded system before selling its shares to make it a public corporation, right?

    Yes, that was my understanding.

     Is that the only one?

    It's the only one that comes to my mind, but we could probably follow up with you, if you like.

    Okay, that's fine.

    Mr. Albas.

    Thank you, Mr. Chair.

    I appreciate the presentation today. I'm going to be asking a few questions relative to what I asked the previous presenters.

    CUTA indicated in its May 2011 report on national transit policy frameworks that all G-8 countries, including Canada, have elements of a national transit strategy, as opposed to an actual strategy like the one proposed by the NDP.

     In your opinion, is it accurate to say that Canada is the only G-8 country without a national public transit strategy?

     It depends how you define a national transit strategy and what you would include in it.

    As I mentioned earlier, we're looking at about 30 components of what could constitute a policy framework, and we looked at all the G-8 countries. We also looked at New Zealand, Australia, and the Republic of Korea to see what's out there, what they're doing. If you include the 30 components, there is no such thing as a complete, overall, overarching national transit strategy, but some countries have many of these components. If you look at the U.S., for instance--this is a country we're really looking at, because our cities are competing against each other--they have a good, comprehensive approach to a public transit strategy.

    It's right to say that in Canada you have elements in place, but we need to make sure that we complement these with other elements. Given the nature of the political system in Canada, it's really important to design a strategy that would be tailor-made, not to take just anything. We know that transit is a provincial jurisdiction. We respect that, and our aim is to see what elements we could put in place and adapt to fit our jurisdiction as well.

    Thank you for that, and I think you have answered half my question with your previous statement. So what I understand from you is that no G-8 country has a complete strategy per se, although some countries may have elements of one. None of them has a legislated comprehensive public strategy. Is that what you're saying?

    Again, it really depends how you define it, what you include in the strategy.

    Also, we've noticed that rather than speak of a strategy, CUTA has proposed a coordinated national framework of policies and programs to guide investments in the expansion and renewal of transit systems. Can you explain how a framework would differ from a strategy as proposed by the NDP?

    Yes. I think the strategy in the NDP proposal is based mainly on what was proposed in 2007 by the FCM and CUTA as well. That was also endorsed by the Conservative government at the time. Lawrence Cannon, the minister at the time, said it was an idea to investigate.

    There were five elements: capital funding, R and D, accountability, land use, and tax incentives--the federal employer-provided tax benefit exempt from taxation. And we looked in a more in-depth fashion at what it would mean. That's why we're talking about a framework, because we know that the word “strategy” is used with pretty much anything now. You have energy strategy, you have a strategy for head injuries in hockey, things like that. So you have strategies everywhere, but what we're really looking at is the framework.

    The framework guides what you want to do and what you want to include with the provinces and the mechanism to include within the framework to deal with policy integration, for instance. When you look at what is done in some provinces, and the fiscal policies you have, then you can look at how the federal government could match these policies. We're already in discussion as well with the federal finance minister on that. He was open to the idea. But you also need to look at policy integration in a policy framework. How does that fit with your environmental strategy, for instance? How does that fit with your gateway strategy? How does that fit with your innovation strategy? To have it as a framework, it's not that rigid. You give clear strategic directions, objectives and goals that you define as partnerships around the table, and then it's a bit different. Then you have many components. You make sure it fits the country where it is implemented.

    Mr. Sullivan.

     Thank you very much for your presentation.

    We got into a discussion a minute ago about strategy versus framework. They're very similar, in the sense that what we're saying in our strategy discussions and what I hear you saying in your framework discussion is that there's a role for the federal government to play in designing a system whereby funding would happen and whereby.... That's really the number one issue. How do you get money into this system to build it? Where is the money going to come from to build it? And once that happens, once there's leveraging in the private sector, the municipalities, and the provinces, then you triple or quadruple the amount of money that's available and you build the systems. I don't think we're very far apart in terms of what we're talking about. It's all about money.

    I also liked what you were talking about when you suggested that people take their cars, really, because it's faster. It's really about time. If there's a public transit system that comes to my door every five minutes and gets me to where I want to go in a reasonable period of time, I'm going to use it. Once you've built something that is that effective, it also, in turn, becomes more efficient, which means it starts returning more of the investment back to the people who put it together. Am I right? The density, as you said with respect to Hong Kong, and the frequency of use and the ability of the system to be convenient and displace cars actually makes it more economically viable for municipalities and maybe the private sector, although it's difficult in Canada.

     Is that correct?

    You're right.

    You touched on the private sector. In Canada, the private sector is really involved in public transit. If you look at the suburbs of Calgary, for instance, you have private operators there. It's the same thing in Montreal avec les CIT. You have private operators there, as well. The private sector is already there.

    I agree with you. But people will think, first thing, that we come to the table asking for money and that's pretty much it. This is really not what we want to do. That's why we talk about a policy framework. We want to look, as well, at the implications for the private sector. We want to look at the social inclusion of public transit and at the administrative support.

     For instance, there was a policy theme within Transport Canada that has now moved to Infrastructure Canada. We want to know how they work with other departments, for instance, in administrative support and in the level of policy integration.

     It's really to have a real overarching and comprehensive approach to public transit that goes beyond funding. But obviously the funding part is there, and it's an important one.

    In terms of the private sector involvement, I'm aware of only some in Canada. There is some private sector involvement, for example, in the city of Vaughan, north of Toronto, where some of that system was set up. But it's heavily subsidized by the province. It's $4 a rider that's being put into that bus system to keep it running. A person pays $2.50 for his or her fare, and the province pays another $4. But it's private, and therefore it's better.

    Generally speaking, Canada is too big for the private sector to be a significant player in a public transit system, with the exception, perhaps, of some bus systems, as an operator--as in wall-to-wall, we're going to build a system, we're going to operate it, and we're going to make money. Because there isn't the density to provide it, generally speaking, in Canada. Am I correct is saying that?

    I'm not saying that there isn't a role. I'm just saying that you can't just hand the keys to the TTC over to the private sector and all of a sudden it's going to make money.

    That's difficult to say. I wouldn't want to speculate on it either.

    Fair enough.

    In terms of the tax incentives, I'm very interested in the notion that the provision of public transit by an employer should be a non-taxable benefit. Can you give us any examples of where that works and how it works?

     We know, for instance, that many transit systems have programs. OC Transpo and Winnipeg Transit offer a rebate to employers, and the employers have to match the rebate. The incentive for employers is that it reduces the amount of money they have to pay, because it really reduces their taxable expenditures. They don't pay employment insurance on that part because it's not taxable, and they don't pay on the pension plan either; it is exempted.

    Some studies show that when it's a major employer, there's an incentive for them to offer that. As an example, I recently had a discussion with a vice-president at MasterCard. They were really interested to see how they could help make that happen in Canada, because they offer that to their employees in the U.S. They said it was great that when you hire someone and you're based in a downtown core, it's a nice incentive to offer. It's less expensive than offering free parking, because sometimes that's the case. So this is a good benefit they would like to include. It shows that they are socially responsible as well.

    I have to stop you there.

    Mr. Watson.

    Thank you, Mr. Chair.

    Thank you to our witnesses for their presentation.

    I may cover some of the same questions with you that I covered with FCM. Before I get there, vision 2040 is a long way out. Are you asking the federal government to make a financial commitment that far out?

    No--for the record.

    That gets tough to justify. Building Canada is a seven-year fund, and it pretty much stretches the limit beyond an existing mandate already.

    In consideration of some of the elements of a possible transit strategy or framework, I'll go through some of the same questions here.

    Is CUTA looking for a specific dedicated fund to fund transit, or are they looking for that to be eligible within an omnibus program like Building Canada? I think about 40% of that fund ultimately went to transit projects, but it compelled municipalities to sort of prioritize which infrastructure they were looking for.

    Are you endorsing a particular dedicated fund, in addition to municipalities being able to access an omnibus program for their other infrastructure needs, or are we happy with the way the BCF has worked? That's really the question.

    We're really looking for a cocktail of measures. For instance, the gas tax is working well. There were some programs within the Building Canada fund that were good as well.

    In our previous pre-budget brief we submitted--and we're appearing later this week before the finance committee--we're asking for an extra cent from the excise tax to be dedicated to transit. It's not additional spending; it's a transfer of money. We understand that for the government it might mean switching priorities. We're also looking for investment in R and D, or support for R and D in transit and the automotive sector. So it's really a cocktail of measures we're looking at.

    On potential federal funding and the question of cost sharing--how much for each level of government, and what about the private sector--what proportion of cost sharing would you expect to come from that?

    When we look at infrastructure needs, our assumption is for it to be equally shared among the federal, provincial, and municipal governments. For instance, in Montreal the AMT just got funding within the P3 fund for a new garage facility. This is something that is extremely interesting that we're looking at as well.

     Okay.

    Capital funding has typically been where the federal government has invested. Operational funding, should that be considered or not? The feds typically aren't in that. What are you recommending, that federal funding should continue with respect to funding or...?

    Capital funding.

    Typically, it's been the pattern to apply that funding incrementally--that is, for a new project or new construction only, as opposed to funding maintenance costs for existing systems.

    Does CUTA have a position on whether future federal funding should remain incremental? Or should it also consider underwriting the cost of maintaining existing systems?

    Chris can correct me if I'm wrong, but the maintenance would be part of operational funding, to maintain it. For instance, in some places where you have a fleet that is really old or there can be safety issues, they will replace their fleet with new vehicles as well, fully accessible and greener. That would be considered as well.

    How long of a timeframe, with respect to a federal program, are you looking for? Would it be like a renewal of the Building Canada plan, like another seven years? Or are you asking for longer?

    And in terms of federal funding, are we looking at the continuation of the way it's typically funded now, or is there a place for interest-free loans? Should it be on a grant basis? What do you consider on that?

    An overall policy framework would be there, ideally, for a very long time. Now, if you go into a funding program in particular, then we can look at something like five to seven or up to ten years. For instance, when we do our infrastructure needs assessment, we look at the next five years. That's really what we're looking for.

    I have to thank you, and we'll move to Ms. Morin.

    You talked about some elements we would need to complete what we currently have—we could not call it a strategy—in order to spend the billion dollars available.

    What would we need to be able to say we have a public transit development strategy?

    In the case of many infrastructure funding programs, all the funds have expired. We therefore currently have no long-term program, except the Gas Tax Fund, which is not dedicated funding, though a large part of it goes to public transit. We therefore need long-term, predictable and sustainable dedicated funding.

    We are also discussing measures to support research, development and innovation in the area of public transit. We are going to examine policy integration measures in different departments. For example, a team assigned to urban transportation policy was at Transport Canada and is now at Infrastructure Canada. We want to see how they integrate the other departments' teams. Applied urban planning is being discussed, notably in Italy, in France and in Germany, but not here. There is the example of what was suggested in 2007.

    In any case, I will send the document to the chair and to the clerk.

    In the end, a responsibility is recognized and shared by the partners. The federal government cannot be dictating to municipalities the way they plan their cities. However, the federal government can ask that cities submit plans to support the investments they ask for infrastructure and public transit.

    I'd like to go back to a part of the question my colleague asked earlier.

    Could you tell me about a country, for example a G8 country, whose public transit strategy is working well and tell me what elements of that strategy we should add to ours?

    We look a lot at what is done in the United States, but they have a totally different system of government than we do. We have to be careful when we make comparisons. However, they have a marked advantage because of the Federal Transit Administration, which has a clear role and which also exerts a lot of pressure regarding policies to be passed. Think of the Buy American Act. The president of the FTA appeared before the committee of the United States Senate and said that the Obama administration planned to increase from 60% to 100% the American content in public transit systems. It shows that, even within the administration, they have a very strong tool to advance their position.

    My colleague was telling me that in North America 60% of buses are made in Canada. It is therefore a key sector of our economy. For this reason a great deal of pressure could be brought to bear by the United States.

     Regarding the bigger infrastructure projects, such as bus or train rapid transit—some people were talking about high-speed rail, for example—there is a lot of interest, because it will be long-term funding, over a number of years. That changes things.

    I will let my colleague ask the other question.

    You have one minute.

    Thanks, Mr. Chair.

    Would a strategy help municipalities make infrastructure choices based on life-cycle costs?

    Ideally, yes, because you'd have predictable funding so you can plan your maintenance, plan your rolling stock renewal, plan the maintenance of your heavy infrastructure, and you're not continuously deferring it, and you're ensuring a smooth, efficient operation of the system.

    I'm sorry, but that's your minute.

    I would like to note about those buses you referred to that I think more than half of them are made in Manitoba.

    Mr. Poilievre, final comments.

    It seems that you're an advocate of a “Buy Canada” strategy for procurement. Was that what you were trying to get at by making the comparison to the United States?

    No.

    Okay, good. That's all I need to know on that.

    Mr. Sullivan mentioned earlier on the fact that the private sector alone cannot operate at a profit public transit in Canada because the population densities do no permit such a return on investment. Mr. Leung pointed out that he's only aware of Hong Kong as an example of a profitable privately administered, privately run, mass transit system. So our expectations have to be realistic in terms of the ability to recover costs through the fare box.

    I know this is a complicated question, and it's difficult to boil it down, but in many disciplines we boil thousands of complicated factors down into one formula, equation, or ratio—everything from E = mc2 in physics, to real estate investors using the capitalization rate to determine if an investment is a good one, to stockbrokers and equity buyers looking at price-to-earnings ratio or price-to-book ratio, depending on their investment philosophy. The most sensible ratio to determine the economics of a project seems to me to be the fare box recovery rate. In Canada, what do you think is a minimum threshold for a fare box recovery rate of a project before it should go ahead?

    If you're looking at a project, we usually refer to the return on investment. From a purely operational point of view, when you're counting fares compared to what it costs to actually operate the system, it's what we call the RC ratio, the revenue to the cost. Right now, in Canada, on average, we're hovering at around 60%, as I mentioned. It's one of the highest ones, if not the highest, in the G-8. The transit systems here in Canada heavily rely on fares for their operations.

    What is an acceptable level? Usually those are set by the local municipalities that operate or have jurisdiction over that.

     I understand that, but when we're looking at an investment and we want to determine.... The reason the farebox recovery rate is a great indicator of the value of a project is that if a project is useful, people will be prepared to pay for it with fares. If you were to build a mass transit system in the Northwest Territories, I suspect your farebox recovery rate would be next to zero, because there isn't population density. If you build it in downtown Toronto, it's closer to 80%.

    As one of the calculations we consider in making an investment, should there not be a threshold that we say if we can't recover 30% or 40% or 50% of operating costs, it's not a good investment? Have you done any work as an organization into what that number might be?

    No, we have not done any work on what that minimum threshold would be.

    Okay, thank you.

    We have just a couple of minutes left, so I'll thank our guests for being here today. We appreciate it.

    For the information of committee members, the website also gives you access to the report up to 2040, so if you're not inclined to take the paper copy, you can do it on the Internet.

    Thank you very much.

    Committee, just a heads-up that on Wednesday we have one confirmed witness and we're working on the second. Please watch your notes as they are distributed as to what's going on.

    The meeting is adjourned.