Proceedings of the Standing Senate Committee on
National Finance
Issue 32 - Evidence - May 26, 2015
OTTAWA, Tuesday, May 26, 2015
The Standing Senate Committee on National Finance met this day at 9:32 a.m., to review the expenditures outlined in Supplementary Estimates (A) for the fiscal year ending March 31, 2016.
Senator Joseph A. Day (Chair) in the chair.
[Translation]
The Chair: Honourable senators, this morning we begin our review of Supplementary Estimates (A) for the fiscal year ending March 31, 2016.
[English]
As honourable senators will know, last week we finished the work on this phase of the Main Estimates that lead to main supply. We are working on that report. I understand that report should be ready in about a week's time. It is in translation now. Once it is ready we will have a meeting to go over the report and have it filed so that we will be ready when we get the main supply. That is one of the items we are working on.
The second one is this one we are starting today. I expect that we will deal with the hearings today and tomorrow on Supplementary Estimates (A). Then we will have to get a report on that one. We have the Library of Parliament working hard for us. We will get that report in as well. When that supply bill, based on Sup A has arrived, then we will be ready for that one.
For the third and final one, we will start this afternoon on Bill C-59, the Budget Implementation Bill. We work on it for two hours this afternoon and then go right ahead with the departmental officials for the rest of this week on that one. That will be a busy time for us, but thank you all. I hope you all had a good rest over the weekend so that we are ready to go.
In our first hour this morning, on Supplementary Estimates (A), we are pleased to welcome our good friends from Treasury Board of Canada Secretariat, Brian Pagan, Assistant Secretary, Expenditure Management Sector; and Marcia Santiago, Executive Director, Expenditure Management Sector.
Mr. Pagan, you have the floor, sir.
[Translation]
Brian Pagan, Assistant Secretary, Expenditure Management Sector, Treasury Board Secretariat: Thank you, Mr. Chair, and good morning. I would like to begin by providing you with an overview of Supplementary Estimates (A) for 2015-16 after which we would be pleased to answer your questions.
[English]
If you turn to slide 3 of the presentation, I will begin with a brief overview of the organization of the document. This was tabled on May 14 to support the government's request for authority to spend public funds, which will be approved through an appropriation act later in June.
There are no major changes to the organization of the book, which is organized in three parts, but I did want to take some time to walk the committee through the organization of that and perhaps respond to some of your questions.
Part one is the introduction to the supplementary estimates. It summarizes estimates to date for the fiscal year and gives the total of these estimates. It also allows for comparisons between fiscal years by providing summary level information on estimates for the previous year and actual expenditures for 2013-14.
For example, turning to the tables and graphs on page 1-2 or —
The Chair: These are in the supplementary estimates?
Mr. Pagan: Correct. You will see summary tables that set out the amounts and comparisons.
[Translation]
This can be found on page 1-3 of the French version.
[English]
The introduction also describes the largest voted initiatives in dollar terms. For example: page 1-4 and 1-5 in English.
[Translation]
Or on pages 1-5 and 1-6 of the French version.
[English]
The introduction also introduces new vote authorities, which are being presented to Parliament for the first time. For example, on page 1-7 in the English version, or 1.8 in the French version, we see the introduction of the Canadian High Arctic Research Station for the first time. The Canadian High Arctic Research Station received Royal Assent on December 16, 2014. It combines the resources and knowledge of the Canadian Polar Commission and the current Canadian High Arctic Research Station into one federal organization, thereby strengthening Canada's leadership on polar science and technology. The act's provisions will come into force on a date to be determined by the Governor-in-Council at which time CHARS will be officially established as a new organization. By these supplementary estimates, we are positioning the Canadian High Arctic Research Station to have appropriations from Parliament.
[Translation]
Then, we have the introduction that provides a summary of the total amounts per department, on page 1-9 of the French version —
[English]
— or 1-8 in the English version.
[Translation]
Finally, the introduction provides descriptions of horizontal items that involve more than one department, on page 1-14 of the French version.
[English]
It is on 1-13 in the English version. That is the introduction to the supplementary estimates, which provides high level summary information.
The heart of the estimates document and the most detailed and largest section is section 2 of the supplementary estimates, which sets out detailed requirements by department and agency. Each organization will display its requirements by vote and initiative. Information is included on transfers, as well as a breakdown of additional grant and contribution funding by program.
[Translation]
The details for Treasury Board Secretariat can be found on page 2-38 of the French version.
[English]
It is on 2-45 in the English version.
I will take a minute or two to walk you through the detail of the Treasury Board Secretariat. I understand there were questions on central votes.
Looking at page 2-45 of the English version, we will see that Vote 1 is program expenditures. These are voted amounts for the sole use of the Treasury Board Secretariat. What follows, the remaining votes, are central votes for the management of the public service as a whole. These are not for TBS departmental use. They are for the management of the public service.
So Vote 5, Government Contingencies, is in the amount of $750 million. Government contingencies exist to provide a source of supply in the event of urgent or unforeseen requirements prior to the approval of an appropriation act. As an example, we have a recent case — in fact just last week — with Marine Atlantic. You will recall that in presenting Main Estimates at the beginning of the fiscal year that there was a reduction in Marine Atlantic's voted requirements and their operating budget to start the year. This wasn't a reduction. It was simply a question of timing. The corporate plan of Marine Atlantic had not been approved by Treasury Board ministers in time for inclusion in the Main Estimates. Therefore, Budget 2010 funding had lapsed and was no longer available to the department. I believe they started the year with some $19 or $20 million. Their corporate plan has subsequently been approved and is presented in these supplementary estimates. You see a fairly significant increase to the voted authorities of Marine Atlantic. That money will not be available to the department until the appropriation act is approved by Parliament later in June.
In that interim, the department is forecasting a cash shortfall to be able to continue with their operations. Therefore, we have allocated money to them from Vote 5, so that they can continue to meet their operating requirements in conformance with their mandate until such time as Supplementary Estimates (A) are approved.
In the online summary of central votes, you will see the detail for Marine Atlantic with an authority to access up to $22.1 million from Vote 5. In fact, last week we allocated $18.2 million from that authority. Again, this will cover their cash requirements until the approval of sups (A) in June, at which point Vote 5 will be replenished.
That is an example of a central vote that is used for the management of the public service.
The Chair: Where do we go to see that breakdown? I am looking at Treasury Board. Then do I go to Marine Atlantic to get the details?
Mr. Pagan: On the page on Treasury Board Secretariat, page 2-45 of the English version, you will see the amount of the central vote and then the wording is in the appropriation act. The actual allocation from that central vote is recorded in the online annex to the supplementary estimates. That detail is not presented here in the document, but it is available online.
When we turn to Marine Atlantic, we will see the new authority for that department that is reflective of the budget decisions and TB approvals. I am simply highlighting for you the interplay between the voted authority, which will only be realized later in June, and the use of a central vote authority which is now required to meet that more immediate cash need. That is the way in which the central votes are used.
The Chair: I have to go to your website to get the breakdown on the information as to how much of the government contingency went to Marine Atlantic?
Mr. Pagan: That is correct; yes.
To highlight one other central vote that is of recurring interest to this committee: Vote 25. This is the operating budget carry forward, in the amount of $1.6 billion, which is again, a central vote that is dispersed or allocated to departments in accordance with the provisions of the carry-forward mechanism.
As you know the fiscal year of 2014-15 has just ended, so we are in the process of finalizing the accounts and determining actual expenditures by department. To the extent that there is a difference between the authorities voted by Parliament and the actual expenditure of a department, up to 5 per cent of the program expenditures, the Vote 1 operating budget, is available for carry forward into the subsequent fiscal year. This was a measure that was introduced back in 1994 as a means of facilitating a more effective and efficient use of voted resources. It allows departments to better plan and to take account of changes to those plans resulting from program delays, contracting issues, staffing, et cetera.
As an example of some of the factors that are beyond a department's control: Supplementary Estimates (C), which was tabled in February, only received Royal Assent on March 31, which was the very last day of the fiscal year. As I recall, that was $1.8 billion. Departments don't have the authority to spend that money until they receive Royal Assent, so they were in a situation where $1.8 billion was approved on the last day of the fiscal year and was only available for use by departments until midnight on March 31. That is an example of a circumstance beyond the department's control and one of the reasons why a carry forward would allow for more effective and efficient utilization of the resources provided by Parliament.
We expect that some of those amounts approved in sups C will actually roll over and carry forward into fiscal year 2015-16. We are in the process now of working with departments to finalize their accounts. We will be presenting information on the use of that carry forward and allocations from that central vote in the next supplementary estimates that are presented to Parliament.
The Chair: You are speaking now of Vote Item No. 1, Operating.
Mr. Pagan: The operating budget carry forward is solely for the use of operating votes or program votes in departments — so Vote 1. There is a second carry-forward vote for capital requirements. These tend to be larger dollar value procurements, infrastructure, major equipment purchases, ships, et cetera. Therefore, the carry-forward provision for the capital requirements is higher; it is 20 per cent. If something happens on a major infrastructure or ship, then a contract can involve significantly more money.
Senator Chaput: This one is 10 per cent?
The Chair: Five per cent.
Mr. Pagan: The operating budget is 5 per cent and the capital carry forward is 20 per cent.
The Chair: That is for all departments other than the Department of National Defence, is that correct?
Mr. Pagan: Correct. For DND there is a much larger operating base and therefore their carry forward of their operating budget is 2.5 per cent.
That is a brief description of the detail that is available for each department in section 2.
I have taken some time to explain the Treasury Board Secretariat. The information presented is a little bit different in that we have an operating vote for departmental use, but we also have these central votes that are available for effective management of the public service. The vast majority of information presented on Treasury Board Secretariat deals with those central votes.
Wrapping up the overview of the organization of the document, as an annex to the tabled supplementary estimates, you will find the proposed schedule to the appropriation bill presented in these estimates. This is broken out in two schedules. Schedule 1 is for those departments with an annual appropriation expiring March 31, 2016 and then Schedule 2 is for those departments with non-lapsing appropriations: Canada Border Services Agency, the Canada Revenue Agency, and Parks Canada. Again, they have non-lapsing authorities.
As we just discussed, a great deal of additional information is included in online annexes. On the TBS website, one can find information on statutory forecasts, estimates by strategic outcome and program, planned expenditures by standard object, transfers between organizations, and any allocations or dispersements from TB central votes.
Additional expenditure management detail by department that transcends these supplementary estimates can also be found online at the TBS InfoBase site. I believe the President of the Treasury Board recently wrote to the committee outlining some improvements to InfoBase that may help with the study of estimates and an understanding of the expenditure management process.
Turning to page 4 of the presentation and specifics of this Supplementary Estimates (A), we see a table outlining the requirements from 43 organizations presenting planned expenditures of $3.1 billion in voted budgetary appropriations. This new funding supports government initiatives that were set out in Budget 2015 or prior budgets. Parliamentary approval for these expenditures will be sought through an appropriation bill later in June.
These estimates also show an increase of approximately $20 million in statutory spending, which relates to contributions for employee benefit plans. The statutory forecast annex, one of the tables available online, will show the various changes in anticipated statutory spending across all departments.
Turning to slide 5 of the presentation, we see a table that compares these supplementary estimates to previous exercises. As mentioned, these supplementary estimates request $3.1 billion in voted appropriations and present total authorities of $244.7 billion in 2015-16. Of this amount, $91.3 billion is voted by Parliament, or roughly 37 per cent of the total, with the remaining being statutory authorities provided through separate enabling legislation.
You will recall that the statutory amounts contained in the Main Estimates for 2015-16 are $4.4 billion higher than 2014-15. These forecasts of statutory expenditures continue an upward trend, driven by the annual escalator to the Canada Health Transfer and increases to elderly benefits.
The voted amount in Supplementary Estimates (A) of $3.1 billion includes $1.1 billion related to federal infrastructure initiatives. On the next slide, I will speak to some of the largest of these initiatives.
Turning to slide 6, in the introduction to supplementary estimates on page 4 — page 5 in French — we can find information on the largest voted amounts. In these estimates, we have highlighted 13 initiatives of $50 million or more. The 13 initiatives total approximately $2.5 billion, which equates to 78 per cent of the voted amount in these supplementary estimates.
We have divided the list of major items into two parts. The initiatives you see on slide 6 relate to the November 2014 announcement of $5.8 billion in federal infrastructure funding. As you look at section 2 of the supplementary estimates, the detail by organization, you will see that these items, as well as initiatives for smaller amounts, have been tagged as federal infrastructure to make them more easily identifiable.
The largest of the federal infrastructure items presented in Supplementary Estimates (A) is $345.7 million for Parks Canada. That funding will allow Parks Canada to make improvements to parks and national historic sites in all provinces and territories. Examples include restoration of the historic walls around Old Quebec City and repaving of sections of highway within Banff and Jasper National Parks.
The second largest of the federal infrastructure items is $219.8 million for Canadian Armed Forces bases and other National Defence properties. The funding will support both new construction as well as repairs and upgrades. Examples include a new support training centre in Kingston, Ontario, and repairs to airfields, hangars and armories across the country.
Fisheries and Oceans is requesting $189.3 million in funding to accelerate infrastructure work related to the repair and maintenance of small-craft harbours. The department will also use the funding for vessel life extension projects and the purchase of new small craft.
Public Works presents requirements of $70.2 million for real property projects. This amount does not include funding already provided for the parliamentary precinct.
Transport Canada's infrastructure funding of $58.3 million spans a range of activities across the country, including six federally owned airports and the retrofit of a testing facility for hydrogen fuel cell liquefied natural gas and battery electric vehicles.
Finally on page 6, we see $50 million for Indian Affairs, which is part of a $500 million, seven-year initiative announced in Budget 2014 for on-reserve schools. At least 12 new schools are to be built over the next seven years with the money provided.
Turning to slide 7, we see the other major items that are not part of the federal infrastructure announcement. The largest amount of $402.6 million is for the construction of the Gordie Howe International Bridge to connect Windsor and Detroit. The project includes a new six-lane bridge across the Detroit River and associated border inspection plazas and connections to the freeway systems in Ontario and Michigan.
Other major voted items include Marine Atlantic, which I mentioned earlier, presenting an operating capital requirement of $354.9 million; Indian Affairs and Northern Development for out-of-court settlements totalling $255.5 million; the Department of Natural Resources for the Nuclear Legacy Liabilities Program, $231.3 million, which is a part of a 70-year strategy to deal with the safe disposal of nuclear waste; Atomic Energy of Canada, $164.9 million for nuclear science and medical isotopes; the Jacques Cartier and Champlain Bridges Inc. for $58.1 billion; and the National Research Council, $52.4 million.
[Translation]
As I mentioned earlier, the introduction for Supplementary Estimates (A) contains descriptions of horizontal initiatives that involve more than one department. An overview of those horizontal items is provided on slide 8 of this presentation.
[English]
The first item that you'll see on slide 8 is the first year of the $75 million, three-year initiative announced in Budget 2015 to support the continued implementation of the Species at Risk Act. Funded activities include species assessment, listing and recovery planning, as well as the implementation, monitoring and evaluation of protection action for species at risk.
The second horizontal item involves four organizations' activities aimed at preventing family violence and violent crimes against Aboriginal women and girls. This funding will be used to raise awareness of the impact of violence, to undertake prevention activities, to address community safety needs, and to support victims of violence and their families.
Finally on slide 8, we see renewed funding of $15 million over five years for the National Counterfeit Enforcement Strategy, which was announced in Budget 2015. The funding support provides dedicated resources within the RCMP and the Department of Public Safety for the enforcement, prosecution and prevention of currency counterfeiting.
[Translation]
In closing, Mr. Chair, these Supplementary Estimates (A) present Parliament with requirements for 43 departments and agencies, totalling $3.1 billion.
[English]
A supply bill supporting this appropriation request will be presented to Parliament later in June.
With the conclusion of this overview and introduction, Ms. Santiago and I would be happy to respond to any questions you may have.
The Chair: Mr. Pagan, thank you very much. I will go to the list I have, but before I do that, I wonder if you could go back to the Treasury Board outline of expenditures and the $750 million government contingency that you discussed with us.
Can you tell us how that relates, if at all, to the $1 billion amount the government sets aside when it does its budget forecasting for the year? It used to be $3 billion, but this year it's down to $1 billion for the next year or so. How does that $1 billion set aside in budgeting and planning relate to government contingency?
Mr. Pagan: Thank you for the question, Mr. Chair. Vote 5, Government Contingency, which is presented in the Main Estimates of the Treasury Board Secretariat and is reported on in subsequent supplementary estimates, is a mechanism that is in place now and can be exercised by departments in real time.
For instance, again going back to the Marine Atlantic example, we see in these supplementary estimates a request from Marine Atlantic for $354 million, which will be approved by Parliament sometime in June with the tabling of the Appropriation Act. Vote 5 exists in the event that there are urgent or unforeseen circumstances in a department where they need immediate access to cash in order to support their activities. Vote 5 has been approved by Parliament for the direct allocation by the Treasury Board to that department to support an immediate cash need.
The contingency of $1 billion that was presented in Budget 2015 is a more general provision in the fiscal framework to account for any manner of changes to the economic forecast or the expenditure requirements of the departments. It exists to, for instance, counter unexpected changes in interest rates or economic growth. It would allow its revenue and expenditure forecasts some flex or buffer between their forecasts and the actual amounts.
It could also be used by the Minister of Finance, with the approval of the Prime Minister and Treasury Board, to augment expenditure authorities of a particular department. It might very well be that there's a situation where a department identifies an unanticipated requirement beyond its approved mandate or programs. A portion of that contingency vote could be allocated to the department to augment their existing activities. In that case, that would be approved by Treasury Board and would also be presented for approval by Parliament to augment the estimates authorities of a department.
They're similar concepts in the sense that they exist to account for unanticipated requirements. The contingency in the budget are much broader because it allows for not only program developments in a department, but also the broader economic and underlying forecast of the government with respect to revenues and expenditures.
The Chair: So the $1 billion — the government anticipates, let's say, $401 billion worth of revenue, but they plan for expenditures of $400 billion, so they have that cushion of $1 billion in there?
Mr. Pagan: Yes.
The Chair: If something comes up where they need to provide more expenditure, we would expect to see that in one of the supplementary estimates before it could be used for expenditure; is that correct?
Mr. Pagan: That's correct.
The Chair: At the end of the year, with respect to the Vote 5, the $750 million one that's managed by Treasury Board, you keep using that during the year, but it's topped back up with supplementary estimates when the amount is approved for Marine Atlantic, for example. You might have been given access to that for a short period of time, but then it's brought back up to $750 million.
Mr. Pagan: Correct.
The Chair: At the end of the year, you expect to have $750 million sitting there.
Mr. Pagan: Correct, and that funding would lapse.
The Chair: It lapses. So it's there and available to help balance the budget at the end of the year?
Mr. Pagan: Correct. The only circumstance in which Vote 5 would not be replenished or topped up is if there was an allocation from the vote subsequent to the tabling of the final supplementary estimates of the year. So had there been an instance where we were to allocate funding from Vote 5 to a department after the final tabling of supplementary estimates for the year, there would be no mechanism by which Parliament would be able to replenish that vote. So we wouldn't be able to carry forward the full $750 million — we don't carry forward. That funding would simply lapse as unexpended funds in the fiscal framework.
The Chair: When you look at the revenue that the government wishes to allocate and that we vote on, $750 million of that revenue is Vote 5 contingency. So it's going to be there at the end of the year. When it lapses, the revenue that wasn't used can therefore be used to either reduce the debt or deficit.
Mr. Pagan: Just to clarify: Vote 5 is to support departmental expenditures, so it's not part of the revenue forecast. The government, in the budget, will be forecasting a revenue target. They will be forecasting departmental expenditures.
The Chair: Including the $750 million, right?
Mr. Pagan: Correct.
The Chair: So if it's not spent, which it isn't — you don't anticipate it would be spent — if the system works well, it's going to lapse at the end of the year.
Mr. Pagan: Right. This becomes part of the ongoing narrative around departmental lapses. As the president of the Treasury Board has said, it is normal and expected in our system where Parliament provides a vote authority of an "up to" amount. It is normal that we have lapses in votes, simply because departments cannot exceed that voted authority. In the case of a central vote like Vote 5 Government Contingencies, where it's only used if existing appropriations are insufficient for cash needs, then we would expect, as you say, to see a significant lapse, if not a lapse in the entirety of that vote at the end of the fiscal year.
The Chair: The only other point of clarification is in relation to one of the major expenditures, or other expenditures that you discussed. It was the Jacques Cartier and Champlain Bridges. Some funds are being requested to build a bicycle path on one of the bridges. That would not be on the Champlain Bridge, which is being replaced, I assume. The Champlain Bridge has a separate authority and funding; is that correct?
Mr. Pagan: Correct. Thank you for the question. I should be perhaps more precise on that requirement. The $58.1 million presented in the supplementary estimates for the Jacques Cartier and Champlain Bridges Incorporation is required to support construction on the estacade, which is the ice control structure running parallel to the Champlain Bridge, about a thousand feet upstream. It's a span of some 2,000 metres and it extends east-west between Nuns' Island and the St. Lawrence Seaway. The Jacques Cartier Bridge Corporation needs to reinforce the concrete deck to enable the estacade to be able to handle construction materials and vehicles while the new bridge is being constructed. At the same time they will also construct a separate bike path to protect the safety of the 150,000 to 200,000 cyclists that use the estacade annually.
The Chair: That is very interesting. Am I correct in my recollection that the Champlain Bridge has a separate authority for construction that's going on and a partnership with the private sector to build the new bridge?
Mr. Pagan: That's right. The corporation has just concluded the RFP process and announced the results of that contracting process with SNC-Lavalin leading a consortium to build or to finalize construction of the bridge by 2018.
The Chair: But the money for that does not flow through this particular Jacques Cartier and Champlain Bridges Inc.? It flows through another entity?
Marcia Santiago, Executive Director, Expenditure Management Sector, Treasury Board of Canada Secretariat: There is only one vote for the corporation, but the funding for that arrangement that Mr. Pagan described is not part of the $59 million that's in these supplementary estimates. It was previously appropriated.
The Chair: But still through that same entity?
Ms. Santiago: I think so.
The Chair: I thought it was going through Infrastructure Canada or —
Mr. Pagan: No. When the contract is awarded, it will be presented in a subsequent estimates process.
The Chair: That's helpful for background.
[Translation]
Senator Maltais: In the case of the Jacques-Cartier Bridge, and particularly the Champlain Bridge, we see the need for weekly repairs that are urgent and necessary. Are these repairs included in the $59 million amount, or will the Federal Bridge Corporation be receiving additional funds?
[English]
Mr. Pagan: In my opinion, in this supplementary estimate, we are presenting the new requirements specifically for this estacade. The ongoing work that you mention is part of the existing reference levels of the corporation that would have been presented in Main Estimates.
[Translation]
Senator Maltais: This morning, the Federal Bridge Corporation identified urgently needed repairs on the Champlain Bridge while awaiting the construction of a new bridge. Apparently, these repairs will be quite expensive. Will the cost of this work appear in a separate budget, or will it be included in the $59 million budget?
[English]
Ms. Santiago: Very likely. If there are new requirements that have been identified after we prepared Supplementary Estimates (A), if the costs of those repairs can't be handled within the existing authority of the Crown corporation, they would have to seek a new funding decision and then you would see them in a future supplementary estimate.
The Chair: Or Governor General warrants.
Ms. Santiago: Or warrants.
Mr. Pagan: If one turns to the detail of the Jacques Cartier and Champlain Bridges Incorporation, which in the English version is on page 2-43, we see that in previous estimates, which would be Main Estimates for 2014-15, the corporation has a funding base of $368.7 million. This becomes the operating budget for the department to support ongoing maintenance and operations in accordance with their mandate.
Through the supplementary estimates, they've identified a specific requirement for the estacade. As Marcia says, if more recent developments and more urgent work cannot be incorporated from their existing base of $368 million, then that would be presented as yet another supplementary requirement necessitating the approval of Parliament.
[Translation]
The Chair: Would you like to stay on the list to ask further questions?
Senator Maltais: No.
The Chair: All right. Senator Bellemare, from Quebec.
Senator Bellemare: I am trying to understand the link between the supplementary estimates and the departments' plans and priorities. I will take the example of Parks Canada, which is asking for one of the highest adjustments in Supplementary Estimates (A), on the order of $349 or $354 million.
We will be voting on appropriations, and when we examine the plans and priorities, I would imagine that those appropriations will be linked to a particular program and subprograms.
In the Parks Canada Agency example, each subprogram has its own budget, and when you look at the subprograms of each department, there is a budget appropriation for every subprogram with FTEs.
When we adopt the adjustments for Parks Canada, we adopt a total amount. But do you know where this money goes? For the Parks Canada Agency, where there are different subprograms and programs, we can see in the table of contents in program 1.1 for example, which is called Heritage Places Establishment, that there are subprograms like national park establishment and expansion, national marine conservation area establishment, and other heritage places designations.
Will the appropriations that we vote on be allocated to subprograms or to the overall program? Can be appropriations be allocated to subprograms that do not exist?
Mr. Pagan: Thank you for your question, senator. It is a fairly complicated question, but I will do my best to answer it.
Senator Bellemare: You can answer in English; everyone will be able to understand.
[English]
Mr. Pagan: The interplay between departmental votes, the means by which Parliament controls departmental spending, and the allocation within departments by program and subprogram is a complex area and one of some ongoing discussion in terms of the best means of presenting information in an open and transparent way. I can assure you, senator, that we do have a line of sight into the department to know where the department is spending that money and the results that they're achieving.
Unfortunately, I don't have the departmental RPP in front of me, so I can't speak to the details of their program activity, but the basic construct is that we present in the Main Estimates authorities requested by departments that are controlled by Parliament at the vote level: Vote 1 operating, Vote 5 capital.
Senator Bellemare: The big picture.
Mr. Pagan: Yes. Within that big picture in the Main Estimates, we will disaggregate those votes by the program activity of the department, so that becomes the starting point for the year.
Senator Bellemare: Do you say yes to the proposition of the department?
Mr. Pagan: Yes.
Senator Bellemare: At the program and subprogram levels?
Mr. Pagan: The Management, Resources and Results Structure policy of the Treasury Board Secretariat is the mechanism by which we work with departments and the Treasury Board to organize their business in these strategic outcomes, program activities and subprograms. That basic structure, which is developed by individual departments, is presented to Treasury Board Secretariat officials for review, comment and challenge, and ultimately to Treasury Board ministers for approval. It's the means by which Treasury Board ministers satisfy themselves that the individual activities in a department are rolling up to successively higher levels of outcomes and achievements which can be monitored, tracked and reported on.
Now, I don't have the exact number in my head, but there are more than 1,350 program activities across government, so it's huge. The simple fact is that to present that level of detail to Parliament would become —
Senator Bellemare: It's a delegated power to the ministers of the Treasury Board?
Mr. Pagan: That's right. The Treasury Board ministers approve those program activity architectures. We present information both in the Main Estimates and in the public accounts about how that money is related from a vote to a program activity.
Senator Bellemare: And the subprograms, too?
Ms. Santiago: No. We don't publish that.
Senator Bellemare: Not in the public accounts?
Ms. Santiago: No.
Senator Bellemare: Only the programs are published?
Ms. Santiago: Yes.
Mr. Pagan: Again, to make that link between the Main Estimates and Public Accounts Volume II, where if you were interested in a particular department, you would be able to go in and see the actual authorities approved by Parliament for that program activity and then the actual final expenditure against that program activity.
It's very important to understand this, because within a year there can be several, sometimes a dozen program activities in a particular vote. Again, using the example of Supplementary Estimates (C), which was only approved by Parliament on the last day of the fiscal year, in order to manage within their vote authority, departments do require the flexibility to move funds, to reallocate funds from one program to another within the vote. They can't transfer between votes as that requires approval by Parliament, but within the vote they have flexibility. If a contract for program X is delayed or a staffing action for program Y is delayed, the funds that had been allocated to that program can be moved to another program in the vote as long as it is again within that total authority or construct of the vote approved by Parliament.
Senator Bellemare: If a department wants to add a subprogram, do they need to seek the authority of the minister of Treasury Board to create a new program out of the blue during the year?
Ms. Santiago: A new program, yes.
Senator Bellemare: And a new subprogram?
Ms. Santiago: New subprograms are a delegated approval.
Senator Bellemare: Delegated to whom?
Ms. Santiago: The secretariat and sometimes to the department itself.
Senator Bellemare: So it's the department itself that creates subprograms?
Ms. Santiago: They can refine their subprogram structures. Those are the structures that you don't see in the Main Estimates.
Senator Bellemare: I know, but does the creation of subprograms usually have to be approved by the Treasury Board minister?
Ms. Santiago: No. Minor adjustments are left to the secretariat and to the department itself.
Senator Bellemare: Even though it's a completely new subprogram, it would be the authority of the minister.
Ms. Santiago: Of the organization, as long as it doesn't affect the bigger program that it belongs to.
Senator Bellemare: Does it affect the total amount of money spent in the program?
Mr. Pagan: The total amount of money spent in a program. That's a very good question. Treasury Board ministers will approve the terms and conditions of a program, including the amounts available. That becomes part of an aggregate number of votes by a department. So again, within that vote, it is permissible to reallocate funds from one program to another to take account of in-year developments related to that program.
Senator Bellemare: From one program, not subprogram, by the authority of the Treasury Board?
Mr. Pagan: Correct. We approve a program structure, but we do not control the allocation of funds within those programs simply because, again, there are 1,300 programs. Departments do require some flexibility to account for in-year developments and the issues around staffing, working with partners and contracting, so that if planned activity in one program does not materialize, they are able to reallocate from one program to another, as long as it's within the confines of that vote.
That is the art of cash management in departments. It's a complex, multi-billion dollar business in most departments that has to account for, again, working with partners, contracting, staffing and parliamentary approvals, not all of which are within the influence or control of the departments.
Senator Bellemare: I understand. Related to that, I have one more question.
Have you had discussions with respect to finances with administration about the law on deficit, le loi sur la deficit dans 2015? There will be consequences if there's a deficit. In the bill it says that the consequences will be on the Prime Minister, the ministers and the deputy ministers.
So if it is a department in particular that is responsible for this deficit, have you had discussions so you can identify the program that has not been respected in the expenditures? Have those debates been had yet, or is it not yet clear how it will be?
Ms. Santiago: It's very early days still. We've only just begun to talk about how that bill might be implemented.
The Chair: Just to clarify the record, Bill C-59 has not come to the Senate yet. It's a budget implementation bill. We will be having a pre-study on it, but we never know what the final form will be until it arrives in the Senate, so we're into speculation here.
Mr. Pagan: What I should say, however, in response to the question is that in the area of fiscal forecasting and management of public finance, it can be very difficult to pinpoint a surplus or a deficit on one particular program. Again, there are issues of economic forecasting, underlying interest rates and economic growth which play on the revenue side.
On the program expenditure side, there are voted authorities approved by Parliament which are up-to amounts. It is, as you know, very rare in our system that a department would exceed its authority and therefore unlikely that a deficit would be caused by a department exceeding a program authority.
Senator Eaton: You're talking here about more than $11 million to address family violence, funding of $16.2 million and I guess $11 million in Supplementary Estimates (A). What I find interesting is that the organizations — well, you might tell me. The organizations that this money will go through are Indian Affairs and Northern Development; Department of Justice; Office of the Co-ordinator, Status of Women; and Public Safety and Emergency Preparedness.
When you start this program, if you come before us next year and we ask you, "Have you lowered family violence?" how will you make it accountable? Who is in charge of seeing where the money actually worked, or is it just another $16 million thrown at a problem?
Ms. Santiago: I think we can start by saying $11 million of those $16 million are for capital contributions to First Nations to build shelters. For the first $11 million, it's fairly discrete and identifiable.
Senator Eaton: Okay, $11 million for shelters. When we had Canada Mortgage and Housing here and they're spending $400 million a year, they have no way of going on reserves to make sure the building and houses — as I'm sure you've heard — are up to scratch. In other words, there are no building codes. They cannot make sure that the building codes are as good or as strict as the ones that would be imposed in downtown Ottawa or Halifax.
Will it be the same thing for the shelters? In other words, you're going to give $11 million and you hope shelters are built? Or will there be some way of assuring yourselves that those shelters will be built?
Ms. Santiago: With respect to the specific measures around program assurance, you would have to go to Indian Affairs to talk about what they're particularly doing in this area to ensure the shelters are built and that the program available through the shelters is what it should be.
Senator Eaton: In other words, you give them $11 million and it's kind of "goodbye"?
Mr. Pagan: No, I don't think that would be a fair characterization, senator.
There are really two dimensions to your question, and it's a very good question. The first thing you mentioned relates to the question from Senator Bellemare in terms of the role of the Departmental Planning and Performance documents, so the Report on Plans and Priorities and the Departmental Performance Reports. In those documents, the departments should be presenting details of their various programs, including a horizontal initiative that had such profile as announced in Budget 2014.
That's where one would find a bit more detail than is presented in this document in terms of the outcomes and outputs to be achieved. Then the departments should be reporting regularly on these in their DPRs. We work with departments to make sure there is ongoing attention to the transparency required.
Senator Eaton: We've had Indian Affairs here before us, but when you give them money or you come and appeal for money before the government, you don't take on the accountability aspect of it. Once they've presented their case — and it could be a very good one — you give them the money and it's kind of "goodbye." Is that right?
Mr. Pagan: At the Treasury Board Secretariat and with the Treasury Board ministers, we are responsible for putting in place the framework for the management of public funds, so policies related to the awarding of contracts, the payment of invoices and the staffing of positions. We would have an accountability to make sure those policies are being followed. The actual results achieved on the program, it's the department that's accountable for that.
Senator Eaton: Let's take the shelters, because those are buildings. You would expect Indian and Northern Affairs to send you back invoices. Would they have to come back to you and prove that those buildings had been built? I'm sorry; I can see that you've put the process in place, but do they actually come back and follow the process?
Mr. Pagan: Right, and that's the second dimension of your question. The first is the RPP and DPR, where they set out their plans and report against those, and committees are always encouraged to review those with departments in detail.
The second dimension is our evaluation policy. As you may know, a new policy was introduced in 2009 which required that over a four- or five-year cycle, every government program is evaluated to make sure that it is achieving its intended purpose and providing the results expected of the expenditure of public funds.
So it's in an evaluation report where we would have a very direct line of sight in terms of what has been achieved by a department, whether they have met their plans, if there have been obstacles or impediments and what their workaround is to deal with those.
We're not in a position at the Treasury Board Secretariat where we are taking every bill or invoice and reviewing and approving them before they're paid. A long time ago that was the role of the Comptroller General of Canada, but the Government of Canada has gotten too big and complex to provide that line of sight. Through the RPP and DPR, through evaluations and through our ongoing challenge function of departments, every time they come forward with a new submission we use that opportunity to add to our knowledge base of what is happening in that department, satisfy ourselves that the new requirements are incremental to what has already been provided to the department, and ensure that there is progress in realizing the objectives and the achievements.
Senator Eaton: I guess it is frustrating. We have numerous witnesses that come before us, obviously, every week. For instance, there was one item a couple of months ago, $45 million to teach First Nations how to fish. You say to them, "So how many people have you taught to fish and what are the successes of where this money is going?" They say," Well, we don't know yet."
It is frustrating as a taxpayer, because you keep hearing about how First Nations are not getting this, don't have adequate housing and don't have clean water. We seem to be spending so much money, but we don't seem to have the accountability column in place yet where, at the end of the year, people can go around and count how many shelters have been built, whether they are up and operating, and if not, why not. We never seem to get those answers.
Mr. Pagan: Unfortunately, I am not familiar with the specific issue you are speaking to about training fishermen, but I can assure you that the management resources results structure, that policy that takes a departmental spend and disaggregates it by strategic outcomes and programs, is designed exactly for the purpose that you mention, namely to track dollars to programs and measure results or achievements against those programs.
We have been at this for approximately 10 years now. I think the current framework for program activities was introduced in 2005-06. It may be admittedly far from perfect, but there are good success stories and examples of where departments are able to be precise about what they are spending on a program and what they are achieving for that program.
Quite frankly, where they are not, they should be taken to task for that by committees, by their stakeholders and by Treasury Board of Canada Secretariat and Treasury Board officials. In allocating scarce resources, we expect that it is for a defined purpose and will achieve some measurable, demonstrable outcome. Through the instruments that I mentioned, we work hard to try and advance that agenda so that we can satisfy ourselves, the President of the Treasury Board, the Minister of Finance and parliamentary committees that the allocation of those resources is resulting in benefits to Canadians and stakeholders.
Senator Eaton: Thank you.
The Chair: Lots of different questions arise from this exchange that you have had. I guess part of the accountability aspect is us, the questions we ask and the performance we demand.
Ms. Santiago, you indicated that of that $1.7 million to Indian and Northern Affairs that appears at page 1-13 has some shelter —
Ms. Santiago: The $11.7 million, yes.
The Chair: That is, construction infrastructure. However, if you read the wording at page 2-18, it doesn't talk about infrastructure. It just says "funding to address family violence." Where do we go to find out the breakdown? Is it plans and priorities that we have to go to?
Ms. Santiago: This would have been approved after they established plans and priorities. In general, yes, the breakdowns would be available from the departments. The information that I provided is based on the information the departments gave us when they were presenting their sups.
The Chair: It would have been helpful if it had been in the Main Estimates to tell us that some of this was going to infrastructure. It looks here like it is all going to the department.
Senator Eaton: Yes, to several departments.
The Chair: For the $11.7 million is 1a and 1a in Indian and Northern Affairs is "Operating Expenditure." So they are keeping $610,000 to manage this account and then 10a is the balance of the $11.7 million and that is grants and contributions.
Ms. Santiago: Construction on reserve is normally done through contribution agreements with the bands.
The Chair: Yes. We have followed up on that. Senator Eaton and others have asked questions about what the Government of Canada's follow-up is. We were told that they don't have a lot to say once the money goes on reserve. That is what we have been told in the past, but that is another department.
Ms. Santiago: Correct.
The Chair: We have two different items. Vote 1a, where Indian Affairs and Northern Development keeps $610,000 and then transfers the balance as a horizontal item.
Ms. Santiago: No, it transfers the balance to First Nations out of the grants —
The Chair: Grants and contributions?
Ms. Santiago: Yes.
The Chair: We can find out that much. To clarify a point, when we look at this $11.7 million, which is in the horizontal items, it is not part of anything else in the major items that we looked at, namely major items and other major items? Indian Affairs and Northern Development appear in those comments as well at pages 1-4 and 1-5. We then go over to "horizontal items" and it appears again. We are not double accounting here and double counting, are we? They are in one or the other, is that correct?
Ms. Santiago: That is right.
Mr. Pagan: If I may, the evolution of our reporting on horizontal items in fact stems from just that very concern.
Several years ago, we would have descriptions of items in many departments that were all saying the same thing. Committees were naturally concerned that there was a duplication of effort going on. In the introduction of the estimates, we summarized those horizontal items so that you can see where there are instances of departments working together to address a common problem.
As you quite rightly note, on page 1-13 we see an overview of those horizontal items, including funding to address family violence and violent crimes. For those four departments, including Indian Affairs and Northern Development, you will see a bit more detail about that particular item in the departmental page proof. That is the manner in which we are best able to present to committees the fact that there are initiatives out there that concern more than one department and that they are working together to address those priorities.
The Chair: Is that Treasury Board's job? When Indian Affairs and Northern Development asks for money and suggests the different things and you say, "We will take out that portion and put it in horizontal items," or is the department made aware of that and they say, "This is a horizontal item" when they come to you?
Mr. Pagan: That is a good question. In fact, it is a sort of ongoing dynamic. Often the start is the budget process, where the Minister of Finance and the Prime Minister will look at a number of different funding requests from departments and realize that there is a horizontal nature to some of these issues. They will provide a source of funds for multiple departments to address that. The Treasury Board of Canada Secretariat will then work with those departments to develop the terms and conditions of the program.
In other instances, it can be, again, the results of evaluations which conclude that perhaps a department working on its own is not sufficiently able to address a complex issue and needs to work with partners. Then we can feed that information, again, into the budgeting process.
It is an ongoing dynamic, but the way in which it is presented here is our responsibility at the Treasury Board of Canada Secretariat. As a result of feedback from this committee, from house committees and from the Auditor General, we have organized the document in such a way that you can see at the outset where there are horizontal initiatives and then provide that detail in the departmental summaries.
The Chair: Thank you. That was helpful.
Senator Eaton, what I was trying to clarify were some of the points that you had raised.
Senator Eaton: Thank you very much. I guess the same question could be asked about the repair and construction of on reserve schools — the $50 million. Again, we have no data that will assure that they will be repaired.
The Chair: Some of the difficulty is that we have one group in and they say you should ask somebody else. Then we ask somebody else and they say you should ask somebody else. Maybe one day we will have everyone in together.
Ms. Santiago: I was going to backtrack and make a correction and then an apology. When Senator Maltais asked about the funding for the construction of the new bridge in the St. Lawrence, it was in my head that it was the Jacques Cartier and Champlain Bridges Inc., but it isn't. For the new construction, the funding will go through the office of Infrastructure Canada. I am sorry.
The Chair: That's alright. That was our suspicion, but we were going to check that after the meeting. Now we don't have to. Thank you very much.
Senator L. Smith: I want to follow up on your point and that of Senator Eaton and ask a question of Mr. Pagan and Ms. Santiago. If I understand correctly, the Treasury Board has an overseeing responsibility on some of the other departments in terms of money spent, allocations, et cetera: Is that correct?
Mr. Pagan: That is correct, yes.
Senator L. Smith: For the last two years, our committee is not trying to be negative and we are trying to be positive where we can make a contribution, but with the accountability concept, I think there is an opportunity for maybe Treasury Board or whoever has the initiative in your plans and priorities to really clarify and pick some examples. The examples, of course, brought up by Senator Eaton are on point because you have the Treasury Board, Public Works, Indian Affairs, CMHC, as an example, involved in funding for construction of houses and then when we get CMHC in and ask the question: what about the codes? Then we are told that it is in the jurisdiction of the band councils.
My only thought is that if you are giving money out, then you have a certain authority to given money out, if you are in a banking function. Is it not unreasonable to ask to make sure that the conditions for proper coding are set up in such a way that you can have consistency? We recognize that there are hundreds of different groups across the country involved in this, but wouldn't that be an opportunity, if you guys are the overseers, to make sure that that accountability is put on paper and is measured properly? The truth is that we do get these people coming in, telling us what they can't do. There is something missing in the accountability framework. Truly, if we are to build more efficient systems within government, it would appear that there is an opportunity. This is not to say that you are not doing a good job; that is not the point. But it is maybe to pick some examples.
Another example was with defence contracts when we had Public Works in and, chair, you remember that. We asked questions on the allocation of contracts. We asked about the accountability of these contracts. The trouble is that everyone is working hard in their own area, but there appears to be an opportunity to have coordination in terms of that accountability framework — but a real accountability framework that is tied to dollars, cents and performance.
Maybe that is something that you folks can do because a lot of people say that it is their responsibility; it's not my responsibility. There are jurisdictional issues. We can't do this or that but, wait a second, when you are handing out millions of dollars, then there has to be a way that this can be done and implemented in a step-by-step process. You have probably already done it and maybe I am completely wet behind the ears, but it appears that we see this on a recurring basis.
From our perspective, as a committee, if one or two examples were taken, worked out and we saw the results, then we could say that we made a contribution to the government. That is just a point, not a sermon, but it is a thought. What do you think?
Mr. Pagan: Thank you, senator. Quite honestly, I think you are bang on. We work very hard at the secretariat and with Treasury Board ministers to make sure that there are clearly defined terms and conditions so that we know what we are buying when we allocate money. The accountability for implementation, once approved, rests with department X or Y to deliver on that.
I think the work that remains to be done is to improve the performance information, as you say, and there are some good success stories across government in the way in which departments use performance information to continually inform and improve the delivery of their programs and services. There are also examples where a great deal of work remains to be done. Some of these areas can be especially complex because they involve other jurisdictions, others levels of governments and all kinds of things.
However, the core of accountability is performance information and knowing, in concrete terms, what outcome or output has been achieved with the dollars provided. We recognize that as an opportunity in the secretariat. I can assure you that the President and the Secretary of the Treasury Board have directed me and my team to move the yardsticks in that area and deepen our use of results measures and performance indicators on programs.
Over the last several weeks, we have engaged with departments, CFOs and program managers to identify what we are good at and what strengths we can build on and maybe some gaps that need to be addressed to be able to move this forward.
Senator L. Smith: If I could interject, the deputy minister that was sitting right beside Senator Rivard, from Public Works, had an interesting explanation of how she was able to coordinate with other departments within the federal government and even the provinces in dealing with infrastructure-type projects in terms of the accountability. However, still at the end, we are waiting to see the bottom line that was able to be delivered.
I recognize there are cross boundaries and people are reaching over other people in terms of departments. I am listening to what you are saying but, again, if there were some specific success stories that you can come in and talk to us about. If we have had any influence on creating any form of mechanism that you guys can create, then I think our committee has done a hell of a job. We keep on bringing up the same issues.
Mr. Pagan: Senator, I welcome the opportunity to come back and have a discussion about performance measures in government, what we are doing, what is working and maybe some observations about what is not working. Some of the needs expressed by the committee would be helpful to us in moving forward.
The Chair: And some concrete examples from you.
Mr. Pagan: I mentioned the policies on management reporting results structure and our policy on evaluation. We have recently assessed both policies. We have done an evaluation of our own policies to see how they are working and what adjustments might be required.
We are in the process of doing a reset of those policies and combining them into one. They are both aimed at establishing value for money and being able to track the allocation of resources to results. In moving forward with that policy rewrite, again, I would welcome an opportunity to meet with the committee to understand better your views and expectations with the idea that we could take that back and make sure that our policy directions to departments reflected the needs of parliamentarians. I would very much welcome that.
[Translation]
The Chair: I would like to ask Mr. Pagan and Ms. Santiago to take their pens, because I am going to call on the three senators who still have questions to ask. Please give a brief answer to the questions. If that is impossible, perhaps you could submit your answers in writing.
We will start with Senator Chaput from Manitoba.
Senator Chaput: Thank you, Mr. Chair. I would like to receive a written response if you are not able to answer my questions. On page 6 of your presentation, under major voted items, transportation infrastructure is discussed. The transportation system is undergoing modernization, and many airports belong to the federal government. There is also another program. I would like to know, first of all, what percentage of the $58.3 million will be dedicated to modernizing airports that belong to the federal government? Could this modernization include addressing the technological needs of the airports? For example, could a small airport that does not have a website but wants to develop one use this program to do so? How is the funding allocated? Do the federal airports have to make a request for funding, or does the Department of Transport determine what the airports' needs are?
[English]
Senator Wallace: Mr. Pagan, as you know, each of us represents regions of the country. Senator Mockler and I are from New Brunswick and we have a particular interest in New Brunswick — and Senator Day. That is right, chair. You live 10 minutes from where I live and I forgot you.
The Chair: That is right.
Senator Wallace: In any event, with the infrastructure announcements that you have highlighted, when I look at each of these, whether it is Parks Canada, National Defence or Fisheries and Oceans, I am wondering how those impact New Brunswick. What monies could impact infrastructure in New Brunswick?
My question for you is whether we should be directing those to those departments when they appear before us, or can you provide us with that information?
[Translation]
Senator Maltais: In your presentation, in the major voted items section, there is funding for endangered species. You know that the government, the Senate, nearly all of the Atlantic Provinces, and Ontario, have all mobilized to help protect the Atlantic salmon. Minister Shea has responded favourably to agreements with suppliers, fishers' associations, universities and researchers. She agreed to some fairly small amounts for this year, but it was not really necessary to obtain more money. I believe it was around $1 million. What I would like to know is what would happen if the minister submitted a request for supplementary appropriations once she has finished her consultations? She has already started the tour, and the only place she has not visited yet on the list is Quebec City. She will undoubtedly be presenting the recommendations that were made, including making more significant investments than those that have already been made, in other words around $1 million. The Atlantic salmon represents added value for Canada, both in terms of reputation and in terms of gastronomy. So I would like to know, will the minister be able to obtain supplementary appropriations if she asks for them?
[English]
The Chair: Are there any of those questions you can answer quickly, or would you rather give us a fulsome answer in writing?
Ms. Santiago: It would be better for us to send you written answers for all of them.
The Chair: It would be better for us, actually, too.
Thank you very much, Treasury Board of Canada Secretariat, Mr. Pagan and Ms. Santiago. We appreciate your help. We ran over time because of the interest that we have and the rapport we are developing with you. We thank you very much for helping us again today.
[Translation]
Honourable senators, we are continuing our study of Supplementary Estimates (A) for the fiscal year ending March 31, 2016.
[English]
From the Windsor-Detroit Bridge Authority we are pleased to welcome Michael Cautillo, President and CEO; and Linda Hurdle, Chief Financial Administrative Officer. I have another name and, in the event that we have to call upon her, she will be introduced at that time — Marta Leardi-Anderson, Vice President of Policy.
Mr. Cautillo, you have the floor, sir. We will listen to your comments. I believe you prepared some remarks that have been circulated. They will be on the record as soon as you give them, sir.
Michael Cautillo, President and CEO, Windsor-Detroit Bridge Authority (WDBA): Thank you very much for this. I appreciate the opportunity to appear in front of this committee to discuss the Gordie Howe International Bridge project and the Windsor-Detroit Bridge Authority.
The Windsor-Detroit Gateway sees over 30 per cent of the total Canada-U.S. trade carried by trucks. In dollar terms, this amounts to over $100 billion per year and approximately 2.5 million trucks per year travel through this important gateway.
Due to the significance of this trade corridor, it was identified by the governments of Canada, the U.S., Michigan and Ontario that there was a need to provide redundancy, additional capacity, system connectivity and improved border processing through the gateway to improve the flow of people and goods between Canada and the United States.
There are four major components to the Gordie Howe International Bridge project.
First, the bridge itself will be six lanes and three kilometres in length, with an 850-metre-long centre span.
Second, the Canadian port of entry will be about 55 hectares and include customs, border processing, tolling and toll collection, and maintenance facilities. When completed, it will be Canada's largest port of entry.
Third, the U.S. port of entry will be 60 hectares and include customs and border processing facilities.
Fourth, there will be the interchange with Interstate 75.
The Windsor-Detroit Bridge Authority was created in October 2012, with staffing and operations beginning in August 2014. It is a not-for-profit Canadian Crown corporation and our mandate is to oversee and manage the procurement process for the design, construction, financing, operation and maintenance of the new bridge between Windsor and Detroit through a public-private partnership, or P3. The WDBA will also oversee and manage the construction and operation of the new crossing, and it will set and collect tolls.
In August 2014, I was appointed as President and CEO of the WDBA and became the WDBA's first employee. My first priorities were to set up the corporation, build the capacity and undertake pre-procurement activities, enabling the WDBA to move towards P3 procurement.
We have achieved many accomplishments, including the retention of 35 people. Typical P3 projects include the engagement of key advisers that are required to launch the P3 procurement process. We too have retained key advisers, such as the P3 financial and transaction adviser, our capital markets adviser, our P3 legal adviser and P3 fairness monitor, and our general engineering consultant. We are also taking advantage of public sector best practices by having retained the services of Public Works and Government Services Canada to assist us in the procurement process.
To be able to launch the P3 process, the WDBA has engaged in numerous pre-procurement activities, including the planning for works to be completed at the Canadian port of entry. Referred to as Early Works, it includes construction of a four-kilometre access road, utility relocations within the right-of-way of the access road and the placement of significant quantities of fill to stabilize the ground to allow for subsequent activities such as the construction of customs buildings. The completion of Early Works is required to prepare the Canadian port of entry site for the work to be undertaken by the private sector partner.
We are working in close cooperation with various partners and stakeholders, and these include Transport Canada, Public Works and Government Services Canada, the Canada Border Services Agency, the Canadian Food Inspection Agency, the Government of Ontario, the State of Michigan, the Michigan Department of Transportation, the U.S. Federal Highway Administration, the U.S. Customs and Border Protection Agency, the U.S. General Services Administration and both the cities of Windsor and Detroit.
Our 2015-16 priorities are the formal launch of the P3 procurement process as well as a continuation of the groundwork that we laid in 2014-15. Our priorities include Early Works, utility relocations on both sides of the border, property acquisition in Michigan and the launch of the P3 procurement process. The acquisition of Canadian properties is also a priority and is being undertaken by Transport Canada. The $402 million requested through Sups (A) for 2015-16 is aligned with our priorities of Early Works, utility relocations on both sides of the border and property acquisition in Michigan.
The WDBA is committed to achieving the priorities set out for relocations for 2015-16, as just stated, and ultimately for the project as a whole to build the Gordie Howe International Bridge in an effective and efficient manner.
Mr. Chairman, I will end my remarks here and I would welcome questions from the honourable members of the committee.
The Chair: Thank you very much, Mr. Cautillo. I think you probably should explain to us why you're going from the estimate that we got in the Main Estimates of $58 million to an additional $402 million in two or three months. Could you explain that to us?
Mr. Cautillo: Mr. Chair, this is a reprofiling of funds. These are not new funds, but they are simply because we've accelerated the various priorities that I've mentioned, including the acquisition of properties on the Canadian side. Of the $402 million in Sups (A), $369 million of that is for the acquisition of properties in Michigan.
The Chair: And was some or all of that $402 million in last year's estimates?
Mr. Cautillo: Perhaps I can turn to my CFAO to provide more details on that.
The Chair: Thank you.
Linda Hurdle, Chief Financial Administrative Officer, Windsor-Detroit Bridge Authority (WDBA): It's not a reprofile from last year's estimates. When the Main Estimates were set at $58 million, the activities anticipated for this fiscal year did not include things like the property acquisition in Michigan and some of the utility relocations that we're contemplating right now. When looking at the project budget, we're really bringing forward some of the activities to accelerate the pace of the project and therefore are bringing forward some of the funding that had been anticipated to be required in later years.
[Translation]
Senator Rivard: Welcome. We see you periodically during budgetary requests or requests for supplementary funding. I have already asked questions about the new bridge, which will be called the Gordie Howe Bridge. Once this new bridge is in service, what will become of the existing bridge? Will it be demolished or will it be used as a second corridor that will foster the market? It is expected that the new bridge will make things easier and make wait times shorter. Has the fate of the existing bridge been decided upon? The current bridge is private property, if I am not mistaken.
[English]
Mr. Cautillo: Thank you for that question. Our focus is in constructing the Gordie Howe International Bridge and crossing. That's what we're focused on, to provide redundancy, increased capacity, system connectivity and improved border crossing. In all likelihood, the existing facilities will remain, but that's a decision that will be made by others. Again, we're focused on getting our bridge built in the time frame that we've stipulated.
[Translation]
Senator Rivard: I have already asked this question, because we know that the U.S. government was reluctant to invest in the customs building. Obviously, it is not too late to make a decision. However, a warning signal appeared a couple of months ago.
In President Obama's budget, amounting to some $4 billion, the amount of $250 million, which is required for the American part of the customs facilities, is not provided for. I know that the governor of Michigan is extremely disappointed. That is not surprising, coming from the opposition, but this matter interests him in his capacity as the governor of Michigan. Even the member of the U.S. Congress, a Republican, is also very disappointed.
It almost appears, today, that the Americans are going to leave it up to Canada to pay the total cost of the customs building, whereas both countries are involved in this file. In short, did you know that there are no amounts provided for this purpose in President Obama's budget? Now, you may say that it is too soon to draw such a conclusion. We will still have the time in 2017-18, especially if there is a change of government. But do you not think that this causes concern for us, to perhaps have to pay the entire bill for the customs building?
[English]
Mr. Cautillo: Senator, thank you for that question. The cost of the entire project will actually be repaid through the collection of tolls over time, and that includes all of the costs for the project.
[Translation]
Senator Rivard: The costs of the bridge and the work will be borne by a P3, including the customs building. That means that the Canadian government does not have to invest in the customs building or the customs facilities. Is that correct?
[English]
Ms. Hurdle: That's exactly correct. We expect to recoup all of the costs. By "all of the costs," I mean everything. All of our operational costs at WDBA, all of the costs that Canadian taxpayers have contributed to this project, will be recouped through the collection of tolls, including the U.S. plaza facility.
[Translation]
Senator Rivard: In the supplementary estimates, there are sums allocated for the purchase of land. If I understand correctly, these sums will be taken into account and returned to the total project envelope so that we are reimbursed directly from the revenue generated by the Gordie Howe Bridge.
[English]
Ms. Hurdle: That's correct.
Senator Wallace: Senator Rivard has touched on some of the issues that I wanted to raise with you. To make sure my understanding is correct, the Gordie Howe International Bridge will be Canadian owned; is that correct?
Mr. Cautillo: The bridge itself will be owned jointly by Canada and Michigan.
Senator Wallace: And Michigan?
Mr. Cautillo: Yes.
Senator Wallace: All of the toll revenue that would originate from the use of the bridge would come to Canadian sources; is that correct?
Mr. Cautillo: Senator, thank you for that. In fact, the toll collection is only going to occur on the Canadian side. So whether you are U.S. bound or Canada bound, returning to Canada, you'll be paying tolls in Canada. Canada will collect all the tolls. WDBA will set the tolls and Canada collects the tolls. Those tolls will be used to repay, if you will, the outstanding costs for all elements of the project.
Senator Wallace: I guess that would be the only source of revenue from the bridge. Would any portion of the tolls be paid to companies or governments in the U.S. for the use or the location of the bridge in the U.S.?
Mr. Cautillo: No. Those tolls, again, will be used to repay the debt. Once those costs have been repaid, then there will be a sharing of those revenues between Canada and Michigan.
Senator Wallace: Again, when the bridge debt is retired, then the State of Michigan would receive some portion of the toll revenues?
Mr. Cautillo: Yes. I said that it should be the overall costs of the project, once those costs are recovered.
Senator Wallace: When is it estimated that those costs will be recovered?
Mr. Cautillo: That's a good question. The recovery of those costs is a function of the invested capital and it will be a function of the toll rates that are going to be set and the traffic that's actually going to use the facility. What I mean by "traffic" is both traffic volume, as well as the type of traffic that will be using the crossing. The crossing agreement speaks to beyond 50 years for the repayment of all those costs.
Senator Wallace: Beyond 50 years?
Mr. Cautillo: Yes.
Senator Wallace: So the State of Michigan won't recover any portion of the tolls for 50 years based on that?
Mr. Cautillo: They will get a portion of the tolls once the costs for the entire project have been covered.
Senator Wallace: Right, which is estimated to be 50 years?
Mr. Cautillo: Again, the estimate as to when that might happen is a function of the traffic that's used, the invested capital to start with, the overall cost of the facilities and the mix of traffic that is going to use the facility.
Senator Wallace: It could be influenced by the point that Senator Rivard brought up, namely, what's going to happen to the existing bridge? If it's the only bridge that crosses the border, obviously it will make a difference in the value of the tolls that will be received.
Mr. Cautillo: Senator, thank you for that. The toll setting itself will be undertaken by WDBA. We will set the tolls. We will collect the tolls. The tolls will be set in a manner to be competitive but also to recoup the costs for the project.
Regarding where we see the advantages, again, we come back to why build this crossing. It's to provide redundancy, the additional capacity, the system connectivity and the improved border processing. We see that having a freeway-to-freeway connection will be a big advantage to commercial vehicle operators and we will see significant usage of this particular crossing.
Senator Wallace: In terms of the recovery of Canadian taxpayers' dollars that will be invested in this bridge, it's estimated that it will take up to 50 years for those costs to be recovered. I just want to make sure I'm clear on that.
Mr. Cautillo: The recovery of those costs will be a function of the traffic that will be using the bridge.
Senator Wallace: You've done projections. I understand that. It would be over 50 years, approximately?
Mr. Cautillo: Depending on the cost, depending on the invested funds and depending on the traffic that will use the crossing. It all goes into the mix.
Senator Wallace: That's right. Thank you.
The Chair: I guess you can't be more precise; interesting.
Senator Eaton: Just a supplementary or a clarification. That would include interest rates and ongoing maintenance on the bridge? We know these infrastructure projects need ongoing maintenance.
Ms. Hurdle: Thank you for the question. Yes, interest rates are added to the unrecouped amounts. Every dollar that comes from the Government of Canada, either before or after the bridge opens — that is, if the WDBA is not self-sufficient right away and the government has to supplement — will be part of this amount and there's compounding interest on those dollars.
Senator Eaton: Is there money allocated for ongoing maintenance?
Ms. Hurdle: Absolutely. Once the bridge is operational, ongoing maintenance will be added to the amounts also.
Senator Eaton: Which we will pay for it at the beginning, obviously. Will the ongoing maintenance be shared by Michigan and Canada, or will we pay the ongoing maintenance?
Ms. Hurdle: Once the bridge opens, the WDBA will incur expenses for ongoing maintenance. I'm going to use the word "profit" loosely here. Only the net surplus, if you will, will be allocated to the recoupment of the amounts. Once all the amounts are recouped and the Canadian taxpayers have been repaid, then only the net surplus, again, will be shared with Michigan.
The Chair: Interesting structure.
Senator L. Smith: Sir, regarding the American side, in terms of the facility to be built, who will control advertising and marketing revenues on that side?
Mr. Cautillo: Senator, thank you for that. That will be something that we're going to control at WDBA.
Senator L. Smith: Was that a contentious issue? Has it been negotiated already or is it to be negotiated?
Mr. Cautillo: It has been discussed. It has not been concluded.
Senator L. Smith: It may be a bit of a contentious issue, knowing how some of the U.S. folks negotiate. We talked about that issue with some of the other bridge authorities, if you remember, chair.
The Chair: Yes.
Senator L. Smith: Depending on the structures that are built, there should be some outstanding marketing revenue opportunities. I would hope that we would protect our interest if we're putting up all the money to make this thing go. Piece it off so that they get a small percentage of it and over time it would grow, just as a thought.
Mr. Cautillo: The bulk of the revenues are going to come from the traffic that's going to use that. It's in our mutual advantage to ensure that this is an efficient and effective crossing and that we're providing, if you will, freeway-to-freeway connections and making all parts of crossing function effectively. That's not only the customs facilities, but also the toll collection facilities, and then the connection from 401 and the Herb Gray Parkway into Interstate 75 so that there's an unimpeded traffic of flow and goods.
Senator L. Smith: Understood. However, if you're building a big facility, on each side there should be revenue opportunities from shops and restaurants and things like that so that it is potentially in our best interest to make sure we protect ourselves and we don't get pushed aside by the big guys on the other side.
Mr. Cautillo: Senator, we look at every opportunity to enhance the revenues for the project.
The Chair: I'm thinking of the collection of tolls as the vehicles leave Detroit and come over the bridge. I hope there's enough space on the Canadian side that they're not backed up over the bridge to pay their toll to get into Canada.
Mr. Cautillo: Our functional layout, we've had extensive testing and simulation around the placement of the primary inspection lanes within the customs facility and the toll collection. Because, again, we want to make sure that everything functions effectively. It doesn't do us any good to have a very good functioning customs facility only to be lined up to pay tolls. So we are looking at how we could expedite the collection and enforcement of tolls so we would not have backups either into the customs facility or when you're leaving Canada into the United States.
The Chair: You have a complicated planning job ahead of you, and I'm sure you're well into it now.
Senator Mockler: I'm trying to comprehend, knowing that Michigan and President Obama's Administration are not putting money into it, but lately we have seen a surge of economic activity in the U.S. I would have two questions.
One would be: Do you think, since we have a better economy, that it's time to make the ask again if they want to participate in this beautiful project?
My second question would be: Could you explain to the committee why should we share profits with Michigan after the 50 years with the way they're treating us?
Mr. Cautillo: Senator, thank you for the question. Again, the sharing of profits is once all of the costs have been recovered, and we are working extensively with our partners, our stakeholders in this, and we have the cooperation of Michigan in the property acquisition process to ensure that we do get the properties and they're working hand in hand to ensure that we have a good connection to I-75 and that we do have a seamless connection.
Senator Mockler: Mr. Chairman, I'll agree to disagree.
The Chair: That happens from time to time, and that's fine.
Can you go back to the governance structure? This is a Canadian not-for-profit company, the Windsor-Detroit Bridge Authority. Is the authority going to manage the bridge in the long term: maintenance, upkeep, et cetera?
Mr. Cautillo: Absolutely, we're going to be there long term. We're there initially to design, construct, finance, operate and maintain this, but also oversee a P3 concessionaire who will undertake this on our behalf. WDBA will be there to set and collect tolls and basically administer the project.
The Chair: And who makes up the board on this not-for-profit Canadian corporation? Are they all Canadians that are on the board, or is there an agreement to share the board with people from Michigan or the United States?
Mr. Cautillo: Mr. Chair, there are two boards. There is the board of the WDBA, who are all Canadian members. There's also the international authority, which was created when the crossing agreement was negotiated in 2012. On that international authority, membership is 50 per cent Canadian and 50 per cent from Michigan.
The Chair: And what authority does this international authority have over the bridge? Has it all been delegated down to the Windsor-Detroit Bridge Authority, or do they retain some governance and authority?
Mr. Cautillo: Mr. Chair, again, the international authority and the authority that it has are covered under the crossing agreement. In short, they are responsible for approving the request for qualifications and the procurement process on a go-forward basis, and they're there to oversee the broader operation of the crossing. But the day-to-day operation — the setting and collecting of the tolls, the administration of a concessionaire that we have, the dealing with outside parties — is all a WDBA responsibility.
The Chair: And the design of the tollgate and that kind of thing, do they have anything to say about that, or is that all Windsor-Detroit Bridge Authority?
Mr. Cautillo: That's all within the purview of the WDBA.
The Chair: Not that we dislike the name — in fact, we're very pleased to see Gordie Howe's name perpetuated that way — but could you tell us who made the decision to name the bridge?
Mr. Cautillo: The naming of the bridge was a decision made by the Prime Minister and Governor Snyder. I can tell you there's been widespread support for the naming of this wonderful bridge, the Gordie Howe International Bridge.
The Chair: I would think so.
We know that the Champlain Bridge in Montreal is on an accelerated construction completion program. Are you in a similar type of situation? When do you anticipate that the first paying vehicles will go over that bridge?
Mr. Cautillo: Mr. Chair, we are anticipating the completion by the end of 2020.
The Chair: I think Champlain will be a little faster and sooner.
The public-private partnership, P3, we have authorized money to a department within Industry Canada, as I recall, to encourage and work on and build up expertise in that particular way of doing major government projects. In your opening remarks, Mr. Cautillo, it sounded like you were not using that expertise. You did say you were going to Public Works for some expertise, but not the triple-P aspect and that you're hiring all your own advisers, legal advisers. Is there duplication going on here that could be avoided?
Mr. Cautillo: Mr. Chair, we're actually trying to use the skill sets of some of our federal family, and that's why we've reached out to Public Works and Government Services Canada to assist us in the procurement process itself.
Again, we're also working extensively with Transport Canada and in the various activities that they're undertaking. We've also reached out to the CBSA and Canadian Food Inspection Agency to get their requirements, if you will, as we develop both the procurement process and the specifications that are necessary for the actual design and construction of the customs facilities.
The Chair: I am correct that you have hired separate legal and financial transaction advisers, et cetera, onto the Windsor-Detroit Bridge Authority?
Mr. Cautillo: Mr. Chair, they are advisers. Typically in a P3 such as this, these would be the typical advisers that would be retained to assist us or government in undertaking such a major initiative.
The Chair: You can't get those services through Industry Canada and the P3 secretariat or directorate that exists within the Government of Canada now that we have funded by millions of dollars?
Mr. Cautillo: Mr. Chair, typically, as I've mentioned, the various advisers that we've retained, including our general engineering consultant, those would be resources that can only be obtained from outside. Our legal adviser is again from outside. For the most part, these are services that are not available within that department.
Senator Rivard: Can you remind me of the total costs for the new Gordie Howe Bridge?
Mr. Cautillo: Mr. Senator, thank you for that particular question. Maybe I can break it down into construction cost and say that, when the bridge opens at the end of 2020, how much money will we have spent on construction alone? It's about $2 billion. Of that, about $1 billion is specifically to the bridge. This will be a very large bridge. It has a clear span in excess of 850 metres. That is the major cost item for this. Then we have the customs facilities on both sides and the connection to Interstate 75.
The Chair: Colleagues, that concludes our session. Thank you very much, Windsor-Detroit Bridge Authority, for being here. Mr. Cautillo and Ms. Hurdle, keep up the good work. We look forward to driving over that bridge and paying your tolls.
(The committee adjourned.)