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Proceedings of the Standing Senate Committee on
National Finance

Issue 11 - Evidence - Meeting of May 6, 2008

OTTAWA, Tuesday, May 6, 2008

The Standing Senate Committee on National Finance met this day at 9:32 a.m. to study the estimates laid before Parliament for the fiscal year ending March 31, 2009.

Senator Joseph A. Day (Chair) in the chair.


The Chair: Good morning, everyone. I welcome you to this meeting of the Standing Senate Committee on National Finance. My name is Joseph Day; I represent the Province of New Brunswick in the Senate, and I am the chair of this committee.


The committee's field of interest is government spending and operations, including reviewing the activities of officers of Parliament and those various individuals and groups that help parliamentarians to hold the government to account. We do this through the estimates of expenditures and funds made available to officers of Parliament to perform their functions through budget implementation acts. We also review other matters referred to this committee by the Senate.

Today, as part of our committee's review of the 2008-09 estimates, we are examining federal expenditures on infrastructure and related activities, including the participation of federal regional development agencies in the delivery of infrastructure funding.

It is my pleasure to welcome our first panel today from Infrastructure Canada: David Cluff, Assistant Deputy Minister, Corporate Services and Chief Financial Officer; Jocelyne St. Jean, Director General, Intergovernmental Operations, Program Operations Branch; and Taki Sarantakis, Director General, Policy and Priorities, Policy and Communications Branch.

Mr. Cluff, I understand you have a few opening remarks and then we will go into a discussion.


David Cluff, Assistant Deputy Minister, Corporate Services and Chief Financial Officer, Infrastructure Canada: Mr. Chair, thank you for giving us an opportunity to speak with you regarding the financial arrangements for the delivery of federal infrastructure funding.

I would like to provide you with some context for the issues that you discussed with Treasury Board officials on March 4, 2008 and with officials from the Atlantic Canada Opportunities Agency (ACOA) on April 29.


Before I turn to the specific financial issues raised at these meetings, I would like to give you an overview of the way in which the Government of Canada has been supporting infrastructure investments since 2000.

Although you will see that a variety of program instruments and funding arrangements have been used, all of these programs share one common objective: to support quality, cost effective public infrastructure that meets the needs of Canadians in a competitive economy, a clean environment and liveable communities. An overwhelming proportion of the funds provided through these program instruments is invested in tangible capital assets that provide common services to Canadians. These assets are owned and managed by someone other than the Government of Canada, such as a province, territory or municipality.

I will draw your attention to the multi-coloured diagram that has been provided. This chart will be read from the bottom up. You will note the first program above the line of years in pink is the Infrastructure Canada Program, which was designed primarily for smaller-scale infrastructure projects at the local level.

The second generation of infrastructure programming consisted of the Municipal Rural Infrastructure Fund, which is very similar in scope and objectives to the Infrastructure Canada Program, and two new programs: The Canada Strategic Infrastructure Fund and the Border Infrastructure Fund. The former is aimed at larger projects of strategic importance, and the latter was focused on improving our borders and access to them.

The next generation of infrastructure programming was the introduction in 2005 of the Gas Tax Fund. The focus of the Gas Tax Fund is to provide money to municipalities for infrastructure projects that promote cleaner air, cleaner water and reduce greenhouse gases. There was also a parallel program for one year called the Public Transit Fund.

The most recent generation of programming is that introduced in 2007 under the Building Canada plan. We have provided you with a succinct description of the plan, and you will note that the plan contains programs and funding that are not the purview of Infrastructure Canada; these I have left off the chart. Those that are of interest to us are the Building Canada Fund and the Provincial-Territorial Base Funding.

The Building Canada Fund has two major components: the Major Infrastructure Component, which is very similar to the Canada Strategic Infrastructure Fund, and the Communities Component, which is similar to the earlier Infrastructure Canada Program and Municipal Rural Infrastructure Fund.

Finally, the Provincial-Territorial Base Funding is innovative in that it provides an equal, fixed amount of money to provinces and territories for infrastructure initiatives.

Having provided an overview of the chronology, I will speak to two particular aspects of this suite of programs: first, the way in which projects are selected under each main type and, secondly, the funding arrangements which will get us closer to the Main Estimates issues you have been discussing.

The suite of programs consisting of the Infrastructure Canada Program, the Municipal Rural Infrastructure Fund and the Communities Component of the Building Canada Fund — three generations of community programming — are similar in that they are all application-based. Applications are prepared by interested municipalities and submitted to a joint federal-provincial or federal-territorial review board that assesses them against various criteria and then recommends projects for approval. Under this programming, not every municipality applies and not every applicant receives money.

In the second group of programs — the Canada Strategic Infrastructure Fund, the Border Infrastructure Fund and the Major Infrastructure Component of the Building Canada Fund — projects are identified by a number of parties, primarily provinces, and are assessed against an appropriate set of criteria and then are approved by the Government of Canada. Projects are selected through extensive negotiations and discussions with the interested parties. Due to their size, they are all subject to intensive due diligence before the federal minister approves them.

In the final group of programs — the Gas Tax Fund and the Provincial-Territorial Base Funding — the role of the federal government is significantly less than in the other two. For the Gas Tax Fund, the federal government does not select the projects; funding is flowed in advance to municipalities and municipalities report on how they have spent this money within the parameters of this program.

Every municipality in Canada is eligible to receive Gas Tax Fund money. With respect to the Provincial-Territorial Base Funding, the Government of Canada reviews and accepts a plan from the province or territory but is not involved in the approval of specific projects. Every provincial and territorial jurisdiction in Canada will receive this base funding.

As you can see from this discussion, the federal delivery partners are not directly involved in the delivery of the Gas Tax Fund, the largest individual program we have, or the Provincial-Territorial Base Funding. They do, however, play a direct role in the management of the Canada Strategic Infrastructure Fund projects and, more significantly, in the suite of community programs such as the Municipal Rural Infrastructure Fund and the Communities Component of the Building Canada Fund.

I would also point out that these community programs are the ones that the Atlantic Canada Opportunities Agency, ACOA, spoke to when it appeared last week, and I believe they are also at the heart of this committee's questions in relation to understanding the Main Estimates.

I will not try to explain the variations in administrative processes of these three generations. Essentially, however, the federal delivery partners carry out the day-to-day administration of the programs from beginning to end.

However, over these three generations of community programs, there has been one significant change that bears directly on the issue you discussed with the Treasury Board of Canada Secretariat officials on March 4. When the Infrastructure Canada Program was created, there was no department responsible for infrastructure. As a result, the money attached to this program was placed directly in the reference levels of the federal delivery partners.

That changed in 2002 when Infrastructure Canada, officially known as the Office of Infrastructure of Canada, was created with the purpose of being the focal point for the Government of Canada's infrastructure programming. From that point on, all the money for infrastructure programming has been placed in our reference levels. These monies are made available to federal delivery partners based on allocation formulas approved by the government in the case of the communities program after the Infrastructure Canada Program, and the location of the projects in the case of the Canada Strategic Infrastructure Fund. Because these funds are in the reference levels of Infrastructure Canada they do not show up in those of the delivery partners.

Now I would like to draw your attention to the second chart. Table 1 is a summary of the commitments that various governments have made toward spending over the specified lifetimes. Table 2 is about what has actually happened over the last five years. I have included information on the Infrastructure Canada Program, drawn from our delivery partners, as well as the funding for infrastructure from our public accounts. You will note that the total expenditures of the government on infrastructure have been rising steadily as the various generations of programs come on-stream. It is not surprising, given the change brought in with the creation of the department, that our share is rising and that, as the Infrastructure Canada Program projects are finalized, the amount going to the delivery partners as recorded in the public accounts is decreasing. This same phenomenon also appears in the Main Estimates that you are reviewing.

The estimates for Infrastructure Canada show an increase of some $437.8 million. This is almost entirely due to the increased flow of funding under the second and third generation of programs that I mentioned, as well as the introduction of parts of the Building Canada Fund. We can look at the details on page 24-16 of the Main Estimates if there is interest.

Our approved spending on grants and contributions for the current year is roughly $2.4 billion. This money reaches Canadians all across the country in accordance with the allocation formulas for the various programs and the individual projects that are funded.

I know that I have tried to summarize a number of program instruments in a short period of time, but I hope that I have been able to shed some light on the issues that you have raised about certain numbers in the Main Estimates. I would like to thank you for your time and attention this morning, senators. I would be happy to answer your questions and to provide more information on any of the financial matters that I have presented.

The Chair: Thank you, Mr. Cluff. As a matter of clarification, can you please explain again what we are looking at with the two tables on the second chart that you brought to our attention?

Mr. Cluff: The first table shows in the first column the money for infrastructure that has flowed through Infrastructure Canada. The ICP is the Infrastructure Canada Program, which is the money that has flown directly through our delivery partners.

The Chair: For clarity on the acronyms, INFC is Infrastructure Canada and ICP is Infrastructure Canada Program.

Taki Sarantakis, Director General, Policy and Priorities, Policy and Communications Branch, Infrastructure Canada: The program came before the department.

Mr. Cluff: Infrastructure Canada, INFC, is the department and ICP is the program, whose money does not flow through our Main Estimates or public accounts.

The second table merely takes the INFC column and shows the three main components: the Gas Tax Fund, which is growing; the Canada Strategic Infrastructure Fund, or CSIF, and the Border Infrastructure Fund, or BIF, which are reaching their peak; and the Municipal Rural Infrastructure Fund, or MRIF, which conceptually is the successor of the Infrastructure Canada Program.

The Chair: The right-hand column entitled "Others" and "ICP" is difficult to follow. Is everyone else clear on these charts? Do we understand what they include?

Senator Murray: I understand that the Community Development Trust is not included and that you do not know anything officially about it.

Mr. Sarantakis: It is an initiative out of the Department of Finance Canada.

Senator Murray: The Minister of Finance is responsible for that initiative. What other trusts are excluded? I see the note on your first chart about programs administered by Infrastructure Canada that exclude funding provided through trusts. What other programs might be excluded?

Mr. Sarantakis: There is a series of trusts that the government typically does every year toward the end of the fiscal framework. This year, there was the Public Transit Capital Trust in the amount of $500 million. Some of them flow through the Department of Finance Canada and some through other departments. Each year, there are typically one or two of these trusts, and we can provide you with a list.

Senator Murray: Why do you not have oversight of these trusts?

Mr. Sarantakis: It is a decision of the Department of Finance Canada when they announce the budget. Some of them flow through Infrastructure Canada, such as the public trust that is noted in the chart. Trusts tend to be different from programs in that they are financial instruments for which funding is provided by the government without conditions.

Senator Murray: They are drawn on by the provinces.

Mr. Sarantakis: Typically, they do not require administration.

Senator Murray: Who has the Gateways and Border Crossings Fund?

Mr. Sarantakis: That is Transport Canada.

Senator Murray: Who has the Asia-Pacific Gateway and Corridor Initiative?

Mr. Sarantakis: Again, that is Transport Canada.

Senator Murray: There is some history to this Community Development Trust and Bill C-41, which the Senate was urged — putting it mildly — to pass with all possible speed to have Royal Assent last February. A couple of agreements were made between the Prime Minister and various provinces. I have not heard anything of it since then, although I would like a progress report soon.

The Chair: Are the witnesses able to inform us of the progress on the Community Development Trust?

Mr. Sarantakis: That is not our responsibility. The government uses a number of instruments, such as the Canada ecoTrust fund, which was administered by the Department of Finance Canada and Environment Canada. We can speak to our programs, but we cannot speak to those of other departments.

The Chair: We understand that. I thought you might have some information. We would not want you to speculate, of course.

Senator Ringuette: On the first chart, we have eight different infrastructure programs, but you specified that only three are application-based.

Mr. Cluff: That is correct.

Senator Ringuette: Why is that?

Mr. Cluff: There are different program instruments for different purposes. For example, the purpose of the Gas Tax Fund was to flow money to the municipalities. It was designed to be broader and more flexible than the other programs. In effect, each municipality receives its share of the Gas Tax Fund and then chooses how to spend the money.

The Municipal Rural Infrastructure Fund and its predecessor the Infrastructure Canada Program and the successor, the Communities Component, do not have enough money in them and are not designed to be universal in the same way as the Gas Tax Fund. Therefore, the application-based approach is used to determine which projects are most appropriate for funding.

Senator Ringuette: For each of these programs, do you have a strategic plan? We have been hearing in the media that cities and municipalities have made lists of their respective infrastructure deficit. Have you looked at that list? Is it part of your planning? Is there a schedule of priorities with respect to these different programs?

Mr. Sarantakis: Each program has its objectives and goals against which it is evaluated, and each one serves slightly different purposes because they came out at different times. We began in 2000 and developed new instruments in each of the following years. The multiplicity of instruments before you seems difficult to understand. It means that the Government of Canada continues to make commitments to attack the public infrastructure deficit, which is a controversial notion because it is difficult to measure the deficits in waste water and roads, for example. We know there are issues and challenges in health care, for instance, but we do not speak of the health care deficit. However, the infrastructure deficit has caught on. In terms of the objectives, typically we focus on water, waste water, public transit, highways and trade, if you were to narrow down the priorities of the Government of Canada in all of these programs.

Senator Ringuette: I understand the water issue. I know that New Brunswick has a list of infrastructure requirements for the various municipalities. They range from water to bridge infrastructure. The current flood situation is another issue. We are looking at billions of dollars, and I am surprised that we do not have a strategic plan with the provinces to address their priorities.

The other issue that I would like to have some information on is in regard to the three programs you have that are application-based. I would think that the communities that are financially better off would put forward applications, but these municipalities would not necessarily have the greater need for infrastructure money.

I would like to see what sort of breakdown you have in regard to the small, medium and larger communities — where the money from these programs went.

Mr. Sarantakis: Can I speak to your first statement about the strategic fund? This is the plan of the Government of Canada. It is the Building Canada plan, which is $33 billion. It includes a host of different initiatives such as the Building Canada Fund, the provincial-territorial base, and the borders and gateways fund. This is where the Government of Canada, really for the first time in its history, is articulating a strategic vision for infrastructure in Canada.

In terms of our federal-provincial relations, to implement the Building Canada Fund, we are signing framework agreements with every province and territory in Canada to focus and gear the program to the particularities and the needs of every region. As we know, New Brunswick is a little bit different.

Senator Ringuette: Is it one program out of eight programs?

Mr. Sarantakis: No, the Building Canada plan encompasses a host of programs.

Senator Ringuette: It is $8.8 billion, and it is application-based, is that right?

Mr. Sarantakis: Part of it is, but the Building Canada plan is more than the Building Canada Fund.

Mr. Cluff: We may have made it a little more confusing in that there are two things we are talking about. One is the Building Canada Fund, which is the $8.8 billion on the chart. The second thing is the Building Canada plan, of which the Building Canada Fund is a part. Mr. Sarantakis was saying that this is the government's strategy for dealing with infrastructure. Then the framework agreements that he was talking about are for the administration of the Building Canada plan, not the Building Canada Fund.

Do you want to say more about the framework agreements?

Senator Ringuette: I understand that. My concern is that there is $33 billion of taxpayers' money in those eight programs. I do not see that there is a strategic priority plan for each one of them. I understand that some are per capita-based. However, as a case in point, when ACOA was here last week, they said that they had no strategic plan in regard to infrastructure for the Atlantic provinces — and they are your partners in delivering the program.

It is a lot of money. I am not sure if we know where we are going and what the end result will be. If you could send a breakdown, maybe we will have a better understanding of where it is going and if the communities that need it the most are targeted in regard to these issues.

Another issue that I would like to have your comments on is the creation of the public-private partnership office. Are you part of that office — are you partners with it? Do you have anything to say in what is happening there?

Mr. Sarantakis: There are two parts to the office.

A new office has been created, which is called PPP Canada Inc., or P3, for short. It is a Crown corporation that will formally report to the Minister of Finance. This is an initiative outside of Infrastructure Canada's responsibilities. However, the Public-Private Partnerships Fund, P3 Fund, which will be administered by the P3 office, is part of the Building Canada plan. Again, it is under the rubric of what the government announced in Budget 2007.

Senator Ringuette: You have opened up quite a line of questions here. Essentially, the money and the programs that you have the mandate to administer will be under the purview, guidance or directive of this P3 office, is that correct?

Mr. Sarantakis: No, the Building Canada plan is $33 billion. That is the plan as a whole. Underneath that plan are a number of different programs that add up to $33 billion. Most of those are the responsibility of Infrastructure Canada, but not all of them. For instance, the Gateways and Border Crossings Fund is the responsibility of Transport Canada. The P3 office or the P3 Fund will be under the responsibility of the Minister of Finance.

Senator Ringuette: What is the P3 Fund?

Mr. Sarantakis: It is in Budget 2007. The government announced $1.26 billion for a program that will, for the first time in the history of Canada, deal exclusively with public-private partnerships, P3s.

Senator Ringuette: In what domain, if not in Infrastructure Canada?

Mr. Sarantakis: In Infrastructure Canada.

Senator Ringuette: We have a major problem if you guys have the mandate to administer and deliver $33-billion worth of programs, and this new Crown entity called PPP Canada Inc. is not talking to you guys and will have an additional $1.26 billion.

Mr. Chair, I would like for us to invite this P3 office to talk to us because it is directly related. We have different organizations happening all over the place, and we are talking about billions of dollars here. It is very important. If a new fund has been created to administer $1.26 billion with respect to P3s dealing in infrastructure, and they are not even talking to the people that already have $33-billion worth of infrastructure funds to deliver, we have a problem.

Mr. Sarantakis: To clarify, we did not say that they are not talking to us. It is a new organization that is being set up. It has just been set up. Minister Flaherty could speak to the P3 Fund. However, the money for the P3 Fund is part of the $33 billion. A host of initiatives come under the Building Canada plan, including the Building Canada Fund, the borders and gateways funds, the Provincial-Territorial Base Funding and the extension of the Gas Tax Fund. It is part of the multi-pronged commitment of the Government of Canada to infrastructure.

Senator Stratton: If you read the document, page 24, which we just received this morning, it gives you the breakdown. It includes the Public-Private Partnerships Fund and the Asia-Pacific Gateway and Corridor Initiative. I know there have been announcements with respect to that throughout the West.

Mr. Sarantakis: This was published in November. The minister announced the program, so this document has been public since November 2007.

Senator Stratton: Before we jump off bridges, we should read the document and then bring our questions.

The Chair: In fairness, as you say, we just received the document this morning. A number of programs in this document are not the responsibility of Infrastructure Canada.

Senator Stratton: I realize that. However, Senator Ringuette was asking about the Public-Private Partnerships Fund as being separate. It is part of this program — of the $33 billion.

Senator Ringuette: My concern is the fact that we have a new office dealing with delivering infrastructure programs that is not part of the $33 billion — well, it is part of the total infrastructure funding, but there is no discussion here. I think it is absolutely necessary to have them in front of us in order for us to understand this infrastructure situation. Honestly, if your group has been administering the eight different infrastructure programs here since 2000, I do not see why we had to create another entity.

The Chair: That was a government decision. We have to live with what we have.

Senator Nancy Ruth: Mr. Sarantakis, is there any coordinating function between these bits and pieces that are part of the $33 billion, such as the P3s? Is it your expectation that at some point, some of the P3s mix might help fund part of what you are also doing?

Mr. Sarantakis: Absolutely. Coordination happens back and forth, not only within our portfolio, which includes Transport Canada, but also with Western Economic Diversification Canada and ACOA. We work with Industry Canada and Indian and Northern Affairs Canada. One of the goals of the Government of Canada when it started in infrastructure was to not replicate existing administrative resources. We were created as an organization that was designed not to replicate what Indian and Northern Affairs Canada, INAC, does, with regional offices in the North, or what ACOA does, with regional offices in Atlantic Canada. The government decided we would work closely with these existing organizations to streamline administrative delivery of the programs. Yes, we coordinate intensively all the time.

Senator Nancy Ruth: You just do not supervise.

Mr. Sarantakis: It depends on the initiatives. This is a historical context going back eight years. Each of the programs has slightly different administrative features; each of the programs reflects what the government of the day wanted to do with respect to that funding.

The Chair: Senator Ringuette makes a good point for us. We had hoped and anticipated that you would be able to discuss all infrastructure programs that exist from a federal government point of view or federal government participation in Canada. Clearly, that is not the case, as you pointed out to us. You say that there is good coordination and you indicated, for example, the Public-Private Partnership Fund, is $1.26 billion, administered by the Department of Finance Canada.

Who else could we bring in that would have an overview of the coordination of all the programs in addition to the ones administered by Industry Canada?

Mr. Sarantakis: You would have to bring in almost every department in the Government of Canada. Canadian Heritage, Indian and Northern Affairs Canada, Health Canada and Industry Canada have infrastructure programs. The Government of Canada does not have things in tight, clean boxes for every issue. That is why departments work together all the time.

If you were to ask who is responsible for the North, INAC tends to have the lead on northern issues, but again, Health Canada is involved there, as are Public Safety Canada, National Defence and Infrastructure Canada. It is part of the Government of Canada working together.

The Chair: You say that you have good coordination on infrastructure programs. Who decides who should be invited to the coordinating meetings?

Mr. Sarantakis: It depends on the issue. Typically, the two primary drivers are the geographic location and the substantive issue. We deal geographically with ACOA and Western Economic Diversification Canada, and at the same time we deal substantively with Industry Canada, Transport Canada or Canadian Heritage, depending on the substantive investments being discussed.

The Chair: Let us look at Building Canada, with all of the programs in here. That may exclude some of the ones that you just mentioned. From the point of view of a Building Canada plan, which department is the overall coordinating agency?

Mr. Sarantakis: Infrastructure Canada is responsible for the overall design of the program, but each of the components has different delivery. We can run through them if you would like. On page 24, the municipal GST rebate is not a program; it is an initiative. It is run by the Department of Finance Canada. The Gas Tax Fund is operated by Infrastructure Canada. The Building Canada Fund is, again, Infrastructure Canada. For the Public-Private Partnerships Fund, the lead is the Department of Finance Canada, but we will be working closely with them. The Gateways and Border Crossings Fund is Transport Canada, as is the next one, the Asia-Pacific Gateway and Corridor Initiative. Finally, the Provincial -Territorial Base Funding is Infrastructure Canada.

The Chair: Is that $33 billion at the bottom over a period of eight years?

Mr. Sarantakis: It is over seven years.

The Chair: We do not count one of those two years; 2007 and 2014 are not counted.

Mr. Sarantakis: It is seven fiscal years.

The Chair: Over those seven fiscal years, is it straight line for each of these programs? If I divide the $33 billion by seven, will I know how much is available for infrastructure programs each year, or is each program different?

Mr. Sarantakis: Each program is different.

The Chair: That is what I suspected. Do you have a summary to help us out that we can distribute to each of the members of the committee? You can send it to our clerk.

Mr. Sarantakis: Yes, we have a summary. You can find it in Budget 2007, which lays out the projected notional cash flows for each of the initiatives.

The Chair: The chart that was given may not answer all of our questions in terms of how much money per year is available.

Senator Nancy Ruth: I always like to ask a question around equity, which is my focus, but the background to my question is that the Federal Contractors Program was implemented in 1986 following the proclamation of the Employment Equity Act. This act covered private sector, federally regulated enterprises with 100 or more employees and required them to implement employment equity. It targeted non-federally regulated federal contractors with a resident workforce in Canada of 100 people.

Are the parties to the contribution agreements for infrastructure grants covered by the Federal Contractors Program with respect to employment equity?

Mr. Sarantakis: We can follow up on that. I do not believe they are. As Mr. Cluff mentioned in his opening remarks, the infrastructure that is built as a result of these programs does not belong to the federal government. It is infrastructure owned and built by provinces, municipalities and community groups. Those tend to be outside of federal jurisdiction, but we can follow up on that.

Senator Nancy Ruth: If they have 100 employees or more, they are required to do employment equity, no matter what the contract is.

It seems peculiar to be dumping $33 billion into the swimming tank and not having some sort of monitoring system around equity issues. I look forward to you getting back to us.

My second question is around the fact that you are in the business of national physical assets, such as railways, ports and so on. These assets exist to serve people and are built in human contexts and within communities serving people with diverse needs. This is the diversity question. How, and how much, do you consider the relationship between hard infrastructure and the social side of policy — social cohesion, social inclusion, social infrastructure — in deciding which projects merit funding?

Mr. Sarantakis: I would not make as strong a distinction between hard and soft infrastructure because there is hard infrastructure that supports the soft infrastructure objectives. Sport infrastructure, recreational infrastructure, community centres and the like are hard infrastructure in a technical sense, but they support equity and inclusion objectives. For instance, we know in small communities across Canada that a community centre tends to be the centre of a community in terms of social inclusion and cohesion. It is the place where the community meets, gathers, discusses, debates, and where new immigrants are taught English or French as a second language. The hard infrastructure does tend to support social inclusion and social equity objectives as well.

Senator Nancy Ruth: Is there a way in which the federal component of this forces or encourages — I like forces — the other levels of government to participate in these projects to make their building code standards around these issues even better?

I come from Toronto where mobility and access are huge issues. We may have a transit system that works for the disabled and seniors during rush hours, but during the middle of the day it can be tough. What is the federal obligation in regard to that?

Mr. Sarantakis: We have accessibility criteria in all of our programs, where appropriate, and we work closely with the Office of Disability Issues at Human Resources and Social Development Canada to ensure that those criteria are incorporated in the proper way. Obviously, there are slightly different accessibility regimes in provincially regulated areas, but in federally regulated areas, such as air transport, that is the federal government's direct responsibility. We do incorporate accessibility criteria into project selection.

Senator Nancy Ruth: That does not go to who is actually building whatever is being built. I am thinking not necessarily of disability but of equity issues, too, where employers are required by federal law to do this.

Get back to me on that, but I would like to see you push a bit harder on it.

The Chair: Thank you for the undertaking to help us with any other information that you can.

Senator Di Nino: It strikes me that someone watching this committee meeting at three o'clock in the morning when it is played on television would be totally confused, since most of us are having difficulty grasping this. We may consider putting this in a more understandable format so that we can better appreciate how this works.

Having said that, governments past and present have tried to respond to the needs of Canadians from time to time, which is why we have such a plethora of programs.

Without talking about the Building Canada concept, are most of these programs sunsetted? Are they designed to serve a purpose for a specific period of time?

Mr. Sarantakis: Every program, with the exception of the Gas Tax Fund, which has become permanent under Budget 2008, has sunsetting features. The Government of Canada typically works on five-year periods per program.

Senator Di Nino: We are seeing so many because some of them are overlapping; some are not finished. As they finish, we will have less, or perhaps more depending on new programs that are instituted. Is that correct?

Mr. Sarantakis: Yes, that is correct. The multiplicity of programs is a good thing because it shows that governments of Canada, both today and in the past, are making increasing commitments to public infrastructure.

Senator Di Nino: I understand that. I am trying to rationalize it for myself. It is difficult.

Mr. Sarantakis: It is similar to going into a supermarket: If there is only one item on the shelf, your choice is easy to make, but it is not necessarily the best choice.

Senator Di Nino: I do not disagree with that, particularly in regard to the mandate to build Canada's physical plant, and that changes from time to time.

What is Infrastructure Canada's role in the relationship with the provincial and municipal jurisdictions? In some programs the decisions are made jointly and in others, they make the decisions. How do you work with them on that?

Mr. Sarantakis: It depends on the program; every program is slightly different. Provinces are our partners. We tend to sign agreements with provinces directly. Sometimes we are building provincial infrastructure, such as highways, and other times we are building community infrastructure, such as recreation centres or public transit. We work very closely with provinces. Virtually all of our programs are joint with the provinces because we are either building provincial infrastructure or municipal infrastructure. We are not building federal infrastructure with these programs. That is important to note.

We are very much a partnership organization. Unless we have a provincial partner or a municipal partner, we cannot function. Our relationships are very important to us.

Senator Di Nino: On the P3s, do you work with a combination of provincial, municipal and private, or can it be just private?

Mr. Sarantakis: The P3 office is not yet functional, so I cannot speak to the details, but it would be very difficult for the P3 office to focus only on the private sector and not work with provinces and municipalities. I expect that they will continue to work closely with provinces and municipalities.

Senator Di Nino: Is it correct that all of these would be reflected in the framework agreements that you sign for each program and funding initiative?

Have you signed these framework agreements with all the provinces at this point?

Mr. Sarantakis: We have agreements with almost all the provinces. We are in the final throes of our discussions with Ontario, Quebec, Manitoba and Alberta. We have nine of thirteen, and three of the other four are coming relatively soon.

Senator Di Nino: Finally, I suspect that there are, from time to time, joint funding programs with the provinces and the municipalities. Obviously P3 is a special type of relationship. Would you undertake some of these where there would be contributions from two or three levels of governments?

Mr. Sarantakis: Absolutely; the programs can be roughly categorized into the two streams: community infrastructure and major or strategic infrastructure.

On the community side, the Infrastructure Canada Program, the Municipal Rural Infrastructure Fund and the Communities Component are all formally cost-shared with one third of the contributions from each of the municipality, the province and the federal government.

Senator Di Nino: On page 24, we see $33 billion under Building Canada. Would any of these programs be joint with other jurisdiction? If so, this must be only the federal component. Would you know what the other jurisdictions contribute in addition to that $33 billion?

Mr. Sarantakis: We estimate that the $33 billion will generate at least $55 billion in total infrastructure. It could go as high as $100 billion, depending on what projects are selected over the next seven years. It will make a substantial contribution to the improvement of Canada's public infrastructure stock.

The Chair: To which minister do you report?

Mr. Sarantakis: We all report to Minister Cannon.

The Chair: The Minister of Transport.

Mr. Sarantakis: He is the Minister of Transport, Infrastructure and Communities.

The Chair: Is there a secretary of state that is particularly responsible for infrastructure?

Mr. Sarantakis: No, there is not.


Senator Chaput: Thank you, Mr. Chair. Mr. Sarantakis, you have already answered my question. But I have a follow-up to Senator Di Nino's question. It has to do with the relationships that you have with regional organizations.

As I understand it, when programs are developed and implemented, it is someone's responsibility to inform those organizations or partners. Who has that responsibility? In some cases, it would be you, and I assume that, in other cases, it would be someone else.

Earlier, you used the example of a supermarket where a range of products would be available. But with all these programs, who represents the supermarket?

In other words, if someone needs help, do they talk to you and do you direct them?

Mr. Sarantakis: As I said, that depends on the program and the project. However, I can say that we work very closely with our counterparts and our colleagues in other departments at all levels, whether they be ministers, deputy ministers or other senior managers. It may sound involved, but we speak to our counterparts every day.

If you have a specific question on a project, I can give you an answer, but talking in generalities is more difficult.

Senator Chaput: But you could direct someone to the right place if they had some project application from a region. You could direct them to another program?

Mr. Sarantakis: Absolutely.

Senator Dawson: In a situation with two successive minority governments, like in Quebec, where negotiations seem difficult, and where projects are announced but never implemented, how do you manage with a two-level program? In a minority situation, you try to reduce negotiations to a minimum. You must surely have been negotiating with the Government of Quebec for a year or a year and a half. They had an election and were re-elected. At federal level, we could have an election any week and there is no agreement. In your world, how do you go about reducing those delays to a minimum?

I have the greatest respect for politicians, whatever side they are on and whether they are provincial or federal; but commitments made by a previous government, even signed ones, are not always honoured. What do you do to cut down the delays in negotiations?

Mr. Sarantakis: Negotiations are always difficult, but elections are something we cannot control. If elections are held, the negotiations are interrupted, but we keep talking with our Quebec counterparts in order to bring the agreement between the two levels closer to a conclusion.

Senator Dawson: Do you know when it will be settled?

Mr. Sarantakis: Normally, we do not talk about negotiations during the negotiations, because it is not really fair for the two partners.


Senator Stratton: While the questioning has been going on, I have been reading through this publication that you gave us, Building Canada: Modern Infrastructure for a Strong Canada. It is rather fascinating. It would be important for all of us to read this to gain a better sense of where we should go.

I would like to talk about the P3 issue. In Manitoba, people are coming forward on a constant basis. I have one project in mind.

The Chair: Are you looking at page 26 of the document?

Senator Stratton: Page 26, yes.

I know this P3 office is evolving. Part of the problem is to arrive at definitions of what constitutes P3s. The first P3, and it is a fascinating description, is the Confederation Bridge. Senators should remember that. That was the Mulroney government, and it was a public-private partnership. This is not a question so much as a statement to our senators and me that this is important for us to read. I will quote from Building Canada: Modern Infrastructure for a Strong Canada:

. . . western jurisdictions such as the United Kingdom or Australia, Canada generally lags behind in the use of P3s. In fact, Canadian pension funds are often investing in public infrastructure projects in other countries as a result of a lack of P3 opportunities to be found within Canada.

I found that last fact very interesting. We should read through this to gain a better understanding of where we should go. I would like to follow up and try to find out what the status is of the P3 project. Can you give us information as to where that is at right now?

Mr. Sarantakis: It has been incorporated. It is called PPP Canada Inc. and, I believe, has been registered under the Canada Business Corporations Act on the Industry Canada's website. Beyond that, I do not really know, because, as I said, it is the responsibility of Finance Canada. However, we would expect that the office will be up and running relatively shortly.

Senator Stratton: Thank you. I know people are lining up.

The Chair: Who is the president of the P3 corporation?

Mr. Sarantakis: I do not think a president has been appointed yet.

The Chair: Do you know who is anticipated to be president?

Mr. Sarantakis: I have no speculation.

The Chair: I assumed it would be one of the ministers as president of that company.

Mr. Sarantakis: No, Crown corporations do not have ministers as presidents.

The Chair: Would this be a separate appointment process by the appointment commissioner who has not yet been appointed?

Mr. Sarantakis: All Crown corporations, as you know, report to Parliament through ministers, but ministers are not the presidents.

The Chair: Thank you. I was anticipating this would be a little closer to government. My colleagues clearly recognize that it would not be.

Senator Murray: In response to Senator Di Nino, Mr. Sarantakis reported that we are still in negotiations, albeit final phases, with Ontario, Quebec, Manitoba and Alberta. I observe there a fair chunk of the country with unsigned framework agreements, which is really the first step in this process.

Let us talk for a moment about the provinces with which framework agreements have been signed: British Columbia, November 7, 2007; Nova Scotia, November 9; New Brunswick, December 7; Newfoundland and Labrador, December 7; and I am told Nunavut and the Northwest Territories signed in February 2008.

I want to give you an opportunity to respond to and to bring us up to date on information contained in a periodical called Forum, Canada's national municipal affairs magazine. Some of this information may have been overtaken by events. You can tell us if that is the case because the edition of the periodical was for March-April.

We will start with British Columbia, where Saanich Mayor Frank Leonard, is quoted as saying that while they are ready and hopeful about what this will produce, municipal leaders are still waiting for the funds to flow nearly five months after the Campbell government signed its framework agreement. Leonard said that he still has not had any correspondence from the Building Canada Fund or any Building Canada application forms.

I would also like to know where we stand with the following signed agreements: Nova Scotia, November 9; New Brunswick, December 7; Newfoundland and Labrador, December 17; Nunavut and Northwest Territories, February 2008. Has the money started to flow? Have applications been received and accepted? What is the status of the framework agreements and the follow-up to them in those jurisdictions?

Jocelyne St. Jean, Director General, Intergovernmental Operations, Program Operations Branch, Infrastructure Canada: British Columbia has a signed framework agreement. One of the conditions in the framework agreement for us to flow the money for the Community Component is for them to have spent all of their Municipal Rural Infrastructure Fund money. They just finished awarding 58 projects early in the year and that is flowing through. That was part of some of the top-up money, which is part of the Building Canada Fund money.

From there, we are working on a memorandum of understanding on how to deal with the next application-based program, which is the Community Component. We met with them last week and will be finalizing that in the next few weeks. They will be identifying where they want to go for another call for applications to all the communities.

Senator Murray: Who are "they"?

Ms. St. Jean: The Province of British Columbia, with our partners, Western Economic Diversification Canada. That will be happening in the next few months as they get ready.

The provinces also identify which of their priorities they want to identify as their highest priority in the categories for the applications. The Building Canada Fund has 17 categories. A province may decide that they want to target maybe five of those categories. For example, water or waste water might be most important for their communities, which they would then address. That is what British Columbia is doing.

For Nova Scotia, that was signed, and actually right before Christmas they did go for a call for applications for the Community Component. They received all their applications by mid-February and are now in the process of assessing the applications. In the next few months, they will probably identify which of those projects will go forward.

Senator Murray: Are you speaking of the Government of Nova Scotia when you say, "they"?

Ms. St. Jean: A joint secretariat is put together; the province and our partners, who deliver for us, look through the applications to ensure that they meet all of the criteria for eligibility and that they meet the needs of that community and the targets that they have identified. That is what Nova Scotia is doing through the joint secretariat at this time. They should be announcing some projects in the near future. They did receive quite a number of projects in that intake.

In most of these projects, how the money flows is that the provinces, with our federal delivery partner, will identify how many intakes they want to do so that they can manage those projects over time. If they get 300 project applications, but there is only money for 150, for example, they want to know how they will manage that. Often they want a target so that they will get a manageable number, and they will go through all the categories over the period of that program.

Those are the two that are most advanced. As far as New Brunswick is concerned, we have been talking to them, and they are thinking of doing their intake pretty soon. We are talking with all of the other provinces that have signed framework agreements too, and working on their memorandums of understanding with the federal delivery partners and the contribution agreements we need to have with those provinces.

Therefore, it is progressing, and they should see the funds flowing in this fiscal year.

Senator Murray: I will put this a little crudely, perhaps, but do I understand correctly that if there are hold-ups, they are not at your end?

Ms. St. Jean: There is a process to go through in identifying how the money will flow, and that is always the case with that intake process. We are trying to not have any hold-ups at our end, and they are trying at their ends too. However, it is a massive endeavour when we do go for an intake process.

Senator Murray: Why does a municipality — or is it a province — have to exhaust its supply of funds under the Municipal Rural Infrastructure Fund before it can qualify for money under Building Canada?

Mr. Sarantakis: That is not exactly right. The criteria or the provision is that the province has to have finished their Municipal Rural Infrastructure Fund intake before they launch their Building Canada intake so that we do not have two competing calls at the same time. It is basically to finish one program before we start the next program. Some of the provinces finished the Municipal Rural Infrastructure Fund quickly and others took three, four or five years.

Senator Murray: They are not necessarily overlapping in all cases, are they?

Mr. Sarantakis: No, MIRF is finished everywhere except for one province.

Senator Murray: In terms of the communities that would be eligible, there must be communities or are you simply dealing on a province-wide basis?

Mr. Sarantakis: We deal on a province level not on a community level.

Senator Murray: It does not make much sense, although I should not be arguing that with you. I do not understand why that should be a condition of applying or obtaining funds from Building Canada.

Mr. Sarantakis: It is not a condition on the municipalities. If the MRIF program is still accepting applications in a given province, we do not want to start the Building Canada Fund program because then we would have the same municipalities.

Senator Murray: Maybe in some cases, but there would be different municipalities perhaps.

Mr. Sarantakis: It is a moot point because the MRIF program is essentially finished everywhere except, I believe, two provinces. The Building Canada Fund is now operational everywhere else.

Senator Murray: The statement here, in this magazine about British Columbia, still holds. The money really has not started to flow.

Ms. St. Jean: The Province of British Columbia has not called an intake yet for the Community Component of the Building Canada Fund. That would mean they have not called for applications of all the different municipalities to apply for this.

Senator Murray: This man in Saanich has a slightly different take on this, but I will not detain you with it.

There is one other matter and Ms. St. Jean has alluded to it, talking about priorities and so on, and so has Mr. Sarantakis. I will come back to a comment you made, Mr. Sarantakis, talking about the coordinating committees.

You drew a distinction between "substantive" issues and "geographic" issues. Substantive issues, in your telling, would be the province of Transport Canada, let us say; geographic issues would be the province of, let us say, ACOA. Would you explain the distinction that you are making there?

Let me put it all on the table at once, and I will try to end on this. I made the point when ACOA was here a week ago that there is only one federal agency that has a mandate to oversee, and a responsibility for, from a federal point of view, the economic development in Atlantic Canada. I would have thought that their role in these types of programs that we are talking about would be more than "geographic," just that they are there on the ground. However, substantively they would have a great deal to say about what the priorities are and where they are and when and how they should be pursued.

Would you like to come back to that distinction you were making between substantive and geographic issues?

Mr. Sarantakis: Every project, in a way, is obviously based in a given place, somewhere in Canada, and it is a given thing, whether it is a water project, a waste water project or a community centre. The distinction I was making was that if it is a water project in New Brunswick, for example, we would tend to want to speak with Environment Canada on the substantive side and ACOA on the geographic side to ensure that both representations, or both interests, are known to us before we make the decision whether to go forward. Similarly, if it is a public transit project in Alberta, we would want to speak to Transport Canada on the substantive side and to Western Economic Diversification on the geographic side.

Just because ACOA operates in Atlantic Canada does not mean that Canadian Heritage or Transport Canada or other departments do not work in Atlantic Canada. We want to have both of those representations before we make an investment decision.

Senator Murray: Perhaps it is a matter of semantics and vocabulary, but I do not think I am too encouraged by that response.

The Chair: I thank the witnesses. I am sorry we have to bring this panel to a close. We could ask questions for some time, but we have another group following. Western Economic Diversification Canada will provide us with a balance of Central Canada and the West.

Mr. Sarantakis, Mr. Cluff, and Ms. St. Jean, thank you all very much. We look forward to receiving your additional material.

We are pleased to now have with us representatives from Western Economic Diversification Canada. First, I would like to thank you very much, Ms. Kapitany and Mr. Saunderson, for appearing today. We appreciate your understanding. We were getting a basic background from Infrastructure Canada. You had a chance to hear some of the questions. If either of you have introductory remarks, please proceed with them, and then we will move to a discussion.

Marilyn Kapitany, Assistant Deputy Minister, Manitoba Region, Western Economic Diversification Canada: Thank you. I am pleased to be here this morning with my colleague Mr. Jim Saunderson, Director General, Corporate Finance and Programs, from our headquarters in Edmonton.

We welcome this opportunity to update you on Western Economic Diversification Canada, WD, and to highlight how our department is enhancing the economic strength of Canada's Western provinces, including the role we play in delivering infrastructure programs. Our colleagues have spoken about service delivery partners; in the West, we are the service delivery partner with Infrastructure Canada.

WD exists to develop and diversify the western economy and to represent the interests of the West in national decision making.

As you know, WD's Main Estimates for 2008-09 were $269.3 million. About half of that is what we consider our core grants and contributions; about 30 per cent is for specific grants and contribution programs such as infrastructure, and the remaining 20 per cent is for operating expenses in our department.

In 2006, we consulted stakeholders widely to determine how WD could best serve the West. The result is a new vision that returns WD to the economic core of its mandate, supporting initiatives that have a significant impact on long-term economic growth and competitiveness.


Our vision — to be leaders in creating a diversified western Canadian economy that has strong, competitive and innovative businesses and communities — is solidly aligned with the principles of Advantage Canada.

Our department has three strategic outcomes and all of our work contributes to at least one of them. Our first strategic outcome is to develop policies and programs that support the development of Western Canada. Our second strategic outcome is to establish economically viable communities in Western Canada with a high quality of life, or, in our shorthand, community economic development. Our third strategic outcome is to establish a competitive and expanded business sector in western Canada and a strengthened western Canadian innovation system, or, in our shorthand, entrepreneurship and innovation.


We provided you with copies of WD's publication Working with the West, which provides an overview of the work our department does and examples of projects we have funded using our core program funds to advance our strategic priorities, which I have just described to you. Most of what we consider our core funding is devoted to entrepreneurship and innovation and includes investment in research and development to expand the West's knowledge-based economy.

WD is also committed to strengthening business development and entrepreneurship by providing entrepreneurs across the West with increased access to training and funding programs.

Trade and investment is another area that has been growing in importance for WD over the past several years. We have worked diligently to strengthen international trade opportunities in the West and increase the global competitiveness of western businesses.

Another major focus for WD is community economic development. This includes a wide range of activities that diversify communities, promote value-added processing, create new employment opportunities and enhance Aboriginal participation in the economy. Under this rubric, WD continues the goal of strong and healthy communities by delivering the western portion of national infrastructure programs in collaboration with our colleagues at Infrastructure Canada.

Under older programs, such as the Infrastructure Canada Program, all the operating as well as the grants and contribution resources for the program are reflected directly in WD's estimates.

Under the newer programs, such as the Municipal Rural Infrastructure Fund and the Canada Strategic Infrastructure Fund, the grants and contribution resources are in Infrastructure Canada's estimates. Our colleagues explained why there was this shift in where the resources appear in the estimates.

The latter model, where the funding will reside with Infrastructure Canada, will also be the case with the new Building Canada Fund. Our portion in that is the Communities Component of the Building Canada Fund.

At the same time, under this model, the government continues to benefit from WD's on-the-ground presence in the West and our understanding of the various provinces in which we work. When we are asked to deliver a program such as infrastructure, we seek the operating resources to assure that we can deliver the program properly.

Although the mechanism for flowing the funds has changed, our role in conducting the due diligence around the projects, environmental assessments and making payments is essentially the same as it has always been.

It is also important to note under this new model that each province's infrastructure program continues to be governed by a federal-provincial agreement, and the allocations are determined by a formula that is largely population-driven.

Across all of our programs and activities, WD has implemented strong accountability measures to ensure that the real results for Canadian taxpayers are realized according to how the program was designed.

Under our well-respected due diligence process, every proposed project is rigorously reviewed and assessed prior to funding to ensure its viability, its potential to contribute to one of WD's strategic outcomes and its impact on the long-term economic growth and competitiveness of the West.

The Chair: Thank you very much. Just to confirm, you indicated at page 3 of your presentation that 30 per cent of the funds administered through Western Economic Diversification go to infrastructure projects.

Ms. Kapitany: It is approximately 30 per cent.

The Chair: Will that go up or down as a result of the Building Canada plan?

Ms. Kapitany: The Communities Component of the Building Canada Fund is the part that WD will be delivering in the West.

The Chair: Will you be participating in the application and selection process?

Ms. Kapitany: Yes, we have secretariats across the four western provinces, some that are virtual and some that are physical.

In Manitoba, we have a joint federal-provincial secretariat. The applications go out generally on the web; it is a web-based process. The communities and municipalities will apply, and then the joint secretariat assesses whether or not the applications are eligible under the criteria of the program.

If they are eligible applications, then there is a system for determining where the priorities should lie in terms of which projects are funded. That is based on the eligible categories, as described by Infrastructure Canada. Then there is a process where representatives of communities will give some advice to ensure that there is geographic dispersion and to look at the biggest priority areas. That is basically how the process works.


Senator Chaput: A very special welcome to Ms. Kapitany from one Manitoban to another. At the outset, I thank WD for paying particular attention to French-language services in francophone communities in Western Canada. It is most appreciated and I thank you both.

I am interested in the relationship between WD and the office of Infrastructure Canada. In the Infrastructure Canada Program, have the criteria changed? Does the Economic Partnership Agreement still exist? In Manitoba, I was told that no funds would be made available under this agreement until September 2008. That may cause difficulties.

Ms. Kapitany: First, the criteria have changed since the new program. Most programs have to do with water. Seventeen project categories will ensure that communities' needs are considered. Second, the programs help to develop the infrastructure in the Western provinces.

Last April 25, our minister, together with the other Western provincial ministers, announced a new program under the Western Economic Partnership Agreement. This is not a partnership with the Infrastructures Canada program, but a partnership of WD and the four Western provinces. This is a new program that has recently been launched with a view to improving and diversifying the western economy.

Senator Chaput: The program has just now been announced. I understand perfectly. Thank you.


Senator Stratton: I would like to go to the document that you have submitted, Working with the West. On page 18, it gives a breakdown for Municipal Rural Infrastructure Fund projects in the West. If everyone looks at that, you will see quite a diverse allocation of funds for provinces in the West, with one exception. Water and waste water seem to predominate in the three provinces, with Alberta lagging behind. This is not to say that it is lagging, but it is the lesser of the four.

Could you give me an idea of the water and waste-water projects that you have under your jurisdiction? What are the projects that you fund?

Ms. Kapitany: Those could be largely the water-treatment plants. I mentioned priorities, and boil-water orders would be one. There were boil-water orders in the Western provinces, and those were very high priority in terms of ensuring a safe and secure supply of water. Water-treatment plants to that take care of those issues and water-delivery systems would be the vast majority of the projects. That would include water and waste water: ensuring there is clean water and that waste water is properly handled so that there is no pollution or contamination.

Senator Stratton: Would those projects be primarily in smaller centres and municipalities rather than the large cities?

Ms. Kapitany: Yes, that is correct. In particular, under the most recent Municipal Rural Infrastructure Fund program, I believe 80 per cent of the funds were allocated to communities of less than 250,000 people. Most of those dollars would have gone to smaller centres. Previously, there were water and waste-water projects done in larger centres.

Senator Stratton: Such as in Brandon, Manitoba.

Ms. Kapitany: Brandon would be considered a smaller centre, so there could have been projects done in Brandon.

Senator Stratton: I think there was a project done in Brandon.

In the chart on page 18, under Manitoba, there are eight categories of different projects listed, the last one being a little black pie segment called "other." In the three other provinces those are virtually nonexistent. In Manitoba, it is a significant part of the pie.

What is that black portion? Can you give us any idea?

Ms. Kapitany: We did some broadband work in Manitoba because many communities in Northern Manitoba were not connected to the Internet. It was a fairly large broadband project.

Senator Ringuette: To follow up on Senator Murray's statement in regard to British Columbia, are you sitting at the table when framework agreements are signed with the provinces?

Ms. Kapitany: No, we are not. Infrastructure Canada largely does the negotiation of the framework agreements with the provinces. I do not believe my colleagues in British Columbia were at the table. They did have draft copies of the agreements and were able to give comments, but I do not believe they were at the table when the framework agreement was signed.

Senator Ringuette: The article quoted earlier indicates that there is still no money flowing from that framework agreement in British Columbia. What are your comments?

Ms. Kapitany: As Infrastructure Canada described, in order for dollars to flow, there must be a process where applications are received from the municipalities. We then do our first round of due diligence to ensure that they are eligible applications and look at where the dollars would exactly flow in terms of which would be the highest priority projects. In British Columbia, the process of going out and asking the municipalities to submit applications has not yet been done.

My understanding is that it is quite close to being done, but it has not happened yet. Once the applications come in, then the project approval process can get under way and the dollars can flow.

Senator Ringuette: Are some of your human resources part of the joint secretariat that has been mentioned in regard to the federal-provincial-municipal relationship? You are the delivery agent. Are you always at the joint meetings? Are you always part of the joint secretariat?

Ms. Kapitany: The secretariats take a different form across the West. Some are virtual secretariats. In British Columbia, it is a bit more difficult because the provincial government is centred in Victoria and our WD office is in Vancouver. Because of the way communications works now, with the Internet and with phone systems being so reliable, it is a virtual secretariat there, whereas in Manitoba they are sitting together in the same location.

Under the Municipal Rural Infrastructure Fund program, WD was a direct member of the management committee. The secretariat would look at the applications, and there would be municipal involvement in how projects would be prioritized. They would be brought to the secretariat, to a management committee meeting for recommendation and then jointly, federally and provincially, we look at whether it was a project we would want to recommend. If it was, we would then recommend it to our minister in WD, they would recommend it to the ministers in the province, and it would be the ministers who would make the final decision.

Senator Ringuette: To which minister are you referring?

Ms. Kapitany: In our case, it is Minister Ambrose.

Senator Ringuette: Is that even in the case of an infrastructure program that is under the responsibilities of Minister Cannon?

Ms. Kapitany: Yes, for the Municipal Rural Infrastructure Fund program, Minister Ambrose, the WD minister, had the accountability and the delegated authority to decide on the projects.

Senator Ringuette: What about the other infrastructure programs?

Ms. Kapitany: Under the Canada Strategic Infrastructure Fund, it was basically Infrastructure Canada that made those decisions. Under the Building Canada Fund, there will be some joint accountability there. Minister Cannon has the money in his reference level, so he is the final level of accountability for those dollars. We are working on the details now, but there is a delegation of responsibility to our department, to Minister Ambrose, for some of the funds. For some of the larger projects, Minister Cannon will be the final approving authority for those.

Senator Ringuette: What is the current status of framework discussion for infrastructure with Alberta and Manitoba?

Ms. Kapitany: With Alberta, I believe they are close to reaching an agreement. Alberta had an election, during which all the negotiating must stop. New people then come in, so it takes a while for them to get their feet on the ground and get ready to go again. In Manitoba, the negotiations are ongoing. We are hoping there will be a framework agreement relatively soon.

Senator Ringuette: In all the different funds that you have at your disposal to help in infrastructure, have any of these funds been applied directly or indirectly to the energy sector in Alberta or Saskatchewan?

Ms. Kapitany: With an economic development project, there might be infrastructure needs that would underpin the success of that project. There may have been some to do with water or waste water. We could check and get back to you on that. I am not positive about that.

Senator Ringuette: Through the secretariat, if you could please, let us know if there is any money that was directly or indirectly allotted to the energy sector.

The graphs on page 18 of your document show that Alberta has made substantial investment in roads in comparison to the other three provinces. Therefore, would these roads be leading to energy development, mining, and so on, to help out with those investments that maybe should have gone to water and waste water?

Mr. Saunderson: We will follow up. I am not aware of any investments that had been directly related.

Senator Ringuette: I am interested in those indirectly related as well.

Mr. Saunderson: Alberta has been experiencing a lot of growth; Fort McMurray, in particular. The requirement for roads and sewers to meet those needs has been driving a lot of infrastructure demand in Alberta. Indirectly, obviously that contributes to the energy economy as well as other parts of the economy.

Senator Ringuette: If you can provide us with that data through the clerk, we will look through it.

What is your role in the Asia Pacific Gateway project?

Ms. Kapitany: WD has been quite involved with the Asia Pacific Gateway not only as it affects British Columbia but also as it affects all the way across the West. It would be a gateway that would impact all the Western provinces. We have been very involved in working with Transport Canada on looking at how the gateway should develop in the best way and with the Asia Pacific Foundation of Canada in terms of looking at the priorities and assessing how best to develop that infrastructure. We have also been involved directly in some parts of the project itself.

Mr. Saunderson: The single biggest involvement that we had was a grant that was made in the 2006-07 fiscal year to the Prince Rupert Port Authority. That grant went toward a larger project to establish Prince Rupert as a container port. We have seen the beginnings of success on that with the first container ships arriving and being unloaded in Western Canada.

We are trying to work with the province of Alberta with the idea, for example, of a port Alberta to add some value to those containers as they go across Western Canada and leverage that initial success at Prince Rupert into something that is longer lasting.

Senator Ringuette: I am very interested in what is happening there because I think it is good for Western Canada.

When you say " add some value" to the containers, what do you mean?

Mr. Saunderson: The advantage of Prince Rupert is that it is two days closer to China by sailing than southern ports, such as Seattle or Los Angeles, for example. Most of the containers are off-loaded and then shipped by rail through to Chicago and to the United States. If we can get some of these containers that may contain partly finished goods to stop along the way and be finished or have some value added in Western Canada, then there is a much greater benefit to the West than simply shipping them through on the rail line.

Senator Ringuette: However, they would have to have more than 50 per cent of Canadian content in order to be eligible under NAFTA for the duty part.

Mr. Saunderson: There are some issues, yes.

Senator Dawson: Following the question about logic — and, NAFTA is an example of what we are not allowed to do while the containers are coming into Prince Rupert — I am a big fan of what you did in Prince Rupert; it is a success story to be studied.

However, we are not always consistent because Transport Canada now has legislation going through where ports will be permitted to borrow only if they make $25 million or more in business a year. Prince Rupert is not there yet, and will be told that they are not allowed to borrow because they are not making enough money even though we know that it is inevitable, with their phenomenal growth, that they will in the future.

You have a chapter on policy advocacy and coordination ensuring federal policies and programs meet the needs of Western Canada and coordinating programs between departments of governments. Some logic does not make sense, for example NAFTA, taxation issues and other issues such as availability of funding for other programs that are not necessarily under your purview.

How do you assure that, above and beyond money, logic and policy is always respected?

Second, on the same issue as inland terminals, we can look at added value at the start. We already know that most of the containers coming into Prince Rupert are going to Chicago or Houston. However, thousands of containers are coming back empty when we have grain, canola and other stock in the West, and they are looking for an opportunity to send it back. It costs less to send it in an empty container than to buy one to put it in.

Instead of looking at the empty container pass by, there should be an inland terminal where the empty containers are put aside, filled with an export-driven product and put on ships leaving for China anyway. They are looking for a lot of our commodities. In specialized grain exports, they do not want mixed grain; they want grain that comes from a certain district or province.

How does Industry Canada, Agriculture and Agri-Food Canada and your agency coordinate when you sit down at the table together to insure that we get the maximum efficiency on, for example, the containers going back to Asia?

Ms. Kapitany: There are numerous tables. For example, we have an assistant deputy minister here in Ottawa who is the ADM liaison. I was in that position for four and a half months, so I am familiar with it.

Amongst a number of ADM committees is a gateways and corridors committee of which we are a member, where we talk about what the priorities are for the West. We bring the West's view forward. We talk about how factors in various parts of the West can contribute to the betterment of the Canadian economy. Our deputy minister does the same with colleagues at her level, and the same is true at the ministerial level bringing those issues forward to her cabinet colleagues.

Often our opinions are taken into consideration and, sometimes due to other government priorities, they are not. That is the way a democracy works. However, we definitely send those messages forward.

On the issue of back haul, I agree with you completely. Work is being done with Transport Canada and discussions are being had about how to make better use of those containers to add value to the economy and to ensure every possible opportunity is considered.

We are also looking at inland ports and how container facilities in the four Western provinces can contribute. Traffic from the Pacific Gateway in and also the corridors from the Western provinces going down into the U.S. and the Americas, as well as out to the East Coast of Canada needs to be considered.

We are trying to look at it from a perspective of the whole of Canada and the West's role in building the Canadian economy. However, we get our message out at every possible opportunity along the way.

Senator Di Nino: I was impressed with the presentation and all the information you have given us. It appears from the information that you have provided that the WD mandate is meeting the objective of long-term economic growth and competitiveness. I congratulate you on that.

I have a clarification. On page 5 of your document, you make an impressive statement. You say that last year every dollar Western Economic Diversification Canada invested in innovation attracted $2.88 million from other sources. That is impressive. Am I reading it correctly?

Mr. Saunderson: You are reading it correctly. However, we made a mistake. I wish it was that good. Take the million off and for every dollar we invest, we lever $2.88. It is a little more modest, but accurate.

Senator Di Nino: A three-to-one ratio is still a great success anyway. Obviously, I was not trying to embarrass you, but I am glad you gave us that clarification. My opening comments are not detracted by that error. This is a great success.

The Chair: Senator Di Nino just received this document. Are there any other errors or omissions that you would like to bring to our attention?

On page 16 in the upper right column, it says that you are involved in the two-year Community Economic Diversification Initiative. Was this not part of the $1-billion project from the community economic diversification funds of the recently passed Bill C-41 or is this separate from that?

Mr. Saunderson: This one is separate. It is part of the government's larger response to the mountain pine beetle infestation happening in the interior of British Columbia now. Approximately $33 million of that larger package was set aside for a community economic development initiative.

We are in the process of doing our due diligence on about 180 applications from smaller communities in the interior of B.C. that we will be approving soon. I think announcements have already started on projects that will assist those communities largely dependent on the forests to plan and adjust to move to other forms of economic development.

The Chair: Are you aware of whether any other funds have been flowing to your region from the $1-billion community economic diversification initiative reflected in Bill C-41 that was passed in the last few months?

Mr. Saunderson: Are these the community trust funds?

The Chair: Yes.

Ms. Kapitany: Yes, they have. The money has been distributed to the provinces and the provinces are determining the best way to make that sectoral adjustment happen.

The Chair: Therefore, the trust agreements have been signed and everything is in place.

Ms. Kapitany: Those are handled by the Department of Finance Canada, but I believe they have.

The Chair: Could you double check that for us and if it turns out to be otherwise, let us know? We were under the impression that things were not flowing.

Senator Ringuette: For many years, you have had the community development programs specifically targeting communities affected by the forest industry and loss of jobs. Is that program still on?

Mr. Saunderson: There was an earlier program, the Community Economic Adjustment Initiative was intended to assist communities impacted by the tariffs the Americans had put on softwood lumber exports. All the money has been spent and the projects are in place on that program. Since then, there was some resolution of the tariffs on the softwood lumber.

Unfortunately, we have the new problem with the pine beetle infestation affecting basically the same communities in the interior of B.C. These are two different programs following sequentially that are similar in many ways because they affect the same communities and the same industry. However, they address different issues.

Senator Ringuette: Do you still have the program for the communities affected by the pine beetle?

Mr. Saunderson: That is right. Our portion of that $33 million is intended to assist the communities impacted by the pine beetle.

Senator Ringuette: That $33 million is not part of the community investment program of $1 billion.

Mr. Saunderson: No, it is over and above that amount.

Senator Ringuette: Mr. Chair, I would like to highlight two things: First, there was the program for the communities affected by the forestry sector. None of that money flowed for the Atlantic provinces. No additional money for reforestation, in the same venue as the pine beetle, has been directed to the Atlantic provinces.

However, in regard to the $1 billion, it is distributed on a per capita basis. By the way, I think you are doing a great job. Actually, you are doing too great a job; we would like to move you to Atlantic Canada. However, my comments are in regard to the fair distribution of economic development funds. As an Atlantic Canadian, I truly believe that we have not been receiving and are still not receiving the fair share of economic development funds that we should have.

The Chair: I am not anticipating that you would have any answer to that. However, we are fortunate that tomorrow evening we will have the economic development agencies from Quebec, Northern Ontario and the North. We had ACOA previously and now Western Economic Diversification Canada here today.

Ms. Kapitany and Mr. Saunderson, we appreciate your comments and the answers you have given. We will look forward to receiving the undertakings. This book will be helpful to us. Congratulations on the work that you are doing for Western Canada. This meeting is concluded. We will meet tomorrow afternoon at 6:15 p.m.

The committee adjourned.

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