CCPPP 2016 Federal Budget Submission

During his consultation meetings in Toronto, Minister Morneau noted “There is no better time to invest in infrastructure.” To that end, the Canadian Council for Public-Private Partnerships, (CCPPP) believes it is important to invest and not simply spend on infrastructure. We would agree with the minister’s assessment that “smart, targeted investment in infrastructure is the key to economic growth.”

We commend the government’s commitment to “invest in Economic, Social, and Green Infrastructure today to create jobs, grow the economy, improve social well-being and create a sustainable future for Canadians”.

CCPPP believes that public-private partnerships (P3s) should play a prominent role in the government’s infrastructure agenda. We would readily acknowledge that P3s are not a panacea. They are, however, an important and necessary tool that can support the government’s infrastructure goals.

When used and applied appropriately, P3 projects consistently outperform traditional forms of procurement in meeting delivery deadlines and budget objectives. We know that a failure to complete projects on time and on budget often results in significant cost overruns for governments.

Economic Infrastructure

Economic infrastructure is a key element to unlocking long-term prosperity for the country. We share the government’s view that those investments would target public transit, roads, bridges, transportation corridors, ports, and gateways to help Canada’s manufacturers get their goods to market. We would also recommend that broadband infrastructure be added to this category.

There are currently 54 transportation/economic infrastructure P3 projects either operational, under construction, or in procurement in Canada.

Operational examples include the Canada Line in Vancouver, the Sea-to-Sky Highway Improvement in British Columbia, the Anthony Henday highway in Edmonton, the Charleswood bridge in Winnipeg, City of Barrie transit project, the Billy Bishop Airport pedestrian tunnel in Toronto, A25 and A30 highways in Montreal, the Fredericton-Moncton highway in New Brunswick, and of course the Confederation Bridge connecting Prince Edward Island to the mainland.

Projects under construction include the Eglinton Crosstown LRT in Toronto, the Iqaluit Airport, the new bridge for the St. Lawrence in Montreal, the Regina Bypass, the Ottawa Confederation Line LRT, and the Edmonton Valley Line LRT. Examples of projects in procurement include the Gordie Howe Bridge, Port Metro Roberts Bank Terminal 2 project.

We recommend:

• Continued and increased investment in economic infrastructure. • The use of the P3 model where there is a demonstrated value for money

The new Public Transit Fund announced last budget would provide investments into transit projects over $1B in value so that large transit expenditure did not drain a province’s resources under the Building Canada Fund.

We recommend:

• The Public Transit Fund should be fully implemented and that the government could consider accelerating the fund should transit projects be both shovel worthy and shovel ready before 2017 in order to stimulate the economy. • Continue with P3 projects already in motion (ex. Green Line in Calgary)

On the broadband front, the Northwest Territories is building the Mackenzie Valley Fibre Link project as a P3 that will bring high speed internet to Canadians from coast to coast to coast. Canada lags behind the world when it comes to internet connection speeds.

We recommend:

• Every major infrastructure project funded by the federal government require fibre be laid during the course of construction in order to allow Canadian communities to take full advantage of the digital age.

Social Infrastructure

P3s have a strong track record in the social infrastructure space with nearly 90 hospitals and health related projects across the country (e.g., B.C. Cancer Agency Centre for the North), 19 Justice and Correctional facilities (e.g., Sorel-Tracy Detention Centre), 19 Recreational and Cultural centres (e.g., Maison Symphonique in Montreal), 14 educational projects (e.g., K-12 schools in Nova Scotia), and 2 in the social housing sphere (Vancouver Single Room Occupancy project and the conversion of the Pan-Am Athlete’s Village into mixed-use housing). We recommend:

• Increased investment in social infrastructure beyond historical levels and the traditional purview of the federal government • Consideration of the P3 model where there is demonstrated value for money and appropriate transfer of risk to the private sector.

Indigenous Infrastructure

Within the Social Infrastructure category, the well-documented and imposing infrastructure gap in indigenous communities and in particular, on First Nations reserves, need to be addressed. There is an urgent need for more schools, water and wastewater facilities, justice and healthcare facilities, and social housing is extensive.

We recommend:

• Creating a First Nations Infrastructure Plan that is funded based on need, not population. This fund should be sufficient in size to put a bona fide dent in the infrastructure deficit on reserve • Establishing long-term, flexible funding arrangements with First Nations communities • Enhancing the capacity of the First Nations Financial Management Act institutions to allow for more communities to leverage own source revenue to borrow for infrastructure • Consulting with First Nations and the private sector to resolve barriers to the use of P3s in First Nation communities and provide a path forward for those communities that wish to pursue this procurement option

Inuit, Northern, and Métis communities face many of the challenges found on reserve and the risks and costs associated with building infrastructure in the North are unique and severe.

We recommend:

• Creating a Northern Infrastructure Plan that is funded to reflect need and the true cost of building infrastructure in the North, not a per capita distribution that will further increase the infrastructure deficit • Ensure the Métis qualify for funding program

Green Infrastructure

P3s already play a major role in delivering green infrastructure across Canada and there is potential for even greater use of the model to help the government achieve its objectives. Clean energy, waste to energy, water and wastewater, flood mitigation, and all-season roads in the north are some of the sectors where P3s can effect positive change. The John Hart Dam project on Vancouver Island and the Bruce Nuclear Facility in Ontario are two examples where P3s have been used to deliver reliable, long-term energy supplies that reduce or eliminate GHG emissions and have led to lower electricity prices for consumers.

Waste to energy is another green endeavour that can lead to positive environmental benefits, with the Sudbury biosolids project being a good case study in the benefits of this sector. Water and wastewater P3 facilities are increasingly being considered by communities like the new Regina wastewater facility that will save almost $250M over the lifecycle of the asset or the Saint John Safe Clean Drinking Water Project which just reached financial close saving over $20M.

Fast melting snow and ice in the mountains can lead to the kind of flooding we witnessed in Calgary. Melting permafrost has the potential to cause significant challenges in the Canadian north and warmer weather will mean either limited or no ability to use winter roads to bring goods and fuel into remote and northern communities, particularly First Nation communities. Flood mitigation and all-season roads can help alleviate the adverse effects of climate change.

We recommend:

• Investing in energy infrastructure that reduces or eliminates GHGs • Investing in projects that connect rural, remote, aboriginal, and northern communities to the grid • Investing in infrastructure that mitigates the effects of severe weather, including floods, and eliminates reliance on winter roads. • Transferring many of the risks associated with climate change that can impact infrastructure to the private sector where appropriate to build and maintain green infrastructure

CCPPP believes that economic, social, and green infrastructure overlap in a number of areas and the government should not be too stringent in its terms & conditions as to what qualifies under a certain category.

Public transit has economic and green benefits and could easily fall under either category. Having the economic pot of funds oversubscribed should not rule out a public transit project from being funded if say there is available money in the green fund.

Infrastructure Bank

Council members have questions as to what the government’s intention is when it comes to creating an infrastructure bank. There is an abundance of private sector capital in the Canadian marketplace and a number of provinces and municipalities already have strong borrowing regimes in place. If not executed correctly, the creation of an infrastructure bank could have unintended consequences for existing institutions and on private lenders. Uncertainty exists in the infrastructure community due to a lack of clarity around what the mandate would be of a Canadian infrastructure bank. We recommend:

• The government delay implementation of an infrastructure bank • A discussion paper/guide should be presented as the basis for extensive consultations with industry and the intended beneficiaries of the bank.

P3 Screen

The P3 screen was put in place to ensure accountability for federal funds invested in major infrastructure projects over $100M. The screen was intended to ensure all reasonable options were considered to maximize the investment of tax dollars. Criticism of the P3 screen suggests the process is onerous and can delay the implementation of a project. There is also a view that decision-making and due diligence should occur at the local or provincial level.

While there may be some legitimate concerns about the P3 screen, it provides a framework of discipline and rigor for the allocation of public financial resources and ensures the long term management and maintenance of valuable assets.

We do not support a process that does less to ensure accountability, transparency, and value for money invested in publicly owned infrastructure. We would encourage and support solutions that result in a more streamlined process and more local control.

Our preferred position would be for the federal government to keep the P3 screen. In its absence, we would recommend:

• Federal investment decisions for projects over $100M require the applicant government to examine and consider alternative procurement options including P3s. • Preserve the P3 Canada Fund as a standalone fund to incentivize smart choices in infrastructure procurement. Implementation of the previous government’s announcement that the federal government would fund up to 33% of a project from 25% should be followed through to keep consistency with the existing Building Canada Fund. • Appropriate resources should be set aside to go towards capacity building and business case development to lower levels of government (particularly municipalities and Indigenous governments) so that they have the tools to make appropriate procurement decisions. PPP Canada and/or its partners can assist in this endeavour.

Canada as a Global leader in P3s

Canada is recognized as a global leader in the effective and innovative use of P3s. We have a track record of 236 P3 projects that are operational, under construction, or in procurement. Those that have reached financial close have a value of over $93B. Our public sector provincial procurement agencies which include Infrastructure Ontario, Partnerships BC, SaskBuilds, Partnerships New Brunswick, Alberta Infrastructure, and La Société québécoise des infrastructures are viewed as world class institutions and international jurisdictions look to them for guidance and best practices.

We also have an experienced and robust private sector that includes a number of Canadian owned companies. The more we promote our expertise worldwide and have other jurisdictions adopt the Canadian P3 model, the more opportunities we will unlock for Canadian companies abroad.

We recommend:

• Expanding promotion of the Canadian P3 model on trade missions and highlight the expertise of provincial partners in these endeavours • Continuing to direct foreign aid towards P3 initiatives in the developing world as a necessary and supportive agent to help countries build critical infrastructure and a thriving economy.

Conclusion

CCPPP has long been a strong partner with governments across Canada. We have supported their efforts with our independent research and industry expertise. Since its inception in 1993, the council has become Canada’s preeminent forum for the public and private sector to interact.

In that time, Canada has built a reputation as the go-to world-class leader in P3 procurement. The federal government need look no further than the province of Ontario to find a bold example of internationally renowned homegrown Alternative Finance and Procurement (AFP) success (as P3s are known there).

We wish the government well on its first budget and look forward to engaging in discussions over these important policy matters going forward.