EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, November 19, 1996

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[English]

The Chairman: Let us begin. Welcome. I am trying to orient myself. We have just finished a very large piece of legislation and we're now getting back into the triple T.

Our first witnesses are Stephen Grundy and Nathalie Racine from Active Living.

I don't know if you've presented before the committee before, but we have about half an hour in total. If you could keep your presentation or your remarks down to about ten minutes, that would give members a chance to question and have a bit of a discussion.

[Translation]

Ms Nathalie Racine (Project Manager, Active Living - Go for Green!): Good morning everyone. My name is Nathalie Racine, and I am Project Manager for the Go for Green program. I am very happy to be here this morning.

Go for Green! is a national program based on community action combining outdoor physical activity and the desire to improve, restore and protect the environment. Our organization is the leader in the field of active transportation in Canada. More than 1,000 Canadian communities have participated in activities initiated by Go for Green! A partner coordinates the program in every province and territory.

We have proven ourselves as far as promotion and education in the area of active transportation are concerned. We have had an impact on the old infrastructure program, we have offered workshops on active transportation in more than 20 Canadian communities, we have developed publications aimed at removing the obstacles to walking and biking in our communities and we have established partnerships with various national, provincial and community organizations.

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Furthermore, several of our publications and activities have been approved by the Federation of Canadian Municipalities, the Canada Mortgage and Housing Corporation, the Canadian Institute of Planners, Environment Canada and Health Canada. We were also recently invited to participate on two committees of the Transportation Association of Canada, the first one dealing with the environment and the other with urban transportation. Our involvement and our commitment to urban transportation led to our drafting of a certain number of recommendations we would like to put to you.

I would now like to introduce to you Stephen Grundy, National Facilitator of the program, who will explain these recommendations to you. Thank you.

[English]

Mr. Stephen Grundy (Executive Director, Active Living - Go for Green!): Thank you, Nathalie.

Honourable members and ladies and gentlemen, thank you for the opportunity to participate in this process of consultation. During the course of our presentation, we will be referring to overheads. All of the overheads are contained in the materials you have before you on your table.

No doubt during these hearings you will receive very different and divergent views on the directions for transportation that should be undertaken as we enter the 21st century.

On the relationship between transportation, trade and tourism, you will hear from many who would have us pave the world, on the one hand; on the other hand, you will hear from those who would ban the automobile from the face of the planet. How do we achieve a middle ground with two such divergent points of view?

Active Living - Go for Green!, in conjunction with its 12 provincial and territorial partners, has developed common-sense strategies and tools designed to achieve that middle ground through developing communities for active transportation.

Go for Green! believes that developing communities for active transportation is consistent with the new vision for urban transportation that has been endorsed by the Transportation Association of Canada and its various partners at all levels. Active transportation is walking, cycling, wheeling and other forms of people-powered transportation.

By developing communities for active transportation, we specifically address 6 of the 13 decision-making principles also endorsed by the Transportation Association of Canada. Those are before you on the overhead now. We address those in bold.

We plan for increased densities and more mixed land use. We promote walking as the preferred mode for person trips. We increase opportunities for cycling as an optional mode of travel. We promote intermodal connections. We design and operate transportation systems that can be used by the physically challenged. And, very importantly, we ensure that urban transportation decisions protect and enhance the environment.

Developing communities for active transportation contributes to healthier people, communities and economies. Go for Green! has four specific recommendations for your consideration.

The first recommendation is that a provision of 5% of funding activities related to transportation construction or retrofitting be established, to be used only for infrastructure enhancements that encourage walking, cycling and other forms of active transportation.

The second recommendation is that governments at all levels put in place mechanisms for the preservation of abandoned railway rights of way in Canada.

The third recommendation is that strategies be put in place for community institutions, including workplaces, schools and places of commerce, to improve the efficiency of the movement of people and goods through active transportation.

Finally, our fourth recommendation is that governments and the private sector cooperate to recognize the substantial and long-lasting impact, both regionally and nationally, of creating enhanced facilities for active tourism, and that they cooperate to identify, create and maintain these transportation facilities as an important component of regional economic development for ecotourism and for tourism in general - and I'll touch on each of these.

Allow me to address these recommendations in reverse order so that I can finish on what I consider to be the most critical point.

First of all, what is the rationale for creating enhanced facilities for active tourism?

Planning active transportation infrastructure allows visitors and residents alike to experience the history and culture of Canada, rather than passing by it travelling 80 kilometres an hour down a highway. Encouraging active travel within Canada has tremendous potential for regional development and economic divergence within Canada.

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Tourism worldwide is a $2-trillion-a-year industry. Ecotourism generates, worldwide, economic impacts of $500 billion to $1 trillion each year.

Over the past 10 years there's been a definite shift in the travel preferences of the tourist. Cultural tourism and ecotourism are the fastest growing of the tour segments.

Overhead 6 indicates what is important to the tourists in planning their destinations. You can see that today, people are much more interested in exploring and understanding new cultures and history, getting off the beaten path and taking in the natural beauty of a region. People want to see, to touch, to learn and to experience their destinations.

The visitors engaging in these active modes of travel for tourism are seeking services that can have a significant impact on our local economies. They stay longer in a region and spend more money than the general tourist. They're more likely to stay at hotels and motels and more likely to shop, but they demand infrastructure services for active transportation. Vélo Québec estimates that for every dollar invested in these types of infrastructure improvements, such as trails, $16 to $41 will be returned to the local economy. Trails and other infrastructure for active tourism can keep Canadian tourist dollars at home and invite the world to our doorstep.

In our third recommendation we suggest that strategies be put in place for community institutions, including workplaces, schools and places of commerce, to improve the efficiency of the movement of people and goods through strategies for active transportation. When it comes to commuting to work in Canada, there are 100 million trips to and from work every week, or about 5 billion trips per year. Of those, 76% are by car, 15% by public transit, 2% by bicycle, and 9% by walking. There is, however, a very high degree of willingness among Canadians to walk or to ride a bike instead of drive a car for two additional trips per week. About 73% of Canadians said they would do that.

Active transportation is highly efficient in moving people throughout the workday and can lower transportation expenditures. Congestion costs in Ontario are projected to reach $6.4 billion annually by 2001.

Canadians aren't switching to active modes of transportation unless infrastructure barriers are addressed. Several infrastructure barriers must be addressed to facilitate active forms of workplace-related travel. These are listed in your handouts.

When it comes to travel to and from school as part of the daily commute pattern, I know you'll be receiving a presentation later today, so I'll simply say that Go for Green! endorses the recommendations of the Canadian Association for Health, Physical Education, Recreation and Dance.

Traffic accidents are the largest killers of Canadian young people and children between the ages of 1 and 24, and 40% of Canadian youth have at least one risk factor for heart disease - namely, physical inactivity. Therefore, we must develop communities for active transportation that allow kids to walk and cycle and wheel to school just as you and I did. The only way we can do that is by providing safe and secure physical and social environments.

The second recommendation we list is that governments at all levels put in place mechanisms for the preservation of abandoned railway rights of way in Canada. The issue is this. Canada today is on the threshold of a massive abandonment of railway lines. Estimates suggest that more than 50% of current lines will be abandoned by the turn of the century. For example, CN will abandon 3,400 kilometres of rail lines over the next three years.

Railway lines are a significant access amenity. Their sturdy roadbeds and low gradients provide surfaces that can accommodate a wide variety of users, including the physically disabled. Walking, cycling and horseback riding may be accommodated simultaneously on these surfaces. They often provide links within and between communities that are ideal for active transportation. However, once these roadbeds, and works of engineering such as trestles, have been destroyed, the usefulness of rail corridors all but disappears for this purpose.

There are some interesting success stories. Newfoundland has purchased 1,200 kilometres of rail corridors, to be designated as a provincial linear park. Prince Edward Island purchased its rail lines, then sold off the railway yards in Charlottetown to finance trail construction around the province. Their goal is to develop a world-class tourism facility on those old lines. New Brunswick has set a goal of 2,000 kilometres by the end of 2000. In large part, these trails fall on old rail lines. The problem is that unless action is taken quickly in the rest of the country, these rights of way may be lost forever.

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Finally, honourable members, our first and most critical recommendation is that a provision of 5% of funding activities related to transportation construction or retrofitting be established to be used only for infrastructure enhancements that encourage walking, cycling and other forms of active transportation. The evidence clearly shows that in communities where there is a well-developed infrastructure for walking and cycling, people do indeed walk and cycle significantly more.

Therefore, in order to remove barriers to active transportation, there must be resources devoted to developing supportive infrastructure. This approach has been successfully implemented in the United States, where the greatest support for government interest in walking and cycling has come from the 1991 Intermodal Surface Transportation Efficiency Act, or ISTEA. ISTEA provides funding sources for infrastructure, for metropolitan planning organizations and for state coordinators for walking and cycling.

A provision of 5% of funding activities devoted to infrastructure for active transportation in Canada, while significantly less than the 10% set aside in the United States, could be accomplished within existing budgets. The 5% figure is consistent with current infrastructure spending.

This overhead and the two graphs that accompany it in your handout show the percentage of infrastucture dollars spent on facilities for active transportation under the previous infrastructure plan. The national average was 5%, but you will notice significant provincial differences. In fact, if you take Quebec out of those calculations, because Quebec tends to skew it - they've taken a very positive and progressive approach to active transportation - the national average lowers to 1.8% of infrastructure spending for facilities for walking and cycling.

By setting the 5% provision as the minimal level in each province, a more effective and efficient movement of people and goods is possible. Opportunities for economic divergence are increased and sustainable tourism opportunities are created in ways that are regionally equitable and nationally sustainable. By taking the same systems approach, these objectives can be achieved at the same time as we enhance individual and community health, reduce environmental impacts, strengthen our sense of history and culture, and create lasting jobs.

Thank you. We welcome any questions at this time.

The Chairman: Thank you very much.

Mr. Crête.

[Translation]

Mr. Crête (Kamouraska - Rivière-du-Loup): Thank you for your presentation, that I found most interesting, particularly because I see in it a vision for the future taking into account environmental factors.

I would ask you to elaborate a little bit on the American experience. You talked about the Intermodal Surface Transportation Efficiency Act. Do you have copies of this Act and, more important, an evaluation of its impact? This Act was passed some five years ago and I would like to know if there have been any significant results to date.

Furthermore, what do you expect from the federal government in this regard? Would it be the same type of approach, respecting, of course, the various jurisdictions as outlined in the Canadian Constitution? In other words, do you see a federal act that would have roughly the same aims?

[English]

Mr. Grundy: Yes. We are advocating a similar approach to that type of legislation, but a made-in-Canada approach. Basically, the ISTEA legislation has been successful in putting the issues of walking and cycling and the development of communities that support that on the agenda of all governments in the United States at the national, state and municipal levels.

The success has been demonstrated by the number of state coordinators that have been put in place and by the number of municipal planning organizations. There are 360 municipal planning organizations that have been developed through that initiative. When you look at cities where these facilities have been put in place, you see the success of these types of things, and where there are cities that have infrastructure for walking and cycling, you can see severe reductions in the use of the automobile.

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Just to take a Canadian example, in the city of Toronto, in the downtown core, where there are facilities that allow walking and cycling, only about 50% of the residents actually own a car. So we know that infrastructure changes affect our travel patterns, absolutely.

[Translation]

Mr. Crête: You talked about infrastructures relating to the railways that are going to be abandoned. This will not necessarily challenge Canadian policy. What guarantees should we demand from railway companies when they sell a line or from the buyer of such lines, so as to avoid the need, in the medium term, to have to rebuild trestles, etc.? In my riding, there is a bike path of at least 150 kilometres between Edmundston and Rivière-du-Loup, and we have maintained the various elements of infrastructure, such as the bridges, etc. What do you expect from the federal government in this regard?

[English]

Mr. Grundy: I'm going to refer that question to my colleague Ann Robinson, who is the executive director of the Rails to Greenways Network.

Ms Ann Robinson (Executive Director, Rail to Greenway): If I understand the question, I think it is this. What can the federal government do to make sure that the bridges and the trestles are not torn down? I think that can occur simply through legislation and in negotiating the purchase of the abandoned rail corridor - and the preservation, that that not be taken out.

The fear of the rail company, I think quite legitimately, is one of liability. Something the United States has done is rail land banking. The government accepts the liability until such time as it decides what the future use will be. In that way that infrastructure remains intact, and it suits both; the corridor is then preserved.

Some have gotten around it. For example, I think Prince Edward Island is a marvellous example, and one of the furthest advanced provinces in the country. It made the objective that it was going to create a world-class tourism facility. It bought its 400-and-some-odd kilometres and is pursuing the recycling of that as a trail throughout the island.

[Translation]

Mr. Crête: There is a similar project in Quebec, called la Route verte. I believe it would be worthwhile for you to have your local players make the same type of representations to each and every member of the House of Commons. You are trying to sell an idea that is still new for Parliamentarians. One can sensitize people by giving them information. Cycling in particular is often considered to be somewhat folkloric rather than a serious means of transportation for the future so as to reduce pollution.

[English]

Mr. Grundy: In Quebec, we are continuing to work very closely with both Vélo Québec and Kino-Québec, and we have similar delivery systems in each of the provinces and territories - partnerships.

Ms Robinson: May I also add that I wear another hat in addition to the Rails to Greenways one. That is as a counsellor in a local community. I think people recognize it in a community, there's absolutely no question, and I happen to be in a rural area. But the bulk of the dollars go to the pavement and to the bridges, the culverts and all of that. That's not to say that the other isn't important. I think this is an absolutely wonderful opportunity to use infrastructure dollars as an incentive to get that on the ground.

I'll give you just a small-case example. An older chap came to me two years ago. He had been in a serious car accident and the therapy recommended was walking, but we had very, very poor sidewalks and no trails. We have since put that in, and I see, incredibly, more people, especially older people, able to walk. I think that's what it means on the ground.

The Chairman: Of course, in my province we walk under the ground these days.

Jim.

Mr. Gouk (Kootenay West - Revelstoke): I think the initiative you brought before the committee is a good one. I won't say that I'll cringe in horror, but I have some apprehension with these types of initiatives.

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I come from a rural area as well, but my rural area is quite different from yours. I'm from southeastern British Columbia, and we have a lot of...well, what you call mountains we call small hills. We have real mountains, and even the rail terrain is incredibly rugged.

We have an area now we're trying to put into a trail, but we have bridges and the liability factor is significant for somebody to take care of. We have landslides. We have areas on the old right of way that are already buried. It was one of the problems for the rail line.

To some degree we have bike paths in the towns. We have walking circuits. But in the rural areas we can't even put in a viable bus system, because there simply isn't the population to support it, unless there are horrendous subsidies. So when we look at our infrastructure spending, we have to look at major transportation factors in terms of the automobile and the highways and the asphalt, because that is the basic necessity for people in that area.

I'm not at all putting down what you're saying. I like the initiative you've taken to come in here. But you have to recognize there are some of us who, while we would like to support what you're doing, have other constraints that at least partially prevent us from doing that.

Mr. Grundy: That's one of the reasons why I think we've tried to approach it in the way we have, in that we're not anti-car. We're saying we're pro- some other things.

The approach we're trying to take with the infrastructure program is to say to you you have an opportunity to act here that won't cost you one extra dollar. If you look at the infrastructure program that was under way last time, you have already spent 5% on walking and cycling facilities in Canada. What we're saying is let's get a little more equity across the country on this issue and make it more of a priority in all jurisdictions. Let's not necessarily spend more money but highlight the fact that it is an important part of infrastructure for communities.

When we look at our communities, we have to decide what kind of community we want to live in, because walking and cycling have an impact not just on transportation but on the safety of the community, our young people, economic development, the environment, and so many other issues. We're trying to position that there's a positive thing you can do without really spending any new money.

Ms Robinson: I want to say too I recognize the difference in a rural area for sure, and you can't just take an application and apply it. And yes, the particular rural area I come from may be more populated. But even to pave the shoulders is a big help in encouraging cycling and the safety of cycling in the community.

I think the approach here is wonderful, because it isn't saying no, you have to go in this direction. It's really complementing the infrastructure that's happening.

The Chairman: Roy.

Mr. Cullen (Etobicoke North): Thank you, Mr. Chairman.

Thank you for your presentation. I would like to say I'm a big fan of converting abandoned rail lines to bike trails where it works. I use one a lot in Toronto. The Belt Line Trail behind Chaplin Crescent is a good one. If someone said to me it's going to cost $1 every time you do it, I$don't think I would complain. Do you think there is any role for user-pay with some of these recreational trails?

Ms Robinson: There's definitely a role. Some of the groups are better at it than others. I'm sure you're familiar with the snowmobile groups that institute a licensing fee and have raised literally millions of dollars through that venue. It has been somewhat more difficult logistically for other groups to do that.

Trail groups tend to ask for a membership. Where it's more rugged they encourage volunteers to clear brush and to volunteer in that way. But to have someone standing at the gate of the line, collecting, just has not worked out. Perhaps there are some examples here with the canal, where you just have the boxes and people can put their donation in.

I think the problem has been not so much that people would object to it as finding a way that isn't so costly to implement when you could do it. I know Vélo Québéc has looked at a surtax on bicycle helmets as a means of doing that.

Mr. Grundy: There may be some really interesting and creative ways to pay for some of these things, but part of the consideration has to be that we have to consider that one in five Canadian households doesn't own a car, and they're paying the same taxes as everyone else. They're paying for roads. They're out there now. So is there a way to make sure roads are for everyone and there are alternate forms of roads for bikes and walking?

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Mr. Cullen: If you did move to a user-pay model in terms of the highway system, for example, or if you had more of a focus in this respect, I suppose you could make an argument. Is there a way to mobilize this kind of thinking at the local level to put the user-pay concept into play? Is there anything that could be done at a national or provincial level to mobilize this kind of thinking or effort? Is it going to happen only at the local level?

Mr. Grundy: Certainly this is the approach we've taken. We've tried to support communities in their efforts to do these types of things. It's one of the reasons we've said if there are the infrastructure dollars available in the future that were available in the past, communities should try to access them for some of those types of things.

I think there is a lot of room for creative thought on this process. The Rails to Greenways Network has done some of this on their Rails to Trails conversion. Certainly, there has been a lot of local fundraising to make some of those projects happen.

I think communities are looking for ways to make these things happen. It's a priority for them. I think they're looking for the incentives and supports we can provide and you can provide as governments to get the project going.

Mr. Cullen: Thank you.

Mr. Grundy: Thank you. It was a pleasure to be here.

The Chairman: We have, from the Railway Association of Canada, Mr. Ballantyne andMr. Cameron.

You know the procedure. You have about half an hour. Please keep your remarks to about ten minutes to give people a chance to ask questions. Copies of your brief have been circulated.

Mr. Robert Ballantyne (President, Railway Association of Canada): Thank you very much, Mr. Chairman. We appreciate the opportunity to make the views of the railway industry known to this committee. With me today is my colleague Roger Cameron, the general manager of public affairs.

We're certainly pleased the committee has undertaken this comprehensive study on transportation, trade and tourism. Although the initial focus is on highway infrastructure, we hope this is but the first step towards a comprehensive study of all the modes of transportation as they relate to the North American continental market.

My colleague Roger Cameron will give a brief presentation, a summary of the written brief we've presented to you. After Roger's remarks, we'll be pleased to answer any questions the committee members may have.

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Mr. Roger Cameron (General Manager, Public Affairs, Railway Association of Canada): Thank you very much. As Bob said, I'll summarize the main points of our presentation.

Canada's railways compete with large U.S. railways in the continental market. The United States taxes its railways at a lower level, however, and also provides investments for rail-truck and rail-marine intermodal linkages. User pay is being applied to Canadian ports, airports and railways. Railways build and maintain their own infrastructure, though, and compete with trucking that uses a road system subsidized by $5.5 billion a year. Allowing even bigger trucks would divert freight from rail to road, reduce the enjoyment of driving, and increase highway congestion, pollution and demands for more road spending. Our view is that there should be no road infrastructure program unless trucks are put on a completely user-pay basis, because a level playing field between truck and train would create a more efficient system for all. Any new infrastructure program must also include intermodal terminals, rail-port and commuter rail-public transit links. The fact is that there is more to transportation infrastructure than roads.

Railway service is critical to more than 25,000 Canadian shippers in every sector of the economy, to east-west trade corridors, to Canada's ports, and for north-south trade. Together, they generate a significant economic multiplier effect. Canada's economy relies on rail transport more than the United States' economy does. The economic importance of Canada's railways extends into all aspects of the Canadian economy.

Nearly two-thirds of our railways' Canadian workload involves international trade; however, rail is the only transportation mode that completely finances its own infrastructure. CN and CP, for example, invested nearly $1 billion worth of capital improvements in border tunnels on their main lines between Toronto, Windsor and Chicago, and through to the Rockies. These investments have made the international trade routes through Canada more competitive.

North-south trade is two-way, however. Canadian railways and their customers are exposed to a continental market, and that is the case even within our domestic borders. Canadian railways compete with U.S. railways and governments through lower taxes in the U.S. For example, U.S. railways compete with us for the haulage of imported containers from the Pacific coast to Ontario and Quebec. Canadian railways pay higher fuel and property taxes. Tax depreciation is twice as advantageous for U.S. railways.

The uneven playing field with the U.S. hurts not just the railways, it kills jobs in various sectors of the economy, particularly in export-oriented industries that are of strategic importance to the industrial fabric of the Canadian economy. They're major foreign-exchange earners and are also hit hard by the tax component of transportation rates.

Canada's freight railways not only compete with large U.S. railways and governments, they also compete with governments in Canada that subsidize roads for trucking. Canadian road fuel taxes and licence fees in 1993 fell $5.5 billion short of covering the costs of roads. In contrast, Canada's railways pay all the costs of their infrastructure and pay fuel and property taxes. Fuel taxes paid by tractor-trailers cover 42% of the public road costs that the trucks cause. As well, highway trailers have tax depreciation rates one-third more favourable than for identical-use intermodal containers.

The lack of a level playing field and poor pricing of roads are causing excess demand for trucking, road expansion and reinvestment. Proposals to fund a road infrastructure program with public dollars will further undermine the competitiveness of Canada's railways, which must pay their own way. The billions of dollars required to repair deteriorating roads and bridges can be reduced in part by proper road pricing of trucks. Another 20% shift of freight from rail to road would increase annual road- and traffic-related costs by $1.1 billion, while a 20% shift of freight from road to rail would reduce annual road- and traffic-related costs by $482 million.

Government decisions should reflect the multimodal nature of North American transportation because highway policy is also railway policy. The impact of progressively higher truck sizes and weights on the railway industry has been very clear in eastern Canada, where traffic has shifted steadily from privately financed rail lines to publicly financed roads.

Just for the record, ``eastern Canada'' means east of Manitoba in this context.

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Railway operations in Ontario, Quebec and the Maritimes would be most affected by further modal shifts. Ironically, this is precisely where the industry's investments in modern transportation systems and services do the most to reduce highway congestion, stress on motorists, and wear and tear on the roads. If multiple-trailer trucks are allowed to operate freely across the border, they could seriously erode traffic through the Sarnia and Windsor rail freight tunnels, where the railways have invested private money to improve service and reduce highway congestion. Proposals to allow larger trucks without a full cost-recovery policy will further undermine the competitiveness of Canada's railways. Such action would also shift freight from the user-pay rail system to the subsidized and congested road system.

People are also congregating in major metropolitan areas, increasing demand for goods and personal transport into and within these areas. Intercity and commuter trains in Montreal, Toronto and Vancouver move some 33 million passengers a year on existing rail tracks, reducing the burden of road congestion, road expansion, accidents and pollution. There are other opportunities to use existing rail infrastructure for commuter service.

Highways are also an important conduit for visitors from the United States to Canada. Affluent, aging baby boomers will be a prime target market for tourism. The proposed increases in the size of transport trucks will make the auto touring experience less enjoyable and aging baby boomers will be less comfortable with increased highway congestion. Canada's passenger and tourist railways are important players in attracting foreign visitors and their dollars to Canada.

In conclusion, Canada's railways compete with large U.S. railways in the continental market. The United States taxes its railways at a lower level and provides investment for rail-truck and rail-marine intermodal linkages. User pay is being applied to ports, airports and railways in Canada. Railways that build and maintain their own infrastructure compete with trucking that uses the road system subsidized by $5.5 billion a year. Allowing bigger trucks would divert freight from rail to road and would increase accidents, pollution and demands for road spending. This would also harm tourism by reducing the enjoyment of driving and by increasing driver concerns over highway congestion.

We feel there should be no road infrastructure program unless trucks are put on a completely user-pay basis. Canada must manage its roads responsibly and affordably. A level playing field between truck and train would create a more efficient system by making better use of existing rail infrastructure. If a new infrastructure is developed, we feel it must go beyond road infrastructure to accommodate intermodal terminals, rail-port and rail-truck linkages, and commuter rail better integrated with public transit.

Thank you very much. We would be pleased to answer any questions we can.

The Chairman: Thank you very much, Mr. Cameron.

Mr. Gouk.

Mr. Gouk: One area that I want to get into is fuel tax. I generally agree with you, first of all, in that I think the federal government's revenue should come from general taxation unless there is a specific expense that it realizes and has to collect some fee for. In the case of railway locomotive fuel taxes, there's very little justification in taking them - and you've brought that up.

You talked in terms of subsidy. With regard to the highway system, have you balanced that against the fact - and we're speaking strictly federal now - that the federal government spends about $300 million a year on highway improvements? They collect almost $5 billion in fuel revenues from the users of those highways in the form of fuel taxes. When you talk in terms of subsidization of the highway system per se against the railway, are you taking those figures into account?

Mr. Cameron: Yes, we take into consideration all the levels of government. The $5.5-billion shortfall is identified in one of the Transport Canada reports that was released earlier this summer. Essentially, the expenses on roads are in the range of $15 billion, and the revenue is about$10.5 billion. That's the order of magnitude.

The point we're making, sir, is quite straightforward. There are choices to be made and the choices are driven largely by public policy decisions. A good example involves the Iron Road Railways system, a short-line group of companies that didn't exist two years ago. For the sake of those who may know them by other names, the former Dominion Atlantic Railway is part of that group. It's now the Windsor and Hantsport Railway in Nova Scotia. The rail trackage between the northeastern U.S. and southeastern Quebec initially, but more recently Delson and Côte-Saint-Luc, is part of that network.

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This is a short-line company that didn't exist two years ago. By the end of this year, it will handle 100,000 carloads of freight, which has the effect of taking 275,000 big trucks off the highways. That reduces taxes and expenditures by various levels of government by $120 million a year, and that's in addition to paying its taxes. This is one company, but there are various examples like this. There are options, and the options are effectively being put to work here.

Mr. Gouk: I certainly want to see the viability of rail lines. The rail line in my area in British Columbia is marginal, and I certainly don't want to lose it. I would like to see solutions in terms of enhancing the viability directly for the railroad, though, as opposed to imposing a lot of new costs on trucking. Yes, that will drive some trucking to the railroad, but there are other cases where it is not viable to go to the railroad. There are certain types of operations where trucking is necessary, and we all agree on that. I therefore don't want to solve the railways' problem by creating a trucking problem for those who still have to use trucking.

We have to keep things in balance. We can't just arbitrarily say these guys aren't paying their fair share, that we're therefore going to drive their price up, and that this is going to put a lot of business on the railways. I think we need to concentrate on the cost factors for the railways themselves and work on matters from that point of view, or else we might solve one problem and create a bigger one somewhere else.

Mr. Cameron: I don't disagree, sir, but the point is that we're not saying trucks don't have a role to play. They obviously do, and in many cases there are partnerships between the railway industry and the trucking industry. It's especially so in intermodal operations where, for example, the Port of Vancouver, the Port of Halifax and the Port of Montreal have benefited significantly from being able to use import-export containers and associated transportation improvements to get traffic moving between continents, traffic that in some cases is using Canada as a direct bridge to central U.S. markets.

The point here is that in some cases, both within Canada and in trans-border operations, the trucking companies use domestic containers and other technology. To use the economies of rail for long-haul transport and trucks for local pickup and delivery reduces fuel consumption for everybody, as I said. Using the truck for local pickup and delivery helps the trucking industry cope with a very high turnover rate of drivers in many cases.

So there is no question that there can be advantages for everybody. In the case of the equipment financing side, for example, there are competitive changes that can and should be made.

The Chairman: Thank you, Mr. Cameron.

Mr. Jordan.

Mr. Jordan (Leeds - Grenville): I think you'd find agreement with the committee here - indeed, I think you'd probably find agreement with most Canadians - that our roads are in a dilapidated condition. We've been hearing that and we know that from the practical experience of driving on them. There's a massive problem here, and if we don't start to repair them soon...

Personally, I agree with you that a lot of the damage to the roads, the deterioration of the roads, is caused by trucks - although I wouldn't like to say the excessive use of the roads by trucks - that have moved from the railroad onto the highways. It seems to me that the trucks are becoming larger every year. As I mentioned sometime earlier, perhaps the problem started when we allowed trucks to become that large.

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Wouldn't it be a rather difficult calculation to have the user-pay portion established when the trucks aren't the only ones that use them? There are bicycles and motorcycles and cars of all descriptions. You name it, they're all in there. How would you...? Would you base it on the gross product moved or something like that? You'd have to consider the distance travelled and perhaps even the season of the year. During certain seasons of the year roads are much more vulnerable to damage than in other seasons of the year, and in various parts of the country.

It's a nice concept, and I agree with it, but I wish you could make some kind of determinant to tell me how you would establish what it costs to have trucks on the road.

Mr. Cameron: To answer briefly - and Bob has some points he wants to make on that - the wear and tear issue is the one I would suggest you need to focus on in that case. Certainly automobiles and bicycles use the road system too, as they should, but the effect of wear and tear is where the difference really comes to bear. There is ample evidence of that kind of difference. There is no shortage of that information. It's readily available.

I think one of the basic difficulties here is that everybody agrees with the rightness of the argument. Advancing to do something about it seems to be where the sheep run off in all directions.

Mr. Ballantyne: It is a difficult calculation to do. It is not an unusual calculation in business. A lot of businesses that have multi-product lines of course have the problem of allocating costs of the plant, whether it's a factory or whatever, between their different product lines. In fact, the railways have to do this day in and day out, depending on when they're pricing their services for handling coal or handling automobiles or whatever.

There has been some work in terms of that at the Transportation Association of Canada, which has a close relationship with the Canadian council of transport ministers. They've been wrestling with this for some time. There is certainly discussion around attempting to do some further studies that would attempt to allocate the road costs among the various user groups in an equitable way.

So we would certainly hope to see that work going on over the next half year or so through the Transportation Association of Canada.

Mr. Jordan: I would suggest, though, that you wouldn't want to let just the truckers determine that calculation.

Mr. Ballantyne: No. The Transportation Association of Canada is a fairly broad-based group. It has among its members the Department of Transport and all the provincial government ministries, which we know are very independent and very balanced in their views about everything they deal with, as well as the railway industry, the trucking industry and the people who build highways, in fact.

Mr. Jordan: Thank you.

The Chairman: Mr. Cullen.

Mr. Cullen: Thank you, Mr. Chairman.

Gentlemen, as I understand it, there is some consolidation or rationalization under discussion with CN and CP in eastern Canada. Maybe you could update that - without speaking on behalf of CN or CP. If that goes through, or if it's going through now, does that have any impact on rail infrastructure in eastern Canada?

Mr. Cameron: You're right on the first point. Any discussions of that nature would be commercial discussions between CN and CP. However, we've seen the press reports, as you have. The issue is largely one of viability of the railway industry in eastern Canada, and particularly between Ontario and Quebec. The fact of the matter is the issues that bring those railways to that kind of discussion are exactly the kind of issues we've been talking about.

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It's been a creeping issue for almost a quarter of a century. The increases in that field tend to be always at the higher level, but I think the day is fast approaching when some of these issues are going to have to be looked at in a broader context in terms of cost allocations. Bob referred to the symposium sponsored by the Transportation Association of Canada on this subject, which is scheduled for Ottawa next spring. These are the kinds of issues.

It's difficult to deal with what has happened in the past, but you should learn from that in terms of the direction for the future.

The Chairman: Thank you, Mr. Cullen.

Mr. Crête.

[Translation]

Mr. Crête: In your brief, you mention the American Intermodal Surface Transportation Efficiency Act. Does that not reflect the fact that we have a problem here in Canada, because we have no such integrated strategy for transportation? In the past, it seems that every level of government acted on its own, without there being any coordination between them.

My second question would be to ask you what effect you believe this might have on the structure of railway companies such as the CN, CP and perhaps others. Will the new North-South continental approach and the Free Trade Agreement have an impact on the structure of these companies? Has there already been any such impact and what will the significance of all of this be in the future? This is a double question.

[English]

Mr. Cameron: I understand completely what you're saying. The fact is that both...predictably CN and CP, although it is extended to the Algoma Central Railway, which is merged with the Wisconsin Central and other Canadian-U.S. railways that operate trans-border.

The problem the Canadian railway industry faces is that it has to deal with competitive issues on both sides of the border and on a continental basis. That playing field isn't level either. It's a marvellous concept to encourage open competition, but with one hand tied behind your back it's not quite as fair a fight as one might think.

One obviously should learn from other experiences, and it really becomes an issue of equity between the industries and levels of government. Remember I said that 30%...I didn't mention that specific amount, but about 30% of container traffic into the central-Canadian market comes in through U.S. west-coast ports.

One of the reasons that happens - not the only reason but certainly one of the reasons - is the difference in cost, tax, a whole basket of issues that come into play. The head of the major container shipping line at the Pan-Pacific conference in Vancouver earlier this year dealt with that issue specifically. There's an opportunity for more business to move through Canadian ports, handled by Canadian employees, with the whole stream of benefits that flow from that, with these kinds of issues being addressed. If you haven't seen his presentation, I'd be happy to send you a copy of it. It's really quite interesting, and it's one of those issues where sometimes it's especially useful to see ourselves as others see us. He zeros right in on the nature of the problems that Canada has and opportunities for addressing them.

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[Translation]

Mr. Crête: In the study, are there any examples of results obtained in the United States? Did your association publish more detailed results on the differences that exist between Canada and the United States? If your answer is yes, could you provide this information to the committee? I was also wondering if you had any more detailed documentation that would give us the list of the ten, 12 or 15 points, so as to enable us to make a comparison between the two.

[English]

Mr. Ballantyne: There has been a lot of work done by a number of different groups within the railway industry and other places. We could certainly pull some of that information together.

There was quite a good study done by the Transportation Association of Canada in 1993 on taxation in the transportation industry. It took quite a detailed look, broadly, at tax issues, and again, incidentally, showed that the Canadian railway industry is being taxed substantially above every other Canadian mode of transport and all of the U.S. modes, and all other industries as well.

So if you want, we can certainly attempt to pull some of that information together. It would be from a number of different sources.

[Translation]

Mr. Crête: That would be much appreciated. But I believe you have not answered me concerning the impact of the new continental approach for company structuring. Do you believe that CP or CN will have to make changes to their administrative structures so as to take into account the new North-South approaches, or do you believe that this might be accomplished within the existing framework?

[English]

Mr. Ballantyne: Well, it's certainly hard to say how that will play out. I think the fact that we're in a free trade era and the fact that the economy of the continent is becoming more integrated is having an effect on the way all businesses operate, whether in the United States or Canada. So it's possible that will have some impact.

I think both of the two major railways - incidentally, there are 34 railway companies now operating in Canada, and the number gets bigger almost week by week as more short lines come on - have made major changes in the way they administer their businesses. They've basically been doing that so that they can continue to operate, and operate successfully and in competition with the U.S. railroads.

They've also entered into strategic alliances with U.S. railroads. That does a couple of things. It helps them extend their reach from a marketing point of view, but it also helps them maintain their corporate identity and corporate control from a Canadian perspective.

The Chairman: I have one other comment. At the Transportation Association conference in Charlottetown earlier this fall, there was a presentation by one speaker at a workshop that might be of interest or help to you.

The example in particular I'm thinking of involves a new intermodal terminal in New England, particularly for a stream of traffic moving between there and Chicago, which is the principal interchange point for rail traffic in North America, quite frankly, and certainly in the United States.

That particular presentation dealt with the kind of societal benefits that are there that can be quantified and that aren't normally taken into consideration by the public when they think of costs and equity.

One of the things they were able to do in that study was demonstrate the fuel savings, for example, the kind of land-use issues that come into play, and the other benefits to the use of rail for that kind of transport. I'll get that material to you as well, if you wish.

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[Translation]

Mr. Crête: I have one final small thing to ask. It would be very helpful to us, as Parliamentarians, that there be a campaign on the impact of railways led directly by people from the Transportation Association of Canada. Having been a member of Parliament for only three years, I can tell you that the information that has been gathered on that gives us a completely different vision from that of Canadian citizens in general, who may see the railways in a more folkloric way. I therefore believe that it is your responsibility to lay out to a broader public all of the arguments you have put forward here today.

[English]

Mr. Ballantyne: Thank you very much. That's an interesting and helpful comment. We've been doing what we can in that area, but the implication is that we certainly need to do more. It's certainly a business that's as technically up-to-date as the aerospace business. The technology is state of the art and maybe we need to get that across.

We publish this little statistical book every year, which we've sent to all members of Parliament, that gives an overview. We publish this widely, but maybe we need to be doing more than that.

[Translation]

Mr. Crête: I was talking of the general public.

[English]

The Chairman: Thank you, gentlemen.

From the Ontario Road Builders Association, we have Mr. Robert Bradford. Welcome. You have about half an hour. Please confine your remarks to about ten minutes to allow for some questions. As you can see, there will be some interaction, I'm sure.

Mr. Robert Bradford (Executive Director, Ontario Road Builders Association): Certainly. Thank you very much. You mentioned I'm from the Ontario Road Builders Association, so I guess my vested interest is laid bare from the beginning.

Thanks very much for the opportunity to appear. I guess our brief was circulated some months ago and you have other copies here today. The subject of your committee's current investigation is the linkage between investment in our national highway system and trade and tourism. These and other benefits to be gained from investing in the national highway system are addressed in our written submission to the committee, and I will spend a few moments briefly highlighting those benefits. I'm not certain that's the real question in front of us today.

The many studies done over the years and the submissions you've received from groups like the Coalition to Renew Canada's Infrastructure and our Better Roads Coalition from Ontario show quite clearly the very important social and economic benefits to be derived from investment in the national highway system. We also believe that those linkages are generally well understood and accepted by all levels of government, so perhaps the issue left on the table is that of funding.

Just to touch on some of the benefits to be derived from investment in our national highway system, our submission comments on the reliance of the Canadian economy on exports and notes that most of those exports are moved over the road.

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We've shown how traffic on our busiest highways has grown by 10% per year since 1980, while the highway system has only expanded by a total of 3.4% in that time.

We've also made the linkage by citing studies that show congested highways cost billions of dollars per year in lost productivity and profits.

An adequate road and highway network is high on the list of priorities for businesses seeking to locate or expand. They must be able to receive inventory on a just-in-time schedule and they must be able to move their finished goods to market cost-effectively. If they can't do these things, they will do business elsewhere, and there are real examples of businesses that have chosen not to do business in Canada because the road transportation network is inadequate.

Our brief also goes on to discuss the benefits of investment in the national highway system in terms of public safety and health care costs, economic growth, job creation, reduced user costs, and environmental responsibility. I'd be pleased to expand further on any of those points for the committee.

Perhaps just a note on the issue of jobs, because we're hearing more and more these days that jobs created by road building projects are make-work jobs; they're not real jobs. Nothing could be further from the truth. If you have an ongoing commitment to a highway program, you create a pool of long-term jobs. Those people go to work every year. They're well-paying jobs. Construction industry jobs create more economic spin-offs than most other industries, and they're skilled jobs.

I suggested at the outset that we believe all of these linkages to social and economic benefits have been well-established and generally accepted. I suppose you can correct me if I'm wrong, but I have spoken to members of this committee and other people in government and I don't believe there's a heck of a selling job left to do on the importance of an adequate national highway system.

The question then is where does the money come from? I don't have the miracle solutions, and I haven't heard any recently, but I'm going to suggest to you today that it's a matter of responsibility and priorities.

First, all levels of government, including the federal government, must accept responsibility in the matter of funding for the national highway system. We've heard federal officials state that highways are not a matter of federal responsibility, according to the Constitution.

It's our opinion that if we accept that a national highway system is fundamental to our national interests, then the constitutional issue is just a convenient red herring. It's incumbent upon the federal government to accept its share of the responsibility for our national highway system and to move as quickly as possible to fulfil that responsibility.

Having assumed the responsibility, the issue then becomes one of priorities. This government, like all governments, is struggling with deficit reduction realities, but it still has to make decisions about funding priorities. Having recognized the tremendous benefits to be gained from an efficient national highway system, we believe the government must place funding for it high on the priority list. What is more fundamental to the responsibility of government than providing and maintaining the core infrastructure that allows us to grow and prosper economically?

Currently, the federal government collects over $5 billion per year in road user taxes, yet less than 5% of the revenue is reinvested in the highway system. Dedication of just 2¢ per litre of the federal fuel tax - and that's about 20% of the total federal revenue from the gas pump - would go a long way toward funding an ongoing national highway program that would ensure our ability to maintain the system to proper standards. In the minds of road users, they're already providing the funding; unfortunately, not much of it is getting to the roads.

The message today is that we must have a commitment from the federal government to our national highway system. We add our voice to the others you have probably heard recently in calling for a 2¢-per-litre dedication of the federal fuel tax directly to the national highway system. I believe that message has been delivered by the Canadian Automobile Association and the Coalition to Renew Canada's Infrastructure, and we're part of that gang.

Before closing, I think it's important to understand the consequences of continuing to let our national highway system deteriorate. Almost half of the entire system is now operating at below acceptable standards.

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Highways have a design life of 15 to 20 years. If you perform preventive maintenance when you should, it costs about $1,000 per lane kilometre and the life of the pavement can be extended by many years. If you let the road go two or three years longer than you should, rehabilitation is necessary and the cost is now about $80,000 a lane kilometre. A couple of more years down the road - and this is just a couple, two or three years more down the road - if you let the road deteriorate past the stage where you can rehabilitate it, the only option is reconstruction and the price tag is now about $250,000 a kilometre.

Right now, a significant part of the national highway system is past the point where preventive maintenance is an option, and some is moving well into the reconstruction stage. Every year that passes without a properly funded national highway program means exponential erosion of a valuable public asset and enormous unnecessary costs when the problem gets so bad it can no longer be ignored. The old expression ``pay me now or pay me later'' takes on a whole new significance when you're talking about maintaining roads. In this case it's pay me $1 now, pay me $80 three years from now, or pay me $250 five or six years from now. It's our choice.

Those are my comments and I'll be pleased to elaborate.

The Chairman: Thank you, Mr. Bradford.

We'll start with Mr. Cullen.

Mr. Cullen: Thank you, Mr. Chairman.

Mr. Bradford, you have provided a very comprehensive brief, and I'll be reading it in the next day or so.

In the section where you categorize funding a national highway program, you urge the standing committee to investigate the important role that might be played by the private sector in financing aspects of a national highway program. It is something we're looking at.

The range of options are quite broad, and I wondered if you had anything you'd like to add to that today and whether, in our deliberations, we could call upon you to provide some information or data that might move this forward.

Mr. Bradford: First of all, we'd be pleased to work with you in any way you see fit.

We've been giving a lot of thought to the whole question of public sector involvement in the national highway system. I know Mr. Alcock threw out a challenge in P.E.I. when he suggested to us that perhaps the private sector has to get involved and come up with some good ideas and what have you.

It's a bit of a difficult situation, because we're essentially dealing with a built highway. For private sector involvement you've got to develop some sort of revenue stream. This works beautifully with new highways. You've got the example of the 407, which is no longer a private sector situation, but it began that way and it certainly could work that way. The bridge in P.E.I. is another good example. But the private sector has to have some source of revenue, so the question becomes, how do you generate a revenue stream off a highway that's been built? You're going to ask a private sector company to maintain it, to put its equipment out on it, and there has to be some return. That's what we have to find.

In Ontario I just heard a good idea recently, or what I thought was a good idea. Our transportation minister, Mr. Palladini, is investigating the possibility of road sign advertising. Apparently, there's some tremendous revenue to be generated from that source, although you've got to keep in mind the safety aspects of the thing. I don't know where else you look. We have government-owned rights-of-way along the highways. There are services to be provided to the public. There's certainly some revenue to be generated from those types of activities.

Yes, I think it's possible. But I think we're kidding ourselves if we think we can turn to the private sector and ask them to look after the national highway system. This is going to require some government money and government funding on an ongoing basis, and I don't think there's any way around that.

Mr. Cullen: If we had put the same question to Mr. Palladini when he spoke to us in Hamilton not too long ago, about whether you could look to, specifically, toll roads on built highways, he had the same observation that... I think he came at it from a political point of view. He said, politically it would be very difficult to put toll roads on existing highways.

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One of the ideas we've been playing around with is if you're able to offer some kind of enhanced service, whether that means upgrading or it means higher speeds or it means you can get from point A to point B more quickly... I agree with you completely that if you're just looking at an existing highway and there are no enhancements, then it's a very tough sell in a policy sense and certainly in a political sense. If there's enhanced service or performance from the highway, do you think there is any scope to put some kind of user-pay feature on it?

Mr. Bradford: The public is certainly willing to pay to move more quickly and conveniently. Certainly the commercial sector would find some value in enhancements in a highway system if they allowed them to move their goods more quickly from one point to another, because that's what it's all about for business these days: moving things quickly. There are some possibilities there.

I would add a caution, though. In our association we're road builders, but we aren't necessarily in favour of tolling every road in the country. Our policy so far has been yes, tolling on new roads and where the public has an alternative. That's certainly not carved in stone. If we need to go to tolling to raise money to maintain our highways, we could wrap our minds around it. But you have to keep in mind the road user is already paying a tremendous amount of money. The road user believes he's already paying directly for the highway. If you come along with a toll on the road, in the public's mind the public is paying twice, and that becomes a political problem.

Mr. Cullen: I'm sure it would be useful to be able to continue this discussion a bit later, and we may do that. Thank you.

The Chairman: Mr. Jordan.

Mr. Jordan: I have to agree with you on the likelihood of getting a lot of private sector money involved. I'm puzzled how you would do it on an existing road, or what the incentive would be to do it on an existing road.

You mentioned you thought the public was willing to pay, and you made some suggestion that they are already paying. Do you think they would be willing to pay if a tax were clearly delineated - a tax on fuel, for example - and it could be used for no other purpose than to maintain and build roads?

Mr. Bradford: I think they would be prepared to pay that. More to the point, I think a lot of the public believe that is what is happening now. When we talk to people and talk about the tax taken at the gas pump we get met with looks of surprise when we say not a heck of a lot of that is going back into the road.

Mr. Jordan: Some of it is.

Mr. Bradford: Some of it, yes.

Mr. Jordan: I know a lot of the $2 billion the federal government put into the infrastructure program didn't go into roads, but some of it went back into roads.

Mr. Bradford: The infrastructure program certainly was an anomaly, and it was much welcomed.

Mr. Jordan: We have two basic modes of transportation we've talked about here this morning. One was the railroads, which are underutilized, and you are speaking on behalf of the highways as overutilized. Instead of trying to upgrade what you're asking for and make it meet every individual's personal demand, could you not visualize where maybe the emphasis should be put on using the other mode of transportation, which is there and is not being used to the extent it could, according to the railways?

Mr. Bradford: I don't have much background in railways, but at the risk of alienating my own people I would suggest if there is room to carry more people or goods cost-effectively and efficiently on the railways, then those should be investigated. Certainly it would get something off our backs if we took a bunch of the cars off the roads. It won't decrease the need for the roads and the need to maintain them. It might help us move goods and people more efficiently.

Mr. Jordan: Both of you are in the same business of moving goods and people. It just seems that one is overworked and the other underworked. Surely there is some way we can get together in the interests of people and the nation.

Mr. Bradford: That's probably a good point. I think what we have to do first is develop some sort of policy or direction for a national highway system. We have a policy for rail. If we had one for highways maybe we could put the two together and see how they fit.

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Mr. Jordan: Thank you.

The Chairman: Thank you, Mr. Bradford and Mr. Jordan.

Mr. Gouk.

Mr. Gouk: Thank you, Mr. Chairman.

As you're probably aware, Mr. Bradford - well, you wouldn't necessarily be aware that I wrote it - our party has a policy on dedicated revenues for fuel taxes. We believe they should be held separate and should be accountable only back into the industry from which they're taken.

I'm also very aware of the CAA's drive to 2¢, which is only a portion of that money that the federal government is taking. When we were in eastern Canada, we had witnesses come forward saying that there had been an additional tax put on at one time - as Mr. Jordan had mentioned - for the specific idea of road building. They said it didn't work because it just simply came off of what was being spent anyway. So they got an extra lump of money from this extra tax, but they just took it away from what they previously had been spending; they didn't get any better results.

Would you look favourably on this 2¢ put in by the federal government, matched by the provincial government, and perhaps a new 2¢, if there was legislation put in place both at the federal and provincial levels that said those two bodies must spend the same amount that they had previously been spending aside from this dedicated funding? In other words, it would be separate. Would that answer a lot of the problems that the road builders in eastern Canada brought to us?

Mr. Bradford: I certainly think that kind of idea would begin to generate the kind of money you need to do the job properly. I'm not certain where either our transport minister or any of the other provincial transport ministers sit. Yes, certainly we would be in favour of both levels of government dedicating matching funds, and of new funds from the provinces. I don't believe there is a lot of support for that provincially, but if that kind of an idea were to be floated by the federal government, we would do our utmost to make it fly in Ontario.

Mr. Gouk: One of the other things that you mentioned is this question of whether or not the federal government is responsible for the rebuilding. That could be taken two ways. You took the position that they either are or should be. The alternative...

One of the things I have a problem with is the whole concept of the way in which our finances work in this country. The federal government taxes money away from the various provinces and regions and reduces us - we are the taxpayers, and there is only one source - to begging to get our own money back. Rather than being responsible for highway infrastructure, would it not be better for the the federal government to simply give up some portion of their federal tax on fuel while allowing the provinces to put one on in its place? Do you have some concerns about that at the provincial level? Is that simply moving a problem from the federal government to the provincial, or do you think that would be a step in a solution to highway infrastructure?

Mr. Bradford: I think it's one way to go, but I really believe the federal government has to say this is partially its responsibility. This is a national highway system. It has to build it; it has to maintain it in an integrated fashion. That goes beyond the funding of it. We have to look at the overall benefit to Canada, not just the regions of Canada. How does what we do here affect what we do there? So your idea certainly does begin to solve my funding problem, but I believe there has to be a real commitment beyond a monetary commitment.

Mr. Gouk: There is just one last area. With regard to toll highways, the position I have taken on highways and facilities is that tolls be only for new or substantially rebuilt facilities, and then only when there is a viable alternative route available for people. We have an example of that in British Columbia, where it hasn't been the private sector that has done it. We have the Coquihalla Highway, and there are still alternate routes for those that choose not to pay the $8 toll, or whatever it happens to be for trucks and so on. Do you know of any opportunities like that here in Ontario for routes with toll highways or bridges or whatever that could be put in by the private sector, and where alternate routes would still be available?

Mr. Bradford: I think most of our major highways that carry interprovincial and international traffic in Ontario... I can't think of any offhand that couldn't be twinned. Just as the 407 took the pressure off the 401 - or will take it off - I believe you can do that with basically any major highway if the need is there.

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I'm not too sure that idea of building new highways is the answer in most cases, though. It's a lot easier a lot of the time to add a couple of lanes and expand a current highway, and a lot more cost-effective, but there are opportunities.

Mr. Gouk: One last thing, then, on tolls. Is there practicality in putting a tolled high-speed lane or whatever on a highway system and to still have that as part of the overall highway when you talk in terms of twinning or combining?

Mr. Bradford: I don't know how you'd enforce something like that. I'm sorry, I haven't given it much thought. It hasn't come up before. I don't know how you would maintain a high-speed lane. There will be people, particularly in Ontario right now, who'll tell you that the speeds are already too high on our highways. We have the high-speed lanes but nobody's paying for them.

Mr. Gouk: I don't know either. It's just an idea that's come up.

Mr. Bradford: Offhand, it doesn't sound terribly practical, but I wouldn't throw it out before looking at it further.

The Chairman: Thank you, Mr. Gouk, and thank you, Mr. Bradford. I note that we've had the railways and now we've had the road builders. Both of you have raised this question about how we pay for it. We're now going to have the answer presented to us by the Canadian Council for Public-Private Partnerships.

Mr. Stephen, you can see that we are anxiously awaiting a solution to this difficult problem.

Mr. Terry L. Stephen (President, Canadian Council for Public-Private Partnerships): Thank you, Mr. Chairman. The paper you've just received is ostensibly authored by our chairman, the Hon. Donald Macdonald. On your agenda we suggested that our executive director, Cathy Boynton, might be here today to address you. I apologize for all that confusion. I hope it gets better from here on in.

We're largely a volunteer organization. We have two part-time staff. My day job is as a partner in corporate finance at Price Waterhouse in Toronto. We found that this is an area of great interest in the country, and perhaps of increasing interest. Things are heating up a bit.

Thank you for the opportunity to be here today. We think there are many achievable projects. It's just a matter of the various players, including the public, accepting some of the structures that can be devised.

My council is a non-partisan, non-profit organization. We represent a broad range of governments and private organizations from every region in Canada. We were established to try to define cooperative approaches between the public and the private sectors for financing and delivery of public services and infrastructure. If you like, we are attempting to be a ``how to'' organization - that is, how to solve these issues and problems in specific detail.

We appeared before the House of Commons Standing Committee on Finance last December and on November 8 of this year. We stressed the necessity for government to, in our view, accelerate the pace of public-private activities.

Today we're here to again propose a specific action where this group could accomplish certain of its objectives. The transportation sector is particularly well positioned to continue to raise opportunities for partnership transactions. It is probably the most active sector in North America in this regard.

We believe private investment in Canada creates jobs. It allows projects to be initiated that may not otherwise go. We know the resources of government are limited. Private initiative also offers additional tax revenues. We also know money doesn't come out of the air. It comes from only one place, at the end of the day, whether I'm called a user or a taxpayer or what have you. So we really are looking for innovative approaches. There is no tooth fairy, no magic source of new money.

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But in Ottawa the federal Department of Transport has been one of the most active departments in pursuing this approach, with national airport policy, which has seen and will see the operation of 26 national airports and 76 regional airports transferred to local authorities - with active consideration, I'm told, of a high-speed rail service, possibly through a partnered arrangement; with privatization of CN rail; and with the new air navigation structure. Those are examples of innovation, we think. Not all of them create new sources of money, but they represent innovative approaches to getting the players focused on their activities and they may create additional economic activity. At the provincial level - today it has been referred to at least once - in Ontario there is Highway 407, in Nova Scotia there is Highway 104, in Winnipeg there is the Charleswood Bridge, and many others are under way.

Other opportunities in transportation, trade, and tourism and other public sectors can build on these approaches. As private investment looks for a home - and that's a real issue as we come out of the recession - people are looking for work. That's true of individuals as well as corporations. We need to create the conditions to make investment in this country attractive and to strengthen our public services and national infrastructure. A coherent national public-private partnership policy framework and a strategy are essential to creating those conditions.

Such a strategy, as outlined in our paper - that's just after page 11, I believe - entails two core features. One is the creation of an enabling environment that identifies other candidates for alternative delivery approaches and invites private sector participation and financing. The other is the drafting of legislation and regulatory reform, facilitating the speedy implementation of potential new initiatives. This model has successful precedents in other jurisdictions, both within and outside Canada.

In conclusion, we would recommend the creation of a partnerships minister as well as a secretariat and a corresponding enabling legislative environment. The Canadian Council for its part would be willing to play a role in that secretariat as an adviser, if that's what you want to do.

We need to continue to gather best-practice examples. It would be wise and interesting and illustrative, I think, given the activity of the transportation sector in Ottawa, to document in a rigorous way some of the issues that were solved or that remain. We could co-sponsor that with your group or others.

We think the infrastructure works program, if there is to be another one, should at least seriously consider increased private sector financial involvement. That gives you more leverage. We're now levering one federal dollar with two other dollars, and if you could get more dollars in there, that would be even more leverage.

As a council we're willing to play a facilitating role if we can, lending both the experience and the expertise of our members. We feel we uniquely combine the perspectives of both the public and the private sector and offer a non-partisan outlook. We feel we do that in a very specific way, a very issue-oriented way. We believe we're in a strong position to identify opportunities for partnerships, alternative service delivery and financing through our 140 public and private sector members, and co-sponsored activity with government.

The Chairman: Thank you very much, Mr. Stephen.

Mr. Gouk.

Mr. Gouk: Mr. Stephen, good morning. I had the occasion, as it happened, to read some information about you recently. I acquired your CV for a very specific reason, one I'm sure you're aware of.

I've just quickly read through your brief. I need to take more time and have a look through it. My interest was already piqued from your CV.

I think the idea of leverage is a very good one, and it's one of the things that have to be investigated very carefully. More federal money does need to go into the highway infrastructure system. That would be a good way of getting the maximum dollars and making it more palatable for government.

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I sit here in opposition and the government is sitting on the other side, but we don't accomplish anything unless I can come up, from my side, with an idea that the government can support and, likewise, by working with the government when they come up with things. It's all well and good for political rhetoric and all the rest of it, but in the end it's only through cooperation, first of all, inside, that we come up with agreeable legislation and then to cooperate with the private sector.

I would think in the future that your organization might be very helpful to us. I'll read this with interest.

The Chairman: Mr. Cullen.

Mr. Cullen: Thank you, Mr. Chairman.

Mr. Stephen, thank you very much. I must confess my ignorance. I didn't know this organization existed, and it looks like it has been very active and doing some great work.

The studies you refer to at the end, the benchmark, ``Best Practices'', and the reports on partnership agreements - I wonder, Mr. Chair, if it would be possible to get copies of those.

Mr. Stephen: Sure, we'll send the clerk a package.

Mr. Cullen: Thank you.

Mr. Donald Macdonald, of course, did the Royal Commission on Ontario Hydro recently. I guess he was seconded or loaned from...or was this in his capacity as chair of this organization?

Mr. Stephen: I don't think so, particularly. Obviously, he has an interest and is a student of the area, but I think he is a person that the government thought the community would look to and say, well, that person should be unbiased and has integrity. But we'd be flattered to think it was because of our organization.

Mr. Cullen: I follow that with interest, because I've had the natural resource sector looking at Ontario Hydro and comparing energy policy and energy infrastructure in Canada versus the United States - the kinds of competitive advantage, the way utilities are organized in the United States, and the way they provide to their natural resource industries. I thought his recommendations were good ones.

As you probably know, we've been looking at private-public models for the national highways program. I hope there are ways we can dialogue further on this. One of the challenges...and this is sort of a philosophical question, but I wonder if you have any insights on it. You have probably dealt with it in your discussions over the period. It is the whole question of looking at public good and private good and some insights on how you deal with those trade-offs in this sort of model.

Mr. Stephen: I think the council would advocate that the public good is paramount. You never can lose sight of that. The difficulty is defining it at any point in time. You start with that.

I guess our experiences have taught us the benefits of being rigorous. If, through some rigorous analysis of a particular stretch of highway, you find there are no particular benefits that the private sector could provide beyond the normal contracting work, then reject it. We're not a driver for privatization. We know that because of specialization around the world this has less to do with ideology than it has to do with specialization and scale projects. Sometimes, as with the 407, you can get something done in four years that was going to take 22. In the private sector time is money, and in the public sector we're beginning to accept that as well.

I think our touchstone is, let's put some rigour in our analysis. We did a toll road study in New Brunswick, for example, where it looked at any and all aspects of tolling. In California there is a road within a road, called state road 91. It depends on the facts you find yourself with. That particular right-of-way seemed to have room for another four lanes down the middle, which is now tolled, and if you want to go free you can go on the outside. Now, they're dealing with huge traffic flows, which we don't always enjoy here, although we do worry about congestion.

A voice: ``Enjoy'' is certainly the operative word.

Mr. Cullen: It's interesting, just to follow up, the wording, the terminology, partnerships as opposed to... You make reference to the Ontario privatization. I think often the two things are confusing. In terms of the seaway, for example, the operators being more involved in the operation of the seaway... It tends to be captioned as privatization, and it's not really an apt description in my view. Your word ``partnerships'', I think, is more appropriate; it is broader and includes privatization but it is also...

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Mr. Stephen: If there's a residual public interest, we don't think you can sell it to someone else. So there's an ongoing partnership concept, whether it's financial or moral or legal.

Mr. Cullen: Good. Thank you.

The Chairman: Thank you, Mr. Cullen.

Mr. Stephen, you referred to a toll road study from New Brunswick.

Mr. Stephen: That's a Price Waterhouse study. I can ask the people down there if they would like it made public. I think people know it was done. I don't think it's a public document.

The Chairman: If you could make that inquiry, though... If it is public, we would certainly be interested in seeing it.

One of the things that I think needs to be examined here is something that we're going to be spending some time looking at. When people think of private sector involvement in roads they tend to think only of tolls. Yet we have some examples, like the Charleswood Bridge that you've mentioned, where there are no tolls. We have examples of other forms of payment calculation that don't involve tolling but do involve significant involvement on a design-build-own-operate basis and involve private sector entities in the creation or management of public infrastructure.

The question here - and the wraparounds are one example - about the leasing of existing infrastructure and operation of existing infrastructure...one of the big criticisms or concerns that is raised is the lack of support on the part of the public for upfront tolls on existing infrastructure.

Mr. Stephen: In Europe, and arguably for the fixed link in P.E.I., there are what is known as ``shadow tolls'', which means government topping up the revenue forecast to come from users with another amount that makes the equation balance.

So there are different kinds of tolls. The big impediments are probably political. We now have technology that allows you to travel at the full rate of speed and still be tolled through electronic means. We know how to do all of that, but there's a concern about people possibly feeling they're paying twice for something. I think it's a matter of public acceptance. There are mechanical conventions to get there.

The Chairman: Mr. Jordan.

Mr. Jordan: I think probably your biggest challenge is to get this idea across to the public that they're not being asked to pay for something twice. Quite often they'll say they've already paid for the road and they'll ask why they have to pay twice. I suppose that's true, but there's a whole lot more to the maintenance of the road and the periodic reconstruction of the road.

I'm like Mr. Cullen. I hadn't heard of your organization, but I can see a real need for an organization such as yours, just to get that idea across to the public. It's something like the chairman mentioned. There's a pretty narrow idea of it. Particularly here in Canada we haven't had a lot of that. If you've travelled through the States to any degree, you know that you're always shuffling in your pockets to throw something at the bin when you're going through. We haven't done a lot of that here, and I think it's going to take a little while before we get that idea sold to the public in a fashion that they are willing to accept.

I don't suppose it will ever be done to the extent that everybody will accept it, but I'm glad to see there is an organization that has a concern for this, because I think it's going to be a long, tough, hard sell.

Mr. Stephen: Thank you.

The Chairman: Mr. Stephen, thank you very much. I appreciate you taking the time to come here today.

Our next witness is the Hon. Donald R. Downe.

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This is a particular pleasure. I have had several private briefings on 104, so I'm delighted to have an opportunity to hear from the horse's mouth, so to speak.

Certainly you are credited with having one of the true public-private partnerships in Canada. So welcome.

Hon. Don R. Downe (Minister of Transportation and Public Works, Government of Nova Scotia): Thank you, Mr. Chair.

The Chairman: You have more than a little experience in presenting before these committees.

Mr. Downe: Actually, it's my pleasure to be here today.

I'd like to introduce Jim Vance, who is the senior policy adviser for the Department of Transportation and Public Works.

We clearly welcome the opportunity to outline Nova Scotia's position on a very critical economic issue that's obviously related to the whole issue of transportation and the infrastructure surrounding it.

I was born in Charlottetown, P.E.I., lived in Ottawa for a few years, grew up in British Columbia in the Fraser River valley, and then moved back to Nova Scotia. From that, I realized the importance of transportation certainly in a national context. Clearly, as an MLA in a rural constituency, I realize that the need for a good transportation network throughout the province and the country is even more important.

I'm here representing the province and speaking on behalf of not only the minister responsible for economic renewal and tourism, Richard Mann, but also the premier of the Province of Nova Scotia, John Savage, who has also indicated very clearly many of the points that I'll be bringing forward here today.

Transport Minister Anderson described transportation as a strategic asset that has the potential to drive the Canadian economy. I would agree with that. Mr. Anderson, from a number of discussions and meetings I've had with him, is clearly quasi-born-again to the importance of transportation to the national structure of Canada in driving a self-reliant and more economically vibrant economy within our national boundaries.

Improved transportation access and infrastructure is absolutely critical. It's an enabler of economic development in the province of Nova Scotia and clearly across this country. Transportation in itself is also a source of jobs and wealth creation. As all of us are struggling with serious issues of fiscal restraint, we need to make sure that jobs and wealth creation are key in allowing our province and our country to move forward.

A nation under-investing in its transportation system is clearly critically undermining the underpinnings and some of the foundations of economic survival on which our country is so dependent.

I believe your committee has had a number of presentations from our region, such as the Alliance of Manufacturers and Exporters of Canada. We also have supported the position they've taken. We made it very clear that there's a necessity of maintaining ferry links in southwest Nova Scotia and that small ports and harbours are important to the manufacturing sector.

I would be remiss if I didn't mention the recent announcement of Northumberland Ferries acquiring the call for a proposal - they won the proposal - for the Digby to Saint John ferry crossing year round and also the Yarmouth to Bar Harbor crossing.

I will state very clearly that we are very concerned as a province that the winter season from Yarmouth to Bar Harbor is not necessarily an absolute. We're very concerned about that. We've been a strong proponent of the fact that it went to the private sector. It moved forward because we realized the importance of that link, but it's very clear from our premier and our province that winter service, certainly in the Yarmouth-Bar Harbor area, whether it's all winter or certainly in the most critical period of time of October to January, is an absolute position that the province has taken.

The Tourism Industry Association of Nova Scotia, TIANS, also came here and articulated the issue of beaches, culture, kayaking, hiking, restaurants, and so on as being an important part of the economy of our province. It's close to $1 billion a year. But they pointed out very clearly that if consumers cannot get to those particular destinations, then it's all for naught.

The Atlantic Provinces Transportation Commission was also here. They made it very clear that changes need to support, not hinder, the regional economical development and industrial competitiveness of our province.

Really, what they're all saying - the consensus was made between stakeholders - is that it's imperative that we maintain and improve not only the seaway, but the highway, air and rail transportation networks within our province.

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I'll talk about three items today, if I may, Mr. Chair.

The first issue is on the port, which is really a vital gateway between the North American continent and that of the European Community. It's a tremendous factor within our economy of Nova Scotia. It's a vital link again to the economic well-being of our province.

Clearly, a national transportation asset is the port of Halifax. More than 60% of the container business at the port of Halifax originates from or is destined for Ontario, Quebec or the very lucrative U.S. midwest market areas.

It's the only east coast Canadian port positioned to clearly take advantage of international shipping trends. I'm speaking specifically of the post-Panamax vessel issue. This is a window of opportunity for our particular area. The question of either going big or staying at home and remaining stagnant is really the question we pose.

We view this issue such that the status quo is no longer an option. The window of opportunity is clearly there for us to grab. We believe there's a tremendous opportunity for the port of Halifax to basically double its potential with the post-Panamax issue and other opportunities that are there.

What we have to take a look at is the structure we're setting up for our port. We know that we need about $600 million in capital investment to make the port work properly.

One of the factors that we realize is that the federal government, although we would certainly appreciate any dollars that would be coming our way...

We need to foster an environment of opportunity. We are not, under the present system, able to leverage the asset base of the port to be able to bring new dollars into the opportunities that are there. That is a major challenge to us.

We derive about $25 million a year in revenues from the port from a cashflow point of view. That's what we deem as the possibility. When we're talking about an expenditure of somewhere around $500 million or better, $25 million a year doesn't give you enough cashflow to really sustain the opportunities that are there. So clearly, if we want to unbind and uncouple the process and allow us an opportunity for economic growth, we need the flexibility in the system and in the port to be able to make that happen.

We realize that the port in the greater Vancouver area probably had similar types of issues that needed to be addressed. We're not asking for an unfair competitive advantage. We're looking for an opportunity to put some business sense behind the port opportunities and be able to expand that in a very positive way. Clearly, we need to be able to take a look at how we can lever dollars to help make it happen.

We believe that we have a very realistic vision. Obviously, the fact that we have an ice-free port with very deep water in the harbour means that we're strategically located as being one of the major springboards of opportunity for the United States and obviously the European Community.

We also have worked very closely with CN Rail. I was happy to hear those comments that were made earlier this morning about providing favourable taxation treatment We are a province that realizes the importance of CN. Quite frankly, without CN, you wouldn't have a port, and without a port, you wouldn't have CN. They're extremely important to each other. We've had good cooperation and working relationships with regard to developing the port though everything from moving into double-stack rail lines and, of course, moving into the whole area of the U.S. midwest.

There's a need for a level playing field, competitive container traffic and marine service fees to avoid the negative, unfair disadvantages that we presently are seeing.

We're an advocate of a true user fee that is based on a port-by-port cost. The navigational fees we're paying in Nova Scotia for foreign vessels coming into our port are 17.6¢ per tonne. Yet those same foreign vessels are moving into Montreal or Thunder Bay for 14¢ per tonne.

So we have to take a look at the map, put a little common sense behind it, and realize that if we're going to have a level playing field and be competitive - we're asking to be self-reliant - then clearly we cannot be disadvantaged by unfair fees that are really a disadvantage to our particular port.

We welcome the establishment of the sea coast advisory board to work with the coast guard in developing ports and port changes. I believe it's going to start in April 1997.

One could, and should, state very clearly that the decision to look into this after the fact is an important issue, but I applaud the process on the part of the federal government.

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We are also watching very closely the whole issue of the ice-breaking fees there, especially given the fact that Halifax and Canso are basically ice free. We certainly would expect the fees for those services to be similar to the fact of the position we presently have.

This is our national and natural comparative advantage, one of the few advantages we have in Nova Scotia. We think we have a lot of natural advantages, but this is truly a natural comparative advantage and we do not believe we should be encumbered by that. We want to make sure we are not used as a subsidy base for other regions within Canada. The bottom line is that we support the user fee, but on a fair, just, and level playing field basis.

On the issue of airports, our Halifax International Airport offers another element of a gateway, but it also needs some major capital investment. We realize Halifax International Airport is one of the fastest-growing airports within Canada. It's extremely important to us to make sure this airport, in its present structure, is allowed to continue that growth. It's one of the hub airports, and we want to maintain it as a hub airport. We think in the different layers of airports across this country we're on a second tier, the first ones being the Vancouver, the Calgary, and some of these other very-large-volume airports.

Obviously the transition of privatizing that from the federal government has been a move we don't necessarily disagree with. We see the benefits of that. The question we've always had is about the cookie-cutter mould that was used in the negotiations with the Vancouver airport and other airports. It's fine for the large-volume airports, but in a second tier of airports that mould doesn't necessarily fit the province of Nova Scotia or Halifax International Airport.

We have an airport authority that is willing, able...and very aggressively pursuing the opportunity to sit down and negotiate a package. But clearly when you go into the negotiations on that basis, especially at this level, we need to make sure the airport infrastructure system there is on a level playing field with that of the other ones that were negotiated in the past. We are anticipating an approximate need of $150 million worth of improvements in order to put us on a basis of being able to secure, on a private sector basis or certainly on the Halifax International Airport authority basis...for that airport to be able to survive and move forward.

We believe - and I presented this same message to Minister Anderson - the structure for which the funding programs are there is very weighted on behalf of the federal government. We appreciate the need for that, but at the same time we want to make sure the weighting factor is not such that we have basically given the airport a negative cashflow problem and we will not be able to maintain the structure that is there.

We're asking for equal treatment. We believe the fact that we need better handling facilities for our baggage, to bring it up to the volume we require, and passenger opportunities, is very important, and also important from an economic point of view. We see the Halifax International Airport as being a tremendous opportunity for tourism, business, and development. We will work very closely with the federal government in pursuing those opportunities. We believe it is also very much a gateway of opportunity, especially from the European Community to Canada, and certainly from the U.S.

We find the consultative process with the air carriers, that initiative, is beneficial. We think that's very important, but we want to be on the front line with that process as well. We see that we need to be part of that process in order to gain opportunities for the airlines that are prepared to come and move and fly out of Nova Scotia, because we consider that an economic driver for the economy.

The third point I wanted to cover is the highway infrastructure, but if I may, in listening to the conversations earlier today...the Rails to Trails concept is another interesting one. When I was natural resources minister in Nova Scotia we negotiated with CN for two and a half years for the ability to acquire the abandoned rail lines. I would just like to put a plug in for those people. I think there is an opportunity there from an ecotourism point of view, from a healthy community perspective...and the list goes on. I believe many of the presentations were right on. We are working very closely with Rails to Trails organizations in the province to do a similar project.

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The next topic is highways. The point was made very clearly here today that the highway system across this country is in an absolutely critical situation. Highways, especially in rural areas of this country and certainly in the province of Nova Scotia, are in serious need today.

We appreciate the tremendous support we've received from the federal government through other forms of assistance, such as SHIP, HIP and the feed freight assistance program we presently have. But we have 26,000 kilometres of roads in Nova Scotia. We can literally drive to Vancouver and back four or five times. We have 3,400 bridges. It's a tremendous infrastructure to maintain with the very limited budget we have in the province of Nova Scotia.

The infrastructure is deteriorating to the point that it's been estimated that close to $750 million would be required to bring our highway system to present national highway standards.

As I mentioned before, a similar problem is developing in our trunk and secondary roads in the province of Nova Scotia. This has a tremendous impact on tourism and on bringing goods and services from rural areas, from agriculture, from forestry, from mining, from fishery and from manufacturing sectors to the point of sale. We are realizing now that close to 5,000 kilometres of roads are going to need some major upgrading in rural Nova Scotia, and clearly we just do not have the funding, under the present budget structure, to be able to make that happen.

A delay in investment will add to the total cost, and ultimately we will all be paying, nationally and provincially, in years to come if we do not address this very serious issue.

In 1995-96 the federal government contributed less than $25 million to the Nova Scotia highway capital program. At the same time it received approximately $125 million or more in excise tax revenue from gas and diesel. I am encouraged that this year that number is going to increase because of the spike in the dollars that have been committed, through the additional programs that have just been announced, to $38.3 million. But the reality is the window of those dollars is closing very quickly.

Clearly we need to have a long-term plan for our highway system, whether it's through an infrastructural development program or through a national highway system. Either one of them would be fine, but we need to make sure there's some sort of continuity. We need a road map or a blueprint so each one of us, in different geographic regions of this country, can say we have a plan to make sure the highway system is going to be maintained at a level that we believe, from a national point of view and from a provincial point of view, is critical in order to really give us the opportunity to develop our economic levers, which are all there.

Clearly, from a national perspective, your challenges are no different from ours. We need to create jobs, we need to balance the budget, we need to put our fiscal house in order, and at the same time we need to make sure that for the dollars we do spend, we get the biggest bang for the buck we are investing. We're looking for a win-win opportunity, and we believe that through the infrastructure program, highway systems could be a major win-win process from a job point of view and from an economic point of view.

To compare the provincial investment in highways, we spend approximately $250 million in the total Department of Transportation's budget in Nova Scotia and we spend a little over 90% of the total revenue drive from the province. So when you look at the fact that we're spending over 90% of what we receive from gas tax programs in Nova Scotia on our infrastructure on highways, and federally we're spending one-fifth or 25%, there needs to be some readjusting in those numbers. We would certainly recommend that.

Public-private partnering was talked about today. Nova Scotia is the first and only province in Canada to have gone forward with a public-private partnering that not only covers design, building and operational costs but also the financial aspect. This is the ability of a province that obviously is watching its fiscal debt, realizing this is an off-balance sheet development program.

The 407 around Toronto is a very strong initiative, but that was financed provincially, and I believe the Auditor General made it very clear there was a lot of money spent and he's wondering if that was the best investment. In Nova Scotia we're dealing with an off-balance sheet proposal, truly a major step in a new direction, and one that I understand the federal minister is very interested in looking at.

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We're talking about partnering. We're talking about being a little more creative with the limited dollars we have. That initiative has brought forward a lot of interest and a certain amount of political sabre-rattling. We're able to build a road on the 104 that is safer, quicker and less costly to the consumer and the taxpayer of the province of Nova Scotia by approximately $20 million.

In fact we're paving part of that road as I speak. Well, it's raining at home, so they obviously aren't going to be paving today. That will be open in November 1997. Otherwise we'd be looking at five to ten years before that project could ever be brought to fruition.

Public-private partnering is an interesting approach for us, and we'd be happy to entertain some questions in regard to that.

The next topic is funding. How do we do all this?

I've covered a lot of areas, but it's a long way to fly from little old Nova Scotia to come up to the big city of Ottawa, and when the taxpayers are paying to get me up here, they want me to make sure I'm bringing the points home loud and clear. So if you will be just a little lenient with me, Mr. Chair, I'd appreciate it.

How do we make this happen? I could simply say we need more money, but you know we need more money, and your dollars are very tight.

One way is through the fuel tax initiatives that could be brought in. The second opportunity for us to fund these issues we're talking about here is through an infrastructure development program. That's one we would be very interested in entertaining, because then you're multiplying every dollar by three - municipal, provincial and federal. There's an opportunity for us to have a positive initiative through that endeavour.

The last infrastructure program has worked very well in Nova Scotia, and we strongly support and thank the federal government for that initiative. It created jobs and built infrastructure that's solid, dependable and will last a period of time. So we encourage that initiative.

In closing, transportation is a gateway to a realistic vision. The port is important to us. We consider that a very key economic driver. With the potential job improvements there, the employment opportunities could basically double over the next five or ten years with the proper investment at the right time. Strategically we're looking at setting up a system that has industry and business around the table to make sure we come up with economic drivers for that port in a very strong, businesslike fashion.

The airport needs infusion of dollars. We need to make sure we have a level playing field before we move into the negotiations and finish those negotiations. Whether the money comes up front or they're part of that negotiating process, it's critical that we be allowed the cashflow to be able to reinvest in that airport. It was built at the same time the Ottawa airport was built, under the same basic box structure. We can see what happens in Ottawa. Come to Halifax and we can show you the need there, from an environmental point of view and for baggage and personnel.

We think there are opportunities ahead by working together. I want to assure members of this committee that the Province of Nova Scotia is very willing to work in a cooperative way with the federal government to find some solutions, and we're here with some ideas on how that could be done.

Thank you.

The Chairman: Thank you very much.

I note that Mr. Regan is here.

I have to say that your presentation, trying to run as many projects as you can through the same doorway, is something Mr. Regan and the Atlantic caucus does weekly here. Those of us from, shall I say, more sedate areas of the country are always amazed at the ability of the Atlantic members to move these projects forward.

I do have one question I'd like to ask before I turn it over to members. I have read with interest, and I support everything you said, about the 104. It is identified as the one clear private-public partnership. I believe it has been reviewed by Moody's and it has been determined that it is not part of your provincial debt.

You indicated a $20 million savings by moving on that project now. Can you outline those savings?

Mr. Downe: From an economic point of view, our staff have taken a look at the net present value of the money due to the fact that we're building today.

The other issue, which is really important, is that the private sector has been involved in the construction side of this. They've found innovative ways to build this at a cheaper rate and still maintain the integrity of the environmental considerations that are there. Also, they are building with the responsibility to maintain that structure, so they're obviously not going to take some shortcuts, because they're going to be held up to make sure the infrastructure works. So by working with the private sector we have found some creative ways.

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It's like strategic alliances. You bring everybody together. You might have a circle, a pie chart, and if you put a little triangle in there of what you know and maybe another part of a triangle of what you think you know, there's a whole lot of that pie you don't know. So that's really what strategic alliances try to do, and by bringing the private sector together, by working together with the consortium, we're able to find some innovative approaches that we haven't seen before, done in a strategic way that is economically beneficial.

But I want to make it very clear that it has been a tremendous challenge putting this Highway 104 together. It's the first time. We're leaders in this country for doing it, and I believe we'll be really the benchmark for many other jurisdictions, including New Brunswick, as time unfolds.

We can simply say, give us a cheque for $700 million tomorrow to help us with our highway system, and you're going to say, well, that's fine, Mr. Downe, thank you very much. But I might as well pound sand as be able to get that. The reality is that you might have some money and we might have some money, and if we pool it together we're going to be able to acquire what it is we want.

The vision we're all talking about here is very clear. That's what we should be focusing on. The member from British Columbia talked about the cooperation approach on the vision we're trying to see. The question is, how do you get to that vision? If we're prepared to work together, I think we can do that, and that's what happened under the Highway 104 approach.

The Chairman: Thank you very much.

Mr. Regan.

Mr. Regan (Halifax West): Thank you, Mr. Chairman. Is there no one else ahead of me? I'm delighted to be able to get a chance. It's very kind of the members of the committee to let me ask a question of the minister, who I want to welcome here. I'm not a member of the committee, so they are being generous today in allowing me to take part.

I want to focus on the issue, of course, of Halifax International Airport, which is in my riding. The port is nearby and it's a very major issue also. But first of all, I want to talk about Halifax International Airport.

As I understand it, before the airports at Edmonton and Ottawa - which have a comparable volume of traffic and which were built, of course, at similar times - were transferred, there were major capital upgrades to those two airports. Of course, that didn't happen in Halifax. That is a concern I share with the minister about Halifax International Airport.

What other options do you see in terms of private-public partnering there? Do you see any other options besides federal infusion of dollars for funding capital expansion at Halifax International Airport?

Mr. Downe: Mr. Chair, I appreciate very much the question from Mr. Regan. He has been a great supporter of infrastructure in the province of Nova Scotia, including the airport.

We require $150 million in improvements, and the federal government has to recognize the reality of that issue, especially in regard to what you mentioned when you compare the Ottawa, Winnipeg and Quebec City airports and other areas of Canada.

We are saying that we would like to see those dollars up front. In the event we can't find those dollars up front, then in the negotiating process that's there, there has to be the ability to be able to drive the cashflow back to the airport authority, to be able to cashflow the upgrades that are required, and if the federal government, in its negotiations, is going to be squeezing the ability for the airport authority to be able to derive the cashflow, obviously you're basically freezing off the opportunities of the Halifax International Airport as a tremendous hub.

As I indicated before, it's sixth or seventh in Canada. We see it as a growing airport, a great opportunity to invest in, and we need to make sure that the federal government does it one way or the other.

Obviously I'd like to see the money up front, but at the same time, if it can't come up front, there has to be a mechanism whereby we can have the cash coming out of the system to be able to pay for the needed upgrades.

Mr. Regan: Mr. Chairman, if I may, I have one more question.

Maybe you can fill me in on the details of what you know about the amounts of assistance or revenue stream, the stream that has been spent already in Quebec City and other major airports that are of a similar size. I gather that Transport Canada has agreed to sort of advocate $12 million in revenue stream from Halifax International in future years. That's far less than what is of course needed for the capital improvements that are required. What do you know about the other areas?

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Mr. Downe: I'm sorry, I didn't bring the numbers. I had a meeting with the Halifax international authority group, the team that's been put together. It gave me the numbers about two months ago, but I don't have them.

Mr. Regan: If I say $30 million in the past year for Quebec City's airport, does that sound accurate?

Mr. Downe: You could probably say $30 million minimum, but I believe that is pretty close.

The Chairman: Thank you, Mr. Regan.

Mr. Regan: Thank you very much, Mr. Chairman.

The Chairman: Thank you for your intervention. On behalf of Winnipeg, I'll talk to you about this afterwards.

Mr. Cullen.

Mr. Cullen: Thank you, Mr. Chairman.

Minister, I really want to talk about Highway 104, because I'm also convinced it's a really unique experiment and one we can all learn from.

I'll say something about the Halifax airport in the sense that the open skies agreement seems to have created some incredible opportunities for airports in Vancouver and Toronto, if we can convince people that the airport can co-exist with everybody in the Toronto area. I'm just wondering if open skies creates opportunities for Halifax and whether that will make some of the economics in the future a little brighter.

Maybe I can leave that hanging for a bit and come to Highway 104. You talked about the roughly $20 million of present value in terms of the benefits of doing it today, and in a shorter period of time, I suspect, than it would otherwise take. It seems to me there must be some operational efficiencies as well if you're doing a highway in a couple of years as opposed to five, six or seven. I wonder if you could elaborate a bit on that, because it's an important issue for us as we look at this on a broader scale.

In terms of highway maintenance, as I understand it you are quite prepared to look at it being privatized, in a sense. It came down to a critical mass in terms of the structure of the road, and maybe it didn't make economic sense for the private sector to do it, so it's contracting those services back from the Department of Transport provincially. Is that correct, or will the private sector actually do the maintenance completely?

Mr. Downe: There are three or four points here. Those of you from Toronto are good at bringing a whole pile of issues to the floor.

By the way, my wife's from Winnipeg, so I hear all about Winnipeg all the time.

Mr. Cullen: We're not supposed to do it in Toronto, either.

Mr. Downe: Getting back to the whole issue of the airport and the open skies concept - I mentioned it earlier, but I was speaking a little quickly because I knew I had a lot to say and I was going to get bumped if I didn't get through it - the consultative process that is under way with the whole issue of air carriers is important to us. We just finished working on an arrangement with Icelandair and other air carriers in our region. We need to make sure we are part of that consultation to find out what the air carriers are really looking for and how we can meet their requirements.

It's one thing for government to set up all these stipulations, costs, walls and barriers of coming here, but we want to make sure we can provide an opportunity to show air carriers we're open for business in Nova Scotia and be a part of that process.

Everything seems to go to Toronto. Toronto is the hub of all of Canada, and that's fine. Toronto is a beautiful spot.

Mr. Cullen: I haven't noticed lately.

Mr. Downe: My sister lives in Barrie and I would have loved to have gone there.

We have other hubs at different levels, and we have to make sure those strategic hubs are maintained and enhanced. We cannot take it for granted that the airlines that are coming in here will just come here for the sake of Halifax being a natural destination. We have to show that Halifax is an opportunity as a destination, so we need to be on the front line of that issue.

With Highway 104, the numbers have been crunched together at this time, and I'm sure more work will be done. We have a team analysing the whole concept of the Highway 104 western alignment program. We'll be happy to share that information in time. One of the points was that the private sector can build it cheaper. It's building the highest quality we can have as far as standards go. Its ability to be able to do it at a more reasonable cost than if government were building it is truly one of the major savings.

On the maintenance issue, the private sector is responsible for the maintenance, and that's part of the process.

If you're going to hold somebody's feet to the fire in a public-private partner initiative, it's going to make money. If they weren't going to make money, the lenders weren't going to make a return on investment. If the contractors weren't going to make a return on investment, they wouldn't be doing it. They're not doing it to create a job for themselves; they're doing it to create a bottom line. If you don't hold their feet to the fire on one of the issues, and that would be maintenance of the operation, then clearly you could be concerned.

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We, as the controllers of the purse strings in the province of Nova Scotia, through this initiative have found the ability to be able to do this - that is, they are responsible for the maintenance of the work. So they have a vested interest in doing this project correctly.

The other aspect of the negotiations was clearly on the issue of environmental integrity. You're building a major infrastructure. In terms of the 407, a billion-dollar project, 10% of their costs were spent on environmental protection measures. We're probably going to spend over 10% on environmental protection measures on the 104, because we have some awkward terrain to go through.

So those issues are very important to us from an integral point of view and to move the project forward.

The Chairman: Thank you very much, Mr. Cullen.

Mr. Paré.

[Translation]

Mr. Paré (Louis-Hébert): As you know, we heard some very surprising things this morning. The minister seems to be in the very easy position of the party making demands, and I will suggest to the Minister of Transportation of Quebec that he take the same stand since it seems to be a very privileged position. I do not know if the inflation that we see occurring in the Maritime provinces is due to the harmonization of GST with the provincial sales tax.

On the other hand, Mr. Regan raised the issue of the airport of Quebec and I do not mind spending some time on it. He is making a big deal out of an investment of approximately $30 million, although not 1 cent had been invested in this airport in 40 years. As soon as some money is invested in an airport like that in Quebec, people raise a big fuss.

Before that minor 4,000 square metre expansion that took place, the airport of Quebec had only 7,000 square metres. Ottawa airport has 18,000 square metres, Halifax 24,000 square metres, Winnipeg 24,000 square metres also, and Edmonton 36,000 square metres. So, do not raise a big fuss because the federal government finally, after delaying things for 40 years, invests in an airport!

It is only $30 million, while the Minister of Transport is requesting $150 million for the Vancouver airport. The port of Quebec would need an investment of $150 million, but Halifax wants $600 million. I find this inflation to be quite extraordinary and I am shocked by what I am hearing this morning.

Furthermore, the Minister of Transportation of Nova Scotia tells us that he does not want to pay anything for de-icing since the port of Halifax is ice-free. What I see is that he wants to benefit on all sides. Every time there is a disadvantage, it is being passed on to the others, but when there is an advantage, he does not want to share it.

We know very well that the whole fee structure for de-icing is unfair, not only for the port of Quebec, but also for those of Ontario. Canada will be divided - I think it has already happened - into three sectors: two where navigation aids are not much of an issue, whereas in the St. Lawrence Seaway, which is critical for the economic development of Quebec and Ontario, users will have to pays fees to which other regions are not subjected.

I feel this is a very narrow vision of Canada that leads nowhere.

I would like to conclude by asking a very specific question. Mr. Minister, when you compared fees paid by the ports of Quebec and Thunder Bay to those paid by Halifax, you said that for each ton moving through the port, the fees paid by Halifax were higher than in other ports.

Could you tell us exactly what fees would be higher in Halifax than in Quebec and Thunder Bay?

[English]

Mr. Downe: I find very interesting the excitement about the dollars invested in the Quebec airport. I too am excited about the dollars invested in the Quebec airport; it's one that's required. I'm merely stating that there is a requirement for investment in our airport as well. I have spoken with the minister of transportation for Quebec. We have a lot of similar concerns. Basically, we're very supportive of both initiatives in bringing forward the concerns to the federal Minister of Transport, Mr. Anderson.

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On the issue of inflated numbers, I don't believe we're here to talk rhetoric; we're here to talk facts.

On the issue of the port, we're talking about $600 million if we move into post-Panamax crane requirements, and clearly those are fairly substantial investments. One of the reasons we believe post-Panamax is a benefit to our region is because of the deep water port we have. We have a natural comparative advantage there, and the post-Panamax is one of the options that we're looking at as far as future opportunity for building a stronger, more self-reliant port.

Comparing the costs of the 17.6¢ versus the 14¢, why the difference is a good question. When you take a look at navigational aids, I don't believe there'd be more navigational aids getting from Europe to Halifax than there are getting from Europe to Halifax to Montreal and Thunder Bay. So I asked the same question back: why would we be paying 17.6¢ per tonne for navigational aid costs, as I understand it, compared with other jurisdictions up the St. Lawrence? It's an issue that we are obviously looking at and making sure we're competitive. When you have a natural comparative advantage in location, there shouldn't be a deterrent on another basis.

Secondly, when you have natural comparative advantages, such as ice-free ports, what factor should we be employing in there with regard to our business? This is a very competitive industry, the port, and one that we consider being extremely strategic to the economic survival of our province, as well as other modes of transportation. We are not in a position to put ourselves at a natural comparative disadvantage when we have a natural advantage for the purposes of employment.

Now, there are other mechanisms, and I don't want to get into the national issue, but there are many other issues in which we work very, very closely together to build a national system, but we are just saying we shouldn't be penalized for being where we're located.

The Chairman: Thank you very much.

Mr. Gouk, for an efficient and informative question.

Mr. Gouk: I will be very efficient, as I've been this morning, and no longer than the other side took, Mr. Chairman.

First, I have to start by saying that I always find it astounding when the Bloc are opposed to division when it doesn't work for them, and yet their fundamental purpose in being here in Parliament is division.

I want to make comment on three areas. You talked highways, airports and ports, and I'll go through it - two of them are very brief - and invite your comment.

With regard to highways, all I have to say is we will be writing a report on this triple-T study, and it's my intention - I'm sure the chairman won't be surprised to hear me say it - to see dedicated revenues for highway funding from the fuel tax in that report.

With regard to airports - and the member from Halifax might take particular interest in this - first of all, in terms of having revenue for your structure and improvements, an introduction of an airport facilities fee, such as Vancouver has, would provide you with a cash stream. I don't think that's the problem. I think that's there and it has real potential, but the national airports program - in my opinion and in the opinion of some very highly placed consultants, including the one the Halifax airport has hired for this purpose - is nothing more than 26 disasters looking for a place to happen, from a financial point of view.

Two of the airports I know of that are under way right now, Calgary and Edmonton, are already financially insolvent because of the federal government's fee structure system. It is based on the gross revenues of the airport and it is based on deemed revenues and deemed expenses, a completely unheard of and unworkable model. The consultants for the Halifax airport, if they have not already given you a report on this, soon will. They will advise that you do not sign.

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The only other comment I have is with regard to ports. I'm very concerned, and Halifax would certainly be part of this, that Bill C-44, which is now through this committee and will go back to the House of Commons at report stage, will collect their fees from the ports, again based on gross revenues. There's a report that talks about how this will be done. I've only been privy to it within the last day and have not yet had a chance to look at it, but because it is based on gross I have the same concerns that I have for the airports - the airports that are now proving financially unfeasible.

Mr. Downe: Thank you very much. I appreciate your commitment to the highway infrastructure system that is required. I see CAA, with whom we were standing in the beautiful city of Halifax not too long ago, talking about the need for infrastructure dollars for highway work. I appreciate your support.

I might say that the federal minister, Mr. Anderson, is absolutely a very strong supporter of a good highway system in this country. I was extremely impressed with his dedication, commitment and knowledge of the infrastructure of highway systems and all transportation issues. You're very fortunate in having a member from British Columbia of his calibre. He certainly was very supportive of the need for infrastructure dollars in transportation -

Mr. Gouk: It'll be interesting to see how that translates.

Mr. Downe: The issue of the airport and the port on the gross revenue...we have some concerns about those structures. I believe I talked about that in the formula, where we're deriving $25 million from the numbers we've been able to see from the port on the benefit side. It's not enough to cashflow the operation. It's not enough to be able to make the capital investments that are required, and if you can't pay the capital investment up front from other mechanisms, then it can't survive. So we have some very legitimate concerns.

Calgary - and I'm not going to comment on other airports - has more volume throughput; they have more capability. I remember the $10 fee as I go through the Vancouver airport every so many months when I'm out there. Of course, they have a beautiful structure out of doing that, but you have a volume throughput. As a business person, if you don't have the volume throughput, you can put any levy you want on there; it probably won't work.

We have a different situation in Halifax. We have a certain volume, but we don't have the population passing through there. We need to be able to be a little more creative in negotiations on those particular arrangements so that we're allowed to be self-reliant and able to economically support the initiatives that are there. I believe that's what you're saying.

Mr. Gouk: Actually, I haven't looked at the numbers in terms of your passengers and your insufficient volume to derive the revenue you require through a passenger facilities tax, provided you don't lose it back out the other end.

Mr. Downe: Yes, that's a fair point.

The Chairman: Thank you, Mr. Gouk.

Thank you, Minister. I really appreciate you being here. We followed the 104 with some interest. I believe one of the groups that was involved with the financing is going to be here in another week to talk about it from their perspective.

Mr. Downe: Mr. Chairman, I want to thank you very much for the extra time, the leniency, the liberalism of allowing me to take as long as I did. I appreciate it very much.

We have presented a position paper on Bill C-44, as you know. We were unable to be here to personally present it. We tried to cover some of those points here today. I encourage you to continue these efforts, and don't forget that infrastructure is probably the single biggest issue we can deal with right now in regard to job development and job creation and allowing our industries - forestry, mining, agriculture, fishery, manufacturing - to be able to move our products to the marketplace in order to create new wealth for this country and our province.

Thank you.

The Chairman: There's a quote we could use in the report. Thank you.

Now we have one of those small regional interest groups with 3.2 million members, the Canadian Automobile Association. President Brian Hunt, Richard Godding and David Leonhardt, it's nice to see you again.

Mr. Brian Hunt (President and Chief Executive Officer, Canadian Automobile Association): Thank you very much, Mr. Chairman. I'm pleased to be here today to present the view of the motorists on the national highway system. With me today is one of our vice-presidents, Richard Godding, and our government relations manager, David Leonhardt.

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I would like to begin by thanking the chair, Mr. Alcock, for joining CAA last week when our Roads Work for Canada expedition stopped in Ottawa to report on its cross-Canada journey from Victoria to Saint John. It was very encouraging to hear that this committee is ready to put forward some proposals that will lead to a much needed national highway program.

For those of you who may not be familiar with our Roads Work project, CAA sent an expedition across Canada to speak with Canadians about the national highway system issue. The campaign gave many people a means of expressing their views on this important issue. We were further encouraged by the intensity of the support we received from coast to coast.

I could speak for hours on how important our key trade and tourism routes are to our economy and to job creation. However, I sense that most members of Parliament now recognize this, and this committee more so than most. Therefore, I will limit my comments on the importance of the issue to one reference to a recent Angus Reid-Southam poll.

The pollsters informed residents that the federal government had surpassed its deficit reduction target this year and asked them what they thought should be done with the funds. The most popular choice was to spend it on job creation and the second choice was to spend it on health care.

The national highway proposal would create long-term jobs in tourism, manufacturing and transportation. It would also reduce the load on our hospitals by reducing injuries by 2,300 and deaths by 160 each year - this in addition to the economic and mobility benefits we would enjoy if this program were approved.

Back in September, CAA launched an awareness campaign called ``We're putting our two cents in''. We called on the federal government to dedicate at least 2¢ per litre from the current excise tax on gasoline for our federal-provincial cost share program, to rebuild our national highway system. That money already exists. In other words, it should come from current revenues.

CAA believes this proposal is reasonable, fair and, most importantly, it is what business and the consumers want - to get what they already have paid for. CAA believes using existing revenues to fund our national highway system is the best option. Canadians see the excise tax on gasoline as a user fee. When they pay it, they believe they are buying better highways. We believe all 10¢ per litre now charged by the federal government should be invested in highways. However, if the federal government would start by putting their 2¢ in, Canada would be on its way to having a much smoother ride.

In the past, CAA has proposed a highway trust fund. In a recent survey, 93% of motorists said they would favour such a proposal. The finance department must deal with the constraints of public accounting and avoid earmarking tax revenues to specific programs out of concern for possible misallocation of funds.

As everyone here will agree, this issue is a difficult one. However, one way or another, we must find a way to pay for our highways before we are faced with an even bigger road funding problem down the road. Whether through a trust fund, or as an allocation from general revenues, our highways require immediate attention, and the money must come from the existing revenues.

There are several other options that have been proposed when it comes to funding our highways, and CAA has at various times responded to each of them. Let me start by saying that increasing the gas tax would not be well received by Canadians or by the CAA. Motorists are not prepared to bear another excise tax increase when they are already paying for what appears to be only crumbling highways.

We have also been asked about tolls. Again, we have some difficulty with tolls in principle, because motorists are already paying for so much more road than they are getting for their money. We also have concerns about the applicability of tolls to most of this project. Tolls, in our opinion, only work in high-density areas such as Toronto or Vancouver, but not on the majority of the national highway system. Basically tolls just don't apply to this issue or help to resolve it.

Another idea that may have some merit would be to establish a national highway authority. This government, and indeed this very committee, did some creative work with airport authorities, which seem to be working fairly well to date. Your colleague Mr. Nault from Kenora proposed a private member's bill in the previous parliament calling for a national highway authority. Such an authority could receive funding from both the provincial and federal levels of government.

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What has always seemed awkward about government accounting is that there is no recognition of the value of government capital assets or its investment in capital projects.

A highway under construction is viewed only as a debt because it represents cashflow, but it also produces a counterbalancing asset and many long-term benefits. However, this is not reflected in the public accounts. If it could be, I am sure we would find all sorts of creative ways to fix and upgrade our highways without adding to the deficit and without imposing new fees on already overtaxed motorists.

This government may not be able to amortize, but what about a crown agency? What about a national highway authority? It could purchase a road and amortize the cost. It could set up a highway as an asset. It could establish reserves. The federal government would simply have to transfer its road user revenue to the new body. Such a structure would ensure the long-term fitness of our trade and tourism routes and sustain job creation and public safety over the years to come.

With each day our road debt increases. With each day the situation grows more urgent.

In the 1995 federal budget the excise tax on gasoline was increased by 1.5¢ per litre. At the time, Mr. Martin said it was placed in the budget as a cushion in case his budget predictions fell short. They did not fall short, and now that we see this budget has been more successful at deficit cutting than anticipated, let's return the gas tax increase to our highways, where it belongs in the first place.

Thank you very much.

The Chairman: Thank you very much, Mr. Hunt.

Mr. Gouk, would you like to start?

Mr. Gouk: Thank you, Mr. Chairman.

Mr. Chairman, I believe you're well acquainted with the fact that I support not only the 2¢ program, but the whole concept of dedicated revenues. That is something we will see when we write the report.

I've been critical of, shall I say, past committees who have hearings, hear considerable majority or otherwise stronger input from people, and then don't act on those particular recommendations. I then call into question why we bother to have hearings.

I'm very optimistic that the committee is listening. We have been hearing ``dedicated revenues'' from many sectors of the country and from various industries, and I hope that will be reflected in the report that comes out. If it is not, then I suggest to you that you have a greater job to do.

I've heard conflict in so many different sectors between my opinion and that of the government. I have gone to the people who are going to be affected in the field and said, ``I don't think this is in your best interests. Are you going to say anything? Are you going to support what I'm trying to do for you?'' and the response has been, ``Well, we don't want to rock the boat. We don't want to get the government mad at us.''

I would suggest the first step is to see if we can put together a report that reflects the opinion of yourselves and the other witnesses that have come before this committee. If it does not, then you have, as you have stated, 3.8 million members. Are you prepared to tell them that there is support, but that some aspects of government will not support that, and to use your influence with 3.8 million members? Or, quite frankly, are you going to roll over and allow it to be done, if in fact that's what's done?

Mr. Hunt: We appreciate your support for our view that revenues should be dedicated. If this committee recommends those things, we would support that very much.

The crisis in our highways is critical, we think, for the economic well-being of our country, going forward for job creation...for a number of issues. I think our challenge, if the government doesn't respond with dedicated funds or somehow come up with funding the national highway system... We have no intention of ceasing our direction and our goal and making ourselves heard, because that would be a mistake for the CAA, for our members and for our country.

So I would hope that we would take our 3.8 million members - we will let them know. We're hoping to grow that to 6 million or 7 million members, so we'll have even more influence on the government.

Mr. Gouk: That's it. Thank you.

I was succinct, just like you wanted me to be.

The Chairman: Thank you, Mr. Gouk. You've set a precedent that I hope will be followed by all members of this committee into the future.

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Mr. Cullen.

Mr. Cullen: Thank you, Mr. Chairman. I missed the subtlety of that. I'm a little slow this morning.

Thank you, gentlemen. I have two questions. I'll keep them short.

While I find the idea of a trust fund appealing, I'm just looking at some history. Trust funds have been set up and have come and gone, notwithstanding the best of intentions. In Nova Scotia we were told they set up a highway fund that survived and then it didn't survive... In British Columbia, as my colleague opposite me knows, a lot of funds have been set up for forest management and they've come and gone.

How do you structure it so that it is there to stay?

Mr. Hunt: It has to be structured with a mandate that the funds will be invested in the roads on a regular basis, and it has to be managed.

If you look south of the border, to the U.S., they have trust funds. There's a lot of money sitting in those trust funds that isn't being invested in roads. It's being used, not for other purposes, but... The way we look at it, it's being used just to reduce the deficit calculation that the U.S. government has. I think once the fund is set up it has to be managed, it has to be workable, and there has to be the dedication for investing in the highways.

Mr. Cullen: With respect to the national highways authority concept, I guess there have been some jurisdictions that have worked towards that model. They take it off balance sheets. They're able to amortize along the lines you've talked about.

Jim, in B.C. I think the government came under some criticism for taking a lot of that debt off the balance sheet and sort of... Maybe you could comment on that.

As for tolling and toll roads - or user pay, because I think tolls are part of a user-pay concept - you've canvassed your members or surveyed them over time and obviously they don't like it too much.

I hear what you're saying about some of the high-density areas. It's more appropriate there. If you were able to bundle it up into a bigger scheme and say that you can't cherry-pick... You would say that they can't toll just those areas where there are high densities, and tolls or user pay would only be used when there's some benefit or some alternative. Do you think it has any attraction, or do you think as far as your members are concerned it's a non-starter?

Mr. Hunt: You can put a toll road in provided there's a free alternative. This is what we've heard from our members. I guess we look at it from the point of view of the lower-density areas. Look at the route from Sudbury to Thunder Bay as an example. If you have a toll road and an alternative in a low-density area, I can't see the economic justification for the toll road ever being paid for. You would assume that people would use the free alternative.

So we think that in certain areas of the national highways system tolls just don't work, provided there is a free alternative. And if we're talking about no free alternative, then from our point of view - we've heard from our members - that's not acceptable and we would have great difficulty with that type of set-up. Where you provide the alternative, we don't think the economics work for toll roads, unless it's a fairly high-density area.

To respond to your point on the highway authority, I guess one of our concerns there is that if one of the things holding the government back from allocating funds... We look at rebuilding the national highway system. We understand that a lot of people are competing for dollars. They are limited dollars in terms of the government's budget, but to rebuild the national highway system over the next ten years is going to take somewhere between $14 billion and $18 billion, depending on who you're talking to.

We think the need to get this going and to get away from a government accounting principle, if you want, to move it to an authority that would have the ability to go to the private sector and build a road that we know is going to last anywhere from fifteen to thirty years is such that... In order to get that done on a timely basis and accrue those economic benefits today, the safety issues, etc... We think that's very worthwhile. It should be looked at.

The Chairman: Thank you, Mr. Cullen.

Thank you, Mr. Hunt.

Mr. Paré.

[Translation]

Mr. Paré: Just a quick question on tolling. What is the minimum volume required for tolling to be economically feasible?

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You probably know the answer. How many vehicles per hour or per day?

[English]

Mr. Hunt: I would think a business case would have to be built. If you look at the 407, north of Toronto, or you look at the 104 project in Nova Scotia, you go in terms of how much it costs you to build per mile of the highway versus the revenue you're going to receive on an annual basis and then work out whether that's going to be economically feasible or not. Our concern is that in high-density areas that would work, but it would be determined between a two-lane road and a four-lane road. In a low-density area we're concerned that even with a two-lane toll road the economics won't work.

I think it would be on a case-by-case scenario. I don't think there's a standard rule, so many cars per hour.

Mr. Richard Godding (Vice President, Corporate and Pubic Affairs, Canadian Automobile Association): Could I make a comment on the toll issue, Mr. Chairman? I think there's a tendency to ask this question about tolls because people see it as an opportunity to raise more funds. We view fuel taxes as a toll, and probably the most efficient toll there is. If you get into tolling specific sections of the highway you're creating an unbalanced system because you're charging some people and you're not charging others. We saw what happened in Quebec, for example, with the tolls that were on the auto route north of Montreal. Eventually the public pressure became so much the government had to take them off.

We see the fuel tax as a toll that's there now.

The Chairman: Let me juggle with just a few questions here. Some of them were not contained in our original terms of reference, so you may not be in a position to answer them, but I would be interested in your responding at a later date if you can't do it now.

First, I want to thank you for the work you've done. I think the CAA has been very active on this issue for some time. I think the Roads Work for Canada program has been quite effective in raising the public profile. Various members tell me they have large bags of pennies in their offices right now. In fact, one of them said it in a rather colourful way, which I shan't put on the record.

About the provincial response, you're not asking just the federal government to put forward the 2¢, you're asking the provinces to do the same thing. I know a number of provincial ministers have participated in the campaign. What has been the response? Have all the provinces agreed to come in at the 2¢ level?

Mr. Hunt: We can respond to you in detail, but it's my understanding that the majority of provinces, if not all, have supported our campaign as we've gone across the country.

The Chairman: Good.

The second question is on this issue Mr. Cullen raises - it certainly is one we're looking at from a number of perspectives - of some sort of entity, a trust or whatever. Have you had any sense from the provinces on that question of whether or not they would be prepared to participate in some sort of third-party, arm's-length, federal-provincial creature that would manage this?

Mr. Hunt: We would be glad to come back to you on that in more detail. I think the sense we've had as we've gone across the country is that there is a need, and everyone recognizes the need. The solution is something we're still grasping at...to determine what that solution is.

I would suggest to you that from the conversations I've had - I was in Halifax with our previous witness to this committee, I've been in Ontario, I've been in B.C., and I've met with the various provincial transport ministers - I think they would be very open to the idea. But we would canvass them and come back to you.

The Chairman: Okay.

The other question is this. One suggestion that was put forward anecdotally was why doesn't the federal government simply reduce its fuel tax 2¢, allow the provincial governments to increase their fuel tax 2¢, and turn the entire responsibility over to the provinces?

Mr. Hunt: If that's an alternative, that could be done. I would want to make sure the 2¢ the provinces picked up was dedicated to highways somehow. We would have to pursue that. That could possibly work.

Mr. David Leonhardt (Manager, Public and Government Relations, Canadian Automobile Association): One of the reasons why a national program is required and we're not going out to each province and saying ``put a little more money into the roads'' is that a certain aspect of planning and coordination as a country is involved here. You might well appreciate a certain amount of work has been done on north-south routes from Winnipeg to the United States, for instance, but when Manitoba companies want to get goods to market in Vancouver or Toronto, they still have to go through Saskatchewan and Ontario, and maybe they're working on their north-south routes, not their east-west routes. The same situation can be seen in Nova Scotia and New Brunswick and through Quebec.

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The Chairman: That is at the heart of the debate, whether there's a need for a federal involvement to ensure continuity - not on all roads, obviously, just on the national system. But that presages a kind of federal-provincial entity that may not be broadly supported.

The final question is the truck-car question. A lot of studies suggest that it is trucks that do the greatest amount of damage to the roadbed and cause the greatest amount of wear. There has been some talk about differentially tolling trucks, either through a shadow toll or through some other mechanism where they would pay a specific user fee dedicated to the roads.

Has CAA considered this at all, or have you been strictly focused on cars?

Mr. Hunt: We've focused on the truck issue more from a safety issue with some of the things that have been occurring. To the degree that the deterioration of the roads is impacting that safety issue, then we've clearly focused on it.

We'd like to see a study on what you're proposing in terms of the difference between the damage the truck is doing to the road versus the vehicle, and should they be tolled and should there be higher user fees for some of the trucks. That also comes into an issue of whether it makes it economical, the transportation costs to get our goods to market, and so on, and all those things impacting.

That's something on which we will respond to you in more detail.

The Chairman: I would like to thank you for the work you've done to date, and I look forward to hearing from you. We hope to be reporting to the House with an interim report on this question of roads before the House recesses for Christmas.

We'll look forward to your response to our deliberations.

Mr. Hunt: We thank you for the opportunity to present to you.

The Chairman: For the information of members, we'll be reconvening for our first witnesses at 4 p.m., rather than at 3:30 p.m., as you were previously notified. So, Mr. Gouk, you can take that half hour in quiet contemplation.

The meeting is adjourned.

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