:
Thank you, Mr. Chairman.
My name is Tom Garlock. I'm the general manager of the Niagara Falls Bridge Commission, and I'm also the president of the Bridge and Tunnel Operators Association.
With me today is Mr. Ron Rienas, the general manager of the Buffalo and Fort Erie Public Bridge Authority, and one of my associates from the Niagara Falls Bridge Commission, Mr. Ted Gibson.
[Translation]
I'm sorry, but I do not speak French.
[English]
Members of the standing committee, thank you for your courtesy in permitting me to address you on behalf of the Bridge and Tunnel Operators Association concerning the provisions of Bill C-3, a legislative initiative that is important to the interests of Canada.
The Bridge and Tunnel Operators Association, comprised of the 10 entities responsible for 11 of the international crossings between the province of Ontario and the states of Michigan and New York, works diligently to support the efficient movement of people and commerce over the Canada-United States border. The BTOA, as we are known, is acutely aware of the importance of an efficient border to Canada's competitive economic position in the world.
We have carefully followed the development of the legislation before you since it first appeared in a previous Parliament as Bill C-44. While I am appearing today on behalf of the members of the BTOA, I advise you that individual operators may offer testimony or comments independently that will reflect their particular view or circumstance. However, the issues I raise today are of consequence to all the members of the association. They have asked me to bring them to your attention, as well as specific language recommendations for the bill that would cure what we are advised will be unintended consequences of the present language.
On at least three occasions over the past 18 months or so, Canadian officials have generally advised us of the intended legislative provisions together with their reasoning and expected outcomes of the legislation. While we appreciate the information, there are two areas within the legislation that we have explained would be injurious to crossing operators in a way that is not intended by the legislation.
The first and most significant issue deals with the intent to approve the setting of tolls, fees, and charges. The majority of the BTOA members are financially independent and fund their operations and capital improvements from toll revenue. It is that revenue that is pledged to bond holders to raise capital for significant projects.
As I am certain you can appreciate, bond holders require that issuers have the ability, means, and flexibility to manage their revenue sources in such a way that debt obligations are repaid according to contractually agreed terms. In the event that financial markets sense an issuer may be constrained in managing its funding streams, there is a direct negative impact upon the issuer's rating that could have the effect of dramatically increasing future borrowing costs. I can also assure you that this language may be troubling to present bond holders as well.
We brought those concerns to the attention of officials concerned with drafting Bills C-44 and C-3. Last year, we also arranged to have officials briefed directly with bond counsels by teleconference. At this time, in response to Bill C-3, we have written statements from two bond counsels, a financial adviser, and a rating agency that have acted on behalf of four of our members.
At the moment, all communications are available in their original language only, but we will be pleased to provide translations as soon as possible.
Permit me to give you the details of the contents of these communications. Standard and Poor's rating service has advised the Blue Water Bridge Authority as follows:
The BWBA's current toll-setting autonomy is one of the authority's more important credit-supporting features. The draft legislation, as currently published, would not actually impose any constraints on the BWBA’s toll setting autonomy, but simply specify that the government had the power to do so. Rating action of any kind would be unlikely, unless the BWBA were to receive official notice of the government’s intent to disallow or limit the magnitude of a toll increase proposed by the BWBA or force a reduction to existing tolls without any mitigating policy initiatives and we were to judge that such a constraint stood a reasonable chance of materially affecting the BWBA’s debt service coverage ratios. Given the BWBA’s status as a federal non-guaranteed Crown corporation, we do not expect the government to take any action which would diminish the rights of the BWBA’s creditors without concurrent and offsetting policy adjustments.
Roosevelt & Cross Incorporated, financial advisers for the Niagara Falls Bridge Commission, has commented on the impact of clause 15 of the bill. They say that the resolutions authorizing the issuance of the commission's bonds specifically require that the commission at all times charge and collect tolls sufficient to generate net revenues equal to at least 130% of maximum current or annual debt service and 100% of any deficiency in the reserve account. Bill C-3 conveys very broad powers regarding fees and tolls to the government and provides no assurance of any kind that the commission's ability to charge sufficient tolls will not be impaired in the future by a decision of the government. Credit analysts for the rating agencies and for purchasers of any future bond issues that the commission may choose to issue to finance capital outlays will definitely take a negative view of the impact of Bill C-3 on the credit of the commission. This, in turn, will increase the cost of capital for the commission and possibly limit its access to the capital markets. The market for outstanding bonds of the commission could be damaged by the uncertainties created by the bill, possibly creating financial penalties for the holders.
I am aware that the committee has heard directly in writing from the Buffalo and Fort Erie Public Bridge Authority on the matter of bond market impacts. Again, we have copies of correspondence for your review.
You will note common threads among the written advice that we have received, and I would add that other members of the BTOA have expressed similar concerns. You will also note that we have indeed had conversations with our financial experts.
Paragraph 15(b) of Bill C-3 stipulates that the Governor in Council may, on the recommendation of the minster, make regulations respecting the tolls, fees, and other charges that may be imposed by owners or operators of international bridges or tunnels for their use to ensure the efficient flow of traffic. While we understand the government's interest in prohibiting activity in this area that could be deemed predatory and contrary to the goal of efficient movement of traffic, we are most concerned that bond holders and rating agencies would regard this language, as written, with alarm. In light of that, the BTOA submits additional language in that clause for your consideration.
Clause 15 of Bill C-3 would be amended so that clause 15 in its entirety would become clause 15.1. A new clause would be added immediately following paragraph 15.1(e), which would be 15.2. It would read as follows:
Notwithstanding all other provisions of this section, no action by the Governor in Council, on the recommendation of the Minister, shall be taken under this legislation or in ensuing regulation that will adversely affect the commercial or financial viability of owners and operators of international bridges and tunnels in the operation, use, tolls, fees and charges for which they have legal jurisdiction and liability. Any such action shall only be taken in the interest of addressing existing, demonstrated negative impact upon the efficient flow of traffic over the border.
We belive that this addition will preserve the government's ability to address the matters with which it is concerned while clarifying that owners and operators will be able to continue managing their financial affairs in the most efficient manner in accordance with their legal obligations.
The second area of the bill that we believe can be improved without diminishing the government's interest is clause 4, which deals with the relation of the act to other regulations now in place. The BTOA understands the interest of the government in regard to maintenance, security, and safety of international bridges and tunnels, and the members of the BTOA are equally committed to exemplary performance into those areas.
The members historically have followed the safety standards of the province or state in which they make landfall, adapting the more stringent of the two. This has also been the case with security, particularly in the wake of the events of 2001, and we willingly comply with the requirements of a wide range of agencies, including, but not limited to, Transport Canada, RCMP, OPP, the United States Coast Guard, the Canada Border Services Agency, and the United States Department of Homeland Security.
We believe that in most cases the interests of Bill C-3 are already being served through any number of agencies, and respectfully request that the statute provide for the recognition of existing requirements by including language that will do so.
The BTOA recommends that clause 4 of Bill C-3 be amended by adding a new subclause (5), to read as follows:
Prior to the creation of any regulations made under this Act establishing standards regarding maintenance, repair, security and safety of international bridges and tunnels, the Minister shall examine Provincial and other agency requirements for the purpose of acceptance of such existing standards and/or regulations as being sufficient to fulfill the intent of the Act.
This language in no way limits the minister's authority, but does cause a review to avoid the reinvention of the wheel, so to speak.
Finally, it is most important that I assure the members of the committee and all of your parliamentary colleagues that the members of the BTOA clearly understand their unique obligation to the people of Canada and the people of the United States to maintain an efficient border between these two great countries. As you know, in many instances our members operate in close geographic proximity to one another, working together to offer our travellers greatest efficiency, rather than an adversarial competitive environment that considers only self-serving goals.
We can assure you that we will continue to work carefully with the Government of Canada to ensure an open, efficient, and safe border.
Thank you, Mr. Chairman. At this time, I would be pleased to respond to any questions the members might have or to receive their comments regarding my testimony.
:
That is correct, Mr. Bell. We're looking for parliamentary direction in this area to make it part of policy.
As far as the requirements go, Mr. Rienas, at the Buffalo and Fort Erie Public Bridge Authority, and I, at the Niagara Falls Bridge Commission, presently work with Ontario's and New York's safety standards. They are similar in many respects, but in any instance when one is more stringent than the other, we automatically adopt the more stringent standard. This goes for things such as bridge inspection. We have to give our inspection teams specific guidelines to follow in inspecting the structures to make sure that they are safe.
I might add, too, that usually the provincial and the state standards would be for “every other year” inspection. I can tell you, at least in our case, and I think in the case of a number of other operators, we do annual inspection.
Our point here is that we would encourage the minister to look at the language of existing regulation out there, rather than to immediately proceed to create new federal regulation that could be redundant. If there's a compelling interest on the part of the Government of Canada, clearly that has to be addressed, but we're just asking that we take a look at what is existing.
:
That's true, in the area of regulation.
Going back to the language concerning setting of tolls, fees, and other charges, we think it is very important to financial markets that Parliament make a policy statement in statute, rather than waiting to have this clarified in regulation. I know I don't have to explain to the members that financial markets can be very sensitive to nuance, and if they believe that our ability to manage our funding stream is going to be undermined by activity on the part of the government, it's going to have an impact on our rating.
By way of example, at the Niagara Falls Bridge Commission we work very diligently to improve our financial standing. We support all of our activity by virtue of our tolls, fees, and charges. The first exception in more than 68 years has been the partnership with the Government of Canada and the Province of Ontario on the BIF. That resulted in major improvements on both the Lewiston-Queenston and Peace bridges. But as far as ongoing operation, we support ourselves. We go to the bond market to fund our capital projects, and if the financial markets believe that our ability to fund this is going to be impaired, it's problematic.
I started out by saying we work diligently to improve our financial standing. In 1993, when we made our last significant bond issue of $130 million U.S., we had a triple-B rating, so our cost to borrow was not insignificant. Through careful management in the years since then, by 2003 when we did a refinance, Standard & Poor's rated us as an A. You can appreciate how dramatically our cost to borrow went down.
Obviously these costs are ultimately borne by our toll payers--Canadians, Americans, and visitors to the two countries. In the instance of the not-for-profit operators, we have a powerful incentive to keep all of our costs low so we don't have to pass them on to our toll payers.
:
No, Monsieur, I would not say that it's not true, but it may be a misinterpretation.
I don't believe there is a correlation between congestion at the border and toll structure anywhere at this time. I do believe that in drafting the bill, the agency is concerned that in the future, in the case of our two crossings.... I operate three bridges on the northern part of the Niagara River, and Ron operates one bridge on the southern part of the river. I think that the Department of Transport would be concerned that if I were to drop the toll for transport trucks to a dollar, for example, transport truck traffic would suddenly dry up on the Peace Bridge. That would diminish his ability to recover the revenue to satisfy his bonds; that would be a predatory practice.
Conversely, if a crossing was not as close as we are—with a considerable distance to the next crossing—an operator could engage in predatory practice by charging a very high toll, which would be unfair to toll payers.
I believe it is those extreme situations that the minister would want to address. In no way does the language that we proposed to you this morning impair the minister's ability to intervene in those situations.
I don't know of any instance when congestion is related to tolls at this point in time. In fact, on the international bridges, congestion is usually the result of what is happening in one plaza or the other, with either the United States Customs and Border Protection or the Canada Border Services Agency, with all due respect. We take your money very quickly and send you down the way.
It is this predatory practice that the agency is concerned with, and the minister would be in a position to address it.
I hope I have answered your question.
:
I think it's a combination of both, quite frankly. I will tell you that right now, with the Canadian dollar strengthening against the United States dollar, we are starting to hear from some of our bridge and tunnel users. I know from talking to my colleagues that just about everyone I'm aware of is ready to address that situation.
We went from a significant disparity between the two currencies not long ago to now climbing very close to parity. But we are not insensitive to that, particularly those of us who have been established with public benefit corporations. We have to respond.
I will give you the example of how the Niagara Falls Bridge Commission began. I wouldn't be with you today if it weren't for a terrible accident. There was no loss of life, but when the Falls View Bridge--the Honeymoon Bridge--collapsed into the gorge in January 1938, it was owned by a private operator. At that time communities on both sides of the river were having some issues with the operator, and they said they had an interest in having a quasi-public entity do this because they wanted the entity to be responsive to the community. That's why the Niagara Falls Bridge Commission was created. That is why we have four Canadian commissioners and four American commissioners, to be sensitive to the interests of the communities we serve.
Finally, we perform many public purposes. In Canada, under section 6 of the Customs Act we provide hundreds of millions of dollars of infrastructure, usually at no cost whatsoever to the government. As I say, the border infrastructure fund of late has been an incredible tool in improving border operations, but generally speaking we pay to build these facilities for CBSA, and even more important, we continue to pay to maintain them. In the instance of the Niagara Falls Bridge Commission, I would estimate that cost to be about $4.5 million a year that we bear.
So obviously it is not an inexpensive pursuit operating an international crossing and making sure that it is done in a safe and efficient manner that is responsive to the interests of the people of Canada and the people of the United States. We are asking the committee and your colleagues in Parliament to clarify this language on fees and tolls so that we are able to do that efficiently and at the lowest cost to toll payers.
To follow up on Mr. Julian's questions, first of all, I appreciate the fact that you're generally supportive of Bill C-3. I believe there's general consensus that this legislation should be moving forward.
I'll address the two key issues that you've raised. First of all, on the issue of the regulation of tolls by the minister, you had provided some suggested wording and made the statement that you felt the minister's hands wouldn't be tied at all. From the wording used on the toll issue, as I recall, you basically brought in the whole act, as opposed to just section 15. In other words, what you're suggesting is that no action would be taken by the Governor in Council that will adversely affect the commercial or financial viability of these facilities. You don't refer specifically to section 15; you refer to the legislation as a whole. And that would tie the minister's hands, not only on the issue of tolls, but when it comes to perhaps increasing security requirements, which have attendant costs, obviously.
If in fact there are going to be any revisions to this particular section, you're probably going to have to go back to the drawing board again and consult with ministerial staff and make sure that in fact the minister's hands are not tied.
Could I have a brief comment on that before I go to the second issue?
:
I don't believe we do have a problem with that clause. As I said earlier, these are important links for Canada. They are important economic links, and I think if the minister sees a situation that could undermine the safety of a crossing, it is within the government's purview to step in and say this has to be taken care of.
In terms of finances, we did have some discussion with the Department of Transport along these lines. I'll give you just a brief overview. As I have been operating three bridges, and Ron has been operating a bridge between two wonderful communities, Fort Erie and Buffalo, New York, we have been able to be self-sufficient. Some of the members of the Bridge and Tunnel Operators Association, though, don't deal with the volume that we do. So looking at a security standard and looking at the Niagara Falls Bridge Commission with more than 150 cameras on top of the bridges, under the bridges, in the plazas, with motion detection down in the gorge, with controlled access for all 90-some doors around the commission--a $3.5 million system--we're very proud of what we've done in security, both in hardware and in our practices.
The international bridge at the Sault, however, does not have the resources to do that. I think if it became an interest of the government to emulate the strongest standard and to require, say, a similar security system to what I would have or Ron would have at the Ogdensburg Bridge or even at the Federal Bridge Corporation Seaway International Bridge, then the federal government might have to look at some financial assistance.
Those are discussions that we have had, but we're not here proposing that a financial component be included in the bill.
:
I believe the answer to your question is yes. I would agree with that, Mr. Blaney, but your earlier statement is accurate as well. Ontario has very stringent standards, as does New York, as does Michigan, to ensure the safety of these spans.
As I noted earlier, we take it a step further. I believe Transport Canada already asks us to provide inspection reports of the spans every other year. We send them every year. Most--in fact, almost all--of the bridge and tunnel operators do their inspections on an annual basis. Again, it's reflective of our understanding of the importance of these crossings to both countries.
For another thing, we are unique, and part of the benefit of all these public benefit corporations operating the crossings.... Take, for example, the Ministry of Transportation for the Province of Ontario. They have thousands of spans to look after across the province. We have the luxury at the Niagara Falls Bridge Commission of only looking after three.
If I could, I would tell you that I think the Minister of Transportation for the province holds us in some regard, in that, through the BIF program in 2003 there was an allocation to the province for provincial Highway 405. For only the second time in the province's history, the MTO designated an agent to do the Highway 405 project for them. It was a $14.4 million project. The Niagara Falls Bridge Commission, with no material interest in a provincial highway, was named the agent.
We took it from the moment of design and engineering to substantial completion in 13 months. That is because we were able to concentrate on the project. We are able to concentrate on our spans. I feel that you would find the majority of our spans in superior condition relative to non-border spans in the same regions.
:
That would be correct. As they should, they will invest if there is a problem.
As far as the approach is concerned, there are very specific regimens that are followed by the inspectors, specific things according to the type of span or the tunnel that the inspectors have to examine and report upon. It's a very detailed inspection. I know at our crossing it takes upwards of two to three weeks to inspect all three spans.
Ron, I believe your inspection goes at least more than a week, and two weeks at the Peace Bridge.
In fact, Mr. Blaney and all members, if you have an interest, please contact us. We would love to have you down during an inspection period. You haven't lived until you're in the bucket of a C-arm that is underneath the Rainbow Bridge, 270 feet above the river. We do look at everything in some detail.
Please don't misunderstand me. If the minister, in his or her wisdom, believes there is something more that has to occur that the provinces, the states, or the various security interests have not addressed and the minister feels that he or she must step in, we have no quarrel with that whatsoever.