Proceedings of the Standing Senate Committee on
National Finance
Issue No. 19 - Evidence - November 23, 2016
OTTAWA, Wednesday, November 23, 2016
The Standing Senate Committee on National Finance met this day at 6:45 p.m. to examine the expenditures set out in Supplementary Estimates (B) for the fiscal year ending March 31, 2017.
Senator Anne C. Cools (Deputy Chair) in the chair.
[English]
The Deputy Chair: I would like to begin by welcoming all the viewers to the Standing Senate Committee on National Finance. Colleagues and members of the public, the mandate of this committee is to examine questions and matters respecting the federal estimates generally, as well as government finance. We are the Standing Senate Committee on National Finance and that is our concern.
My name is Anne Cools, and I am a senator from Ontario. I am also the deputy chair of this committee. I'm sitting in for a few minutes for the chairman, Senator Smith, who will be along shortly.
Let me introduce the other members of the committee, my colleagues for whom I have deep respect and greet esteem. They are as follows: to my right, the beautiful redhead, Senator Eaton, from Toronto. Senator Neufeld is next, from British Columbia; Senator Mockler, from beautiful New Brunswick; Senator Ataullahjan, from Toronto, where I'm from; and the very beautiful Senator Marshall, from Newfoundland. And to my left is Senator Pratte, from Montreal. As you can see, we are covering the regions.
Colleagues, today we begin our very deep, profound and probing study of Supplementary Estimates (B) for the year ending March 31, 2017, which were referred to our committee last week.
To give an overview of their funding requests in the Supplementary Estimates (B), we have with us three government organizations, and they shall appear in turn.
During the first part of our meeting, we will hear from the mighty Department of Finance, from which flows great wisdom, as we know.
We welcome before us right now Christopher Meyers, Chief Financial Officer of the Financial Management Directorate, Corporate Services Branch. Sounds impressive. And — I've encountered him many times before — Richard Botham, Assistant Deputy Minister, Economic Development and Corporate Finance Branch.
Having said all that, I must inform colleagues and viewers that the Department of Finance representatives tonight have brought several colleagues to reinforce and support them. We have a great abundance and array of talent to call upon as we proceed. I am told half a dozen of them are prepared to be called to the table at a moment's notice to answer specific questions if such needs arise. Knowing this committee, they could very well arise.
There are two other organizations mentioned on the agenda, and they will appear as a panel during the second part of the meeting. We are in the first part of the meeting.
I would love to say to you, gentlemen of the Department of Finance, I've had much experience dealing with many of you and many of your predecessors over the many years I've served in the Senate on this committee. Please proceed.
Christopher Meyers, Chief Financial Officer, Financial Management Directorate, Corporate Services Branch, Department of Finance Canada: Thank you for having us here this evening. I have some short opening remarks.
[Translation]
As Chief Financial Officer, I am the lead executive responsible for financial reporting and disclosure of the 2016-17 supplementary estimates (B). With me today are officials to assist in providing a more in-depth perspective on the rationale or policy that supports the numbers within these estimates documents.
These Supplementary Estimates (B) reflect a net increase in departmental budgetary spending of $548.3 million composed of forecasted increases in statutory expenditures of $542.5 million and increases in voted expenditures of $5.8 million.
The statutory items are displayed in the Supplementary Estimates (B) for information purposes and will not be included in the appropriation bill.
[English]
Within the statutory forecasts, the contributing factors to the $542.5 million increase are as follows: a $290.8 million decrease in recoveries of alternative payments for standing programs; a $124 million increase in interest on un-matured debt, reflecting in part a higher forecasted financial requirement and a higher forecast of Consumer Price Index adjustments on Real Return Bonds for 2016-17, all consistent with assumptions in Budget 2016; a $66.7 million increase in territorial financing; a $66 million decrease in Youth Allowance Recovery payments from Quebec; an $81,900 increase in employee benefit plans; and a $5 million decrease in other interest costs.
The new funding requirements for vote 1, totalling $5.8 million, consist of the following: funding for Harbourfront Centre of $4 million, representing payments made prior to the transfer of this program to Canadian Heritage; funding for the Financial Sector Legislative Review announced in Budget 2016, totalling $549,100; a reprofile of $451,000 for the implementation and monitoring of the Financial Stability Reform Agenda; a reprofile of $283,500 for the arbitration process under the Canada-Quebec Comprehensive Integrated Tax Coordination Agreement; a reprofile of $270,700 to support the policy and legal work for the Target Benefit Plan Initiative; and funding to continue the negotiation of comprehensive land claims and treaty and non-treaty agreements, totalling $265,600.
There is also a new vote 7b in these estimates which provides authority to increase the limit from $300 billion to $350 billion of outstanding mortgage or hypothecary loans insured by private-sector entities under section 27 of the Protection of Residential Mortgage or Hypothecary Insurance Act.
This concludes my overview of the supplementary estimates for the department. We would be pleased to address any questions that the committee may have at this time.
Senator Marshall: Thank you very much for your opening remarks. I do have a couple of questions.
I realize it's statutory and not budgetary, but you were talking about the interest, and all I got was the higher than forecast, the $124 million. Is that because we're borrowing more or is it because the rate of interest has gone up? The reason I'm asking is because in previous supply we've noted that the interest is going down; it's a negative. This is the first time in a while that I've seen it go up. Could you explain again what it's for?
Mr. Meyers: The interest on the un-matured debt line item reflects all our payments made on our outstanding bonds, treasury bills and market debt. These supplementary estimates reflect the first set of assumptions — or it's the first time you see the Budget 2016 assumptions manifest in the estimates. The increased financial requirements from Budget 2016 — in other words, more debt, or more net new financing — are creating an upward pressure on the total interest cost. The estimates that you see here are a reflection of that increased financial requirement.
Senator Marshall: So the result of increased debt as opposed to an increase in interest?
Mr. Meyers: That's right.
Senator Marshall: The Financial Sector Legislative Review mentioned in Budget 2016 is ongoing now, isn't it? That's sort of like one of the government's consultation items?
Mr. Meyers: That's right.
In Budget 2016, there was an announcement made with respect to the legislation that governs all federally regulated financial institutions. A number of acts regulate those institutions: the Bank Act, the Insurance Companies Act, the Trust and Loan Companies Act and the Cooperative Credit Associations Act. Those have sunset provisions within them, and that sunsetting was set to happen this year. As part of Budget Implementation Act, No. 1 for 2016, there was an accompanying extension of the legislation for a couple of years while this review is taking place.
With me at the table is Leah Anderson from the Financial Sector Policy Branch, and she can provide a bit of background on the nature of that review.
Senator Marshall: The government has undertaken a number of initiatives, like consultations or strategies. This one here, does this include going out to the public? There's a public process involved in this one also?
Leah Anderson, Acting Assistant Deputy Minister, Financial Sector Policy Branch, Department of Finance Canada: Yes. In fact, we launched a consultation in August. We released a paper setting out the trends we see in the sector and asking stakeholders and the public what their views are on what they're seeing out there and what we should be looking at, and whether there are issues and gaps that need to be addressed. That consultation closed last week and we're in the process of analyzing those responses.
Senator Marshall: So you look at not only what's there in legislation now but also, as you were saying, gaps and areas that should be covered but are not covered now?
Ms. Anderson: Exactly. It's a very fast-changing sector. We're looking at developments and making sure our framework remains current and sound.
Senator Marshall: I'll have to ask Mr. Meyers if he could go over the authority to increase the limit of insured mortgages. Is this relating to CMHC? Because they've been in the news quite a bit lately with regard to possible exposure or risk. Could you go over that again?
Mr. Meyers: Sure, I'd be happy to.
This is a reference to the limits with respect to private-sector mortgage insurers, so it does not relate directly to CMHC. The government provides a guarantee to mortgage lenders and for insurance provided by private-sector mortgage insurers to those lenders in the carrying out of their lending activities.
Senator Marshall: Is that like a reserve?
Mr. Meyers: It's not a reserve; it's a guarantee. In the event those private-sector mortgage insurers were subject to a windup provision, this guarantee could come into effect and essentially backstop those private-sector mortgage insurance contracts.
Senator Marshall: Would that be picked up in the public accounts? Is that where it shows up under the guarantee?
Mr. Meyers: The guarantees are disclosed in the public accounts. There are no disbursements against this guarantee. It would be a very remote possibility. But you do see these guarantees, along with the CMHC guarantee, for example, disclosed in the Public Accounts of Canada.
Senator Eaton: Can you explain to me why Harbourfront Centre gets money from the federal government? Is it considered a national park?
Mr. Meyers: I'll just pass that off to my colleague.
Richard Botham, Assistant Deputy Minister, Economic Development and Corporate Finance Branch, Department of Finance Canada: Harbourfront Centre is in Toronto, as you're aware, senator. It is a cultural centre. Its roots are in a federal Crown corporation, and that was really the initial relationship with that organization. The Crown corporation was wound up — I'm sorry, I can't remember the date. I believe it was in the 1990s.
Senator Eaton: Maybe I should tell the National Ballet of Canada and the TSO to make themselves into Crown corporations, too. Wonderful support.
Mr. Botham: The roots of the federal funding for Harbourfront Centre are really that relationship from a prior Crown corporation.
Senator Eaton: So now that it's been transferred to Canadian Heritage, it's no longer a Crown corporation. It would be considered like any other cultural institution?
Mr. Botham: Its existence as a Crown corporation really ended — and I can't remember the date — but many years ago.
Senator Eaton: But you're still supporting it very well.
Mr. Botham: It continued to receive funding under a Harbourfront Centre funding program, and that program was transferred from the Department of Finance to Canadian Heritage.
Senator Eaton: They're very fortunate. I'm involved in several cultural institutions, as we all are in Ontario. I guess I find it quite enormous.
So you don't know. I guess they will go to the Canada Council eventually and be like the rest of us.
Mr. Botham: The government hasn't announced any plans to change the direction it is currently operating under, which is to have that funding program.
Senator Eaton: As of next week, they are off your books; we won't see this again.
Mr. Botham: Not in the Department of Finance.
The Deputy Chair: Mr. Botham, perhaps you can explain. There's a large federal jurisdiction in respect of harbours and ports, and I think lots of those activities grew out of Harbourfront many years ago. I have very vivid memories of 30 years ago of fantastic plans to develop Harbourfront. It didn't happen in accordance with fantastic plans, but the Harbourfront facility as we think of it was the beneficiary of quite a few dollars. Could you explain the interesting constitutional relationship that it has? It is federal. It is a federal institution, so to speak, I think.
Mr. Botham: As I say, my understanding is that the relationship relates to the status as a Crown corporation. Why it was constituted as a Crown corporation, I'm sorry, I don't remember. But I would say that as far as I know, it's not related to that land as being a port, because it's not the same as the Toronto Port Lands. But again, that's many decades ago, and I'm sorry, I don't have that information.
The Deputy Chair: Anyway, it was very complicated.
Senator Neufeld: The $66.7 million increase in territorial funding, what's that about?
Mr. Meyers: A couple of factors contribute to that. I might have one of my colleagues from the federal-provincial branch join me at the table.
At the time of the production of the Main Estimates, some impacts related to the manner in which Statistics Canada prepared data that is used to calculate those territorial transfer payments; impacted them downward. So at the time of the production of the mains, there was a downward impact as a result of those changes to the territorial financing payments.
Subsequent to that, adjustments were made to the Federal-Provincial Fiscal Arrangements Act to ensure that those territories were not unnecessarily penalized as a result of the methodological changes undertaken by Statistics Canada. So the increase that you see is in part a reaction to changes in the act to ensure that payments to those territories were stabilized, essentially on a go-forward basis.
There is another factor contributing to the net increase, although it's going in the opposite direction. I might have Mr. McGirr step in and help me out.
Tom McGirr, Chief, Equalization and TFF Policy, Federal-Provincial Relations Division, Federal-Provincial Relations and Social Policy Branch, Department of Finance Canada: I'll backtrack just a second.
Last year when we calculated the Territorial Formula Financing amounts, and those were the amounts put into the Main Estimates, those amounts were significantly below territorial expectations because of the impact of a Statistics Canada data revision. The data revision reflected new and improved information regarding provincial spending, and that spending information is used to determine the amount of territorial expenditure requirements.
The Territorial Formula Financing has a unique feature that's different from, the equalization calculation, where the revised data impacted closed years. What happened was that the government decided to make changes in the way the Territorial Formula Financing payments are calculated as part of Budget 2016, and those changes were legislated earlier this year. The amount that's shown in Supplementary Estimates (B) is actually the increase in the amount of TFF as a result of those legislative amendments.
Senator Neufeld: Can you tell me how that breaks out between the three territories? Do you have that?
Mr. McGirr: Bear with me about two seconds.
Mr. Meyers: The totals for 2016-17 are $3.6 billion split between the three territories; so $895 million to Yukon.
Mr. McGirr: The numbers I have in front of me would be $16.5 million for Yukon, $24.1 million for the Northwest Territories and $26.1 million for Nunavut.
Senator Neufeld: Thank you.
My next question concerns the $66 million decrease in youth allowance recovery payments from Quebec.
Mr. McGirr: I'm probably not the best of experts to talk to you about this, but I'll give you the story as I understand it.
Quebec benefits from an additional tax point transfer that other provinces do not have. We sort of wrap up the two programs; both of them are basically the same thing. It's a benefit of a tax point transfer to the Province of Quebec. What happens is the benefits of that amount are deducted from the amount of transfers that are given to Quebec, so that's why we call it a recovery. Those amounts get re-estimated over time. What's happening here in Supplementary Estimates (B) is that new and more recent information regarding the value of the tax point transfer has come in, and it results in a lower amount of recovery than what was underlying the Main Estimates. That's the reason for that number.
Senator Neufeld: I understand that.
Why is it called youth allowance? What is the significance of that?
Mr. McGirr: The youth programs date back to the 1960s. It's not exactly my bailiwick.
Senator Neufeld: You're saying it has nothing to do with youth, or does it?
Mr. McGirr: From my understanding, and I could be corrected, is that it relates to programs being contemplated in the 1960s. Quebec preferred having programs administered by themselves, by the province, rather than by the federal government. Instead of the federal government offering a program, there was a tax point transfer, as I understand it, and we simply deducted the value of that tax point transfer in the calculation of transfers to the province.
The Deputy Chair: Our researcher has quickly put before me some information that's currently on the computer. I don't know which site, who is hosting it, but Harbourfront Centre. I'd like to record that. It says:
Harbourfront Centre has been on the cutting edge of all that is current and creative for the past four decades, bringing together the best in Canadian and international arts and culture and animating the 10 prime acres of Toronto's waterfront as free and open public space . . . .
Forty years ago, the central lakefront was a veritable wasteland of derelict industrial buildings. Devoid of green spaces, recreational facilities and cultural attractions, it was in need of a change.
In 1972, Pierre Trudeau's federal government created a Crown corporation with a mandate to revitalize 100 central acres of waterfront land stretching west from York Street to Stadium Road. Culture, education and recreation were to be the tools that would bring Torontonians back to the lake and attract visitors from around the globe. In 1976, Harbourfront Corporation was formed to fulfil this mandate and initiate change.
It goes on to say:
Harbourfront Centre was established in 1991 as a not-for-profit charity to carry on this legacy, and the site was transformed into an international platform for theatre, dance, literature, music, film, visual arts, fine craft and cultural celebration . . . .
I think I remember correctly.
Senator Eaton: But my argument, Madam Chair, would be that between the Toronto festival, Stratford, The National Ballet, the AGO, Orchestre Métropolitain in Montreal, none are Crown corporations; none get big infusions from the Finance Department of $4 million. They apply to the Canada Council, they raise their money and they apply for grants to the department. It just seems outrageous, that's all.
The Deputy Chair: All of what you say may be very true, I do not know, but the fact of the matter is that Harbourfront has been a stunning success. The federal government at the time had to work with the tools that were available to it and they thought to go down that route constitutionally was the way to do it.
Having said that, I now call on Senator Marshall.
Senator Marshall: I want to go back to a question that I asked earlier when we were talking about the public accounts. It's not an expenditure for the government; it's just a disclosure of the possibility of a payment.
The limit is going from what to what?
Mr. Meyers: It's going from $300 billion to $350 billion.
Senator Marshall: Thank you very much.
Senator Andreychuk: I'm new to the committee, so I'll admit that upfront.
I'm intrigued with this reprofiling of an arbitration process. I'm aware of the Canada-Quebec comprehensive agreement, but what is the arbitration process, how is it being reprofiled and what is the total cost? This seems to be additional cost for reprofiling, which means what when you say reprofiling? Does it mean you're gathering statistics differently or is it that the program has changed?
Mr. Meyers: The term "reprofiling'' is simply the movement of previously authorized funds from one period to another. The motivation behind doing it is generally a reaction to the underlying work perhaps slipping into another period. That's what the term "reprofiling'' refers to.
The underlying issue here is the Canada-Quebec Comprehensive Integrated Tax Coordination Agreement. In 2012-13, there was a harmonization of GST/HST with the province of Quebec. As part of that process, there's an underlying agreement that contemplates a process whereby the Government of Canada and the Government of Quebec determine and agree on the costs of administering that harmonized sales tax within the province of Quebec.
That process is a fairly involved one, which involves the deployment of experts in the area of costing and that sort of thing. These costs and the reprofile of these costs support the process of the determination of what those costs will be ultimately to Canada for the administration of that tax in the province of Quebec.
Senator Andreychuk: Just to fill that out, there's harmonization elsewhere. What are the costs? I come from a province that I don't think is affected in the same way, but I'm thinking the Atlantic provinces, et cetera. Is there a harmonization cost of arbitration elsewhere or is this unique to this agreement only?
Mr. Meyers: I'll have my colleague from the Tax Policy Branch come in and describe it.
Senator Andreychuk: You've got this coordinated very well, I must say.
Mr. Meyers: He can give an overview on the harmonization system generally with respect to some of the other provinces.
Miodrag Jovanovic, Director General, Tax Policy Branch, Department of Finance Canada: Thank you, Chris. I was following your answer and I thought it was very good.
With respect to your follow-up question, what is important is that contrary to other provinces where there is a harmonized sales tax, Quebec actually administers the Quebec portion of the GST and HST for the federal government. That is why this is particular to Quebec. The Canada-Quebec Comprehensive Integrated Tax Coordination Agreement basically says that we're going to agree on an amount that represents the cost of administrating this, and we're going to give it to you because Quebec is administering the federal and Quebec portion. That's why it's different in Quebec from other provinces.
Senator Andreychuk: There obviously is a cost to the federal government in administering harmonization programs elsewhere. How do you factor and figure out the costs of managing that system if it's a federal responsibility? Are they comparable or is this a more costly way of doing business, giving more discretion?
Mr. Jovanovic: I think there's a question of how the federal government negotiated these agreements with other provinces, so I actually don't know to what extent it's comparable. It's actually difficult to compare because of the structure of the arrangement. The fact that Quebec is administering this regime is fundamentally different than the federal government administering the other regime. As part of the negotiation to agree with the province to go to a harmonized system, it's difficult to disentangle that particular aspect of the negotiation from the overall agreement.
Senator Andreychuk: I think there is more transparency in this one because you are figuring out the cost of doing business, if I may say. So you know what the management costs are. You have an arbitration process to determine whether it's the most efficient way to do it, et cetera. There's a dialogue, I would think, which leads to arbitration.
How do you know in the other places that you're doing it efficiently if it's all federally controlled? How does the province or the provinces fit into that? How do we know that is the best way to manage the other comprehensive harmonization?
Mr. Jovanovic: Quebec has a sophisticated, complex, good administration system because they administer their personal tax, corporate tax and all that. Other provinces may not be as well-equipped to administer these taxes. They are part of the tax collection agreement for personal tax and corporate tax. It's a very different situation and a different landscape, so, again, it's difficult to compare. There is this practicality of comparing a province that does not have a similar structure as Quebec.
Senator Andreychuk: You didn't want to do it for comparison but you wanted to know what it's costing the federal government to administer the harmonization. Can we find those figures?
Mr. Jovanovic: The CRA knows the costs of different activities related to administering the GST and the HST in different provinces depending on their accounting systems. I don't know to what extent they can drill down and separate the costs. That's part of the exercise they do in Quebec because to come up with an estimate on that agreement of how much the federal government would compensate Quebec, it's all based on an understanding of the current cost structure of this particular aspect of the tax system. It's quite complex, actually, to do that exercise.
Senator Andreychuk: If you can just tell me, the $283 million, if I heard correctly what reprofiling is, it's really where it lands on the negotiation and when you conclude it, where it shows up, and that's why it shows up as a reprofiling, which would be an increase of $283.5 million.
Mr. Jovanovic: Yes.
The Deputy Chair: I would like to ask a question, if you could oblige me, gentlemen.
I'm looking at vote 1b in the amount of $549,150, and I'm very curious. I'm informed that it's an amount of money to examine the executive and legislative framework governing the financial sector in light of emerging trends and developments to ensure that it remains robust and technically sound, and to begin consulting stakeholders and to provide $4.2 million over 5 years to support the review.
I wonder if you could tell us about this Financial Sector Legislative Review, please.
Ms. Anderson: We launched the consultation process this summer, and it closed last week. The paper we released explained the picture of what the sector looks like and the key trends. It asked a number of questions of stakeholders about whether it is effective, sound and is meeting our core objectives for the sector, which are stability, competition and utility, or otherwise consumer protection.
It's very much good governance to ensure that the legislation governing the financial sector remains sound. Process-wise, we'll be taking a look at those comments over the next several months, and we'll come back with a further paper with specific proposals emanating from that stakeholder input.
To date we have received approximately 85 submissions, so very good interest, particularly in light of emerging developments such as Fintech and its impact on the sector. It's very timely to take stock.
The Deputy Chair: It sounds like a very promising enterprise. I'm sure that we all share the common wish and desire to make sure that our financial sector is sound. It's very reassuring to hear that we're working on its soundness because, as we all know, money is a coward. Money flies away very quickly when there's trouble.
Senator Neufeld: I'd like to go back to the $66.7 million increase for territorial financing. I remember that from work we had done previously and had asked some questions around that.
I've just been reminded that the three territories were expecting somewhere in the neighbourhood of $90 million, not $67 million. Is there a shortfall or is there more coming? Where are we at?
Mr. McGirr: The government took legislative action to change the calculation of TFF to minimize the impact of the data revision. The $67.7 million increase in Territorial Formula Financing that you see in Supplementary Estimates (B) represents the result of that legislative action. The TFF that's going to be calculated for the forthcoming fiscal year will be calculated on the basis of the new formula.
Senator Neufeld: To come up with a number, the territories must have done some work on their own, I would only assume. I wouldn't think they would just reach in a hat and say it's about $90 million short. What you're saying is the work that they did —
Mr. McGirr: The territories —
Senator Neufeld: Let me finish. If the territories actually worked that out in the neighbourhood of $90 million, and the feds came along and said, "No, you're $24 million over because we've done the calculation differently,'' would I assume that's what's going on?
Mr. McGirr: The territories' expectation was based upon earlier data, data that existed prior to Statistics Canada bringing out the data that was released, the data that's required in legislation and regulations to be used in the calculation of Territorial Formula Financing payments. The territories were essentially asking for us to ignore the data that was coming in and simply to go back to the old data.
You need to spell out how you're going to calculate transfers. You need to set out in legislation and regulations the exact recipe you need to follow, and it's important to do that.
The numbers that were calculated last December did that. They took into account the data released by Statistics Canada.
The legislative change that was made to make the Territorial Formula Financing payments more stable and predictable was simply to align the Territorial Formula Financing calculation more closely with other transfers and to make sure that the data revision did not affect years that were already closed. That resulted in an increase in Territorial Formula Financing of $66.7 million.
Senator Neufeld: The process of determining how much it was didn't change. The federal government used the same process.
Mr. McGirr: Correct.
Senator Neufeld: They just came up with fewer dollars.
Mr. McGirr: We used the updated data, which would have reflected the Statistics Canada revision. The territories were displeased with the Statistics Canada revision.
Jurisdictions that receive transfer payments, in my experience in federal-provincial relations, like to see a calculation that is as beneficial as possible.
Senator Neufeld: Certainly. I think that works for everybody.
Thank you very much. I appreciate that.
Senator Ataullahjan: I have a question about the Target Benefit Plan Initiative. Can you tell me about that? You have over $270,000 to support policy and legal work. Who is doing that work?
Ms. Anderson: The Department of Finance is doing the policy and legal work.
This was an initiative announced in Budget 2014. The legislation was tabled in the past couple of weeks to introduce this new framework. Essentially it's a new pension option for employees and employers.
Currently we have defined benefit plans or defined contribution plans, and there are pros and cons with each. This is in between, where it's not a defined contribution. It has a lot of the benefits of a defined benefit plan in the sense that you target a certain benefit, but there are risk-sharing mechanisms. It makes it more sustainable for employers to offer, from a risk perspective.
The Deputy Chair: Would you like to add one or two concluding comments? You're free to.
Mr. Meyers: It has been a good round of questions. I'm happy to answer anything else you might have. Otherwise, we can wrap up, if you like.
The Deputy Chair: If it's okay with you, it's okay with us. Thank you very much. You've been very thoughtful and very kind in your remarks. Know that a large number of senators have great respect for the work that you do.
I have had the positive experience of working very closely with both Treasury Board Secretariat, mostly, and the Department of Finance individuals, and know that I admire your work and appreciate it deeply.
Senator Larry W. Smith (Chair) in the chair.
The Chair: First of all, I'd like to thank Senator Cools for so aptly filling in as the chair of the first part of our session. It wasn't that I was not available to come here. It's just that, for whatever reason, someone wanted to interview me concerning the tax bill that we're studying right now, Bill C-2. Actually, when they interviewed me, the first question they asked was on a napkin, and I said, "I haven't seen that since I was a football player,'' because that's what all the media used to do with me. Anyway, thank you very much, Senator Cools. It's most appreciated. You did a great job, and I thank the committee.
We have now before us officials from Employment and Social Development Canada. We welcome Mark Perlman, Chief Financial Officer; Jason Won, Deputy Chief Financial Officer; and Paul Thompson, Senior Assistant Deputy Minister.
From the Windsor-Detroit Bridge Authority, we welcome Michael Cautillo, President and CEO.
Michael, you look like a bridge builder. You're an engineer, aren't you?
Michael Cautillo, President and CEO, Windsor-Detroit Bridge Authority: Mr. Chair, yes, I'm an engineer, but I've done this for Movember.
The Chair: Okay. I just thought you were what, in football terms, we used to call third and short.
Mr. Cautillo: I am short, and I'm second.
The Chair: In my case, in training camp, I tried to grow a beard for nine years, and unfortunately I couldn't.
Linda Hurdle is the Chief Financial Administrative Officer, the lady who controls the purse strings.
It's very nice to see you. We thank you all for being here with us.
Each department will have five minutes to make an opening statement about their funding requests in Supplementary Estimates (B), to be followed by questions.
Mr. Perlman, the floor is yours.
Mark Perlman, Chief Financial Officer, Employment and Social Development Canada (EDSC): Mr. Chair, members of the committee, I'm pleased to appear before you in my capacity as Chief Financial Officer for Employment and Social Development Canada.
Senior executives from key areas of ESDC are also in attendance and may be coming forward to help me answer some of your questions.
[Translation]
The department delivers a range of programs and services that affect Canadians throughout their lives. The department provides seniors with basic income security, supports unemployed workers, helps students finance their post-secondary education and assists parents who are raising young children.
We also have the mandate to maintain a strong, productive, healthy and competitive workplace within the federal jurisdiction through the Labour Program. Service Canada delivers ESDC's programs to citizens, as well as other Government of Canada programs and services.
[English]
Allow me to present to the committee an overview of ESDC's portion of the 2016-17 Supplementary Estimates (B), tabled on November 3, 2016.
Supplementary Estimates are tabled in the House of Commons by the President of the Treasury Board to obtain the authority of Parliament to adjust expenditure plans as reflected in the estimates for the fiscal year.
[Translation]
Supplementary Estimates (B) present information on spending requirements that were either not ready in time for inclusion in the main estimates, or have subsequently been updated over the course of the year to account for developments in particular programs and services.
We use the supplementary estimates to give Parliament an update on various legislative programs. Statutory items are included in the estimates for information only, since Parliament has already approved the purpose of the expenditures and the terms and conditions under which they may be made through other legislation.
[English]
As part of our Supplementary Estimates (B), ESDC is requesting $43.1 million in funding for the Youth Employment Strategy. Budget 2016 announced that it will invest additional funding for the Youth Employment Strategy in 2016-17 by increasing the number of youth who access the Skills Link program and also to create new green jobs for youth. For the Skills Link stream, $40.9 million in funding will be used to serve 3,000 additional youth clients in 2016-17. The Career Focus stream will create 150 green jobs by investing $2.2 million in 2016-17.
Also, ESDC is requesting $16.5 million for the Old Age Security increased workload and enhanced program integrity measures to ensure that seniors have timely access to the OAS benefits that they depend on and to ensure that only individuals who are entitled are receiving these benefits.
In addition, ESDC is requesting a $3.1 million transfer from Indigenous and Northern Affairs for Nunavut Inuit labour force analysis costs and $0.5 million to support the Kativik Regional Government to streamline delivery of youth programming.
ESDC is requesting to transfer $32,000 to the Canadian Institutes of Health Research to support the Canadian Longitudinal Study on Aging initiative and $0.1 million to the Privy Council Office to support resources for the Blueprint 2020 initiative.
[Translation]
I hope this overview has given you a better understanding of the Supplementary Estimates (B) for our department.
[English]
My colleagues and I would be pleased to answer your questions.
The Chair: Thank you.
Senator Ataullahjan, why don't you start off with questions and then we'll go from there.
Senator Ataullahjan: Thank you, chair.
You mentioned $0.1 million to the Privy Council Office to support resources for the Blueprint 2020 initiative. Can you tell me a bit about that?
Mr. Perlman: Blueprint 2020 is a government-wide initiative to develop a world-class public service. It's an initiative being run out of the Privy Council Office, and it's to ensure that we're better equipped to serve Canada and Canadians now and into the future. This is basically our corporate contribution to this government-wide initiative, to help find ways to build tomorrow's public service.
I could get into a lot more detail. The initiative was a ground-up approach that started a few years ago with the previous Clerk of the Privy Council. The idea was to foster ideas as to how we could streamline, eliminate red tape, find ways of leveraging technology to make it easier and more productive for the public service as we move into the future. This is just our contribution towards that.
Senator Pratte: The Youth Employment Strategy has been in place for a few years. The additional monies asked for in these supplementary estimates for your department is $39.7 million; correct?
Mr. Perlman: Yes. Forty-one, including EBP, but yes.
Senator Pratte: And in the Main Estimates, what was the amount?
Jason Won, Deputy Chief Financial Officer, Employment and Social Development Canada (EDSC): For the Youth Employment Strategy, for ESDC, it was $261 million.
Senator Pratte: This is a horizontal program, so it involves 10 or 11 departments, correct? I'm always concerned with horizontal programs and how their results are being monitored, and now there's quite an important increase in expenditures for this program for 2016-17, not only for your department but for other departments also. To what extent is the strategy monitored, not only for your department? Are you the head department for that strategy? Is there a head department?
Paul Thompson, Senior Assistant Deputy Minister, Skills and Employment Branch, Employment and Social Development Canada (EDSC): I can speak to that.
ESDC is indeed the lead department for the Youth Employment Strategy. There are three different streams of activity in the strategy, involving 11 departments. We have a network that works together, a governance structure that oversees the different phases of implementation, setting the targets, doing the proposed allocation of the funding and monitoring results. The 11 departments share a common set of terms and conditions, and we move towards consistent performance measures as well. So there is a network that coordinates the rollout of the strategy amongst the 11 departments.
Senator Pratte: So if I want to know, for instance, where you're at compared to the objectives that you set at year one, year two and year three, where do I go? Is there an annual report for the youth strategy each year?
Mr. Thompson: Each department would report separately on the money they receive as part of their estimates, but we also do some coordinating. I'm sure that information could be made available. I don't know off the top of my head in what form it comes together, but we certainly do have aggregate results for the Youth Employment Strategy.
Senator Pratte: I'd be curious to have that information if you have it in aggregate form.
Mr. Thompson: Just to note that we're in the midst of a rollout of a significant expansion, so there are obviously no results associated with the expanded activity, but historically there would be results.
Senator Pratte: I appreciate that. Thank you.
The Chair: Thank you very much, senator.
I must apologize. I was so impressed, Mr. Cautillo, with the fact that you were growing that beard for Movember that I forgot to ask you for your comments. See how you just slipped by the chair? The chair has had too many hits to the head; 160 games and never missed a game, but I've had so many concussions that I can't remember how many games I actually did play.
Would you like to give us a comment? Then we'll start with questions so that you can get into the game.
Mr. Cautillo: Mr. Chair, I appreciate the opportunity to appear in front of the committee to discuss the Gordie Howe International Bridge project, the Windsor-Detroit Bridge Authority, sometimes referred to as WDBA, as well as the authority's Supplementary Estimates (B) tabled on November 3, 2016.
You may know that 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. Approximately 2.5 million trucks per year travel through that particular gateway.
Due to the significance of this trade corridor, it was identified by the governments of Canada, the governments of the U.S., Michigan and Ontario that there was a need to provide redundancy, to provide additional capacity, to provide system connectivity and improved border processing through the gateway to improve the flow of people and goods between Canada and the United States. It's important to keep going back to those four points of providing redundancy, additional capacity, system connectivity and improved border processing.
There are four major components to the Gordie Howe International Bridge project. First, the bridge itself will be six lanes and 2.5 kilometres in length.
Second, the Canadian port of entry will be 53 hectares, and for us in the old system, 53 hectares is about 130 acres. Once completed, it will be the largest Canadian port of entry on the Canada-U.S. border.
Third is the U.S. port of entry, a site that is comprised of 60 hectares, or about 145 acres.
Fourth, there will be the interchange with Interstate 75.
As you know, the Windsor-Detroit Bridge Authority is a not-for-profit Canadian Crown corporation that was created in October 2012 with staffing and operations beginning in August 2014. Our mandate is to oversee and manage the procurement process for the design, the building, the financing, the operating and the maintenance of the new bridge between Windsor and Detroit through a public-private partnership, or P3. WDBA will also oversee and manage the construction and operation of the new crossing. We will actually set tolls and collect tolls, which will be used to repay the project costs.
In August 2014, I was appointed as President and CEO of WDBA, and I'm actually its first employee. My first priorities were to set up the corporation, build the capacity and actually undertake pre-procurement activities, thus enabling WDBA to move toward P3 procurement. Through fiscal 2014-15, we achieved many accomplishments, allowing us to move forward with our corporate priorities for 2015-16. These priorities included 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 was also a priority and is being undertaken by Infrastructure Canada.
In 2015-16, WDBA launched the P3 request for qualifications, or RFQ, process and announced the three shortlisted respondents for the P3 request for proposals, or RFP.
We developed the RFP, tendered and awarded a contract to start the early works on the Canadian port of entry. Work, I'm pleased to say, is well under way on that contract.
We signed most of the utility reimbursement agreements with Canadian utilities, and we've begun utility relocations on the Canadian side. We've also made significant progress on mapping the Michigan property acquisition process, and we've hired over 40 employees at WDBA, including all key senior management positions.
I'd like to take a moment to provide you with information about the U.S. property acquisition priority, a key project activity that has received some attention. As a result of an extensive environmental study, the properties required for the construction of the U.S. port of entry and the footings of the bridge in the U.S. were identified.
Michigan, as you know, is our partner in the delivery of the Gordie Howe International Bridge project. We work closely together. Through funds provided by WDBA, the Michigan Department of Transportation is acquiring the Michigan properties required to build the U.S. port of entry and the bridge footings; and a rigorous process has been put in place related to the funds for the Michigan properties.
Actually, good progress is being made, and I'm pleased to say that of the total 961 properties required for the project on the U.S. side, MDOT — the Michigan Department of Transportation — has control of over 516 of those properties, or about 53 per cent of the required properties.
With the progress that has been made in acquiring properties in the U.S., and after the risks associated with acquiring certain properties in the U.S. and Canada had evolved to the point where we believe they have been mitigated, we reached a significant milestone in this historic project just a few weeks ago. We released the RFP on November 10, 2016, so two weeks ago. On that date, we were pleased to announce that the request for proposals had been issued to the three proponents that had been shortlisted through the rigorous evaluation of submissions received in response to our request for qualifications.
With the issuance of the request for proposals, we've begun the second stage in our P3 procurement process. We actually anticipate the RFP stage will be 18 months in duration. At the end of this stage, which is going to be around May 2018, subject to approvals, we will have our private-sector partner on board and construction should start thereafter.
I know you're going to want to know about a construction and completion date. I can't provide you with a completion date, as we will know the construction schedule once we select our private-sector partner, and we lock down both the construction timing and the actual costs for the construction. We anticipate that the selected private partner will begin work as early as possible on the main bridge, as we see that particular activity as having the longest duration time to construct.
Our priorities over the next five years are to finalize the P3 procurement process, to acquire the Michigan properties, to complete the early works on the Canadian port of entry, to complete utility relocations in both Canada and the U.S., and then to construct the Gordie Howe International Bridge project.
The $350 million requested through Supplementary Estimates (B) for 2016-17 is aligned with these priorities, being early works, utility relocation on both sides of the border, property acquisition in Michigan, and the ongoing delivery of the P3 procurement process. It is actually totally aligned with our mandate.
The requested funds will be used for capital and operating costs necessary to further our mandate to deliver a safe, secure and efficient international crossing for commercial and passenger traffic over the Detroit River.
I'll end my remarks here, and I welcome any questions from you or the honourable members.
The Chair: Thank you very much.
To follow up on Senator Pratte's question, what we're really interested in as a group, and we talked about this amongst ourselves, is that there's a lot of money here for investing in programs. What are you trying to accomplish with this investment? We're not sure whether the investment is just money going in to support administrative duties to create programs. What's your end result? Are you trying to create jobs?
To go back to your letter from the Prime Minister, when he set up objectives with your minister, what are your key objectives so we understand the tie between money and funding and what you're trying to achieve? I know it's a macro-type question, but you may use your Youth Employment Strategy, going back to what Senator Pratte was digging at, to give us some real indication of what you folks are up to.
Mr. Perlman: In general, it's about funding for employers to create the jobs. It's not about the administrative infrastructure within our department. When we use the Youth Employment Strategy, it's funding for employers and organizations to have eligible activities for youth facing barriers to employment. That's the direction that we're going, at a macro level.
The Chair: How do these organizations get to you? How do they apply? How you do you select them? How long does it take?
Mr. Thompson: I'd be happy to elaborate. There are three streams in the Youth Employment Strategy for different clients, and they run slightly differently. I will speak briefly to each one.
We have the skills link stream, which is targeting vulnerable youth. We are administering that through a call for proposals. That call for proposals just ended about a month and a half ago. We're going through a very large number of funding proposals from community and not-for-profit organizations to deliver programming to get youth into employment.
Each project has a numerical target in terms of the number of youth they intend to serve and hopefully get into employment or have them return to school, and those are the metrics that we measure on that one.
The Chair: Are these the number of jobs? If you look at your Youth Employment Strategy, when you come up with X number of jobs, how many jobs specifically are there? Will there be 3,000 additional youth clients or 3,000 more jobs? How many jobs did you get in 2015-16, in your last fiscal year?
Mr. Thompson: We do an annual Departmental Performance Report, so each of the 11 departments outlines the job. We measure two things: the employment results as well as returns to school with respect to vulnerable youth. A return to school is a very good outcome as well. So we measure both of those metrics.
The career focus stream, one of the others mentioned here, is indeed about working with graduates and finding them jobs. That one is definitely about the number of participants that end up with full-time employment.
The third stream is the summer work experience. That is measured by the number of students that get a work experience over the course of the summer.
Two of the three streams are exclusively about employment. One of them has a return to school or employment target.
The Chair: Is there a measurement to see how many kids graduate from high school? Is that what it is? What type of school are they graduating from?
Mr. Thompson: It's not a program associated with graduation. It's getting a kid who is not in employment or education and getting them into one or the other. It's working with vulnerable youth who face barriers and are on a trajectory that is not looking promising in terms of jobs and getting them on a better track.
The Chair: For someone going back to school, how do you measure the success? What is your measurement stick?
Mr. Thompson: That they actually return to enrolment.
The Chair: So is it just returning or is it getting through school?
Mr. Thompson: Once they're in school, they're no longer considered a vulnerable youth. If they were out of school, they could be picked up by the program again, I suppose, but it is a program intended to get those two outcomes I mentioned.
The Chair: Do you think that's the correct measurement stick to have, just to get them back into school, or do you think a better measurement would be to get them back into school and complete it?
Mr. Thompson: That would be a far more expensive proposition, to track an individual throughout, but we do look at how sustained the outcome is. We look at sustained employment, not just for a number of months. We look at 6 and 12 months after the intervention, and we're looking at ways of going beyond that in terms of employment. I'd have to get back to you on the sustained school part.
The Chair: We would be very interested in seeing that because there are so many people involved with not-for-profit organizations assisting young people in school. We look at the issue with Senator Eaton, who spent a lot of time in terms of the indigenous population and their challenges with the graduation rates. It's great to say we're going to put people into school, but it's most important not only to put people in school and help them to get back into school but to have them graduate because unless you graduate, you can't go on to the next step. You have to ask yourself what the value is of the money you're spending.
The only reason I asked the questions in rapid fire is that I just wanted to get the blood flowing so that we could get excited.
Senator Andreychuk: This is of concern to me. You're talking about vulnerable youth, so we need to get a definition of what you consider in the program, for other purposes, not just the estimates.
They need so many support systems. It isn't just getting them to the office. You say that you will be able to tell whether they were sustained in employment for more than six months to a year. That would be a good yardstick, if you can maintain them in employment for the long term. It's usually the first six months that are the difficult ones because they don't have any of the skills that normal people have. They haven't had the support systems to wake up, get to the job, get the transportation and sustain it all.
Through the courts, I worked on that all the time. It wasn't just getting the employer. I would get the employer. I did it personally, but they wouldn't show up. Then they didn't show up the following Tuesday, and there was always a reason because the support systems weren't there.
So does your program fund all of the support systems for the employer, or is it just that when they get through the door, it's the employer's problem to look after them and make sure they —
Mr. Thompson: In fact, we put a strong emphasis on what we refer to as wraparound support. There is often a very short intervention to get the student or the young person prepared for the workplace, and when they enter the workplace, there is a continuation of those wraparound supports — coaching, helping, dealing with barriers and the life skills that are required to show up.
Senator Andreychuk: Do you continue funding those, not the employer?
Mr. Thompson: The program supports so that if we work with a community organization, that organization can continue to provide the wraparound supports to make sure that that employment is sustained for a period of time.
Senator Andreychuk: Is that information accessible to us? Where would I find it?
Mr. Thompson: It's an eligible expenditure, and it's something we encourage the proponents to — when we review proposals, those are the types of things we look for.
Senator Andreychuk: Is there a website? Is there somewhere I can go?
Mr. Thompson: The call for proposals would be the best place to look. It outlines what we were expecting from the proponents of these projects. That's on our website, the call for proposals for Skills Link.
Senator Andreychuk: So I can find out where the programs are, who is running them, which employers are involved in this?
Mr. Thompson: We just ran the call, so right now we're going through the proposals.
Senator Andreychuk: All of that will be available in due course?
Mr. Thompson: All of our grants and contributions have disclosure requirements.
Senator Andreychuk: You can get back to me because I want this as follow-up.
The Chair: Following up on Senator Andreychuk's question, send our clerk a copy, if you could, just one copy, of the type of application. I know it's on your system. If you could send us a hard copy, that would be appreciated.
Let's go to Senator Neufeld.
Senator Neufeld: My question is to Mr. Cautillo in regard to the Gordie Howe International Bridge project. I'm a great fan of P3 projects. I'm from British Columbia, and we built an awful lot of infrastructure using the P3 process.
I have a few questions so that I have it clear in my mind. That project will own the 60 hectares on the U.S. side and the Canadian side, and there will be border crossings on those lands. Are they all managed by the P3 process, or is there something else that happens?
Mr. Cautillo: Thank you, senator, for that question. Perhaps I can go back just a bit.
We are hiring a private sector partner, our P3 partner, to design, construct and operate this crossing on our behalf. We are paying to acquire property on the Michigan side. Infrastructure Canada is acquiring properties on the Canadian side. Our private sector partner will operate this on our behalf. We will set the toll rates, and our partner will collect the toll rates on our behalf.
Unlike other P3s that you may be familiar with, where the private sector is taking the revenue risk or the traffic risk, that is borne entirely by us and the Government of Canada.
Speaking of tolls, we are collecting tolls only on the Canadian side. If you're travelling from Ontario into Michigan, you'll be crossing into the Canadian plaza from Highway 401 and the Herb Gray Parkway. The first thing you will do is get to our tollbooth and pay a toll. Then you go through the Canadian plaza and cross over the bridge onto the U.S. plaza and directly onto I-75.
In reverse, if you're coming from the U.S, you will come off of I-75 through the U.S. plaza, into the Canadian plaza through the customs function. When you clear that, you will get to our tollbooth. Then you will be paying when you come in.
To be very clear, toll collection, toll rates, are set by us. The tolls are collected by our private-sector partner and deposited into our account, and toll collection only occurs in Canada.
The Chair: People coming from the States into Canada will pay a toll.
Mr. Cautillo: Absolutely.
Senator Neufeld: So it's a bit of a hybrid from the P3s I'm used to. Everything is taken care of by the successful contractor.
So what you're saying is that part of this $350 million request is to purchase the lands on the U.S. side.
Mr. Cautillo: Yes.
Senator Neufeld: Can I just stay with the U.S. side, then? With respect to the construction of the buildings at the border crossing, will they be built and operated by Canada also?
Mr. Cautillo: They will be paid for by Canada and built by our private sector partner, yes.
Senator Neufeld: And you said that Infrastructure Canada would buy the 53 hectares on the Canadian side.
Mr. Cautillo: Yes, sir.
Senator Neufeld: So that amount won't show up in the Windsor-Detroit Bridge Authority?
Mr. Cautillo: That is correct.
Senator Neufeld: Can you give me an idea of how much that is?
Mr. Cautillo: I would have to refer that back to Infrastructure Canada, but I can tell you that of the properties on the Canadian side, virtually all of the properties have been acquired. We have one very small sliver of property to acquire. They have done an excellent job of acquiring properties.
Senator Neufeld: I don't dispute that for a moment. I'm sure they have. There are sums here and sums over there, and I just want to keep track of where it all is. If you could get the amount that Infrastructure Canada has spent to date to acquire those 53 hectares on the Canadian side, or whatever costs they have incurred, I would appreciate that. You don't have to do that right now. You can provide that to the clerk at some point in time. They'll get that information to us.
Tell me what the P3 part is, then. I am reading here. It says, "the procurement process for the design, build, financing, operation and maintenance of the new bridge.'' Are you saying that the P3 part of it will only be for the bridge, for the structure, and the rest is financed another way?
Mr. Cautillo: No, sir. P3 actually involves the design, the financing, the operation and the maintenance of the Canadian plaza and the buildings, the main bridge, the U.S. plaza and the buildings, and the construction of the connection to I-75.
There's a bit of an anomaly in the I-75 connection. Once constructed, the Michigan Department of Transportation will take that over and will actually operate it and maintain it as opposed to our private sector partner.
So our private sector partner, just to be clear, designs and constructs the Canadian plaza, the bridge, the U.S. plaza and the connection to I-75, but it only operates and maintains the Canadian plaza, the main bridge and the U.S. plaza.
Senator Neufeld: So the $567 million that you've expended, which would be inclusive, will that stay as paid for by the Government of Canada and also the money that was paid to acquire the land on the Canadian side? Will all those expenses be expended by the Canadian government, or will the actual person or company that gets the P3 have to reimburse this initial money to the Government of Canada?
Mr. Cautillo: Senator, I'll ask Linda to answer that particular question.
I just want to go back to your earlier question about whether the funds for the acquisition of the Canadian properties were included in the $350 million or the $567 million. I did say it was not included. I'm just reiterating that it was not included, and we will endeavour to get that figure to you through the clerk.
Senator Neufeld: Okay. That will be added onto the $567 million.
Linda Hurdle, Chief Financial Administrative Officer, Windsor-Detroit Bridge Authority (WDBA): The $567 million is for activities that are ongoing right now, so it's pre-P3 activities. The largest activity in terms of financial dollars is the acquisition of the U.S. properties. It's $381 million. Then we have other activities ongoing, such as site preparation on the Canadian site and utility relocation on both the Canadian and U.S. sites. Those are activities undertaken by WDBA or the Michigan Department of Transportation and they're not part of the P3 transaction.
Senator Neufeld: Whoever the successful contractor is will not have to pick up any of these costs, so the Government of Canada could incur — I don't know how much. Do you have an estimate of how much the Government of Canada is going to incur for groundwork, for the things that you're doing now that won't be part of the P3? Do you have an estimate, or do we just pay whatever it comes to?
Ms. Hurdle: No. We do have estimates. There is a business plan in place that looks at all the pre-P3 activities. The aim of those activities is to present to the P3 partner, when they come in, with a site that is ready for their construction.
As I mentioned, the activities are the acquisition of the Michigan properties, which is a significant one, and the relocation of the utilities on the U.S. side. It is the same thing on the Canadian side. Some site preparation is also is required on the Canadian side to give the site to the P3 partner once they come in so they can begin construction.
Senator Neufeld: What is the estimate that will take place prior to a P3 contract being signed? It isn't going to happen probably for another year and a half?
Ms. Hurdle: That's correct.
The Chair: So far we're at $567 million.
Ms. Hurdle: This is total cost, some of which has already been incurred, but to relocate the utilities on the Canadian side, we're looking at about $120 million.
On the U.S. side there are negotiations. It's a little bit different than the Canadian side, depending on where the utilities reside, whether they're on a public or private right-of-way. So there is, I guess, a high-level estimate, but there are negotiations that are occurring obviously to try to get the best price.
Senator Neufeld: That's the number I need. What is the high-level estimated number that the Government of Canada is going to incur before a P3 contractor takes over the design, build and maintenance of the bridge?
Ms. Hurdle: The other piece that I haven't talked about in terms of costs is the cost to get to the P3, so the P3 procurement process and all of the advisers. Maybe we can provide you with the total cost of those pieces to get us to the P3 piece, the high-level estimate.
Senator Neufeld: What is the estimate, then? Somebody must have come up with a number someplace along the line that said before we can go to a P3 and get a contractor to actually take it over, it's going to cost us X amount of dollars. Are you saying there is no estimate?
Ms. Hurdle: No, there is an estimate.
Senator Neufeld: What is the estimate?
Mr. Cautillo: Senator, as Linda is looking that up, perhaps I can go back, as you're familiar with P3s, and explain why we're undertaking some of these activities.
On P3s — and this is very much the same story and explanation I provided to this committee about a year and a half ago — the things that usually come back to haunt you are environmental approvals and other approvals, property acquisition, and usually it's subsurface, things that are in the ground that will come out of the ground to bite you. Those would be utilities.
What we're doing in this pre-procurement phase is we've gotten all the environmental approvals. We're acquiring all of the properties and moving all of the utilities so that when we turn the sites over to our P3 concessionaire, all the land is there and the utilities have been relocated. That's why we keep referring to early works on the Canadian side.
There is uniqueness around this particular site. While the Detroit River separates the Canadian plaza from the U.S. plaza, there is also a difference in soil conditions. There's a lot of water in the soils underneath the Canadian plaza. They are very susceptible to settlement. We recognized in the pre-planning for the project that we needed to get this settlement out of the ground; we needed the ground to settle. Therefore, we undertook early works, many of which included placing wick drains and surcharging the site so that we can actually, if you will, squeeze the ground. We stripped the whole site and we placed a million tonnes of gravel on the site. We have done about $110 million worth of work.
In one particular area we brought in more than nine meters of fill, some of which has settled by about a meter already. This is exactly what we wanted to happen. We got this settlement through the surcharge aspect plus through the use of what are known as wick drains — and some of us older folks may remember sand drains — that are meant to get the water out of the ground and let the ground settle. Again, we want the ground to settle but we want to it to settle on our terms and not once we start putting buildings up, for obvious reasons.
We have also moved a number of utilities that are within the Canadian plaza. Bordering the Canadian plaza, we have two power generating plants. They are peaking power plants served by natural gas. So we have had to move natural gas lines and waterlines. We are in the process of moving some very high-voltage towers, all part of what's known as the Lake Erie Loop, which connects the power grid in Ontario with that in Michigan.
There are a whole number of various activities that we have to carefully choreograph, all designed to move the utilities, get the ground to settle and do other preparatory work, including putting a ring road around the Canadian plaza, so that when we turn the site over to our P3 concessionaire, they can begin the construction in earnest of the buildings, but they will principally start with the actual construction of the main bridge span because it's such a massive structure.
You're probably wondering how massive a structure it is. It is a clear span from pier to pier of 850 metres. For some of us that remember the old system, that's about 2,700 feet. The main towers — if you will, the bridge is held by two main towers — just to give you an order of magnitude, they will be about 250 metres in height. You're wondering what 250 meters equates to. The Peace Tower is 98 meters, so think of a tower being two and a half times the size of the Peace Tower.
This will be a massive and iconic structure. This committee said last time that it will be a beautiful project and a beautiful bridge so that the bridge and the plaza can take its rightful place in the Winnipeg-Detroit skyline.
Senator Neufeld: Do you have the number? I just need the number.
The Chair: The senator is getting closer to asking you questions about how the P3 is going to work and the concessionaire and who gets what. We're going to get back to that, but I don't want our other witnesses to doze off and feel they're not wanted.
I would like to get back to the Employment folks and get into some of these measurements, jobs and the end results.
We have Senator Marshall up next. Do you have a couple of questions you would like to ask?
Senator Marshall: Once we got talking about the bridge, I wanted to talk about the bridge because it sounds like it's going to be an engineering marvel, but I did have questions for Employment.
There's an actual document, an actual strategy, is there?
Mr. Thompson: There's a program framework that lays out objectives. The strategy is essentially three streams of programming that have performance objectives established for each of the streams and the 11 departments collaborating to achieve those objectives. That's the strategy.
Senator Marshall: The reason I ask is because the current government, after it came to power, it seems like quite a few strategies or consultations have been taking place. But this was prior to the current government, was it, this strategy that you're referring to?
Mr. Thompson: The Youth Employment Strategy has been in existence for many years.
Senator Marshall: We're talking about performance indicators. Now the new government is focused on results-based decisions. You're currently doing the performance indicators, I would think, under the old system. This thing about the results-based indicators, is this something new? Are you converting over to something else now as a result of the new government? I'm just trying to get my bearings as to where you're at.
Mr. Thompson: We have always had performance measures associated with the program, such as how many people get employment and return to school.
Senator Marshall: I understand that.
Mr. Thompson: What we have in the supplementary estimates here is one year of funding for Skills Link. We actually have an expert panel that the government has set up to look at youth employment. It will advise us going forward on the nature of that programming and the types of things that we should be striving for, so we will be refreshing and updating our performance measures.
We want to look at things like the effectiveness of different types of interventions and what we should be emphasizing in the program, things like the wraparound services I was mentioning. We also want to make sure that we've got both performance measures on an annual basis but also in-depth evaluation studies so we can dig even deeper to what the longer term outcomes and impacts of the program are.
Senator Marshall: But this was in place before the current government came in.
Mr. Thompson: The programming was in place before the current government and the government has expanded it.
Senator Marshall: We're really focused on the results. You're getting performance indicators as you have in the past, but the results-based indicators that the new government is talking about, do they that affect you, or are they saying that what you were doing in the past is fine and you don't have to convert over to this new results-based thing that we have on the go?
Mr. Thompson: It's not only about changing the performance measures. We will be looking at whether those need to be updated, but it's also about finding the most effective interventions. One the streams in the call for proposals I was mentioning earlier is an innovation stream. So we want new ideas to come forward, to test those and measure those, and if they work we want to encourage other proponents to use those proven and successful interventions. Those are the types of considerations as we focus on achieving better results.
Senator Marshall: We were also speaking earlier about how much money is actually going to employing youth and how much money is being used for administration. Would you know what percentage of the funding? We're talking about significant amounts of money. So is it 20 per cent on admin and 80 per cent on the actual youth?
Mr. Thompson: There is an administrative component that my colleagues can speak to that the department maintains to administer the program and the strategy, and then the individual projects also have —
Senator Marshall: That's right. I'm interested in both.
Mr. Won: The $261 million that I referred to earlier, which is the amount of money for the Youth Employment Strategy for ESDC for employment and social development in the Main Estimates, was composed of $24 million of operations and maintenance or admin costs, operating costs, and $237 million in grants and contributions funding, which is the money that actually goes out to the program to help support youth.
Overall, it's under 10 per cent of the costs of the program.
Senator Marshall: So you're saying 90 per cent of the money actually goes to youth employment.
Mr. Won: That's right.
The Chair: Ninety per cent goes to the employment of youth. If you look at your various programs, how many jobs are you actually recreating?
Mr. Thompson: Each stream of the Youth Employment Strategy has its own target in terms of jobs created.
The Chair: Can you give us some numbers?
Mr. Thompson: Our Departmental Performance Report and the Report on Plans and Priorities set out the annual targets for the entire envelope. This is a supplementary investment with a target, so we'd have to refer to the overall —
The Chair: What would be helpful is if you could give us a breakdown. The yearly budget, I guess, goes 2015-16 and 2016-17, the fiscal year we're in now. Comparing your two fiscal years, because it's really hard to understand sometimes, is the money being spent in developing a return or is it being spent to set up programs and get administrators? It's great to say 10 per cent of costs on administration, but we need to see the results. You're tracking your money but you're doing more than tracking your money. You're trying to track your results.
Mr. Thompson: Absolutely. We're doing that. This investment is doubling the size of Skills Link as a stream of activity and it's doubling the expected results to be achieved.
The Chair: If you could find out and get us the number of jobs through your three programs that are actually created or whatever measurements you use, because right now we're talking about money being spent but not totally understanding what the results are.
Mr. Thompson: For sure.
The Chair: As a manager, at least in the private sector, you've got money that you're spending. What is are your deliverables and then what are your results?
Mr. Thompson: We have that laid out in our performance report.
The Chair: That would be perfect. We don't need to see all the performance reports.
Mr. Thompson: An excerpt from that.
The Chair: Give us the excerpt in terms of number of jobs so that we can say, "Hey, this is fantastic. We're spending this amount of money and we're seeing the jobs.''
You mentioned that you have a committee. What does that committee do? Does it make recommendations?
Mr. Thompson: The network that I mentioned that administers the program?
The Chair: I thought you said —
Mr. Thompson: The expert panel. The government has struck an expert panel to advise on the future of youth programming.
The Chair: Who is the expert panel?
Mr. Thompson: Seven members announced and the panel has started its —
The Chair: Where do they come from?
Mr. Thompson: They were chosen from across the country, people with experience in delivering youth programming. Most of the members are quite young themselves, so they have lived experience as well as expertise in delivering these kinds of programs. They have been drawn together to provide advice to the government.
The Chair: How long has this group been together?
Mr. Thompson: One month.
The Chair: This is a new concept. How come it's only a month old?
Mr. Thompson: The government struck an expert panel to advise on the future of youth programming. They've made significant commitments to expand the program over three years and wanted to make sure there was some expert advice in shaping those investments.
The Chair: It begs the question, was there an issue before about the effectiveness of the programs to create the new panel?
Mr. Thompson: The government as part of its results agenda wanted to make sure that we've got the best possible results for the investments going forward.
The Chair: You understand why I asked the question.
Mr. Thompson: Yes. It's been well evaluated in terms of the studies, but there are always opportunities for improvement.
Senator Eaton: I wanted a supplementary to the chairman's questions. I don't mean to be rude, but I find it incredible that you can't even give us a ballpark number of jobs you create with all this money every year.
Mr. Thompson: I can certainly share some results from 2015.
Senator Eaton: Yes. That would be very helpful. That's a beginning.
Mr. Thompson: There were about 42,300 young Canadians served through the Youth Employment Strategy in 2015 through the different streams.
Senator Eaton: Do you have a breakdown of the vulnerable stream?
Mr. Thompson: The largest portion of the program is the summer jobs portion. About 35,000 of those obtained summer jobs through the Canada Summer Jobs program. There were 679 who returned to school.
Senator Eaton: Six hundred and seventy nine out of how many?
Mr. Thompson: This is of the total 42,000 that participated in the program. Thirty four thousand got summer jobs; about 5,500 became employed through the other streams of the program. This is Career Focus and Skills Link. There are about 680 who returned to school as a result. That would be largely through the Skills Link program.
Senator Eaton: That would be great. Next year we could take those numbers or this year's numbers and compare them; correct?
Mr. Thompson: Yes. The objective was to double the jobs obtained and to double the outcomes of Skills Link.
The Chair: You got 34,000 jobs. What was the target? Did you folks meet your objective? The object was a little higher than 34,000 jobs, was it not? Wasn't the target 40,000 to 50,000 jobs?
Mr. Thompson: I'm giving the results for 2015-16.
The Chair: That's what I'm asking. What was the target in 2015-16 before you got to 34,000?
Mr. Thompson: In 2015-16, that was on target, if memory serves, or very close to target. This year, the target was doubled.
The Chair: How much money was spent to get to 34,000 jobs?
Mr. Won: About $110 million under the program. It's been doubled. What was announced previous to Budget 2016 was $339 million over three years, so $113 million per year.
Senator Ataullahjan: I want to talk about the bridge. The bridge authority will charge tolls to pay for the project. Do we know or have any idea what percentage of the project costs will be covered using the toll fees?
Mr. Cautillo: We're estimating that all of the project costs will be ultimately repaid by tolls. The setting of the tolls, though, is going to be something that we are going to undertake in the next few years, and we will have to set those tolls so that we are competitive while also recovering the costs.
Senator Ataullahjan: We paid for the land in the States. Why was that?
Mr. Cautillo: That arrangement was reached by the Government of Canada with the State of Michigan in 2012 under the Crossing Agreement that was signed at that particular time.
Senator, if I may, I also want to talk about other aspects around the Crossing Agreement. We just had questions directed to our colleagues around jobs and things of that nature.
The Crossing Agreement also spoke to community benefits, the involvement of labour unions, the involvement of higher-order education, on-the-job training programs, and the development and levels of local jobs that would be actually provided during the course of the P3 construction and operating exercise.
The Chair: Senator Marshall is excited to ask questions about the bridge. I want to find out who got Gordie Howe's last hockey stick.
Senator Marshall: Some of my questions are the same as Senator Neufeld's.
What is the total estimated cost? What are we talking about? Also, what is the estimated completion date?
Mr. Cautillo: Perhaps I can answer the estimated completion date and then turn it over to my colleague on the overall cost.
We have a request for proposal out now. The process is that there are three private-sector consortia each is made up of between 14 to 20 very large constructors, operators, financiers, et cetera. They are poring over our request for proposal, our project agreement and our project output specs. They will come back within a year and give us a technical and financial proposal. In the technical proposal, they will be articulating what the construction schedule and timing is going to be.
At that point, once we get the submissions, we're giving ourselves six months to actually evaluate the submissions, get approvals in government and then reach our financial close. At that point, construction starts. When we know their construction schedule, then we'll be able to tie down the construction timing, the opening and the costs.
Senator Marshall: That would be in 18 months' time, would it?
Mr. Cautillo: In 18 months' time, we hope to be at financial close.
Senator Marshall: Earlier, you were talking about what you're using this funding for. You were saying Infrastructure Canada was paying for property on the Canadian side. Is that the only separate organization that's paying for something to do with the bridge? CMHC is not paying for anything. Are any other departments or Crown agencies paying for anything? I want to make sure I understand the scope and who is paying for what.
Mr. Cautillo: We are working with Infrastructure Canada, as you mentioned, for the acquisition of the property. We're actually building the plaza and the buildings, and then Canada Border Services Agency will actually pay for the furniture and specialized equipment that they require within the Canadian POE or within the Canadian customs function. Some of that equipment would include what's known as VACIS, or Vehicle and Cargo Inspection System. This is a system where you can actually X-ray tractor-trailers.
On the U.S. side, Customs and Border Protection will similarly pay to equip their building. We'll put the building up. We'll get the air conditioning and heating, et cetera, done. They will then come in and install specialized security and customs equipment, things of that nature.
They also have that same type of large vehicle imaging system. They have two on their side. We have one on our side, with a provision for a second one.
Senator Marshall: That would be the only other organization that would be putting money into this project?
Mr. Cautillo: Yes.
Senator Marshall: How is the money advanced? Do you get it in advance, or do you run an overdraft and then the government pays on the submission of an invoice? How is the money coming to you?
Ms. Hurdle: Like any Crown corporation, we submit our annual corporate plan, and the funding is approved on an annual basis. We draw down appropriations based on our corporate plan and the budgets in our corporate plan.
Senator Marshall: You have a board. Is there an oversight committee for the project, or is the board the oversight committee?
Ms. Hurdle: As you mentioned, we have the WDBA board of directors. There is also another entity, and that's as per the Crossing Agreement, the international authority. That's made up of six members: three members from Canada and three members from Michigan. They're a higher-level oversight with specific duties.
Senator Marshall: Would that be on your website?
Ms. Hurdle: Yes.
Senator Marshall: Who will evaluate the proposals?
Mr. Cautillo: The proposals are going to be evaluated by WDBA staff, advisers and some of our partner agencies, such as the Michigan Department of Transportation, colleagues from public services and procurement, and others.
Senator Eaton: I read in your brief that 53 per cent of the land in Michigan has been acquired by the Michigan Department of Transportation. They're buying the land, but what controls do we have over them? Have we given them a budget or how do we do that? Do we just pay the bill when they send it in?
Mr. Cautillo: Senator, thank you for that question. There is a very stringent oversight of the expenditure. We take all of our expenditures extremely seriously, regardless of whether that's on the Canadian or the U.S. side.
The property acquisition process starts with laying out the property that is required, and then a series of valuations takes place. We use property valuators to evaluate what the property is worth, and then good-faith offers are made at that point.
Good-faith offers come to us for approval. The valuations themselves are overseen by a check valuator to make sure that everything is —
Senator Eaton: Is it expropriation, or do people know, "Listen, I have got a hot piece of property here because the Canadian government wants it,'' and they put it up for sale?
Mr. Cautillo: No. First of all, we've articulated what the footprint is in the property that we acquire. The process of acquiring property is a very long and well-tried process in the United States. The Michigan Department of Transportation has a very extensive process they have to follow on property acquisition.
As much as possible, we like to buy properties on a willing buyer/willing seller basis. Occasionally on the Canadian side we have to go through what we call expropriation; on the U.S. side, it's called condemnation.
Under the Crossing Agreement, Michigan is responsible for property acquisition through either a willing buyer/ willing seller program or through the condemnation process. They are the entity that has the power of eminent domain, so they're the only ones that have expropriation power. They exercise that. But we oversee what they do and their expenditures.
As well, senator, the U.S. federal government is involved through the FHWA, Federal Highway Administration, so that they also have to follow a prescribed process on property acquisition, valuing the properties and ensuring that proper funds are transferred, et cetera.
Senator Eaton: I'm not sure whether you answered Senator Ataullahjan. When you set up the tolls, you have figured out the number of trucks and cars. How long do you think it will take you to pay back the cost of the bridge? What are you anticipating? Ten years, twenty years?
Mr. Cautillo: This question was also asked 18, 19 months ago. My answer is unfortunately going to be the same as the last time. The repayment of that is going to be a function of the traffic that comes and uses —
Senator Eaton: I'm sure you've costed what you are hoping the traffic would be.
Mr. Cautillo: It's the traffic itself, the type of traffic and the toll rates associated with it.
Senator, remember, what we're doing is building a project. We're building a bridge and connections to it that are going to have a design life of at least 125 years. This is the part that I'm not able to express well enough. It's the tremendous benefits that this bridge and crossing are going to bring to Canada and the U.S., not just the local area.
Senator Eaton: I'm in support of the bridge. I'm just asking you an accounting question: What do you anticipate the repayment will be? Because you'll have maintenance. You'll always need the tolls for something.
Mr. Cautillo: Repayment depends on how much you spend to start with. We can give you good estimates of what we have spent to date and what our estimate is to acquire the balance of the property, things of that nature. But the bulk of that cost is actually the construction cost, the operating and the maintenance cost, which we will know once we get the submissions in a year's time. Based on that, we'll set toll rates to recoup those particular costs. The actual recoupment is going to be dependent on the type of traffic we're able to attract, the volume of traffic and how efficient we are at collecting.
Senator Eaton: I'm sure you've figured that out already.
The Chair: I know you already have some estimates. We're all adults. We recognize the sensitivity around the study and around the importance of this project.
Maybe you could give us some comments, without giving us your postseason report in terms of your results, we don't want to see that necessarily, but give us some measurements, the number of jobs and the trail of money that goes towards — we recognize the programs that you have, and you focus on your three programs and focus on other issues, but if you could give us some measurements that we can understand so you can do a comparison of 2015 to 2016 with three of your major objectives, that would be really helpful to us so we get a better understanding.
As you can see, we want to do more than just asking you about numbers and FTEs. We want to get the association with operations to money and the value of money and the results to money.
Senator Neufeld: I asked what the estimate was for the prior works. If you don't have it, please provide it to the clerk or give it to me.
I would like to know what Infrastructure Canada has paid and what their estimate is. I'm happy about the bridge. I'm not arguing about the bridge. I just want to know some of the costs we're bearing as we go forward.
Maybe I misunderstood you, but the construction of the bridge itself, the design, build, financing, operation and maintenance, that's what will be the P3. But all the works before you let that P3 contract will be borne by the Government of Canada and I want to know that cost, unless I misunderstood you. You did say all that would be wrapped up in the P3, but that's not what you told me to start with.
So the works on each end, the stuff that you've done, will not be part of the P3; is that correct? That will not be paid back. That will be a cost to government?
Ms. Hurdle: Just to clarify how things are being paid back, all monies spent by the Canadian government are accounted for and are part of what is called a statement of Canadian contributions, and it's all been tallied up to be recouped by the tolls. So all of it will be recouped.
Senator Neufeld: So the estimate for the prior works, the Infrastructure Canada money that's spent, all of that will be transferred to the concessionaire, to the company that will actually do it?
Ms. Hurdle: No. The money spent prior to the P3, the Canadian government is paying for that. What I'm saying is every dollar spent on the project by the Canadian government is being tallied up in a statement of Canadian contribution. Interest is added to that and will be repaid by the tolls, whether it's through the P3 or whether it's work done before the P3.
Senator Neufeld: It will all be repaid over whatever length of time.
Ms. Hurdle: That's right.
Senator Neufeld: So a certain portion of the tolls will go to the federal government to cover their costs, and a certain portion of the tolls will go to the company; is that correct?
Ms. Hurdle: All the tolls will come to the Canadian government. The concessionaire makes their investments through the construction, and then there are payments throughout the operations to the concessionaire, through the thirty-year concession.
Senator Neufeld: The Canadian government finances the total cost. That's a different P3 than I'm used to. That is a hybrid. That is completely different than anything I've ever seen.
Senator Andreychuk: You're going to tender this P3 project, contemplating the costs, but what about cost overruns and time delays? Are penalties being built in and contemplated?
Mr. Cautillo: Senator, there are penalties and this is one of the advantages of the P3. In essence, the cost is established as to what that cost is.
There will be penalties for late delivery to a bid, if you will, to their construction schedule. There will be both.
Senator Andreychuk: Mr. Chair, it's not the hockey stick we're concerned about. Gordie Howe is very important to Saskatchewan. He comes from Floral, Saskatchewan. That has to be noted in one way or another somewhere on that bridge.
The Chair: I have a final comment to you, sir. You can see that one of the questions we'll ask you — because we'll have you back as we go forward in time — is we want to understand who makes money on this. With the infrastructure bank coming in, private partners getting involved with infrastructure money want to make a return. Your private partners we would assume want to make a return and we want to understand as you go forward how the model will evolve so we can understand who gets what.
We can understand, Madam Controller, that you are extremely cautious and we respect that and we respect the confidentiality of a lot of the things that you're probably working on, but as the Finance Committee we need to have a picture. As you get more information and more sensitivity and comfort in dealing with us, hopefully you'll give us more so we can understand how this works, because it affects other areas that we look at, especially when you go down to the bridge going across to P.E.I. We have a lot of people that are sensitive about paying tolls. I know that you have that sensitivity already in your head. How you manage it will be interesting to understand, but we want to understand how to track that particular money.
Mr. Cautillo: Mr. Chair, I appreciate that, so I promise two or three things. One, by the time I come back next time I'll have my beard taken off. Two, we will get the answers to the senator's question around invested cost and things of that nature. And, Mr. Chair, when I come back the next time, I also want to talk about jobs that are going to be created during the construction period, during the operating period and during the maintenance period. I'm going to focus more on the operating and maintenance period because that's just so much longer. While there's a lot of emphasis on construction jobs, I'm also going to focus on the total jobs and what this beautiful project is going to mean to the area and to its economic vitality.
The Chair: That would be very helpful.
Mr. Perlman or Mr. Thompson, do you have any final comments before we go? You've been great and very patient with us.
Mr. Perlman: Thank you.
Mr. Thompson: Thank you. I'd be happy to follow up. We have the information you're looking for and would be happy to provide it.
The Chair: We're just trying to make sure that we ask questions that are important for the government and for people to improve performance and make sure we deliver the results that are intended to be delivered.
We thank you all for coming in tonight. We have a budget to approve in terms of some of our mapping for the infrastructure program. If you remember, we talked about it last time. I think at this late hour it's inappropriate to take a look at that. We will do it next meeting with your support.
Thank you very much, colleagues.
(The committee adjourned.)