[Recorded by Electronic Apparatus]
Thursday, November 21, 1996
.0932 
[English]
The Chairman: Welcome to meeting 39. We're now meeting on this issue of trade, transportation, and tourism. We have Mr. Evans, from Canadians for Responsible and Safe Highways.
Mr. Evans, if you've been here before, you know we would like you to take about ten minutes for your remarks and to give members a chance to question. I will attempt to keep them under control.
Your organization is named CRASH?
Mr. Bob Evans (Executive Director, Canadians for Responsible and Safe Highways): CRASH. It's a very effective name except when you use it in answering the telephone. It's amazing the reaction you get. There's a great pause at the other end.
On behalf of Canadians for Responsible and Safe Highways, or CRASH, I would like to thank you for this opportunity. We did forward a brief to the committee some time ago. Since then my association has obtained and released some vital information that I would like to share with you today. I'm referring to the findings of an Angus Reid Group poll for CRASH on the subject of public attitudes towards trucking safety issues.
Before I move to the overhead projector, I would like to summarize the contents of our original brief to this committee by a couple of comments to introduce CRASH to you and by some observations on the dangers associated with big truck operations on public roads. I also propose to offer some reasons for drawing the subject of trucking safety to the attention of this particular committee.
First about CRASH. Canadians for Responsible and Safe Highways is a national association dedicated to representing the concerns of the Canadian public about the operation of big trucks on our public roads. CRASH, I think it's very important to stress, is not anti-truck. It is pro-safety, pro-environment, and pro-taxpayer. A sound trucking industry for this country is clearly very important and should be welcomed by all, with one important proviso: transportation efficiency should never be purchased at the cost of the safety and well-being of those who share the roads with those big trucks.
The public, as I will demonstrate in a moment, has serious reservations about sharing roads with trucks. Unfortunately, as we noted in our earlier written brief to this committee, there is much evidence to indicate that such public concern is not without foundation. Consider that every year 10,000 Canadians are killed or injured in accidents involving big trucks. Something in excess of 600 lives a year are lost in those accidents.
.0935
Consider that during random government inspections conducted across Canada this past June, one-third of all trucks inspected had mechanical deficiencies sufficiently serious to warrant that they should be taken out of service.
Consider that while the United States Congress has decided that it would be unsafe to allow truck drivers to drive more than 10 consecutive hours, Canadian law permits truck drivers to drive for up to 13 consecutive hours.
Consider that the trucking industry is pushing for more and more of the larger, multi-trailer trucks. The Quebec government's auto insurance agency, in a training manual produced for truck drivers, describes these extra-large vehicles, which are typically longer combination vehicles, as ``often more difficult to drive''. It goes on to say that these longer trucks are subject to skidding and loss of control.
I'm almost finished with my preliminary remarks, but I have just one other observation before I go to the overhead projector. I'll talk a little bit about the Angus Reid survey. Here are some comments on why I believe trucking safety is an appropriate subject to bring to your hearings today.
There are more and more trucks on our roads, and they're getting bigger. Trucks are, in many respects, as I've already said, essential for economic health, but they cause road damage, congestion, pollution and they're a safety hazard.
As I'll show you in just a minute, Canadians from coast to coast are worried. This is, I suggest, in every sense, a national problem. It's certainly a national issue.
We would draw your attention to the fact that it is the federal government that is responsible for negotiating the harmonization of Canadian, U.S. and Mexican trucking regulations under NAFTA. We note also that the federal government produces trucking safety statistics, although we must suggest that these are incomplete and very untimely.
CRASH believes that it may make sense for the federal government to be regulating interprovincial truck movements. We note a continuing disparity in how the different provinces enforce trucking safety.
Let those in the public talk to you about how they feel about sharing public roads with big trucks. The vehicle for this is an Angus Reid survey of just over 1,500 Canadian adults that was conducted for our association between September 20 and 29 of this year. A survey of this scale for national-level results can be said to be accurate within plus or minus 2.5% nineteen times out of twenty.
As I'll show you, Canadians have very strong views on trucking safety issues, and they want action. If I can move to the overhead projector, I'll show some of the key points they have. I can go through this quite quickly. The information pops out in all of the overheads.
We asked Canadians whether they felt the number of trucks on roads in the last five years had increased, remained the same or decreased. You see that the vast majority said that it had increased. That is of course a fact.
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Then we ask, given the upward trend in the number of tractor-trailer trucks, has the upward trend in the number of tractor-trailer trucks made travelling on Canadian roads and highways more safe or more dangerous? As you see, we have four out of five Canadians saying that has made travel on Canadian roads more dangerous.
We had several questions relating to the longer trucks. These are the LCVs, the longer combination vehicles. We looked at the two principal different types of those trucks, the first being the double 48s. In Ontario, for example, there are double 28-foot trailers, but not double 48s. Double 48s already operate in Quebec and on the prairies, but not in the rest of Canada. Because they're limited to those provinces and because they're frozen out of most states in the United States, currently the number of those larger trucks is relatively limited.
We asked Canadians where they stood on this issue of double 48s. These are trucks, by the way, that are about as long as a ten-storey building is high. As you see, a very strong majority of Canadians are opposed. In the case of double 48s, 69% are strongly opposed, 17% are somewhat opposed. That's 86% in opposition.
We then, in our survey, told them, well, you know, they already exist in.... That had very little effect on their attitude.
We then went through the same questioning on triples. These are vehicles in which one tractor pulls three 28-foot trailers. There was even stronger opposition: 94% opposition to triple-trailer trucks. When we told them they already exist, the opposition shifted to 93%.
So there are very strong concerns from the public over the longer trucks. Why? Well, here's certainly one of the considerations. We asked them whether they agreed or disagreed with the statement that sharing the road with longer trucks would make driving harder for motorists. We had almost nine out of ten Canadians agreeing with that statement.
We also looked at the issue of truck weights, but we approached this from a somewhat different angle. We approached this in the context of NAFTA. The situation of course is that in Canada overall we allow heavier trucks than are permitted on the U.S. interstate highway system, and by a significant margin. We said to people, well, if we harmonize regulations between Canada and the United States, what would you prefer: that it would be harmonized at the Canadian level; that each country keep its own regulation; or that truck weights should be reduced to the American level? As you see, we had 55% of our respondents voting for reducing the maximum weight of trucks to the 80,000-pound level essentially available in the United States. That response, incidentally, was particularly high in Quebec, where we had 72% in favour of a weight reduction.
We addressed the situation where very high percentages of trucks fail roadside mechanical inspections. About what should be done, we asked people to choose between voluntary industry compliance and government regulation to bring about stricter maintenance standards and practices. We had almost 80% opting for government participation.
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Just one final overhead, dealing with the issue of hours of service. We told our respondents that Canadian truck drivers can now legally drive for 13 consecutive hours and in the United States it's 10. We asked them if they would favour or oppose reducing the hours from 13 to the American limit of 10, and 86% of our respondents were in favour of reducing the number of consecutive hours to 10. That's what our Canadians had to say about trucking issues.
The Chairman: Let me see if I have this correct. We asked Canadians if they would feel more safe or less safe if we put a very large number of 10-story buildings going at high speed on the highways and they said less safe.
Some hon. members: Oh, oh!
Mr. Evans: We didn't express it that way, Mr. Chairman.
The Chairman: I have one question for you before I turn it over to the members.
Have you done an analysis of actual accidents, and is there an increase in accidents involving these double-trailer and triple-trailer units?
Mr. Evans: The data for Canada are very limited, for a couple of reasons. The primary reason - and one we're concerned about - is the quality of information available here. Second, the number of these trucks is relatively small as of yet and therefore it's hard to get data on them.
There have been studies in the United States on these larger trucks. When you standardize for type of road - and I say that because currently the very largest trucks tend to run on the best roads, not on secondary roads. But when you standardize for type of road - just for that - there's one study out of the northwestern U.S., which probably has the most of these larger doubles and triples, that suggests the accident rate is about double.
The Chairman: Thank you very much.
I'm going to start with Mr. Crête, and then I'll come back to you, Mr. Keyes.
[Translation]
Mr. Crête (Kamouraska - Rivière-du-Loup): Are you familiar with the U.S. intermodal transportation legislation passed in...
Mr. Evans: Yes, but I am not intimately acquainted with it.
Mr. Crête: Did you know that this legislation addresses the situation you spoke of and the whole regulatory process? You raised a number of issues tied to intermodal transportation and stated that as part of an organized strategy, more tractor-trailers could easily be loaded onto trains, thereby reducing the number of double-trailer or triple-trailer units. I would like to know if the Americans are a step ahead of us on this issue. I don't know whether this information is available to you.
Mr. Evans: Yes, but only indirectly. I believe the Federal Highway Administration is responsible for regulating the trucking industry. Are you asking me if the U.S. favours railroads over trucks?
Mr. Crête: Yes, and I'm also asking you if regulations are currently in place in the U.S.?
Mr. Evans: No.
Mr. Crête: Thank you.
The Chairman: Thank you, Mr. Crête.
[English]
Mr. Keyes.
Mr. Keyes (Hamilton West): Mr. Evans, as a supplemental to Paul Crête's question, we'd probably all like to see the piggyback system of tractor trailers being loaded onto trains and shuffled from one centre to another, but I suppose the industry itself is probably less than satisfied with the mechanisms by which it can do that effectively and efficiently in a cost-effective manner, etc. So as a trucking company, or even as the mover of produce, I suppose business is more concerned with getting their products to market quickly and cost-effectively. Is that correct?
.0950
Mr. Evans: Let me respond by saying that our position is that if the best way to move goods is by truck, so be it, but we want the concerns and the expectations of the public that shares those public roads to be recognized in this whole process. We don't want lives and the comfort and security of Canadians to be treated as a cost of doing business.
Mr. Keyes: Thanks, Mr. Chairman.
The Chairman: Thank you, Mr. Keyes.
C'est tout?
Thank you, Mr. Evans.
Now we will hear from Mr. Benoît Sauvageau.
Welcome, sir. You come highly recommended by Mr. Crête, so we shall pay attention to what you have to say today.
[Translation]
Mr. Benoît Sauvageau (MP for Terrebonne): First of all, good morning. As you know, we make it our duty to submit English and French versions of our documents and I was hoping that my submission would be translated in time for the committee hearing. I find it a little funny sitting here because as a rule, I am seated on the opposite side of the table like yourselves, as a member of the Standing Committee on Foreign Affairs and International Trade.
This morning, I am here to speak on behalf of people in my region who do not have as powerful a lobby as others, but who nonetheless have developed a project which my Bloc Québécois colleagues and I believe is important enough to submit to the House of Commons and to the members of the Standing Committee on Transport.
In some respects, this project directly affects the jurisdiction of the federal and of virtually all other levels of government, that is provincial and municipal.
In the 10 minutes allotted to me by the Chair, I will give you a broad outline of the project and then answer your questions. I know how this works. If I am speaking too quickly, the interpreters will let me know and I will make a point of slowing down in order to make things easier for them.
Before being elected to the House of Commons, I was a history teacher. As you all probably know, waterways were once the principal mode of transportation in Canada.
Today, a body of water, whether in Toronto, Quebec City or Montreal, is viewed as an obstacle to be crossed, either by means of a bridge or a tunnel, because of our climate. Are there other less costly and more economical means of surmounting this obstacle?
The people of my region have developed a project which has my support to provide public transportation by hovercraft. I realize that municipal public transportation does not really come under the committee's jurisdiction. However, I do think it is important to explain the context to you a little so that you can understand how this issue is important to our level of government.
.0955
Today, in Toronto, Montreal, Quebec City, Vancouver or any of the major Canadian cities that have sprung up near bodies of water, we could move people from the suburbs to the downtown core by boat, as is done in Boston or in other larger European cities with climates similar to ours. That's the first point I wanted to make.
One solution that has already been considered and which would be advantageous to some is the commuter train. Both Toronto and Vancouver have the Sky Train. Other urban communities could look to other modes of transportation, including the hovercraft.
With respect to the issue at hand, I refer you to page 10 of the brief where mention is made of ice breaking. We are recommending that the federal government look elsewhere when considering buying this equipment.
As you probably know, the federal government already owns a hovercraft; I'm not talking about some UFO. The Canadian government hovercraft goes by the name of Waban-Aki. In the past, its home base was île Bizard and as far as I know, it is now in Trois-Rivières. It is used to remove ice jams in the spring and to break up the ice during the winter. Under the new regulations, the Canadian government will be asking municipalities to pick up the tab associated with operating the Waban-Aki, that is costs relating to buoys and all services offered to users. It is expected that municipalities will have to pay $780 an hour to use the Waban-Aki.
If the Canadian government were to encourage, not necessarily through grants, but as it does in the case of a Waban-Aki - I'm an MP and I know how this works - the purchase of an ice breaking vehicle to transport passengers, this would eliminate the costs associated with operating the Waban-Aki. Furthermore, there would be no need for the Canadian Coast Guard to purchase new equipment and we could thus kill two birds with one stone. During morning and evening rush hours, we would have a vehicle serving the public and travelling from the suburbs to the downtown core. During the afternoon, on weekends or when ice conditions were a little more dangerous, these vehicles could be used to break up ice jams and to install buoys.
Along with the group promoting this mode of transportation, I spoke to Captain D. L'Heureux, the pilot of the Coast Guard hovercraft. He informed us that when the hovercraft was used instead of a boat to install buoys on the St-Lawrence, costs were 50% lower. The same is also true for other waterways.
The hovercraft would be a less expensive mode of transportation, not to mention a more practical one because of its multipurpose nature: among other things, it can transport passengers, carry out ice breaking operations and be used for installing buoys and for rescue operations. This government, whose focus is jobs, jobs, jobs, should consider and promote this new technology.
.1000
As the government stated in its Red Book, by promoting the transfer of technologies from mainly European countries that manufacture this type of vehicle, new technology could be developed in Canada. While the country may not have the same urban population as Europe, it does have a number of major waterways, as I mentioned earlier.
Some of the benefits associated with this initiative include job creation, the advent of new technology, speedier rescue operations by hovercraft than by boat, passenger transportation and the use of these vehicles as ice breakers.
In closing, I would like to give you an example of the costs which the federal and other governments have to assume when flooding occurs. I won't talk about the Saguenay floods, but rather about those in Châteauguay which occurred during the last thaw. Most likely there was some flooding in your own regions. The costs associated with flood damage in a municipality not served by the Waban-Aki were approximately four times higher than the cost of purchasing a hoverraft which could have prevented ice jams from forming on the St. Lawrence and on other waterways in the area.
We maintain that a single vehicle such as the Waban-Aki is not sufficient. Rather than purchasing new vehicles, we should promote the multipurpose nature of a hovercraft which can transport passengers as well as be pressed into service as an ice breaker.
This concludes my representations on behalf of the people of my region. As my ten minutes are up, I am now prepared to answer your questions.
Thank you for your attention.
[English]
The Chairman: Mr. Keyes.
Mr. Keyes: Thank you, Mr. Chairman.
Thank you very much for your submission to the committee. It's beneficial. It's a thought that has been kicked around by different communities on many occasions. I understand it's a practice that's even done between England and France, in the channel between England and France. These are huge hovercraft, which accommodate cars, etc.
I have an idea to pitch back to you. In my home town of Hamilton, Hamilton West, in the morning or at rush hour in the evening it takes about 90 minutes to 2 hours to drive from Hamilton to Toronto, 55 kilometres. My idea is to create a train, a subsidized commuter train, to run between Hamilton and Toronto; to put people on that and let them park for free in a huge lot. They will get on this train - we'll call it the GO Train - and we'll go from Hamilton to Toronto. We'll zip along and it will be very inexpensive, because it will be subsidized by the provincial government, and that will relieve a huge pressure from our highways.
I'm being a little silly here, only because what you're pitching to me is exactly the kind of thing we have between Hamilton and Toronto now, the GO Train. It does have some passengers. To some extent it is relieving some of the traffic.
I think what we have in this country is a problem. You can identify the disease. You can identify the cure. If you could put into a syringe something called ``modal transfer'' and inject it into these motorists who have such a love of their automobile that they want their automobile at this end of their travel, they want it at that end of their travel.... They want their cars. As a result, without a change in mindset to modal transfer, to getting out of their car and getting onto a train, or getting out of their car and getting into a hovercraft, and saving themselves the commuter time, they will still stay on these highways for two hours or more, going to work and coming home at the end of work.
I think it's a great idea for your area. I think it's a great idea for Hamilton-Toronto, because Hamilton is, as you know, at the tip of Lake Ontario. You could get onto a hovercraft and zip across the lake to Toronto, where there are many docks. I've thought about creating a business myself - ``Keyes Hovercraft'' or something. But it's this whole idea of convincing people to get out of their car, you see. I can imagine that a trip on a hovercraft is probably going to be more expensive than a trip on the subsidized commuter train, because of the expenses involved in running such an operation. It would certainly have to be private sector involvement in this thing.
.1005
Do you have any comments?
[Translation]
Mr. Sauvageau: Yes, I could talk about it for half-an-hour. Your comments are very relevant and I hope that I can answer each one of your questions.
Right from the start, you put your finger on the most important point, namely that the train is a subsidized mode of transportation. You are a Member of Parliament as I am and you know that the federal and provincial governments can no longer afford subsidies. We have to find a cheaper mode of transportation, one that operates with fewer subsidies or, if possible, with no subsidies at all.
In our brief, we compare the costs of the commuter train versus the hovercraft, but in Repentigny, not in Hamilton.
As you know, the commuter trains have a very strong lobby, particularly if we talk about CNCP. Annual operating and infrastructure costs associated with the commuter train which travels a distance of 29 kilometres from the Montreal area to the north shore total approximately $6.9 million. Contrary to what we might think, a hovercraft would be considerably cheaper to operate. Total operating costs are $2.9 million, or $4 million less per year.
If costs are lower, it is safe to assume that government will automatically reduce its funding. If we go with hovercrafts as a mode of transportation, costs would be lower compared to existing infrastructures. Would you like some more background documents? I can provide them to you.
[English]
Mr. Keyes: I'd be interested in those documents, Mr. Chairman, if Mr. Sauvageau could forward them to us.
I guess a supplementary question to your first answer is, if it's such a great idea, how is it that the private sector hasn't come forward and started a business of hovercraft transportation between centres like Hamilton and Toronto, or the location you're speaking of?
[Translation]
Mr. Sauvageau: Some private sector companies are currently interested. Some, seeing that shipyards are standing idle, have shifted their focus to the new hovercraft technology which would require only minor technical modifications to shipyards. Two sectors of activity could be combined, shipbuilding and aeronautics, in a joint venture to develop a new technological credo and new, very interesting jobs.
Some shipyards in Quebec, and perhaps elsewhere in Canada, are already interested in this kind of technology and are prepared to work together with British firms.
In response to your first question concerning mindsets, in our view, the answer is quite simple: in order for a person to park his car in a lot and use a public mode of transportation to get to work, two important criteria must be satisfied.
Firstly, efficiency: the mode of transportation must get the person from point A to point B more quickly than the automobile. If the travel time by car from Hamilton to Toronto is 90 minutes, a person might be prepared to use a speedier mode of public transportation, and this is not always true of trains. People will therefore not be interested. Secondly, costs: costs must be comparable to those associated with existing modes of transportation, among other things buses.
Based on our calculations, it costs a person $8 to travel by public transportation from the north shore to downtown Montreal. The hovercraft would also cost $8, but instead of one hour, travel time would be reduced to 26 minutes. Furthermore, there is never any traffic on the river. The hovercraft can operate with radars under all weather conditions. Therefore, we have satisfied the two main criteria, namely cost and efficiency.
.1010
I hope that answers your question, sir.
The Chairman: Mr. Mercier.
Mr. Mercier (Blainville - Deux-Montagnes): First of all, I would like to comment on what my colleague from Hamilton said. One of the hovercraft's advantages is that passengers are less likely to have to dodge a jeep tire flying through the window than if they were travelling by bus.
[English]
The Chairman: That's a fact.
[Translation]
Mr. Sauvageau: Is this an inside joke or something?
The Chairman: Yes.
Mr. Mercier: We were travelling by bus between Hamilton and Toronto and the wheel from a jeep came flying through the window.
I was saying to my colleague how refreshing it is and quite rare to hear a francophone make a presentation in French.
Mr. Sauvageau: It's quite permissible, Mr. Mercier.
Mr. Mercier: It's extremely rare, but quite refreshing.
[English]
Mr. Keyes: It would not be if we were in Quebec. Everything was in French.
Mr. Gouk (Kootenay West - Revelstoke): It was very rare to hear it in English, and very refreshing.
Mr. Keyes: That's right. It was very rare to hear it in English when we were in Quebec.
[Translation]
Mr. Mercier: You're saying that the trip between Repentigny and Montreal would cost $8. Would this be the cost to the user, in light of the subsidy that would be paid by the provincial government to the Intermunicipal Transportation Council? Does this represent the gross or net cost to the user?
I would like you to give us some details about the hovercraft technology. I have never travelled by hovercraft in Europe. Would this vehicle really solve the ice problems if pressed into daily service?
This appears to be an excellent solution for Repentigny. Have you contemplated using a similar mode of transportation for routes other than the Repentigny-Montreal one? Could the hovercraft be used in other riverside communities where the flow of commuter traffic toward Montreal is heavy both morning and evening?
Mr. Sauvageau: Thank you, Mr. Mercier. I will answer your four questions.
I'm not sure how the other provinces manage transportation costs and my colleagues could perhaps answer that question better than me. At present, no single mode of public transportation is profitable in Quebec. Judging from what we have heard, subsidies are based on the 60, 20 and 20 rule. This means that the government awards subsidies in the order of 60% and the user municipalities subsidize this service to the tune of 20%. Finally, the user covers 20% of the cost.
I will leave it up to you to do the exact calculations. The user who covers 20% of the costs pays roughly $2, the municipalities $2 and the government $4.
Obviously, any mode of public transportation will require an outlay of new money by the government. In these times of fiscal constraints, we have to count on less government funding if we plan to go ahead with this project. A new mode of transportation with a new public/private style of management will result in lower costs.
.1015
However, to my knowledge, there is no single mode of public transportation that is profitable, either in Canada, the United States or any other country. Therefore, the cost structure is 60-20-20, and perhaps it is the same in the other provinces.
As far as technology is concerned, a study was conducted - and this may be of interest to my colleague from Hamilton - by a Montreal firm on the reliability of the hovercraft technology. A survey was sent out to some 20 companies that manufacture hovercraft across Europe. These vehicles, which have been in operation anywhere from 20 to 25 years, were found to be between 95% and 99.4% reliable. They scored better in terms of reliability than the subway with its suicides and better than trains and other modes of transportation. Therefore, in terms of technology and reliability, our criteria have been satisfied.
As far as ice is concerned, many people have told us that travel is impossible when there is an ice build-up. This is rather paradoxical because the Coast Guard purchased a hovercraft to do double duty as an ice breaker. Therefore, ice does not seem to pose too great a problem. The vehicle's skirt is designed specifically to handle this type of climate.
In terms of design and size, some hovercrafts can carry anywhere from 8 to 101 passengers. The larger vehicles cost approximately $6 million. Given its weight and size, a hovercraft can also help to break up the ice and therefore, it serves a dual purpose.
As far as the other routes are concerned, as is the case with any new initiative, we would have to conduct a pilot project. For starters, we will focus on providing service to approximately 100,000 people from the regional municipality of l'Assomption who travel to downtown Montreal. Once we have successfully set up this service, we will develop the technology to serve other routes, perhaps the Hamilton to Toronto route or even other destinations.
Mr. Mercier: Could we say then that this service presents some advantages only if certain distances are involved? In short, what is the average speed in kilometres of a hovercraft? For example, could it be used to ferry passengers between Gatineau and Ottawa?
Mr. Sauvageau: Between Gatineau and Ottawa? Most likely. I'm not familiar with the region's hydrography, but such a service could very likely be implemented.
Mr. Mercier: I'm referring to the Outaouais River.
Mr. Sauvageau: Yes, I cross the bridge every morning. I don't think the distance involved is long enough. An ideal distance would be 30-40 kilometres. It takes approximately 25 minutes to travel 30 kilometres. The 250 kilometres between Montreal and Quebec City could be covered in90 minutes.
Mr. Mercier: Thank you.
Mr. Sauvageau: My pleasure.
[English]
Mr. Keyes: I have a supplemental. It looks like a great idea, and we speak about the jobs it would create to build a vessel and all that, but I think we're getting way down the road on this thing.
We first have to begin with the premise that until we have some modal transfer and people decide they want to leave their cars behind and get into some other mode of transportation, be it a train - I'll argue with you that the GO Train service between Hamilton and Toronto is extremely safe. It has had very few incidents. It's efficient - 25 minutes. It's inexpensive because it's subsidized. It takes traffic off the roads.
.1020
Here's an example for you, Benoît. The Go Train service between Toronto and Hamilton only goes to a community called Burlington, or Aldershot, just before Hamilton, because it will only expand its line when passengers warrant it, when there are enough people to use it. We can't get Go Train service to extend the line 10 kilometres past Burlington into Hamilton because there aren't enough people to get on the train. They'd sooner get into their cars and sit on a highway for two hours going to Toronto in the morning.
Our next witness, who has been a part of building the new 407 highway toll road that will eventually extend from the top of Toronto all the way down to the Skyway Bridge at Burlington, is evidence of the fact that people would sooner get into their cars and pay a toll to get on a faster highway to get somewhere than get out of their cars and get into a train or onto a hovercraft. The mentality first has to be established before we can go on to the next step of building something. It's the old attitude. You're telling me if we build it, they will come. I'm not so sure.
[Translation]
Mr. Sauvageau: I will answer this question in two parts, since it is very important as far as attitude is concerned. I don't know if some of you represent the Vancouver region. If you travel to Vancouver one day with the committee either for pleasure or on business, take a trip on the Sea Bus, a catamaran that can ferry 400 people between Vancouver and North Vancouver. It's a widely used, highly economical means of transportation which has created many jobs and which required a relatively modest investment on the part of the B.C. government.
The distance involved is relatively short. However, the reason why an ordinary catamaran is used, not a high speed vehicle, even though the technology exists, is because there is no ice on this waterway. If there was ice, the vehicle of choice would be a hovercraft which would move passengers more quickly.
I am convinced that all the money spent to build park-and-ride lots or highways will be money wasted until such time as the two main criteria, namely efficiency and cost, are met. The goal is to move people from point A to point B as quickly as possible.
We can build new railways and purchase trains to service the Burlington region, but if it takes as long to cover the distance by train as it does by automobile, than no one will take the train. If the service is quicker and cheaper, then people will use this mode of transportation. The hovercraft is not the answer to all public transportation problems, but it is one viable option for regions with a high population density.
The fact that we have the option of choosing between 40- and 100-seat vehicles provides greater flexibility than the train. That's the first point. The infrastructures are ready and waiting. We can use the waterways in areas where the need is pressing. Commuter trains as a useful option if the tracks already exist and the population has need of the service. Perhaps another mode of transportation could be considered for people living near a waterway. Instead of laying tracks, we could give some thought to another system which would save the government money and, with new technology, create a new employment sector. This would put us on the cutting edge.
In conclusion, Mr. Chairman, while some may find this idea somewhat far-fetched, the fact remains that in Europe, both trains and hovercraft are used far more extensively than they are here in Canada, under weather conditions similar to ours. If the idea is so far-fetched, how do we explain the fact that in Vancouver, a 400-seat catamaran has been operating on a full-time basis for the past ten years? This is an interesting, economical mode of transportation which warrants further consideration.
[English]
The Chairman: Thank you, Mr. Sauvageau. It's always a pleasure to have a colleague come before us.
[Translation]
Mr. Sauvageau: Thank you.
.1025
[English]
The Chairman: From Canadian Highways International Corporation, conveniently know as CHIC, I would like to welcome Mr. John Beck. I trust you've been before a committee previously in your life.
Mr. John M. Beck (President, Canadian Highways International Corporation): This is my first opportunity.
The Chairman: Negotiating a small project like this would never bring you into contact with government.
You can take about ten minutes to sketch the point here. I know there's a lot of interest in this particular project and this particular approach, so begin.
Mr. Beck: Thank you very much.
[Translation]
Good morning, ladies and gentlemen.
[English]
It's a pleasure for me to be invited by the House of Commons Standing Committee on Transport to talk to you about alternative infrastructure delivery methods.
You have already heard about the importance of infrastructure development, and I agree wholeheartedly, so I won't dwell on it. What I would like to address this morning is how we get there, because that's what we've done and hope to do again in the future.
One of the greatest challenges facing governments today across Canada in times of restraint and shrinking budgets is the need to find new and cost-effective ways to rehabilitate and operate existing infrastructure facilities and services and deliver new infrastructure.
I'd like to address how we can face that challenge, and I want to propose a solution that exposes as false the old-fashioned notion that we somehow have to choose between increasing our government's already severe debt problem to carry out a project and allowing our highway system to deteriorate. Public-private partnerships are emerging as a solution where both public and private sector partners can cooperate to deliver quality highways faster at lower cost, at lower risk, and at an affordable cost to the user if risks are properly shared.
I'd like to first briefly introduce our company, Canadian Highways International. Canadian Highways was formed in 1993 and is dedicated exclusively to the private sector development of toll roads through public-private partnerships. We are a fully integrated organization that offers a complete range of services, including design and engineering, environmental planning, construction, financing, and operations of maintenance - that is, all the skills required to develop build/own/operate/transfer, or BOT, infrastructure projects.
The founding members and equal owners of Canadian Highways are four international project management and construction firms. They include Monenco AGRA, a division of AGRA industries; Dufferin Construction, a division of St. Lawrence Cement; Armbro Construction; and Banister Foundation. Together we represent a workforce of more than 10,000 employees with activity in projects in more than 100 countries.
In April 1994 we were awarded the contract for the development, design, construction, operation and maintenance of the all-electronic toll Highway 407 project in Toronto. Next to Hibernia, Highway 407, at a cost of over $1 billion, is the largest ever single-contract infrastructure project ever undertaken in Canada.
The project is being implemented through a unique and innovative public-private partnership with the Ontario government. In May 1996, through our subsidiary Atlantic Highways Corporation, we were awarded a contract to develop, design, construct, operate, maintain and finance on a non-recourse basis the 45-kilometre Highway 104 western alignment project in Nova Scotia. The unique public-private partnership on this project has set a new precedent in private sector financing and risk sharing in the development, construction and operation of new highway infrastructure in Canada.
The project is now 50% complete and is scheduled to open in 1997 just 20 months after start of construction. The Minister of Natural Resources of Nova Scotia, the Honourable Don Downe, who is our partner in this public-private partnership, probably reviewed this project and this presentation with you here two days ago.
Let me now focus on some general aspects of public-private partnerships. Public-private partnerships have one fundamental advantage because they draw on the strength of each of the sector partners to implement projects more effectively. They allow development of new facilities our governments could not otherwise afford. They allow for faster and more efficient development through better management skills. They provide better access to new technologies. They can provide new revenues through taxes and franchise fees. They can reduce the risk to the public sector through a transfer of much of the development risk to the private sector. They can allow us to update our infrastructure system without increasing our national debt.
With user-pay facilities, project financing could be raised as ``off balance sheet'' rather than funding from general taxation. With private sector financing, the credit rating of the government can also be maintained.
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In my opinion, the key to success for such partnerships depends on the way risk is allocated and managed between government and the private sector development partner.
Let me expand on what I mean by risk-sharing.
In general, in projects like Highway 407 and Highway 104, the public and the private sectors are brought together in a new form of relationship. In each case, the partnership does not mean an equal contribution by each partner. Rather, one partner brings all of one requirement, while the other contributes all of something else.
A simple example would be the public sector partner taking 100% of legislation and force majeure risk, while the private sector partner takes 100% of the construction and operations risk.
In an ideal world, each partner should contribute that which it can do best, most efficiently and cost-effectively, and should shoulder the risk for what it can most directly influence and control.
If this principle is accepted, a workable and balanced partnership will result. The creative partnerships for Highway 407 and Highway 104 have allowed the Ontario and Nova Scotia governments to achieve their goals of constructing these toll roads with reduced cost, expedited schedules and reduced risk, along with reasonable and affordable toll levels.
With the exception of the elements that can best be controlled by the political and legislative process, private sector developers will generally take on most construction, operating and traffic risk.
Highway 407 is the first major infrastructure project that provides a high level of protection for the public through transferring the construction risk to the developer. The project is fully bonded and insured. It features an integrated design/build turnkey contract with a guaranteed maximum price, defined completion schedules, and provisions for liquidated damages if completion deadlines are not met.
We're also providing warranties for periods of up to three years on the physical aspects of the project. The Highway 104 agreement has similar features. The risks associated with certain unforeseeable environmental and political events are borne by the province in each case.
Project finance is critical to implementation. On Highway 407, the user-pay principle, adopted in 1993 in Ontario, made it possible to accelerate the completion of the project through project-based financing rather than piecemeal funding through general taxation.
In our proposal, we offered a comprehensive financing package that required some limited-recourse guarantees in view of the uncertainty of the traffic forecast. After careful evaluation, the government decided it could raise the project financing less expensively on its own. Along with the ownership of and the rights to the toll revenues, all financing, traffic and revenue risk are assumed by the government.
In contrast to Highway 407, Highway 104 in Nova Scotia is being financed jointly by government and private sector funding. The $113-million capital cost is being funded on the government side by $55 million through the strategic highways improvement program in a joint federal-provincial agreement. On the private sector side, the balance of approximately $60 million is coming from toll-revenue bonds that are being underwritten by the Newcourt Credit Group.
The private financing portion is being provided on a completely non-recourse basis and is unique to Canadian public-private partnership infrastructure projects. Revenue from tolls collected is the only source of funds for servicing debt and for operating, maintaining and rehabilitating the highway. On Highway 104, in addition to assuming all construction and some financing risk, we also assume the traffic and revenue risk.
I'd like to briefly talk about design, construction and contractual aspects and where private sector participation can improve the delivery process for infrastructure projects.
As originally planned, Highway 407 was to be delivered through a large number of relatively small separate design and construction packages over a period of more than 20 years. The design/build contract for Highway 407, which is reaching a billion dollars, is more than 20 times the size of any prior ministry contract. With single-point responsibility, we were able to reduce the completion time to four years and reduce the cost by an estimated $300 million through value engineering and project-execution efficiencies resulting from standardizations of design, economies of scale and centralized management.
The structure of the Highway 407 design/build agreement also provides incentives to continuously introduce technologies to save cost and time. This is where private sector input could be very beneficial.
Over the construction period, we introduced innovative bridge designs to construct a number of bridge decks that resulted in lighter, thinner structures with significant cost savings. We also introduced new bridge-erection construction methods to speed up construction and reduce interference with existing traffic.
In closing, I hope that in my remarks I have been able to demonstrate to you that public and private partnerships can result in effective risk-sharing between public and private sectors, that such partnerships can result in accelerated programs with resulting overall cost savings, and that partnering can be an attractive alternative delivery method, as opposed to the implementation of projects through either increasing government debt or just letting infrastructure deteriorate.
We believe that our proven experience can help you address your challenges.
Thank you.
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The Chairman: Thank you, Mr. Beck.
Before I turn it over to the committee, let me pose one question.
In looking at these projects, the two you mentioned here are often used as examples. The comment is often made that Highway 104 represents a true public partnership, whereas Highway 407 does not.
You made the comment here that after careful evaluation, the government decided it could raise the project financing less expensively. Now this may not be a fair question for you in this environment, but does that have to be the case?
Mr. Beck: I don't want to speak for a government that made a decision, but in my opinion, the decision was a political one that was made on the basis of it not really wanting to give up its control over this piece of infrastructure. One of the ways to do that is to rationalize the decision to keep the financing and therefore keep control. The government can do it. It was no surprise - everybody knew this - that the government could borrow more cheaply than the private sector could. It will be so in every case.
Of course, what they didn't talk about was the fact that the debt of the Government of Ontario went up by that billion dollars in the process.
So it did not have to be that way, and it does not have to be that way. We've shown that it doesn't have to be that way for Highway 104. In addition, many other toll road development projects around the world are structured in a very similar way to that of Highway 104 or with even less government involvement. The private sector is quite able to finance these projects.
The Chairman: Thank you, Mr. Beck.
Mr. Gouk.
Mr. Gouk: Thank you. I have one curiosity on the toll highway system. When you go into that kind of partnership, is that an open-ended toll by which you recover your costs and then build up reserves for maintenance, restoration and so on? Or is there an end in sight? Is there a period of time at which that ceases to be a toll highway?
Mr. Beck: First, it's not an open-ended toll in the sense that there are very specific toll regulatory mechanisms. So the rates are agreed to as part of the negotiation process.
Mr. Gouk: I don't mean how much you collect, but the fact that you time the toll.
Mr. Beck: You mean in terms of time?
Mr. Gouk: Yes.
Mr. Beck: There are different ways to structure that. There are some arrangements whereby the toll goes on for as long as the agreed concession period, such as 20, 25 or 30 years. If the debt is paid back earlier and there's a surplus in what we need for maintenance, then there's a sharing mechanism with government.
There are other arrangements whereby the day the debt is paid back, that's the day the tolling process ends completely.
There are variations on this theme. It depends on the political will and the financial structure of the deal. We can have open-ended ones or we can have very precise limited endings, including or not including maintenance.
The Chairman: Mr. Cullen.
Mr. Cullen (Etobicoke North): Thank you, Mr. Chairman. Thank you, Mr. Beck, for your presentation.
Looking at Highway 104 in Nova Scotia and Highway 407, these are cited, as you have done, as good examples of public-private partnerships. The testimony we've heard to date on this public-private partnership notion would suggest that it's possible to do these kinds of deals in areas where there is a high traffic volume, while it's much more difficult - some would venture to say it's impossible - for the low-density traffic areas. Have you any thoughts or observations on that?
Mr. Beck: I don't think it's impossible to do it in a low-traffic environment. Highway 104 is an example. We have only 5,000 to 6,000 cars a day on that highway. The costs were such that only about half could be supported through private sector financing, so the government came up with the other half of the financing through a grant. So it really becomes a matter of adjustment as to what the government share of that partnership is, either in the form of a grant or other forms of support to make up for the fact that there is a lower traffic count.
Granted, if you have a country road with only 100 or 200 vehicles a day, that doesn't make any sense. We're not suggesting that. Part of what we do is related to a certain minimum critical mass in terms of size; otherwise it just doesn't pay for anyone to be involved.
As soon as you reach a certain point, you can adapt to the traffic level through the creative financing mechanisms. There's no question the higher the traffic volume the easier it is to finance the project, and when you reach certain levels of traffic, no support, no involvement, and no financial participation are required from the public sector.
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Mr. Cullen: Just to follow up on that, on the 104 highway in Nova Scotia we heard testimony that the design/build...and the contractor also is responsible for ongoing maintenance.
Mr. Beck: Correct.
Mr. Cullen: A compelling case seemed to be made that if you're going to be responsible for maintenance, you're going to be careful how you design a road. It's like making a recommendation as a consultant and then having to implement the recommendations.
Was that same concept used in the 407, or do you think that is -
Mr. Beck: It was.
Mr. Cullen: - something that has to be part and parcel of the public-private partnership in highway construction?
Mr. Beck: I think for two reasons it should be part and parcel. One is that the private sector lender will want to know that the organization that is responsible for repaying the debt manages the maintenance of that road to ensure the highest level of traffic possible and therefore the highest revenues to be able to pay the debt back. The second one is the one you alluded to, which is that if we are financially responsible for maintenance and repair and upkeep of the highway, we'll make sure the best materials and workmanship are used in the actual construction.
So for those two reasons, yes, on Highway 407 we are also doing the operation and maintenance. Initially, as I said in the presentation, we thought we were going to finance as well. For all those reasons, and the reasons I just gave, we thought we should be involved, and the lenders thought we should be involved, in the operation and maintenance.
Interestingly, these processes allow a higher quality of construction. For example, Highway 407 is a concrete road, not an asphalt road. That's a higher quality of construction. It requires much larger up-front expense, but the long-term maintenance costs are lower. Overall, on a life-cycle costing basis, the province, in this case, will inherit a higher-quality road at the end of the concession because the system of borrowing up front allowed us to spend the money required, as opposed to the restricted budgetary constraints in the past.
Mr. Cullen: The 407, I gather, was quite an expensive road to put up, because of all the overpasses -
Mr. Beck: It's an urban highway.
Mr. Cullen: It's an urban highway. Have you any idea why, comparing that highway with other roads that don't have all these overpasses to deal with...? Are we talking orders of magnitude of40% higher cost or 30% or 50%? I know it's ballpark, but....
Mr. Beck: No, the costs are probably more than double what they would be on a normal highway. If you can find a normal...let's look at Highway 104, which is 45 kilometres long, at$113 million or so. That's $3 million a kilometre. With Highway 407 you have 70 kilometres and$1 billion, that's $15 million, so it's five times as much.
Those are two extremes, but it shows you that an urban highway is much more expensive. But of course it has much higher revenues to pay back the cost.
Mr. Keyes: Thank you, Mr. Beck, for your presentation.
When do you expect the 407 to be completed to the bridge at Burlington? I know the top half is just about finished.
Mr. Beck: The contract we have takes us to Oakville. From Oakville to Burlington is what is called the 407 west. The government has not yet made any announcements on when it will request proposals on that, so I can't answer. A wild guess is the end of 1999. I think 1998 is getting to be a little too tight.
Mr. Keyes: How do you answer the query...and it has been asked of me when I go out and talk to my constituents, etc. They say, look, the government wants to build a highway. So they talk to Dufferin Construction and Monenco and Armbro and Banister and so on and they say, this is what we want to do; this is what we want it to look like; we want to enter into a tender process and put together the mechanisms to build this highway.
The government, I would guess, because of its agent status, would probably be able to borrow the money, maybe even more cheaply than the private sector might be able to borrow money, in order to create this highway. The government would then maintain it, take responsibility for it, collect tolls on it, and all the rest of it. So people ask me, ``Why a middleman?'' Why have a company like yours come along, put all this stuff together and then organize for the construction and the maintenance of this highway when the government could do the same at better rates to yield a return because it's going to collect the tolls on that highway?
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Mr. Beck: I think you'll find in the pronouncements of each of the politicians and members of the bureaucracy on highways 407 and 104.... The Nova Scotia minister was here to speak to you a couple of days ago and I think his words were that we could do it at a lower cost than the government could. With respect to Highway 407, the government has made repeated declarations saying it saved $200 million to $300 million on the $1 billion project because the private sector brought new ideas and new methods and new efficiencies to it that the government couldn't deliver themselves.
So without any disrespect to anyone here, the private sector just does these things much more efficiently than the government does. It's just proven.... You may disagree. I'm just telling you what I know and what my experience has been.
You can borrow the money and collect the tolls, but you will therefore increase your overall debt load, and although there are some people who make arguments that you can then take it off the government balance sheet because it's supported by returns, it doesn't always work that way. It hasn't worked that way on the bridge between P.E.I. and New Brunswick. It's back on the government books. In Ontario, I know the government has decided to finance Highway 407 itself and is trying to justify taking it off the books because there will be toll revenues, but the ratings agencies are not agreeing. They're saying, ``It's on your books and we'll see your toll revenues when they come.''
For those reasons, we believe that the private sector is the right solution, but I understand it's an issue.
The Chairman: Thank you, Mr. Keyes.
Actually, I'd like to go a bit further with some of those questions because they're at the heart of some of the public concern about these kinds of projects, which are new in Canada. I understand the Auditor General in Ontario has raised some concerns about the Highway 407 project. Can you respond to those?
Mr. Beck: Yes. The concerns he has raised are exactly the ones I've just raised. He recommends that in future the government go all the way in terms of the public-private partnership process and let the private sector finance it. That is one of the strongest recommendations. He says the previous government made a mistake in not letting us do the financing, because it created a very confused, half-real public-private partnership, if you will. In that case he has come out four-square in saying that if government privatizes it in the future, it should go all the way.
The Chairman: And with respect to the $300 million in savings that you refer to in your document here, that's so we get an original estimate of something in the order of $1.3 billion to build 70 kilometres worth of road -
Mr. Beck: Correct.
The Chairman: - and you bring it in at $1 billion. Is this a back-of-the-envelope kind of estimate -
Mr. Beck: No.
The Chairman: - or is there some official documentation?
Mr. Beck: In fairness, it's not all savings through efficiency and cost-saving ideas. It's through elimination of some things the government felt it needed but we were able to prove it didn't need. For example, some interchanges did not have a business case related to them so they could wait. In other cases, yes, there were efficiencies and new ideas for doing things.
It's not back-of-the-envelope.... It's the government's own estimates, which the ministries of transportation always do. They have a lot of standards and a lot of history and proven experience. It's distributed over the time that it would take them to build that as opposed to our final bid. There are two very hard numbers that determine those savings. But it wasn't just efficiency, it was also deletion.
The Chairman: The same, as I recall, is also true with the Highway 104 project.
Mr. Beck: For Highway 104 I think their budget was $125 million or something like that, and we came in at $110 million or $112 million in terms of the actual construction price. So it's the same thing.
The Chairman: And I believe we had the same situation with the Charleswood Bridge. So depending on the magnitude of the project and the degree of flexibility, it's something between a 12% and a 20% reduction in costs.
Mr. Beck: Yes, and usually a much earlier delivery date.
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The Chairman: But there is a higher financing cost, the debt issue set aside, given that governments can generally borrow at a lower cost.
Mr. Beck: That's right. We found the difference on Highway 407...the government told us the difference is three-quarters of a point.
The Chairman: But on a net-present-value basis, isn't there also a saving to government from building the infrastructure earlier rather than later?
Mr. Beck: There's a saving if the private sector builds it earlier. The private sector usually will deliver earlier and therefore generate revenues earlier, so on a net-present-value basis it's an economic advantage to finish more quickly. The money is not idle for as long.
The Chairman: Okay. Thank you, Mr. Beck. I appreciate it. We've followed this project and we'll be interested in seeing how this works out.
Now, from Northerners Inc., Judy Skidmore, president, and Julie Ingo.
You have about ten minutes to frame the points you want to raise. Then we'll hear the questions.
Ms Judy Skidmore (President, Northerners Inc.): As I mentioned, do we have a deal forMr. Beck in northern Ontario: 4,500 kilometres; times two, if he likes.
Good morning, Mr. Chair, ladies and gentlemen. This morning Ms Ingo and myself would like to review with you the submission we've already provided. We'll go through the beginning of that briefly, with some extra information included. Then we'll be happy to answer any of your questions.
Northerners Inc. is comprised of northern Ontario individuals who believe the future of the region is dependent on growth of its resource communities. The key to a stable future is through a belief in the future of the region and initiative to develop and create new wealth.
Northerners Inc., which was formed about three years ago, a volunteer group, has focused on safe roads as its main initiative for the first years of its operation. We are privately funded through moderate donations from individuals and companies that operate in northern Ontario. The group recognizes the need for ongoing long-term factual information on northern Ontario issues.
While communities, families, and individuals can create and provide new jobs and industry in northern Ontario, transportation is one aspect that is beyond the direct influence of our population. We depend on our governments to provide and ensure good transportation. It's up to us to point out how critical good roads are and the consequences of poor and unsafe highways.
The point of raising the northern Ontario issue here is that we're referring directly to the Trans-Canada Highway, in effect. Northern Ontario, which is the heart of Canada, comprises approximately 20% of the Trans-Canada Highway, that being either Highway 11 or Highway 17, basically between the Quebec and Manitoba borders and between North Bay and Kenora.
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Those two highways, Highways 11 and 17, parallel each other, crossing a couple of times, and have an adjunct of other highways that are designated as part of our national highway system. We refer to both of them as being part of the Trans-Canada system and we use them both similarly. For the most part, Highway 11 is the northernmost route across Canada. I guess it's the flattest route for most Trans-Canada transportation, and again, it's the heart of Canada.
We can safely say that part of the Trans-Canada is of the lowest standard, and from the various reports we can say it is probably well below the kinds of Canadian standards that we do have. As well, it probably comprises...the biggest common issue in northern Ontario is really the state of those roads and how we relate to them.
We have medical data done by the trauma unit of the Sudbury hospital over the past couple of years that indicates our chances of death in highway accidents are much higher in northern Ontario under the same conditions, like weather, when compared to other highways, in Ontario especially.
So based on that medical information from the trauma unit for northeastern Ontario, we have information that shows the two-lane highways and the narrow rock cuts of northern Ontario result in death in highway accidents. The same frequency of accidents elsewhere does not result in death.
Dr. Gary Bota has made these statistics public repeatedly. The report, based on data from 1989-1991, showed that motor vehicle collisions account for one-third of all trauma in northern Ontario. Highway 17 accounted for 20% of those deaths, Highway 11 for 16%, and Highway 69, which is the route just south of Sudbury, accounted for 10%. Highway 144 between Sudbury and Timmins accounted for 4% of those deaths.
Non-intersection accidents accounted for 77% of deaths. I understand that's an exceptional statistic in assessing the kinds of deaths and trauma on highways. Head-on collisions accounted for 44.1% of deaths. Again, the majority of those were in the summer. Collision with fixed road obstacles such as rock cuts accounted for 20% of deaths.
For example, approximately one kilometre from my home on Highway 17, I measured how close the rock cut was to the edge of the pavement. It was 13 feet from the edge of the pavement. There was no painted line on the edge of the highway and the shoulder itself was practically non-existent. Generally, when we go out and measure them with a tape measure, it's pretty scary.
In terms of prevention, people in our survey indicated that we can prevent deaths on our highways by slowing down, driving defensively and wearing seatbelts. Actually, this suggestion was also strongly pointed out by our survey respondents: avoid northern Ontario highways!
The results I'm presenting are the results of our first annual questionnaire. We do this on a volunteer basis. We will collect data over the year from various drivers across the north and present this annually, updating our information and measuring changes as they occur.
One of the reasons why we've gone to this data-based approach - that's what we call it - is that one of our directors was head of the chambers of commerce for northern Ontario for a number of years and was always promoting the four-lane campaigns. Those were very common in Ontario, in northern Ontario and perhaps in other regions of Canada, where chambers of commerce and municipalities have said, ``Four-lane everything''. He has said that the four-lane campaign has been an annual presentation to government since about 1930 or 1950 and has noted that in fact there has been no measurable improvement - and really no improvement at all - over all of those decades in this kind of a four-lane concept.
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We felt that certainly, and as reflected in our data, the population really was not calling for four-laning any more. They recognized the cost, the distance, and the effect it would have on their taxation.
What we identified as the real issue with the people who live in northern Ontario was safety. Again, this is an issue that we have to compare to general international competitiveness, which is maybe another issue we'll touch on here. But the real issue became one of safety, and really, that was what we wanted to identify. We had very few statistics on it. We wanted to hear from the people who drove.
Our first questionnaire consisted of five questions. Drivers were asked to indicate the locations along these generally Trans-Canada routes they felt were the most dangerous; how these areas might be improved; where the priority areas might be improved; priority areas for adding more passing lanes, because that's what we were hearing and we wanted to actually say, okay, where; what they thought of four-laning; and any other suggestions for safety measures.
Our findings were that a number of places were noted as particularly dangerous along northern Ontario's major highways. Generally the responses from the public were varied. Responses from the transport and inter-city coach drivers tended to be quite consistent and focused. Of particular interest are the areas that were indicated by all three respondent groups.
The areas of greatest concern to the public are found mainly on Highway 11, in particular the Geraldton area between Longlac and Nipigon. Additionally, the Latchford-Temagami portions of Highway 11 received considerable complaint from the public.
These are the highlights of those general areas: first, near the Thunder Bay area; second, north of the North Bay area; and third, the area from Sault Ste. Marie to Lake Superior Provincial Park is a very unsafe roadway, with the general upgrade being near and east of Sault Ste. Marie. Of course Highway 69 was a concern as well, and I think we can attest to -
A voice: That highway is very important.
Ms Skidmore: We're lucky to have you alive here today, I think.
The inter-city coach drivers' greatest concern is Highway 17 between North Bay and Spanish. That includes Highway 17 in the Sudbury area and the Montreal River hills.
The transport drivers offered very consistent responses, and I must say in our subsequent efforts and surveys we have really focused on the responses from the transport drivers. They have a very large view and they have a tremendous number of concerns themselves about their own position, their own profile, on the highways, how they relate to the general public and driving, how the highways connect those two, and what they might do about it.
Specific areas along Highway 11 were indicated many times to be quite dangerous and unsafe. The transport drivers did have concerns about Highway 17, mainly between Sudbury and Sault Ste. Marie. It seems clear from combining the responses to this question that these specific areas must be re-examined for safety.
We found from the public responses that very few people identified where they lived as being a concern. Generally the public identified somewhere else as being worse than where they lived, and then similarly, someone from that place would indicate the other area as being worse.
We found that there was a little bias in the public responses, in terms of our volunteer surveys, which was difficult to correct. Of course the traffic goes south, generally - not very many people from North Bay drive to Timmins - so we were getting more concerns with the southern area from the public drivers. But definitely the public is a very large and important part of our survey.
As far as improvements to these dangerous sites, the range of answers given to questions about improvements that could be made tended to be consistent among the different types of drivers, so all the answers will be considered together.
There were two types of responses to these questions. Some responses gave specific improvements; others were more general.
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The areas that were highlighted are again the three main areas we have discussed. They gave improvements that needed to be made. They referred to resurfacing generally, and again we refer.... This is 1995 data, and we found over the 1996 construction year there has been a significant resurfacing program in northern Ontario, and we're noticing that in our responses. A large part of that resurface issue is being met now.
I must say that when we started this survey we thought we were going to be sitting down and talking about where passing lanes should be installed in northern Ontario, because there are some areas - I believe it's about 700 kilometres between New Liskeard and Nipigon - where there isn't one passing lane. I think one might have been installed now. It's not unusual to have significant areas in northern Ontario with two lanes with no shoulders.
Respondents came back saying road markings - you have to get the lines on the edge of the highways indicating where the edge of the pavement is, especially when there is no shoulder. That was a very large issue, and the lines need to be improved.
They expressed concern about the quality of the shoulders on the highways or the quality of no shoulders on the highways. Transport drivers cannot pull over for safety. I personally witnessed one transport that had tried to pull over and had tipped right over. There wasn't enough there even to hold it on the side of the road. They felt that the shoulders should be paved and much better maintained. Respondents indicated that winter driving would be much safer if the highways were plowed, salted, and sanded more quickly.
Another issue is the width of the highways. The roadways should be wider, either through paving shoulders, more passing lanes, or four-laning. Drivers also felt that turning lanes should be longer and better marked.
There are two desired improvements noted that were specific to the group responding. Firstly, the inter-city coach drivers felt there should be more police patrolling the highways. Secondly, almost all transport drivers indicated that there is a definite need for more rest stops with washrooms that are open all year round.
Without a doubt, the two greatest concerns raised were with respect to the quality of the road surface and the width of the roads. The majority of all respondents centred on those two problems. Many of the dangerous areas were listed specifically because of those problems.
Priority areas for new passing lanes, particularly in the Nipigon area, North Bay, New Liskeard.... Some respondents felt there should be passing lanes at regular intervals along Highways 11 and 17.
In terms of four-laning, people felt that the cost of this was perhaps unrealistic, but again they indicated priority areas that fell within those three - Thunder Bay, North Bay and the Sudbury-New Liskeard corridor.
Some general conclusions can be drawn. People are very concerned about the quality of the highways in northern Ontario. They generally felt that these highways are of lower quality than the rest of the Trans-Canada Highway, and they state that this area is much more dangerous.
Comparisons were made between these highways and those in other areas such as Alberta. They stated it was much safer and less stressful to bypass northern Ontario highways altogether and to drive through the United States. Again, here is where our safety and our economic issues combine, in terms of what the drivers are saying.
Generally they felt that northern Ontario highways and our Trans-Canada Highway could be improved by resurfacing, which we feel is being approached; improving the highway markings and lines; and widening the roadways.
We have also found, in terms of research from Canada and the United States, that it is truly those points that can improve the safety on highways up to 60% - that by widening the lanes from nine to twelve feet and by improving the shoulders we can save a lot more lives on our trans-Canada highways.
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The Chairman: Thank you very much, Ms Skidmore. I've been sitting here thinking what an unfortunate last name that is, given the topic you're talking about.
I want to say how pleased I am that you're here, because as we talk about national highway renewal a difficult area is this very large section of road in a very low-density population. It's one we've been struggling with as we try to look at ways in which the federal government could participate in financing the renewal of that road. So your presentation is going to be quite helpful.
I'm going to turn the first question over to Mr. St. Denis, who has been harassing me regularly about the quality of the roads in northern Ontario. To get him off my back, I'll start with him.
Mr. St. Denis (Algoma): Thank you, Mr. Chairman, and thank you, colleagues, on all sides, for letting me participate today. Ms Skidmore is a constituent of mine. She represents an organization that has been vigorous in its efforts to make sure that northern Ontario highways in particular are safe for everybody, winter and summer.
I want to thank you, Judy, for making a special effort to visit with the committee.
I believe my riding of Algoma has the longest stretch of the Trans-Canada of any riding in the country. It takes me roughly ten hours to drive from one end of my riding to the other. If you stop for lunch, it takes about ten hours. About 90% of that is Trans-Canada Highway.
Mr. Keyes: Is that an eight-hour lunch or a five-hour lunch?
Mr. St. Denis: No, that is a thirty-minute lunch.
Mr. Cullen: His usual lunch.
Mr. St. Denis: My usual lunch, if I get it.
I've met with Judy a number of times, and when I read this report I'm reminded that - and for a moment I'll speak from personal experience, with your indulgence, Mr. Chairman - the issues that are being raised here today are critical. I would like to assist my urban colleagues to understand better what it's like being a rural MP, having to conduct one's business on behalf of one's constituents on highways that are very dangerous.
I have done 360-degree spins on the Trans-Canada Highway in a snowstorm. I have hit a large deer and totalled a car. I have had many close calls and seen others in trouble. Just in the last two months, or less, I've driven maybe 15,000 kilometres serving the various parts of my riding, which in the new boundaries will go from northern Georgian Bay at Killarney through to well north of Lake Superior, at Manitouwadge. So this is a very important issue.
Even things such as that in the wintertime the passing lanes aren't plowed.... We have passing lanes that in most cases are okay in the summertime but in recent winters aren't plowed, so we lose our passing lanes. You attempt at your peril to get past trucks or buses or slow drivers in the wintertime.
The issue isn't just a matter of safety, as important as that is and as important as the deaths that occur are, but for transportation of goods out of northern Ontario, which has provided much of the resources for Ontario's economy over the last how many...since the development of Upper Canada. Tourism is important. Our American friends who come across at the Soo, Michigan, through the Soo, Ontario, or who come from the Toronto-Windsor part of Ontario, face highways in northern Ontario that don't look anything like as good as the highways they left in Michigan or Wisconsin or Indiana. I'm sure Judy would confirm that as well. So we have to deal with the tourism issue.
I would like to ask Judy if she could expand in a more subjective way on the areas of tourism and transportation. Not only are they an issue for local residents and people passing through, but there's this image, as you suggested, Mr. Chairman, of a sparsely populated area that is critically important to the economy of Ontario and Canada, because of the mining and the forests that are there and the tourism potential.
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How critical is it in a bigger picture sense to have northern Ontario highways, particularly the Trans-Canada Highway, equal to or better than Manitoba on one side and Quebec on the other side?
Ms Skidmore: Perhaps I can ask our professional, Ms Ingo, to respond to that.
Ms Julie Ingo (Planner, Northerners Inc.): As you mentioned, everybody's well aware that resource industries and the tourist industry are the two most important industries to northern Ontario. Again, I don't think anybody would dispute the fact that the resource industry is critically important to Ontario as a whole. If we cannot move those goods out of there efficiently, quickly and safely, we lose time and we lose our competitive advantage internationally.
There is no question the quality of the roads is a critical economic element - never mind all of the other safety issues - to the functioning of northern Ontario. As you mentioned, we are dealing with a very sparse population across this area, but we're also not asking for massive development of a four-lane road to run through northern Ontario. We're talking about relatively small and inexpensive improvements that would make a great deal of difference to the ability of northern Ontario to move those goods.
Mr. St. Denis: I want to make sure my colleagues have an opportunity. How much time do we have with this witness, Mr. Chairman?
The Chairman: We'll have a round of questions and then I'll come back to you, Mr. St. Denis, if I may.
Mr. St. Denis: Okay.
[Translation]
Mr. Mercier: I was very interested to read your 63 recommendations. Personally, I would add a 64th concerning highways in general.
Let's consider a highway with which I am quite familiar, namely the one between Montreal and Ottawa. Along some parts of this highway, the eastbound and westbound lanes are separated by a strip of land. In some locations, vegetation such as trees and shrubs has been left to flourish, while at other locations, the vegetation has been removed and the grass cut. When I travel along this highway at night, I always find it more enjoyable and safer along those strips where the vegetation has been left undisturbed because I am not blinded by the headlights on the vehicles travelling in the opposite direction. Maintenance costs must also be much lower in this case. Furthermore, vehicles cannot accidentally cross the divider and hit an oncoming vehicle when vegetation is growing along this strip.
I have always wondered why the vegetation is systematically removed along the dividing strip when it seems safer and more economical to let it be. Therefore, don't you think we should recommend that vegetation be planted along highway dividing strips?
Ms Skidmore: I will answer the question in English, if I may.
[English]
In the area we know - 20% of the Trans-Canada Highway from North Bay to Kenora - there is not not one kilometre where we have highway-separated....
Ms Ingo: There's a yellow line.
Ms Skidmore: I agree you may have a point. I wish it were one we had some experience with, because nowhere do we have four lanes that are separated. We have only a couple of kilometres with four lanes in the 4,500 kilometres of our Trans-Canada Highway.
[Translation]
Mr. Mercier: However, when travelling along the highways in other regions, sometimes we see vegetation and sometimes not. Don't you find it more enjoyable and safer to travel in those areas where some vegetation has been kept?
Ms Skidmore: Yes.
Mr. Mercier: Well then, a recommendation such as this is in order. Of course, if you tell me that this is not a problem in northern Ontario, then I can understand why you have not made this particular recommendation.
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Personally, I think it is very important that were restore vegetation along existing highways and that we leave it undisturbed when we build new ones. I've always wondered why it was removed. It's an expensive undertaking and it impedes safety.
[English]
Mr. Gouk: I actually have a section of the Trans-Canada Highway that I think is probably quite a bit more dangerous than yours, albeit quite a bit shorter. That's the Rogers Pass in the Rocky Mountains in British Columbia. Every time there's an accident I hear about it, I can assure you.
I was at a meeting in that area one time and was asked when I was going to Ottawa to demand that it put in a straight, four-lane, divided highway from Kamloops to the Alberta border. My response was ``never'' because that is unrealistic; we're not going to get it.
I really commend you in taking the approach you have. All too many people come in and ask for pie in the sky. It's understandable and yet totally impractical and doesn't help resolve the problem at all.
I want to talk further about what Mr. Mercier brought up, and that is the idea of a divider. That is one of the things we've talked about on the stretch of my highway. We have very little road with four lanes. We have some passing lanes, but it's a very treacherous piece of road.
I notice about 50% of your accidents are head-on collisions. Invariably in ours it's drivers in the wintertime, in particular, who slide across and have head-on collisions, ironically almost always with trucks, which says something about the amount of truck traffic we have.
Would it help to have even a concrete divider? I realize you may have to widen a bit and it would go hand in hand with your widening. It would be terrific to have Mr. Mercier's trees, lawns and everything, but that may not be practical. Is a concrete divider something you've considered at all, and do you think it would be a safety item for you?
Ms Ingo: With the present width of the highway, a concrete divider is not practical. You'd be looking at a dangerously narrow single lane, particularly when you consider the lack of a shoulder and the snow conditions on the side of the highway during the wintertime.
There's one thing that would assist, and this goes back again to the marking of the highway. You've probably experienced the textured dividing line on some American roads so if a driver crosses that line he or she can feel it. Certainly a number of people fall asleep and cross that line.
Mr. Gouk: Yes. That's great in the summer.
Ms Ingo: Right. There's also the visibility issue at night, particularly because those lines are not well marked and not kept up so they fade very quickly.
The other issue is when we talk about the head-on collisions we're not only talking about collisions with drivers in the opposite direction; we're also talking about head-on collisions with fixed roadside objects, and I'm sure you can relate to the rocks on the side of the road in your riding. That is the second element that is equally dangerous and again goes back to the issue of widening those roadway areas, so when a driver goes off the road for whatever reason, particularly in an emergency situation, there's somewhere for that vehicle to go that's not directly into the face of a rock.
Mr. Gouk: I've driven through there before but it's been quite some time. We'd have to widen in our area as well in order to make those centre medians practical.
How practical is it to widen your area of the highway? In some sections of ours it's a real problem because we're cut into the side of a mountain. Going through your area where you want these wider roads, is it primarily a matter of doing it, or are there great constraints because of terrain?
Ms Skidmore: I'm sure Julie can add to this, but Highway 11 goes largely through the clay belt and crown land, where it takes the majority of the Trans-Canada traffic. In some areas it would be very expensive. In Mr. St. Denis' riding it's not mountainous but very rocky. But we do have some extensive areas where it would be quite inexpensive.
The Acting Chairman (Mr. Keyes): Thanks, Mr. Gouk.
Mr. Cullen has a question and then Mr. St. Denis will wrap it up.
Mr. Cullen: Thank you for your presentation.
I would like to talk more about Highways 11 and 17, but I'd like to echo what Mr. St. Denis has said about the importance of good roads for the forest products industry and other resource industries. Having worked in the forest industry for many years, I know the kind of decision-making required when you're looking at rail versus road. In your riding there's a massive forest industry and the good roads are a key factor.
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You talked about Highways 11 and 17 being part of the Trans-Canada system. When we're looking at public-private partnerships for roads in the national highway system, we're looking at various scenarios. An issue, for example, is the need to have alternatives. If you're going to any kind of user pay, and tolling is just one form of user pay, users of the road need to have alternatives. If you're going to charge users, often a better case is built if there are some enhancements to the road.
Let me try this scenario out on you. I wondered if your organization would support a scenario like this. Let's say there's a consultation process and the stakeholders, whoever they are, decide Highway 11 or Highway 17 is going to be turned into a user-pay road. As I say, tolling is just one way. In the process that road would be enhanced, improved, made safer, made more efficient for truckers. In other words, you'd have a quality road. If someone wanted to take that quality road to be safer or quicker, more efficient, etc., they would have to pay for it somehow - don't ask me how at this point - but if they wanted to take the other road, they wouldn't have to pay anything.
Is that a scenario you think you could support? Maybe you could comment on it.
Ms Ingo: That's a difficult issue, because in some areas there is a significant difference between the location of Highway 17 and that of Highway 11. So you're looking at an issue of fairness, because for some northern communities in some parts of northern Ontario it's simply not feasible to reach the other highway. In that respect I think you would see a difficulty with offering that as an alternative.
The other difficulty with that is when you start to offer an alternative that is safer to the people but also costs them money, they're going to start to ask you why they are going to pay for their own safety. They're going to ask you if their own personal safety is not of value to you in both scenarios.
Mr. Cullen: There's a certain level of safety that probably is required notwithstanding. But in this scenario there might be a road that is...I don't know if you could say safer...maybe by virtue of the fact that it would be designed to a higher specification of efficiency and width and whatever. A key driver for the driving community or the business community would be that there would be a more efficient road to take. The truckers are prepared to pay for it, but by the same token it would be a safer road. It would be put up in a couple of years rather than people arguing over it for the next twenty.
I just throw that out. I can see your problem with parts where the roads intersect, etc.
Ms Ingo: We did find in the responses to our questionnaires that was requested. People did say to put a toll on it; let us pay for it that way. I think generally there is support for that kind of system. When you look at the whole issue, it's a difficult one. Maybe it's one Mr. Beck could solve for us. Maybe he could give us a scenario in a couple of minutes by looking at the map. I don't know.
The Chairman: At Mr. Beck's current levels, I think a toll of about $450 a trip would be in order.
Ms Ingo: Some people may be prepared to pay.
The Chairman: Some people may be. Of course, the fewer who pay it, the higher the toll.
On that note, Mr. St. Denis, I will permit you one very brief question.
Mr. St. Denis: Actually, it's just a brief comment, Mr. Chairman. I know the time is almost up and we have other witnesses.
I just can't emphasize enough the importance of this issue, and how hard Ms Skidmore andMs Ingo and the organization have worked to highlight the criticalness of safe and efficient transportation in the north. With the greatest respect to my colleague, it's a good question, but I think we would probably say yes to tolling if all the Trans-Canada were to be tolled, because it's legitimately part of the national highway system. Even though we use the roads locally, a lot more people coming through are from other parts of the country. We want to provide them safe passage through the area and we want to give them good reasons to stop and enjoy our tourism features, not our hospitals because they were in a car accident.
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But your point is well taken. We have to look at all options. In support of Mr. Gouk's comments, you've come here not with a demand for billions of dollars but with reasonable and reasonably modest ideas that, if implemented, can get us down the road towards safer and more efficient roads.
On a final point, I notice under safety recommendations, number 7 - lucky number 7 - is mandatory politician driving across northern Ontario. I hope that's lucky number 7, because I feel like number 13 most days out on the highways in my riding of Algoma.
Thank you.
Thank you, Chairman and colleagues, for your indulgence today.
The Chairman: Thank you very much, Mr. St. Denis.
Ms Skidmore and Ms Ingo, we appreciate your coming here and all the work you've put into this. I want to assure you it's an area we're going to be spending some time on.
Ms Skidmore: Thank you very much.
The Chairman: We are going to ascend to 35,000 feet and ask the Air Transport Association of Canada to come to the table. Their brief is entitled ``Financing Air Transportation Infrastructure into the 21st Century''. I wonder if there's much paving involved here.
Welcome. It's always a pleasure to have you here. You know the procedure. Please make your initial presentation and then we'll get into it.
Mr. John W. Crichton (President and Chief Executive Officer, Air Transport Association of Canada): Thank you, Mr. Chairman.
I'm John Crichton, the president of the Air Transport Association of Canada. I have with me today my vice-president and secretary, Howard Goldberg. Howard is here to get me out of trouble in case you ask me some very technical tax questions.
We filed with the clerk a paper on our presentation, so I'll leave that as filed. I'll try to keep it to some brief opening remarks and focus them on our main concern, which is the federal excise tax on jet fuel. We see it as an impediment to the growth and profitability of the air carrier industry in Canada and obviously to tourism.
In all countries around the world that have VATs such as the GST, the business inputs either are not directly taxed or are refunded through input tax credits. When the GST was first proposed some years ago, ATAC supported it on the basis that we believe taxing inputs harms Canadian businesses, certainly within the context of their international competitiveness.
When the GST was introduced in 1991, the 13.5% federal excise tax was removed and all business inputs except aviation fuel were free of tax. The federal excise tax on jet fuel is 4¢ a litre, and it's applicable to jet fuel consumed in domestic air transportation. The fuel used in international air transport is not taxed, in accordance with international treaty.
Also in 1991, the Conference Board of Canada, in part sponsored by government, did a study on the tax competitiveness between Canadian and U.S. air carriers. The study noted that the federal excise tax on fuel was one area where Canadian carriers were at a major disadvantage.
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Since 1991 we have had the open sky agreement, the new Canada-U.S. bilateral air agreement, which has significantly increased direct competition between Canadian and U.S. air carriers.
What is the difference if we compare Canada to the U.S. in terms of the tax on jet fuel? We find the approximate differential is that Canada taxes it at 4¢ a litre and the U.S. is taxing it at about 1¢ a litre. So we have a major gap in the tax regime.
Compounding that is the fact that some of the provinces impose some of the highest fuel taxes in the world on both domestic and international aviation. In the brief we provided the committee earlier, there is a table setting out what those provincial taxes are.
Right now the federal domestic jet fuel tax costs Canadian carriers about $100 million a year. This places the Canadian carriers in a situation of increased competition from U.S. carriers while paying about 300% more tax than their competitors.
At the same time, downsizing or reinventing by government and privatization of government services are adding significantly to air carrier operating costs. The commercialization of the air navigation system can add between $300 million to $400 million a year in new costs to the airline industry.
The recent decision of Transport Canada and the RCMP to no longer provide policing services at major airports could cost the industry as much as $50 million a year.
Discussions are under way now with Transport Canada that would see a complete transfer of the passenger boarding and baggage security system to the industry; the industry would assume full financial responsibility. Depending on the types of rules that may eventually apply in respect of international services, this could be a new expense of $50 million to $100 million a year.
The transfer of the airports to local authorities removes these airports from the federal budget process in terms of capital expenditures. This means these airports now are free to manage their own capital budgets, and in terms of their capital expenditure programs, to work outside of the national budget.
Right now the top seven airports, we estimate, have about $4 billion in new projects on the books. That will mean an annual debt service cost in the range of $400 million. Those costs aren't in the system today.
The lease costs from the major airports will most likely add in well over $200 million a year, plus regulatory fees that are now being imposed, which, again, our colleagues in the U.S. don't have.
Profit margins in our industry - assuming that a carrier has a profit margin - are pretty thin at the best of times, and at the same time they are having to cope with all of these new costs and situations.
The carriers are facing huge cost increases to fund services formerly provided by the government. We conservatively estimate that the transfer of all of these costs may add as much as $1.5 billion annually, or 17% of the industry's revenue.
The federal jet fuel tax does not directly support any services provided by government, certainly not any more, and I don't think the argument can be made any more.
Removal of this tax would be consistent with the raison d'être of the GST - that is, no tax on business inputs - and it would assist the carriers in meeting these additional financial burdens I've talked to you about, as the government goes about its restructuring and privatization. It will also help them enormously to be competitive.
Those are my opening remarks, Mr. Chairman. I'd be happy to address any questions members of the committee may have.
The Chairman: Thank you very much, Mr. Crichton.
Mr. Gouk.
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Mr. Gouk: I have one comment in support of what Mr. Crichton has said.
A couple of years ago in British Columbia they increased the provincial sales tax from 6% to 7%, which is in effect, I think, about a 16.5% increase, and they had a net loss of revenues. I think that substantiates what you're saying in terms of taking money from one area. You often end up losing it, sometimes in greater quantities, in another.
I think Canada is struggling. We've seen that. A real struggle is going on right now. I think one of the things government is going to have to do is to reconsider its priorities in terms of what it collects, how it collects, and who it collects from.
The Chairman: Is that it, Mr. Gouk?
Mr. Gouk: That's it.
The Chairman: Thank you.
Mr. Cullen.
Mr. Cullen: Thank you, Mr. Chairman.
Mr. Crichton, from your comments about embedded taxes or tax relief on GST and not sufficient relief, in your view, on the excise tax, can I infer that your association would support a harmonized sales tax?
Mr. Crichton: That's a yes-and-no answer.
Howard, I think you could point out some of the differences.
Mr. Howard P. Goldberg (Vice-President and Secretary, Air Transport Association of Canada): Thank you.
The answer is yes, but - and the ``but'' is this. The technical problems of a multi-rate harmonized tax.... Trying to make the computers work is really difficult.
For a long time we've said that one national harmonized rate is not a problem for us. We could accept it, but the current harmonization that is about to descend on us will result in four different rates of possible tax on an airline ticket, based on where you are and where you're going. The complexity that imposes on the computer reservation system is enormous; it's huge. It's on that basis that we have a problem with the piecemeal harmonization. But no, we have no problem with national harmonization.
Mr. Cullen: Because the national harmonization, in terms of the embedded cost of provincial sales tax in some of your goods and services that you're buying - or the goods in any case - must affect you competitively.
Mr. Goldberg: Provincial sales taxes are an issue, but they're not as big an issue as you might think. Parts for aircraft and other such things are exempt from most provincial tax. So even in the harmonized zone, the impact of the provincial input tax credits are welcome, but they're not significant now in Ontario. Costs of printing and other things where we do a lot of that work might be larger, but in a macro sense provincial sales tax isn't as big an issue for us.
Mr. Cullen: I have one more question, Mr. Chairman.
There are a significant number of airport capital projects that are under way or planned. Are there benefits that your members will obtain from some of that investment in that infrastructure or is it hard to quantify?
Mr. Crichton: There are obvious benefits to many of these projects. The concern is that the industry overall and air passengers, taken as an aggregate nationally, have a finite ability to absorb cost increases, as does any business.
While one can find lots of things to be critical about how Transport Canada ran whatever services it had in the past, one virtue was that the capital spending was controlled, on an annual basis, in a central way, so that the airport sector had a governor, if you will, on the speed at which money was being spent and therefore having to be recovered.
With the airports being devolved out to each community, that governor is gone. There is no longer a national overview of the spending. Of course, each local airport authority is understandably interested in improving their facilities and the image of their airport in their community, and they're interested in trying to attract more business and so on, so they are not too terribly preoccupied with what somebody is doing 200 miles away or 2,000 miles away or in another province.
The airlines, of course, have to deal with the system on a national basis, and they have to deal with all of the fees that are going to have to be charged to pay for these projects. Looking at seven airports, these projects right now are in the $4-billion range of investment over the next ten years. The debt service on that is in the $350 million- to $400 million-per-year range, and those costs are not in the system today.
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A lot of things have to be coped with here. We're very concerned that loading up the back of the air transportation mule may break it soon. The $100 million-a-year excise tax on jet fuel, which under all the principles of the GST was supposed to have been removed...because we pay GST on top of that. We're still paying the 7% on the jet fuel. This is the only tax in the country that was left on.
We think it's time, given what has happened.... Personally, I think this tax in the aviation business is a job destroyer. It's one of those taxes that should be dispensed with. It's going to help the industry enormously in coping with these other costs.
The Chairman: Mr. Crichton, a comment on that, or perhaps a question. About the lack of a governor, it struck me that one of the arguments you made in favour of this overall change was that the market would be the governor.
Mr. Crichton: Well, no. Actually, Mr. Chairman, the national airports policy was introduced without any consultation with the airline industry.
The Chairman: Would you like us to reverse it?
Mr. Crichton: No, I'm not asking you to reverse it now, because the industry basically supports the principles and the thrust of it. There are a number of aspects of the policy we have concerns about. One of those is the amount of rent Transport Canada wants to receive from the larger airports. Another one is the inadequate funding for the 71 regional and local airports that currently don't make money. The third, which is more an issue, I suppose, between the airline industry and the airports themselves, is the modalities of financing their capital projects.
Right now the airline industry, unlike with some other government initiatives, was not given a seat at the table in the airport process. It doesn't have any official role in the management and operation of airports, it doesn't have any representation on airport boards, yet it's the prime source of money that keeps the airports going. So that's a concern to us, and we've been working with people in Transport Canada, and also with the Canadian Airports Council, to try to address some of these problems.
The Chairman: It's something similar to the users of ports not being allowed on ports boards.
Thank you very much.
Next Wednesday afternoon we're going to do clause-by-clause on Bill C-43.
Mr. Gouk: Will a notice be going out?
The Chairman: A notice will be going out. We'll call the meeting for 3:30 p.m., and we're going to keep it fairly open-ended, to allow us to get through Bill C-43 that evening, if possible. It's not very large.
Mr. Gouk: I haven't seen my schedule yet.
The Chairman: But now you're aware of part of it.
Thank you. We're adjourned.