Proceedings of the Standing Senate Committee on
Issue No. 14 - Evidence - October 5, 2016
OTTAWA, Wednesday, October 05, 2016
The Standing Senate Committee on National Finance met this day at 6:45 p.m.
to continue its study of the federal government infrastructure funding program.
Senator Larry W. Smith (Chair) in the chair.
The Chair: Welcome to the Standing Senate Committee on National
Finance, colleagues and members of the viewing public. The mandate of the
committee is to examine matters relating to federal estimates, generally, as
well as government finance. Today, we continue our study on the design and
delivery of the federal government's multi- billion-dollar infrastructure
My name is Larry Smith, senator from Quebec, and I chair the committee. Let
me introduce briefly the other members of our committee. To my left, our new
deputy chair, Senator Ann Cools. Senator, welcome.
Senator Cools: Thank you.
The Chair: To my left is the former long-time editor of La Presse,
Senator André Pratte.
To my right, a judge and a major contributor to the Senate over many years —
Senator Andreychuk: Not so many, right, Senator Cools?
Senator Cools: Quite a few.
The Chair: — Senator Andreychuk.
Senator Andreychuk: The mature senator.
The Chair: And to her right, the former Auditor General of the
Province of Newfoundland, Beth Marshall.
Senator Nicole Eaton —
Senator Eaton: That's a bit of a letdown.
The Chair: Not a letdown at all.
We also have Senator Ataullahjan, who is helping us out tonight. She is a new
member of our committee, too. Welcome.
In the second part of our meeting, we'll hear from independent oversight
bodies as suggested in the proposed work plan for the study. First, we'll hear
from the Province of Ontario.
At this point, I would like to note that the invitations have been extended
by this committee to five provinces so far with sometimes follow-up calls and
emails. Unfortunately, Quebec, New Brunswick and British Columbia have declined
our invitation. So far we haven't heard back from Alberta.
We extended an invitation to the Ontario Minister of Infrastructure, but,
unfortunately, they declined our invitation due to scheduling conflicts.
However, fortunately, Infrastructure Ontario has willingly sent us its lead
representative who will be giving us, we hope, a glimpse of how the operation of
infrastructure programs work at the provincial level. Therefore, we welcome Bert
Clark, President and CEO of Infrastructure Ontario. Infrastructure Ontario is a
Crown corporation. Owned by the province, it provides a wide range of services
to support the Ontario government's initiatives to modernize and maximize the
value of public infrastructure and realty.
Welcome, Mr. Clark. I understand you have an opening statement, which will be
followed by a question period from our senators.
Bert Clark, President and CEO, Infrastructure Ontario: Thank you for
having me here this evening. I'm going to keep my remarks brief. Copies of them
were sent in advance.
First, let me tell you a little bit about Infrastructure Ontario.
Infrastructure Ontario is a Crown agency owned by the Government of Ontario. The
government appoints its board of directors and I report to the board. Our board
of directors is a group of accomplished individuals with extensive
private-sector legal, engineering, finance and accounting experience. Each of
them brings strong dedication to public service.
IO has three lines of business: real estate, lending and major projects. I'm
going to focus on major projects this evening.
IO manages large, complex projects on behalf of the province and other public
sector entities. Over the last decade, we have built 55 projects with a capital
value of over $18 billion. A significant portion of that new space has been
hospitals. We helped deliver new hospitals in cities such as Sudbury, North Bay,
Oakville, Kingston, Hamilton, London, Ottawa and St. Catharines.
On top of that, we currently have $15 billion worth of construction work
under way and $5 billion worth of projects in active procurement. We expect to
add to this volume of work in the near future. This makes us one of the most
active and consistent infrastructure markets in the world.
We've had a very successful decade building infrastructure, but it hasn't
always been that way in Ontario. Prior to IO's creation, Ontario's experience
with major infrastructure projects was similar to many other jurisdictions:
Projects were often late and over budget, and assets often weren't built to
We made a number of changes to ensure strong project delivery and asset
maintenance. First of all, there is no substitute for proper up-front planning.
Early due diligence can reduce the likelihood of changes during construction.
Often, there is a pressure to move forward with projects before all the proper
planning has occurred, and our role is to ensure that all that planning has
Second, good project delivery requires public sector employees with
specialized skills in large, complex project delivery. We have a good team of
people at IO with deep project experience. They are as experienced as the
private sector partners on the other side of the table, and that is key to
levelling the playing field.
Third, good partners are key. We pick our private sector partners very
carefully. Frankly, public procurement rules and some trade agreements don't
always make that easy. But we've developed fair and transparent processes that
also ensure bidders have the required local knowledge, and we're also taking
into account past track records now when we select potential partners.
Fourth, we avoid the tendency in the public sector to break big projects up
into smaller projects. There's probably no greater cause of cost overruns than
the practice of tendering out big projects in pieces and retaining that
integration risk with the public sector.
Fifth, we always hold back a significant amount of money until the project is
complete. There is nothing that protects the public sector better in a dispute,
or gives the public sector better leverage in negotiations, than having withheld
some amount of money. However, it's important not to hold back too much money.
This can result in financing costs that aren't warranted. Some amount of private
finance, some of the time, makes sense. Getting the amount right is key. Too
little is risky, too much is expensive.
Finally, we often hold some amount of the construction costs even after the
asset has been built and pay funds out through the life of the asset. This gives
us a tool to ensure that the asset is well-built. If it doesn't perform as
promised, we don't pay.
Many of these ideas are described in the discussion paper that IO prepared in
cooperation with the Office of the Auditor General of Ontario. I'm pleased to
provide a copy of that paper to this committee.
Over the last 10 years, these practices have served us well. A review of our
track record conducted as of March 2015 confirmed that 98 per cent of our
completed projects were delivered on or below budget. As well, 73 per cent of
those projects were delivered on time or within a month of their scheduled
completion. We're always looking to improve. I'd like to highlight a number of
the things we've done recently.
We are working to raise the bar when it comes to health and safety. There are
a number of changes we made in that regard recently. We're always looking to
minimize community disruption when it comes to large construction projects, so
we've recently introduced a system that weighs competing bids in terms of their
effect on traffic, and also charges builders for unplanned traffic disruption.
We require all contractors to have an accounting firm certify they have internal
processes in place that ensure ethical bidding practices. We've reduced the
amount of private financing on all of our transactions to ensure that we're not
incurring any more private financing costs than are warranted, given the risks,
and we track the performance of contractors now and take that into account when
we select partners in the future.
Looking forward, we expect to continue to be one of the most active and
consistent infrastructure markets. Every year we release a market update so
potential bidders can plan to participate in our program. This year's update
will include our most work ever. We have a number of light rail transit markets
in the project already and the regional express rail program in the GTA has just
launched. The next decade will be an exciting time for us, and we're committed
to delivering projects successfully.
I'd be happy to take any questions. Thank you.
The Chair: Thank you, Mr. Clark. Let's start with Senator Marshall
followed by Senator Eaton.
Senator Marshall: Could you just clarify, do all of the government
projects go through Infrastructure Ontario?
Mr. Clark: No.
Senator Marshall: Only certain projects? Which projects go through
your organization and which ones don't?
Mr. Clark: Generally, projects with a construction value in excess of
$100 million we deliver on behalf of the province. Those are the large, complex
ones that warrant having an organization like us deliver them. That would be one
group of projects.
I didn't get into the fact that we also manage the real estate portfolio for
the Province of Ontario, which is second only to the federal portfolio in terms
of size, about 45 million square feet. Every year in that portfolio we undertake
about 1,800 small projects. So we really do all the small projects on the real
estate portfolio and then the really big projects the province undertakes.
Senator Marshall: Who selects the really big projects you undertake?
Are they selected by the government?
Mr. Clark: Yes.
Senator Marshall: So you don't decide that. You're just told to
undertake certain projects?
Mr. Clark: Yes. We play no role in project selection when it comes to
the big projects. We view that as a policy decision which is made by the
Ministry of Health or Transportation. Treasury Board decides what it is they
want to build. We are assigned the project with a budget, and then our
obligation is to deliver it on budget.
Senator Marshall: Okay, so Treasury Board will give you the project to
undertake. Who finances the project?
Mr. Clark: It's actually a mix. We were created because there were two
big hospital projects in Ontario, one in Sudbury and one in Thunder Bay, which
went massively over-budget. The province had a long list of projects that needed
to be completed and could not keep having each project go this way. They needed
someone to do things differently.
We were created and given the mandate I just described. In some of our
earliest projects, the structure of our transactions was asking the private
sector to put up all the money to build the project and come back to us when
you've built the project. We don't want to be engaged with you during the
construction project. If it goes over-budget, that's your problem. You source
the financing wherever you need to and come back to us when it's done, and then
we will start to pay you. We'll pay you every month for the 30 years following
Senator Marshall: So you lease it?
Mr. Clark: Essentially. It wasn't a lease structure, but it looks a
lot like that.
Senator Marshall: Okay.
Mr. Clark: The lease payments are contingent on performance. We said
the building always has to be available. It has to be well-maintained. There is
a regime of deductions imposed if pipes are leaking or the temperature isn't
what it ought to be. It would be privately financed with small pension money in
Canada. Canadian banks and Canadian life insurance put up the money. That was
the model 10 years ago.
Senator Marshall: Would you have known back then what your leasing
costs would have been? The government would know, would they?
Mr. Clark: Going into it?
Senator Marshall: Yes.
Mr. Clark: That's what we bid out. We said whoever can deliver this
product for the least price wins. That's essentially what they're bidding was
Senator Marshall: That was the way you were doing things. What about
Mr. Clark: In the last 10 years, we questioned the need to have 100
per cent of the construction costs financed for 30 years to get the risk
transfer that we're looking for. What happens if we put in 50 cents of every
dollar during construction so that they don't have to go out and raise that
money? Those financing charges are not lease payments, but a monthly payment
forever. Do you actually need 100 per cent of the construction value financed
for 30 years in order to hold them accountable?
We started to reduce that amount and put in 25 cents of every dollar, and
then we went to 40 cents. Now for some assets we're as high as 85 cents of every
dollar we put in and the private sector finances 15 per cent of it for us.
That's enough to get the risk transfer.
Senator Marshall: So for your part of the debt, who pays? Is it the
Mr. Clark: Yes. Ultimately, when the Ministry of Health or the
Ministry of Transportation make a payment, they're making it from general
government sources, and to the extent that they need to borrow to fund the
deficit, they're borrowing from the centralized borrowing. They borrow at the
lowest rate. That was part of the argument. We said, well, we can borrow for
less than what the private sector charges us, so let's make sure we're only
borrowing where we need that private capital to give us leverage and to truly
transfer risk. If you don't need to have that much private debt, then don't have
that much private debt.
Senator Marshall: The committee has been talking to different
witnesses about an infrastructure bank. Do you see any trend that the Ontario
government is moving more towards Infrastructure Ontario, or has it been more
stable over the last number of years? Does it seem like they like what you're
doing, they're giving you more, or is it just more constant?
Mr. Clark: I'm trying to think of a large public project that the
Province of Ontario has undertaken where they haven't used us, and I can't think
The truth is our track record is really good, and it's good because we hired
specialists to do this.
You mentioned an infrastructure bank. I didn't talk about real estate, which
is one of our mandates. I also didn't talk about lending. We actually are an
infrastructure bank, and I borrow from the Province of Ontario and I lend to
municipalities. The logic for that is if municipalities want to put $2 million
into their water system and they're a small town, they don't have ready access
to 30-year, long-term, affordable financing, but they're very high quality
credits. In fact, in Ontario, I don't think there's a municipality that ever
went bankrupt. There are examples in the U.S., but none has gone bankrupt in
Canada. Yet it's hard for them to secure long-term, affordable financing, given
the amounts they are borrowing.
If you're borrowing $100 million, there's a very efficient capital market in
Canada that they can access, and so we said that doesn't make any sense because
it was preventing them, frankly, from doing the work. They would say, "I can't
access the funds," and then they'd ask a senior level of government to give them
the money. The Government of Ontario eventually said, "Wow, you've got the
balance sheet to borrow this. Why am I giving you the money?" "Well, I can't
borrow it." So we now lend them the money, and we lend it to them essentially at
our costs. We don't try to earn any profit. We cover the cost of that lending
activity, and we have done about $6 billion in loans, and that finances
everything from fire engines in a small town to hundreds of millions of dollars
of affordable housing in Ottawa and Toronto where there are big renovation
needs. So we're an infrastructure bank. I certainly support the concept.
Senator Marshall: And you have had good experience. Thank you. That
Senator Eaton: Mr. Clark, the federal government has said that it will
spend a lot of money on infrastructure in the next couple of years to stimulate
growth. Will that affect you in any way? In other words, if they have federal-
provincial partnerships, for instance, for a building, more social housing or
repairing social housing or building a subway, do you come into that at all?
Does it go through the Ontario government to you or will it go directly to you?
How do you think that will work?
Mr. Clark: Generally, Infrastructure Ontario isn't involved in the
negotiations about the funding of a project. But there are examples of projects
that have been funded by the Government of Ontario, the federal government and a
municipality — transit projects in Ontario. That gets sorted out before they
come to us. Once that funding is in place, then we would deliver the project for
Senator Eaton: So you're not a clearinghouse.
Mr. Clark: I wait for the people to decide what they want built, fund
it, and then they say, "Get it done on time and on budget."
Senator Eaton: You were talking about their real estate. Do you manage
their social housing?
Mr. Clark: No. The social housing in Ontario is municipal, for
example, Toronto Community Housing Corporation.
Senator Eaton: You would have nothing to do with that?
Mr. Clark: No, but I do lend to Toronto Community Housing, but I don't
manage that real estate.
Senator Eaton: You said good project delivery requires public sector
employees with specialized skills in large complex delivery.
If you were going to talk to another province on how to set up something
similar, what kind of things would you tell them to look for in the people
they're going to have around the table?
Mr. Clark: You want to find people who look just like the people on
the other side of the table.
Senator Eaton: So for instance in your case, what kind of people do
you have? Chartered accountants? Engineers?
Mr. Clark: Exactly. We have engineers, project managers, architects,
specialist legal folks, specialists in finance, experts in procurement. We have
a big organization of people.
Senator Eaton: How many people work for you?
Mr. Clark: We have 500, but that is in all of those business lines.
There are probably 150 devoted to delivering big projects. We have a real estate
division, a lending division and then, obviously, the HR department and whatnot.
Senator Eaton: Thank you.
The Chair: Could you give us an org chart if we asked for it so we
could understand how your organization works?
Mr. Clark: Yes.
The Chair: Would that be possible?
Mr. Clark: Yes.
Senator Ataullahjan: I am looking through your presentation. You said
that you've provided loans to nearly 400 borrowers in support of projects.
Typically, what kind of projects would those be that you would lend money to?
Mr. Clark: Municipal-type projects, which could be, as I say, social
housing, fire engines, a hockey rink, general government office space,
water-sewer — any of their capital requirements. It is the full range of
municipal infrastructure responsibilities, any of those. We don't second guess
what they're using it for, as long as it's being used for infrastructure. We
wouldn't want to fund someone's operating deficit, but if they come forward and
say, "I'm building a hockey rink," we don't ask them why they need a hockey
Senator Ataullahjan: When you're saying 400 borrowers, it's mostly
Mr. Clark: Mostly, yes. About 75 to 80 per cent of our borrowers are
We have a list of eligible borrowers that's broader than that, and that would
include not-for-profit housing and things like that, but the vast majority of
our lending is to municipalities.
Senator Ataullahjan: Thank you.
Senator Andreychuk: As I understand it, you don't make any of the
political decisions as to what will be funded, even though you get the money to
Mr. Clark: Yes.
Senator Andreychuk: Are you working on infrastructures, then, that are
new projects, building new buildings? Or are you replacing infrastructures? It's
hard to get a handle on what infrastructure is going on. Is it building a new
community centre, hockey rink, or is it replacing a sewer? Is it replacing a
courthouse or a jail, et cetera?
Mr. Clark: We build a tremendous amount of new stuff.
Senator Andreychuk: But was it replacing old stuff?
Mr. Clark: Sometimes it's the old hospital in North Bay being replaced
by the new hospital in North Bay. Sometimes it's brand new. There was no
Eglinton LRT. We are building an Eglinton LRT. We are extending the 407 over to
Pickering. That's brand new.
There are some big renovation projects. St. Michael's Hospital would be a mix
of renovation and new. Then we are responsible for, as I mentioned earlier on,
the real estate portfolio for the province, which is 45 million square feet of
space. There we are constantly renovating existing, but we've built an awful lot
of new, particularly in the health care space.
Ten years ago, the average age of a hospital in Ontario was about 42 years.
St. Michael's is much older than that. Health care has changed a lot in those 42
years; it would be 50 now. You couldn't practice modern medicine. The gurneys
didn't fit through some of the hallways, so we've built a bunch of brand new
hospitals in the GTA area, for example, Bridgepoint, Humber and Halton
hospitals. They are, frankly, the sorts of places you would be much more
comfortable having a loved one go to than some of the things 10 years ago that
we were trying to work with.
Senator Andreychuk: The questions that concern me really aren't in
your area. If you're going to have a new venture, are operating costs built into
it? We often get into infrastructure and then we don't have the maintenance and
the operating capacity. Then the life of the building is something that we
should be planning for.
How do you feed information about the length and the worthiness of the
projects, since you're not making the political decisions?
Mr. Clark: No, I definitely don't make the political decisions.
You're absolutely right that one of the challenges has been, historically,
that it's very easy to cheat on the capital budget year in year out and to not
paint something, to not oil something. It's an absolute fact that that is a more
expensive way to own real estate or assets than to maintain it properly.
Different people have factors. You know, maintenance deferred — what is one
maintenance dollar deferred? Is it $1, $2, $3 or $4? Everyone knows that it's
multiples you end up spending rather than oiling when you replace something, so
that was actually one of the things in our earliest days that we were really
concerned about, which is why for many of our projects the responsibility of the
private sector is to design it, build it and maintain it. So when they build it,
they build it knowing they're going to need to make sure that it operates well
for 30 years, and if it doesn't, they're not paid. They approach it with that
mindset. It creates an incentive for good asset management.
There's also an incredible amount of innovation that goes on when someone
thinks of an asset not as a construction project but as something that has to be
maintained for 30 years. They start making the right tradeoffs in terms of
To use a simple example, it may be more expensive to install tile than to
install linoleum; however, you may never have to replace that tile but you may
have to replace the linoleum five times during the life of the asset, and when
you add it up, it's more than the terrazzo. They make that right choice.
So a big part of what we do is by having them take what we call "whole life
responsibility," it drives that sort of thinking.
Senator Tkachuk: I have two short questions. You said you had about
500 employees; is that correct?
Mr. Clark: Yes.
Senator Tkachuk: How many people are there in your human resources
Mr. Clark: Don't hold me to a number.
Senator Tkachuk: Just give me a range.
Mr. Clark: Fifteen to 20, that sort of range.
Senator Tkachuk: That was helpful. Thanks.
Senator Cools: You said you are a bank?
Mr. Clark: We are a bank.
Senator Cools: Does that mean you are a chartered bank?
Mr. Clark: No, we are a bank in the sense that we are a lender.
Senator Cools: But you're not a bank in the legalistic sense?
Mr. Clark: No.
Senator Cools: I was very curious about that, because Canada has
probably the best controls in the world in respect of creating banks. Canada was
always very powerful in granting those charters to become banks, I understand.
You do lending and so on, but I wanted to figure out how you could formally have
a banking structure.
Mr. Clark: No, we're not a chartered bank.
The Chair: How long have you been with the infrastructure operation?
What model did you use to set it up, or was it set up when you got there? We're
just trying to understand. How were you formed?
Mr. Clark: I was employee number one in 2005. Then I worked at IO for
about two and a half years. I left, and then I was an investment banker. I
actually financed infrastructure in North America, and then I came back four and
a half years ago as CEO.
So I was there day one setting it up. It's doable, having done it. It's
totally doable. Like any start-up, you have 18 months where you're flying a bit
by the seat of your pants, but I think the important thing we did from the
outset was to have a separate board, a distinct entity with a staff that report
to a depoliticized board. We don't do policy. We don't do politics. We just get
Once that process is done, you have to frankly hire people from the private
sector, which means the pay structure probably looks somewhat different than the
civil service proper. But if you don't have that, you won't be able to recruit
people who can actually negotiate day in and day out with the private sector.
The Chair: Did you have a model that you used from some other place to
Mr. Clark: Variations of us do exist in British Columbia. British
Columbia has something called Partnerships BC. The original infrastructure
delivery agency was an organization called Partnerships UK. Australia has some
version of it.
I think what's unique about us is the fact that we manage the real estate
portfolio, lend, and manage large projects. I'd say in the last 10 years there
wouldn't be any jurisdiction — there may be a city in China that's building more
than us, but no one in North America has been building more public
infrastructure than Ontario. We have made a major dent in the health capital
sector, and what's being planned now in transit is truly unique.
The Chair: Do you have a relationship with Partnership BC at all?
Mr. Clark: Yes.
The Chair: So you share information, cross-pollination, that sort of
Mr. Clark: Yes. We meet regularly and try and share best practices.
The Chair: Are there any other provinces that have come to you to
glean your expertise?
Mr. Clark: Yes. Saskatchewan set up a smaller version of us two or
three years ago and has now actually successfully delivered a number of
projects. So there is B.C., Saskatchewan and us.
The federal government had something called PPP Canada, but it was a lot
lighter version, let's say, than us. It was more of a granting organization than
a project delivery organization.
We've had something like 60 jurisdictions, frankly, come and visit us and
ask, "How do you do what you do?" I've been to the World Bank and the
Inter-American Development Bank to help them think about projects. So, yes, we
imitated people and there are imitators of us.
The Chair: Colleagues, any other questions?
Senator Marshall: Do you make money or lose money?
Mr. Clark: I aim to do neither. Honestly. In our budgeting process
every year, I want it to be —
Senator Marshall: You would prefer it to break even?
Mr. Clark: Yes, to be as close to —
Senator Marshall: So is that where you are, at a break even?
Mr. Clark: Pretty darn close, yes, within millions. At the end of the
day, if I'm overcharging other public sector clients, it's a circular flow of
money, so I just aim to be about —
Senator Marshall: You said you break even on the municipal ones?
Mr. Clark: Yes. We make a slight profit there. We do provision
somewhat because there are the odd loans that don't work out, so the profit
serves as a provision for the pool. Then on the major projects side and the real
estate side, I just aim to run flat.
The Chair: Has there been any talk among the people you know, like
Partnership BC and Saskatchewan, that they have to create sort of a Canadian
model that you could do for transformative national projects?
For instance, we have the southern corridor that now exists through our
transportation network, which is the superstructure of getting the goods
throughout our country down into United States export markets. You've heard of
the idea of new corridors. Is there any thought or discussion where you could
put yourselves together with two or three other groups in the country to form a
national organization to take care of transformative national projects? Have you
ever had that sort of thing?
Mr. Clark: No. We're generally working on very Ontario-specific stuff.
Anything that crosses jurisdictional borders gets done by the federal
government. The federal government is doing the Detroit River International
Crossing Project. I guess Champlain doesn't cross boundaries but it does cross a
river. The federal government would do that kind of thing.
The Chair: Where do you see your organization going forward? You're a
builder, obviously. You're an aggressive individual with a lot of skill. Where
is this going? How far can you take it?
Mr. Clark: The next 10 years for us are going to be phenomenal. There
is a consensus around infrastructure. There is no one saying, "I think we've got
enough" or "I think our infrastructure is just fine." So when you're running an
infrastructure agency that builds infrastructure, that's a wonderful thing. We
know there are investments coming.
I think in typical Canadian fashion, we've tended to beat ourselves up more
than we should. The truth is, we are getting on with infrastructure. We've done
great things in terms of hospitals, and there are very ambitious things being
planned on the transit and transportation side. There's light rail being built
in Ottawa right now, and in Waterloo; the Eglinton LRT is being built as we
speak and the air-rail link in Toronto has been done, in Toronto, and you can
travel back and forth; LRT is coming on Finch Avenue and Hurontario in
Mississauga and Hamilton.
There is no U.S. jurisdiction that would be able to rhyme off that kind of
activity, so I don't have any concerns about keeping my people busy on the
infrastructure side. I think we still need to do some work on the real estate
side. I think, like every public organization that has an old portfolio or an
old asset, there have been periods of severe underinvestment that have left the
asset challenged in some ways, and so my job is to figure out how do I get that
The Chair: Senator Ataullahjan has a question, and then we have to
wrap it up. Our witness has to get on the road because his wife is expecting.
Senator Ataullahjan: Are any kinds of studies done on how feasible
some of the projects that you fund would be, and whether they are going to be
used? I'm thinking of the link to the airport.
Mr. Clark: Right.
Senator Ataullahjan: You had to put the price down 50 per cent, and I
don't know whether ridership has increased or if it's being used more.
Mr. Clark: Again, we don't make the decision as to whether a new
hospital is needed, what ought to happen in it or whether there ought to be 13
emergency rooms or five. If we're building a new road, the Ministry of
Transportation would decide whether or not that road is needed, and the same
would be true of public transit. We don't ever question our shareholder or
client. It's their role to make that decision, and our role is to deliver it
Senator Ataullahjan: Thank you.
The Chair: Are there any words of wisdom that you would like to share
with us before you head out?
Mr. Clark: I think we actually ought to be very proud of what's going
on in infrastructure. If you thought of the biggest infrastructure markets in
the world, you would say our Canadian pensions are amongst the most active and
sophisticated in the world when it comes to infrastructure investing. Our life
insurance companies are investing in infrastructure here, and there are not many
jurisdictions that have long-term debt infrastructure like we do.
Small pension funds are big investors in our program. Our contractors and
engineering firms are actually going global and have leading expertise. I think
we should actually feel really good about where we're at in terms of
There is still more to be done. The next 10 years are going to be very
active, but we should feel good about it.
The Chair: Do you have any knowledge of the federal infrastructure
programs and how they are administered? From an observation perspective, is
there any recommendation that you would want to give to the federal government
to improve their delivery system?
Mr. Clark: I think the federal government could benefit from an
Infrastructure Ontario-like organization. Right now, infrastructure projects in
the federal government tend to be delivered by Public Works, the department
responsible for borders or the military and military housing, so it's quite a
fractured approach. I think consolidating that and having one agency responsible
for delivering projects using modern and best practices is something that's
worked very well for us, and worth considering.
The Chair: Mr. Clark, thank you very much. We appreciate your time and
we wish you the best with the newborn on the way.
Mr. Clark: Thank you very much.
The Chair: We will now hear from the officials from two independent
First, we will hear from Jean-Denis Fréchette, Parliamentary Budget Officer.
Mr. Fréchette, welcome.
He is accompanied by members of his team, Mostafa Askari, Assistant
Parliamentary Budget Officer, and Peter Weltman, Senior Director, Costing and
Mr. Fréchette has been involved to discuss the work his office has done with
respect to monitoring the flow of infrastructure spending, as well as estimating
the economic benefits of infrastructure spending.
We also have before us, from the Office of the Auditor General of Canada,
Julie Gelfand, Commissioner of the Environment and Sustainable Development. She
is accompanied by Kim Leach, Principal.
We are particularly interested in the commissioner's report of spring 2016,
entitled Federal Support for Sustainable Municipal Infrastructure.
The title of the report in French is Le soutien fédéral à l'appui de
l'infrastructure municipale durable.
I understand both organizations have an opening statement. Let's start with
you, Ms. Gelfand, and then Mr. Fréchette will follow.
Julie Gelfand, Commissioner of the Environment and Sustainable
Development, Office of the Auditor General of Canada: Mr. Chair, I am
pleased to be here today to discuss our 2016 spring report on federal support
for sustainable municipal infrastructure. The report was tabled in the House of
Commons on May 31, 2016. I am accompanied by Kimberley Leach, who led the audit.
If you have more technical questions, she will answer them.
When planning infrastructure today, it's critical to think beyond the here
and now to consider what the country will look like in 2040, in 2050 and beyond.
From our perspective, Canada must build resilient buildings, roads, bridges,
water and sewage facilities, and transportation networks so that we can move
around, work, keep the economy going and live in vibrant and healthy
communities, and this infrastructure must be built to meet the needs of future
When resilience is built into the infrastructure, it is also built into
communities because they are then in much better shape and much better equipped
to recover more quickly when disasters or severe weather strike.
Our audit looked at federal infrastructure programs intended to support the
sustainability of Canadian communities. In fact, we looked at one fund in
particular that had as its express objective to clean our water, have cleaner
air and reduce greenhouse gas emissions. That's why the Commissioner of the
Environment and Sustainable Development was interested in this topic, because
the Gas Tax Fund had those as its objectives. We assessed whether the objectives
of the Gas Tax Fund and the Green Municipal Fund were being achieved. That was
our goal. We also looked at whether Infrastructure Canada, working in
collaboration with others, adequately coordinated the many different federal
programs under its responsibility, including the New Building Canada Fund. In
our audit, you'll actually see a chart that has all of these different funds
that a municipality could apply for. I'm thinking of a small municipality,
wondering, "How do they swim through this labyrinth, this swimming pool of all
these different funds? How do they figure it out?"
So we, again, looked at programs that funded municipal infrastructure and
that were intended, among other things, to improve the environmental performance
and sustainability of Canadian communities.
The audit did not include the infrastructure funding announced in Budget
2016; however, I believe our findings and recommendations can inform the design
and delivery of the new programs under phase two of the new government's
infrastructure plan. Overall, our audit found that after a decade of federal
funding programs costing billions of dollars, it is unclear to what extent these
programs have produced the environmental benefits they were supposed to bring.
We also found that Infrastructure Canada was missing some critical
information and tools to support strategic and coordinated funding decisions
addressing the long-term infrastructure challenges of municipalities. For
example, Infrastructure Canada did not have sufficient information available to
it on the state of infrastructure, funding needs, and sustainability challenges.
Inadequate information limits the ability of the federal government to design
its programs to meet the current and future needs of communities.
We recommended that the department work with Statistics Canada to build a
source of standardized, reliable, and regularly updated information on the
inventory and condition of core public infrastructure.
We found that, when it comes to considering infrastructure projects for
funding, Infrastructure Canada had not adequately identified or managed
environmental risks and that is obviously a concern to me.
The department expected proposals for major projects to include information
on environmental risks, but it didn't use this information to analyze the risks
of climate change, for example. When environmental risks are not considered,
projects may not be designed to minimize environmental effects or to withstand
the impacts of future weather events. At the same time that we tabled this
report, we tabled another report on severe weather events and whether or not
Canada is ready for them. This means that municipalities, in the future, could
be left facing significant unexpected costs.
We found that Infrastructure Canada did not have final indicators, targets or
timelines to measure environmental performance and report on project or program
In particular, the department did not assess to what extent money spent on
projects under the Gas Tax Fund had produced, as was intended, cleaner air,
cleaner water and reduced greenhouse gas emissions. So that was one of the key
objectives of that fund, and, in the end, they couldn't tell us whether or not
there was cleaner air or cleaner water or whether our GHG emissions had been
reduced as a result of all of their spending.
By contrast, the much smaller Green Municipal Fund, which is managed by the
Federation of Canadian Municipalities, did track and report the environmental
benefits of the projects it funded. So it is possible to do it.
In addition, the federal funding programs we examined did not actively
encourage the use of innovative approaches to mitigate environmental risks.
Innovation is critical to addressing the future needs of Canadian
municipalities, especially given the pressure on available financial resources
and emerging risks such as climate change severe weather.
Infrastructure Canada informed us at the time of the audit that it had not
been given a mandate to encourage innovative infrastructure projects through its
project selection. This means that there is a risk that greener innovative
approaches may not replace older technologies. In light of our findings, our
final recommendation included that Infrastructure Canada, in collaboration with
its federal, provincial, territorial, and municipal partners, should provide a
long-term vision outlining federal infrastructure priorities.
With a long-term federal vision, Canadians would know what results to expect
from the billions of dollars spent on infrastructure through federal programs
and how well federal infrastructure programs are working to make communities
more sustainable for future generations.
Infrastructure Canada agreed with this and the other recommendations in the
report. Budget 2016 also reflects the government's commitment to act on elements
of the recommendations. I would like to let you know that, following my
appearance before the House of Commons' Standing Committee on Environment and
Sustainable Development, on June 2, 2016, Infrastructure Canada officials were
asked to return to the committee in one year to report on progress against the
The federal government is committed to making significant future investments
in infrastructure and to developing a long-term infrastructure plan based on
engagement with partners and stakeholders.
It is important for the government to set objectives for these funds and then
for the government to be able to measure whether those objectives are being met.
It's also critically important that the infrastructure being built is resilient
to climate change and will meet the needs of future generations.
Mr. Chair, this concludes my opening statement, and we'd be pleased to answer
The Chair: Thank you, Ms. Gelfand.
The Chair: Mr. Fréchette, it's your turn.
Jean-Denis Fréchette, Parliamentary Budget Officer, Office of the
Parliamentary Budget Officer: Mr. Chair, Madam Deputy Chair and honourable
senators, thank you for inviting us to appear before your committee to discuss
the federal government's infrastructure funding program.
This meeting is a continuation of our meeting of June 8, when we briefly
talked about the support that the Office of the Parliamentary Budget Officer
could provide to your committee in its study on infrastructure. We have already
taken steps to that end, and we would like to share them with you.
Without further ado and with your authorization, Mr. Chair, I would like to
ask my colleague Peter Weltman to provide the honourable members with an
overview of where we are at in our work. After this short PowerPoint, Assistant
PBO Mustafa Askari and I would be happy to answer your questions.
Peter Weltman, Senior Director, Costing and Program Analysis, Office of
the Parliamentary Budget Officer: This is a very quick presentation, and
it's simply designed to show what we have done in the past on a similar sort of
file and what we're doing right now.
Again, as a reminder, this is the mandate of things that we provide to
Parliament. We provide, in this case, cost proposals and for this particular
project we're going to look at tracking the infrastructure spending.
Again, referring to a past project, we looked at something that was called
the Infrastructure Stimulus Fund that was part of the Budget 2009 stimulus
package, and we looked at how the money was flowing because the definition of
"stimulus" is to get money into the economy quickly, and that was what we were
measuring. The idea was to try to answer the question, if Parliament is asked to
approve something similar, how long it takes for the impact to actually start
This is sort of a flavour as to what we have done. We did a regular quarterly
update, but this gives you a sense as to what we were able to do when we get
regular data. In this particular program, we were trying to project how the
project delays would impact on the program itself and what sort of lapse might
occur at the end of the program. I just want to walk you through this quickly.
When projects basically applied for money, and if you take all of the 4,000
projects that were in the program and you look at their start and end dates and
how much money was going to be spent, you can see that curve, that cumulative
spend curve starts at zero on April 1 and ends at around $10 billion. So that
was a $4 billion federal program with provincial and municipal matching.
They provided us with four quarterly updates. They provided it to
Infrastructure Canada, so we did the same sort of mapping. You can see after
three months that purple curve starts to drop a little bit below the green
curve. We're seeing some delays starting to occur on the projects, more delays,
as we see with that orange curve after six months into the program. After nine
months into the program, we see the bulge getting a little deeper, and then of
course that red line at the bottom, after a year in, is roughly what we're
It's interesting, too, how everything seems to end up right at the very end
as having all the money been spent, whereas in reality we were starting to see
slippage on a lot of projects fairly early on.
What we did is we took this information and projected forward to see how many
projects might or might not get done in the future, and this is what we came up
with. We did a range.
Again, this is to give you a sense as to what we've been able to do in the
past. This is the sort of thing that we will also undertake on infrastructure
spending in Budget 2016, as well as any other information or analysis the
committee would like us to perform.
A couple lessons that we learned. The data is limited, and I think Ms.
Gelfand referred to it too. It's all self-reported data. So there's no auditing
how those project managers are completing the forms. A good example is one of
the fields that we used to measure slippage was defined very differently by the
department, and they didn't agree with our definition.
What we're doing currently is we've developed a project-tracking database
already for every dollar that's been labelled in Budget 2016 as infrastructure
money, whether it be social housing or public transit. Every dollar that has
been announced as infrastructure money, we've developed a spreadsheet to start
to identify which projects those dollars are funding.
We've requested detailed information from 28 departments. We have 19
responses so far. There are roughly 2,200 projects in the database at the
moment. So we are going to undertake this sort of analysis once we have that
spreadsheet complete and are able to give people a picture as to what
encompasses the money that's been announced.
One consideration — and I think Ms. Gelfand referred to it — is under
transfer payment programs, which most of the money gets disbursed as, there are
very limited reporting requirements. They are limited to effectively ensuring
that there are invoices before contributions are made. As long as the project
meets the criteria, it's good to go. To be able to undertake a lot more
additional analysis on whether the projects are hitting objectives, or whatever
the case is, the data at the moment is not there for that. But it could be in
This is an example of another tool we use. We are comparing how we were
reporting on stimulus versus how the Americans were reporting on stimulus, so we
could do comparables with other countries to try to assess or analyze the nature
of the infrastructure programs.
That's all. Thank you.
The Chair: Can you go back to that last slide, if you wouldn't mind.
Mr. Weltman: This one?
The Chair: When I was running Ogilvie Flour Mills, I used to see
reports like that from our finance people. I would get nervous because I always
used to say that the smaller the numbers, the harder to see means that there's
something wrong. So as you compare the U.S. to Canada, what does this graph or
picture tell us?
Mr. Weltman: This is simply telling us that there was a whole lot more
reporting going on in the U.S. on its stimulus program than in Canada. That's
effectively what it's doing.
The Chair: What does that mean? There is more going on in the U.S.?
What does that lead us to? Tie that into what Ms. Gelfand was talking about in
her report, because I think there's a connection here, which is very
Mr. Weltman: It does state that if you undertake the effort and the
expense — and this was an expensive proposition in the U.S. — it is possible to
provide very comprehensive information on government spending, whether it is for
stimulus or whether it is specifically for infrastructure. They had it down to
the contractors on the projects, the executives who were in charge of the
company running the projects, whether any of them had been in trouble with the
federal government before, location data, regular project updates. They were
actually asking people in their areas to just drive by and have a look and see
if, in fact, what was listed on the website was matching what was on the ground.
The Chair: Let's put it in perspective, because the PBO's mandate is
to analyze information. So we have to be fair with the PBO and respectful of
what their mandate is when we ask the questions.
We have Ms. Gelfand here from the Auditor General who may have more leeway in
terms of having an opinion on what's good and what's not as good. Am I getting
this right? So that we keep everybody in perspective, and we have balanced
questions for both of these groups, and we get the maximum amount of information
So let's get into questions.
Senator Cools: I don't think it's on the board right now, but the page
headed "Considerations - instrument choice." Your third bullet says, "In
addition, only Cabinet sets the Terms and Conditions of all transfer payment
Pray tell, who else should set those terms, other than cabinet?
Mr. Weltman: Kind of the conclusion —
Senator Cools: That's what cabinet is about.
Mr. Weltman: That's right.
Senator Cools: That's how those decisions are made, and the Minister
of Finance is in there as well, and then the Treasury Board people divvy it up
and so on. But that's how government runs.
Mr. Weltman: One of the suggestions that we found — and I guess this
is also to the point — is that we can only analyze what we have, and if
Parliament needs more specific information or wants to have different types of
reporting than what is stipulated in Treasury Board rules, then there needs to
be an action on behalf of Parliament to do that; it won't be automatic.
Senator Cools: So you act on behalf of Parliament to secure this
information, and by what authority?
The Chair: These people do analytical work.
Senator Cools: I'm aware of that, but this is not a piece of analysis
here; this is a judgment call.
Mr. Weltman: No. Actually, it comes right out of the Treasury Board
transfer payments policy.
Senator Cools: I agree, but that is what cabinet does. They decide how
money is spent, and there's a whole bunch of it, especially in that field.
Mostafa Askari, Assistant Parliamentary Budget Officer, Office of the
Parliamentary Budget Officer: If I can clarify, I don't think the purpose of
that paragraph was to suggest that there should be an alternative. That was just
a piece of information. That's the way the system works with Treasury Board
policy and the cabinet. Cabinet makes the decision. That was it; there was no
implication that there should be an alternative way of doing this.
Senator Cools: Okay.
Mr. Weltman: There's no judgment.
Senator Cools: I thought you were saying that those decisions should
go elsewhere. I'm very pleased they are where they are.
Senator Tkachuk: This is to Ms. Gelfand. Did you address the question
of why the federal government is funding a water project treatment plant in,
say, Watrous, Saskatchewan? Did you address that issue?
Ms. Gelfand: The very specific one?
Senator Tkachuk: No, not that specific one, but you were talking about
all the municipalities. What are all the municipalities doing accessing every
federal government department? Shouldn't they be building their own water
treatment plants? I mean, they have property tax. Why are we funding all that
Ms. Gelfand: I think that's a policy decision that the Government of
Canada has made.
Senator Tkachuk: Exactly.
Ms. Gelfand: In the case of water treatment, they've made a regulation
that municipalities will actually have to follow, and many municipalities will
not be able to meet those effluent regulations that the government has put on
But the Government of Canada decides; it's their decision what is accessible
and what isn't. I was telling you about this chart. There are all these
different funds along here, and there are all these different opportunities for
funding things like community services, drinking water, energy, highways,
intelligent transportation systems, airports, bridges, carbon transmission and
storage, brownfield remediation. The Government of Canada has said these are all
Senator Tkachuk: I understand that.
Ms. Gelfand: And we checked —
Senator Tkachuk: You're an auditor, right? You're auditing that.
Ms. Gelfand: Yes.
Senator Tkachuk: Do you make any assumption that this is a good way to
do it or there might be another way to do it, which is what auditors do?
Ms. Gelfand: Right. We looked at whether or not they were achieving
its objectives, whether there was any reporting on the spending that was
happening, whether the objectives were smart, specific, measurable. We looked at
the management process, if you may, of how the money was being spent and how the
reporting was coming back to the Government of Canada.
Senator Pratte: We're here to try to see whether we can learn from the
past — you've studied the past — for the present infrastructure program.
It's a $120-billion program, and my understanding is that there are points in
common with what you found, which means that, in both cases, you did not find
enough information to determine whether the objectives of the programs had been
achieved. In the case of the Commissioner of the Environment, there were
environmental objectives related to the carbon tax plan, but there wasn't enough
information to determine whether they have been achieved. In the case of the
Parliamentary Budget Officer, in the report that you had prepared on the
Infrastructure Stimulus Fund —
— I saw somewhere that there was not sufficient information to see whether
the objectives on jobs and so on had been reached.
In the current program, I have seen nothing in everything that has been
presented to us so far showing that we are in a better position. Are there
things that the Government of Canada and Infrastructure Canada should do to be
able to obtain all the necessary information to ensure that the $120 billion
will be spent and that the environmental objectives will be achieved, since
there are green funds that come with economic stimulus objectives? That's what's
important. The program seeks to stimulate the economy, so to create jobs, to
expand the middle class and to also achieve environmental objectives. That's a
long question, but that's basically the heart of the matter.
Mr. Fréchette: To answer your question, that's what we do, Senator.
That's the role assigned to us. That's along the lines of the agreement we
reached in June during our discussions with the committee, based on which we in
the Office of the Parliamentary Budget Officer would try to follow those
expenditures. We want to achieve exactly what you saw in the graph with the
coloured lines. Is the money going out? Will it be spent during the next two
years or not? That's the type of report we want to make to the Finance Committee
on a regular basis, perhaps every three months or so. That's our role.
In terms of creating jobs, our role is not really to estimate the number of
jobs that have been created, because many others do so. We will look at the use
of the funds and their release. For the other part of the answer, I will give
the floor to my colleague.
Ms. Gelfand: I suggest that you look at the recommendations in our
report, along with the department's answer, because we asked the department to
develop performance measures that we could follow with the help of information.
We asked the department to ensure that it receives the information it needs, to
gather reliable data on the status of basic infrastructure, and we recommended
that it work with Statistics Canada and that it manage the risks of climate
change. We made specific recommendations, and Infrastructure Canada has
As parliamentarians, you could follow up with the department to see whether
it truly intends to implement our recommendations.
Senator Pratte: If I may say so, I think these are questions that we
absolutely have to ask some of the people who were before us. Maybe we have to
bring them back, but I think these are questions we have to ask. When they were
before us, I don't think we had convincing answers to those questions. We know
they will spend the money; that's for sure. Obviously, when you spend that
amount of money, it will create some jobs. But whether they are in a position to
really measure those impacts, I haven't been convinced of that.
The Chair: Or what are they measuring.
Senator Pratte: And what they are measuring, how they are measuring
it, and whether we can have some indication after one, two and three years.
Ms. Gelfand: To be specific, their response says that Infrastructure
Canada will work with signatories to develop an appropriate and effective
performance measurement strategy to measure the outcomes. You could ask them
what they're doing on that.
The Department will implement a more practical performance reporting
strategy for the Fund —
This is for the Gas Tax Fund, but it should be applicable to any fund.
— and will move forward with the three specific and measurable outcomes . .
They note this below.
The Department will work with signatories to collect the results of their
next outcomes report in 2018 in order to demonstrate program outcomes. . . .
In fact, for the Gas Tax Fund, there was a draft report to Parliament that
was prepared in 2008 or 2009. It was never released. So there's all this
information that they're gathering. They're not releasing it to parliamentarians
or to the public.
So you could follow up, look at what they've said they're going to do, and
ask them where they are on that. That would be great.
Senator Pratte: Thank you.
Senator Eaton: Ms. Gelfand, in your speech you said, "Our audit looked
at federal infrastructure programs intended to support the sustainability of
We know the present government is going to spend even more than the past
government did on First Nations. In your audit, are you allowed on First Nations
communities to see that what is being built there is to code, is sustainable and
will withstand environmental impacts?
Ms. Gelfand: We did not do that in this audit. We didn't go into that
depth. As the Auditor General's office, yes, we are allowed and we often do many
audits on the issue of First Nations. I believe there's a plan in our audit
planning to look at the infrastructure spending, and I think we've even done
some in the past.
Senator Eaton: Yes, because there's going to be a huge new influx of
money going in, and I think it would be rather interesting to see.
The other thing you pointed out which was interesting was that Canada had not
adequately identified or managed environmental risks. Are you talking about
towns and sewage systems, not thinking about floods? Are you talking about
earthquakes? Are you talking about the fact that cities like Toronto are not
burying their power lines?
Ms. Gelfand: We were looking for when they were making selections of
projects, when they were thinking about what they were going to fund, whatever
tools or mechanisms they had, whether they were considering environmental risk.
They asked for information on environmental risks from the people submitting
projects, but when they considered which project to go with, environmental risk
was not part of the analysis. The analysis included things like whether it could
be done. Was it shovel ready? Was all the financing in place? Those were all
their elements, not whether it is sustainable, is this going to reduce our
greenhouse gas emissions? Is it dealing with severe weather events? They got the
information. They didn't use it in their analysis.
Senator Eaton: It is surprising, because you look at Quebec and the
ice storm, how many years ago and how many people were without power and our
electrical grids, how many people two Christmases ago in Toronto were without
power for 10 days? It's extraordinary.
Mr. Fréchette, what do you think of Infrastructure Ontario as a model for
other provinces or Canada itself to follow?
Mr. Fréchette: I cannot answer that question. We are not comparing
infrastructure from one province to another.
Senator Eaton: No, but a way of building and managing infrastructure.
Mr. Askari: That's really a government management issue. We don't
really get involved in those issues, no.
Senator Eaton: I just thought you might have thoughts.
Mr. Askari: I don't think you want our private thoughts.
Senator Eaton: We could learn something from your private thoughts,
The Chair: What is clear coming from Mr. Fréchette and his group is
that when you look at lapses, time it took to get money out, if their
measurement is time to get money out, how much money do you get out over a time
frame and how much money lapsed? Those are indicators. Their job is not to make
editorial comment on whether it's good or bad, but those are factors that can
lead us to understanding some of the conclusions that the Auditor General has
drafted in terms of measurements, formal feedback, timing. These things,
directly or indirectly, fall together and give us a picture.
Because we haven't discussed today, and maybe, Ms. Gelfand, you can make a
comment on this: There are 12 horizontal departments that handle infrastructure,
because when we were dealing with Infrastructure Canada, Senator Eaton has a
specific interest in the Aboriginal development, and when asking the question,
"Do you control the money that goes out to all of these areas?" and the answer
was no, that there are 12 departments that handle infrastructure on their own.
That gives you an indication that there's a control issue in terms of the
efficiency. If there are 12 departments, do they all follow the same mode of
work and path? It goes back to some of the questions.
I want to make sure we're fair to both sides in terms of the questions we ask
so we maximize the information we can get.
Ms. Gelfand: We did look at the issue of coordination. We looked at
how Infrastructure Canada coordinates within the government and within its own,
and then whether or not it talks to the other departments.
Kimberley Leach, Principal, Office of the Auditor General of Canada:
We did make a recommendation to that effect. It's one of the last
recommendations in our report, 1.100. It says that Infrastructure Canada, in
collaboration with its federal, provincial and territorial municipal partners,
should do a number of things. Number one is to clarify federal roles and
responsibilities, which is one of the key elements of coordination. They also
need to better address information needs, as we've already talked about. Data is
certainly a problem.
They need to provide support to municipalities for adoption of good practices
for asset management. I know the committee has talked about elements of asset
management here as well. And to clarify the federal roles in promoting the use
of innovative approaches, as well as to provide a long-term vision outlining
federal infrastructure priorities that has clear objectives, performance
measures and accountabilities.
That was our overall recommendation with respect to what Infrastructure
Canada could do to better coordinate.
The Chair: When did they commit to get back to you?
Ms. Leach: They agreed with that recommendation. It's a very lengthy
response, and there are a number of elements to it, but they have agreed to
report on progress in 2018.
As Julie explained at the beginning of the meeting, when we took this to the
Standing Committee on Environment and Sustainable Development of the House of
Commons, they asked Infrastructure Canada to come back to that committee a year
from that date, which was June 2016, to report on their progress.
The Chair: 2018 is two years away. Will any of us still be alive by
2018? Is that the way government works, to set up whether you're going to
progress? You would think you might get some checkpoints that would be sooner
than two and a half years out.
Ms. Leach: I should clarify that there were a number of parts to that
recommendation. The 2018 commitment was they were going to report on progress on
asset management, but there were other things within that recommendation that
had an earlier timeline.
Senator Andreychuk: Ms. Gelfand, what you're saying is you haven't
gotten what the government is going to do the environmental performance and
reporting with. You know they were going to do it, but you don't know the
mechanics. We're talking about transparency, aren't we? They have not released
how they're going to do anything, so we don't know whether they have not done it
or they're doing it but they're not disclosing it, and therefore you're not able
to assess their performance vis-à-vis these guidelines and checks.
We have absolutely no idea whether the environmental performance indicators
they're using are adequate according to international standards or otherwise; am
Ms. Gelfand: I think it's worse than that. I don't think they have the
information to tell us whether things are better. Is the air or water cleaner?
Have we reduced greenhouse gas emissions? They don't have the data to do a
They spent $13 billion in the Gas Tax Fund from 2005 to 2015. One of the
stated objectives was cleaner air, cleaner water and to reduce greenhouse gas
emissions. I don't think I would have gone into this file of infrastructure as
the Commissioner of Environment and Sustainable Development unless I heard, "Oh,
my God, really, they had these objectives that were all about sustainability.
Okay. I want to go in and see what's happening there."
It's not a lack of transparency. They don't have the information. They didn't
set up performance measurement systems so that they could gather the data, so
they don't actually know.
From my perspective, it's not that they don't have it and they're not telling
us. They don't have it. They don't know.
Senator Andreychuk: Did they tell you they don't know, or did you have
to ferret that out and come to the conclusion? That's what I mean by
Ms. Gelfand: No, they said that they didn't know.
Senator Andreychuk: Did they give you a reason?
Ms. Gelfand: They never landed on performance measurement systems.
It's a small department. They're set up by order-in-council. They don't have a
lot of people. Their job is to get the money out and their perspective is that
the Gas Tax Fund was to provide stable money for the municipalities. The problem
is that the Gas Tax Fund also had this other objective and so we were auditing
this other objective and they could not respond to us about whether or not that
objective had been achieved. And that's my job. My job is to find out if the
government says we're going to send a woman to the moon, my job is not to say
whether or not we should send a woman to the moon, but my job is to tell you how
well we're doing on that.
The Government of Canada set out an objective: We're going to have cleaner
air, cleaner water and reduce greenhouse gas emissions, so my job is to go in
and ask how did we do and they can't answer it.
Senator Andreychuk: They had other objectives rather than the
Ms. Gelfand: No, that was one of the objectives.
Senator Andreychuk: You said it's one of.
Ms. Gelfand: One of two main objectives. At least that's what they
tell us. They say —
Senator Andreychuk: You were not doing the other objective?
Ms. Gelfand: No.
Senator Andreychuk: Who would do that, the Auditor General?
Ms. Gelfand: Well, I might have been.
Senator Tkachuk: Did anybody get fired?
Ms. Gelfand: Nobody got fired.
Senator Tkachuk: Of course not.
Senator Andreychuk: But you don't know whether they met the other
objective, they measured it, or are you telling us they didn't do either one?
Ms. Leach: The other objective was to provide long-term stable
Ms. Gelfand: They kind of did that.
Senator Andreychuk: They did that.
Mr. Fréchette, is that the same that you are getting when you're trying to do
some performance evaluations? Are you finding that it's not done, or are you
finding that they're not sharing it?
Mr. Fréchette: We don't really do performance evaluation.
Senator Andreychuk: Not evaluation but information from —
Mr. Fréchette: Information? We had some situation where it was more
difficult. As Peter said in his presentation, in this case we sent 28 letters to
deputy heads, which is the normal procedure, and we so far received 19. So the
deadline is coming soon and most of them asked for an extension, which is fine.
We're patient. As long as we have the information and the data, we will be happy
when we get that. The situation is improving, but it was difficult at one point.
Senator Cowan: I don't mean this as facetiously as it might sound, but
if they didn't measure whether the expenditures produce cleaner air, cleaner
water and reduce greenhouse gas emissions, what did they measure? Was it how
much money they spent?
Ms. Leach: Yes, how much they spent on what kind of projects and how
much money was spent on roads or sewers or different kinds of things. They could
measure outputs from the money but not necessarily outcomes. They could tell you
how many roads, sewers and bridges, but they couldn't tell you whether the air
was cleaner or the water was cleaner or the greenhouse gases were reduced.
Senator Tkachuk: But that didn't mean that it wasn't. They just didn't
Ms. Gelfand: You are absolutely right. It's possible that all the
stuff did happen but we don't know. It's possible but their job is to report
back to you. It's $13 billion of taxpayers' funds that was supposed to achieve
cleaner air, cleaner water and reduce greenhouse gas emissions.
Senator Cowan: We didn't know that it didn't?
Ms. Gelfand: We don't know that it didn't; we don't know either.
Senator Andreychuk: We're such a fine-tuned machine here in the Senate
that Senator Cowan asked my next question. I was asking what else was measured,
but we don't know either way. We're in the dark is what we're saying, as opposed
to it's good or bad. That's why my question was: Do they have it and haven't
shared it with us or have they not done it? One is bad, the other is a little
worse, but we still don't know whether it's good, bad or not.
We've just had the Ontario, where clearly we can see who does the project to
make sure the buildings are up, et cetera, but that person wasn't in charge in
Ontario as to the outcomes on anything else but structures and contracts. We
still don't know whether those courthouses are necessary. We were told those
were political decisions.
The Chair: One of the questions that we did ask Infrastructure Canada
was: Do you have technical expertise, i.e., do you have engineers? They don't.
Basically they have bureaucrats that analyze the forms. We had the
Infrastructure Ontario folks here today and they have professionals who are
project managers that know exactly what's going on. So if we look at our
existing situation and we have bureaucratic folks who do a good job analyzing
forms and applications but don't have the technical expertise to understand
what's going on, then it's extremely difficult to set up measurement objectives
because you don't have the competence to measure what's been done.
The other point is that Mr. Fréchette's department has given us a really
excellent report. One of the things we said we want to do is measure from 2006
to 2014-15, when the cut-off took place with the change in government, because
effectively it's not a $120-billion program that we have, it's $60 billion
approximately of lapsed money or money that's in the fund that hasn't been put
into play with another $60 billion. If you look at the graphics that we got
through the latest PBO report, you will see that the new money starts kicking in
sometime in 2016-17, which is quite interesting.
Is that correct? Just to put it in the perspective of what we're looking at
when we look at recommendations, so just a little bit on the point.
Senator Mitchell: Thanks very much for the very stimulating
I'm not sure that this is your role, but we're talking about measurements,
and clearly you have to measure the measurements that are chosen by the
government. In the last meeting we had a number of experts — economists — saying
there was a variety of ways to measure economic impact. Multipliers are not in
favour any longer. Jobs would be one of them and possibly the level of service,
which would seem to me the degree to which you would mitigate environmental
If I asked you for five measurements of specific criteria for measuring the
impact of these infrastructure programs, what would you say they should be?
Should they just be jobs? Should it just be jobs or are there four others? Can
you measure a project's impact on GDP in some way? If you were the Prime
Minister for a day, what five would you pick?
Mr. Askari: I don't want to be Prime Minister, but what we do is
measure economic impact, which actually includes the impact on GDP and impact on
employment. However, there are some issues there. We essentially project the
impact that should come from infrastructure investment. That's based on the
models that we have and the multipliers that you mention. And we have a
multiplier based on our own models, the Department of Finance has its own
multipliers and there are many others around. On that basis, you measure the
impact on GDP and then from there is a link between the GDP impact and the
impact on employment and that impact is done from there. That's the way you
Now, this is all ex ante; that is the projection. The challenge is to
actually verify that after investment has been undertaken, because then the
challenge is that you cannot separate the impact on infrastructure investment on
GDP and employment from other things that are changing GDP and employment.
That's the main challenge.
In fact, a lot of research has been done in the U.S., especially after the
2009 crisis and the significant amount of money they spent on infrastructure,
and you get a range of results in terms of what the impact would be and what the
impact was, actually, after the fact. Unfortunately, it doesn't really give you
any confidence on which one is the right one.
In fact, I can say that the governor of the bank recently said in one of his
speeches that we need a lot more research specifically in the area of the impact
of infrastructure on the economy. It is difficult, and there could be some
research done in that area. But for us, at a very high level, what we do as we
did in our report after the budget, we showed how much the infrastructure
investment will increase the GDP and then from there the number of jobs that
could be created.
Senator Mitchell: Thank you. Do you also make some assessment of the
quality of the jobs and the nature of the jobs, whether they are good and how
they affect women versus men? I ask that because infrastructure jobs are biased
Mr. Askari: No, because these are very high-level estimates. These are
not based on a micro-assessment of each project. This is how much the government
is putting into the economy through infrastructure and how that flows through
the system and increases the GDP, and then the link between GDP and the
employment and that would be the number. So we have no other information other
Senator Mitchell: My next question is a blue sky question, if I can
put it that way. I was mentioning earlier to Senator Pratte that there's
something that keeps coming back to me as we're doing this study. All this
infrastructure stuff seems really old, and we're in the 21st century.
You, Ms. Gelfand, say that Canada must build resilient buildings and roads.
What is the country going to look like in 2040 and 2050? Are we going to need
the kinds of roads we have now if we have automated cars? We think of
infrastructure as just building things, but aren't there virtual infrastructures
now? Isn't there a whole new realm of possible infrastructure that will create a
different kind of economy? We're going back to building ring roads when we might
not even need them. Are there different kinds of infrastructure that will spin
more jobs and create greater long- term wealth than just building a road that
employs 2,000 people for six months and then it's done?
Ms. Gelfand: Well, that's a great question. We did suggest and
recommend that Infrastructure Canada, working with all of its partners, provide
a long-term vision that outlines the federal infrastructure priorities with
clear objectives, performance measures and accountability.
So your question is one about vision, right? What is the country going to
look like? What should we be funding?
I focused at lot on resiliency because I was looking at severe weather. Look
what's happening in Haiti now. We know we're getting more. We had the ice storm.
In southern Ontario, there was flooding in Windsor.
If our infrastructure is not built in order to ensure resiliency, therefore
taking into consideration all the environmental risks and the change in climate,
then as communities, we are not resilient.
Senator Mitchell: So you're saying that climate change is really
starting to cost us a lot of money?
Ms. Gelfand: We know that it's already costing us a lot of money.
Can I answer the other question about the five indicators? I'm not going to
give economic indicators, but I wanted to tell you that the Federation of
Canadian Municipalities actually measured developed performance indicators for
the Green Municipal Fund, for the fund they measure.
The Chair: Do you have specifics?
Ms. Gelfand: They have them.
The Chair: Do you have knowledge of these measurements?
Ms. Gelfand: Do we have the specific measurements?
Ms. Leach: We talk about them in our report, but, yes. For example, if
the project is supposed to reduce greenhouse gas emissions, they check to see
whether it has reduced greenhouse gas emissions not only right away once it's
built but they have a holdback provision, when they provide the funds, for 12
months, so they actually go back and measure 12 months later to ensure that the
project met its environmental objectives.
Ms. Gelfand: This is what we wrote. We found that the federation had
defined performance expectations, so I'm guessing, based on what I know about
our databases before we write anything down, that we probably have seen those
performance expectations. We didn't put them in here in terms of the detail but
most likely our office has seen those performance expectations.
The Chair: If you have them, can you send them to our clerk? We'll
follow up with the federation of municipalities. We're going to ask them to send
them to us also. We had them in here and they were very professional. We've
asked our senators to get out and speak to local mayors because the Gas Tax Fund
is the biggest thing for small municipalities, and they love the Gas Tax Fund,
but we need to find out from them exactly the questions that we've asked tonight
in terms of measurements: What has it delivered?
Ms. Gelfand: Can I just add one other thing that we found in our
The Chair: Please.
Ms. Gelfand: Somebody was asking about the outcomes and results. One
of the things we do know and we did say this in our report is that for the money
that was spent on the Gas Tax Fund, a third of it was spent on roads and
bridges. So does that increase our GHG emissions or not?
There was even an example of a new type of asphalt that reduces friction and
therefore decreases greenhouse gas emissions. I'm not sure how. I was worried
about friction and braking.
We also noted they had improvement of the drinking water systems in Lévis,
Quebec. There was an organic waste processing centre built in Guelph, and we
also know that five large cities have put the Gas Tax Fund towards transit.
That's Vancouver, Calgary, Edmonton, Ottawa and Toronto.
So we do know some of the things they have done. They weren't able to tell us
whether or not that translates into cleaner air, cleaner water and reduced
greenhouse gas emissions, but we do know that the Federation of Canadian of
Municipalities is able to do it. So it shows it can be done.
Mr. Weltman: It's important to keep in mind — it comes back to the
slide that Senator Cools pointed out — that much of the Infrastructure Canada
funding transfers to other levels of government.
So there are terms and conditions that the government lays out in terms of
how those get done, and it limits, to some degree, how much one level of
government can ask of the other in terms of reporting. I think that's important
to keep in mind. I know there was a question last week. I attended the meeting
with Infrastructure's briefing about why the federal government should determine
how small provinces and municipalities should spend the money. I think that
plays into this as well. It's important to keep that in mind.
The Chair: To respond to that, you're absolutely right. However,
Senator Eaton has asked so many questions to the Department of Aboriginal
Affairs. We had CMHC in, and CMHC is a banker that lends money for people
building houses. We asked the head, "When you loan money to a nation, what
guarantees do you have on your money?" They said, "None, because it's out of our
There are too many programs. There are over 20 of them because Infrastructure
Canada has been nice enough to give us a list of all these programs and the
timing. What the PBO has shown us is that we've had since 2006 a lapse of
significant billions of dollars that have not yet gone into the system to be
implemented. So there's a measurement. There hasn't been the execution that's
But when we look at giving out money, there should be some checks and
balances to make sure that if we give you the money, you decide on the project
that you're doing, but you should have some performance indicators that you give
back to the person who is giving you the money. I mean, that seems to be
Why can't we do that?
Mr. Askari: Just to clarify again, I think the graphs that we showed
were not related to the new infrastructure, the $60 billion that you referred to
from the previous government. Those graphs are only for the 2009 stimulus fund.
The Chair: I understand that, but you have the other report that you
showed, which gives you the breakdown of the funds that were distributed in 2006
to 2015, and you show when the new money from the new $60 billion is going to
come into place. I'm not trying to be critical of the former government, but
what it shows us is that of the $60 billion of the original fund, which I think
was $33 billion and then $53 billion that the Conservatives had blocked off in
that period of time, there is a large chunk of that money that never got into
So if it didn't get into play, it's still on the books or it's lapsed. That,
to me, is an indicator that you're not criticizing anyone, but you're
demonstrating that the money hasn't gone into a project that has been in place
Mr. Askari: I guess I should mention that in Budget 2016, the
government mentioned that any fund that is left from that fund is going to be
distributed through the Gas Tax Fund to the provinces.
The Chair: Right.
Mr. Askari: It's going to go out faster than normal.
Ms. Leach: I wanted to bring to the committee's attention a document
that came to our attention during the audit, which was the Australian
infrastructure plan. I don't know if that's come up in the course of your
discussions here, but it does a number of things that the committee has been
talking about both today and in the past. It was published in February 2016, and
it offers a strategic approach. So instead of an infrastructure plan being just
about where the money is going, it's about a strategic approach: What are our
national priorities? How are we going to measure, monitor and do performance
measurement? It's focused on evidence and setting national infrastructure
priorities is part of it.
It's the difference between a strategic approach that has a number of
different elements to it, and a long-term infrastructure plan that is just about
where you're going to put the money, which isn't the whole story.
Ms. Gelfand: I think we have a copy.
The Chair: Do you?
Ms. Leach: I have the table of contents and executive summary here.
The Chair: Could we get that?
Ms. Leach: Sure.
The Chair: That would be fantastic.
Let's have final comments before we wrap it up. Some of us have been in
committee meetings and sittings all day, and we're either freezing, getting
tired or having sugar lows because we haven't eaten since this morning. We don't
want you to feel sorry for us, because you obviously had a nice supper before
you came, but we're starving. Let's wrap it up.
Could we have a comment from you, Mr. Fréchette? Mr. Askari and Mr. Weltman,
you may respond also if you like.
Mr. Fréchette: We are looking forward to working with this committee
and, as we said in our presentation, provide you with additional information to
help you better understand the future of these infrastructure investments.
That's basically it.
The Chair: I would encourage all of our members — if you haven't had a
chance, the PBO has been very efficient in terms of getting us timely
information, which gives us the tracking that we are looking for. So you folks
have done a great job. Ms. Gelfand?
Ms. Gelfand: I'm really pleased and thankful that you've asked us to
appear on this topic. I hope you keep in the back of your heads the resiliency
and the sustainability of our infrastructure as you think about your final
Yes, it's about jobs, but it's also about the future of our communities and
whether we're going to be resilient to the change in climate that's coming.
The Chair: If you wanted to write a one-page summary where you wanted
to put in some key points that could help us, we would appreciate that too.
Could you do that?
Ms. Gelfand: Sure.
The Chair: That would be great.
So on behalf of our committee, we would like to thank you.
My thanks to the witnesses for the information they have shared with us this
evening; it was very interesting. We have other work to do for our study. Thank
you and good evening.
(The committee adjourned.)