Proceedings of the Standing Senate Committee on
Issue No. 97 - Evidence - June 6, 2019
OTTAWA, Thursday, June 6, 2019
The Standing Senate Committee on National Finance met this day at 1:31 p.m. to study the subject matter of all of Bill C-97, An Act to implement certain provisions of the budget tabled in Parliament on March 19, 2019 and other measures.
Senator Percy Mockler (Chair) in the chair.
The Chair: My name is Percy Mockler, senator from New Brunswick and chair of the Standing Senate Committee on National Finance.
I would like to extend a welcome to everyone here in the room, and to all Canadians watching us on television or online.
Also, as a reminder to those watching, the committee hearings are open to the public and also available online at sencanada.ca.
I would like to ask each senator to introduce themselves.
Senator Klyne: Marty Klyne, Saskatchewan.
Senator Pratte: André Pratte from Quebec.
Senator Duncan: Pat Duncan, Yukon.
Senator Andreychuk: Raynell Andreychuk, Saskatchewan.
Senator Neufeld: Richard Neufeld, British Columbia.
Senator Eaton: Nicky Eaton, Ontario.
Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.
Senator M. Deacon: Marty Deacon, Ontario.
I would also like to introduce Gaëtane Lemay, the clerk of our committee, and our two analysts, Alex Smith and Shaowei Pu, who team up to support the work of the committee.
Honourable senators, we have a new addition at the table, Kalina Waltos. She is a legislative clerk and is in training. Welcome to the meeting, also.
This said, honourable senators and members of the viewing public, today we continue our consideration of the subject matter of Bill C-97, An Act to implement certain provisions of the budget tabled in Parliament on March 19, 2019 and other measures. This pre-study of the bill was referred to our committee by the Senate of Canada on May 2, 2019.
Honourable senators, during the first hour, we will cover Part 1(n) as listed in the summary of the bill, which deals with support measures to employees who must reimburse the salary overpayment, and I would say to be brief let’s call it the Phoenix measure.
During the second part of our meeting, we will discuss Part 4, Division 4, more specifically the important payment to the Federation of Canadian Municipalities.
First, honourable senators and the viewing public, to discuss the Phoenix measure we welcome, from the Professional Institute of the Public Service of Canada, Mr. Stéphane Aubry, Vice President; and from the National Association of Federal Retirees we welcome Mr. Simon Coakeley, Chief Executive Officer.
I have been informed by the training clerk that Mr. Aubry will be the first to make his presentation to be followed by Mr. Coakeley and then questions from the senators.
With that said, Mr. Aubry, the floor is yours.
Stéphane Aubry, Vice President, Professional Institute of the Public Service of Canada:
Good afternoon. My name is Stéphane Aubry. I am the Vice-President of the Professional Institute of the Public Service of Canada, the union that represents over 60,000 public servants across the country, most of them employed by the federal government.
I am honoured to be with you today.
I am joined by Mr. Ryan Campbell, our economist, who will also be available to answer questions.
Our members make vital contributions to Canada and to Canadians every day. The Institute represents information technology specialists, scientists, researchers, nurses and tax auditors amongst a host of other professionals. We are the largest union of professionals in the country.
We thank you for inviting us today to share with you our comments on the Phoenix pay system, and on the way we can support employees who have to reimburse a salary overpayment to their employer because of an administrative error in the system or in writing.
I would like to begin by reminding us all of the terrible impact that this flawed pay system has had on tens of thousands of our members that we represent. For the past three years, they have been subjected to a pay system that is unable to pay them on time, properly and correctly. They have received too little, too much or sometimes no pay. Many have gone without their health and dental benefits or their pension severance due to glitches in the system.
The Phoenix fiasco has caused federal employees a great deal of stress and harm. They often have trouble paying their bills, their rent or their mortgage. Their families are also suffering because of the situation, which has led some to seek work elsewhere and to resign from the public service.
Our members are frustrated and angry and simply cannot understand how this has gone on for so long. Yet they continue to show up to work despite all this. Why? Because they are dedicated public servants. Because they are professionals. They deserve to have their employer, the federal government, take all the necessary steps to spare them the consequences of this incredible failure that is the Phoenix system.
This is why PIPSC was pleased to submit comments to Finance Canada’s public consultation at the House of Commons earlier this year into draft legislative proposals related to salary overpayments. We refer to it as the “net versus gross” repayment issue. While the legislation would also apply to employers other than the federal government, we, of course, focused our comments on the effect it has on federal employees. We assessed whether, and/or the degree to which, the proposed changes would assist our members facing negative tax consequences arising from the Phoenix pay overpayments.
In general, it is our opinion that the proposed changes will indeed allow members of the Professional Institute of the Public Service of Canada to overcome the tax burden resulting from overpayments. However, we have some concerns.
First, the conditions set out in the draft legislation’s clause 153(3.1), that overpayments are a result of “administrative, clerical or system error,” require some clarification that all Phoenix-related errors are captured under this definition.
Second, subparagraph 153(3.1)(c)(i) requires that the employer elect in a prescribed form to have clause 153(3.1) apply to the excess amounts.
This provision requires unilateral action of the employer, failing which the employee may not have availed themselves of the relief and an employee would have to repay the gross amount to the employer and then recover overpayment deductions from Canada Revenue Agency.
Similarly, the three-year window will require employees to negotiate repayment arrangements with their employers under this deadline. This may put pressure on some individual cases and indirectly put a form of leverage in the hands of the employer.
Although consistent with current ITA rules and CRA policy, these two conditions are not consistent with the maximally flexible repayment approach previously directed by Treasury Board. It places a condition at the discretion of the employer, who may unreasonably refuse to cooperate. In this context, the institute believes that the employer should be required to apply clause 153(3.1) where an employee requests it.
Our third comment is regarding the length of an arrangement for repayment. An employee is required to have made repayment or to have made arrangements to make repayment by the end of the third year following the calendar year in which the overpayment was made. Subparagraph 153(3.1)(c)(ii) states that an individual employee must have repaid or made arrangement to repay the total excess payment less the excess amount.
The institute is seeking clarification of its interpretation of the condition that the repayment schedule itself must be placed within the three-year window, but that the schedule of the repayment may exceed that window.
This would accommodate members who have multiple or large overpayments to repay. This treatment would be consistent with the Treasury Board directive that the employer makes maximally flexible arrangements with the affected members and employees.
Finally, we also note that the minister can make additional criteria by regulation which may narrow even more the scope where clause 153(3.1) could be applied.
We are grateful to the officials from the Department of Finance who have communicated with us about comments that we made to the House of Commons.
They informed us that Canada Revenue Agency will be publishing additional guidance in the near future to assist employers in the implementation of the proposed amendments.
While this is certainly helpful, we cannot overemphasize how important it is for the government to ensure all its departments and agencies are aware of the net-versus-gross overpayment policy and that they apply it correctly for our members.
There are specific situations in which the employer must pay particular attention to, such as those of individuals who have already begun, or agreed to, a repayment plan on the basis of the gross amount. Are they able to change track or just pay back the net?
Another situation would be employees who have had pre-Phoenix pay problems. Are they bound by the three-year time frame for establishing a repayment plan?
We are also concerned for employees working in Quebec who may have to deal with two separate revenue agencies on these issues.
There are examples of those sorts of things that the government must get right if it really wants to help its employees work through repayment issues with minimal frustration. Our members have suffered enough because of Phoenix. Let’s make sure that they are treated well and effectively when it comes to repayment of overpayments that occurred through no fault of their own.
Thank you once again for giving us this opportunity to present our position to the committee.
The Chair: Thank you, Mr. Aubry.
Simon Coakeley, Chief Executive Officer, National Association of Federal Retirees: Good afternoon, honourable senators. I’m joined this afternoon by Patrick Imbeau, one of our advocacy officers. I would like to thank the Standing Senate Committee on National Finance for inviting our association to speak about Bill C-97, Budget Implementation Act, 2019, No. 1.
Federal Retirees is the largest organization representing active and retired members of the federal public service, the Canadian Armed Forces, the RCMP and retired federally appointed judges, as well as their partners and survivors.
The organization has a proud 56-year history of advocacy on behalf of our members and all retirees. In collaboration with our volunteers and 176,000 members from coast to coast to coast, we continue our tradition of strong, smart advocacy campaigns that seek to protect our members’ hard-earned pensions and benefits and support good policy that improves the lives of all Canadians in their retirement.
We have been asked to speak to the committee about Part 1(n) of Bill C-97. This part of the bill describes modifying the treatment of employees who are required to reimburse a salary overpayment to their employer due to a system, administrative or clerical error. It will, in essence, allow the employee to repay to their employer only the net amount of the overpayment. This is particularly relevant to federal public sector retirees and employees at this time and the section of the proposed legislation is a step in the right direction.
Since early 2016, federal public servants, including retirees, have been affected by many failures of the Phoenix pay system. Those failures include the requirement to repay gross sums that have been overpaid, as opposed to net sums. This means that, even if the retiree or employee set aside the extra funds they were paid through no fault of their own, they would then be forced to repay the sums that been accorded in their name to the CRA, CPP and EI premiums. It would then be their responsibility to seek to recover their missing funds from those same organizations.
Retirees and employees were not responsible for salary or other overpayments. They should not have to bear the burden of gross repayments and years of income tax confusion and challenges, as well as financial uncertainty and hardship, because of a failed pay system.
The proposed legislative changes will help to alleviate some of the burden placed on federal public sector retirees and employees. But this is only a stopgap. The source of these issues must be addressed — the Phoenix pay system must be fixed.
The Phoenix pay system has been a constant source of stress for our members. In a survey of 3,000 of recently retired members, 42 per cent reported having had a pay issue related to Phoenix, from payments that did not stop once they reached retirement to thousands of dollars still owed to retirees for earned severance or vacation pay. Many of our members have experienced financial duress and psychological stress as a result of Phoenix’s failings, often due to substantial gross repayment amounts.
Federal retirees point to the urgency of this matter. Some federal employees and retirees have been living under the shadow of Phoenix and related financial pressures for over three years. The Government of Canada must ensure employees and retirees can make use of the treatment proposed in Part 1(n) of Bill C-97 immediately.
Further, it is the government’s responsibility to proactively contact Phoenix-affected retirees and employees who can benefit from the new framework. We look forward to further positive developments on this topic and to assisting and supporting the relevant departments of the Government of Canada that will provide a sound implementation of the proposed changes with the retirees and employees who have been affected by the Phoenix pay system.
Together, we can give federal retirees and their priorities the consideration they need and deserve.
Thank you very much. I would be pleased to take any questions you may have.
Senator Marshall: Can you give us some idea what the experience has been for people that you represent who had repaid the gross and have tried to get back the deductions? And when I talk about deductions, is it just income tax, CPP and UI premiums? Would it be union dues and health premiums? Would it be other things besides those deductions?
Mr. Aubry: There have been issues with all types of deductions that employees have on their regular pay.
Senator Marshall: Not just income tax, CPP or UI?
Mr. Aubry: No.
Senator Marshall: They have repaid the gross amount and then they had to go to different organizations and asked for a refund of the deduction. It sounds simplistic. Can you give us some idea as to the problems?
Mr. Aubry: It’s not simple. It is tedious and down the line it forces public servants to become pay specialists which is not in their trade. It is tedious to look into your pay every second week to make sure the calculations are proper, to know the legislation about the deduction that should be applied to your pay, to try to figure out whether you have the right pay and try to reach out to PSPC to make sure that they look into your files and try to correct it. After that, seeking Canada Revenue Agency and Quebec Revenue Agency to figure out where can I get my money? It’s not easy and it does put a lot of stress on your members that have to go through that process?
Senator Marshall: Do they get the money back or are there complications with getting the refunds?
Mr. Aubry: I would say that most of the time they manage to get it but overall the situations have been ongoing over the last three years. A lot are, currently, not resolved so it is an ongoing issue impacting public servants. Each has to find ways to resolve them.
It’s not easy and they don’t have the skills to do that. It’s the responsibility of the employer to pay their employees properly.
Senator Marshall: Mr. Coakeley can you tell me about the pensions? I thought there was a new pension system and it was working well. Is it the problem just before people retire?
Mr. Coakeley: In fairness to the pension system, they are doing their best to make sure people go on to pension within normal time frames. We have been advised by them and we have absolutely no reason to doubt they are doing manual verification of people going on to pension and, generally speaking, I would say people are reporting they are getting on to pension in reasonable periods of time. The issue for pensioners is that if anything was not done on the pay side — garbage in means garbage out on the principle of computers. So Shediac can only work with the information the Phoenix pay system provides it. Our members have reported issues with regular pay, acting pay, overtime, severance, vacation pay, deductions like tax, the pension calculation and group insurance benefits. I would point out in terms of deductions that the second-largest deduction is pension contributions. If the salary is wrong, the income tax is wrong, then the pension contribution is also going to be wrong.
If I could, our members are reported things like, “I or my spouse had to return to work, we have had to change our leisure plans for retirement. We have been unable to pay bills and/or make loan payments on time resulting in interest charges or late fees. My spouse or I have used personal savings to make up for the losses incurred and we have been unable to support our children or other dependants.” So there have been significant impacts. I can’t speak to your initial question about whether it’s all sorted out in the final analysis.
Senator Marshall: Do I have time for another question?
The Chair: In the second round, yes.
Senator Pratte: I have one question that is a little broader and one that is very specific. The somewhat broader question goes to you both. It is not at all clear in your text. If I understand correctly, you are not asking that the bill be amended to fix the problems. You are simply asking the government to provide you with a clear interpretation of the rules; of course, that would be good for the employees.
Mr. Aubry: Exactly right. We have some concerns about certain aspects of the bill. In general, we agree with the direction of the bill. However, we are afraid that the problem with the Phoenix pay system, when members are overpaid or underpaid, or were not adequately paid, will have an impact on their financial deductions. This problem has many sides to it. However, we are generally in favour of the direction that the bill is taking.
Mr. Coakeley: Our main concern is how the government is going to communicate with the retirees. They are no longer on the job. They no longer have access to the data they had when they were in the office. We are expecting the government to work with us and with other organizations to communicate with the retirees once the bill has been passed and the act has been amended.
We share the institute’s concerns about what is going to happen with retirees who live in Quebec and who have to deal with the Agence de revenu du Quebec, because the bill deals only with the federal government.
Senator Pratte: Mr. Aubry, I completely understand three of the four points that you explained to us in your statement. I have some difficulty with the second point simply because I’m not familiar enough with the area. Could you explain it to me in a clearer terms? I understand that the employer could make a choice. What exactly are you asking for on that point?
Mr. Aubry: Yes, indeed, the text as worded allows the employer to decide how subsection 153(3.1) will be interpreted and applied. We would prefer a text focussed on the requests from employees. They are the ones who have been affected by pay problems. They are in the best position to decide how they can reimburse the amounts received in the past. The possibility must be considered that employees may have other parallel problems, often more personal in nature. So we are asking for the employees, not the employer, to have more flexibility.
Senator Pratte: I assume that employees just want the government to establish a system that would allow them to reimburse only the net amounts. If you gave the employees that choice, they would say yes.
Mr. Aubry: Yes, because, when those employees received excess pay, the money paid into their bank accounts was a net amount. For the revenue agency and the governments to ask them to reimburse the gross amount is a problem because they never had that money in their hands.
Senator Pratte: I understand.
Mr. Aubry: So we are trying to get rid of that problem.
Senator Pratte: Thank you.
Senator Eaton: Do either of you know the magnitude of this problem? In other words, how many employees or retirees will benefit from this and how much money is involved?
Mr. Coakeley: In the case of the retirees it would be speculation. While many were overpaid, many were also underpaid. So this obviously would not affect the underpayment and I don’t have details of amounts.
Senator Eaton: You don’t think the people who did this legislation would have had the idea? The people who do up this legislation would not have had an idea of the numbers they are dealing with?
Mr. Coakeley: If you permit me some sarcasm, the government has had enough problems with Phoenix that I am not sure they know exact magnitude of the problem.
Mr. Aubry: In the latest survey done by the government toward the public servants in 2018, there were questions about Phoenix and one of them was, “Have you been impacted by overpayments?” The results were between 31 per cent and 37 per cent of public servants have been impacted by overpayment which would translate into a hundred thousand public servants.
Senator Eaton: But the government has given us, and you, no indication of what this might cost them in the budget?
Mr. Aubry: No.
Senator Eaton: One last question. In terms of CPP, do you know if the federal government has begun the negotiations with the province? I gather CPP is a joint thing between the federal government and the provinces? They will have to get the provinces to agree to return the money.
Mr. Aubry: I don’t have the details on that. I could inquire and get back to you.
Senator Eaton: Mr. Coakeley, have you heard anything about that?
Mr. Coakeley: I haven’t. I stand to be corrected, but my understanding is that the federal government collects CPP on behalf of all of the provinces with the exception of Quebec. Negotiations between the provinces and the federal government relate to the structure of the CPP program, but the day-to-day administration of the CPP, I understand it’s administered by the federal government. So to the extent it’s a bookkeeping exercise within the federal government, I would speculate that the provinces don’t need to be engaged on that issue, but again I stand to be corrected.
Senator Eaton: I only have what is written in front of me, which is a government paper that says it will not be implemented until such a time as this consent has been achieved with the provinces. Thank you very much.
Senator Klyne: I have two questions.
We’ve heard a lot about overpayments, underpayments and missed payments. The dialogue here is more around the overpayments. In regard to the proposed changes to the income tax, were either of your organizations specifically consulted? And whether you were or not, through your perspective, what is right about the proposed changes? What should be done differently, and what is it missing?
Mr. Coakeley: We submitted a paper as part of the pre-budget consultations. We were not directly consulted about the idea.
I think we share some of the concerns that my colleague here from the institute has about the precision and some of the gaps to be filled in. Our concern over and above those would be that we would want to see the communications plan that the government has, how they plan to communicate and equip the retirees with the information they need to make the individual decisions they need to make.
Once you leave the federal government, all the information you had access to — for example the compensation web application that federal employees have access to — the minute you leave the federal government, because that’s behind the firewall, you no longer have access to that information. If a retiree has their own good records, then they’re in a position to double-check the information they’re being provided. But none of us are probably as good record keepers as we ought to be.
It’s important to note that many public servants, even on a full pension, are only retiring on $30,000 a year, on average. So the capacity here is not great.
Senator Klyne: You partially answered the second question I wanted to ask specifically. We’ll come back to that. Mr. Aubry, could you comment?
Mr. Aubry: The only contribution we’ve done is through submitting a paper about our comments prior to the legislation being set.
Senator Klyne: Was that unsolicited or did they solicit your papers?
Mr. Aubry: I don’t have the details on that.
Senator Klyne: Did you get any feedback on it?
Mr. Aubry: We were contacted by Canada Revenue Agency on some details, and some of our questions were around how to better educate the employer side on how to apply those possible changes. That’s the limited feedback we had.
Mr. Coakeley: In our case we were invited to the budget lock-up.
Senator Klyne: There is potential for a huge gap regarding communications. I see that. What do they propose to close that gap, or what do you recommend?
Mr. Coakeley: I do not know what they propose at this point. I assume they will probably wait until the bill is approved before they start rolling out some details.
The Pension Centre in Shediac, obviously, does have contact information for all pension recipients. It’s not that they don’t know whom to reach, it’s more what information is provided in a timely fashion. We would like to be able to work with them and use our own communications materials and vehicles to communicate with our members.
Senator Klyne: Do you think they will reach out or will you have to?
Mr. Coakeley: We’ll reach out in concert.
Senator M. Deacon: It certainly continues to be a complex issue. We’re all looking forward to the day when we don’t talk about it any more. It has been a long haul.
As I read the reports and listen, I’m looking at those areas of consultation, the magnitude of this, which was already questioned, the communication piece, which was still a little bit of a mystery, and the best fit.
My question on the best fit is we have this change to the Income Tax Act. Based on you and your staff’s experiences, if we were to talk to the employees — the people impacted, and the retirees, of course, present and past employees — do they believe this is the best way to get this done? Is there something that we’re clearly missing that would be optimal or parallel with it? When you have that conversation, is it, “Yes, let’s do this,” or there are some pieces that we might need to hear about today?
Mr. Coakeley: I think in the retirees’ case, many would argue for going back to the status quo ante which is not viable. We understand that.
In the case of employees or the retirees’ whose pension is not what it should be because not all of their income has been paid or has been properly tracked, they would argue that they don’t care about reimbursements. They care about getting the amounts owed right. We understand that. This does nothing.
For those who owe money back to the government, this means that somebody who is now retired, whose pension is not as high as their salary was, this makes it easier to contemplate making the repayment that they have to make without digging in and finding the total amount, including Canada Pension Plan, EI, income tax and those pension contributions as well that you have to pay twice.
Senator Forest-Niesing: Thank you both for being here.
Since I arrived in the Senate, and even for some time before I arrived, I have been aware that the government has spent a lot of money to try to correct the problems with Phoenix. Has any part of the money spent been used in any way to reimburse those who have been underpaid or perhaps to help employees who may have gross amounts to reimburse but have only set aside the net amounts?
Mr. Aubry: No amounts have been paid directly into the hands of the employees. Since 2016, the employer has put a huge amount of resources into getting better organized in order to deal with the problems: it has put teams in place, it has hired staff, compensation advisers, to examine the files and find solutions.
The overpayments, underpayments and other situations make up more than 300,000 transactions waiting to be processed and that have to be processed one by one. Money has been allocated to establish a better structure and provide more staff to try and correct and improve the computer system, but nothing in the way of direct loans to employees in need. Some small amounts have been made available to employees who feel the need to call on an accountant to go over their situation. The burden has been placed on the shoulders of the employees; they have to try to understand what their problems are, to decode their pay stubs, which are cryptic, and to become experts in their own pay. The money has helped to establish an organization, but the problems are being solved one at a time.
Mr. Coakeley: No, in the case of the retirees, no payments have been made directly to retirees. The pension centre at Shediac has absorbed some of the workload in order to check all the files manually. I don’t know, but I imagine that the pension centre has obtained additional resources, either to pay for overtime or to hire other employees to do that checking. As for direct payments to retirees, no, to our knowledge, there have been none.
Senator Forest-Niesing: Thank you. Can you give us an idea of the maximum amounts of overpayments, in the extreme cases that you are aware of?
Mr. Aubry: It varies from a few dollars per paycheque for three years to several thousands of dollars; total amounts can reach tens of thousands of dollars in some cases. Sometimes, repayment agreements have been established. In some cases, the total reimbursement is done on the next paycheque. The amounts vary greatly. Each case is different and has a different trigger.
Senator Forest-Niesing: Would you perhaps have calculated an average?
Mr. Aubry: That is not an exercise we have done.
Senator Forest-Niesing: This measure will apply to public servants who are still working and those who have retired. But can those who have left the public service have access to it directly or do they have to go via another route?
Mr. Coakeley: Do you mean someone who leaves the public service but does not retire? I don’t know.
Mr. Aubry: I don’t either, I have not looked at whether it applies. I can assume that, when overpayment problems are verified, the employer will try to reach people to get the overpayments back. I don’t know to what extent this change would apply to them.
Senator Forest-Niesing: You do not know whether the employer will begin the communication or whether it will be up to employees who have left their positions to begin the communication.
Mr. Aubry: Ideally, the employee will have noticed the overpayment. That is not always the case, but the employer would have identified it through pay correction requests. The employer will be the one starting the procedures.
Senator Duncan: There were a number of complicating factors mentioned with regard to receipt of the pay and calculations, including acting pay, leave without pay and retirement. Missing from that list was the northern allowance or special amounts that are paid to federal government public servants who work north of sixty that I understand can be a very complicated factor. Some have received it; some have not.
I believe it was Mr. Coakeley who mentioned that 42 per cent of recent retirees or those who have retired within the last three years have experienced problems with the pay system. Does anyone have a geographic breakdown of the affected employees?
Mr. Coakeley: Yes, I do, actually. I’ll just find my chart here. I had it a second ago.
The vast majority, the largest single group, will be in postal code K which is eastern Ontario. The second-largest group would be in postal code V, British Columbia, followed by J, western Quebec, would be this part of Quebec here, the Gatineau area. Montreal actually is considerably smaller — sorry, J, Western Quebec and G, eastern Quebec are significantly larger than the metropolitan Montreal area. Manitoba has a fair number, and then Alberta. Now, we have very few retirees in the North. We have retirees in the North but very few. We have small numbers.
If I could just on your other point. I used to be responsible for human resources at correctional services and we had a thing at the time called the Penological Factor Allowance, PFA, which was paid if you did certain jobs in an institution and if you left the institution it was supposed to stop. Needless to say, in many instances it didn’t stop when it was supposed to stop or it didn’t start when it was supposed to start and I would speculate that the northern allowances are also caught up. Either they didn’t start it when they should have done or they didn’t stop it when they should have done. So you will get both underpayments in some instances and overpayments in other instances but I have to say that would be speculation on my part.
Senator Duncan: With regard to the geographic distribution sometimes the numbers are so small they may not register as X percentage but I was just curious if you had a geographic distribution. If you could provide that material to the clerk, it would be appreciated.
Just to follow up, in terms of repayment, I have encountered a number of people, who have had difficulty repaying the amount and have expressed quite a lot of concern about it. One of these individuals was part of a summer student program. That’s especially concerning.
Could you take a moment to address how we might be working with these people who are affected?
Mr. Aubry: I don’t have much to say on how the repayment is done as it’s per employer, per department that reach out to the employees or students who have been impacted by overpayment and will set up a payment plan or deduct it directly from their next pay. Those payments have to be done to the Receiver General as normal and sometimes those transactions get lost in the system. I don’t have more details about the full process.
Senator Duncan: I believe you heard you recommend to the government that they should outreach to these folks. Do you have a recommendation for us as to how we might hold the government accountable in that regard?
Mr. Aubry: Down the line, those situations are difficult for employees to grasp and to make sure that the amount claimed to be an overpayment by the employer is correct. The employer may have difficulty providing the details and we are public servants, not pay experts. One way would be to put in place a process in which a full audit of every pay is done so that every transaction is reviewed, which would be costly or technically difficult to do with the number of public servants. We’re not convinced of the data provided to us, and employers also say that they don’t have clean data.
In entertaining the next generation system, a big process of cleansing the data is ongoing, but currently the data is corrupted by the Phoenix system.
Senator Boehm: Thank you both for your comments today. They’re very helpful and very useful. I was a deputy minister when the Phoenix system came in. We were all quite jubilant at the time, thinking that it would be a good thing.
Senator Andreychuk: That’s why you ended up in the Senate.
Senator Boehm: That’s not why I ended up in the Senate. I also continued when we discovered that the ship was sinking. At our weekly Wednesday morning meetings when all the deputies would get together, the Phoenix issue was always top of mind and always an agenda item. I recall my colleague, Marie Lemay, had just stepped into the job and had the responsibility to try to fix it.
What was done was we established triage centres in the different departments and responsibility centres. We would give priority to those, first of all, who had not been paid or somehow underpaid and then worry about those who were overpaid later on.
This became a melange of different actions and different activities, and departments handled it differently. The good intentions were always there. Operationalizing it, not necessarily. There were suggestions then about getting more auditors on board as well, but could we pay the auditors? Would they actually get paid? Senator Duncan mentioned that students don’t belong to unions, but that is the future of the public service, and they would have an entire summer term and not get paid. What kind of a message does that send?
In all of this, do you feel that enough was being done? If so, has it continued in terms of triage functions? The retirees, I know that’s a special case because the communication lines are a bit more difficult. Also, if we were looking at Miramichi, which was particularly overburdened in terms of pay, whether enough steps were taken to provide the support.
Mr. Aubry: The task is enormous. Yes, PSPC and the various departments tried to do their best to resolve the issues as they came. But down the line three years later, we’re still in the situation of having so many members impacted and living through issues and concerns of that system.
The resources that were put back — rehiring pay advisers and establishing new ways to work within each department — helped to go in the right direction in resolving those issues. I thank all the people at Miramichi for all the great work they keep doing under stress and all the work that was done at the department, but at the same time, we would like all those situations to be resolved as fast as possible because members are living through those situations currently.
Mr. Coakeley: Senator, as I indicated, at one point I was responsible for human resources at Correctional Services and probably, other than maybe the Coast Guard, was in a more complicated pay scenario than Correctional Services because it is a real 24-7 operation. If a correctional office is sent to a different post for more than about 15 minutes, acting pay gets triggered.
In my last job, I was the Executive Director at the Immigration and Refugee Board, and we were one of the first departments to transfer our pay files to Miramichi before Phoenix in the hope and expectation, quite frankly, that four or five years down the road, everybody would look at that and say, “Why didn’t we transfer to Miramichi 20 years ago,” just the way we now say that about the pension services in Shediac.
I think, for what it’s worth, the problem with Phoenix was it was biting off more than it could chew and trying to do too many things at once, but I wasn’t involved in any of those conversations, so I really don’t know.
In terms of what has been done for retirees, we are very pleased with the service that Shediac is providing. They are doing their best to ensure, based on the information they get from the pay centre, from the Phoenix system, that people get into their pensions as soon as possible and as accurately as possible. I would congratulate them for the efforts they are making.
Unfortunately, though, of course, if they can’t get good information out of the pay system, they can’t make things up.
I would say again, unfortunately, the only real solution is to continue to devote resources to identifying the mistakes, number one; fixing the mistakes, number two; and in the case of underpayments, getting those payments out to people as soon as possible. In the case of retirees, this probably means that there are retirees who are owed pay that they haven’t received, and that would have a positive impact on their pension as well.
Senator Boehm: Are you concerned at all about retroactivity in terms of pay awards that are still coming that are retroactive for retirees?
Mr. Coakeley: Yes. Those are some of the issues that retirees have. If they retired and, for example, their collective agreement was negotiated a year or two retroactively, those retroactive payments are not always issued or taken, and as a result, they’re not always taken into account on their pension. They will follow through. They will get there, but it’s the time that it takes.
The Chair: We will move to a second round.
Senator Marshall: Could you talk about the three-year rule? Mr. Aubry, I know you’re concerned that the repayment not be required to be completed within three years. But aside from that, what I was more interested in, within the three-year rule, will that pick up everybody who has had a problem? Or will some people be left out in the cold because it’s so far back in time?
Mr. Aubry: My understanding is if the legislation passed today, it would apply to the last three years, including the full 2016 year that members have issues related to Phoenix. Some of the issues were prior to 2016, when the system was slowly being implemented.
So yes, the rule would apply to transactions, to issues that occurred mostly starting in 2016 but have not yet been identified, clarified or confirmed. Yes, it would cover all the transactions that we see —
Senator Marshall: It would cover everyone in —
Mr. Aubry: In that same period of time, some members have been going through the process of paying back, and we were wondering if that new legislation would apply to them, allowing them to pay the full payment or being able to pay just the net. That would be something to clarify.
Senator Marshall: I don’t know. I wouldn’t venture an opinion on that.
Both of you said that you submitted briefs to the government. What was in your briefs, is that what showed up in the legislation? Is there a correlation between what you submitted and what came out in the legislation?
Mr. Aubry: I provided to the clerk a copy of the previous brief we presented. It’s mostly the same concerns that are still there in trying to better support our employees and our members. No, they have not been implemented in the current legislation.
Senator Marshall: Okay. And for the pensions?
Mr. Coakeley: In our case, the briefs that we’ve submitted over the years to the Finance Committee from the other place haven’t been focused on Phoenix because we have a number of other issues that we feel are important to retirees, Phoenix being one of them. Our thrust on Phoenix has more been, you know you have a problem — we didn’t need to tell them that; they knew that — but you need to find a way of fixing it and as quickly as possible.
Senator Marshall: Thank you.
Senator Pratte: I have a quick question for Mr. Aubry. The statistics published each month by the department of public services seem to indicate that the situation is slowly improving. I was looking at the data on what they call the percentage of transactions processed within service standards. In March 2019, it was 53 per cent and, in April 2019, it is 64 per cent. Other statistics show a slow improvement. Do you see that improvement in the trenches? Are there still a lot of problems? Is it gently decreasing? Are employees more able to obtain information than previously?
Mr. Aubry: There have been improvements over the years, such as more detailed pay stubs, allowing situations to be better clarified. The range of problems has calmed down a little; fewer and fewer new types of problems are appearing. So the data on the number of transactions and the progress on files that are waiting are improving, albeit very slowly. Unfortunately, if you calculate the speed with which the situation is improving in terms of the current numbers of files that are waiting, it will still take us a number of years for all the problems to be solved. That is unfortunate, because the employees are forced to live with those problems and they are beginning to lose hope that their cases may some day be resolved.
Mr. Coakeley: In my experience, at some point, something has to be done. I am no longer in the system, so I am not aware of the scale of the technical problems with Phoenix. So I cannot say whether it would be simpler to fix Phoenix or to start again from scratch. It’s like a car, sometimes it is possible to repair it, sometimes you have to buy a new one.
Mr. Aubry: Before the system was rolled out, the compensation advisers who were involved in migrating the system were already encountering problems. In the first months, the unions asked to be involved in the process. Our IT experts examined the system and came to the conclusion that Phoenix was built poorly from the outset. We have been asking for Phoenix to be replaced since 2017. That is the route we are advocating, after consulting with the people involved who know the system well and could develop one that will work and that people could trust.
The Chair: My thanks to the witnesses for accepting our invitation and for sharing your opinions. You were very professional and you gave us very good information.
Honourable senators, we now welcome our next group of witnesses to discuss Part 4 of Division 4 of Bill C-97. We have before us from the Federation of Canadian Municipalities, Carole Saab, Executive Director, Policy and Public Affairs; and Chris Boivin, Director General, Green Municipal Fund.
I have been informed that Ms. Saab will give a presentation. The floor is yours, Madam.
Carole Saab, Executive Director, Policy and Public Affairs, Federation of Canadian Municipalities: My thanks to you all. We are pleased to have this opportunity to explore the 2019 budget with you, particularly the tools that it provides to municipal governments to help them build better lives for Canadians and our country’s workers.
FCM’s 2,000 municipal members representative more than 90 per cent of all Canadians. These are the governments that are closest to people’s daily lives, everyday needs and challenges. When the federal government works with them directly, municipalities deliver cost-effective solutions that work.
That’s why successive federal governments have taken steps that empower municipalities to do more for Canadians — steps like allocation-based public transit funding that’s already empowering cities to lead major systems expansions. Even so, Budget 2019 really stands out as a turning point. The budget takes our federal-municipal partnership and fundamentally elevates it to build better lives.
Budget 2019 solidifies our federal-municipal partnership, because it is the surest way to improve the lives of our fellow Canadians.
For instance, this budget has an unprecedented focus on rural broadband infrastructure. This implements the urgent front-line advice of FCM and our rural members. I will note that Bill C-97 also enacts legislation for the National Housing Strategy, a generational priority commitment for our communities.
This budget, however, also builds on the Gas Tax Fund transfer, the GTF. FCM worked with successive governments to launch the GTF, then make it permanent and ultimately index it with a 2 per cent escalator. It’s our most reliable infrastructure-funding tool, and municipalities can turn every dollar into real outcomes. That means better roads, bridges and public transit; better water, waste and energy systems; and better places to live, work and raise our families. Take, for instance, Ontario’s Clearview Township. GTF funds powered a new affordable transit service, linking residents to grocery stores, parks, retirement homes, schools and clinics; or in Granisle, B.C., where a new biomass boiler is reducing emissions and saving money by heating the village office, arena, elementary school, curling rink, fire hall, public works office and tourist information centre.
The Chair: Ms. Saab, please slow down a bit for the interpreters, please.
Ms. Saab: In Quebec, the city of Terrebonne is putting in a safe, modern path for pedestrians and cyclists next to a very busy street, thanks to sustainable, long-term funding from the gas tax.
The Gas Tax Fund is proof that when you put tools directly in local hands, we build better lives for Canadians. The GTF’s one Achilles heel is its scale. Every year, it leaves key projects unfunded. Budget 2019 recognizes this by doubling this year’s GTF transfer to move more local projects forward.
In short, this budget doubles down and working directly with municipalities to achieve national, economic and quality-of-life objectives. No delays or roadblocks — this is direct fuel for projects that build better lives for Canadians.
This same principle — to give tools directly to Canadians — is at the heart of a second aspect of the 2019 budget. For two decades, the FCM’s Green Municipal Fund (GMF) has funded 1,250 local, sustainably developed projects. Those projects have eliminated 2.5 million tonnes of greenhouse gas emissions and have allowed Canadians to enjoy a healthier and more affordable life. We must also point out that the GMF has achieved these results while keeping every dollar of the amount received from the federal government.
Budget 2019 substantially scales up FCM’s mission to drive cost saving energy efficiency across Canada through the Green Municipal Fund and it extends FCM programming that boosts local asset management capacity. This means greener community buildings that cost less to run, from social housing to libraries to local arenas. It means making it more affordable for hard-working families to retrofit their homes through smart local financing programs that will also reduce energy bills. It means good jobs in communities across Canada. Once again, it means directly working with municipalities to get things done for Canadians.
Naturally, we want to see the budget implementation act move forward so that important work can move forward, and we want to see the principles this budget implements continue to guide Canada’s federal government. That’s the principle of working together directly as orders of government to build better lives.
On behalf of our new president, Bill Karsten, and FCM’s 2,000 members, thank you for this opportunity. We look forward to taking your questions.
Senator Marshall: I think I might have asked this question the last time the federation appeared, but how do you distribute the money? Do municipalities make application? How do you allocate?
Ms. Saab: Is that in relation to the Gas Tax Fund transfer, or the Green Municipal Fund?
Senator Marshall: The Green Municipal Fund.
Chris Boivin, Director General, Green Municipal Fund, Federation of Canadian Municipalities: Essentially, we run an application process. It is open year round. There are a range of initiatives that we fund, everything from smaller scale planning —
Senator Marshall: So it’s the municipalities that apply, right, not the province or territory?
Mr. Boivin: Yes, the municipalities apply directly to us as a program.
Senator Marshall: Then you review the application, and if it is approved you give them the money?
Mr. Boivin: Yes, exactly. We enter into a contribution agreement with them and that defines the terms and conditions.
Senator Marshall: How do you make sure they spend the money where they said they would?
Mr. Boivin: There is a reconciliation of the accounting of every project. We do a verification of the costs incurred and make sure they were consistent with the initiatives that were approved for funding.
Senator Marshall: You seemed to indicate that you would be willing to indicate how the gas tax is allocated. We were speaking about that yesterday amongst ourselves. If you could do that, it would be helpful.
Ms. Saab: The gas tax is allocated on a per capita basis for provinces, territories and First Nations, but it does provide a base funding amount of 0.75 per cent of total annual funding for P.E.I. and each of the territories. There is a bit of a different formula for those.
Senator Marshall: The $2.2 billion that was allocated this year, has that been allocated in the same manner with a base amount?
Ms. Saab: Yes, the same formula.
Senator Marshall: And then on a per capita basis.
Ms. Saab: That’s correct.
Senator Pratte: I’m wondering how you manage all this. You will have even more money than you had before, at least for one year, for the Gas Tax Funding. You just said, Ms. Saab, that you — I’m not sure of the words you used, but something like, we preserve the federal funding or make sure they are well allocated. But there must be management costs. Are they included in the money you receive?
Ms. Saab: I’ll speak first to the Gas Tax Fund because it’s a direct transfer that’s a flow through and is not managed by FCM directly. It will flow, in most cases, through the provinces. Although, in Ontario and B.C. it is through the provincial municipal associations and that is a straight, direct federal transfer to the municipalities.
When we informed our membership that the federal budget included a one-time doubling, there was no shortage of immediate projects that municipalities had in the queue to be able to fund some significant infrastructure priorities. I’ll turn it over to my colleague to outline the management set up for the Green Municipal Fund.
Mr. Boivin: The Green Municipal Fund has dedicated staff to oversee the funding processes, to oversee the investment of the endowment and the resolving funding as well. The parameters of that operating cost are set out in our funding agreement with the federal government. It covers the funding administration, we have a capacity building arm to what we do, mobilizing knowledge and training municipal staff to more successfully execute projects. Then, obviously, we have a finance arm to the organization.
That operating envelope comes from the income generated from the endowment itself, from the fund given to us by the federal government. It is a resolving fund that generates an income stream.
Senator Pratte: Ms. Saab you mentioned the provincial governments. I know in my home province, all the money that goes to communities is supposed to go through — but what about the green fund, is that the same thing? It goes directly to municipalities that are selected, right?
Ms. Saab: Correct.
Senator Pratte: Does that cause problems with provinces? Are provincial governments unhappy about that?
Mr. Boivin: This is a structure that was established almost 20 years ago. There are no issues in terms of how it’s structured. The fund is directly managed by the FCM, but within the project-level investments we often see stacking of provincial funds on top of the funding that GMF provides. The spirit of the Green Municipal Fund is to leverage other sources of investment into municipal environmental projects.
Senator Pratte: Does that mean you have relationships with provincial governments? We are going to finance this project, can you add money to this? Or is this happening on the go?
Mr. Boivin: I would say it happens more organically because the provincial parameters come and go. Whatever funding is available, if it aligns to our areas of focus, then it creates an opportunity for that stacking to occur. We try to keep up to date on where those provincial programs are going so that we can make our funding as complementary as possible to those provincial streams.
Senator Eaton: I’m fascinated by this. I’ve asked Minister Morneau in the past when he has appeared before us about why he was not considering giving municipalities a greater share of the gas tax, and he would say to me it is because we don’t want to lose control. Even yesterday, I had a bit of an argument over wording with my colleagues here because I suggested that more tax should go directly to municipalities, they shouldn’t have to be a political arrangement between the provinces, the federal government and the municipalities.
With this generosity, do you think it has anything to do with the fact that this is an election year and they have not gotten the infrastructure money out the door? Or do you feel uncomfortable commenting about that?
Ms. Saab: Well, I won’t speculate on whether it has to do with election timing, but I will say it is clear recognition that the Gas Tax Fund transfer has proven to be the most effective and efficient way to get projects started and to have money moving. What I will say is that, in the context of other large federal programs that are application-based that flows through the provinces, we are experiencing significant delays and inability to get projects moving.
Senator Eaton: You are singing to the choir here.
Ms. Saab: Just taking the opportunity.
Senator Eaton: Can I ask you a more relevant question? $300 million for home retrofits. Will your federation develop programs or will it be up to individual municipalities to come up with programs that qualify for funding? The reason I ask is that some smaller municipalities would not have the capacity to design and administer that type of program. Will you be helping them?
Mr. Boivin: Yes. I can provide more detail on that. We were conscious of that aspect, that not all municipalities have the same level of capacity. Part of the beauty of the way the program will be designed is that there will be a healthy amount of capacity building, cohort based learning and knowledge projects that will help smaller communities develop programs with a lot of assistance and then access the funding. We were certainly looking at meeting the needs of both the larger and the smaller communities as part of that.
Senator Eaton: Thank you very much.
Senator Forest: Thank you, and welcome to the Senate. We are pleased to see you again.
First, the gas tax is distributed on a per capita basis, with a threshold for certain regions of Canada. Can you give us a little more information on the priorities involved? This is the assistance program that is most appreciated by the municipal world from coast to coast. There are some constraints, given that money is attributed per capita according to established priorities and the way municipalities participate in the program. Could you give us more information about that?
Ms. Saab: With the Gas Tax Fund transfer, there is a set and predefined list of categories of eligible projects. It’s quite extensive and there are heavy infrastructure focused, but it is everything from transit, waste water, drinking water and solid waste management to transportation oriented roads, bridges, highways, short sea shipping and a little bit of disaster mitigation. And it also included our culture, tourism and sport and recreation. It is fairly comprehensive but it does keep it to that defined list.
In terms of the concern raised earlier with the federal government wanting to ensure where money going, it is going to concrete and pretty spelled out infrastructure categories in municipalities across the country.
Senator Forest: Municipalities also have to submit the ways in which they will participate financially in carrying out their plans.
Ms. Saab: Yes, they do, absolutely. And what municipalities receive in a large part from the gas tax is a portion of what they need to spend to implement any of these projects. The gas tax is stackable and they use that with their own dollars, as well as dollars that come from the provincial order of government.
Senator Forest: In terms of the GMF, when comparing the results, if you look at the investment made for some time against the per-tonne cost reduction in emissions, you get an average of $170 per tonne. When you compare that to the credits given for electric vehicles, you come to approximately the same amount. The GMF not only makes investments focused on reducing emissions, it also provides communities with infrastructure. However, very often small municipalities do not take advantage of the GMF. In some regions of Canada, and especially in Québec, the fund is not used as much.
Does the Federation of Canadian Municipalities have a strategy to support small communities and increase the participation from those regions of Canada that are using the green fund less than others?
Mr. Boivin: That’s a very good question. Yes, absolutely. We certainly have objectives in terms of maintaining a balance between smaller and larger communities. To date, our portfolio has been fairly balanced in terms of municipalities. Over the years, we have received comments from small municipalities, who find the task more difficult, with less capacity and fewer staff. So it’s important to provide a little more support.
We’ve always approached this challenge from a perspective of continuous improvement. Last year, we even identified other green municipal fund initiatives to make it more accessible. Consideration is being given to launching a type of help desk within the green municipal fund to provide some guidance to municipalities to help them through the process and to assist them with the implementation phase, once their projects are approved. There are also knowledge and capacity building products that focus on these municipalities, as there is a lack of access to information and expertise. We are well aware that more effort is needed for these communities than for others. We want them to be part of our mandate and the results we seek to achieve.
Senator Klyne: I have two questions with regard to Budget 2019, which proposes funding — and Senator Eaton touched on this — to increase energy efficiency for residential, commercial and multi-unit buildings. Has it been identified or prescribed how these funds will be allotted by region or municipality, and/or by each type of real estate?
Mr. Boivin: I can certainly answer that. In our funding agreement for the program, there is a requirement for us to maintain a regional balance as well, as I said earlier, the balance between the more rural and smaller scale communities and the larger municipalities.
Historically, we have been spot on with that, in terms of maintaining balance by region and across the smaller and larger municipalities. Do you mean asset type?
Senator Klyne: To increase the efficiencies for residential, commercial or multi-unit buildings. You talked about the regional basis, but are there amounts per type of building?
Mr. Boivin: For example, the individual household residential market, the $300 million, Community EcoEfficiency Acceleration program stream is just for households, your individual home. Then the second stream, the sustainable affordable housing stream, is just for affordable housing or a mix of affordable and social housing, or a mix of affordable and more conventional units, depending on what model makes the most sense from a financial point of view multiple. That will be a multi-unit and within affordable housing focus. Then the third stream is where we get into the larger — we will call them energy hog type facilities — where the focus will likely be on recreational facilities, multi-unit residential. Commercial is less of a focus based on the programs as they were designed, so it would be more multi-residential and large energy-intensive municipal and community facilities.
Senator Klyne: My second question is specific to the residential in increasing energy efficiencies. You mentioned retrofitting earlier. In that regard, is it retrofitting and/or new builds on the residential side?
Mr. Boivin: Excellent question. For both the affordable housing stream and the residential stream, the idea was both retrofits and building in that layer to a new build, but the focus of our funding is really on those energy-related actions or initiatives, so the installation, the on-site renewables, things of that nature.
Senator Klyne: Whether it is retrofit or new build?
Mr. Boivin: Or new build, yes.
Senator Forest-Niesing: I’d like to come back to the access process for municipalities to budget envelopes. With the exception of the GMF, in which the process is direct, does the process in place allow municipalities access budget envelopes to quickly and efficiently?
Ms. Saab: The process related to the Gas Tax Fund transfer? Yes, it is the most direct and efficient because it is allocation based as opposed to application based where there are often delays and holdups.
Senator Forest-Niesing: I have a more general question. Is it enough? Would you have liked to see other measures taken to increase the eco-efficiency of municipalities?
Ms. Saab: I will say that we are very pleased to see the investment that has been made. Certainly, our view is that future opportunities continue, particularly in transit. It’s a significant area for further development. We already do some work with the Green Municipal Fund around electrification of fleets and the like, but it really is an area of further development potential.
Senator M. Deacon: I applaud the organization for the number of visits you’re making to the Hill to meet with senators and MPs. It certainly has been educational. It’s been helpful in understanding some of the things we’re talking about today.
The piece you started to talk about at the beginning, Mr. Boivin, was around monitoring, accountability and assessing as we go. How are we doing with that whole ability? Here are some opportunities; here is some funding; here is what we’re trying to do and to work through, but how are we monitoring, assessing and making sure that the money is actually making sense where it is or where it will be and where we wish it to go?
As we’re going into the early thoughts of this, is there something set up that will help as this proceeds to make sure we’re on our game with the municipalities, using the money in the best way? If not, do we have the agility to adjust?
Mr. Boivin: Yes, absolutely. We very consciously gave ourselves some time for the design-and-build phase of the program before we went into receiving applications. Our team is working really hard to develop some performance targets that will go with that money. So should it be as close to net-zero energy as possible in certain kinds of buildings? In order to do that, they need to do a deeper dive on the state of the art to set those parameters while balancing achievability with stretching the sector to where it needs to go, to perform better in energy and environmentally.
Once that analysis is done, that will then feed into knowledge products to help people get there and to recommend measures that you can take — layers of measures, we’ll say. It will recommend how to finance those, as well as it will be built into the eligibility requirements for the funding itself. Applicants will have to demonstrate that their measures can achieve the targets that we’re hoping to stretch them towards.
Senator M. Deacon: I am thinking about typical change and typical activity taking at least three to five years. Do you think this will be accelerated a little bit, that you could get the indication a little earlier?
Mr. Boivin: Yes. One of the advantages of the Green Municipal Fund is that it operates in perpetuity. We have this ability. It’s not just a three-year funding column that you don’t know what happens and it’s maybe too late to make a course correction. We will be monitoring on an annual basis whether we need to make adjustments. Is it accessible? Should we keep stretching the targets? Given that a significant portion of the new funding is meant to support the sector for the next seven years, I imagine there will be at least one or two iterations within that to keep boosting the sector’s performance.
Senator M. Deacon: Thank you.
Senator Boehm: Thank you both for your comments today. As you look across the country with the Federation of Canadian Municipalities, you can see a lot of smaller municipalities that are thinking about smart cities or smart towns, if they’re smaller. Many of them do not yet have coordinators or project officers.
Are you making suggestions to them that this might be a path to follow? A lot of attention is going to Sidewalk Toronto, but what about the smaller urban centres or towns that could probably use energy-efficiency methods in municipal buildings? They could look at their own grids and how they’re handling it. That’s the first part.
The second part: Are you relying on any international experience and best practices in other jurisdictions. In Europe, for example, many areas are a bit more advanced than we are. Maybe they’re more geographically concentrated. Is that applicable to your work or the powers of suggestion that you might have for smaller municipalities that are just starting on this path?
Ms. Saab: Thank you very much, Senator. Those are both excellent and pertinent questions. Certainly in the capacity of our smaller municipalities and communities across this country, this is in the front of our mind for almost everything we do — is ensuring that we’re also moving the markers and helping our members with building their capacity to engage in these areas.
As it relates to smart cities, I can tell you that this is an area of interest across the board, from our biggest members but also from our mid-sized and smaller communities. We’re doing a lot of work right now from a policy perspective to share best practices to start helping them develop the kind of thinking and capacity within their resourcing to be able to do that. Very deliberately into the funding for the Green Municipal Fund is a very deliberate initiative around capacity building, as well, to ensure that smaller municipalities are able to engage effectively with the program and that we’re able to reach across the country to members of all sizes with this kind of funding.
I wanted to highlight — because your question gives us a bit of an opportunity to do this — that part of the investment the federal government is making in this budget is also a program that FCM runs which is the Municipal Asset Management Program. This is a capacity building program that isn’t exclusive to, but almost exclusively used by our smaller and rural members to help them build capacity and asset management which, of course, builds in best practices around energy efficiency moving forward.
We’re putting quite a bit of effort into enabling and supporting our smaller members to move markers forward and, in some cases, to effect a bit of a step-change in their communities within the resources that are available to them.
On international examples, I’ll certainly say we do a lot of field research to be able to do. As it relates to our residential energy-efficiency model, we were looking at examples in the United States as well — pace models that could be scaled up and enabled here. I’ll ask Chris specifically on the international examples if there are other examples to highlight on the Green Municipal Fund.
Mr. Boivin: Yes, certainly we monitor what is happening in the rest of the world quite often. It is part of the design for these new programming streams. We’re not just containing ourselves to what’s happening in Canada. We’ll be looking at successful models in similar jurisdictions, similar climate and so on.
To Carole’s point, even when you look at the financing instruments for the residential stream, we’re emulating practices that have gotten a little more traction in Europe and the U.S.
I have one quick point on the smart city side. Within the initiatives or the approaches where we will be providing capacity related to the energy-efficiency program will be things like energy modelling. The smart controls function is one of the low-hanging-fruit opportunities for that programming.
Senator Marshall: For both the Gas Tax Fund and the Green Municipal Fund, does the money go directly to the municipalities or is there a role for the provinces? What is the route for the money?
Ms. Saab: I’ll start with the federal gas tax transfer. Everywhere except Ontario and British Columbia, the money is routed through the provinces. It is a very direct flow-through to the municipalities from there.
Senator Marshall: The three levels must decide on the projects? Is it a federal government, provincial, municipal or is it the federation?
Ms. Saab: The federal gas tax money flows through from the federal government to the provinces. In Ontario and B.C., it’s the provincial-municipal association. That money goes directly to municipalities and municipalities decide on the projects.
Senator Marshall: In Newfoundland, which I represent, it’s coordinated with the province, isn’t it?
Ms. Saab: The money is flowed through the province, but the province doesn’t have a role in project selection.
Senator Marshall: What about the Green Municipal Fund?
Mr. Boivin: In general, the funding goes directly to the municipalities. In some cases, there is a sort of need to inform the province of those transactions —
Senator Marshall: It’s the municipalities that make the application?
Mr. Boivin: Exactly. Yes, they decide what they’re seeking funding for but just given things like debt limits, in municipalities and so on there needs to be —
Senator Marshall: For the Green Municipal Fund, do the municipalities go to the provinces for sharing of the costs of the project or is it totally funded between the federation and the municipality?
Mr. Boivin: There are many options. It’s not mandatory that it has to go provincial. We can fund on large capital projects up to 80 per cent so the 20 per cent can come from the municipal tax base, from the private sector, from federal, it could come from a variety of places.
Senator Marshall: Can it come from the gas tax?
Mr. Boivin: It could be stackable, yes.
Senator Marshall: It could?
Mr. Boivin: Yes.
Senator Forest: To be clear, the gas tax is distributed per person, and the green fund is per call for projects. Am I correct in making that distinction?
We see that, from one year to the next, the government’s intervention plan aims to invest in our infrastructure in a targeted way by allocating very significant funds to it. However, at the end of the year, we don’t succeed... Despite the fact that our infrastructure stock is deficient, many funds aren’t spent and aren’t invested in our communities. Has the Federation of Canadian Municipalities thought about a strategy that would make better use of the funds available under the infrastructure program for all Canadian communities?
Ms. Saab: Yes, that’s an excellent point and question, and I’ll use the current Investing in Canada plan as an example.
Of the 13 provinces and territories there are only six that have opened application and intake processes for projects. We’re quite literally seeing money just sitting not being used and certainly not advancing projects at a local level that was intended to go towards local infrastructure priorities. That’s a real obstacle to making efficient progress. It’s also an obstacle to the reliability and predictability of the funding towards a municipality which is essential for a municipality to be able to do the kind of long-term planning required on major infrastructure programs. To your question about this, our suggestion to the federal government has always been that where they are having difficulty moving dollars through federal infrastructure programs that our municipal preference would always be to flow it through the federal gas tax. It is unencumbered by that kind of a holdup in process and will enable the municipalities because the eligibility criteria are broad enough to advance projects. It’s the most predictable long-term tool that’s available. So FCM is calling for coming out of this kind of a budget commitment using this as baseline for moving forward and making this one time doubling a permanent feature for funding for municipalities moving forward.
Senator Forest: In this scenario, you use the gas tax route. So it would also be on the basis of a distribution per person, not per call for projects.
Ms. Saab: The amount of money a municipality would receive is per capita unless you’re in a province that also has a base fee. From there they apply them to the various projects that they’re moving forward.
Senator Klyne: I want to get back to increase in energy efficiency specific to residential. As we can all imagine on the existing home you can look at new windows, high efficiency furnaces, on demand tankless water heaters. On a new build there is a wide range of things available, including everything from smart homes, passive housing, solar and wind, to taking it right off the grid.
Do you have any policy that influences where homeowners focus their initiatives?
Mr. Boivin: Yes. It’s a great question. One of the considerations for us is even what is appropriately regionally if you’re really trying to get at affordability and emissions reduction. The way we’re approaching the design of the programs is carving out a few macro regions as well as the intensity of the carbon intensity of the electrical grids that are there because in some cases it might not make sense to shift onto electricity and in others it might.
Also, the impact of certain initiatives. If I put PV in Quebec versus PV in Alberta, we will have a big difference in terms of the emissions reductions that come with it. The way we’re approaching the program is there will likely be three to four categories and within that there will be some recommendations on what the most appropriate measures to take within that category are.
The Chair: To the witnesses, thank you very much for sharing your opinions and also your vision with us. It has been very informative.