:
One of the pieces we'll be doing in addition to this legislation is supporting Treasury Board policy.
Something we're considering for that framework is to what extent and what actually has to be shared with the stakeholder groups. One of the things proposed currently is understanding and sharing with the stakeholder group what the costs are, the methodology for how you've determined the costs. So if you only meet with the stakeholders to change costs or modify costs every five or seven years, it's at least understood how that model would work.
The other thing that would be part of that discussion would be around the private-public split. Obviously, the government and the minister have the final say in terms of how much. From a user perspective, they might say it should be more public versus private. There's a tension there, but the idea is that there would be a discussion of that as well, all of which leads into the setting of the price and an articulation of that price, and a consultation in terms of that whole process.
From experience of talking with some of my colleagues in departments where they're already engaging with stakeholders, that's exactly the type of thing they've been doing in terms of pre-work. They've been developing their costing model and understanding what it's going to take, having an internal discussion, a public-private policy discussion, and then engaging with their communities and their stakeholders around what that is in terms of setting the fees.
:
That would be great. I have no further questions.
A very deep thank you. I don't know how many times you came before this committee, probably five or six, before you actually got to deal with your division 21. Thank you both very much, and for your responses.
I call forward, then, part 4, division 18, the Office of Infrastructure of Canada. I would mention to committee members that we will have to go, at 12 o'clock to the person from Veterans Affairs, who is appearing by video conference from Charlottetown. We might have to depart from Infrastructure for a bit at noon while we hear from division 12.
With the Office of Infrastructure of Canada, we have Mr. Kuhn, director, Canada infrastructure bank transition office; Mr. Grover, analyst, Canada infrastructure bank transition office; and Mr. Campbell, assistant deputy minister, Canada infrastructure bank. We also have Mr. Fleming, chief of infrastructure policy at the Department of Finance.
Mr. Campbell, go ahead please.
:
Thank you, Mr. Chair and members.
Part 4, division 18 would establish the Canada infrastructure bank, announced first in the 2016 fall economic statement as well as in budget 2017. For reference, the proposed amendments are clauses 403 to 406, and can be found on pages 236 to 248 of the bill.
Please allow me to briefly provide some background and context around the proposed bank, and walk through the contents of the proposed legislation at a high level. Finally, I'm happy to get into questions and answers.
The Canada infrastructure bank is intended to provide innovative financing for new infrastructure projects and help more projects get built, including those transformative projects that would not have otherwise been built in Canada, by attracting private and institutional investment. The proposed bank is part of the government's overall $186-billion investment in the Canada infrastructure plan.
Federal support for infrastructure will continue to be delivered largely through the traditional infrastructure models, and the bank represents less than 10% of the total planned fiscal amount. The bank would be only one new tool that government partners, particularly municipal, provincial, territorial, and indigenous, could choose as an option to build more infrastructure projects.
The bank is a new partnership model to transform the way infrastructure is planned, funded, and delivered in Canada. Leveraging the expertise and capital of the private sector, the Canada infrastructure bank would allow public dollars to go further and to be used more strategically, with a focus on large, transformative projects such as regional transit plans, transportation networks, electricity grids, and interconnections.
The proposed Canada infrastructure bank act can be grouped into six main areas: incorporation, mandate, functions and powers, governance, funding, and accountability. I will address these in turn very quickly, Mr. Chair.
First, it would incorporate the bank as a crown corporation, effective on royal assent.
Second, the legislation would set the mandate and purpose of the bank, which would be to make investments in revenue-generating infrastructure projects that are in the public interest and seek to attract private sector and institutional investment to those types of projects.
Third, the proposed legislation describes the functions and powers of the bank to help it achieve its purpose. The bank would be able to make investments through a wide variety of financial tools, including debt and equity investments. The bank would make its investments directly in the infrastructure project, and its investments would be alongside private sector and institutional investors, as well as alongside other government investors. This would be a co-investment or a co-lending model in the project. Projects supported by the bank would be structured using conventional and robust legal agreements among partners, designed to protect the interests of Canadians. The bank also may make loan guarantees on an exceptional basis, with the approval of the Minister of Finance, where separate approval is consistent with the general requirement for all crown corporations. The bank also has important functions other than making investments, including acting as a centre of expertise and advising other governments on development of revenue-generating projects, and working to build capacity with all orders of government to collect and share better data to inform future investments in infrastructure over the long term.
Fourth, the proposed legislation sets out high-level governance of the bank. These provisions strike a balance between independence and accountability. The standard crown corporation governance requirements in the Financial Administration Act generally apply. Under the proposed legislation, board members and the CEO would be appointed by the government through the Governor in Council, and the board would play a role in the selection of the CEO. On May 8, the government launched an open and transparent merit-based selection process on an anticipatory basis, to identify the bank's senior leadership. Through these processes, the government would first select a chairperson of the board, followed by the remaining directors and the chief executive officer. Any appointments would only be effective if legislation establishing the bank is passed by Parliament and receives royal assent.
The fifth aspect of the proposed legislation allows the Minister of Finance to pay up to $35 billion in cash to the bank.
It is expected that the bank's assets, liabilities, revenues, and expenses would be fully consolidated in the Government of Canada's books. We expect capital—that is, cash provided to the institution—to be transferred to the bank only as needed to execute deals and to reduce cost and overhead.
While the cash amount would be $35 billion over time, the government has announced that the bank would be authorized to fiscally expense on an accrual basis only up to $15 billion over 11 years. That would be effectively federal support.
The sixth aspect of the legislation would allow the Governor in Council to designate the location of the bank and appoint a responsible minister.
The crown corporation would also be accountable to Parliament in a number of very important ways. It would be required to submit to Parliament a summary of its annual corporate plan, as well as its annual report. It would be subject to the Privacy Act and the Access to Information Act, although only commercially sensitive third-party information would be kept confidential—about the commercial partners, not the projects themselves. This is very routine. It would be subject to the highest standard of having its books audited by both the Auditor General of Canada and a private sector auditor working together, and a review of the bank's legislation would be conducted and tabled in Parliament every five years.
In conclusion, Mr. Chair, as announced in the budget, the goal would be to have the bank operational in late 2017. This would be approximately one year after the bank was first announced in the fall economic update and tabled in Parliament. The government has been discussing the proposed bank extensively with stakeholders and in the public domain, and I, personally, have been leading much of that effort.
As part of the overall investing in Canada plan, provinces, territories, and municipalities are currently engaged in long-term planning for how they will fund, finance, and deliver infrastructure. While the bank represents less than 10% of the overall investing in Canada plan, it provides an additional option for government partners to make their public dollars go further by using a new partnership model.
Those government partners have already indicated strong early interest in using the bank as a catalyst to move their infrastructure priorities ahead and deliver more infrastructure for their communities. This supports decision-making at the local level. Many of our partners already have in place, or are considering, other alternatives and revenue-generating models that would make their dollars go further and relieve the pressure on the public balance sheets. The proposed establishment of the bank would allow all of this planning for the short, medium, and long term to continue at a good pace.
The bank could also provide early value through its data function and as a centre of expertise, which will take time to develop, to help all governments make better evidence-based infrastructure investments.
To conclude, the proposed infrastructure bank would be only one new tool that our partners could use to build more infrastructure in communities across Canada.
We would be happy to take your questions.
Thank you.
:
There were two main questions that I understood.
On the first one, I would disagree that under user-pay models the individual is paying twice. If you look at what's happening with a piece of infrastructure, when you bring in a revenue-generating model, you're building a piece of infrastructure that might not have otherwise been built, or if it had been built, it would have less government money into building that infrastructure than it otherwise would. So to suggest that someone is paying twice for the same infrastructure, I think is a flawed expression.
The objective here is to attract private-sector financing into that particular model and, to the extent to which there is not public funding into that model, there may be a user pay that is attached to it, and that is what the private sector is bearing the risk on. They're basically incented to ensure that asset is built and used, and that revenue receives value for money into the project.
Really, we would disagree strongly that they are paying twice and, quite frankly, whether it's tolls, or tariffs, or user charges, many of our provinces, territories, and municipalities, which I engage with personally, have them in place now and are already contemplating more. This is an opportunity to use this and build even more infrastructure than we otherwise would, and I think that's an attractive concept, but it will be something that will need to be decided at the local level.
On the second point, far be it from me to refine the wise words of the , or the , but I can repeat what the minister did say, that there would be appropriate oversight of the crown and on the various projects, and that there will be room for an independent crown corporation to use its professional commercial abilities to structure a deal among many partners.
We call this a partnership model that includes not just the bank, or the Government of Canada through the bank, but also another order of government, as well as potential investors. It's quite clear: the objective would be that the bank would not be even searching to try to find financing for a project that was not already approved by one level of government. Our intent is that the discussions will come up through bilateral discussions between the province and the federal government. They would determine a list of their priority projects. The majority of those will be funded through the invest in Canada plan, through all those other envelopes.
The extent to which that partner says, “I think there's a revenue model they'd be willing to attach to that project, and would this be a candidate for the infrastructure bank?”... It's not obligatory to be funded by the bank. It goes on a pipeline list and then the bank deals with investors on a project that all governments are already aware is on the list—it's already there—and then at some point all the parties will need to come back as they start negotiating a deal. The debt investors have to go back to their credit committee. The equity investors will have to go back and make a decision. Whatever the municipality or province is, it will have to go back at some point. And the bank will have to go to its main shareholder and say, “We think we have a financing agreement on this asset; are we willing to go ahead?” Then the independent arm's-length bank goes ahead with all those parties and constructs a commercially very valid deal on that process.
In the partnership model there are partners doing the decision-making, and it won't be a surprise to anyone the projects that the bank is working on. It will be visible through the corporate plan tabled in Parliament, and they will be made available publicly by those provinces, which are saying, “Here are candidates”, because they'll be trying to sell it to investors, if they'd be interested in that project. It will be a very transparent process.
:
There are a number of points there for me to unpack that are really worth discussing.
In the first instance, I hope I was clear. It may have been mischaracterized. Cabinet will have appropriate oversight of both the bank and the projects in which it invests. As I said earlier, through that federal-provincial discussion of priority setting, cabinets on both sides will be able to determine which projects are priorities, and the Government of Canada will have an obligation through cabinet to decide whether those projects on the priority list are worth being funded, either through bilateral funding or through the bank.
That public policy determination process will have been made. As I said, every project in the bank's pipeline would already have been through that screening in both orders of government. It will not be a surprise. That means the government and the cabinet will have a say to ensure those projects on the list meet its priorities.
In terms of the second point about the independence of the institution as it pertains to what the function is going to be, once a project is deemed to be something the bank may support, it can go try to find investors. The objective would be as little support as possible provided by the bank and a risk transfer deal that works for both parties to attract as much investment as possible. The bank would be the one in control of structuring that partner agreement, along with the public sponsor of that asset, and it would go out and bid for financial support from the private marketplace, either in debt or equity, to ensure a good dynamic.
The independence and role of the arm's-length entity is merely around making sure they have a good dynamic to structure the projects. They will not be asked to do public policy determination, because a project that is in the public interest will already have been predetermined, either by the government bringing it forward, or by the federal government saying that it's a project that taxpayers are going to fund at 100% and bear all the risk through the normal models. This is the case for all those projects that don't have a revenue-generating model.
However, for those exceptional cases where the governments say that there may be a revenue model that would allow a project to get built without as much government support as would otherwise be there, then it goes through, and the bank uses its tools.
The public interest will be reflected, as it is now, in the legislation. It will be reflected in the corporate plan.
The objective is to have an independent board of directors, representative of Canada, with no government interference on that board, so that you actually have them making sound financial risk, financial modelling, infrastructure, and legal due diligence. That's what we want the board to do. The board presides over the institution and gives direction to the CEO so that they can effectively run the arm's-length crown corporation to execute its mandate, which is the structuring of robust deals and managing that way.
To conclude, we will be reducing some of the overhead and financial costs of the institution by only providing cash to that bank as it needs it and as projects develop. You mentioned $35 billion. The government is being very transparent that it's a $15-billion profile, which it would have otherwise just transferred to other projects. It now wants to use that strategically to absorb some very strategic risk in a project and to ensure that more incremental projects get built than otherwise would. We think, collectively, that's in the public interest.
Mr. Chair and honourable members, it's certainly a privilege to be able to address you today. I have some very brief remarks just to situate the context of the changes that are being put forward for division 12 of the budget implementation act. I will be brief because I know there are some time constraints today.
We are here to discuss the budget implementation act that includes three of the eight budget 2017 initiatives that were provided for Veterans Affairs Canada. They include the veterans education and training benefit; a redesigned career transition services program; and the new caregiver recognition benefit; as well as a change in the name of the act and enhancements to simplify administration, all of which will come into place as of April 1, 2018 and total $624 million of investment over five years.
To begin, we are proposing to change the name of the act from the Canadian Forces Members and Veterans Re-establishment and Compensation Act to the Veterans Well-being Act. This change highlights the important link to our ultimate goal, which is the well-being of veterans.
As well, the family caregiver relief benefit will be replaced with the caregiver recognition benefit, a monthly payment of $1,000 tax free and indexed annually that will go directly to the caregiver. It will be provided in recognition of the valuable role that caregivers play in supporting seriously disabled veterans.
In addition to the supports for families and caregivers, we are doing more for veterans transitioning to their post-military life. We are introducing the veterans education and training benefit. It will cover up to $40,000 in tuition and other costs for veterans who have served at least six years and up to $80,000 for veterans who have served at least 12 years. Of this, $5,000 can be used towards professional and personal development courses such as pursuing a real estate licence.
[Translation]
We're also redesigning our career transition services so that more people can use them, including serving members of the armed forces, and the survivors, spouses and common-law partners of veterans.
Labour market information, career counselling and job search assistance services will be provided based on needs. The service providers will have access to job search assistance and counselling in order to work with veterans and employers to ensure success. The veterans will be guided by coaches who understand military life and culture.
[English]
We are also adding ways to help streamline program delivery. The act includes a more simplified application waiver that will enable the department to waive application for benefits and to make decisions if the department already has the necessary information on file. This change is being added to the general provisions, so it will apply to all programs.
In closing, the measures included in budget 2017 and the budget implementation act will go a long way to support veterans and their families as they transition out of the military and settle into civilian life. However, the job is not yet complete. There are additional measures that are currently being pursued that will be announced in the coming months. An example is the lifelong pension. The department is committed to continue the research and work to understand the needs of veterans and their families.
I thank you for the opportunity to speak briefly to you today in my remarks, and I am certainly available now to take your questions.
:
Okay, thank you for the clarification.
The occupational stress injury clinics are indeed run under the authority of Veterans Affairs Canada, so they are for our client group. We do, however, include the RCMP, which as you know also through a memorandum of understanding are involved in our services as well. I'm uncertain specifically what types of programs these individuals were referring to.
Also, we have one residential clinic, operated by the Province of Quebec out of Ste. Anne's Hospital, where veterans only, and other clients possibly from the RCMP as required, can actually go and physically remain there for a period of weeks for in-patient type care. That is specifically for our client group.
The centre of excellence, with $17.5 million provided over four years, is to assist in moving forward with treatment practices, research, and analysis with key partners and stakeholders so that we can enhance the services that we are already providing as an example through these occupational stress injury clinics.
I'd be more than happy, though, to dig a little further into that. I haven't had a chance to read the testimony of the individuals yesterday, sir, but I can, and I can certainly get back to you.
:
Thank you again for that question. It's a very important one.
I acknowledge that the system is complex and is not necessarily the easiest to manoeuvre through, whether from a client perspective or at times even from a staff perspective.
As you know, we've made a significant investment in order to hire about 400 new employees directly in the field and in the service delivery area. We have developed a very robust national orientation training program that all of our new field staff have gone through—and will be going through, if they are very recent hires. Part of it is certainly explanation of policy and of benefits, and it includes explanation of systems.
As well, we will be rolling that orientation out to all of our existing staff to make sure that everybody is at the same level of understanding. Even more so, for example, in my area in policy, the training and orientation will also be offered to staff in other areas of the organization.
More specifically to your point, we also just completed a service delivery review. One outcome of that service delivery review acknowledged that communication needs to be more assured in terms of the way we communicate, from a functional direction perspective, with the field. As well, there needs to be a reduction of complexity, in the numbers of policies, of business processes; it ties back even to the legislative authorities that we have.
How can we best simplify that work going forward? We have already reduced our policies by more than 200 in the last few years. We are also looking, as an example, through what we're doing with the budget implementation act, putting in this waiver whereby, if we already have all of the information on file, we would be able to make a decision without having to have contact directly with the veteran to get further information. We can then also look at what other benefits they would be eligible for and make decisions on those. That should reduce the, as you said, unfortunate need for the veteran to be constantly going back and forth and possibly even requesting reviews and appeals.
It's certainly something we're very aware of through the training, orientation, and even our service delivery review action plan. We are looking actively at moving forward.
I want to go back to the remarks made yesterday by members of a group representing veterans. They said that significant amounts will be allocated to the training program to help people who have left the Canadian Armed Forces return to school.
I asked how many people could use the program, and I was told the details, meaning the regulations, could cause problems. Even though there are new provisions, clause 5.93 of states in part:
5.93 The Governor in Council may make regulations:
(a) prescribing how the length of service in the reserve force is to be determined for the purposes of paragraph 5.2(1)(a);
(b) respecting what constitutes honourable release for the purpose of paragraph 5.2(1)(b);
(c) providing for the periodic adjustment of the maximum cumulative amount referred to in subsection 5.2(2);
(d) defining “educational institution” for the purposes of paragraph 5.3(1)(a);
(e) prescribing the education or training that may or may not be approved by the Minister under section 5.5;
Therefore, everything will be established through regulations. As we were told yesterday, the regulations could cause difficulties in terms of whether veterans can use the program, for example.
Can you tell us when the regulations will be made and when the details on eligibility will be released so that veterans can know whether they're eligible for the program?
As parliamentarians, we can also determine the program's effectiveness.
:
Thank you for the question.
I believe you raised three points.
First, we're reviewing the regulations. We're open to possibilities regarding eligibility. We want a fair process for the veterans who will be eligible for the program. Depending on the Treasury Board's approval, we anticipate that the regulations will be released by the end of June. As you know, a process will be followed in that regard.
I'll get back to the three points. For the institutions, we intend to use Employment and Social Development Canada's current list. The department already has a list of recognized institutions, and we intend to use it. Other federal departments that conduct research and analysis also use the list. We don't intend to do things differently.
Regarding what constitutes an honourable release for Canadian Armed Forces members, we intend to consider the definition used by the armed forces themselves. We won't create a definition that differs from the existing one. However, as required by the legislation, we'll give power to the minister for certain exceptional cases. For people whose release isn't considered honourable, but who may have had a good reason for their actions, we'll give the minister the necessary flexibility.
The maximum amount will be set based on the person's years of service. We're talking about $40,000 or $80,000. For example, a person may want to take a course to become a helicopter pilot, but the course isn't provided on a quarterly basis, as is the case in an institution such as the University of Ottawa. We'll have the necessary flexibility to give the person the full amount—$40,000—so they can take part a six-month program, for example, rather than issue the amount on a quarterly basis. That way, the conditions will be more flexible for the veteran.
In short, the goal is to be as flexible and respectful as possible when it comes to veterans.
:
Yes, that's an important question.
I will start by saying that all of this was done in partnership with the Canadian Armed Forces, so in all of our discussions in terms of time frames, eligibility—to the point just a moment ago as well—we had these discussions to ensure we were on the same page as our colleagues. We wanted this, the education and training benefit, to not only be a recruitment tool but also a retention tool, in the sense that we did not want individuals to necessarily leave the forces earlier than they might have. The incentive is as well, then, at 12 years, so that if they're at 10 years and thinking of going, they may stay the extra two in order to benefit from the $80,000.
As to why the six years, again it really ties in to that retention. Individuals in the Canadian Armed Forces, unlike our American counterparts, tend to have longer careers. They come in for much longer periods of time. In the States they come in, they might do one tour and then they'll release. Here in Canada we already know that individuals stay. Really, by the time they invest in basic training, in whatever education is required, possibly language, six years was felt as a very reasonable return on investment for that initial $40,000 for education and training. Then, double that...the 12 years. Again, we're seeing it, really, as an incentive for individuals to stay on. It also ties in to the period when they might be eligible for the Canadian Forces superannuation, pension.
In the lengthy consultations we've had among officials of the Department of Infrastructure and the Department of Finance, and when we've looked globally, many other forms of structures that rely on loan guarantees to finance infrastructure have emerged that in Canada, given that we don't have the same level of political risk as is usually attached to using loan guarantees in other countries, would not need to be preferential or primary instruments to do what the Canada infrastructure bank is designed to do.
However, given that it has a suite of innovative tools, the government is saying that the loan guarantee tool could be, under very limited circumstances, a tool to achieve an outcome. Because, however, of the very specific contingent liabilities associated with the loan guarantee instrument, which mean that they need to be priced and the maximum exposure for auditing and accounting purposes needs to be determined, there is a separate checkback to the Minister of Finance to make sure that this is done. It is not put in the window that the infrastructure bank itself can design a project around a loan guarantee structure unless it has explicit concurrence through the department and the Minister of Finance. Those are the same parameters under which other crown corporations would use a loan guarantee.
The government is thus proposing to give the infrastructure bank equity and debt tools to use and a sufficient balance sheet that it need not resort to a loan guarantee scheme as a preferred instrument. However, given that it is designed to be a service instrument to other orders of government, if they come forward in a project structure together with the bank and in a unique circumstance think that such may be the preferred instrument, they would work through that structure and then go and make a case as to why a loan guarantee fits in that specific project structure. It will be imperative upon the bank to make sure that this tool is priced and the maximum exposure is recorded for accounting purposes. That's why we have both the Auditor General and a private sector auditor engaged with the bank.
I hope that answers your question.
That's a very good question, and I'll give it my best shot.
Public-private partnerships are obviously a very useful tool when they're applied carefully and for the right kind of project. They can use private sector incentives to get projects built on time and on budget, which has very obvious benefits.
In terms of the capital structure for a project, P3s in Canada primarily involve financing through loans for a portion of the project's costs. These loans still ultimately have to be repaid by governments, usually a municipality, through availability payments, in order to pay for the costs of the infrastructure.
I think I'd say that what the government heard in its consultations is that there's a need to help build more infrastructure than can be done just through the public purse, and that municipalities, in particular, have limits on the amounts that they're able and willing to borrow to pay for infrastructure. What the infrastructure bank would be able to do is bring an additional party to the table for the funding of projects so that it doesn't rest only on all three levels of government. This would free up public funding for other projects, including infrastructure, that wouldn't have the required revenue stream, like social housing, for instance.
In order to attract that private sector investment, and also do it in a way that protects taxpayers properly, a new institution was needed that would have the right level of expertise and could be the counterparty for the negotiations with sophisticated private sector equity investors. I think part of the vision with the infrastructure bank is that it's a different skill set than the functions of PPP Canada, which are focused on providing advice for structure and procurement contracts, as Glenn mentioned, that are delivered through P3s.