Proceedings of the Standing Senate Committee on
Aboriginal Peoples
Issue 10 - Evidence - November 25, 2014
OTTAWA, Tuesday, November 25, 2014
The Standing Senate Committee on Aboriginal Peoples met this day at 9:31 a.m. to study challenges relating to First Nations infrastructure on reserves.
[Translation]
Marcy Zlotnick, Clerk of the Committee: Honourable senators, as clerk of the committee, it is my duty to inform you of the unavoidable absence of the chair and deputy chair, and to preside over the election of an acting chair. I am ready to receive a motion to that effect.
[English]
Senator Raine: I move that Senator Tannas do take the chair.
Ms. Zlotnick: Are there any other nominations?
Senator Moore: I move that nominations cease.
Ms. Zlotnick: Seeing no others, it is moved by the Honourable Senator Greene Raine that the Honourable Senator Tannas do take the chair of this committee.
Is it your pleasure, honourable senators, to adopt the motion?
Hon. Senators: Agreed.
Ms. Zlotnick: I declare the motion carried and invite Senator Tannas to take the chair.
Senator Scott Tannas (Acting Chair) in the chair.
The Acting Chair: I would like to welcome all honourable senators and members of the public who are watching this meeting of the Standing Senate Committee on Aboriginal Peoples, either here in the room or via CPAC or the Web. I'm Scott Tannas, a senator from Alberta, and today I have the privilege of chairing the Standing Senate Committee on Aboriginal Peoples.
The mandate of this committee is to examine legislation and matters relating to the Aboriginal peoples of Canada generally. This morning we are hearing testimony on a specific order of reference authorizing us to examine and report on the challenges and potential solutions relating to infrastructure on reserves, including housing, community infrastructure, and innovative opportunities for financing and more effective collaborative strategies.
We have completed our hearings on housing and are now focusing our study on infrastructure. Today we will hear from two panels, the first on public-private partnerships for infrastructure. The second panel will focus on issues faced by regional organizations in supplying infrastructure.
Before proceeding to the testimony, I would like to go around the table and ask members of the committee to introduce themselves.
Senator Moore: Good morning everybody. I am Wilfred Moore from Nova Scotia.
Senator Lovelace Nicholas: Senator Lovelace from New Brunswick.
Senator Watt: Charlie Watt from Nunavik.
Senator Sibbeston: Nick Sibbeston from the Northwest Territories.
Senator Wallace: John Wallace from New Brunswick.
Senator Beyak: Senator Lynn Beyak from Ontario.
Senator Raine: I'm Nancy Greene Raine from B.C.
The Acting Chair: Members of committee, help me in welcoming our first panel on public-private partnerships. From the Canadian Council for Public-Private Partnerships, we have Mark Romoff, President and CEO. With him at the table is Dale Booth, President of Tiree Innovation Inc. We look forward to your presentation. It will be followed by questions from the senators. I understand Mr. Romoff will go first.
Mark Romoff, President and CEO, Canadian Council for Public-Private Partnerships: Good morning and thank you, Mr. Chair, the clerk, members of the committee and staff, for the invitation to appear this morning before the Standing Senate Committee on Aboriginal Peoples.
Though government and First Nations may not agree on the exact dollar figure that constitutes the infrastructure deficit on reserve, neither side disputes that it exists and we know that it runs in the billions of dollars. We know the need to build new infrastructure and repair existing assets covers a number of sectors including water, waste water, schools, housing, policing stations, health facilities, roads, bridges, energy, broadband connectivity and so on.
It is timely that this committee is studying such an important topic that is top of mind for so many Canadians, but even more pronounced on reserve. Finding new ways of delivering infrastructure and breaking down current barriers that exist will be necessary to build strong, healthy First Nation communities.
As many of you are aware, there is no magic bullet solution. Rather, it will take a series of tools and investments over a significant amount of time to bring infrastructure on reserve up to a standard we can all be proud of.
I am here today to tell you that public-private partnerships, or P3s as we refer to them in Canada, is one tool that governments can use in reducing the infrastructure deficit on reserve. Evidence has shown that when used appropriately, the P3 approach can bring world-class infrastructure to communities while delivering projects on time and on budget, at less cost and with less risk than projects procured in the traditional way.
We know that governments do not have the capacity to finance many of the projects needed without going deep into deficit. P3s can play a role by putting the onus on the private sector to finance projects, while government pays the private sector back over time as milestones are reached. Quite simply, P3s allow governments to build infrastructure today that may not get built otherwise due to fiscal realities.
We also know that the quality of new infrastructure on reserve often falls below off-reserve quality because there are no legislative standards. P3s again can help because they build quality and maintenance standards into the contract and penalties exist for not meeting those benchmarks. In short, payments from government can be withheld if quality infrastructure is not delivered. The risk is shifted to the private sector.
We know that construction projects are often delivered late or have cost overruns. On reserve, this can be pronounced because of short building seasons. Unlike the conventional design-bid-build approach, public-private partnerships integrate the design, construction, finance, maintenance and/or operation of the facility into one contract. This allows for better project management. As well, contracts incorporate penalties if the private sector is late in delivering infrastructure and also holds them responsible for cost overruns. For many of these reasons, we are seeing P3s used in the North with the Mackenzie Valley Fibre Link project, the Stanton Territorial Hospital project — two great projects in the Northwest Territories — the Government of Nunavut buildings, and the Iqaluit International Airport Improvement project. They're all using this model. This proves promising for First Nations in northern and remote communities.
Finally, we know that once infrastructure is built on reserve, it is difficult to maintain. It's no different than facilities off reserve. First Nations either have difficulty obtaining the funding necessary to contribute their share of the operations and maintenance, or the capacity does not exist at the community level to maintain the facilities. P3s put the burden on the private sector to maintain and in some cases operate the assets for the duration of the contract with service and hand-back standards in place.
The benefits of the P3 model in Canada are clear. We now have 220 P3 projects in operation, under construction or in procurement across the country and across a wide variety of sectors. The value of those projects that have today reached financial close exceeds $70 billion. This is big business in Canada.
These projects are delivering results. An independent 10-year economic impact assessment of P3s in Canada undertaken last year found that these projects have created over 290,000 direct jobs, over a half a million jobs when you include indirect and tertiary jobs created. These projects have contributed $25 billion to Canada's GDP, a direct contribution to GDP. They have led to $7.5 billion in tax revenues for the federal government and provinces, and they have produced $9.9 billion in savings to government versus traditional procurement.
Public opinion research has also shown that Canadians broadly support the use of P3s to build infrastructure and deliver public service. A recent national poll indicated that 62 per cent of those surveyed support the public-private partnership approach to infrastructure development. That support increases when citizens are aware of a P3 project in their community. The research also found that a majority of Canadians surveyed in communities with P3s believe that the project would never have been built had it not been for the public-private partnership approach.
However, adoption of the P3 model in First Nations communities has been slow. Up until recently, the correctional facility being built on the Osoyoos reserve was the only P3 project happening on reserve. Just recently, PPP Canada funded its very first project involving First Nations, which is the Kokish hydroelectric project involving the Namgis First Nation where PPP Canada will provide a loan to allow the First Nations to buy an equity stake in the project at a much lower borrowing rate than the markets would allow.
In the potential project pipeline, we know that the Atlantic Policy Congress is leading an initiative that would bundle water and waste water projects together and create a single water authority. This is a revolutionary initiative which I know you will hear more about from the following panel. As well, we know talks have been off and on regarding the potential building of schools in northern Manitoba.
We know the interest is there across the country, but some barriers exist. First and foremost is capacity. P3s take upfront due diligence that requires expertise and money. More training, adoption of best practices and access to legal, financial and technical advisers will be needed to equip First Nations with the tools they require to pursue P3s.
Second is access to capital. While P3s can solve part of the financing equation, First Nations need the tools to leverage long-term revenue streams the same way other levels of government do. P3 contracts tend to last between 25 to 35 years, far exceeding the average time frame of a First Nations funding agreement.
Third is bundling. P3s tend to be most successful in large, complex projects. Bundling of projects in the same sector but across communities or bundling multiple projects within the same community lend themselves to the P3 model. Bundling of projects means government must play a coordinating role.
Before concluding, Mr. Chair, I wish to take a moment to say a few words about the council. Established in 1993, the Canadian Council for Public-Private Partnerships is a national not-for-profit, member-based organization with broad representation from across the public and private sectors. Its mission is to promote innovative approaches to infrastructure development and public service delivery through public-private partnerships with all levels of government. The council is a proponent of evidence-based public policy in support of P3s, facilitates the adoption of international best practices, and educates stakeholders and communities on the economic and social benefits of public- private partnerships.
The council organizes an annual conference that is recognized internationally as the premier forum bringing together senior government and business leaders in the P3 community at which the most successful Canadian P3 projects are celebrated through our national awards for innovation and excellence.
As some of you may know, we held our twenty-second annual conference November 3 and 4 in Toronto. I was especially pleased that that program included a panel discussion on the opportunities for Aboriginal communities to use the P3 model to address their infrastructure challenges. The panel was moderated by Harold Calla, Executive Chair, First Nations Financial Management Board, and the panellists included: John Paul, who you know and is here today, Executive Director of the Atlantic Policy Congress; Garry Ullstrom, Senior Financial Officer of the Namgis First Nation; Jack Bittan, Senior Vice President, Business Development at Capstone Infrastructure; and Greg Smith, Vice-President, Finance, Risk and Administration, and Chief Financial Officer at PPP Canada.
In closing, I hope you will agree that public-private partnerships can certainly play a major role in reducing the infrastructure deficit on reserve. It is not a panacea, but our track record in Canada shows that P3s provide high- quality infrastructure on time, on budget and at less cost.
The Canadian Council for Public-Private Partnerships is keen to support the efforts of First Nation communities to address their infrastructure deficit and in turn foster economic development and greater prosperity for these communities.
I look forward to answering any questions you may have.
Dale Booth, President, Tiree Innovation Inc.: Good morning. I would like to thank the committee for the invitation this morning. I greatly appreciate the opportunity to talk about infrastructure in First Nations communities.
My name is Dale Booth. I'm a member of the Naotkamegwanning First Nation in northern Ontario, and I've been involved in public-private partnerships since 2005. I have seen over $2 billion of projects through the development of business cases and even through procurement. Some of my favourite projects so far, from what we have learned and what we have seen, are B.C. housing projects, the SRO initiative, seeing how the APC project is growing, and also learning from the Iqaluit airport project some of the approaches they're using in terms of building that project going forward.
It is a unique vantage point because I understand P3s and have been involved in the development of P3s, but I also understand and have been involved in working with First Nations for well over 20 years.
I look at P3s as an opportunity to do something in communities to bring a new way of doing infrastructure in those communities. To agree with Mark, it's not a panacea, but there are features within P3s and alternative service delivery that could benefit First Nations communities and the Canadian taxpayer at large.
The way that we examine P3 projects and the opportunity to do P3 projects is through the lens of risk, the lens of governance and the lens of what the market expects.
We have benefited greatly from lessons learned internationally and domestically. The Canadian P3 market is a market that international investors are looking to move to and invest in because of the success rates. The Canadian experience also provides a litany of lessons learned that we can look at and adapt and hopefully be able to use in First Nations communities going forward.
I want to thank you for giving us the opportunity to speak, and I look forward to your questions this morning.
Senator Raine: Thank you both very much for being here. I must say it's very encouraging to hear these words because as you started off, Mr. Romoff, we all know there's a huge deficiency in infrastructure on reserves.
You mentioned that tools will be needed. Could you elaborate specifically on what tools are required from the federal government? I believe it's extending the time frame to their commitment in the funding.
Mr. Romoff: You would always want governments to put in place long-term infrastructure plans in order to ensure you get the development you need, which has immediate results around economic prosperity and global competitiveness. Our encouragement to the federal government and all the provinces around Canada is to move ahead with those kinds of programs.
The Government of Canada has put in place a 10-year plan, as has the Government of Ontario. The important thing with respect to Ontario is they have put out their project pipeline, so for the private sector, which is interested in pursuing these projects, they know exactly what the Government of Ontario has planned.
Dale made reference to the fact that Canada's approach to P3s is recognized internationally as being best in class. He didn't use those words, but I'm happy to use those words because we hear it all the time and it's in part because we have features that are quite unique.
First and foremost, we have unbelievable support at the political level. You would all know that former Finance Minister Jim Flaherty was an incredible ambassador and promoter for public-private partnerships; a great loss for all of us.
At the provincial level, the premier in British Columbia is a strong supporter of P3s, and before that, of course, Gordon Campbell, now Canada's High Commissioner in the U.K. In fact — I'm not sure he would like this terminology — he is the father of P3s in Canada because he was the first one to bring the model to Canada and use it effectively to ensure that infrastructure that was necessary for the Olympics was built.
I've probably diverted from the question you asked. The reality is that there is a continuing need, both on reserve and off reserve, to address Canada's infrastructure deficit. It's pegged at anywhere between $300 billion and $400 billion, and that requires innovative approaches because we're faced with the reality of big deficits and fiscal restraint. While P3s are not a panacea, they are one approach. As I mentioned earlier, when right, it has really delivered an economic impact for Canada and can deliver, I believe, the same economic impact on reserve.
Senator Raine: Thank you very much.
As a follow-up question, when you're analyzing the needs in the PPP world, I assume you look at the economic opportunities for the community or the First Nation, because obviously you don't want to be building infrastructure if there isn't going to be growth in the community or if there isn't going to be a sustainable economy in the community. You don't want to overbuild.
In doing that economic analysis of the future of the community, is there money through PPP for economic development planning?
Mr. Romoff: That's a good question, senator. I'm not as familiar with their program because PPP Canada is, as you know, a Crown corporation. Dale can actually speak to this better than I can, but they do have funding to assist communities in doing the preparatory work necessary to put together the case study that would demonstrate the viability of the P3 approach for the particular project at hand, and that would include a hard look at economic benefits.
Dale, would you like to add a bit more to that?
Senator Raine: Maybe I could give you a specific example. We visited a reserve in British Columbia, the Tsartlip First Nation, which is just outside Victoria. In fact, it borders on the community of Saanich, which is a very thriving community, and the reserve is struggling to get some funding somewhere to do an economic development plan and a master plan for their community. We are not talking about a lot of money here, but without a plan, they really don't know where things should go. So that's the vacuum I see. Sometimes little things get in the way of common-sense planning for the future.
Mr. Booth: I agree that there is the obvious need for looking at what the impact is going to be, both positive and negative, once you put this infrastructure in the community, and you do that before you embark on your project.
I believe there are funding envelopes that are available to do comprehensive, community-type planning that have economic considerations, but in the pure P3 sense and the funding that you would get from P3 Canada, that would be dedicated to developing the P3 business case. It would help you to make a decision as to whether there is value for money in going the P3 route.
You could do a business case. What it does is it compares between doing the project using a design-build or a traditional method versus doing a design-build-finance-operate-maintain, a P3. It determines whether or not there is value for money in going the P3 route. I've been involved in business cases that have gone the P3 route, but I've also been involved in business cases where it did not make sense — the value for money was not there — and so they chose not to go that way.
That is the funding that they would be able to obtain through P3 Canada, to determine those types of things.
Senator Moore: Thank you, gentlemen, for being here. I wanted to follow up on the questions of Senator Raine.
In your brief, Mr. Romoff, you mentioned that the correctional facility in Osoyoos is the only one on reserve. Is there a way of qualifying that? How is it that they are the only one? Have other reserves applied for or attempted to have P3 projects and not make it for some reason?
Mr. Romoff: I'm not aware of any projects that have evolved on reserve where there has been an interest in using the P3 model, beyond the couple that I referred to earlier. Again, you'll hear more from the Atlantic Policy Congress on some of that.
What I would say, senator, is that this is a unique situation in that the project is not one with the Osoyoos community, but rather, it is on their reserve. The project is the Okanagan Correctional Centre. It's a project that engages the Province of British Columbia, and they are building this correctional centre on reserve. They have partnered, if you like, with Osoyoos on this project in order to make the land available to house the facility.
Senator Moore: We visited that reserve and also that building site. So the owner of the facility is the Okanagan Correctional Centre?
Mr. Romoff: Yes.
Senator Moore: Not the Government of Canada. It's the private correctional —
Mr. Romoff: It's not private. The key to public-private partnerships is that the government entity always owns and always controls the facility. So in this particular case, the Okanagan Correctional Centre is owned by the Province of British Columbia, and it is housed on reserve.
Senator Moore: With regard to the barriers that you mentioned, you talked about the first one, capacity, and you also talked about best practices and access to legal, financial and technical advisers. Do these things have to be in place before a P3 project can be seriously looked at and advanced?
Mr. Romoff: They don't have to be in place before, but it's wise to make sure that you've got the advice you need before you proceed with a P3 project.
To be frank, senator, this would be the case whether you decided to move ahead with your infrastructure project and procure it using the P3 model or the more traditional approach. Quite frankly, it's not unique to First Nations communities.
The case right around the country is that there are more experienced jurisdictions with P3s and they continue to move ahead, but the reality is that the growth in Canada's P3 industry is shifting from the provincial level to municipalities and to First Nations communities. Both of these groups are relatively new players in the space, so it's important to educate themselves as well as they can, and P3 Canada helps with that. We assist with that, too, and we often partner with PPP Canada to do that.
This is a different way to deliver infrastructure. It's complicated, so it's important that communities understand the path to the finish line. Even in more advanced jurisdictions, such as the province of Ontario, the province of British Columbia or the province of Alberta, in every instance of a project, the government hires professionals to provide them with the legal, financial and technical advice, as does the private sector consortium.
Senator Moore: Later on in your remarks you mentioned that your council educates stakeholders, so I thought the education part would be the participation of First Nations in projects and learning as a project goes ahead. I acknowledge that they'd have to have, like in any business transaction, the proper advice going into it, but is that what the process would be? Would they learn these standards and practices as the project advances?
Mr. Romoff: I believe it's important that communities understand what they're getting into before they get into it. Some of the activities that my council is engaged in are aimed at heightening the awareness of the P3 model, the understanding of it, which can then lead to greater adoption of the model. But it's critically important that, at the outset, communities recognize the approaches available to them and how best to proceed.
Senator Moore: Can you run us through a project as to how the financing happens?
Mr. Romoff: Sure.
Senator Moore: For example, can you talk about, without divulging too much — it's private — the Osoyoos one?
Mr. Romoff: In that particular case, the Government of British Columbia decided that they were going to deliver this project as a P3 and turn to a private sector consortium to design it, build it, arrange for private financing for a portion of it and maintain it for a period of 30 years. That's a pretty typical arrangement.
The normal process in a situation like that would be for the government to announce the project publicly and to put out a call for expressions of interest from the private sector. What normally happens in that instance is a number of consortia quickly form and respond formally to government, expressing their interest in the project, laying out their early views on the project. The government then takes that list of those who expressed interest — it could be six or seven consortia — and they'll bring that group down to three. Those are the principal proponents. It's only those three who then get the actual RFP for the project and have a particular time frame by which they have to respond.
Senator Moore: That would include the financing?
Mr. Romoff: Yes.
Senator Moore: In that case, what portion or percentage does the government finance, what percentage does the private sector finance, and how do they get their money? If it was three quarters, do they have to have a government guarantee for their private portion of the financing?
Mr. Romoff: The private sector will arrange financing in two ways. There could be long-term debt, at which point the banks will engage in that facility. There will also be an equity piece. So the private sector could take an equity up to — it varies — 7 per cent, 10 per cent of the project.
That's the key in these projects because once the private sector has a stake in the game, they're very focused in ensuring that this project gets delivered on time and on budget and that all the obligations are met over the 30 years, otherwise they are penalized. It's amazing how the private sector focuses their attention when they know that their profit is at risk.
Senator Lovelace Nicholas: Welcome.
I don't know if you answered my colleague's question about the government part. What I'm concerned about is whether the P3 model relieves the government of its responsibility to fund infrastructure to First Nations.
Mr. Romoff: No. It's important to understand the difference between funding and financing.
Senator Lovelace Nicholas: Well, I know the difference.
Mr. Romoff: Sorry. I didn't mean it that way.
In the context of public-private partnerships, we're only talking about financing arrangements which engage the public sector. The funding is already in place from government through whatever tax mechanisms they may have.
You can think about it this way: It's a bit like buying a house with a mortgage, except we'd love a P3 arrangement. Under this arrangement, we're buying the property but we're paying for it over the course of 30 years, through monthly or annual payments.
The difference in the mortgage that I've got is that if it were a P3, when my roof leaks, the person who built that house has to fix it at their cost and they have to ensure that it's maintained to a particular level over the next 30, 35 years. This is the feature of a P3 which is so distinguishing. It guarantees that the asset will be maintained to a level agreed to at the point of entering into the contract for the 30 years so that when it's handed back to government it's in pristine condition. That's a very unique feature.
Mr. Booth: In addition, what it does is there's money at risk throughout the entire concession period. So if in year 18 of your 20-year deal the consortium is not doing what it said, they have money at risk. They can still be penalized down the road if they're not doing what they're supposed to do under the contract, which is a really good feature.
What ends up happening is that let's say, for example, they didn't repair the roof and it continued to leak. You can penalize them and not pay them the full amount that they're supposed to get because they have not rectified that deficiency. So you're not paying them. The banks and the equity providers that are part of that consortium are going to get angry and will make sure that deficiency is rectified.
Mr. Romoff: It also ensures, senator, that you get very innovative solutions to problems and that the consortia that win these projects use state-of-the-art materials.
If we're talking about the building of a highway, you don't want to use inferior gravel because if you have to pave the road again two years from now, it's at the expense of the private-sector consortium. This is a fixed-price contract, yet they can't allow the asset to not perform.
These are the unique features that have proven to be so successful in Canada and in other jurisdictions around the world.
Senator Lovelace Nicholas: If P3 is such a terrific model and does good for First Nations, why is it just coming out now?
Mr. Romoff: Because it's a process that evolves. Canada's been in this business for about 20 years, and municipalities are only beginning to use it now.
Much of the mandate of the council is to heighten awareness of this model: how it works and how it can make a difference for communities.
Senator Lovelace Nicholas: Can a private First Nation access this P3 model?
Mr. Romoff: Yes. In the case of PPP Canada, First Nation communities are eligible for access to PPP Canada's fund, which enables the government, through that fund, to contribute up to 25 per cent of the capital cost of these projects. First Nations communities are viewed in the same way as provincial and municipal jurisdictions in terms of access to that government fund.
Senator Sibbeston: I noted on page 1 of your presentation that you say that P3 approaches provide for delivery of projects ''at less cost and with less risk.'' If that's the case, why isn't everybody using this approach? I thought the benefit of a P3 approach is that institutions or governments that don't have the money now can have a building or facility built this way, but then there are interest costs and so forth that are spread over 30 years. So I imagine there was a cost in that, bringing the cost higher than if it were just to find the money and build a project.
Are you telling me that P3 it is the cheapest approach to building or doing a project? Is it really as good as you say?
Mr. Romoff: Evidence would say yes to that.
The issue of cost lends itself to myths of interpretation. Governments can borrow money cheaper than the private sector, so the cost of construction of a project or the upfront cost might appear cheaper if the government purchased it or borrowed the money rather than the private sector. But the feature of P3s is the life cycle of the asset. When you factor in the cost of maintenance over the course of the 30 or 35 years of the project and the certainty that, in fact, it will be maintained, then you will see that the cost of the project through its lifetime is significantly less expensive than if procured in the traditional way.
What we have found historically is that when governments contract out to have an asset or a building built, often those projects take longer than expected and come in costing more than had been initially budgeted. It's been this way for a hundred years.
Part of the challenge is human behaviour, getting people to change the way in which they've traditionally done things. What we have found, and as Dale mentioned, when it is done for the right reasons, if you can demonstrate there is more value for money to move ahead with a public-private partnership approach, it has delivered the asset on time, on budget and at significant savings.
I would say in the case of British Columbia, the Canada Line built in Vancouver is a classic example of a project where the Government of British Columbia turned to the private sector to design it, build it, arrange for outside financing, maintain and operate it, and it does to this day. It's profitable, it delivers, and it saved the Government of British Columbia over $90 million. It came in ahead of time, motivated very strongly by the need to ensure it was there and operational before the Olympics.
Senator Sibbeston: I wonder if this P3 approach would appeal to First Nations where, on any projects, they're very interested in benefiting from employment, jobs, contracts and so forth. I take it that the P3 approach will insist on its own workers, just to have control throughout, right from the start to finish.
In this sense, rather than use local people and business, they would insist on their own personnel. Would that not be a downside for First Nations?
Mr. Romoff: That's generally not the case, senator. At the outset of these projects, in the crafting of the project description, governments or jurisdictions like First Nations communities can specify the conditions around how the project will go ahead, the requirement for local knowledge and use of local personnel.
In many cases, particularly in Ontario, they have a provision in place requiring that any public-private partnership must respect the terms and conditions of the collective bargaining process so that as employees may shift from the public sector to the private sector, they are in no way disadvantaged.
That's what I was referring to earlier about understanding the process, making sure you understand the elements that are critically important to protecting your interests and moving ahead; but if these features are incorporated into the contract, and if the contract is well written, then the obligations for both parties will be very clearly articulated. Again, if those elements are not respected, penalties will apply. That's why it's so valuable to have private financing, because it's an additional set of eyes and they're probably the ones who are most agitated when projects tend to veer a little bit off their planned path.
Senator Beyak: Thank you, gentlemen, for a very inspiring presentation on taxpayers using the dollars wisely. It's always good to hear ''on time, on budget, less cost.'' It's a great concept that I didn't know a lot about.
You had a guest speaker at your conference in 2012, I believe, former National Chief Shawn Atleo, who was very inspiring in his support of P3s. I wonder if you can tell us a little bit about the reception — there are only a couple of projects going on — and how you see the future. You touched on it in your presentation, but perhaps you could elaborate for me.
Mr. Romoff: I'm hugely optimistic, but you should know that I'm optimistic about everything in life.
Senator Beyak: So am I.
Mr. Romoff: The reality is that there is such a huge need on reserve. It's such an important issue for Canadians, and the opportunity is there to make a difference. That is a motivator in itself.
At the moment we have experience in Canada using the P3 approach for schools, principally in Alberta. For water and waste water projects, there is an excellent one under way now in Regina. It's being used at the municipal and provincial levels. Those are two areas where we know that are critical needs for Aboriginal communities.
We have experience in Canada using the model for that, so let's take that experience and see if we can't apply it to communities, whether we bundle them as was the case in Alberta. They built over 40 schools in three tranches. Each one bundled a series of schools in order to give the project enough heft to attract external financing, and the international community could bid the projects.
We can do exactly the same thing with First Nations communities. We at the council are very committed to supporting these communities in any way we can to enable them to benefit from the advantages and to avoid some of the challenges others have experienced. It is in our interest as a council to make sure each of these projects is a success because if it fails, we all know the battle to defend the approach becomes more challenging.
Senator Beyak: As a supplementary, we had the senior policy adviser here from Aboriginal Affairs and Northern Development, Mr. Karl Carisse, and he told us a big impediment is the Indian Act. Is there anything we can change in regulation to make it easier for P3s under the Indian Act?
Mr. Romoff: Unfortunately, I'm not well enough versed on the terms and conditions of the act to comment on that; I apologize.
Senator Beyak: Thank you.
Senator Enverga: Thank you for the presentation. A few of my questions have been asked already, but you mentioned that the P3 approach is being used right now. How widely is it being used? How many of the First Nations are on track to use the P3 approach?
Mr. Romoff: As I mentioned earlier in my remarks, the uptake amongst First Nations communities is modest at the moment. There is interest, but the number of projects that have moved forward is almost zero.
Experience in Canada, though, is very strong. As I mentioned, we have more than 220 projects now. There is a project in every province across Canada, two of the three territories, in more than 40 municipalities. So we have a strong base, and we're viewed internationally as having a model and an approach that beats everybody else's. In fact, other countries that are looking to put P3 programs in place have come to study the Canadian approach and emulate it.
We have an approach that lends itself to application in First Nations communities, and I think that the work of this committee, organizations like PPP Canada, ourselves and companies like the one that Dale represents, are all keenly interested in working together to make a difference for communities. I hope the next time we meet that we will be able to talk about some of those examples in a way that will make you proud.
Senator Enverga: Thank you.
You mentioned about three barriers that exist: capacity, access to capital and bundling. Is there a barrier more like the way jurisdictions work with regard to First Nations, something like independence? Is that part of the barrier that you have been encountering with the First Nations as to P3s?
Mr. Booth: At the outset of P3 projects with any jurisdiction where it's new, the first couple projects are always going to be the longest because there is a learning portion. It is not a critical barrier, but a critical challenge is getting the governance structure right at the outset that is going to manage the project going forward and ensuring that you have the right people with the right technical skill involved in the governance of that project going forward. It's not a barrier, but it is challenging at the outset.
I think that every province that has jumped into this, including the federal government, when it comes to the inception of a project, getting that right at the outset is going to help you move that project forward correctly.
There's been an overall theme about how can First Nations get involved in a project after it's going, and we look for lessons learned. The Iqaluit airport improvement project is a very good example of how you can get the Aboriginal community involved. That project exists within the Iqaluit territory and therefore is subject to the NNI agreement, the agreement that put Iqaluit in place. There are features within that agreement that say that you will, for projects over a certain amount, hire local labour; you will access local suppliers. They are using that now under that particular project. So what we do is we look around and see the different existing projects across the country, and we can examine the critical features that we anticipate we are going to see in projects in First Nations.
Mr. Romoff: Dale makes an excellent point because under the Iqaluit airport project, the Government of Nunavut required that 15 per cent of the labour force be Inuit and that it move to 20 per cent once the project is in operation and to 60 per cent by the end of the 30 years of the project. So there is a very well-crafted agreement which provides for exactly the outcomes that I think the Senate committee is looking for.
The Acting Chair: This has been a terrific panel, and the final question goes to Senator Wallace.
Senator Wallace: Gentlemen, as we all know, there is a need for new school construction on reserves throughout the country and improved operation and maintenance of those schools. I'm wondering what your thoughts might be about the appropriateness of P3s for that purpose.
Mr. Romoff: The example I mentioned earlier is in the case of the Province of Alberta, where they are building over 40 schools, K to 9, using the public-private partnership model. It has proved very effective for them, and several of those schools are in operation now. Because of the bundling, it enabled enough substance to the project, if you like, that it became very attractive to the building community, and there was very aggressive bidding for that project.
Again, what happens because of the competitiveness of it, it drives down cost and forces more innovative thinking because competitors are looking for ways to separate themselves from the competition. It proved to be very effective in the province of Alberta. Saskatchewan is moving ahead with a similar project right now.
The model has been used in the education sector, principally schools, and it can be replicated in First Nations communities.
Mr. Booth: Yes, and I agree with everything that Mark is saying, but I think you need to identify a coalition of the willing. You have to find willing First Nations partners that require the school, that want to take part in this new way of doing it.
There has been experience in Manitoba with a four-school project. One of the communities pulled out. That was their choice. They're moving forward with three communities that are willing to go. Now, it is not in a P3 model, but if you're going to be bundling, a key feature is that you want to make sure you have a good coalition of the willing. Once you have that, you can start building towards a good governance structure that will pull them together and focus on the project at hand.
Senator Wallace: For the purpose of building schools, would there be a minimum financial size and scale of a project that would have to be proposed in order to be considered appropriate for P3s?
Mr. Booth: Yes.
Senator Wallace: Because we have heard that $50 million to $100 million would typically be the minimum P3 model. In terms of schools, that's a lot of money. Would there be an ability to build smaller projects for school use through P3s?
Mr. Booth: Well, you could, but you're probably not going to be able to attract a full P3 solution because you need to get it to that size in order to attract the financing. When you're putting together a P3 bid, the companies are investing a lot of money. To prepare some of these bids could be $1.5 million or higher. To do that, you want to make sure there is a big enough project and that the project is going to generate the returns you're looking for.
Yes, they do have to be bigger, and given the First Nations context, I don't think there is any one First Nation that would be able to support a large complex P3 project. But a bundled group of First Nations — tribal council level, PTO level — yes, I believe at that level it would be appropriate because you're going to have the size.
Senator Wallace: Would that group have to be in the same geographic area in order to make it a bundled project?
Mr. Booth: It would probably be beneficial because part of the bundled project is innovation, probably common features among the different assets for maintenance and operations purposes. So contiguous would probably be better. Again, I would have to see what the project looks like and do the analysis to tell you that, yes, that would work. There could be situations where you could have P3 projects that may even go over provincial boundaries. You never know. At first glance, you could suggest that contiguous is probably better and cheaper.
The Acting Chair: Thank you for your time here today. You answered a lot of questions very well, and we appreciate you coming to Ottawa and spending time with us.
Our next panel is composed of four regional organizations. From the Assembly of First Nations of Quebec and Labrador, we will hear from Chief Madeleine Paul of Eagle Village First Nation in Quebec, and Guy Latouche, Consultant.
They'll be joined by John G. Paul, Executive Director of the Atlantic Policy Congress of First Nations Chiefs Secretariat.
Also at the table is Manitoba Keewatinowi Okimakanak Inc., or MKO, represented by Grand Chief David Harper and Michael Anderson, Research Director, Natural Resources Secretariat.
Finally, we welcome Kevin McLeod, Director of Housing, Economic and Community Development Secretariat for the Federation of Saskatchewan Indian Nations.
We have several presenters. I ask that each of you limit your opening comments to five minutes, if you could, so that we can get into a discussion with you and questions. Let's begin, please, with Chief Paul.
Madeleine Paul, Chief, Eagle Village First Nation, Quebec, Assembly of First Nations of Quebec and Labrador: Thank you, Mr. Chair and honourable senators, for the invitation and the opportunity to inform you about the housing and infrastructure needs of the First Nations of Quebec and Labrador.
My name is Madeleine Paul. I'm the Chief of Eagle Village First Nation, an Algonquin community in the Timiskaming region, also known as Kebaowek First Nation. I'm also the chief responsible for the housing and infrastructure file for the Assembly of First Nations of Quebec and Labrador.
I am joined today by Mr. Guy Latouche, our adviser on housing and infrastructure. He will present an overview of the needs of our housing and infrastructure and share observations and some very concrete proposals to improve the situation in our communities, as housing and infrastructure are two interrelated topics. After the presentation, we'll be glad to answer any questions.
Thank you.
The Acting Chair: Thank you very much.
Guy Latouche, Consultant, Assembly of First Nations of Quebec and Labrador: Thank you, Chief Paul.
Good morning, senators. I'm pleased to be with you today.
To be as quick as possible, I will use the PowerPoint deck we have submitted.
On slide number 2, Quebec and Labrador consist of 42 First Nations, with 81,000 registered members and 70 per cent living on reserve.
On slide 3, as you probably know, housing and infrastructure play a central role in our society, and they have a determinant effect on the well-being of individuals and communities. They interact with different sectors, such as health and education.
On slide number 4, since 2000, the Assembly of First Nations of Quebec and Labrador has collected data on the housing and infrastructure needs of First Nations. Its data comes from the First Nations themselves, and it was obtained by conducting interviews with each one of the individuals responsible for housing in each First Nation. That data has been reconciled with official databases. The data tells us about the need for new housing units, the need to renovate and decontaminate the existing housing stock, and also about the related infrastructure to housing. By that I mean water and waste water networks and roads.
We are able to see the evolution of the needs from 2000 to 2006 to 2012. We see the trends and challenges in housing and infrastructure. In the last report, the one we submitted to this committee, we have a proposal for a new approach in housing and infrastructure.
I will proceed rapidly with a summary of housing and infrastructure needs. I'm on slide number 6. I will have you keep in mind that the on-reserve population is 58,000 registered members and the housing stock is 14,000 units. Please keep in mind that each year, the First Nations in Quebec and Labrador build an average of 250 housing units per year.
I'm on slide number 7. You will see there's a need to build an additional 9,000 units over a five-year period, and this need is justified mostly by overcrowding of the existing stock and demographic growth over a five-year period.
On slide number 8, there's also a need to renovate 5,000 units at different levels, major renovations and minor renovations.
On the next slide, there's a need to decontaminate 1,600 units that are affected by mould contamination at different levels.
On slide number 10, as for the infrastructure directly related to housing, there's a need to service 8,000 residential lots. By that I mean water infrastructure, sanitary sewers, storm sewers, roads and street lighting. If you are in a rural community, it would be individual installations to allow the construction of new homes. It is infrastructure to serve new residential lots for community members, and it does not include major structures like a water and waste water plant, schools, a health centre and so on.
On slide number 11, you will see that all of those needs translate into a financial need of $2.4 billion over a five-year period. If you take into consideration the existing federal funds allocated to First Nation housing through regular programs and if you take into consideration the First Nations contributions in the form of down payments, mortgage loans and other loans, and if you take into consideration the potential savings by First Nations on capital costs that could take place with a large construction project to catch up with the backlog, at the end of the day, the real gap is $1.3 billion over a five-year period.
I'm now on slide number 13. To share some observations, the first one is very important because our data clearly shows that the additional federal investment made through the 2005 housing initiative and through the Canada economic action plan in 2009 had a very positive effect in Quebec and Labrador First Nations.
Just to remind you, the 2005 housing initiative was $295 million nationally, and the Canada economic action plan in 2009 was $400 million nationally. We have seen slower growth of needs between 2006 and 2012 if we compare that with the six years prior. For example, it resulted in the construction of 760 additional units. You remember I told you 250 units are built per year, so those 760 units are like three additional years of construction over a six-year period, which is a huge improvement.
There was the renovation and lot servicing, too, that went along with those budgets. It was over and above the regular budget. We have seen also the overcrowding decreasing slightly, and the general state of the housing stock has improved.
However, our data shows that the financial need increases significantly, and this is attributable to an explosion in the cost of construction. You will see this in slide number 14. You have a good example of why it costs so much. You see in year 2000 the average cost of a house is just a little over $100,000, and in 2012 it's close to $200,000. This is due to inflation, and several First Nations have reported to us that there was high growth in the costs of material and labour between 2006 and 2012. You have the same exact picture for infrastructure costs. The cost to service a lot has followed the same curve over the same period.
The next slide, number 15, contains another observation. You see the average cost for a house is close to $200,000. The average subsidy from AANDC is 20 per cent of that, so the down payment and loan by the First Nation or the individual is the rest of the cost, so 80 per cent. That means that First Nations are investing heavily in addition to federal funds for housing construction.
On the next slide you will see that means that First Nations provide significant added value to federal investments in housing. We're talking about a leverage of 4 for 1 for regular housing and a leverage of 1 for 1 for social housing.
On slide 17, another observation is the First Nations of Quebec have alone contracted themselves about a quarter of the ministerial loan guarantees issued by Aboriginal Affairs between 2005 and 2014. They represent only 9 per cent of the population. I think that it shows dynamism in response to a strong demand for housing and also a substantial investment in private housing. As you probably suspect, the infrastructure investment is coming in parallel with that.
The last observation, slide number 18, is that the history shows that the First Nations of Quebec have demonstrated their ability to deliver housing projects because all regular and special budgets are always fully utilized.
A quick word on the chief's position on housing and infrastructure, slide number 20. It is based on two fundamental actions. The first one is a massive federal investment in partnership with the First Nations — and I insist on that key word ''partnership'' — to eliminate the accumulated backlog.
The second one is the negotiation and implementation of a new approach by which the First Nations will exercise their full jurisdiction over housing.
I will end very quickly with avenues of reflection and concrete proposals in addition to the chief's position. An example of avenues of reflection would be a partnership between First Nations and government. First Nations could commit themselves to densification of social housing. By that I mean the intensification of land use for social housing. It's a way to do more with the same funds. You build according to the needs, and the private option becomes more attractive because social housing and private housing are delivered through a different type of house.
Slide number 23, while waiting for a massive federal investment to eliminate the housing and infrastructure backlog, I will summarize for you some very concrete proposals for the short term. First, for Aboriginal Affairs, a small increase of the regional budget for housing construction — let's say only $3 million — with the leverage up of 4 for 1. That means an additional $12 million for a total of $15 million. That translates into 75 additional housing units per year. It's 33 per cent more housing units built per year, 380 units over five years. But the regional budget for related infrastructure should ideally be enhanced by an equivalent amount to give the First Nations the capacity.
Another concrete proposal for the short term for AANDC is the indexation of basic subsidies based on actual construction costs. Senators, the subsidies considered in the formula for determining the capital base budgets of the First Nations are at the same level since the early 1980s.
As for CMHC concrete proposals, an increase in the regional budget for social housing construction with a pilot project focused on densification, only $3.5 million, with a leverage of 1 for 1, 3.5 additional, for a total of $7 million. It translates into 30 additional social housing units, which is 50 per cent more than what we do each year, 150 units over 5 years.
Slide 26, other concrete proposals for CMHC, revision of the national allocation formula for the social housing and rehabilitation programs, with the integration of a new criterion, namely the contribution of First Nations in the housing projects.
Senators, the Quebec region has experienced a decline in its share of about 40 per cent when the allocation formula was changed in 2005.
I think another important proposal for CMHC would be the injection of funds to encourage the transfer of property. I mean renovation and conversion of community housing to private ownership, and many social housing agreements with CMHC will mature over the next five years. In Quebec alone, 1,800 units will become free of mortgage and free of agreement with CMHC. With a budget of $2.5 million, it allows for the renovation and conversion of 100 units.
I am still with the CMHC: indexation of program budgets. Increase the flexibility of the rehabilitation program to give the First Nations the opportunity to use the RRAP grants for urgent repairs without it being necessary to perform a complete renovation of the house.
Finally, we think that the mandate of the First Nations Market Housing Fund should be revised. Even if the idea of this fund is interesting, and capacity development is interesting too, we have to admit that the fund has generated very little new construction — at least in Quebec — since its inception six years ago. We think that the fund could support a major catching-up project in social housing, and it should be more open to developers and promoters of affordable housing to help develop private rental housing at affordable rents.
I will stop here. It was just a presentation. It's a concrete and realistic proposal that will not solve all First Nations housing and infrastructure problems, but I think it may contribute and make a difference in the short term.
The Acting Chair: Thank you, Mr. Latouche, for doing your best to boil down what is a comprehensive presentation with some extremely interesting analysis and good, solid proposals. We appreciate your presentation and your efforts to shorten it.
On that note, we are keen to get into a question period, but we are also here to hear you and understand your various perspectives.
We will go now to John Paul, please.
John G. Paul, Executive Director, Atlantic Policy Congress of First Nations Chiefs Secretariat: Good morning, senators. I am here again from the Atlantic Policy Congress of First Nations Chiefs Secretariat to speak on behalf of our chiefs regarding challenges, but also some proactive solutions regarding housing and infrastructure.
We represent 37 communities across Atlantic Canada and into Quebec and Maine. Our organization's mandate is ''to research, analyze and development alternatives to federal policies that affect Mi'kmaq, Maliseet, Passamaquoddy and Innu First Nations communities in Atlantic Canada, Quebec and Maine, U.S.A.''
Our chiefs recognize that housing issues are not stand-alone issues, but they are tied to many other issues that affect our communities. These issues are tied to our relationship with the federal government, social conditions on reserve, the absence of funds, and asset management and operations.
Our Atlantic First Nations will always hold the position that our communities deserve safe, healthy homes and overall community infrastructure. Our population is the fastest growing in Canada, as you know. As our people continue to grow and thrive, the demand for First Nations infrastructure is steadily increasing. It is difficult as a leader to tell your people that because of funding cuts, they will not receive houses or buildings they desperately need. The lack of adequate infrastructure forces our people to live in overcrowded homes, leading to a variety of health issues.
Until this fiscal year, our organization had what is known as the Atlantic First Nations Housing & Infrastructure Network. The network's purpose was to give advice and strategic direction on regional initiatives concerning housing, water, waste water, emergency management, et cetera. However, due to funding reductions out of Aboriginal Affairs, the network was forced to suspend operations for this past fiscal year.
Our organization has maintained a housing working group comprised of First Nations managers and federal partners to pursue the goals and initiatives outlined last year at a facilitated session held in one of our largest communities, Eskasoni. There, First Nations housing managers and decision-making personnel from key federal departments, such as CMHC, Health Canada and Aboriginal Affairs Canada, met to discuss and identify the true housing and infrastructure issues in the Atlantic. The working group agreed that the following were the five overarching issues related to housing.
The first issue was external government in terms of limitations and restrictions. As I mentioned during my past presentation to the committee, one of the major challenges regarding First Nations housing is limitations and restrictions created by the federal government. These restrictions can come in the form of funding cuts to essential programs or new programs and requirements put in place without consultation.
A prime example is CMHC reductions in section 95 units allocated in Atlantic Canada. Based on yearly figures, we have seen a glaring drop in social housing units being allocated, from 75 units in 2001 down to 41 in 2012-13, to 38 in 2013-14. This year, only four houses were allocated in our biggest community. These cuts lead to continued overcrowding in our homes and added stress for the community housing staff.
Similar concerns arise when new government initiatives and programs arise with little or no warning, for example, the new code compliance requirements under CMHC's section 95 housing program. In February 2014 our communities received a letter stating that at the onset of the new fiscal year, First Nations would be required to submit certificates of code compliance at a minimum of three stages of construction, which is basically a new cost.
During the first year of enforcement, communities in the Atlantic have had trouble finding qualified inspectors to perform these inspections. CMHC has recently informed our housing working group that they plan on subsidizing training for 12 professionals to become code compliance inspectors. However, this perfectly illustrates the difficulties, at times, of working with the federal government. The response more often than not is reactionary. A new initiative is rolled out without consultation and when problems arise the government has to scramble to correct a problem they created. Time must be taken to consult and plan to mitigate potential risks and challenges that could arise when doing something different.
Furthermore, our communities' housing staff is having trouble keeping up with increasingly strict requirements on funding and renovation paperwork and approvals. This, coupled with a high turnover of staff at both Aboriginal Affairs and CMHC, makes for a difficult and stressful situation for our communities dealing with a major shortage in housing, and dealing with different people every week.
The federal government also inhibits First Nations housing by passing legislation with no tools or resources to help adjust to new laws and regulations. APC has done a tremendous job on our Clean Water Initiative, proactively addressing regulations in Bill S-8. However, there will always be new legislation passed that First Nations will have to struggle to find alternatives for and implement.
A more transparent consolidation process is needed for this new legislation. It has been well documented that the reactions to Bill S-2, the Family Homes on Reserves and Matrimonial Interests or Rights Act, from First Nations have been primarily negative. Now, protections from section 89 of the Indian Act can be challenged by allowing a spouse to claim damages for unlawful transfer of a property. As well, there is the possibility that upon divorce or separation of a non-First Nations couple, a non-First Nations person could be awarded rights for occupancy of a home in a community. Legislation should never pass with such serious concerns.
However, our collaborations have not always been negative. As mentioned, in November 2013, members of our staff, with CMHC and Aboriginal Affairs and Health Canada, met to set immediate and future priorities for the working group. One of the ideas that came out of that meeting was raising the profile about housing and looking at the way to control costs; in other words, how much it costs to be built, maintained, cleaned and lived in for the duration of the life expectancy of a house.
Another big area we looked at was governance and local leadership. First Nations homes are the biggest asset in our communities, but they are not First Nations assets alone. They are Crown assets as well. Therefore, the top priority when it comes to First Nations needs to be housing.
We feel that housing has fallen off the radar in the eyes of the federal government. When funds become available for housing needs, they only address the issue of the day and reflect the interests of the federal government and what they see as a priority.
As First Nations leaders, there needs to be a serious reminder to the federal government that housing must remain a priority for the First Nations community. It is a top priority for Atlantic First Nations communities. In our community, we face all kinds of social issues. These issues have a direct correlation to the quality of housing. A house may be built to code, but with more people than space, it causes problems. Whether it's energy efficiency, mould, it doesn't matter; the unit will deteriorate more quickly. These deteriorating units cause other social issues and it's an area where we've tried to help by focusing on homeowner education, and to allow as many people to understand how to operate and live in a house.
As well, some of our people are too dependent on the band to fix the minor stuff. We need to teach the owners, in very practical ways, what they need to do as owners of the units.
In terms of asset management, the current scenario is unsustainable and we need a way to ensure that the assets are managed for the whole life cycle of the units, which is 25, 30 years.
In terms of operations, we need improved operations on reserve. When it comes to skilled workers, in one of our communities they've partnered with he community college to generate ventilation people, carpenters, plumbers, and the entire maintenance regime of people to provide those services to the community. I think there is always going to be a need for housing in the communities and a need for skilled workers in and outside our communities.
In terms of use, we have always had a long-term issue with youth in trying to keep them interested in housing and making sure more and more get into the housing field. We're looking at a modification of a tool kit by CMHC called My Home is My Wigwam, and it's basically to use it in our communities and schools to educate young people about housing, housing needs and the requirements. It's really trying to educate them at the earliest possible age so that they understood what is involved in housing and get them interested in real careers that are not just building housing but all the related activities that are needed to support a housing unit or a community.
In terms of assets in communities, the asset report was done a few years ago by Neegan Burnside, and it is recommended that we do a similar study in terms of housing to get a clear picture of what the backlog and demand is today and what it will be in the future.
The other big area we're working on is private-public partnerships with Canada and the First Nation water authority. Our chiefs are continuing to work towards finding a proactive and innovative solution in addressing the current state of water and waste water systems under a potential P3 agreement based on a clear business case and establishment of a region-wide First Nations water authority.
On April 8 and 9 our chiefs met with the Centre for Clean Water Resources Studies out at Dalhousie University to adopt a project charter that clearly describes the work that we have to do over the next two years to take the project to its fruition. It's called the First Nations Clean Water Initiative — Atlantic Region and formation of an Atlantic First Nations water authority, and I can provide a copy of the charter to the committee as well.
We have been working in partnership with the government in terms of looking at land, water, communication, funding, and really engaging the communities on this approach about trying to come up with an innovative solution to clean water. We have to date secured 27 band council resolutions to continue this work in all our communities in Atlantic Canada.
This is a very innovative project, and our communities have been seeing great support of the project by others outside of us, and there's great enthusiasm from our leadership in terms of passing the BCRs and moving this project forward.
We have been working on developing a request for proposals for the engineering work, which we're working on in November. This is all part of our long-standing effort to work actively to research water assets and the land that they reside on to ensure that the engineering work can be done from all our First Nations communities to create a more detailed cost estimate, considerably more accurate than plus or minus 15 per cent. We're looking at plus and minus 5 per cent in terms of the accuracy of costs.
Ultimately, the APC will engage the community members and the stakeholders and make this a community initiative in finding a solution to water and waste water infrastructure. It means now and in the future the clear need for long-term resources to carry out the water initiative so that if it does end up being a business case, that funding is set aside for the entire life of the project, which is 25 or 30 years. This includes the entire life cycle costs of each system in each community.
This will be one of the largest land transactions in Canada in First Nations communities, because we're going to designate and transfer large pieces of our community to our water authority to assume liability and control over water and waste water assets in our communities.
We have been working diligently in terms of trying to deal with the other big factor in this project, the actual water and waste water regulations which are currently under development. The overall purpose of our initiative is to improve public health and safety in our Atlantic communities by providing safe water and waste water disposal. Our main activities relate to drinking water and waste water regulations for our communities, but there's a fundamental importance. If it does get to a business case or gets to the cause, the regulations and the clarity of regulations become paramount in terms of getting a bid from the private sector. If the rules aren't clear, the pricing and the costs will increase; the P3s start not looking as great.
Our key effort in the next little while is making sure that the regulations are clearly done, clearly understood and clearly implemented. That means that there is an issue to finalize how enforcement is going to get carried out, finalize approvals of templates in terms of how you carry out both drinking water and waste water, expert review of all the regulations. We've developed draft templates of regulations. There are about 780 pages of regulations we provided to the department almost a year ago, and we haven't got much back. We're waiting to try to move ahead to get greater clarity in terms of what those rules are going to be so everybody understands what the rules of the game in the future are going to be.
The Acting Chair: Mr. Paul, we are desperately short of time, and I see that you're just coming up on your conclusion. Could you wrap it up? Thank you.
Mr. Paul: I just want to stress that housing issues are not stand-alone issues. They're part of what goes on in communities, and what we're doing in relation to water provides a potential vehicle that could work. It's still unknown a little because there is clarity on the regulatory side, and there still is clarity on the pile of work that we have to do.
I can say we've garnered great support and cooperation from PPP Canada and the council in terms of offering their expertise to help us gain a greater understanding of the possibility of a P3. From our perspective, we must be able to mitigate and address any and all risk that our community members and leaders identify in terms of whether we do this, how we do this, and how it can benefit all our communities for the next 25, 30 years.
Thank you.
The Acting Chair: Thank you, sir.
We will go now to Grand Chief Harper and Mr. Anderson from MKO.
David Harper, Grand Chief, Manitoba Keewatinowi Okimakanak Inc.: First of all, Mr. Chair and senators, I would like to say thank you for the invitation.
We come from northern Manitoba, a community of 30 communities. We have the Dene right on the tip of northern Manitoba, the Oji-Crees, which is where I come from. Unfortunately, this morning we are saying that we call on this committee to fast-track the needs of First Nations, especially infrastructure.
My home community is the Garden Hill First Nation, and the last several years we have brought these issues out. We had at least a thousand homes that did not have running water, even as the government has put in money over the last fiscal year. Even today there are about 500 homes. I know there is a child this morning that didn't have the benefit of turning the tap on, unfortunately. That's the reality that we face each day.
I will get Mr. Anderson to continue with our presentation, but over the last several years we've been experiencing a lot of difficulty on infrastructure, especially in remote communities. We have to drive in through the wintertime and fly in our goods throughout the year.
Unfortunately, the challenge we face is establishing measurable and enforceable standards that are comparable between First Nations and non-First Nations, regardless of the geographical situation.
I don't want to talk much about the problems that we've heard time and time again. I'm sure you've heard about the problems and how we could eliminate a lot of these things with policies. As my good friend mentioned, we have a model that we engage in, which is the P3 model. Unfortunately, P3 itself cannot work on communities in remote, isolated areas, but the model itself can.
I went to visit one of the communities in Alberta where they built 23 schools in 24 months. I said, ''How can you build 23 schools in 24 months? Can you do the same thing in a remote community? If one cement truck goes from here to here to here, in that circle, how can you do that in a remote community?'' I see that our First Nations have cement trucks in every one of their communities, and it could be done. We are in the process of moving forward with four schools in our region. Unfortunately, that has slowed down, but it's the model that we're after. The model can work.
We're playing catch-up with all the policies. That's why I don't want to get into those kinds of problems. We're stealing from Peter to pay Paul, you name it. We lack those payments and infrastructure and the way it's structured, but if we are to build 10,000 housing units under one project — the problem is, I've seen nursing stations in our health centres. There is a contract being given to this man, and he has to design, build, and everything else, all the costs. Now the government says, ''Okay, next community.'' Same thing: design and build. We're already spending all the money. So when we look at bundling capital projects, that would eliminate another design.
We're working with Health Canada now to look at broadening the capital project on developing nursing stations and health centres where we could have one designer, which will meet a lot of the needs of our First Nations communities, not just in Manitoba, but they've given us the opportunity to work with Ontario. I'm very happy to say that this afternoon I will be meeting with Health Canada to discuss that issue, because a lot of our First Nations require this particular health centre, which has been there for hundreds of years, yet improvements are lacking, especially in Dene communities, which I came from just this morning. I want to say I bring greetings to you from northern Manitoba.
I will let Mr. Anderson carry on with our submission. Thank you.
Michael Anderson, Natural Resources Secretariat, Research Director, Manitoba Keewatinowi Okimakanak Inc.: Thank you, Grand Chief Harper.
Thank you, Mr. Chair. Honourable senators, it's always a pleasure to have an invitation to appear before you and to discuss the issues of importance to First Nations in Canada.
In our submission, we use the phrase ''the elephant in the room.'' Any consideration of challenges and potential solutions regarding First Nations infrastructure, as Grand Chief Harper was explaining, establishes a measurable and enforceable standard of comparability between infrastructure and related services in First Nations communities and infrastructure and related services in non-First Nations communities in similar geographic locations.
We note that, for example, in Part III of the Constitution Act, 1982, in two provisions in section 36, there are express provisions made for establishing public services of reasonable quality for all Canadians in 36(1)(c) and, of course, the equalization provision of 36(2):
Parliament and the government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation.
There is no similar provision that appears, for example, even in the ''whereas'' provisions of various DIAND funding agreements, that that's an objective of the agreements.
I've reviewed the material that's been filed with a lot of the evidence you've received. Particularly, for example, we would make note of the evidence you received from Chief Alex McDougall of Wasagamack First Nation, who provided a detailed analysis of a major capital initiative under way to try to rectify homes without running water. It still remains that there is no measurable, comparable standard that is in the background of the funding and the activity that's being engaged.
Senators might be interested to know that MKO is the very first entity in Canada that litigated section 36(1)(c) of the Constitution Act, 1982, to determine whether it would be enforceable in respect of electricity services provided by Manitoba Hydro to our most remote First Nations. While the result that we were looking for wasn't achieved, the Court of Appeal in Manitoba did say a reasonable argument might be advanced that the section could possibly have been intended to create enforceable rights.
So, in essence, we're trying to find a yardstick, some form of reasonable measurement to assess housing backlogs and requirements, such as the conditions of buildings and the services available within communities, and to do this in a manner that the provinces insist upon through the Constitution being addressed by the federal government.
In terms of some of the policy issues, restating them as issues but also seeking them as solutions, four of the key matters affecting infrastructure that are experienced in our territory is, as Chief McDougall explained in detail, that the DIAND requirement for First Nations to contribute band-based capital toward the cost of major capital projects and toward minor capital projects, including retrofit projects, places a great drain on the ability of the First Nation to build new housing and to do many other things, including repair and maintenance, of existing facilities.
The other issue is the DIAND requirement in many cases for First Nations to secure commercial debt at the generally suboptimal market rates that are available to First Nations, instead of Canada borrowing at the much more favourable senior government rate and making a contribution to First Nations of the entire capital cost. Putting it in other words and numbers, commercial rates available to First Nations are between 6 and 8.5 per cent. The Government of Canada, the last time we did an analysis, was borrowing at something like 3 per cent. In essence, that 5 per cent spread on the interest rates being paid for a capital project are not really coming out of the First Nation's pocket; it's coming out of taxpayers' pockets. It's all federal funds.
So in our view, it simply is inefficient to require First Nations to borrow funds at market rates when the Government of Canada can borrow at 500 points cheaper. That's a major consideration because it often indebts First Nations for extended periods of time, resulting sometimes in First Nations being placed in some level of intervention, specifically because of these debts.
The Acting Chair: Mr. Anderson and Grand Chief Harper, thank you. I apologize; I'm relatively new and inexperienced as a chairman. I just wanted to let you both know — and colleagues as well — that we have about 11 minutes before we have to give up the room. Unfortunately, we can't go over time because there is another event that comes in afterwards, so we're not going to be able to ask questions, colleagues, and I apologize for that.
Mr. Anderson, we've got one more witness after you. We've got your presentation, and we will read through it carefully because just in the read-through I've done, we understand there are some important points. If you wouldn't mind, please give us the two-minute drive-by of the balance of this.
Senators, if you wouldn't mind, while it's fresh, please compile some questions in writing that we could, in turn, submit to the witnesses and ask for you to provide us with answers, that would be helpful.
Again, I apologize. We had looked forward to a good discussion, and it's my fault that I let the last panel go over time. With that, Mr. Anderson, go ahead.
Mr. Anderson: With that, I'll put my Manitoba Public Utilities Board hat on and refer to the evidence.
An attachment to MKO's submission, you'll note, is an extract from material that MKO filed in a recent intervention before the public utilities board. MKO, as a matter of note, has appeared as an intervener in front of the public utilities board since 1989 on every single major electricity rate increase application, capital projects application and so on in an effort to keep the costs of electricity as low as possible for all our First Nations.
I would like to draw your attention, senators, to lines 26 to 33 on the document numbered page 33 at the upper right-hand corner, which is part of our filing. You'll note that Indian affairs has noticed, in respect of potential increases in costs, that it's not in a position to provide assurances of increases to O&M funding if costs increase. In particular, I'd like to draw senators' attention to lines 28 to 31, where it says:
. . . INAC would need to prioritize the expenditures within the Region, and possibly nationally, to allow for reallocation from other program areas, and such reallocations cannot be assured.
At lines 32 and 33:
The current approach in the INAC Manitoba Region is to prioritize funding for education and social development programs before the Capital Facilities and Maintenance program.
That means that all of these cost pressures result in additional pressure, even at the departmental level, on maintaining capital projects within the region in response to cost increases, for example those associated with Manitoba Hydro's proposals. Manitoba Hydro's own evidence is that with the project plan that was proposed to the PUB prior to its decision, we are facing 20 years of rate increases at double the rate of inflation, which would have been impossible to match either through the income of customers or through Indian Affairs' cost allocations.
I would make the small point that is important to us, that as of April 1, 2014, fully 86.3 per cent of every single electricity account in the MKO First Nation was in arrears. If you're in arrears, you don't qualify for Power Smart. So the very people most in need of energy efficiency, including facilities like our arenas, band offices and so forth, are ineligible to receive the benefits of those programs.
We have these multiple influences that altogether restrict the availability of resources and require reallocation of the available pot of funds to meet exigent, immediate requirements, as distinct from investing in capital projects and infrastructure.
The presentation speaks for itself, Mr. Chair. Thank you for the few minutes. I wanted to draw senators' attention to the exhibit, because it provides a statement on behalf of the department that was placed on the record before the public utilities board.
Thank you, Mr. Chair and honourable senators.
The Acting Chair: We read a bit about that in The Globe and Mail recently. Thank you very much, sir.
Next is the very patient Kevin McLeod, Director of Housing, Economic and Community Development Secretariat for FSIN.
Sir, I apologize. You've come a long way to make a short presentation. Please do your best, and thank you. The floor is yours.
Kevin McLeod, Director of Housing, Economic and Community Development Secretariat, Federation of Saskatchewan Indian Nations: Thank you, Mr. Chair, and thank you to the Senate. You guys are paying for my time, so let's try to get some value for money here. Thank you for the opportunity.
I'm a member of the Lac la Ronge Indian Band in northern Saskatchewan. We're about 10,000 strong. I worked for my band for about four years, developing a home-ownership program and saw the success of that. That's definitely my bias on things.
That said, given the fact that I have a short amount of time, in my planning for this I thought what would be the most beneficial thing I could bring to the Senate? What's the one thing that would make the biggest difference on the ground for First Nations in Saskatchewan? As it turns out, it would be for the Prairie provinces, and in my opinion that is shelter allowance. My suggestion/request is that the Government of Canada fund shelter allowances so First Nations can collect from social assistance clients in band homes, in non-section 95 homes.
There are many benefits to this. It would have a knock-on effect. Obviously it would provide money to repair and maintain homes. Right now the formula is about $400,000 for every 1,000 members on reserve in minor capital. Once you get through insurance and admin and some of the other things, you're left with probably two or three rentals you can do, but if you've got ongoing rent to cover O&M, that changes things.
The second thing it does is creates fairness. Right now it's very difficult for bands to administer a housing policy, much less come up with the desire, drive and consensus within the community to adopt a policy if you've got only people in section 95 homes that are required to pay rent. Co-workers side by side, one person is required to pay rent and the other isn't. Guess what? All of a sudden you have big structural deficits in the section 95 program. As you're aware, over time some bands are getting into trouble and going to third party co-management because of this, all because the two programs, minor capital and section 95, are in silos.
That said, the policy exists in Saskatchewan and across Canada for bands to implement rent regimes and have the ability to collect social assistance, but there's no money for it on the Prairies. It's, of course, done differently in other parts of the country. But the net effect is that in the provinces where bands can collect shelter allowance, it forms the basis of income for their housing programs, and that creates sustainability.
The thing that may be overlooked is that if we're doing this, if we're enacting universal rent, it is going to provide a massive boost to efforts to get home ownership promotion on reserve. It's very simple.
You have to think of whom universal rent would affect. For section 95 clients already on the Prairies, you can collect that rent from SA clients. It's the working people, for whom their excuse for not paying rent is removed completely if everyone has to pay it.
For the people in band homes, by and large it's more working people than people on SA. On the Prairies you can get SA to pay the rent for section 95, so that's where the SA clients go, into section 95 homes. So we have more working people in band homes.
The way I look at it, the standard rent, four bedrooms, is about $350 a month for section 95. It's cheaper, therefore, for a person to own a band home than to rent it.
In my community, we set a base level of $1,000 for transfers of band homes for home ownership. A lot of communities in Saskatchewan developing programs are looking at just transferring for $1. The reason is that right now it's not a band asset; these homes are a liability. Transferring it with the stroke of a pen into private ownership, all of a sudden it becomes a personal asset. It's very much worth it in the long run for a band to transfer the home for $1.
For these people in band homes, the working people for maybe $150 a month, that's insurance plus a lease fee, versus $350 just for rent. There's a small middle group, people who are working but on the bubble, who may be affected. Again, it's cheaper to own than rent.
As we've seen, there are a lot of things, repair payments, that sort of thing. You move the public works and housing departments into a fee-for-service type agreement, and all of a sudden you have housing as a business.
Another thing I should bring up is an Ontario initiative that I tried to bring into Saskatchewan. I was given $45,000 from Indian Affairs to put on a three-day conference. At the end of that conference, I had 14 bands ready to go. I had a group set up in the province. My proposal to Indian Affairs to do the follow-up work was turned down. This is a worthwhile proposal. It started in Ontario, and I think it does deserve support nationally.
Anyway, the policy for social assistance exists. I would also say that the money exists as well. It's been alluded to before. It's the market housing fund. It's not doing what it's supposed to do. That's it. The design isn't exactly what it was advertised to be at the outset.
To back up half a step, the estimates in the Saskatchewan region are that social assistance costs about $17 million a year. That's at full take-up. I would suggest with regard to the take-up that you might get to 80 per cent over 5 years. We have issues relating to shelter on the Prairie provinces and the treaty regions, but the idea of O&M instead of shelter, you're starting to see a major shift in thinking on this.
I would suggest we re-profile that money from the market housing fund and use it to fund a five-year pilot on the Prairies for shelter allowance. We could maybe have a national slant on that if that's required, but basically what you're going to see is a huge shift in the way that housing is delivered and the ownership that First Nations will take of their programs. Right now it's something that is dictated. There's no continuity; the two halves aren't talking to each other. If we can have policies that back up a consistent approach at the ground level, the band level, it's not going to be an overnight thing, but it will go a long way toward getting to some of these goals we're all talking about.
The social cost of housing is massive. It's plain to see that budgets in other program areas are being used to Band- Aid problems that are caused by housing.
Talking about one government and different departments, the silo effect just doesn't make sense. You've got health departments on reserve trying to expend money by the end of the year, while you've got mould in houses that the health department can't go and clean up using their funds. In this respect, it's almost like the Red Cross has more benefit. They give you a bucket and a sponge at least to clean up the mould, rather than Health Canada.
On section 95, we've got about 18 First Nations eligible in Saskatchewan and only 14 of those traditionally build homes. There is extra money in the budget this year. I see CMHC having a hard time committing all of that budget. We've had a few really hard years here with cuts.
The Acting Chair: Mr. McLeod, does CMHC not reallocate? You alluded to this, too, Mr. Latouche, that there used to be reallocation that happened, but has it stopped? Is that what you're saying?
Mr. McLeod: There's a national allocation formula that Mr. Latouche referred to. If money isn't committed within one region, it will go back to Ottawa, and whether they choose to reallocate that to different regions would depend on time.
The Acting Chair: You're saying it would be nice if it was reallocated within Saskatchewan rather than going back to the mother ship?
Mr. McLeod: CMHC in recent years has raised the bar to eligibility. They've changed the focus of their capacity development group to compliance. This is in wake of Attawapiskat, let's be frank. The Auditor General pointed out CMHC very clearly.
With CMHC, like INAC or Indian Affairs or AANDC — that's the decade we're in — everything is administered differently by province. Each of the regions has a slightly different approach. The fact is that in Saskatchewan an average 25 per cent of bands are getting allocations in social housing. We're only talking 100 units a year. About 75 per cent of the bands haven't had housing in over five years. We say our need is about 11,000 units in the province. If we're building a hundred a year, even at ten times that amount with family formation and the number of units becoming condemned, I would guess 20 years to catch up. It's a huge challenge, but I see it as an opportunity as well, especially looking through the lens of housing as a business. That's the goal. The goal is self-determination and developing of First Nations economies through trades, building material materials. It's a massive opportunity. I would suggest that that be supported as well.
The Acting Chair: Thank you very much, Mr. McLeod.
Again, I apologize to all our witnesses for the time that we could have spent here in addition. You have provided us with a great deal of information, statistics, advice, which is greatly appreciated as we try and find answers to this enormous question and the problems around it.
Thank you for your attendance here today. You'll expect to see some questions from senators in writing and we'll look forward to your responses.
Colleagues, again, I apologize for not being able to get into questions.
(The committee adjourned.)