Proceedings of the Standing Senate Committee on
National Finance
Issue No. 33 - Evidence - May 16, 2017 (morning sitting)
OTTAWA, Tuesday, May 16, 2017
The Standing Senate Committee on National Finance met this day at 9:33 a.m. to continue its study on the federal government's multibillion dollar infrastructure funding program.
Senator Percy Mockler (Chair) in the chair.
[Translation]
Welcome to this meeting of the Standing Senate Committee on National Finance.
[English]
My name is Percy Mockler, senator for New Brunswick and chair of the committee.
I wish to welcome all of those who are with us in the room and the viewers across the country who may be watching on television or online.
[Translation]
I remind our listeners that committee hearings are public and accessible online on the Senate's official website.
[English]
All other committee-related business can also be found online, including past reports, bills studied and lists of witnesses.
Now I would like to ask all senators to introduce themselves, starting on my right, please.
Senator Eaton: Nicki Eaton, Ontario.
Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.
Senator Andreychuk: Raynell Andreychuk, Saskatchewan.
[Translation]
Senator Moncion: Lucie Moncion, senator from Ontario.
Senator Pratte: André Pratte, senator from Quebec.
Senator Forest: Éric Forest, senator from the Gulf region, Quebec.
[English]
Senator Woo: Yuen Pau Woo, British Columbia.
The Chair: Thank you, senators.
[Translation]
I would like to introduce the clerk of the committee, Ms. Gaëtane Lemay, and our two analysts, Sylvain Fleury and Olivier Leblanc-Laurendeau, who together support the work of this committee.
[English]
Today, honourable senators and viewers, we continue our special study on the government's program of infrastructure.
For the first part of our meeting this morning, we have invited officials from the Privy Council Office to discuss the results framework as it pertains to the infrastructure program across Canada.
[Translation]
This morning we welcome our two witnesses from the Privy Council Office: Matthew Mendelsohn, Deputy Secretary to the Cabinet, Results and Delivery, and Francis Bilodeau, Assistant Secretary to the Cabinet, Results and Delivery. Thank you for having accepted our invitation and for sharing your opinions and your vision so that we may together examine our three objectives —
[English]
— predictability, accountability and transparency.
I have been informed by the clerk that Mr. Mendelsohn will make the presentation, to be followed by the senators with questions.
[Translation]
Mr. Mendelsohn, you have the floor.
[English]
Matthew Mendelsohn, Deputy Secretary to the Cabinet, Results and Delivery, Privy Council Office: Thank you, everyone, for inviting me. I have quite short opening remarks. As you mentioned, I am here with a couple of my colleagues, Francis Bilodeau, whom we refer to as the brains of the operation in our shop, Christopher Valiquet and Melissa Tan, who do the real work in our shop. I am very glad that they are with us.
I'll tell you a bit about what we do at the results and delivery unit at the Privy Council Office because it is a new group, having been created in January of last year.
I wanted to begin by mentioning that the work of this committee has been very helpful in highlighting issues around the importance of accountability, transparency and ability to report clearly results and outcomes to Canadians in ways that make sense to parliamentarians and Canadians so that they can follow where their money goes and what actual real-world impact it has.
[Translation]
As you know, Privy Council Office's mandate is to provide non-partisan advice to the Prime Minister and ministers of the cabinet. With the Results and Delivery Secretariat, we focus our efforts on three objectives in particular. First, what do we want to achieve, that is to say what are the results targeted by a program or expense? Secondly, what is the work plan, how will we proceed to implement a given program? Third, how will we evaluate our results, how will we determine if we have reached our objectives?
[English]
As people here know, there is a great deal of public money spent on infrastructure and many other government priorities. One of our jobs is to help and support departments to determine how best to measure the results and outcomes of that spending and report it in ways that make sense to Canadians.
For that job, it is very important that we mobilize data and evidence to support program, policy and implementation. The mobilization of evidence and data is crucial to be an evidence-informed and results-driven government.
The government has identified those as important principles. The Ministry of Infrastructure recognizes and identifies those as important principles. Part of our role is to help them to identify, mobilize and report the best data to determine whether their spending is having the results they are trying to achieve.
When it comes to data, part of our strategy involves three things. First, we want to ensure we have the right data. As the members of this committee are aware, there are issues that are very important to the government for which we don't have data. Over the last year, we have begun to invest in new kinds of data and data that will allow us to answer questions about the results, outcomes and impacts of public spending. Ensuring that we are investing in the right data is one part of that strategy.
Second, it is important that we have people who can understand, analyze and interpret data and, third, that we have a culture as well as processes and rules that allow the government to use good data in decision making.
[Translation]
Another important aspect is making the results of programs public in a transparent way. As you know, the government is developing several new processes and policies to make data public in a more transparent manner, so that Canadians and parliamentarians can follow expenses more easily.
[English]
We have implemented a number of processes over the last year to help facilitate a results and delivery approach. We have created a new cabinet committee, chaired by the Prime Minister, which focuses on the overall agenda of the government to ensure that top priorities are being followed; that programs and policies that are intended to have a particular result are in fact having the intended result, and if not, why not; and whether adjustments or recalibration is necessary.
We have also created more informal ministerial results tables to follow top government priorities and to ensure that, where horizontal collaboration and coordination are necessary, as they certainly would be in infrastructure, that ministers and officials are meeting regularly to ensure alignment, coordination and horizontal progress.
We have also developed documents that we call results and delivery charters for many new initiatives, which highlight clearly the following:
What are the objectives? What are the targeted results? What is the data strategy? What indicators or metrics will be used and mobilized? Do we have those data? What is the clear implementation plan? How will we check in, recalibrate, adjust and assess as we evolve to ensure that promised results are in fact being delivered or, if not, that there is some understanding of why they are not being delivered, as well as some strategy for adjusting.
New cabinet and Treasury Board submission templates are more focused on results outcomes, data strategies, indicators and delivery plans than they had been. We have adjusted those to reflect this government's commitment to rigorous measurement of outcomes and reporting on results.
[Translation]
As you know, Treasury Board has also developed a new policy on results. The departments are preparing reports pursuant to this new policy, precisely focused on results indicators and data. These reports will be evaluated and implemented so that we may reach our objectives.
[English]
We have also put in place soft governance structures to help drive this agenda. We have tables now. One is Chief Results and Delivery Officers, which my colleague chairs. Every department now has a Chief Results and Delivery Officer who is responsible within that department to ensure that the government is moving forward with its agenda and delivering on results.
Part of Francis' job is to help ensure coordination, alignment and best practices in the departments that are moving forward in a successful way and helping other departments that may be having more challenges implementing the new approach.
We also have a Data Leads table. All departments have identified a Data Lead in their department. That table, like the CRDO table, is co-chaired by the Privy Council Office and Treasury Board. That Data Leads table is designed so that for all the various data strategies, as we collect and share new data and as we make data public and mobilize existing data which one department may have that might help another department, there is a coordinating and alignment mechanism to ensure that the government is moving forward on this agenda in as coherent a way as possible.
In sum, part of our mandate is to move, as much as we can, the culture of reporting to one that focuses on outcomes and impact. Historically, reporting has sometimes focused on outcomes, sometimes on results, but often on activities or inputs. We will continue to encourage departments to focus on activities and inputs.
Those are very important elements of, as you said, transparency, predictability and accountability. It is important for the public and parliamentarians to be able to see how much money is spent and to understand inputs and activities in a clear way so that at the end of the day we are not spending money just to spend money. We are not undertaking activities just for the sake of activities. There is always a clear result, outcome or impact in mind.
Sometimes it won't be as successful as we would like. As part of our job at results and delivery we have been creating the structures, processes and culture over the last 14 months to help departments more explicitly focus their public reporting on outcomes and results, and to do it in a way that is at a whole-of-government level, a horizontal level.
For example, in the infrastructure file, as you know, many different departments play a role. Through the Treasury Board processes, we have traditionally reported on departmental spending. We will continue to do that because that remains an important aspect of accountability.
At the same time, the horizontal aspect, the whole-of-government aspect, the alignment across diverse programs, the spending lines and departments are equally important. We help departments to align on horizontal priorities and to be able to report in a way that will make sense to parliamentarians and the Canadian public.
I will say one final point that I think is important to highlight before I open this up to conversation and questions.
Nothing we do changes ministerial accountability. Nothing we do changes departmental accountability. The Minister of Infrastructure and the deputy, down through the department are responsible for managing those programs.
We play a challenge function. We try to ask difficult questions. We introduce new routines that focus on ongoing updates. We try to coordinate across departments to ensure alignment. We help departments overcome obstacles to delivery that may arise, because sometimes those arise within the system of government itself.
If we want to hold ministers and departments accountable and there are obstacles within the system, part of our job is to help them overcome them. We all share the same objective of delivering programs that deliver results for Canadians.
Our job is one of facilitating, enabling, challenging and encouraging alignment, but nothing we do changes the system of ministerial accountability that you are all familiar with.
[Translation]
I would be pleased to answer your questions.
[English]
Senator Marshall: Thank you very much for being here today. I have to commend the initiative because I know it is quite large.
Can you clarify something? I am trying to get a handle on how you fit within the government. You interface with departments. You are saying that there is somebody in each department.
Do you also interface with Crowns? Are they included in this program?
Mr. Mendelsohn: That's an interesting question, senator. I will answer it in two ways.
No, we don't interface with Crowns. Our chief results and delivery officers around that table are department leads. They often have lines of sight into agencies, boards, commissions or Crowns. Individual Crowns, agencies, boards and others may implement a results and delivery approach that is consistent with our general encouragement, but we don't interface directly with them.
Senator Marshall: That would be left up to the respective departments that they are accountable to.
You mentioned infrastructure several times. When I looked back at the 2016 budget, it seemed like the performance indicators and the whole program would be all of government. Then, when I read the 2017 budget, I got the impression that it might be more narrowly focused on infrastructure. It is for all of government, is it?
Mr. Mendelsohn: Deputy Tremblay is coming in next and can speak in more detail, but the departmental result framework submitted to Treasury Board by Infrastructure is striving for more whole of government. Infrastructure will be undertaking reporting, as the lead minister for infrastructure is highlighting infrastructure spending and results of other departments as well.
Senator Marshall: Then other programs in other departments would also have the performance indicators.
Mr. Mendelsohn: Yes.
Senator Marshall: We quite often talk about performance indicators when we have witnesses appear. There was an individual that seemed to be the performance indicator guru. I was looking for performance indicators for all of government, and I was told that I would hear back from the President of Treasury Board.
Is there one place? Where can we get the performance indicators that are currently in effect? Some must be done already. Where can we get them?
For example, we had the Department of Innovation in talking about the budget. There are two performance indicators mentioned in the budget. We were told those were the only two performance indicators there were, but there must be more.
Where do we go to get the performance indicators for the various programs throughout government?
Mr. Mendelsohn: The Treasury Board process and the departmental results frameworks have detailed outlines of departmental performance indicators.
The government is currently considering how we will do whole-of-government reporting. I would say stay tuned. The government certainly has a commitment to do more whole-of-government, horizontal reporting on performance indicators on top government priorities.
Senator Marshall: So we can't get them yet.
Mr. Mendelsohn: You can get individual departmental performance indicators through Treasury Board processes but, as I say, the government is considering how and when to begin horizontal reporting on overarching government priorities. There will be more forthcoming.
Senator Marshall: Would you be able to give the clerk the name of the contact person? I did have a contact person, but I wasn't very successful in getting the information. Is there an individual we can go through?
Mr. Mendelsohn: At Treasury Board?
Senator Marshall: Yes, or wherever, to get the performance indicators that are available right now.
Mr. Mendelsohn: Sure. Do you want to answer, Francis?
Francis Bilodeau, Assistant Secretary to the Cabinet, Results and Delivery, Privy Council Office: Sure. The performance indicators in individual departments are rolled up as part of the estimates process in the departmental plans and departmental results.
Those are all available on the TBS website, and the individuals at the officials level would likely be within TBS EMS, which is responsible for the overall expenditure management system.
We are happy to put you in touch with the appropriate people at TBS.
Senator Marshall: I would like that. This is almost like a big project for you. Do you have end dates for your progress? You must be at stage one. You have to set up systems and then decide what systems and what information.
Are there timelines? Do you have performance indicators for the project that you are doing?
Mr. Mendelsohn: That's an excellent question. I'm not sure we have performance indicators quite yet. As part of the Privy Council Office's overall performance plan and the reports that the clerks submit to the Prime Minister and the Privy Council Office submits into Treasury Board Secretariat, there are overall performance indicators and a performance plan for the Privy Council Office. Those are publicly available.
Senator Marshall: Is there an end date to your project? Will there be a certain date where you say on March 31, 2018, you have finished your project and the departments will be put on their own to deliver what they are supposed to deliver with regard to information?
Mr. Mendelsohn: No. We have informal work plans that we use to try to drive progress. I would not say we have hit all our own internal timelines and deadlines as we have moved along. There is no end date to the project.
The Clerk and the Prime Minister have created a new secretariat within Privy Council Office that works very closely with existing secretariats.
We work to support departments, deliver on commitments and support the cabinet process. Our role in that is to help departments focus clearly on outcomes, delivery plans and measurement strategies as part of the cabinet deliberation process and cabinet support process.
There is not a specific end date to our project.
Senator Marshall: Thank you.
Senator Woo: Good morning, Mr. Mendelsohn and Mr. Bilodeau. Thank you for your testimony. Your presence here is in the context of our study on infrastructure.
We heard some testimony previously on how to measure the success of the massive infrastructure spending. There is one view that we should only be counting as successful the types of infrastructure investments that increase the long- term productivity of the Canadian economy; in other words, investments that actually improve economic potential to generate more output.
One view is that only a small percentage of the currently announced investments, namely the ones in the area of trade and transportation, would qualify as productivity enhancing.
Of course, there are other ways of looking at infrastructure investments and the benefits of investment. Perhaps this question is better suited for the next set of witnesses, but could I ask you to articulate your own sense of how you would measure performance results, outcomes and results of infrastructure?
Would you agree that this slightly narrower view of productivity enhancement is the correct way of thinking about the infrastructure spending of the government?
Mr. Mendelsohn: Thank you very much for the question, senator. I am happy to offer my thoughts and reflections on that. I am sure the officials from Infrastructure may have additional views.
Productivity enhancing infrastructure is obviously crucial to the long-term prosperity of the Canadian economy. The Government of Canada has a long history of significant and transformative investments in border infrastructure and trade corridors. The Government of Canada has been focusing on these for a long time.
As you point out, these issues are subject to debate. There is lots of disagreement, even if you started with a narrow perception of just focusing on productivity enhancing infrastructure, about which infrastructure will enhance productivity.
Does public transit enhance productivity? Does social housing enhance productivity? Some people would say, "No, that's just social housing,'' but if you are providing lower income Canadians with decent housing close to economic opportunity and close to public transit, there's lots of evidence and research that suggest they're more likely to be able to participate in economic activity and participate in the labour market, which does enhance productivity.
These questions are complex. What we have focused on is a number of different pillars or indicators that would be important. Indicators around productivity and economic growth are very important, but likewise sustainability and environmental considerations are important. What are the GHG emissions from our transportation stock or from our building stock? Those are also important.
Over a long term many people and certainly this government have suggested that it is going to enhance economic opportunities to have a more sustainable economy.
I'd say third is social infrastructure. On some of these things we have quite good data, core housing need, for example. How much of one's income does one have to spend on housing? What is the condition of the housing stock? Is housing affordable?
Likewise, these are important considerations. Housing is unaffordable in certain areas that are often areas near economic activity. People are forced to move quite far from economic activity in order to afford lodgings or housing and then commute for two hours to a job. Those also create congestion and these things interact.
If downtown cities are congested with commuters, it makes it more difficult to ship goods through cities. You find alternative routes, obviously, but those may not be the one that contribute to the greatest productivity.
I would say, in summary, senator, that it's complex. The deputy of infrastructure can speak more, but this government would not focus exclusively on economic measures but a broad range of measures including economic growth and productivity, environmental sustainability considerations and social considerations, all of which together contribute to good economic growth and quality-of-life possibilities.
Senator Eaton: Your remarks were music to my ears. It has been a very long time in this committee that we've asked ministries when they come before us what were the results of last year's program, or what were the performance measurements, and they've never been able to give us any kind of indication.
I guess what you were saying, Mr. Mendelsohn, to define the new departmental results framework, is that in years to come if INAC comes before us we will be able to say you gave such and such to housing last year. "Were the houses built? Were they properly built?''
Those are the kinds of answers we will be able to get on various programs. That's the ultimate aim.
Mr. Mendelsohn: That is certainly the goal.
Senator Eaton: That would be wonderful.
My second question is: We've been looking into infrastructure and it seems that most of the infrastructure is built by municipalities, followed by the provinces. Very little is built by the federal government, but the federal government controls the money.
How are you going to track the money as it trickles down through the various provinces and their priorities and down through the municipalities to make sure that what you've given them ultimately trickles down and gets to where it should be?
Mr. Mendelsohn: Again, it's a pleasure to be here. These are excellent questions and this is an excellent conversation. You are focusing on challenging issues that we grapple with every day.
On the question of provincial and municipal spending and the money trickling down through particular projects that a community may support or a provincial government may support, and again Deputy Tremblay may want to speak to this more, one of the objectives is that we will be moving into a phase where we're negotiating bilateral agreements between the federal government and provincial and territorial governments.
As part of the negotiation of those bilateral agreements, one of the federal objectives is to identify common indicators and approaches to reporting that provinces and municipalities will support.
Obviously, within a system of federalism such as ours, the federal government cannot compel provinces or municipalities to do certain things, but I do think the federal government has a legitimate interest in reporting on some key indicators and results that are important across the country. The provinces and provincial governments in general support this.
Part of the objective of the negotiations of the bilateral agreements is that more money starts to flow through the infrastructure spending. As the federal government agrees with specific provinces on approaches and projects, one of the important aspects will be how we will report out to Canadians so that they can identify the results of the spending.
Senator Eaton: It must be a huge job you're doing if the Department of Infrastructure in itself does not have any money. Am I correct? It really hands out to other ministries to make those infrastructures happen.
Mr. Mendelsohn: No, the Department of Infrastructure has responsibility for most of that money.
Senator Eaton: It won't go to Canada Mortgage and Housing. It won't go to INAC. It won't go to Fisheries and Oceans and it won't go to other issues?
Mr. Mendelsohn: No. It goes to all of those: CMHC, Fisheries and Oceans, ESDC, housing and parks money. There are a number of departments that have pieces of infrastructure, which has been part of the challenge for public reporting and for committees such as this and INAC as well, as you say.
There are bits of cultural infrastructure across Heritage. There is a variety of different infrastructure pieces, but the core program is an infrastructure program. The negotiation of the bilateral agreements in most of those funds, the public transit money and much of the green infrastructure, are in the Department of Infrastructure.
Senator Eaton: You have a long way to track the money. You have a long road to track the results of the money because it starts in Infrastructure. It goes to another ministry. It might go to a province. It might go down to a municipality. You have a tough job.
Mr. Mendelsohn: Sometimes we have a hard job. One of the things we are doing is setting up bureaucratic and political structures and processes to make sure that there's as much coordination and alignment as possible.
The Department of Infrastructure doesn't transfer money to other departments.
Senator Eaton: What does it do?
Mr. Mendelsohn: It was allocated funds. It negotiates and then transfers to provinces. I don't know if Francis wants to pick up on that.
Senator Eaton: It doesn't go to any other ministries.
Mr. Mendelsohn: Some money does, but that's in different programs.
Mr. Bilodeau: Maybe I can add to that. For the Investing in Canada Plan, the envelope as such, some of the funding from the fiscal framework will be going to Infrastructure Canada, for example all the money through the bilateral agreements.
Some is also being transferred to other departments, not from Infrastructure directly but from the fiscal framework. It is voted to those departments directly.
Infrastructure Canada is taking an overall responsibility in reporting on the Investing in Canada Plan. It's working with other departments and it's working with us to ensure that the reporting to Parliament and to Canadians see a whole-of-government view on infrastructure.
The funds are voted directly to both Infrastructure Canada and other departments, depending on the program.
Senator Eaton: Yes, but it's the other departments that will be able to track the performance results, obviously, if it goes through those departments.
Mr. Bilodeau: On the ones where they have been appropriated the funds. For example, on public transit and green and social, those funds will be appropriated directly to Infrastructure. They are the ones that would have the agreements with provinces and territories directly and would have the closest line of sight in terms of the results on those.
[Translation]
Senator Forest: I'd like to go back to Senator Eaton's question about infrastructures. You have an enormous and crucial challenge because of the amounts of money at play at the federal level. The municipalities and provinces will be contributing far less than the federal government.
If we want to know what has been accomplished, we have to know where we are starting from and make an assessment of public infrastructures. Two per cent of Canada's public infrastructure is federal property, 57 per cent belongs to municipalities, and 41 per cent is provincial property. In 2012, we evaluated the municipal public infrastructure deficit in Quebec at $34 billion, and Ontario's was $60 billion. Have you been able to calculate the public infrastructure deficit for Canada?
Mr. Mendelsohn: We have not, because there is a lack of data, and they do not agree with the data collected throughout the country. However, in the 2016 budget, we invested to support municipalities in collecting data on their public infrastructures. We are also preparing a survey that will be conducted country-wide with municipalities and governments in order to better understand the state of public infrastructures, their deficiencies and their needs. However, the type of assessment you suggest is not possible currently, in my opinion.
There are research groups that produce reports and estimates, of course. However, we do not know how accurate the data collected throughout the country is, or its quality, even at the federal level. There is no location about which we can say with certainty that here, all of the infrastructure is public. Indeed, the territories own small parts of federal infrastructures here and there.
So this summer we are planning to go to the municipalities and provinces so as to prepare a report and conduct a detailed survey on the quality of infrastructures, and collect data. You can obtain more information from Deputy Minister Tremblay in this regard.
Senator Forest: If you take port installations that are public infrastructures under federal responsibility, for example, it is undeniable that Transport Canada or Fisheries and Oceans Canada, depending on who owns the infrastructures, must prepare a status report on those infrastructures. We are talking about 2 per cent of all of Canada's public infrastructures. These are important data that will allow us to measure the effectiveness of our investments. By the way, the Federation of Canadian Municipalities has information, and could be an interesting partner, just like the provincial associations.
Mr. Mendelsohn: Yes, the department is working with the Federation of Canadian Municipalities. We agree that we must have a complete status report on all of these infrastructures, and we are collecting this data.
Senator Forest: How do you see the link between the Privy Council Office, Infrastructure Canada and the future Infrastructure Bank of Canada? How do you see the link, the ties, and the coordination among these three institutions in the future?
Mr. Mendelsohn: I have not thought about that. I don't see an important link between the Privy Council Office and the Infrastructure Bank. Infrastructure Canada and the Department of Finance, as set out in the budget, are creating the Infrastructure Bank and announcing its creation. There were extensive consultations on the creation and structure of the bank. However, I do not see many links between the work of the Privy Council Office and that of the Infrastructure Bank.
Senator Forest: And yet it will be a very important tool in the implementation of the plan.
Mr. Mendelsohn: The bank will receive a percentage of the expenses for infrastructure, but we are holding discussions and working with the Department of Infrastructure and other federal departments that will be allocating funds to infrastructure. Once again, I do not see an obvious link between us and the bank.
[English]
Senator Andreychuk: Thank you. You're sitting at a table with a lot of experts in the financial field. I am not one of them.
You make a comment here that you want to make the program results more understandable to parliamentarians and Canadians, and I think I fall into that category.
I've gone through your presentation and then I read it. The difficulty I'm having is: What do we have now? I'm not clear about that. That may be because I'm new to this committee.
You've outlined all the things that you hope to achieve in a plan that you're going to put in, but I think, in answer, we don't know when that will be.
Are we in a state of flux for a year, two years or five years where we really don't know what you're trying to do? I'm not sure in the practical how you're doing it. You've put out a lot of good principles. I wouldn't say they are a plan of action; I would say they are principles. "We want good, sound judgment; we want effective results,'' et cetera, but I don't see the plan and I don't see the time frame.
I'm caught between. Am I still stuck on the data that we have and I'm going to have to get through in some way? I really don't know whether your plan is in place or will be in place. I'm not even sure who the government will be in five years. It's that same old problem. Am I right that we're still in this flux that we're not sure?
The second part that troubles me is one that we already talked about, infrastructure. Infrastructure was always physical buildings, et cetera. Yes, you could ask: "Why are we building a hockey rink?''
You'd still sustain it. It's a social need. It's good for the community. It sustains a small town. We've now moved further and further away from physical infrastructure and more into social needs. That's always the difficulty, for me, because you can take any program and say there is a benefit. The side benefits are always there.
If you build houses, people are better off and they will probably be more productive, but you might have done something socially for them with the same dollars and they would have been even more productive.
I'm having a problem with this new expanded infrastructure definition. I'm having a problem with a plan that will some day be put in place. In the meantime, we're trying to be accountable to the citizens. What do we do in the meantime?
Mr. Mendelsohn: Again, those are two very good and challenging discussions.
With regard to the first one, we were created in January of last year. We are trying to change or evolve processes, structures and culture to whole-of-government reporting and to more transparent reporting on meaningful indicators. In addition to inputs and activities, we are trying to focus on outcomes and impact.
Honestly, that is not a three-month project. It isn't for me to presume when the government will begin to do more public horizontal reporting, but what I would say is that the current government has made a strong commitment to transparently reporting on results at a horizontal level and to focusing on outcomes and impact in addition to inputs.
I would be very surprised if you had to wait years before you begin to see reporting at a horizontal level that you could dig into in more detail.
The fact is that a variety of data and reports are available now at the departmental level that are submitted through Treasury Board processes. I certainly hope and expect and would be happy to be invited to come back at a later date to talk about horizontal reporting once the government begins to report on whole-of-government priorities.
What I'd say on the second piece is that there is a legitimate discussion about what constitutes infrastructure. I would challenge a bit that housing is physical. It isn't roads and bridges, but housing is physical. I want to be clear that the social infrastructure and green infrastructure buckets are not so all-inclusive that they include programs, for example.
They focus on physical assets, and those physical assets may be houses or child care centres, or they may be green energy infrastructure or waste water treatment plants in the green bucket. Different people may have different definitions, but it is not unreasonable to consider energy infrastructure or waste water treatment plants as infrastructure, and likewise social housing, for example. Different people could have different views.
There is an implicit element to your question, or maybe it was explicit, that I think is super important to highlight, namely, your observation that improving the social housing stock will provide some social benefit. However, there might be a different program, perhaps a rent supplement, which would increase private sector building or policy measures that many people in government are talking about to increase building in the private sector of rental stock in an affordable way. There are all kinds of policy levers. Rather, those are subsidies. There are all kinds of different things that one could do.
We're never going to be perfect on this; no government ever will, but part of our approach at results and delivery is to bring data and evidence to bear on those questions.
Part of the motivation for our focus on results delivery outcomes data is that quite legitimately and quite honestly in governments around the world and in municipal, provincial and federal in Canada, often a department will be running three or four different programs that have similar goals but are structured in quite different ways. If you ask them directly which one has the most positive impact, they may have views. Those views may be well informed, but in many cases they don't have data to confirm which of the two policy interventions will have the most positive impact on the thing that people care about.
Your point is exactly right and is embedded within the DNA of our work, which is to be able to produce rigorous, reliable and trusted evidence that would say this particular policy or program intervention has a more positive impact on X or Y than this other one.
[Translation]
Senator Moncion: Thank you for your presentation. It was very interesting. You spoke about the projects. In English you used the term "Productivity Enhancing Infrastructure Project''. What criteria are you in fact going to use to evaluate the productivity of infrastructure projects? Do you have criteria?
The same question will arise when you choose green projects, social projects and projects related to roads. Have any criteria been determined so that they can be placed in these categories? If so, what are they?
Mr. Mendelsohn: We use economic models to measure productivity, or the contribution of projects to economic growth. May I suggest that you put these detailed questions to my colleague? The Department of Finance uses models to try to determine with precision the contribution to productivity. These models are known and widely used; however, they are also debatable. There are many criteria that can be used with a lot of rigour to measure the time it takes for merchandise to go from one point to another in the country or in a city, or to measure the time it takes for a worker to get to his workplace, or to measure how long you wait for a bus or the subway. There are several measurement tools that exist. You can measure greenhouse gas emissions related to our infrastructure investments, available daycare spaces, or waiting lists. There are many things that can be evaluated in the case of social infrastructure, green infrastructure and economic infrastructure.
Senator Moncion: Secondly, earlier you spoke about the fact that you have an informal work plan. Normally, when you establish a formal work plan, there are performance indicators that are applied at the end. You told us that you have a strategic plan, but that the work plans are not necessarily formalized.
When you establish performance indicators, you are really assessing what has been done by others, and not something clearly established by your department or the different departments. For instance, you cannot say that this year there were 500 infrastructure projects, 493 of which were completed. You have not necessarily established figures yet. You are proceeding according to what is happening, and not according to what you had planned.
Mr. Mendelsohn: Plans and their performance indicators, for a department like the Privy Council, whose work is strategic, as it provides advice to ministers and the Prime Minister, are more difficult to formalize than the plans of a department that provides services on a daily basis. At Privy Council Office, we want the government to function well, we want the ministers to receive good advice, and we want the Prime Minister to be well supported. The Privy Council Office provides a strategic plan with indicators in its normal process of reporting to Treasury Board.
[English]
Senator Cools: I would like to thank the witnesses who are before us and to note it isn't very often that we have persons from PCO here. I welcome you thoroughly and properly.
I would also like to let you know that I had the distinct pleasure and honour of serving in the Senate with a senator named Michael Pitfield, who, as you know, was one of the pre-eminent, if not the pre-eminent, Clerk of the Privy Council.
I have always understood that PCO is the operational arm of the cabinet, of the government, so to speak, but my question is not related to anything that you raised today or anything you may raise the next time.
My question is related to a matter that concerns me very deeply. That matter is that the practice in the Senate has been for a century that the Senate government leader is a member of cabinet, a member of government, because to declare matters or bills government one has to be a member of the government. This has suddenly been abandoned. It was partially abandoned by the previous government.
Do you know who advised the Prime Minister that he could avoid or abandon the practice of having a Senate government leader? Was it your office since you are the operational arm?
Mr. Mendelsohn: I am very happy to be here, senator. It is a pleasure to be here. I look forward, if I am ever invited back, to continuing to discuss these things.
As you know, confidential advice to the Prime Minister would not be something that we could discuss with you. You know that.
Senator Cools: I am aware of that. I am just wondering if that would fall into your purview.
I have been around here for a long time, and it wasn't that long ago the practice was that the Prime Minister and the Senate government leader, both ministers, shared a deputy minister. People don't know this. That deputy minister worked in PCO.
I am curious how suddenly these practices were set aside. I'm very curious. If you didn't, you didn't. That's fine and I appreciate that, but somebody did.
Mr. Mendelsohn: It is fair to point out that the Senate, as you know, senator, is in the process of considering and looking at how it evolves to the new reality that the government put in place. I look forward to following your deliberations and your evolutions very carefully as a key institution of Parliament.
Senator Cools: I am reminding you, too, that the Senate government leader, or in the House of Lords the Lords government leader, didn't just lead on government business. He led the other ministers. He was the chief of the other members of cabinet who also sat in the houses.
In point of fact, the government has abandoned the practice of having ministers in the Senate, but we will come to that another day.
The Chair: Mr. Mendelsohn, if you want to answer that one on infrastructure, you can write to the clerk.
With that, we will finish with Senate Marshall asking one question.
Senator Marshall: I have a question relating to our exchange at the first part of your testimony.
You said you look after the departments and the departments are looking after the Crowns. Some of it does flow back to the department, doesn't it? I was thinking in the context of the Department of Finance and CMHC and new rules that went in place last fall for people who are looking for mortgages or insured mortgages. There must be some performance indicators set up in the Department of Finance that channel through CMHC.
Would that fall under your jurisdiction, or would you have any insight or comments on that? I am thinking of it in the context of the housing situation that's on the go now.
Could you clarify that part? There is really a direct relationship in some instances between Crowns and departments because the Minister of Finance has to have information from CMHC in order to come up with some policy decisions. Could you clarify that or elaborate on that?
Mr. Mendelsohn: Sure. There are lots of different Crowns with different relationships with departments. The point I was making was that as part of our formal structures and processes that result in delivery units in PCO, we engage with department heads and through their teams. We don't engage directly as part of the results and delivery table with Crowns or agencies.
As I also said, many Crowns and agencies are adopting many of the results and delivery practices and processes. They also do public reporting and report to Treasury Board.
For CMHC, the example you gave, as part of Budget 2017 there is new investment in data around housing. CMHC has done public reporting on housing as well that one could identify. CMHC, I would say, has a leadership culture and a culture through that organization focused on good quality public reporting and focused on results and outcomes. That will continue to evolve.
The Chair: As we move on, I want to say to Privy Council that we will continue the order of reference from the Senate of Canada Finance Committee. It is all about predictability, accountability and transparency.
There might be a time in the near future that we will ask you to come back, but with that, thank you very much for your presentation.
Honourable senators, for the second part of our meeting, we have invited officials from Infrastructure Canada to present an update on the implementation of the infrastructure program managed by Infrastructure Canada.
[Translation]
It is our honour and pleasure to welcome our witnesses Mr. Jean-François Tremblay, Deputy Minister, and Ms. Darlene Boileau, Assistant Deputy Minister, Corporate Services and Chief Financial Officer; Marc Fortin, Assistant Deputy Minister, Program Operations, and Mr. Alain Desruisseaux, Director General, Strategic Policy and Priority Initiatives.
[English]
We also have Mr. Glenn Campbell, Assistant Deputy Minister, Infrastructure Finance and Investment, Canada Infrastructure Bank Transition Office. I have been instructed by the clerk that the presentation will be made by the Deputy Minister, Mr. Tremblay.
[Translation]
Mr. Tremblay, you have the floor.
Jean-François Tremblay, Deputy Minister, Infrastructure and Communities, Infrastructure Canada: Mr. Chair, I first want to thank you very much for having invited me. I want to commend the Senate committee members for their continuing hard work on their special study of infrastructure. I was very pleased to review the interim report you released earlier this year, and we are looking forward to your ongoing deliberations. I was asked to join you today to give you an update on our programs
[English]
I think I will be very short. I hope you will appreciate the fact that I could have used the strategy to go with a long speech and decided to go with a short speech to give you more time for discussion. The reason is actually because we've been here a few times. I think you know us, and you already have your questions.
Maybe just to come back on three major things: phase one of our programs, what we are doing now with phase two, and maybe coming back at the end with transparency.
On phase one, as you know, first, we had two programs under phase one that were under our responsibility. One is the Clean Water and Wastewater Fund, $2 billion, and the second one is the Public Transit Infrastructure Fund, which is $3.4 billion.
To date, under these funds, we are actually at over 1,770 approved projects. Also, more than 70 per cent of these projects are under way.
[Translation]
The second element concerns what we call our legacy programs, which you will no doubt remember.
[English]
There was more than $800 million on programs that should have been concluded. Of the $830 million,$800 million is now committed to projects. The rest of the money, the $30 million, was actually included in the gas tax as a transfer. This one has been quite well done.
[Translation]
The third element concerns the Building Canada Fund.
[English]
With the Rebuilding Canada fund projects one thing we tried to do over the last year was to accelerate the implementation of the fund.
[Translation]
During 2016-2017, over 91 projects were approved for a total of $3.4 billion.
[English]
That is actually quite a good year for the fund.
On phase two, like us you read the budget, so you have an idea of what phase two would focus on. I would insist on five elements that are really important for us in the development of phase two.
The first one is the priority areas. The government has decided to focus the money on some priority areas that include public transit, green infrastructure, social infrastructure, trade, and transportation, as well as rural and northern communities.
The other element for us is the bilateral agreements.
[Translation]
One of the government's objectives is to attempt to conclude bilateral agreements with the provinces over a 10-year period. Consequently we are really discussing long-term planning in our discussions with the provinces, and we aim as much as possible to develop flexible agreements that also meet our priorities.
The fourth element is the achievement of results.
[English]
Moving from an approach that is focused more on criteria to an approach that is more about what are the outcomes at the end, is actually a significant shift in comparison with programs we had in the past.
The fourth element is the horizontal issue, and you discussed this with us a lot in the past. How do we work with other departments? Some of those programs are not necessarily under Infrastructure Canada, and we are trying to make as much progress as possible in terms of working with our colleagues, especially in areas of green infrastructure, for example, where a lot of the expertise is outside of our department.
[Translation]
The last important element of the plan is innovation, with a focus on two particular initiatives: one involves smart cities, and the other, of course, is the Infrastructure Bank. These are initiatives through which the government is really trying to create incentives to approach infrastructure issues in a different way.
[English]
That is where we are on the phase two elements. The department is working really hard now with other departments to make sure that we have all of this together as soon as possible. We will be pleased to come back when we have the details of the implementation of phase two.
The last point I wanted to mention is just to continue to tell you that we are doing our best in terms of transparency and openness. As you can see on our website, we kind of have now an open data portal where we update our information on a weekly basis.
We are looking forward to doing even more in the future. One of our plans is to use the website as much as possible as a window for people to know what is going on with Infrastructure Canada.
We are a small department that provides crucial support to communities. We have been given an increasingly important mandate, as you know.
That's it for me, and I will open the floor for the discussion.
[Translation]
The Chair: Thank you very much, Mr. Tremblay, for your very precise presentation.
[English]
We will start with Senator Woo, who is the sponsor of Bill C-44.
Senator Woo: That is an excellent preamble to my question, even though we are not studying Bill C-44 here. You may be aware that there was some discussion as to which committee would take the pre-study of the Canada Infrastructure Bank. We had wanted it, but the banking committee got it in the end.
I will use this as a stealth way of discussing the Canada Infrastructure Bank, which, of course, falls under your mandate, so it's quite appropriate.
You described the infrastructure bank as phase two and as an initiative to create incentives for additional infrastructure investment as part of the broader Government of Canada plan.
Could you say a bit more about this idea of creating a new tool which would provide fresh incentives to the private sector to partner with public entities to build infrastructure and the process by which the ideas for an infrastructure bank came about?
I think there is a lack of public understanding about where this came from and why it is needed. Given that the government is already spending billions of dollars on infrastructure, why do we need an additional tool such as the Canada Infrastructure Bank, and in what way does this new creation create the incentive for incremental investment in infrastructure?
Mr. Tremblay: There is a common understanding in Canada that there is a gap in infrastructure and that this gap is higher than whatever amount of money we are putting in the moment, all governments together, to address the gap.
There also has been discussion for years, and you can see it in other countries, about how to ensure that you are building the infrastructure differently. There is always public infrastructure that would be funded through our programs. That is why we have our programs and we will continue to have the bilateral agreements that we have with provinces, or the new ones that we will negotiate in the future.
The bank as a new tool is an option for people who want to look at infrastructure differently. If there is an infrastructure that responds to a public good, has a public interest, could generate revenue and crowd money from investors, they can go to the bank. If they think about projects like that and don't necessarily have all the skills, capacity and expertise, they can go to the bank and the bank will be there to advise.
In that context the bank has been created to offer other tools, opportunities and possibilities for people who are thinking about infrastructure and infrastructure that would be transformative for the country.
I wonder if Glenn, who is smarter than I am on this file, and others too, wish to add something.
Glenn Campbell, Assistant Deputy Minister, Infrastructure Finance and Investment, Canada Infrastructure Bank Transition Office, Infrastructure Canada: I have a few additive points. You talked about the root of where the idea came from. Let me take you back a few years.
The deputy mentioned globally. There was a concerted effort through the G20 to look at ways to stimulate growth globally and ways to achieve better outcomes for the public interest. One of the key areas of focus was infrastructure finance, and particularly ways to bring the private sector investment to work together with governments to achieve better outcomes.
This led to the G20 hub in Sydney, Australia. Many other international groups have focused on this question of both the efficiency and the financing. Canada was not alone.
Many of our own pools of capital in Canada were investors and continue to be investors globally abroad. As the deputy mentioned, there is clearly an infrastructure gap. Despite the government's historic funding, there will also be a lot of pressure for more infrastructure. Much of this particular equity capital is looking to buy more risk and invest more at home in Canada and not just abroad. The issue was that they did not have a tool or an instrument to help them co-invest alongside the public sector; to bring more private sector efficiencies and more capital to fund infrastructure aggregate in Canada; to get more built, particularly more transformative projects that may not otherwise have been built; and to achieve it all in the public interest. Hence the idea of the Canada Infrastructure Bank.
As proposed, it is a unique Canadian entity and now the rest of the world is looking at Canada because of the way in which we approached this particular challenge.
Senator Woo: Could I follow up and ask you to elaborate on the unique aspects of this bank? There are PPP and other development bank structures in the world. They have been around for a long time.
There are two parts to this follow-up question. I don't know if much of the expertise to design public/private partnerships for infrastructure projects existed within the government.
How were you able to generate the advice and expertise in order to design this proposed Canada Infrastructure Bank?
Could you then tell us a bit about how the proposed infrastructure bank is unique and different and perhaps pathbreaking compared to the existing universe of infrastructure banks?
Mr. Campbell: Why don't I take you back 12 to 18 months? There has been a consistent collaborative effort between the Department of Infrastructure and Communities and the Department of Finance to work collaboratively together on this project. They had interdepartmental working groups at the ADM level to reach out to other experts, academics and consultants.
Some of those consultant reports are in the public domain. They really sought to look internally for expertise on the challenge. We had the GAP and the demands our provinces, municipalities and territories were making for more solutions to deal with infrastructure and to consult widely.
We have consulted over that period of time, myself included, to which I can be more precise, with all strata of private and public sector participants in the infrastructure finance ecosystem.
There were many global investors and domestic investors that may be part of pension funds or more specific funds involved in infrastructure finance. There were those particularly involved in public/private partnerships, so-called PPPs. More specifically, construction, engineering and design firms were included, as well as all those on both the debt and equity sides. The whole ecosystem, plus many academics, watched very closely to ensure governments were incented to do better integrated planning in what we are doing.
It was deep. It was broad. I can say as an official there was a lot of media play about one particular group and one particular event which I was not part of.
When I look back at my own calendar, even in the four months since I have taken the helm of this project, there must be a hundred different private stakeholders with which we consulted as this project matured.
This all led up to the announcement in the fall, to Budget 2017, and in turn to the legislation you see before you today. We will continue to keep consulting with all our partners in moving this project forward.
I hope that answers your question.
Senator Woo: And the unique aspects of the current design of the bank?
Mr. Campbell: Pardon me. Many other countries find a lot of political instability or not a lot of equity capital available to put into public infrastructure. Often entities like the World Bank and others need to go in and take more of the risk. There is more subsidy required in many other countries that really doesn't exist in Canada.
Canada was able to put forward an infrastructure bank concept that is very transparent. It does not require a lot of sophisticated leveraging. It is consolidated. It's transparent on the books. The amount of money and the transparent tools are very specific. It did not have to resort to any complex financial engineering.
It's very straight forward mainly because Canada had the wherewithal to put forward this innovative tool. As the deputy said, it is optional. It is merely one tool in the tool kit that represents less than 10 per cent of the overall investment in the Canada plan.
This arm's length, third party commercial aspect will ensure that any agreements among the parties are the most robust and conventional agreements to protect taxpayers and all parties and get the infrastructure built.
We haven't learned all the lessons, but many international partners are already calling me, wanting to know what lessons Canada has learned in our project.
Senator Marshall: My question is also on the infrastructure bank. Correct me if I am wrong, but my understanding is the $35 billion earmarked for the infrastructure bank is coming out of the $180 billion, isn't it?
Mr. Tremblay: No.
Senator Marshall: It is not.
Mr. Tremblay: That is it not the way it works. There are $15 billion coming out of the $180 billion or $186 billion, but the $20 billion is basically money the bank can lever by itself. Mr. Campbell can explain it better than I can. It is not necessarily money coming from the fisc.
Senator Marshall: The $20 billion is not coming from the government at all.
Mr. Campbell: Perhaps I could help.
Senator Marshall: Yes, perhaps you can explain that, because that's not the impression that's being given through media reports.
Mr. Campbell: The Government of Canada has committed to provide the Canada Infrastructure Bank$35 billion of cash over an 11-year period. I mentioned transparency earlier. The government has been transparent in its fiscal framework. The extent that it will potentially expend, or the maximum exposure on an accrual basis over 11 years, is $15 billion.
The government has reflected that $15 billion in its financial accounts. That means that's the $15 billion that's taken out of the $186 billion.
Just to note, as the deputy said, there's an additional $20 billion in cash that we assume would be asset/liability matched. That means the government could lend money or acquire an asset held at par, and it has no fiscal impact on the government.
Senator Marshall: Where is the $20 billion coming from? Is it coming from government coffers?
Mr. Campbell: That's coming from government cash, but it need not be formally expensed as spending if you're buying an asset of equivalent value.
Senator Marshall: It's set up as an asset and hopefully they'll get it back sometime in the future.
Mr. Campbell: That's right. If I may supplement, the $35 billion will only be transferred to this entity as it's needed. It will not be transferred in one lump sum. It will be on a long, slow profile to save costs and to assure that the Crown corporation doesn't have to manage a big treasury function.
Senator Marshall: That was my next question. The $15 billion that's coming out of the $180 billion, what are the timelines for that? Is that going to be disbursed this year?
Mr. Campbell: No, it will not. The government has set out in Budget 2017 a notional profile over 11 years. Not knowing in foresight where our municipal and provincial partners may come forward with projects, it has put in a notional profile to which it will adjust over time.
As the bank gets up and running, and if our partners come forward with more projects, big, slow-moving infrastructure projects, the government will adjust when it will provide the infrastructure bank the money to close those agreements.
Senator Marshall: The $15 billion is already in there just as a note, is it? It doesn't show up in any of their projections.
Mr. Campbell: It's fully transparent in the projection as per Budget 2017.
Senator Marshall: It is in there. What about the $20 billion? Is that also in there?
Mr. Campbell: The $20 billion is merely referenced as a nominal amount. That's just cash expenditure that will have liability-asset match. The government does that every day on a cash basis. It doesn't get reflected in the fiscal framework.
Senator Marshall: My understanding is that the infrastructure bank can either give out money or equity financing. They can enter into partnership agreements with different corporations, but can they also give out guarantees? Can the infrastructure bank also guarantee?
Mr. Campbell: The legislation is quite clear that there is a set of innovative tools that the infrastructure bank could use in forming an agreement around a piece of infrastructure. We anticipate there will always be an agreement. There will always be partnership agreement and the mix of tools will be disclosed.
It is clear under the legislation that a loan guarantee feature is possible. However, there is an additional accountability mechanism. The bank would have to seek the Minister of Finance's approval for use of that specific loan guarantee tool, given that tool needs to be priced and there are specific contingent liabilities attached to a loan guarantee.
Senator Marshall: There is no maximum on the loan guarantees they can give out, but they have to come back to the Minister of Finance for approval and he would be the one who would contain the extent of the guarantees. Is that what you're saying?
Mr. Campbell: It would assume that any one of the tools being used by the infrastructure bank would have to be within its remit and within the framework of the amount of financial backstop that the government is providing. It would be limited in that sense.
Use of the tool requires a checkback. If there were a proposal to go further, it would need not just Minister of Finance approval. It would need parliamentary appropriation to go beyond what was already afforded by Parliament.
Senator Marshall: There was reference in the media in the last couple of days about the KPMG study, the 76-page report which I think was authored back in September.
Would the committee be able to get a copy of that?
Mr. Campbell: Yes. That was commissioned last May. It was one of many inputs we as a government used to consider prior to forming the policy advice around the particular project. We can make that available.
Senator Marshall: Thank you very much.
The Chair: You will make that report available, Mr. Campbell, through the clerk?
Mr. Campbell: Yes, sir.
The Chair: ASAP?
Mr. Campbell: Yes, Mr. Chair.
[Translation]
Senator Forest: Thank you for being here with us. You are establishing the Canada Infrastructure Bank. This tool is not an end in itself, but it must be a means to help resolve a problem. I've asked the question often and no one has given me an answer up till now. Do you have some idea of the scope of the public infrastructure deficit in Canada? What are the critical sectors?
Mr. Tremblay: I don't think I can give you a satisfactory answer. The data vary. You probably have seen figures that go from $100 billion to $500 billion. It is difficult to obtain an exact figure on the infrastructure deficit. The reason is quite simple: there is a shortage of data on infrastructure. It's quite an important problem in Canada. A lot of data, for what it is worth, comes from surveys. There are also a lot of situations where people do not know the exact state of their infrastructure at this time. Often, we don't agree on the definition of infrastructure that is in good condition.
[English]
All those aspects actually play.
[Translation]
Everyone agrees that there is an infrastructure deficit. However, the scope of that deficit is more difficult to determine.
Cities certainly have infrastructure deficits, and that is the case everywhere in the world. Ottawa, Toronto and Montreal are cities that are experiencing rapid growth. The increase in population, of course, generates an infrastructure deficit.
What we hear most often in small regions and remote areas is that it is difficult to maintain existing infrastructure in good condition. Often, it is water treatment systems that are at issue, and energy infrastructure. In our discussions, we see that the needs are different according to locations. It can range from the capacity to maintain existing infrastructure, and the capacity to create new infrastructure to deal with a growing population and a need for services.
Senator Forest: It is indeed difficult to get an accurate appraisal of the deficit. With regard to your priorities, I'm thinking among others of the new standards, new requirements, particularly as regards environmental protection, that are being imposed on small and large communities. They are being asked to improve standards for waste water disposal, for instance. Government action exerts pressure on infrastructure, and in my opinion, it would be quite relevant to assess the potential impact, in order to guide strategic choices as to which sectors to prioritize when making investments in public infrastructure.
Mr. Tremblay: The waste water example is a relevant one. That is why we implemented programs in that sector. We put a lot of emphasis on waste water.
The municipalities can also use the gas tax. We worked hard to see to it that envelopes would be available for cities that wish to improve their waste water treatment capacity in order to respect environmental requirements.
Over the long term, if you look at the sectors involved, public transit is one of them. There clearly has to be an expansion in the offer of public transit. For green infrastructure, in the context of climate change, it's not just a matter of greenhouse gases, but also of adaptation and the quality of the environment. That sector has also been targeted. As to small communities and northern communities, we targeted dependency on fossil fuels, because in the north, the demand for infrastructure can exceed the capacity of the population to absorb the costs.
We can also talk about transportation corridors, which are an important element in the context of globalization. The priorities were not randomly selected; they seem to meet strategic needs, and that would include waste water.
Senator Forest: I have one last question about the Infrastructure Bank. How will you deal with the fact that the bank is supposed to be independent? We are really at the stage of preliminary analysis of the act, but we understand that the Infrastructure Bank will operate through loans, loan guarantees and capital investments. How will you coordinate the projects selected by the bank and your priorities, and those of the provinces and municipalities? For example, how would that coordination be done in a public transit project that would help influence a municipality's housing development?
An amount of $35 billion is not insignificant. That's a pretty significant lever for programs in small and large communities.
Mr. Tremblay: It is a significant lever. For us, that's not really a problem. The bank will be our ally. We receive project requests every day. We are already getting calls from cities and provinces that wish to submit projects that will be attractive for the bank. They are impatiently waiting for an opportunity to discuss with the bank's representatives.
Going forward, we will maintain an ongoing dialogue with the bank. When we see that projects could be funded by the bank and that provinces or municipalities are interested in the bank option, it clearly becomes an advantage. It does not interfere with eligibility to the allocations we currently provide to the provinces and territories. A number of provinces and municipalities are interested in the bank, as they see it as a different option that does not limit their right of access to other programs.
Senator Forest: So the bank will basically have limited independence.
Mr. Tremblay: The bank will have considerable independence. We expect its representatives to meet with people directly. If I were at the bank, I would try to have a discussion with all the infrastructure players. I would talk to ports, big cities, small cities and the provinces. I would try to figure out what the needs are, and in what areas the bank could get involved.
Of course, when we meet with the bank's representatives, we will tell them about projects that are likely to interest them.
Senator Forest: In conclusion, I am concerned about the collaborative will being part of the will of individuals and not of the legislative framework that will be used to create the bank. Everything will depend on those involved. That could be extremely worrisome going forward.
The Chair: That was a comment.
Senator Eaton: I will continue in the same vein as my colleague. Is the bank what is referred to as —
[English]
— an arm's length institution, or will it just sort of be a subcommittee of the cabinet?
Mr. Tremblay: It's an arm's length body. It's a Crown corporation.
Senator Eaton: Who will appoint the CEO? Who will appoint the directors? Who will have the final say on what projects get financed?
[Translation]
Mr. Tremblay: When it comes to projects, the bank will decide. As I said, a dialogue will be ongoing.
Senator Eaton: The cabinet has no say.
Mr. Tremblay: A dialogue will be taking place between the bank and the government, of course.
Senator Eaton: So the government will be deciding.
Mr. Tremblay: No. The government will not be deciding. The minister used the term oversight, which is entirely appropriate, as in the case of Crown corporations.
Senator Eaton: Who will appoint the CEO?
Mr. Tremblay: Glen could explain the appointment process.
[English]
Mr. Campbell: Bill C-44, Part 4, Division 18, lays out very specifically the governance structure of the Crown corporation which is at arm's length, with an independent board of directors led by a chair and with a CEO.
On a go-forward basis, the CEO would be nominated by the board and approved by the Governor-in-Council. There are provisions in the legislation, given the accelerated implementation, to allow —
Senator Eaton: Excuse me, sir. For the boards I sit on there's always a governance committee. From the governance committee comes the appointment of future directors, usually because they have an expertise that you need. The cabinet will not be appointing the directors. It will come from the government's committee.
Mr. Campbell: Let me go back. There are two ways of looking at it. One is the ongoing and one is what we're doing to set up the bank.
The legislation stipulates that the Governor-in-Council can appoint the chairperson and the directors of the board, as well as the initial CEO. The legislation stipulates, though, that if a chair or any board members are in place, they will be consulted on the selection of the initial CEO.
On a go-forward basis, the board itself will be responsible for nominating to the government the next CEO. Whatever process the board uses in terms of selecting and deciding on a CEO, they will do that and then bring it to the government. They will do that process.
The government will be in a position to appoint the chair and the board of directors going forward as a normal Governor-in-Council process. However, there is a provision in the legislation that allows the minister responsible, the Minister of Infrastructure and Communities, to consult with the board on future board members.
In the government's view, this strikes the right balance between independence and accountability. You have an independent board. There are no government members on said board. It's really intended to be a professional high- quality representative of the Canadian population.
Senator Eaton: If there's a change in government, the new government can get rid of the CEO, some of the directors can resign, and you start all over again. Is that the idea, or will it be that independent that the new government, whoever takes over after 2019, will not be able to say to the CEO, "Thank you very much. We've enjoyed your service. We want something else?''
Mr. Campbell: I won't comment on the context around which there may be change. However, there are provisions in the legislation that are two ways. If the board itself wanted to remove the CEO, it has the power to do so but it needs consult with the government. If it wanted to remove another board member, the chair, the board can propose that to the government.
Likewise, if the government wanted to remove the CEO or the chairperson, they would be required to consult with the board and the chair before doing so.
There's a bit of mutual accountability between the two so that neither one party nor the other can merely remove one of the actors, regardless of the circumstance.
Senator Eaton: It sounds like a licence for trouble. It will be very interesting to see how it develops.
You mentioned in your presentation public transit, green infrastructure, social infrastructure, trade and transportation. Could you give me the percentages that each will take out of the infrastructure fund, roughly?
Mr. Tremblay: If you look at public transit, social infrastructure and green, they were basically a third, a third and a third. Those are the big ones.
Senator Eaton: Is that 30 per cent of the whole infrastructure fund over the next 11 years?
Mr. Tremblay: It depends on what you calculate. If you calculate the $180 billion, that would be way smaller. I don't want to be wrong on this because there's also the gas tax.
Senator Eaton: It is 30, 30 and 30.
Mr. Tremblay: If you look at what was in the budget, it's basically $20 billion, $20 billion, and$20 billion for those three, plus or minus.
The Chair: For the reference of senators, tomorrow afternoon in the banking committee we will have Division 18, Canada Infrastructure Bank Act. I see that Mr. Campbell will be there. Honourable senators, you can be at that meeting also.
[Translation]
Senator Pratte: Mr. Tremblay, you say that the Infrastructure Bank will be responsible for investing at least $35 billion over 11 years, using loans, loan guarantees and capital investments. To continue in the same vein as Senator Marshall, I understand that the bank will have to request authorization from the Minister of Finance for loans and loan guarantees. The government's authority aside, are any limits prescribed by the act for the loans and loan guarantees provided by the Infrastructure Bank?
Mr. Tremblay: The real limit is the $15 billion and the fiscal impact for the bank. You can take the $15 billion and add the $20 billion we talked about earlier. The $15 billion can help the tax base. If the money can be made to work harder, the bank can go higher and even to the limit, provided that it limits itself to the $15 billion. That is currently what is limiting the bank. There may be some other elements in the legislation, but the most important one right now is that the bank was given a $15-billion envelope that has not been redirected to the coffers, but is at its disposal. The bank will have access to that money based on future projects and needs. For the bank, that $15-billion envelope represents its limit, and that is its line of credit.
Senator Pratte: Why do you say "at least $35 billion''?
Mr. Tremblay: Because, with the $15 billion, the bank can go up to $35 billion, and perhaps even higher. If you look at the reports produced by the Finance Minister's advisory council, a number of them give the impression that, with a certain amount of money in the bank, the investments can be higher. It is important to remember that the idea is for the bank's investments to be coupled with private investments. If you add up those private investments, you may end up with amounts of money —
Senator Pratte: That would not be the bank's money. It would be private investors' money.
Mr. Tremblay: It would be infrastructure money.
Senator Pratte: Yes, infrastructure money.
I have a question about something other than the Infrastructure Bank. When we talked to Mr. Mendelsohn and his team about reports and about the outcomes of infrastructure projects, they said that the department was increasingly open and was making more and more data available. However, the goal of the infrastructure program is to grow the economy, improve productivity and create more jobs. That is how the government presented the infrastructure program. Will you be able to report the results of infrastructure programs in those terms, and how will you make the calculations?
Mr. Tremblay: We have established working groups with the provinces over the past 10 or 12 months. We are holding discussions with various departments and with the Privy Council Office. Our objective is to present the desired results and come up with measurable indicators over the next 10 years. The results will take a while to achieve, as infrastructure work is not really done quickly. It must be done within the framework of our agreements with the provinces. It's not just a matter of economic growth, as the minister said, but also of social inclusion and environmental quality. It may also involve access to infrastructure and increased services.
There are many indicators that can be used to determine whether the desired results have been achieved. So we are currently holding a discussion on that, and we hope to be able to present the results in the coming days.
Senator Moncion: Thank you very much for your presentation. I would like to talk to you about a document titled Top 10 Legal Risks for Business in 2017, which was produced in 2017 by Border Ladner Gervais. That document talks about $905 billion in investments required in Canada, with $330 billion for road maintenance and $234 billion for waste water treatment. That's interesting, especially in the context of the question raised about the infrastructure deficit. The document also provides information on investments the provinces will make over the next 10 years.
My question is twofold. Earlier, you told us, while talking about drinking water and waste water treatment, that a $2-billion budget was planned, that 1,770 projects had been completed and that 70 per cent of the funding was committed to ongoing projects. You said the same thing about public transit in the amount of $3.4 billion. Do you know what amounts have been allocated to the various projects you have looked at? For example, if you tell us that $3.4 billion was put into infrastructure and public transit, that gives us a way to determine how much of that money has been advanced and how many of those projects have been completed. I assume that you track the amounts allocated per project, so when we look at the total investments in infrastructure, we can track the amounts ourselves.
Mr. Tremblay: You can find all the information by province and by city on our website. You can see ongoing projects, as well as the funding available per province, the total, how many projects have been approved, what remains in terms of funding and project details. The 1,770 projects are related to two envelopes — public transit and waste water. You will also see that information under the Building Canada Fund, on our past programs. In fact, you practically have access to all the programs we have carried out over the past 10 years, and there would probably be from 9,000 to 10,000 projects available.
Senator Moncion: My second question is about the Infrastructure Bank. Currently, Canada has the EDC, the BDC and the FCC. What are the differences in the way the new bank operates compared with those three mechanisms that already exist to fund exports, business development and farm credit?
Mr. Tremblay: Other than the letters?
Senator Moncion: Yes.
Mr. Tremblay: We currently don't have any institutions that really focus on infrastructure like we want the bank to do. In other words, the bank must participate in the process from the outset to try to identify the needs to be met and to find innovative solutions to achieve the ends. This is not a bank that gives out loans on a daily basis by providing the best interest rate. It is a bank that funds projects that have an economic aspect and can generate revenue, but that would not be possible without assistance. They need help. That is where the bank comes in with its tools, either by providing loan guarantees or acquiring equity and by accepting, in some cases, not to make as much profit as others could make, but to make the investment possible. That is very different from what other banks are doing.
I don't know whether Mr. Campbell would like to add anything to this, but it's really very different from what the EDC and the BDC do.
[English]
Mr. Campbell: First off, as the former head of financial institutions, banks and banking at Finance Canada, I'm well versed to be able to say that the Canada Infrastructure Bank is a bank by construct in the sense that it's a merchant or investment bank.
Many other private sector comparables provide a structuring and investing support function. They lend to projects and attract investors and do complex structuring. They just don't take deposits. It's not regulated.
In a sense it would be a merchant bank in the role of doing something that is unique in that no private sector player now really has the capacity to underwrite the risk between those parties to do big infrastructure projects. It is filling a clear hole in the marketplace, and there's a gap in that kind of vehicle.
By comparison, the BDC is really a lender to small business and other forms of very specialized programming on a wide scale across Canada with a big structural base.
EDC provides very specialized support to exporters and often underwrites various risks outside of the country.
FCC largely underwrites risks on the farming side.
Much like the private sector, the government has separate entities and agencies to be held accountable, to make sure their mandates are focused and to see their results.
By comparison, the Canada Infrastructure Bank is intended to be very niche, a very small apparatus of maybe 50 to 100 people, with growth depending on its skill set and some of these other data advisory functions. It really is a niche, unique skill set.
The Government of Canada would need to attract highly specialized equity and credit underwriters to provide advice to the government and structure this like a bank. We see clear delineations between them.
The corollary is that provinces have procurement agencies like IO, SaskBuilds and Partnerships BC. They are all involved in procurement.
It is about construction and the downstream issues with which the bank may still partner without any duplication with all of those entities because that is a decision about how they are constructed. It is very much delineated responsibility among those various parties.
The Chair: Senator Andreychuk is next, followed by Senator Cools, but we have a time factor so I will leave it to both senators.
Senator Andreychuk: I will restrict my question. I want to be sure about your answer to Senator Eaton, Mr. Campbell.
You started out by saying the government would have a role in appointing the board and the initial directors, et cetera. Then you went on to say, and this is what confused me, that in fact the government had a role. They could remove a CEO or could remove a board member in consultation with the existing board throughout its mandate.
Mr. Campbell: To be clear, senator and chair, in terms of construct under the legislation the Governor-in-Council will appoint the chair and the directors.
Senator Andreychuk: No. We get the start, the beginning. What about ongoing?
Mr. Campbell: On an ongoing basis, when it comes to the chair and the directors the minister may form a committee, including the directors, on getting consultation on appointments of future directors. That is in the legislation. That is clear.
The point that we were talking about is that the CEO is the one position to which the board can appoint. They can select in the future and appoint on their own, with approval from the Governor-in-Council. It is a separate discussion.
The senator raised the issue of what happens on termination. There are clear provisions under the legislation that stipulate various players can be removed from office, but there is a provision that both sides need to consult with one another.
The idea is that neither side can unilaterally remove one of those specific officers without dialoguing with the other. That is the balance embedded in the legislation.
Senator Andreychuk: Yes. As I understand that, it means there is a dialogue but then there can be action unilaterally. I will leave that discussion.
Mr. Tremblay, we just heard from PCO. They have a massive plan, which seems really good, about how we will be able to track horizontally and understand the performance, et cetera, of all these infrastructure projects.
At this moment, are you the person responsible for the $186 billion plus, plus whatever it is, and 32 departments? You made an interesting statement that the minister is the one that wants the capability of not only saying these infrastructures are being handled according to the references that have been made. He may want to say that they are valuable and that they have done their job on social impact as well as structural impact.
Does it all go to you and then go to the minister? Are you the person or may it change?
Mr. Tremblay: Am I the 186 billion dollar man? That is a good question.
Senator Andreychuk: The problem is: Where do we go to get the final answer? If we are frustrated elsewhere, are you the person to go to?
Mr. Tremblay: The way we tried to organize is that we have a coordinating role. That is for sure. As I said, we are moving more and more toward an approach that is way more interdepartmental than it was before.
Yes, we want as much as possible horizontal reporting so that people will stop trying to find out what is there, there and there. It is not necessarily on everything, but most of it, for sure. That is not something we are trying to do.
We have put in place structures with other departments. PCO and Treasury Board, to be honest, are helpful to ensure those things are being done. So, yes.
We are not necessarily responsible for the delivery of all those programs. We had those discussions with the provinces. Some of them said, "Why don't you do everything because we like you or you are nice?'' I am teasing. Those discussions are there.
We tried to focus on the ones where we think we have value added and the capacity or the relationship with the province to do that.
If you look at a lot of the social infrastructure, for example, you will see CMHC, that was mentioned before, already has agreements with the provinces. There is no reason for us to manage those agreements. There are already discussions on a lot of those activities. We try not to duplicate them. We are trying to do it in a more coordinated fashion.
When we work with PCO on indicators and outcomes, we don't think necessarily just about outcomes in Parliament but outcomes on the infrastructure. We take that kind of broad approach. This is step by step, but as Mr. Mendelsohn mentioned before, this is the kind of objective we have.
The Chair: As we conclude the session this morning, Senator Cools, please.
Senator Cools: I have two small questions that may be difficult for you. I'm not sure. I want to know why this thing is moving so quickly. What is the rush?
A few months ago we barely heard the words "infrastructure bank,'' and here we have the statute before us, the 280- page Bill C-44 that contains a bill on the infrastructure bank of 12 pages. I would have thought that this issue is so innovative, so novel, so profound and so large that we wouldn't rush so quickly.
The second question is in respect of the removal of the CEOs. The bill says, at clause 34(1) says the first chief executive officers to be appointed by the Governor-in-Council to hold office during pleasure for a term that the Governor-in-Council considers appropriate.
Whoever drafted this doesn't understand that "during pleasure'' does not mean "term.'' There are appointments during pleasure. They are appointments during good behaviour and they are appointments for terms.
Somebody has to look at that very carefully. The term will be that which the Governor-in-Council considers appropriate. That needs a lot of careful looking at.
Mr. Tremblay: On the time frame, it was in the party platform, their platform. It was in the mandate letter that my minister received a year and a half ago. We have been working on this now for more than a year.
As Mr. Campbell mentioned, there has been a lot of consultation and work with people from outside. We also have people from outside who joined us to help us, like Jim Leech.
I don't necessarily have the impression that we are moving too fast. We are moving at a steady pace, that is for sure. It has involved discussion for a year, that is for sure.
Senator Cools: In your circles, but not on the floor of the Senate or the House of Commons. When I say "moving so quickly,'' I am talking about the rush now to rush it through the Senate in record time. That is what I am talking about.
[Translation]
The Chair: Do you have any comments to make?
Mr. Tremblay: No.
The Chair: Can you tell us, in the context of the vote you are asking the Senate for, what percentage of the funding will currently be set aside for housing in Canada's rural and urban regions? What percentage of the $186-billion budget will be used for housing cooperatives, social housing, rent supplement and your bilateral agreements on housing? I don't need an answer right away. Can you send it to us through our clerk?
Mr. Tremblay: We will discuss this with the CMHC, as it falls within its responsibilities.
The Chair: That is why we are putting the question to you.
[English]
Honourable senators, to the witnesses, thank you very much. If we require additional information, we may call you back.
Honourable senators, at 2:15 this afternoon we are continuing on with the BIA, the budget implementation act, in this room. The first witness will be the World Health Organization via video conference.
(The committee adjourned.)