CAPITAL INVESTMENT PLAN ACT, 1993 / LOI DE 1993 SUR LE PLAN D'INVESTISSEMENT
CONTENTS
Monday 16 August 1993
Capital Investment Plan Act, 1993, Bill 17
STANDING COMMITTEE ON GENERAL GOVERNMENT
*Chair / Président: Brown, Michael A. (Algoma-Manitoulin L)
*Vice-Chair / Vice-Président: Daigeler, Hans (Nepean L)
*Arnott, Ted (Wellington PC)
Dadamo, George (Windsor-Sandwich ND)
Fletcher, Derek (Guelph ND)
*Grandmaître, Bernard (Ottawa East/-Est L)
Johnson, David (Don Mills PC)
*Mammoliti, George (Yorkview ND)
*Morrow, Mark (Wentworth East/-Est ND)
Sorbara, Gregory S. (York Centre L)
Wessenger, Paul (Simcoe Centre ND)
*White, Drummond (Durham Centre ND)
*In attendance / présents
Substitutions present/ Membres remplaçants présents:
Cousens, W. Donald (Markham PC) for Mr David Johnson
Hope, Randy R. (Chatham-Kent ND) for Mr Dadamo
Mathyssen, Irene (Middlesex ND) for Mr Fletcher
Phillips, Gerry (Scarborough-Agincourt L) for Mr Sorbara
Sutherland, Kimble (Oxford ND) for Mr Wessenger
Also taking part / Autres participants et participantes:
Casey, Tim, assistant deputy minister, realty group, Management Board of Cabinet
Merritt, Jim, executive director, clean water transition team, Ministry of Environment and Energy
Salerno, Tony, director, investment strategies, Ministry of Transportation
Stewart, Barbara, executive coordinator, treasury board division, Ministry of Finance
Sutherland, Kimble, parliamentary assistant to the Minister of Finance
Watson, Robert J., director, capital markets research branch, Ministry of Finance
Clerk / Greffier: Carrozza, Franco
Staff / Personnel: Anderson, Anne, research officer, Legislative Research Service
The committee met at 1402 in the Humber Room, Macdonald Block, Toronto.
CAPITAL INVESTMENT PLAN ACT, 1993 / LOI DE 1993 SUR LE PLAN D'INVESTISSEMENT
Consideration of Bill 17, An Act to provide for the Capital Investment Plan of the Government of Ontario and for certain other matters related to financial administration / Loi prévoyant le plan d'investissement du gouvernement de l'Ontario et concernant d'autres questions relatives à l'administration financière.
The Chair (Mr Michael A. Brown): The standing committee on general government will come to order. The business of the committee today is to deal with Bill 17, the Capital Investment Plan Act. We are fortunate this afternoon to have with us the parliamentary assistant, Kimble Sutherland.
Mr W. Donald Cousens (Markham): We'd be more fortunate if we had the Treasurer here.
The Chair: The agenda will be as follows: Mr Sutherland will make a statement followed by the two opposition party critics. Mr Sutherland, would you like to begin.
Mr Kimble Sutherland (Oxford): Thank you, Mr Chair. Let me say it is a pleasure for me to be here on behalf of the Minister of Finance. The Minister of Finance would have been here, but he is away on a vacation that had been planned for a long time and, given all the things that have gone on, I think probably a well-deserved vacation.
As I say, it is a pleasure to be here and to provide some opening remarks regarding the Capital Investment Plan Act. Let me say at the outset that I will not be taking the full 20 minutes that has been allocated. I hope to take much less than that.
In February of this year the Premier announced a new framework for strategic capital investment as part of the government's economic renewal strategy. This new framework will facilitate investment of about $6 billion in the province's infrastructure as a result of a partnership of municipalities and the private sector with the government of Ontario.
The capital investments, which will be sustained through the province's Jobs Ontario initiative, will create about 60,000 jobs by 1996 and over 100,000 jobs by its completion in 10 years. The emphasis on infrastructure investment is a key part of the government's economic renewal strategy as outlined in the April 1993 throne speech.
The Capital Investment Plan Act, 1993, is a crucial component of the capital investment framework and the 10-point economic plan to strengthen our economy and support jobs.
The bill establishes three new crown corporations: the Ontario Transportation Capital Corp, the Ontario Clean Water Agency and the Ontario Financing Authority. It renews the Ontario Land Corp as a crown agency called the Ontario Realty Corp.
The crown corporations responsible for handling the province's investments in transportation, water and sewers, and the province's real estate holdings will be able to use new financing techniques, including private-sector partnerships and joint ventures. Where appropriate, the corporation can recoup costs through charges to users and levies on those who benefit financially from the projects.
This will spread the costs and benefits of capital projects more fairly and will make sure that money is being spent effectively, thereby reducing costs to the taxpayer.
Finding new ways to finance projects is vital for a strengthened, competitive economy and the creation of jobs.
The crown corporations will be created as schedule 4 corporations with demonstrable accountability features. Government will appoint the board of directors, and staff will be appointed under the Public Service Act.
The legislation is clear about roles and responsibilities of the corporations and the government. Government retains policy roles. This is a fundamental provision ensuring corporations are not operating in a vacuum or for their own interests. The corporations' activities will be monitored and the public will have access to annual reports and audited statements.
The bill also enables universities, hospitals and school boards to gain access to loan-based financing for capital projects. Converting capital grants for transfer partners into loans allows Ontario to account for capital expenditures in a more businesslike fashion and ensures greater stability of funding, which will allow for better long-term planning and budgeting; capital costs that will more closely match benefits realized over the life of the assets; fairer interprovincial comparisons, since many other provinces have a similar approach; and a better planned and more consistent approach to capital spending.
Ontario's new approach to capital spending and adoption of loans-based financing will encourage efficient and more cost-effective operations. Infrastructure development and the entrepreneurial partnerships that this bill provides will lay the foundation for a strong and competitive future for all Ontarians.
More jobs will be created and capital projects vital to preserving the economic strength of the province will be completed sooner.
The government has put forward the legislation and will also be putting forward several motions to amend the Capital Investment Plan Act, 1993:
1. Section 13 will be amended to specify that the Provincial Auditor or another auditor appointed by the Lieutenant Governor in Council annually audit subsidiaries of a corporation.
2. A minor housekeeping change in subsection 33(7) to add the word "unrestricted" before the word "power" in the eighth line to ensure that hospitals can undertake loans-based financing.
3. Subsection 47(2), related to tolls on highways, is amended to clarify that only new highways or extensions will be tolled, the kinds of expenses covered by tolls and the intent to remove tolls when liabilities have been discharged.
4. Section 56: Deletion of this provision would remove legal authority for the Ontario Clean Water Agency inspectors to enter upon private lands in order to carry out the agency's mandate.
5. Subsection 121(7) will be amended to ensure that separate school boards can undertake loans-based capital financing without significant time delays.
Those are my opening comments. I believe after opposition comments we'll be having a technical briefing and Barbara Stewart, who's the executive coordinator for the project, will lead us through that briefing.
Mr Gerry Phillips (Scarborough-Agincourt): I look forward to learning more about the bill. I think first I'd say that we, as we've said throughout the debate, see some merit in portions of this. I think there is some merit in the sewer and water corporation, the roads corporation, in terms of looking at some creative new ways of ensuring we have adequate infrastructure.
I guess the issues we'll want, hopefully this afternoon, some help on are that -- I think our first concern is the risk that we're running up a lot of new debt. The bill, I think, envisions funding school, college, university and hospital capital in a new way. As I look at it, the thing just continues to run up debt, not on the government books, but on school board books and on hospital board books and on college books. The numbers I've looked at suggest that in five years they'll have a debt close to $3 billion in new debt on their books, off the province's books. But the province has the sole responsibility for paying that off and it never gets any smaller; it just keeps growing every year.
I want to know the benefits to the public of doing that, because it's not clear to me there's a benefit to the public in the debt being on the school boards' books, with the province having the sole responsibility for paying it off. That's what the parliamentary assistant called loan-based financing.
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As I look at the sewer corporation, it looks like there's a similar provision for the province to continue to provide to the sewer corporation similar loan-based financing. I would like, I guess, in response maybe a 5-year and a 10-year financial plan of what the province will owe to the sewer corporation on these loan-based finances, because this is not how a corporation would deal with capital; it would depreciate its assets and fund its capital in a different way. As far as I can see, we are simply going to continue to build debt in these areas.
I think the third concern would be the Ontario Financing Authority. It's not clear from the legislation what the benefits are, and I hope we will hear that this afternoon, the benefits to the public in the Ontario Financing Authority, but I gather it's going to assume responsibility for the debt of the province. According to the legislation it's off the consolidated revenue fund, and I guess I'd like to hear from the staff on what the advantages of that are.
The realty corporation already, I gather, has bought from the province it looks like about $600 million worth of land. They've given the province, I gather, $600 million, or at least that's the number I see in the budget. I'm not aware of any land having been sold and I'd like to hear a little bit about what the plans are for government buildings moving to the realty corporation. I assume, for example, this building could end up in the realty corporation and then the province simply leases it back.
Again, I'd like to see the advantages of that, because my fear is, as the province has already done -- it has taken $600 million worth of revenue from "just a paper transfer of land from the province to the Ontario Realty Corp." No land has been sold, the province has taken $600 million worth of revenue, and I'm afraid that -- maybe the Provincial Auditor can be helpful to us tomorrow to make me feel less worried about this. I'm afraid that we are distorting our financial picture by these paper transfers of land, and then we're going to transfer, I gather, government buildings into the realty corporation and then lease them back.
The fourth thing I would appreciate some comment from the staff on is just, I gather we're setting up four new or revised schedule 4 agencies here. As I read schedule 4 agencies, they're arm's length. They are not part of the consolidated revenue statement. There will be, I gather, staff moved from the consolidated revenue numbers over into the schedule 4 agencies, and I guess I'd like some comment on the numbers of staff that the government sees moving over to there. I guess I'm less confident about -- either these are arm's-length agencies that do have independence or they're not. The way I read schedule 4 agencies, they're supposed to be independent, arm's-length agencies, and I'd like to know, are they independent agencies?
As I say, on the sewer and water one and the transportation one -- and I know there will be many presenters who will speak in favour of it -- I think the committee will want to know how we are going to fund these things in the future. I guess they will be funded partially through what you called loan-based financing and then funded through some form of charge against water.
But I think we should know what is envisioned here, both from residential costs and also I guess the business sector may want to have some indication of whether industries that rely heavily on water are looking at any substantive changes in their water rates or not, just because I would think water is as important to some industries as electrical power or power is to other industries. I think we should have some idea of how this is likely to impact both the residential sector and the business sector.
I wanted to simply raise several of the questions that we will want some discussion on.
I might say that the government has tabled four or five amendments today. One of our challenges is probably going to be Thursday; we will have just completed hearings on Wednesday. I would serve notice that we will have difficulty in incorporating, and the government may have difficulty incorporating, the testimony in any possible amendments for Thursday. I don't know how we work our way around that, but I would hope the committee would allow all of us, the government and the two opposition parties, to be somewhat flexible in not having our final amendments in first thing Thursday morning, before we've had a chance to hear the debate that many in the audience would be providing us over the next two days.
Those were my comments. I don't know whether you had anything you wanted to add, Ben.
Mr Bernard Grandmaître (Ottawa East): Yes. I realize what the government is trying to do. They're trying to find creative ways to finance capital investment.
My biggest concern at present with Bill 17 is the transfer partners: municipalities, school boards, and colleges and universities. How can municipalities be really interested? Right now they're accusing the government of downloading some of our provincial responsibilities. I'm just wondering if we're going to create more competition among our "have-not" and "have" municipalities. Some municipalities at the present time are very concerned, as Gerry pointed out, that they need new work to be done, renovations to bridges, to schools, municipal infrastructure. I know the federal government is not interested in participating in a joint program with municipalities and the provincial government.
So now my biggest concern is that we will permit municipalities and school boards to indebt themselves and, as pointed out by the previous speaker, what are the advantages? What are the real advantages? These expenditures will not be shown on the provincial financial tally sheet at the end of the year; they'll be on somebody else's back. It's going to look good for this government, because it's going to say: "Look, we've cut back. We're asking everybody else to restrain their expenses."
I don't know what the government has done in terms of consultation with AMO and our school boards in the province of Ontario. I'm sure a lot of them will like it, but municipalities with reserves -- there aren't too many in the province of Ontario right now, but we do have school boards and municipalities that do have reserves. Are we creating some unfairness to smaller municipalities, especially in northern Ontario, where 75% of our municipalities are unorganized? How will these small municipalities compete against the major school boards and municipalities?
I'm very anxious to hear from the parliamentary assistant or somebody from the ministry to explain to me what the real advantages are to municipalities and school boards and other institutions.
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Mr Cousens: I'm pleased that we have the parliamentary assistant for the Ministry of Finance with us for the hearings. I want to put on the table my disappointment that in spite of the fact that the Treasurer or Minister of Finance is having a holiday, when this was originally scheduled I think everyone had the high expectation that we would be graced by his presence. I want to put on the table my own personal disappointment that we don't have the minister here.
I know the parliamentary assistant will do his very, very best, and I appreciate that and I welcome that, but I know that in the end, the decision will rest with Mr Laughren. I hope the parliamentary assistant will have access to the minister in case issues are raised during these hearings and other amendments are to be brought forward or that he's been given the authority to act accordingly.
We've all suffered a rather rough summer when it comes to time obligations. The fact that you're here, Mr Sutherland, the fact that the Liberals --
Mr Ted Arnott (Wellington): And newly married.
Mr Cousens: Newly married? Is he?
Mr Hans Daigeler (Nepean): Not any more.
Mr Sutherland: No, I'm still married.
Mr Grandmaître: He's spending his honeymoon at Queen's Park.
Mr Cousens: Anyway, my point was that there is an authority the minister brings to hearings such as this, and his absence will be felt. If there's any way in which you can take away that worry, I'd be very pleased.
Mr Randy R. Hope (Chatham-Kent): We'll bring a picture of him and put it here.
Mr Cousens: Bring a picture? No, no, I didn't ask for that.
There are a few issues I'd like to touch upon as it pertains to the bill. We did have a short debate in the Legislature on it.
The first has to do with the whole subject of honest accounting. It's not just a matter of looking at the numbers that will appear in different corporations; it has to do with the number of employees who will now be moved out of the Ontario government systems and then could well be within the different agencies: the Ontario Realty Corp, the water agency, the Ontario Transportation Capital Corp, and the financing authority.
How many people are going to be in those authorities? When we want to really get a sense of what the numbers are within the Ontario government structure, this could well be just a way of moving staff from the books of the government to another set of books. That also applies to the point which I think Mr Phillips and Mr Grandmaître made very well, the financial accounting and the way in which this gives the government an opportunity to cook the books. That doesn't sound like a nice way of saying it, but when you say in your own charge that the new Capital Investment Plan Act will facilitate innovative financing arrangements, that's what I call a shell game or cooking the books.
As we go through discussions on the bill and through the presentations, I'm most interested in knowing that that isn't really going to be the case. I'm anxious about the fact that this becomes another way for the government to move things out of the public eye into another inner sanctum, and by virtue of doing that it removes it from the scrutiny we would want to have. You've addressed that in part by now allowing the Provincial Auditor, in your amendment, if I read it correctly, to have some say and some purview. I think that's a good move.
I also would like to take some sense of satisfaction that you're moving another amendment on the tolls. I was about to spend some time on your section 46 or 47 in the bill, which was a very open-ended invitation for tolls. People don't think of tolls as being a tax, but tolls are just another way of taxing. The fact that you're making some amendments to remove tolls from new highways is one of the things I felt very, very strongly about in my opening remarks. I'm very pleased that someone listened to us on that one, because you really left yourselves in a position that you could have put tolls on the 401, and I don't think the people of Ontario would be too happy with that one. I look forward to seeing your amendments a little further. The fact that you remove the toll roads as something that could be universal is a step in the right direction.
There's one thing that's worrying me, and I look forward to the presentations that staff will be giving: the competing consortia that are being put together for the Highway 407 development. I want you to somehow address, if you may and if you can in your remarks, how this is not the creation of monopolies, that this is not going to take away the opportunity of other builders, entrepreneurs or other participants who want to take part in the construction of highways and roads in the province of Ontario, especially of Highway 407. What chance do they have of participating? If they are not part of the two consortia, how else will they have a chance to participate?
I'd like to be satisfied that in anything the government is doing, it is not moving toward even more monopolies and favouritism of any one group over the other. That would be an interesting dimension, and I'll be looking for something on that, if we can, from staff.
The business of debt financing raises just a huge number of issues. The previous government, the Liberals, brought in a bill that allowed for lot levies. That was going to be the new way for school boards to finance new construction of schools.
Now that same bill has been thrown out in the York region case, against the York Region Roman Catholic Separate School Board, so the Roman Catholic separate school board in York region is unable to collect lot levies and apply them to the construction of new schools.
If in fact what is being described here is another way of raising money, does that set aside or put away that other legislation for lot levies? Is this a way of supplementing it, and how does that fit into that other legislation? This bill touches on so many things, but there isn't any doubt in my mind that we have another piece of legislation that is now in trouble before the courts. Is this meant to change it, impact it, and how will it? I will be interested in that.
A number of questions about the operation and management of the new crown corporations: I'm interested in the effect of the new capital financing plan on transfer payments as they apply both to school boards and universities. I'm interested in the cost to the province of assuming hundreds of millions of dollars annually in new contingent liabilities. I'm interested in the cost-benefits of turning the management of the province's borrowing plan over to a schedule 4 crown agency. I'm interested in the ability of the new crowns to attract joint venture partners from the private sector.
There's one other issue that underlies my concerns, and it's a trend that I don't think many people have given much thought to: After 12 and a half years in the Ontario Legislature, I'm beginning to feel less and less capable of influencing what's going on, on the floor of the Legislature, that more and more is moving outside of the jurisdiction of the legislators to crown corporations, to other agencies, to regulations, to cabinet decisions, and that the authority and power of the Legislature is now in the process of being changed. Whether it's undermined, I'm not sure, but it is in fact changing. The role of an MPP has changed significantly. We have less power today than we did 12 years ago, and what we have today is being even further eroded.
The classic example is the Interim Waste Authority, which was established under Bill 143. When you want to ask a question of the Minister of Environment and Energy about the Interim Waste Authority you are stonewalled, because the minister will then say: "No, I have nothing to do with their decisions. They all reside in the Interim Waste Authority and they will then report to us what their decision is at the appropriate time."
With this legislation, I'm inclined to believe that when we, in our own wisdom, have questions on, for instance, the Ontario Clean Water Agency, that is an agency which will now -- there's a Mr Marshall who has been appointed to head that up already even before it's passed, and I suppose that's fine because it's all going to happen -- report through to the deputy minister.
Again I have a sense that a tremendous amount of power is going to be moved out of the forum of the chamber of the House in the Legislature, where legislators make the decisions, to another body. It's being moved down and out and away from. That's been the history of OTAB, the history of the IWA and now here again with this. I know if we went around the table, we could think of many other examples where the power structure is moving away from the floor of the House to other levels, to the bureaucracy and to other decision-makers. Maybe the honourable parliamentary assistant or staff would comment in some way on that.
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The reporting structure, which to me is repugnant in the extreme as to what I've seen at the IWA -- really, really, I have nothing but anger when I think of how the government has played games with the legislators on that one. They passed Bill 143; it's now happening. I won't get on to my diversionary, but they selected 57 sites; that was the process they set. Now, in their own wisdom, they're looking at another site that wasn't on the original 57. Who can make them accountable for what they're doing or explain what they're doing? Who can understand what's happening?
It's so far removed, since it doesn't report through to the minister -- at least he says he doesn't and he doesn't comment on it. I'm concerned that in the future the decisions that are made under these agencies will have some way of being accountable to someone other than just the deputy minister or the ministerial staff, and how that will interface with the Legislative Assembly.
Those are a few comments. I could go on --
Mr George Mammoliti (Yorkview): Please don't.
Mr Cousens: "Don't." It's been such a nice summer till we came back here. It should be an interesting few days.
My final remark has to do with, how are we able to listen to the presentations -- and I see that we have a very good list of presenters who want to share some thoughts and suggestions with us -- how are we going to react to their recommendations and suggestions if in fact it requires amendments to be made to the bill?
What we may have to do, and this goes to you, Mr Chair, is find ways, if in fact we need more time and the House resumes -- I know we won't get more time before September 26, but there may be ways in which we can address some of these other issues if they arise. I think we have to be open to the views the public has to raise, and I look forward to hearing what they have to say. Maybe my colleague has some comments.
Mr Arnott: How much time for our caucus?
The Chair: Seven or eight minutes.
Mr Arnott: I'm very pleased to be here on Bill 17 to discuss this very important legislation as it affects the province's finances. I think it strikes at the very heart of the most important issue in the public's mind today, that is, the issue of public debt, public indebtedness.
I think you can make a public interest argument that the public interest is better served if the awareness is high of the public indebtedness problem. Every step that we can take to better inform people of the amount of money they are on the hook for, whether it be nationally, provincially or locally, I think we're well serving them. I dare say the government, having gone through this tortuous social government process, should support that, knowing full well that steps had to be taken to address the compensation issue of the public sector because we just couldn't afford to continue to pay the amount we were paying.
I think that argument should be appealing to them. We have got to find ways to better inform people of the level of indebtedness that they find themselves in. My question is, does this bill do that?
This bill talks about innovative accounting, innovative financing. The Premier has used that line of thought to try and promote this bill; so has the Treasurer. Well, to be blunt, one person's innovative financing is another person's crooked accounting. I'm not saying this bill will necessarily create a situation where accounting is crooked or where the books are to be cooked, but the potential is there. Certainly we don't have as clear an indication of the total amount of provincial public indebtedness if this bill goes through, I feel, in the direction it's going.
I think a sensible addition to this bill or an amendment to this bill would provide for, in the annual budgetary document, a listing of all the crown corporations, including Ontario Hydro, including the Workers' Compensation Board, all of those additional liabilities that we as a society provincially are on the hook for. That's something I would like to see.
Another very important issue that's just raised in this bill is that, with respect to my responsibilities as the member for Wellington, a lot of small towns and small municipalities in Wellington county were very concerned about the change from financing based on grants to financing based on loans. Many of the small municipalities, in order to provide a basic standard of public service, for example, sewage and waterworks, have required in the past provincial assistance just because they don't have enough money locally to do it; simple as that. To change that now to a system of loans will be a significant change affecting them, and I think that's an important issue the government will have to address properly.
My colleague the critic for Finance talked about the change in terms of us as legislators, and the cabinet as well, devolving power to a schedule 4 agency, once again taking another step where we're saying, "We can't look after this problem as elected people, so we're going to have to transfer it over to a crown corporation or whatever." I think, personally, that's one of the reasons -- surely there are a number of other reasons -- why people have lost faith in the political process and have lost faith in politicians.
But one of the reasons that has happened, that lack of trust we're all experiencing, is the fact that we've given up so much authority to other independent agencies. We still retain the authority for governing but we've lost much of the power of governing, and it's a difficult position to be in. We have the authority but we don't have the power in many cases to make the changes we feel are required, and certainly from opposition we find that in many cases.
I hope that the government will listen very closely to the presentations that are made over the next few days and will respond in an appropriate fashion, so that this bill will reflect the public interest in its final form.
The Chair: At this point I would just like to inform members that we have been able to schedule every presenter who wished to come before this committee, and you should have in front of you the information regarding all the presenters who will be before us in the next few days. I would also ask if the subcommittee of this committee could spare a few moments following today's presentation to speak about what's going to occur with Bill 40, which is next week.
At this point I'll turn it back over to the parliamentary assistant. I would suggest, though, that as we go through the technical briefing from the ministry, perhaps with the indulgence of the committee we can move through the presentation and then deal with questions afterwards. Would that be the will of the committee? Is that the most expeditious way to deal with it?
Mr Cousens: Sometimes it's not the best way if in fact there's something that comes up, as long as someone doesn't monopolize the time. If there's a clarification, we could come back later.
Mr Hope: Remember those quotes, Don.
Mr Cousens: Having said that, I'll quickly forget it.
Mr Hope: Somebody give me a printout of Instant Hansard on that.
The Chair: Well, now, I'm not sure, Mr Cousens, but we'll attempt to go through with only minor clarifications during the presentation if those are necessary.
Mr Cousens: And you'll be the judge of what's minor and what's major.
The Chair: Of course, Mr Cousens. Mr Grandmaître.
Mr Grandmaître: Mr Chair, can we then ask the parliamentary assistant to give us about five minutes of the concerns raised by the opposition? Can you address those in five minutes?
Mr Sutherland: Maybe we could do it this way: If we had the technical briefing, then we do have staff here who are familiar with each of the corporations, who can respond to quite a few of the questions that were raised. If they are not able to respond to them today, then certainly they'll undertake to have those answers to us, hopefully some time tomorrow or certainly before we get into clause-by-clause.
Let me just say as a few general comments that I think the questions you raised today are certainly not new questions or new issues. You raised many of them in the House during the actual debate on the legislation, and in developing the legislation people were aware of those types of concerns. But I think, as you will see through the technical briefing and in terms of some of the responses that are being provided, many of them have been dealt with and have been addressed. I do believe there is a lot of broad support out there for the general concept, as many of you have mentioned, and there are some concerns about the specifics, as there always might be.
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Let me just say to you on Mr Cousens's comment, I know he's been here 12 1/2 years and I haven't been here that long, but from all reports I certainly know that when he was part of the government, that government had a great deal of respect for the Legislature and never felt that government could be run as an executive forum or just leadership from the top. But I think what needs to be pointed out in the comments you made and the comments Mr Arnott made is the government does allot more today than it's ever done before.
There's only so much time that the Legislature can deal with all the issues. Obviously, we can't be there dealing with every specific issue that comes out of every agency, every crown corporation, every ministry. We have to be able to decide and take priorities and there has to be an administrative side to carry out the functions. All of us are looking and are concerned about ensuring that we have appropriate accountability mechanisms to the Legislature. As I say, I think schedule 4 agencies, as compared to the other three, have developed new ways of having greater accountability mechanisms to the ministers and through the ministers to the House in terms of annual reports.
I should also remind the members that of course all agencies are accountable to the Legislature through the committee on agencies, boards and commissions and all agencies are also subject to the public accounts committee in terms of looking at its operations there. So those avenues continue to exist, and I think you will see that there is overall a greater accountability mechanism.
With that, I guess maybe I could turn it over to Barbara Stewart to go through the formal presentation. Then we can have some of the staff involved with each of the corporations come forward and add any additional comments and try and address some of the issues and questions that were raised.
Mrs Barbara Stewart: This presentation actually takes the better part of three quarters of an hour, so I'll try and get through it fairly quickly as best we can.
As you know, there were a number of ministries involved in preparing this bill. It indeed is quite complex and I think you would benefit from hearing from some of the staff involved in the different ministries in response to some of the questions you have raised. I hope that the presentation will cover off some of those questions. With others, we will indeed have staff available to answer some questions at the end of the presentation.
Apologies for the difficulty in seeing this presentation. I don't know; you may want to try and move seats a little bit to be able to see the overhead a little better. You do have the hard copy of the presentation in front of you somewhere, and that may be actually easier for you to follow.
Interjection.
Mrs Stewart: Do you not have a hard copy? They are available.
The Chair: Like this.
Mrs Stewart: Indeed, it looks like that. There should be plenty of copies available.
The presentation walks through a number of parts, a little bit of the economic context, some particulars and overview on the act itself, a little bit more on the roles and responsibilities and indeed the accountability features that are in the bill related to the corporations being created. Then we'll try and spend a few minutes going through each of the corporations in terms of the mandate and scope of that corporation as outlined in the bill. I'll spend a few minutes on loans-based financing and then come back to the latest budget's presentation in terms of the actual financial commitments and financial scope of the committees involved.
With regard to the first portion, in terms of the economic context the bill is seen as a key component of the government's economic renewal policy, which is indeed related to investment in jobs and creation of economic growth and is, through that process, assisting private enterprise, including investments in infrastructure in the province.
Five areas of focus for economic renewal through capital spending include transportation, safeguards for the environment, education and research facilities, community economic development and telecommunications technology. The crown corporations being created through the Capital Investment Plan Act actually have direct contributions in the first four of those areas.
I probably don't need to say a whole lot about the importance of infrastructure development for Ontario. It's quite clear that developing infrastructure is intended to produce sustained and accelerated capital investment; job creation, particularly at an economic time of need; and strategic infrastructure improvements: earmarking and focusing infrastructure developments. Infrastructure development itself is crucial to overall competitiveness in building future economic needs and an economic base for the province in order to make Ontario an attractive location for business investment.
Ontario as an export-oriented economy requires modern infrastructure. Ontario's central location in North America certainly offers Ontario businesses an ideal situation to capitalize on market opportunities. As an example of that, total household income within one day's trucking distance of Toronto, approximately 400 miles or 650 kilometres, is higher than for any other major North American city. It certainly offers Ontario businesses ample market opportunity.
In this kind of context, these crown corporations have specific strategic objectives, the first being developing an efficient transportation system, which is vital to helping Ontario businesses compete in those North American markets. New highways construction is an example. The new Highway 407 and widening of the Queen Elizabeth Way can certainly have significant impacts on just-in-time production methodologies in business.
The sewage and water services are rather fundamental contributors to planning housing developments, commercial developments, improving public health and promoting conservation of water resources.
Real property, as envisaged in the real property corporation, and the development of services to the public sector will allow for a more businesslike orientation to the government's management of its physical assets, with clear efficiency benefits.
In total, the corporations are designed to provide for more efficient ways of identifying, developing and financing infrastructure investments. The corporations are mandated to explore new ways of financing capital, developing projects more rapidly and involving private sector partners throughout the ventures.
As we look at the Capital Investment Plan Act itself, the purpose of the act is to indeed create the vehicles that will deliver this portion of the government's capital investment strategy. The act will encompass new approaches, effective partnerships to enable corporations to access new revenues and complete projects sooner and more effectively.
In scope, the legislation covers the three capital corporations which were announced by the Premier this past February. It also creates the Ontario Financing Authority, which itself will include the Province of Ontario Savings Office. The legislation also makes amendments to what we term, unfortunately -- pardon the acronyms -- the USH sector: universities, school boards and hospitals. The legislation will make the amendments in those areas that will provide for loans-based financing.
Just a very brief overview of the corporations being created and indeed the mandates implicit in the legislation -- and we'll come back to each of the corporations in a little more detail later: The Ontario Clean Water Agency is being developed to finance, plan and develop water and sewer works and water and sewer services and to very clearly encourage water conservation in the province; the Ontario Transportation Capital Corp is being created to facilitate the development, financing and implementation of transportation programs and systems, including transit and highways; the Ontario Realty Corp is to provide government and others in the broader public sector with real property services and improvements to real property; finally, the Ontario Financing Authority has a mandate to arrange and coordinate financing for the province for these capital corporations and for other public bodies.
The expectations in the bill created for these corporations include their ability to engage in long-term commitments for enhanced stability and certainty in capital project investment, the ability to enter into joint ventures and entrepreneurial arrangements with public and private partners, the ability to seek out alternative financing mechanisms and thereby try and reduce the burden on the taxpayers, the ability to operate in a more flexible and businesslike manner than certainly many ministries can and the ability to be somewhat more attractive to private investors to enter into joint ventures and partnerships than private investors may feel with respect to government ministries.
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A couple of comments on the major milestones with respect to creating the capital crown corporations: As many of the members will be aware, the legislation was introduced on May 17, achieved second reading on June 16 and is here today on August 16 for committee hearing. Pending approval from the standing committee, we're looking to head for third reading and royal assent during the fall session, and create those corporations once they have the legal entity to do so.
There has been a good deal of discussion and a number of questions related to the roles and responsibilities to some degree of the corporations, effectively to the accountability structure behind them, and I thought it would be useful to take a moment out to have a look at what the bill has to say about the roles of government vis-à-vis the roles of corporations in these new capital corporations.
As the slide portrays, there's rather clear separation of government roles from those of the corporations, and the bill clearly sets out that government will set policy for the corporations and will do so by issuing directives.
The government owns, directs and controls these crown corporations, and in legislative terms these agencies are very clearly crown agencies.
Government will appoint and remunerate boards.
Government, through various actors, will be approving the bylaws including the borrowing bylaws of these corporations. That speaks to some of the questions in terms of the accumulation of debt. That will certainly be a planned operation under the capital planning process that ministries of government are participating in.
Government will be approving the plans related to these corporations, including corporate, capital and revenue plans. Again, that will be happening through the capital planning process in government.
Government has a responsibility to monitor the affairs of these corporations and the Provincial Auditor will indeed audit the corporations. Kimble Sutherland spoke to an amendment to deal with the Provincial Auditor's responsibility with respect to subsidiaries.
The mandates of the corporations are very clearly focused on planning and implementation of government policy and capital planning strategies. The corporations will be very much involved in negotiating proposals and developing plans to be submitted to government. They will also, under their boards of directors, manage the operations of their respective corporations.
There have been a number of questions in terms of the relative sizes of some of those operations. Effectively, of the four corporations, there are two that are envisaged to be relatively large. The clean water agency will have in the order of 1,000 staff, the realty corporation anywhere between 1,300 and 1,500 staff and the other two agencies will be considerably smaller.
The financing authority will have in the order of 250-odd staff, most of whom in fact are involved in the Province of Ontario Savings Office operation, and the transportation corporation will be quite small, 10 or 15 people, very much focused on a financing mandate.
For those corporations that have operational roles, they're very clearly involved in managing those operations.
The corporation will implement the policy and plans of government. They'll manage the financial commitments and the revenue streams involved in the operations. They will be delivering services for those with delivery mandates and they'll be monitoring and reporting on their results.
Further on the roles of the crown corporations and related to the specific content of the legislation, we've detailed the common powers of some of the major actors with respect to the corporations and the exclusive provisions for the corporations themselves.
They have the powers of a natural person, subject to the limitations in the act. It's a concept from the Business Corporations Act. It basically means that the corporations can go out and undertake financial commitments, they can make arrangements and partnerships, they can take on mortgages, those sorts of aspects, again subject to whatever limitations are elsewhere in the act.
They certainly have the power to manage the affairs of the corporation, and are expected to do so. They'll be responsible for the corporation's operations. They will pass bylaws regulating the procedures of the corporations and specifying the powers and duties of officers and employees of the corporation. They'll hire staff under the Public Service Act. They can also hire contract persons, who wouldn't be under the Public Service Act, to undertake particularly time-limited types of activities.
The act prohibits the sale, lease or transfer of all of the businesses of the corporations, ie privatization. So any initiative to privatize any of these corporations would have to return to the Legislature for amendment of the act.
The corporations certainly are there to implement policy directives, and the legislation has them very clearly submitting annual reports that will include audited financial statements.
The Lieutenant Governor in Council, the specific provisions in the act: It will indeed appoint and remunerate board members, chairs and CEOs; formulate policies for a corporation; approve loans by the Minister of Finance to a corporation or a subsidiary; it has the power to change the fiscal year of a corporation should that be required; to raise loans and advances to corporations or the Minister of Finance to purchase securities and to make regulations on matters necessary to carry out the intent of the act.
The bill provides treasury board with explicit authority to approve the terms of transferring properties to corporations. That's a necessary feature to ensure that any of those planned transfers are reflected in the fiscal planning of the government. Also, treasury board would need to be involved in the creation of any subsidiaries.
By policy, Management Board would also be provided in subsidiary creation. The act provides Management Board explicit authority and expectation to ensure that appropriate employment policies and practices are followed by the corporations, and can issue directives to that avail.
I think the members are aware there is one minister responsible for each of the four corporations, so one different minister for each of the four. That minister is clearly responsible for the corporation in cabinet and in the Legislature.
The minister will approve all bylaws of the corporations, and therefore will certainly know the undertaking of the corporation. The minister can issue directives regarding the corporation's exercise of its powers and duties and can require the corporation and subsidiaries to report on any matter at any time. There are very clear reporting authorities within the act.
The Minister of Finance has a number of duties, and given the financial nature of these corporations, the Minister of Finance features relatively strongly in the act. The act provides the Minister of Finance's sign-off, a requirement to approve all bylaws that involve borrowing, issuing of securities, investing of funds, managing risk regarding financing or investment, or making commitments that facilitate the financing of others. That feature is there to ensure the possibility of coordinating the financial commitments of all of these corporations.
The act is also clear that the Ontario Financing Authority -- again, apologies for the acronyms -- has the mandate to arrange and/or coordinate the financing, investing etc, activities, unless the Minister of Finance agrees otherwise. So there certainly is provision for corporations to engage in those activities, but again, there's a need to coordinate that so the Minister of Finance would know where the exceptions were being made.
The Minister of Finance may require the payment of surplus funds from a corporation into the consolidated revenue fund, but again there are clear circumstances and provisions for when that provision would be exercised.
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The Minister of Finance can purchase the securities of the corporations and thereby invest in them as other individuals can, and there's also provision for the Minister of Finance to deduct unpaid loan instalments from other payments to delinquent public bodies if the public body agrees to that provision in advance.
The Provincial Auditor clearly has the responsibility to audit the corporations, and indeed we'll see the amendment related to providing the Lieutenant Governor in Council with the choice of having the Provincial Auditor or another auditor appointed for subsidiaries should any subsidiaries come forward.
Mr Cousens: What do you mean by choice?
Mrs Stewart: You'll see the wording of the proposed amendment, probably tomorrow. It's essentially that the Lieutenant Governor will have the option of appointing either the Provincial Auditor or an external auditor to audit the subsidiaries, but very clearly that an auditor will be appointed. The Provincial Auditor will audit the corporations. That's very clearly a part of the bill.
In terms of the overall accountability features, it's been a challenge to deal with balancing, creating an operating flexibility for these corporations, given that their mandates are to go out and develop ventures and partnerships and look at new ways of doing business, but balance that against very clear public accountability linkages.
The bill attempts to be very clear on the roles and responsibilities of the corporations vis-à-vis the government. It's very clear that the government retains the policy roles and it's rather a fundamental provision, ensuring that the corporations are operating with due regard to public policy interests.
The corporation's activities will be monitored and the public will have access to annual reports which include the financial statements of these corporations, so there shouldn't be difficulty in accessing the specifics around the types of activities and commitments that these corporations are involved in. Of course, a key feature of accountability will remain in the effective use of the powers that the bill envisages.
Just one point of clarification as we go through this: It is the intent of the government to report the number of staff related to these corporations. Once they're up and operating, that should be publicly available information as well.
A note about the role of the Legislature vis-à-vis the capital crown corporations: Certainly, it's very much involved in approval of the establishment of the corporations through this bill. There is the ability to review potential appointees to the boards of directors of the corporations through the standing committee on government agencies. One minister will be clearly responsible for the corporation and submit annual reports to the Lieutenant Governor in Council and those reports will be tabled in the Legislature.
Through those reports, the Legislature will have access to the audited statements of the corporations and the Provincial Auditor, who will audit the consolidated financial statements, will have access to the accounts of the corporation and its subsidiaries whether the Provincial Auditor is the auditor or another auditor is.
Finally, the Legislature can certainly review the crown corporations through the legislative standing committee on public accounts and through the agencies, boards and commissions committee.
The next portion of this presentation outlines in a little more detail each of the individual corporations, the first being the Ontario Clean Water Agency, which clearly has a number of goals to protect public health, protect the environment, attract investment to Ontario and create employment.
The Ontario Clean Water Agency will accomplish these kinds of goals by assisting municipalities to plan, develop, finance and operate water and sewer works and services; promoting water conservation and demand management; supporting provincial policies on land use and settlement; negotiating partnerships with municipalities and private sector; and developing area-wide projects.
The agency will be self-supporting and will have five basic business streams, two of which are operational and three of which are more financial.
On the operational side, the Ontario Clean Water Agency will operate one third of the water and sewer plants in the province, much as the ministry currently undertakes. It will also help municipalities plan, design and construct water and sewer facilities.
On the financial side, the business streams include making direct investments and providing loans for the provision of water and sewer works, negotiating partnerships with the private and public sectors and administering the municipal assistance program.
The Ontario Clean Water Agency has a mandate for cost recovery and full-cost pricing. The agency itself will be self-supporting. It will recover its costs from its clients, will operate as a commercial enterprise and will develop partnerships with municipalities and the private sector. The structure involved will attempt to make the corporation competitive.
Municipalities are provided the authority to charge local service rates to local users, as they already and currently do. They have that authority now.
With respect to municipalities, the Ontario Clean Water Agency exists to serve municipalities. The agency is available to provide water and sewage and related services to client municipalities on a cost-recovery basis.
The municipalities are not obligated to use the services of the agency. It's not a monopoly. If municipalities have more cost-effective or more effective ways of providing that service, either on their own or through other partners, they're certainly entitled to pursue those.
As I mentioned before, the agency will indeed operate plants where there's an agreement to do so with the municipality, and the agency will take over from the ministry that responsibility to operate virtually a third of the water and sewer plants in the province.
The agency will also continue to devolve plants back to municipalities when municipalities are ready and able to operate their own, and that's a continuation of a mandate in the operation that the ministry has been pursuing for some time.
The Ontario Clean Water Agency will promote water efficiency through the operation of water and sewer plants and by providing technical services to municipalities on the provision of the same kinds of services.
The Ministry of Environment and Energy is currently out consulting with municipalities on the new financing system. There were a couple of questions raised about the level of consultation. In the municipal sector, the new municipal assistance program is out for open consultation now right across the province. I think over the last week and the current week there were a number of meetings scheduled to debrief municipalities on the new system and obtain feedback etc.
Through the new financing system, the Ontario C·ean Water Agency will make loans for eligible projects. The loans would be amortized over the life of the project. Annual grants to the municipality would be provided through the Ministry of Municipal Affairs to cover the yearly principal and interest costs of the Ontario Clean Water Agency loans.
The municipal assistance program, which is a revision of the old water and sewer capital grants program, has been designed to respond to provincial priorities and to municipal needs. Through it there will be promotion of regular maintenance of existing technology in plants, of water conservation, of the optimization of existing systems and of good environmental and land use planning, including the development of area-wide schemes that may serve several municipalities.
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In terms of activities envisaged for 1993-94, just a couple of parameters: Under the Jobs Ontario program, the province will be investing some $258 million in the upgrading and construction of new water and sewer facilities throughout the province, and that's a commitment over three years. Of that $258-million commitment, more than $90 million will actually be spent in the current fiscal year to support 120 projects, and there are estimates that this activity will put some 2,800 people back to work.
The second corporation, the Ontario Transportation Capital Corp, will indeed provide financing for transportation programs and for projects such as rapid transit and provincial highways. It will be facilitating the development and implementation of such programs and projects and related resources envisaged through transportation systems.
The corporation will have a focus on developing private sector partnerships and ventures, and in seeking new revenue sources, including beneficiary-pay as a concept that's being exercised through some of the recently announced transit projects and tolls on Highway 407, as examples. The corporation will be focusing on producing efficiency in the delivery of transportation infrastructure, seeking to reduce ultimate total expenditures and provide services on a more rapid or timely basis.
There were some questions over the past several months in terms of how the corporation will repay its indebtedness. Indeed, there are a number of potentially applicable sources for repayment for the transportation corporation. Third-party contributions such as the beneficiary-pay concept, toll revenues, the best use of surplus lands to generate repayment and the potential for earmarking transportation related revenues, such as fuel taxes, drivers' licences etc, are certainly possible under the legislation. Any operating shortfalls after exhausting those above sources would be met by the government through the consolidated revenue fund.
There are a number of questions about the use of tolls. Just a very short note on the criteria used for tolling, the decision leading to tolling the 407: Clearly, under the legislation the decision to put a toll on a highway is the government's decision, not the corporation's. Tolls in the case of Highway 407 will be used to permit innovative financing and accelerated construction of Highway 407.
Some of the principles behind that choice: Highway 407 is a new facility, not an existing highway; there are several non-tolled facilities that parallel the 407, so the travelling public will have a choice in terms of which routes it takes; and tolls will be used only to pay for the specific costs of 407, they won't be used to offset the costs of other types of investment or operating expenditures etc of different ministries etc.
The Ontario Realty Corp is being created to provide the government in its programs and others with real property services and improvements, to hold, manage and finance new government accommodation, and it'll be involved with government in having government clients pay rent to the corporation for accommodation services.
Its specific roles will be in developing and marketing surplus government properties, those that have been declared surplus to the program and service needs of government. It'll also finance, hold and manage all the lands and buildings related to government accommodation in its programs, and that includes this building and the Macdonald Block.
It will have a role in optimizing the value of real estate investment and a role in bringing strict accountability to the use of accommodation space. It will be empowered to provide a broad range of services, from leasing, lending, acquisitions etc through appraisals, administration and codevelopment.
The financing of real property will be within its mandate by raising funds with direct or indirect Ontario Financing Authority involvement through third-party financing. Those kinds of arrangements could include mortgages, debentures, sale or leaseback arrangements, backed by the value of the real estate asset.
Mr Cousens: Under your third point, to provide a full range of services, would that include developments like Markham East? Would that come under this corporation rather than the ministry?
Mrs Stewart: I believe that is the case.
Mr Cousens: You don't know?
Mrs Stewart: Yes, it is the case. If you have further questions on that, Mr Cousens, we'll probably take them up afterwards. We have a couple of people here from the Ontario Realty Corp, from the Management Board secretariat.
In terms of property acquisition and the selling of surplus assets, another area where there were some questions previously, real estate assets will include those properties that have been declared surplus to government's program needs, existing accommodation properties to be managed and future accommodation properties to be constructed.
Surplus properties involve a variety of lands across the province, from farm land sold for compatible agricultural use, to vacant urban sites to be developed for housing, commercial and/or institutional uses. The Ontario government would indeed identify the surplus assets to be sold, not the corporation.
Some of the key activities that will be undertaken by either the land corporation that's currently in existence or the realty corporation later this fiscal year -- indeed, the realty corporation will continue with the development and marketing of surplus properties that the Ontario Land Corp is currently involved with.
The plan outlined in the budget that Mr Phillips made earlier reference to would have the realty corporation financing, acquiring and holding or managing $250 million of government of Ontario office buildings in the current fiscal year. Indeed, there were some $350 million of assets addressed in last fiscal year. The $600-million figure that Mr Phillips was quoting earlier would be the combination of those two.
The realty corporation would be financing capital projects for the Ontario government relocation program to help promote infrastructure investment and jobs through that avenue.
The fourth corporation, the Ontario Financing Authority, has a number of roles, including the arranging and coordinating of the financing of the province, its capital corporations and public institutions in the most efficient and cost-effective manner possible.
The act provides that when necessary the financing authority would act as an intermediary between the financial markets and the crown corporations and public institutions.
The financing authority would coordinate the borrowing, financing and short-term investments of funds and financial risk management activities on behalf of the province, its crown corporations and public institutions.
It would provide efficient and centralized cash and liability management for the province and its crown corporations.
It would operate the Province of Ontario Savings Offices.
Where appropriate, the financing authority could pool the financing requirements and issue debt in its own name and lend the proceeds on to its clients.
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The results expected to be achieved by these kinds of activities: Probably most importantly, the centralization of financial management through the financing authority will help reduce any duplication of effort on finance-related activities and provide the financial expertise for the crown corporations and the province to access international capital markets, a rather refined expertise.
It's expected that the authority will be providing stable long-term sources of funding for capital projects by employing some of the new financing tools, that it will help conserve on the provincial credit by limiting the use of the provincial guarantee and seeking other financing sources, and that it will achieve operational efficiencies through centralized financing and cash management.
Further, the financing authority is expected to minimize the borrowing costs through coordinated debt management, to obtain benefits of liquidity, timing and market access in terms of capital markets management, and it will expand the financial services currently provided by the province to crown corporations and other constituencies.
Finally, the inclusion of the Province of Ontario Savings Office in the Ontario Financing Authority will facilitate the introduction of new financing instruments through that delivery vehicle.
There have been a number of questions related to loans-based financing and in terms of why that financing technique is being undertaken. Some of the responses and answers relate to the government moving to a more equitable financing method that will more closely match the capital costs of capital facilities with the benefits they generate; so a mapping of time frames, where the costs indeed are financed over the same period in which the benefits are accruing. The loans-based financing system will bring greater stability and certainty to funding for a number of capital projects. Loans-based financing allows the government to sustain the investment levels and create jobs in a financially trying period. Ontario is moving, again, to a more comparable basis with other provinces that undertake the same sorts of financing vehicles, and the loans-based financing is hoped to reduce the distortionary effects of capital investment on the deficit by reflecting that investment over the period in which the asset is in use.
The kind of mechanisms envisaged under loans-based financing: The change to loans-based financing is being done at no additional cost to the recipient. The government will be providing the recipient, through its operating budget, the annual repayment instalment of principal and interest. Indeed partners will face no additional cost and there's no new net debt being created.
Some of the specific implications of this loans-based financing to, as we term it, the USH sector, the universities, school boards and hospitals: The fiscal plan announced in the 1993 budget clarified the capital investment strategy, including a shift from capital grants to loans, and under this loans-based financing approach, universities, colleges, school boards and hospitals will receive their provincial capital funding in the form of loans from the Ontario Financing Authority. The amounts that were envisaged in the 1993 budget are displayed on the table, for a total of $608 million as reported in the 1993 budget.
Implications for the USH sector: The capital expenditures by government and its transfer partners will generate economic and public service benefits over an extended period. These benefits are critical during cyclical economic downturns and to support sustained economic recovery.
While the provincial debt for capital corporations will be transferred to universities, school boards and hospitals, so will the revenue streams for their repayment. Again, there will be no additional costs to those recipients, and they'll be provided the repayment stream by the appropriate ministries.
The USH sector partners involved in these changes were consulted on these plans in the fall of 1992, and as I mentioned earlier, municipalities are being consulted right now on the new municipal financing program envisaged for the Ontario Clean Water Agency.
Just a final note in terms of implications for municipalities, which are impacted primarily by the water and sewer corporation's activities but also to some degree by the transportation capital investment undertakings: Again, the use of certainly the services of the clean water agency is optional for municipalities, and their traditional borrowing mechanisms are still available to them. There's nothing requiring municipalities to use these vehicles. There's no additional authority being created under this legislation for dealing with traditional municipal abilities. The debt limits applying to municipalities will still apply.
The Ontario Financing Authority will make borrowing accessible to some municipalities at provincial credit rates, and transfer payments from Municipal Affairs to municipalities will cover the amounts of the loan repayment that are needed. Non-payment of a loan by a municipality, given that Municipal Affairs has provided it with the repayment stream, would create the reduction of an unconditional grant to a municipality. That kind of provision is there to give assurance to the purchasers of bonds that their investment is a worthy one.
The implementation of the water and sewer grants process will be much streamlined through the Ontario Clean Water Agency, and while this act does not provide any additional authority for municipalities to enter into joint ventures, that kind of activity is set out in Bill 40, the Community Economic Development Act.
I think we'll call an end to it there.
The Chair: Thank you, Mrs Stewart. I believe the members may have some questions regarding your presentation.
Mr Sutherland: Do we want to have the individuals from the corporations come first, or did the committee want to have questions regarding the presentation? I just thought it might answer some of their earlier questions if we have the individual representatives --
The Chair: I'm getting ahead of myself.
Mr Sutherland: It's the will of the committee.
Mr Phillips: Would we have the presidents-designate speak on their corporations? Is that your plan now?
Mr Sutherland: No. There are staff people here available to talk about each specific corporation, and some of the questions you raised earlier in response to my opening remarks they may be able to address.
Mr Phillips: How long would you expect they would take?
Mrs Stewart: I might suggest that there are probably four individuals who could come forward in turn and in a matter of five or 10 minutes, I think, can try to address a couple of the questions you raised in your opening comments and see if there are any particular follow-up questions right now, if that would be helpful.
The Chair: Does that sound reasonable to the committee, that we have the presentations from the four capital corporations now and then we'll pursue the rest of the questions following their presentation?
Mr Grandmaître: Just one short question, Mr Chair: Who can answer questions on conditional and unconditional grants to municipalities? Which corporation?
Mrs Stewart: None of the specific corporations here may be able to answer those questions. It depends on the nature of them. If there were specific questions, we'd try to answer them; otherwise, we could get hold of --
Mr Grandmaître: When you say that unconditional grants will be reduced, this is what I was going after. When will they be reduced? And how about conditional grants? Will they be reduced as well?
Mrs Stewart: Okay. An individual from the financing authority can help answer that question. It's not envisaged that conditional grants would be reduced.
The Chair: What I would suggest is that we proceed with the individual presentations and, following that, the committee obviously reserves the right to ask people to come back to answer specific questions the members may not have found a satisfactory response to.
Mrs Stewart: If I can ask Tim Casey, who's the assistant deputy of the realty services division in the Management Board secretariat and he can respond to a couple of questions that were asked about the realty corporation. I think, Tim, the initial one related to the benefits of transferring buildings to the realty corporation and what the public benefit might be there.
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I think Mr Phillips asked that question. Are you comfortable with the response to the $600 million in the budget plan, or would you like any follow-up on that?
Mr Phillips: Well, it's suspicions confirmed. Maybe Mr Casey can be helpful as he outlines what the plans are for the next few years, because my own view is that you can keep transferring government buildings in and raising paper money and putting debt over here, but it would be helpful for me to get a longer-term view of how much annually is expected to head into this corporation and how they're planning to service the debt.
Mr Tim Casey: All right. Ontario Land Corp, which is presently in place at this time, purchased about $350 million worth of what we call surplus lands this past March. The intent at the present time as outlined in the budget document was that another $250 million in other buildings -- these would be, in effect, marketable buildings, not necessarily surplus -- would be going into the realty corporation this year. That would be followed by probably similar amounts in the next few years. The key to it is, however, that all the property that would be going into the corporation would be what we would call marketable. In other words, it would either be capable of being sold outright to buyers in the private sector or, alternatively, it would have a revenue stream attached to it, such as income from rent, that would be drawn largely from the government.
Property that has no market would likely end up being held by the government itself, so the object is to make the corporation an ongoing business operation, not simply a holder of property.
The Chair: Mr Daigeler, you have a question?
Mr Daigeler: I don't know. These are general questions that I have and I'm not sure whether it's fair to ask you the question. But, really, what you're saying -- it sounds like the government is going to keep the lemons and you are going to have all the oranges and obviously it's going to be easy to sell the oranges and the taxpayer will have to foot the lemons.
I don't get where this makes the whole operation of the province more businesslike and efficient. You're saying you're going to get the ones that create revenue. Sure. Any business is going to like to get the stuff that sells and that you can rent, if the taxpayer has to hold those that don't rent and that you
can't sell. So I don't follow how that's going to be more businesslike for the province as a whole. It may be, of course, businesslike for the realty corporation, but for the province as a whole and for all of us, for the taxpayer -- and I think that's our responsibility as a committee here, to examine how all of this is going to benefit the taxpayer -- perhaps you can enlighten me further on that. But I can't see how that in the long run will benefit us.
Mr Casey: Well, if a property essentially has no value -- in other words, if it has no marketable value -- then it wouldn't matter whether the government sold it to a crown corporation or sold it to the private sector; it would still get no value for that piece of property. So it wouldn't be particularly fair for the government to sell that property with no market value to a crown corporation and then take into revenue a value which is artificial.
The Chair: Mr Hope, you had a question.
Mr Hope: My concern would be dealing with the surplus of the land. You're talking about vacant land that's currently out there or vacant buildings out there that are marketable, whether it be through sale -- how would that be advertised to the general public to know about it? Is this going to be a little club that's going to have access to the land, or is it going to be public information, like the land that might be available in Kent county would be public information to those people in Kent county?
You talked about the land issue and I really am concerned about public information towards the public land. I understand what you're talking about, the other part where government land -- the private builds something on it and these buy-back arrangements are made.
Mr Casey: Prior to the shutdown of Ontario Land Corp in 1987, it had been in operation for a number of years. As well, MBS, in its former activity -- the partner was the Ministry of Government Services -- operated for many years selling land as well. In both cases, they do it on the open market in an open, competitive sense. We do not have any private clubs; we don't have any special favours. We do it competitively.
Mr Phillips: I gather what you said is that you've transferred $250 million worth of buildings this year and you anticipate similar amounts in the future.
Mr Casey: We would intend to.
Mr Phillips: I believe you said that this building, for example, ultimately will be transferred into it. Maybe it would be useful, just for the committee: What were the $250 million of buildings and how much of the revenue is government lease payments versus "private sector" payments that you expect this year?
Mr Casey: No buildings that are existing today, from the standpoint of this type of building, other than a few that we anticipate will be surplus in a very short term, have been transferred over yet. The intent is that once the corporation is up and running, then the $250 million worth of properties would be transferred into the corporation. We are in the process at this time of identifying which assets and what the valuation of those assets will be.
Mr Phillips: That's not an answer. I think the committee has to have some idea of what we are expecting in terms of the examples of the buildings, and is it expected that the revenue source is government lease payments, or is the majority going to come from leasing the buildings to the private sector?
Mr Casey: No, the vast majority will come from leasing the buildings to government.
Mr Phillips: And presumably you've identified it. The $250 million would be buildings that the government ministries are sitting in right now?
Mr Casey: Yes.
Mr Phillips: There will be a paper transfer of that: somebody will valuate the building, pay the government $250 million, and you'll take that into revenue and you will then incur a new lease cost that didn't exist before.
Mr Casey: That's correct.
Mr Phillips: Thank you. I'm sorry -- and you expect $250 million a year for several years to come into the --
Mr Casey: Somewhere in that neighbourhood. It's up to essentially the Minister of Finance to make the determination as to how much property they wish to sell through the corporation.
Mr Phillips: I don't want to monopolize it.
The Chair: Thank you. Mr Mammoliti and then Mr Cousens.
Mr Mammoliti: I just have two questions. The first one would be whether the corporation would be responsible in selling the land -- I'm still not too clear on it -- to the private sector. That's my first question.
Mr Casey: Any lands that would be surplus to government needs, it would attempt to market to the private sector.
Mr Mammoliti: Okay. Do communities have a say? If that's the case, and when the corporation would in essence be in that position, would communities have a say in terms of whom this land gets sold to, and if so, what policies would be in place to allow communities to have some input in terms of whom they're sold to?
Mr Casey: The government adheres to the municipal planning process from the standpoint of determining zoning of land and so on. In addition, as part of the surplus process, we normally request from the municipalities if they have an interest in the land as well. I believe they could purchase it and get a priority on that basis. It goes around to government agencies, in effect, which includes a lower-tier government. Those would be the two normal areas where they would have input.
Mr Mammoliti: I lied; I have three questions. The third question would be, I guess -- and I'll give you a piece of land. It's no secret that the Workers' Compensation land up in my neck of the woods is being looked at, I think, and if that were the case, there is some problem in terms of even the existing policies that might be in place now and acts that might be in place in terms of the involvement with communities and whom they're sold to. Developers are already looking at that land. How can we better hear the community in this particular case if the corporation were to decide to sell that land one day?
Mr Casey: We can use that as an example. However, you would have to understand that neither the OLC nor, I would anticipate, the ORC would have any role with regard to the ownership of that land. It's owned by the WCB and they can market their own lands, so that would be one of their parcels.
Mr Mammoliti: If they declare it surplus, though.
Mr Casey: They would still have the ability to market it themselves. They do not have to use us, nor would that land normally come into our ownership.
Mr Mammoliti: I see.
Mr Casey: However, if you had a situation like that, if the municipality had a special interest as to what it wanted to have done with that land, it could express that as part of the surplus process and advise us. Then beyond that, we'd get into the municipal planning process.
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Mr Cousens: I don't know whether it's appropriate or not, but I want to ask a question on the Markham East project. What would be different now with this project falling under the Ontario Realty Corp versus where it now sits under the ministries?
Mr Casey: One of the primary differences is that at the present time all the land held by the ministry itself is valued at zero, including these buildings, vacant land and everything else. Once the land has been sold to the crown corporation -- in the case of East Markham, it has been sold to the Ontario Land Corp -- it has debt attached to that. Debt tension tends to focus attention on the decisions around asset management, and indeed that will happen with regard to East Markham.
If, as we used to do with some of the land banking, we hold lands for many years and don't attach any holding costs to those, one can accumulate quite a few assets and, in effect, not manage them very efficiently. At the present time, that land carries debt. We have to make decisions in a timely fashion or eventually the kinds of decisions we will make could be shown very easily to be a totally inappropriate or inefficient use of those lands.
Mr Cousens: The policies, the guidelines, the development of that whole area, will that now will fall under the corporation? I then ask the relationship that that corporation would have with the Ministry of Housing, the Ministry of Municipal Affairs and the other ministries. Would they operate somewhat independently of the other ministries or would they continue to have the close interaction that they now have under the different ministries?
Mr Casey: I would anticipate they would have a close interaction. The crown corporation is subject to all the same government policies and requirements. We are proposing in this that the corporation would also have its class C exemption, which is an equally onerous process, what happens on all parcels of land, which is something the private sector doesn't have to go through. In addition, we follow the housing policy of the government, so housing gets a first priority on the lands. That would continue. As well, as I mentioned before, we have to go through the municipal planning process, so the same kinds of standards that come out of that would apply to the development of any lands for the corporation.
Mr Cousens: I have one other question, Mr Chair, on another area within this.
The Chair: That's fine, but would you move slightly closer to the microphone or speak slightly louder.
Mr Cousens: I'm sorry. Why would this new sector be responsible for the government relocation program and just what were you doing? To me that seems somewhat anomalous to the other responsibilities that you have, unless you're talking about moving sectors of the government to Peterborough or other things. Is that exactly what you mean by that?
Mr Casey: The reference is really to the capital requirements. In other words, there are two parts to it. There's an operating requirement, which tends to get involved in the actual moving of staff and so on. While we have some involvement in moving people in a home owner relocation activity, that reference is largely to the construction of the new facilities for that relocation.
Mr Arnott: You said that the Ontario Realty Corp will facilitate the disposal of surplus lands. I'm just wondering if there's any structural impediment right now which prevents the government from selling or disposing of surplus lands that it wishes to get rid of, for whatever reason.
Mr Casey: If the government wanted to make revenue quickly, it could dispose of its lands very quickly. In other words, you could dump them on the market. In some cases, I've got thousands of acres of residential property in one location. I think you can imagine what the impact on the local market would be if I dropped those thousands of acres on the market all at once. It's the same thing with other commercial buildings, for instance, and those types of things.
What we do is take a look at what it will cost us to perhaps take land through the planning process, get the highest invested value for it from the standpoint of zoning. We match that off against its holding costs. Truly, an asset management activity is what we're looking at, and the debt is just in looking at that kind of exercise, because in effect you have a holding cost for land. Nothing is free, particularly the land.
Mr Arnott: I guess we're saying that the government hasn't managed its responsibility with respect to that particular asset, which is land, as well as it might have, as well as it could.
Mr Casey: The government can account for its assets in any way it wishes. It just so happens to account for its realty assets at a zero value at the present time. If one wants to put a value on those so that you can manage those more efficiently, then you have to find a mechanism to do that. In the private sector, if a corporation has something it wants to put a value on, it can sell it. It can sell it to one of its subsidiary corporations. In this case, you have a like situation.
Mr Arnott: Again, there's no constitutional or legal impediment to the government disposing of land that it owns as it sees fit in whatever manner it wishes.
Mr Casey: Subject to regulation, environment requirements, in some cases, if we adhere to the municipal planning process, that type of thing.
Mr Phillips: Just to ask maybe some information that may not be available today but before we're finished, I would appreciate it. My own view is that the government's financing $250 million of its debt creatively by this manoeuvre. That's just my own view. It's paying for that through lease costs as opposed to interest costs on the debt, and it's creative.
But it would be useful, I think, for the committee to get from Mr Casey the best bet on a 5- and a 10-year financial plan, just so we have some idea of what we're dealing with here, which I gather the tentative plan is $250 million a year of buildings offset by presumably some $25 million incrementally each year in lease cost or something like that, just so we could see a 5- and a 10-year plan, because I think that will also be necessary on the sewer and water corporation, transportation corporation and financing authority. I'd like to see in the end what debt we're running up on the schools, hospitals and what not -- I realize that's not available today. Secondarily, of the $350 million of land that has been transferred into the corporation, what is that land?
Mr Casey: That land includes some commercial buildings, vacant land, farm land.
Mr Phillips: I don't need that today by the way. I just thought that may be part of our report.
Mr Casey: We can give you a description.
Mr Phillips: That would be useful I think before we get into clause-by-clause.
Mr Mammoliti: One very quick question, assuming that third reading and royal assent occur in the fall session, how many jobs would this corporation create for the immediate public and how quickly, if any at all?
Mr Casey: I could give you a figure at the next meeting on our capital works and the number we feel would be generated out of that.
Mr Mammoliti: Will you give me that? Would I have to wait for that?
Mr Casey: I don't have that at my fingertips.
Mr Mammoliti: You don't have any estimates then? Okay.
Mr Casey: In effect, the corporation creates jobs by building things, constructing, whether it's new buildings, additions to buildings or capital repairs, and I would have to get you a figure on what the anticipated figure is for this year and next year.
Mr Mammoliti: How quickly can you get me that information or get us that information?
Mr Casey: I can have it actually by the end of the day and perhaps at the next meeting we could review it.
Mr Mammoliti: That's great.
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Mr Cousens: Just a very quick question, but I'm interested in the answer. When you point out that the new crown corporations will provide stable, long-term sources of funding for capital projects by employing new financing tools, do you see your own private systems to incorporate computer technology for the new realty corporation outside and apart from what is within the Ontario government, or do you see yourself tying into a schedule 4 agency to total government systems? If you can answer that one, and otherwise, what new financing tools do you see beyond the fact that you're going to just be selling off property?
Mr Casey: Any information systems that we develop would be able to communicate with the general government information systems. If you're referring to financing --
Mr Cousens: Will you have your own computer systems? Will they be separate from the government? Are you going to set up your own little administrations with computer systems and so on?
Mr Casey: I don't anticipate anything different than what we do today, with the same linkages that we have today. As a matter of fact, some of the ones that we've recently developed, we are putting terminals into our client ministries so that they can access those as well. I assume the same thing would continue to go on.
It's important, I think, to keep in mind that our clients are the ministries. They're our primary clients. So it doesn't do us any good to be independent. We need to be able to communicate with them, we need to be able to get approval of financing through the Ontario Financing Authority and so on, so to the greatest extent possible, we want to stay very closely linked to all of those clients and the people who control, essentially, our financing.
With regard to innovative financing arrangements, in effect, we are looking at what we would call asset-based loan financing; in some cases in partnership arrangements we could have equity contributions. That offers some opportunities that we presently haven't engaged in at all and could offer us a lower cost of borrowing as well.
The Chair: Mr Sutherland has a comment, and then Mr Arnott.
Mr Sutherland: Yes, I was just wondering, in response to Mr Phillips's request for what types of buildings are in that, maybe you could also include what type of land is excluded or exempted from being eligible for sale.
Mr Arnott: There was a figure given earlier this afternoon about the approximate staffing level for the Ontario Realty Corp. I forgot what that was, the number of people.
Mrs Stewart: Anywhere between 1,300 and 1,500. The numbers are not finalized.
Mr Arnott: And those employees will come from the Ontario public service, I gather, most of them or all of them. Is that the plan?
Mr Casey: They would in effect be the employees who presently are in the realty group of the Management Board secretariat.
Mr Arnott: Now the government has stated on a number of occasions that the change that this bill provides for will allow more effective administration of the responsibility, so I gather from this that you'll be able to do the job with fewer civil servants.
Mr Casey: That's our anticipation.
Mr Arnott: Do you have any estimate of how many civil servants will be laid off as a result of this change over, say, the next two to three years?
Mr Casey: We anticipate that we can accommodate the downsizing through a combination of the retirements that will come along, new opportunities and so on, so there would be very few people at the end of the day, if any, who would be laid off.
Mr Arnott: But fewer jobs than presently.
Mr Casey: I would anticipate it would be fewer jobs than presently.
Mr Daigeler: There goes the job creation.
Mr Mammoliti: It's called managing.
The Chair: Order.
Mrs Stewart: If I can add in response to one of Mr Phillips's earlier questions, you mentioned a reference to the Provincial Auditor and the land transactions from the previous fiscal year. I understand that the Provincial Auditor has indeed audited the Ontario Land Corp for 1992-93 and has attested that the accounts of the corporation reflect the status of the corporation, so he's basically signed off on the audit for last year.
Mr Phillips: I wouldn't doubt that. That wouldn't be my concern at all. I'd just like to know what land and buildings we're planning, what we're going to do over the next five years and then ten years, how much debt we'll have there and how much new added expense.
My own view is, as I said earlier, that we are going to add $25 million a year in lease costs -- $25 million, $50 million, $75 million that aren't there currently -- and we'll take into our revenues $250 million. It's just a creative way of financing debt, in my view. But I don't doubt that everything that's gone on is completely clean. It never even entered my mind that the auditor would not have approved.
Mrs Stewart: If I can ask Jim Merritt, who's the executive director of the Ontario water corporation's transition team, the Ministry of Environment and Energy's transition team leading to the Ontario Clean Water Agency. Jim, there were three questions raised earlier that I think you can help us with before further questions are tabled.
One question was raised about any substantive changes to water rates that might impact residential or business water rates as a result of the creation of the corporation; a second one about the new funding arrangements creating difficulties or unfairness for small or northern municipalities, a question from Mr Grandmaître; and, finally, the question raised by Mr Cousens about the CEO designate reporting to the deputy minister, which indeed is not my understanding. My understanding is that the CEO would report to the board of directors of the corporation, but Jim may be able to shed more light on that.
Mr Jim Merritt: The question of rates has come up on several occasions and it's an important one. The Ministry of Environment and Energy announced last winter its intention to put in place a 5.7% overhead charge for all the utility operations, water and sewage plants, that it operates on behalf of municipalities. Historically, there had been in effect a subsidy because all the overhead efforts were not charged back to those municipalities. Municipalities that operated their own plants absorbed these themselves. This was an effort to put all plants on the same basis.
The agency, at least in the initial phase when it got started, would anticipate continuing this overhead charge. However, there is opportunity to then sit down with municipalities on a case-by-case basis and look at the overall operation of their facilities and endeavour to find ways to reduce costs. This is one of the major initiatives of the agency through things like water conservation and plant optimization.
This is also tied into the new municipal assistance program, which now introduces the opportunity for grants to municipalities so that they can then start building water conservation into their programs and also invest in things that will streamline and make their existing systems more efficient.
We anticipate overall that this will, in effect, help municipalities to reduce rates and reduce their overall capital costs in the long term.
Mr Grandmaître: On page 36 of the presentation it says, "Under the loans-based financing approach, universities, colleges, school boards and hospitals will receive their provincial capital funding in the form of loans from the Ontario Financing Authority."
Does that mean that the government or the Ministry of Municipal Affairs is abolishing the conditional grants to municipalities? I realize that the minister is now negotiating with municipalities, as you said before. Right? The Minister of Municipal Affairs right now is in consultation with municipalities. Right?
Mrs Stewart: The minister is involved, and the ministry. The Minister of Municipal Affairs is indeed consulting and has been consulting with municipalities on the use of loans-based financing for that sector. What I mentioned earlier, indeed the Ministry of Environment and Energy is out consulting with municipalities on the specifics of how loans-based financing may impact water and sewer capital project investment. So it's rather specific to that.
I'm not aware of negotiations currently on conditional grants, and certainly I'm aware of no relationship between that negotiation and this bill. There is reference in the presentation to potential impact on unconditional grants. If I could ask you to hold that question until we have someone in a few minutes from the financing authority, it's a rather specific relationship in this bill related to the potential non-payment of loans that are as a result of the clean water agency's activities on capital investments with water and sewer plants.
The provision in the bill related to unconditional grants basically says that if a municipality has entered into an agreement with the clean water agency for a loan to finance a water or sewer undertaking and the municipality defaults on that loan, the bill provides the Minister of Finance with the ability to constrain, essentially, unconditional grants to that particular municipality in order to ensure that it actually makes its loan repayment. That's the only connection here, and I'm unaware of any connection at all to conditional grants.
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The Vice-Chair (Mr Hans Daigeler): Mr Merritt, I think you wanted to add something to that.
Mr Merritt: Yes. On the question of conditional grants, so that we're all very clear, the old water and sewage direct grant program, as it was referred to, is being amended and revised, but there certainly is an assistance program for municipalities. Although it will be managed under the loan-based assistance, the grants will still flow to the municipalities over time. The levels of assistance are essentially very much the same. I think one of the second questions was a concern for the small rural and northern municipalities, and that certainly is an equal concern. The new assistance program still provides a population-based approach so that smaller municipalities are eligible for larger levels of loans and again can receive up to 85%, which was consistent with the earlier program. So that is very much still on the table.
Mr Grandmaître: So what you're telling me is that the Ministry of, let's say, Environment and Energy will not change its grant system.
Mr Merritt: We are not changing the overall amounts. There are some fundamental changes to the grant system in terms of the way it's scored and the types of projects that are eligible.
As I referred to before, the old system only provided money for traditional water treatment and sewage treatment projects as they were substantially built, in a historic sense. The new program will expand that so that if a better alternative is now available -- for example, we are asking the municipalities now, if they are looking at an expansion, to look at water conservation and see if water conservation would in fact reduce the size of that expansion or maybe eliminate it altogether. If that is the case and they'll need some money to implement that water conservation, the water conservation project will now be eligible for a grant. In this way, we're hoping to save them money and the province money through the grant program.
Mr Grandmaître: I still have a concern, because I can recall the Minister of Municipal Affairs saying this will be a job creator: "Let's get involved in renewing our municipal infrastructures. The federal government doesn't want to do it; we'll do it on our own." In fact, if I'm not mistaken, the minister at the time mentioned that $150,000 -- it wasn't a whole lot of money; it was just a small amount -- would be used to improve municipal infrastructures. That's why I'm asking you, if we're trying to create jobs by improving and renewing our municipal infrastructures, will unconditional and conditional grants to municipalities be affected? Will they all become loans from now on? I perfectly understand your answer, but I guess it's going to take a while before all the ministries that are involved can provide us with all the answers.
Mr Merritt: I think there was a third question, and that is the reporting of responsibility of the chief executive officer under the legislation and other concepts that Barbara's talked about. The chief executive officer would report through the chairman of the board, through the board of directors. The chief executive officer would not report to the deputy minister. The chairman of the board would report to the minister under this legislation and that would be the reporting linkage.
Mr Cousens: Just on that --
The Chair: No, no, I have Mr Hope, Mr Mammoliti, Mr Phillips, and Mr Cousens now.
Mr Hope: I've got a few questions. You say one third of the plants. Do you have a list of one third of the plants and their locations that the province is running currently?
Mr Merritt: We could provide that list. It totals approximately 350 plants.
Mr Hope: We'd appreciate that during the process of the hearings. Also, do we have provincially owned and municipally run facilities out there?
Mr Merritt: Yes, we have all mixtures. We have provincially owned and municipally run plants; we have municipally owned and provincially operated; we even have ones where part of the plant is owned by the province and part of the plant is owned by the municipality, run by us.
Mr Hope: And if I asked you to pull that information, you'd be years trying to gather it, right?
Mr Merritt: I would say we would be, yes.
Mr Hope: Okay. I need which ones are the provincial ones, the one third.
Mr Merritt: I should add that in terms of the concept of a plant and getting the list together, I'm referring to the major plants. We also operate a large number of smaller component systems to them which we don't necessarily refer to as plants as a whole; for instance, pumping stations and other ancillary facilities. If we include those, the list is in the thousands.
Mr Hope: Well, the one third will be sufficient.
Dealing with the provincially owned facilities we have out there, when you do expansions or upgrading or whatever, the debt is allocated to the municipalities. Under this new corporation, how is that debt now going to be -- is it going to be taken off the municipal books and put on your books?
Mr Merritt: That is in fact a loan. Under the old program, with provincial projects, where we did the work and built on behalf of the municipality, that portion it didn't get a subsidy for was borrowed and put on the books of the municipality. That will still continue. The agency would borrow on their behalf, but the debt, because it's not subsidized, would sit on the municipal books, so that would not change.
Mr Hope: So it's the same current structure, where the ministry goes ahead and does capital initiatives without -- really, the municipality has no say in this process.
Mr Merritt: The municipality requests the expansions.
Mr Hope: But it's also known that a provincial facility is when they have capital expenditures without the support of the municipalities. We talk about regional water supply, and we have two facilities in southwestern Ontario that provide regional water supply. I leave that with you. You've given me an answer which I'm not particularly keen on.
Also, with the new system you're talking about, where municipalities could opt into the system, when we're dealing with rural Ontario -- I understand what you're saying about water conservation, but in order to conserve water, you've got to have water. My biggest concern is around the smaller municipalities, which we've heard some concern about, not being able to build up all these water supplies.
I'm saying, what is the avenue for rural Ontario to provide stronger mechanisms? I remember that when the Conservatives were in power, they built the water facility in a city which now is hogging the water, preventing the rest of the smaller municipalities from accessing that water. I'm wondering what mechanism is going to be there to provide for the smaller rural communities to access water through this new system.
Mr Merritt: One of the agency's roles, in fact its primary role, is to be an assist to municipalities, and we will enter into agreements to do that. If the municipality would want us to find water or access water or to assist to negotiate agreements with other municipalities to find that water, we then would embrace the municipality as our client.
Mr Hope: What about the one third of the plants that you currently operate?
Mr Merritt: They would be part of our client base. If they want additional water, then we'll look for the best way for them to find that water. Water conservation comes into play in terms of reducing the cost of the options. If they don't have water in the first place, water conservation isn't going to be too helpful to them.
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Mr Hope: The other question I have, my last one, dealing with water conservation, is, what would encourage people to participate in water conservation if they have water surplus? Let me tell you, if you put in water conservation programs, it means the operating costs are still there and high, but the consumption is lower. That means the operating costs are going to go up when human consumption is down, which means that rates will go up.
Mr Merritt: I think that's exactly the point and what we want to avoid in the program. The water conservation program is looking for alternatives to a project need as it stands today. If there is not a project need, then we're not moving ahead with water conservation. It's only when a municipality comes forward and it's got a particular problem, either with its sewage service or water service today, and water conservation may well be a reasonable alternative to that.
The Chair: Mr Mammoliti.
Mr Mammoliti: Well, the Conservatives hog the water, and I think they should be ashamed of themselves.
Nevertheless, one of the reasons I support this is because, as I've said earlier, it's going to create jobs. The only indication --
Mr Daigeler: Who said that?
Mr Mammoliti: It's going to create jobs. Mr Daigeler is saying, "Who said that?" The government's saying that. The question I would have is, how many jobs, new jobs, would be set up out of this corporation? If you can be somewhat specific in terms of immediate jobs, it would even be better for me. I'm not sure if you're prepared to do that. I'd asked Mr Casey earlier to provide us with the same information. If you can give us an indication of immediate jobs, and also which types of jobs might become available, so be specific in terms of the types of jobs as well.
Mr Merritt: The information we currently have is on the Jobs Ontario program. Ms Stewart showed you a slide of that, indicating, if I can remember, that for the current year there were 2,800 jobs created out of a $90-million capital expenditure. That pattern would continue, and in fact in the next year there would be more than that. That's the package that was approved for this current fiscal year. We anticipate that the agency, once it gets started, will be putting together its capital plan and coming forward with yet another package.
It's somewhat premature for us to estimate that because we're now going out to the municipalities with the new assistance program and questionnaires asking them to bring forward their projects. Until we actually see what the project demand is, and then we will include that into our capital submission and capital plan, we won't be able to anticipate what the total demand is at this time, but we can be fairly sure that it's at least at the level of the current year, and I'm sure the demand would be significantly higher than that.
Mr Mammoliti: Which is 2,800?
Mr Merritt: Yes, 2,800 jobs.
Mr Mammoliti: And what types of jobs are they?
Mr Merritt: These jobs range widely, from jobs in the construction fields themselves -- excavation, pipe laying, concrete forming -- to people doing the site work and inspections, the consulting firms, the designers who do the design work, the office people involved and ultimately the operators of the facility once it's up and running.
Mr Mammoliti: These are immediate jobs, are they?
Mr Merritt: These jobs are immediate, and they're tied to projects where the construction is actually now under way.
Mr Mammoliti: So they're individuals who are already working, or are these individuals who might be at home waiting for a call to go to work?
Mr Merritt: The projects have got started now, and as those projects get geared up there will be more and more jobs created. We can get you the list of the Jobs Ontario package as it identifies the jobs over the next two to three years.
Mr Mammoliti: I think it would be wise to get that to the committee, but ultimately, in terms of immediate jobs, what I'm trying to get at is that, in my particular riding anyway, I have literally thousands of unemployed construction workers who are actually looking forward to working. Will this provide jobs for those who are actually sitting at home waiting for that call to go to work, immediate jobs, not jobs that are coming up 10 years from now but in 1993-94?
Mr Merritt: Yes, we're talking about real construction jobs as the projects move ahead.
Mr Mammoliti: This is wonderful.
Mr Phillips: I'd make the same request that we made of the previous speaker, and that is to get some idea of what you've got planned in a five-year and a 10-year financial plan, because we're dealing somewhat in the abstract here and I think we need to deal with specifics, but perhaps I can ask for that.
Secondly, if I can just summarize my general impression of what you're saying, it is that the provincial funding for these projects will not change, that the amount of money that will be allocated won't be changed. Is it running $150 million a year now, or what is the grant system?
Mr Merritt: It's in excess of that. I can get you that number, but you're very close.
Mr Phillips: That's $150 million. You're going to change it to loan base, which means, pardon my being cynical about it, again it's just going to run up debt, because you'll never pay the loans off because you'll keep spending $150 million a year, show on the books one twentieth the cost of that, and we're going to build up an enormous amount of debt that the province will owe the corporation that will be in your books. I think that will come out in your 10-year plan if you show us; every year the province will continue to spend roughly $150 million but only show, I think, one twentieth of that on the books.
The other part of what I gather this is all about is that the hope is that there will be substantial additional money available for projects through other sources of revenue; the province's source of revenue, $150 million, will stay the same each year. What is your expectation there, and how will that come about? Is that through your full-cost pricing? Is that the expectation? What will that mean to, let's say, a municipality or a business in a municipality in terms of real dollars?
Mr Merritt: It's early days yet to start pulling these plans together. We have had some very preliminary talks with some of the people in the financial area and I guess what is referred to as the non-traditional financial groups, and their very strong interest in coming forward and putting money into building and owning and getting some equity value into infrastructure and in fact carrying the debt on their own books. Some of these things look very intriguing on the surface, but we're going to have to look into them in a great deal of detail once the agency is established and can start talking seriously about these. There are opportunities like that which are coming out of equity funds, for example.
Mr Phillips: All that will be funded by the user presumably paying a rate on it. I'm just trying to get some feeling of what your expectation is of who will pay to service the debt and how that will come about.
Mr Merritt: In the end, you're absolutely right. The users of the system will be paying, through a water rate, the costs of building and maintaining that system over the long term. We're looking at trying to make sure that we're not building more than they can afford in the first place and at the same time trying to bring in substantial equity money to make that happen and hopefully keep everybody's costs under control.
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Mr Phillips: My problem is that the municipalities or the users in the end that will be affected by it will ask us the question two years from now, "Why didn't you find out how much our water rates were going to go up before you approved the bill?" Can you be of any help to the committee in terms of what impact this might have on real residential water rates and real industrial water rates?
Mr Merritt: Our expectation is that many municipalities currently have very low water rates, although there are some that have exceptionally high rates. There's quite a distortion among them. We're currently trying to get information on what municipalities have as their total rates and how they're billing them. It has been very difficult. We hope to move towards getting a better grip on that. Municipalities cover their costs off in many ways and often subsidize those rates through their traditional property tax processes.
Simply looking at their billings for water and sewage is not necessarily a really clear idea of what those total rates are. I anticipate that over time some of those rates in some communities are going to have to increase if they're going to meet all their requirements. On the other hand, we also know that there are probably more cost-effective ways of meeting their needs and undertaking these projects and hopefully trying to balance these in the long run.
Mr Cousens: I really liked the line of questioning by my friend, Mr Phillips. It's so important that we have a sense of knowing the net impact to the users. That's the bottom line. I won't repeat those questions; they were just excellent -- any help you can give us to show what impact you're going to have. It leads to the question: The legislative authority that we're giving this agency, could it at some point be forced upon all municipalities in the same way Ontario Hydro is the only exclusive authority providing -- because they assume it. They've closed off other options. When Sudbury was looking for the development of another kind of power, it got closed off; the power that comes out of that group. Is there any way in which you can force your -- I'd have to relook at the legislation -- so that every municipality in some way has to come through this agency?
Mr Merritt: There is in fact no way with this legislation that we can force participation or rates on municipalities. They are free to move away from the services of the agency at any time and if they do so, then rate-setting and costs of services will be completely up to them. In fact, our rates and charges would be negotiated on an annual basis with the municipalities and we would sit down with them very much on a client basis. Our intention would be to bill them probably quarterly so that they know exactly what their costs are and what we're doing with the money they're paying, and if they're not particularly happy with the way we're handling that, then they would be free to go in their own direction.
Mr Cousens: The second question has to do with the number of staff and the levels they'd be at. You're going to be the executive director. Would that be at the same level as a deputy minister?
Mr Merritt: Currently, I'm the executive director within the Ministry of Environment and Energy for assisting with the work in setting up this. I may or may not have any role in the future with this agency.
Mr Cousens: Maybe this question goes through Mrs Stewart: You have a chairman already appointed in the form of Mr Marshall.
Mrs Stewart: There's actually a CEO designate, so it's a chief executive officer designate for the corporation, indeed designate pending potential review by the standing committee on agencies, boards and commissions.
Mr Cousens: We know what that means, but then you said it and that's all right.
Mr Grandmaître: Is he being paid now?
Mr Cousens: That's what I was coming to, Ben. Is he on the payroll yet or not? Are there any people on the payroll yet and if so --
Mr Grandmaître: They're all on the payroll.
Mrs Stewart: I think Jim can answer the question most accurately.
Mr Cousens: Are you under the social contract?
Mr Merritt: There's no one on the payroll of the agency yet because it doesn't exist. Mr Marshall, who actually is here today --
Mr Cousens: Why doesn't he say hello?
Mr Merritt: He'd be happy to come to the microphone.
Mr Mammoliti: For the record, he said "Hello," Mr Chairman.
Mr Cousens: No, that's okay. I don't think there are any questions, but that's fine.
The Chair: Then we have Ms Mathyssen.
Mrs Irene Mathyssen (Middlesex): I'd like to thank you, Mr Merritt, for coming. I think my questions have been asked but in a rather different way than I would have asked them, so if you'll bear with me, I'd like to explore some things and perhaps get a slightly different perspective on a couple of items.
First of all, there has been some criticism that the Ontario Clean Water Agency might encourage bad actors. I'm thinking in terms of some suggestions that in the past municipalities anticipated growth that didn't happen, extended themselves too far in terms of debt and capacity, weren't always as scrupulous about the maintenance of facilities as they should have been and that somehow or other OCWA's going to allow them to get off the hook, as it were, at taxpayers' expense. I wonder if you could respond to that.
Also, in terms of this full-cost pricing, I think Mr Phillips very ably pointed out that the economic health of the province is dependent on the businesses that we have here and that very often those businesses are dependent on a clean, safe supply of water. In what way will OCWA ensure that those businesses continue to thrive because they have that source of clean water?
Thirdly, you said that any municipality is free to go elsewhere in terms of finding a service to deliver clean water and sewer facilities. Why should the municipality go to OCWA? What can OCWA offer that the private sector or someone else cannot offer?
Mr Merritt: Thank you. I'll try and remember all the questions as I go along.
First of all, the question of bad actors: It's quite right that previous assistance programs have said that a municipality could allow its system to deteriorate or its water quality situation to become very poor, and therefore, under the ranking and priority system, get a very high score. We're trying to correct this in the new program. We're adjusting the scoring and the criteria being set up so that municipalities that are demonstrating they now are in compliance, that they're looking to maintain their systems, to protect their projects, will in fact get enhanced scores through the priority rating system. This would give them a good chance to move up and have the type of score that would give them a good chance for moneys through the system.
There still is in there, however, an opportunity for situations where a municipality is in difficulty, where there are serious health problems or serious environmental problems, to still be eligible. We're not saying that we're not going to deal with the problems, but we want to make the system more equitable, so that those municipalities that are making the effort don't get penalized for that effort.
Secondly, the situation of clean water and business opportunities: I think Ontario is known for its water quality overall. However, some communities they do have water quality problems, particularly those municipalities that are taking their water from wells. Many of the areas have very limited well supplies now and the water in those wells, the quality, is deteriorating in some areas. It's going to be important, if we're going to sustain industries in those areas, to be able to maintain the supply of water and keep it at the quality of water that's available. We've heard from industries and development groups saying that's a very important aspect of economic growth, particularly on a regional basis, and the agency is very much charged with that.
One of the things we will be looking for in that is the possibility of partnerships. This comes back to another question: If, for instance, some of those industries come forward and look to develop partnerships -- under our Jobs Ontario project there was an example in southeastern Ontario, where Kraft foods company came forward and had a requirement to put in some water control systems. They knew also that the town required some upgrading. They met with our Ministry of the Environment and we looked at a three-way project where the industry, the town and ourselves could put joint funding, approximately a third each, to the benefit of everyone. We got a plant at a scale that saved us all money and reduced the overall costs.
I think that's an example of how we can build in some of these partnerships and save money for everybody, and we'll be looking for more of those types of partnerships on a community basis.
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Your question about why people should come to the agency for service: I think competitiveness is going to be a big part of it right now. The current plants that the Ministry of Environment operates are either large area projects that service multiple municipalities or they're very small projects in rural and northern communities. We think that approach is going to continue and there is a real need there.
The scale of operations that the agency can provide in terms of purchasing on a bulk basis, making sure that there is a pool of staff available -- for instance, a lot of these small plants don't need a full-time operator. We can share an operator among four or five communities. They can be out on the road. We can make sure that there's emergency backup service in case an operator's sick. We can have someone behind that. The staff relations and the staff support and all those other overhead things that perhaps no one likes to recognize will all be there available and in fact facilitate a municipality to deliver that work.
The same in terms of area projects: We would be promoting multiple municipal efforts to work on area schemes, which will save money for all of them, rather than each project building its own and trying to finance it and run it, in that if we first develop and then operate it on an area basis, there are tremendous economies of scale for those facilities, and that will be a strong role for the agency.
The Chair: Mr Daigeler, Mr Hope and Mr Sutherland, noting of course that the time is scheduled to 5.
Mr Daigeler: I'll be very quick. I'm just wondering, since Mr Mammoliti was making so much of the job creation impact of the agency, perhaps you could answer my question, which is, to what extent is that job creation different from what the Ministry of Environment is presently creating anyway through its capital grant process?
Mr Merritt: I should add that historically the capital grant process has had a number of peaks and troughs and for several years in the past there was in fact little, if any, new money in the grants program. With the Jobs Ontario program coming forward, there was a significant increase again in that expenditure.
Mr Daigeler: But all of that doesn't really have anything to do with the agency. I mean, let's say if the minister would decide, or the Treasurer would give the Minister of Environment enough money, he could create the same number of jobs.
Mr Merritt: I think by going to the loans-based approach for grants it removes the year-over-year pressures for the variation on that money and there's less incentive for this figure to jump up and down and perhaps gives us a more steady-state rate.
Mr Hope: A couple of questions that I have you started answering. You talked about the current one, dealing with water conservation, because a lot of factories use their water for coolants, as a coolant of a dye or whatever it might be. With this agency, will companies be able to access a similar situation where if they want to borrow -- let's say they can't get it from the banks but they want to put a water conservation program on site. Can the facility access funding through this agency?
Mr Merritt: No, this agency is there to assist municipalities. However, in the context of a municipal project, if for example a municipality is coming forward with a water problem and says it really doesn't have enough water and it turns out that if going to the industries within their community and finding ways for those industries to reduce their water demand is part of a whole municipal package, then we will put it together and that would be eligible, but through the municipality, not independently, industry by industry.
Mr Hope: You talked about dealing with wells. If you lived down in Chemical Valley -- you'll know where I'm talking about -- there's water contamination, which we've been dealing with for years. When I'm dealing with -- and this is where I want to bring in the private enterprise -- private enterprise putting in the lines, running water lines, how are we going to regulate the cost of water if they own the piping? They're going to buy water off you, but they're going to put it down a line to supply to a municipality. How is that private enterprise going to be regulated in the prices it can charge to a municipality?
Mr Merritt: If the municipality approaches that independently, then the agency wouldn't have a role. However, if the municipality comes to the agency and asks us to assist it with those negotiations and work towards a partnership development, we will be looking for protection not only for the municipality but for the agency itself in making sure that there's no long-term runaway costs and those agreements are looking out for our interests. That would be part of our service to the municipality.
Mr Hope: I just have one final one, because I'm looking at ways of generating revenue for you, and I'm talking about those polluters of our environment. The best thing we'd like to do is see the environment cleaned up for those who need water versus trying to put pipes all over the land place and just trying to find clean water. I'm wondering about the fine aspect, if you see an avenue of revenue generation through fines.
Mr Merritt: That's not part of this bill. The agency will not have regulatory powers in that we won't be able to exercise fines or, if there is fine money, get access to that. That would be a role for the Minister of Environment and Energy in his future considerations.
Mr Sutherland: I just want to make one comment in response to a question Mr Phillips raised about the clean water agency, saying that two years from now, if the rates go up, the constituents will want to know why we didn't ask the question in terms of how much impact the clean water agency itself, as one of the capital corporations, would have on rates going up.
I think it's important to be clear that whether the clean water agency is the mechanism for financing water and sewage projects, the government has made it pretty clear that it's going to a full-cost pricing system for water and sewage projects. So the fact that water rates may be going up might occur even if you didn't have the clean water agency as the mechanism for things going up, because it's pretty evident that we haven't paid the full cost and full price for water and sewer projects across the province. That point needs to be put on the record.
Mr Grandmaître: You mean through user fees.
Mr Phillips: The only reason I raised this is just that I have a document from the Ontario water services secretariat, which I gather is something perhaps -- is that who you're with, the Ontario water services secretariat?
Mr Merritt: No, we're with the transition team.
Mr Phillips: That indicates there could be a 50% increase in the water rates. I just want to make sure, if that is the case, that we've asked the question, because somebody down the road will ask us the question.
Mr Sutherland: But just to be clear, in terms of a policy or a direction of paying for the full price of water costs, that process, I think, needs to be looked at separately from specifically the setting up of the clean water agency or the capital corporation.
Mr Phillips: The only reason is that full-cost pricing is an important element of it, and if full-cost pricing is a 50% increase on the water rates, we just should know that.
The Chair: One of the things that has come to my attention is that a number of members have asked questions of fact, asking for some technical information. It would be useful if the ministry, when supplying that, could supply that to the clerk so that we could distribute it to all members rather than just the particular member who happened to have asked the question.
Mrs Stewart: If I can ask Tony Salerno from the Ministry of Transportation to come forward to answer a couple of questions that have been raised about the Ontario transportation corporation. I think the one I heard, Tony, relates to the competing consortia on the Highway 407 project and the opportunity that others had to participate in that process.
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Mr Tony Salerno: The first point I would like to make in relationship to that question is that indeed the two consortia competing for the finance, design and construction of 407 account for roughly 80% of that same capacity in southern Ontario. In any event, a large proportion of that capacity will be involved in the delivery of 407. Furthermore, the winning consortium will be required to contract or subcontract a significant proportion of the design and construction of the 407.
Mr Mammoliti: Mr Salerno, welcome. I noticed that you were sitting out there when I asked the questions in terms of construction jobs to the other two who were previous. I'm wondering whether you can provide us as well with an estimate in terms of immediate construction jobs and any other jobs that might come out of this plan to build the 407, how many and what types of jobs.
Mr Salerno: Let me answer that by saying first of all that through the capital corporation, in this new way that we are planning to deliver 407, we are compressing the time from the planned construction of 407. The first 58 kilometres of the 407 were planned to be constructed by the year 2015. Now, under this proposed delivery approach, those same 58 kilometres are planned to be delivered by 1998. Clearly, if you accelerate the construction, you'll be creating a lot more jobs.
In terms of the specific jobs -- I'm not avoiding the question -- let me just say that in terms of direct jobs, every $1 million of highway construction will create some 25- to 30-odd jobs. That phase of the highway, we anticipate, will involve about $1 billion of construction activity. I can't say precisely how much it will be, because of course we're having a competitive process that will tell us for how much they plan to build that highway. We're hoping that we can build it for a significant saving in doing it in this accelerated method.
Mr Mammoliti: For the people who are sitting at home, as I said earlier, who are waiting for that call from their boss for new work in the construction industry, this is a good-news item, and chances are they might get that call come the fall when this thing passes.
Mr Salerno: My answer just dealt with 407. You'll recall also that through the capital corporation, the government was able to accelerate or at least undertake the development of four rapid transit lines and the busway in Mississauga. That is an expenditure of roughly $2.5 billion. Again, the same types of direct jobs will be involved because a lot of the same types of civil activity, civil engineering and construction activity, are involved in that as well. In total, between those two programs alone, we're talking about a lot of jobs.
Mr Cousens: The QEW, it was mentioned somewhere in the sheets, and I can't find it, is listed as one of the reconstruction efforts. Will there be toll roads on the QEW?
Mr Salerno: No.
Mr Cousens: Toll roads will only appear on newly built highways?
Mr Salerno: Newly build highways or an expansion of an existing highway, for example, the 403; some of it is already built.
Mr Cousens: So the next new section.
Mr Salerno: That could be. That would fall under that definition of a new highway; the segment, for instance, from Burlington to Oakville.
Mr Cousens: What level of tolls do you see being levied for the roads? Any estimate at this point? When we're supporting or not supporting legislation, we'd like to have a sense -- it's much the same kind of question that Mr Phillips asked earlier with regard to the cost of water. What could we expect to be paying on the toll roads when they come in?
Mr Salerno: We can't say right now. In fact, we've got a traffic and revenue study being undertaken right now and we won't have the final report till about the middle of November. November-December.
Mr Cousens: So you don't know how much money you're going to raise, and how quickly, through tolls?
Mr Salerno: Well, how quickly: We know that tolls won't be applied until the highway's open.
Mr Cousens: Then how quickly are you going to pay it off?
Mr Salerno: How quickly we'll pay it off?
Mr Cousens: Yes. That was all right --
Mr Phillips: Good work.
Mr Cousens: I don't mind that. At least I got something out of this bloody committee, and you're a good man.
Mr Phillips: Put that in your householder.
Interjections.
Mr Cousens: No, I don't think that was a very -- I'll do a Mammoliti.
Mr White: Will this be any good for business in Markham?
Mr Cousens: Hey, this one is. There's no doubt that I'm sucking around the 407, I'll tell you. I'll be the first to pay the toll if it's within my means.
The Chair: We're worried, Mr Cousens. Mrs Mathyssen.
Mr Cousens: No, he's working on the answer.
Mr Salerno: In terms of when they may come off, that will depend on the level of tolls and how much is borrowed. It's one of those --
Mr Cousens: So you just don't know.
Mr Salerno: We don't know at this time the level of tolls or how much will be borrowed to finance the highway. This will be part of the plan that the two consortia will be giving over to the government, again in about November.
Mrs Mathyssen: I was quite intrigued with your statistic that the first 58 kilometres of the 407 will be built by 1998 rather than 2015. You'll have to forgive me. I did see a map of the four rapid transit lines and the planned 407 and projections, and I was wondering, in addition to jobs -- I know jobs are a very important aspect -- what other impacts will that have on the area? What will these connections mean to the people in the towns that are connected, to commuters? What are the other things?
Mr Salerno: Obviously, the transit facilities within Metro will allow for much greater intensification, a greater utilization of our transit facilities, a more efficient movement of people within Metro. In terms of the 407, it's regarded as a very, very important bypass through Metro ultimately. The people in the north point to the congestion in and around Metro as the biggest obstacle they face in moving their goods to market. So people in the north will be facilitated in moving through Metro. For Oshawa, in terms of the just-in-time delivery that GM relies on to such a great extent, this will clearly provide an alternative to the 401 and hopefully a much faster alternative to the 401.
Mrs Mathyssen: By intensification, do you mean better land use --
Mr Salerno: That's right.
Mrs Mathyssen: -- we won't be so likely to sprawl out because we'll have these good connections. Would safety also be a factor? Do you see any safety benefits with decreasing the congestion and the traffic?
Mr Salerno: Well, there's no doubt about it. I'm not an expert in that area, but certainly to the extent that you move people from cars to transit, transit's a much safer transportation alternative, and to the extent that you reduce congestion, the roads become safer.
Mrs Mathyssen: Thank you.
Mr Mark Morrow (Wentworth East): I kind of think if Mr Cousens can do this, I can do this too.
You talk about the 407 and the widening of the QEW, which happens to be in my riding of Wentworth East. Will this include future roads, such as new Highway 6, into the corporation?
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Mr Salerno: Yes, the plan is to ultimately finance all of the highways program through the corporation.
Mr Morrow: If then it is included in the corporation, can I assume that because it's a new road along an adjacent road, this will also be a toll road?
Mr Salerno: Clearly, that's a decision of the government to make, what highways will be tolled. Because it's permitted through the legislation, it doesn't necessarily follow that a particular highway will be tolled.
Mr Morrow: It's just nice to know that the new 6 will be under your corporation. Thanks.
Mr Daigeler: I just wanted to say first of all that I don't think the government or any section of it would want to be held too closely to any particular time line, because as late as about a year ago the Minister of Transportation promised us in eastern Ontario that the 416 would be built by 1999 and now we don't have any kind of completion date. I wouldn't necessarily wait right next to --
Mr Sutherland: We are still trying to catch up on all your commitments.
Mr Daigeler: No, we put it in place and it's being built, in fact, in my city, the section that we started.
In any case, whatever it is, I wouldn't necessarily put too much weight into the possibility that the 407 might be built by 1999. We'll see it when it's built.
My point is simply this: Who is presently assessing the bids that have been put forward by the consortium? Is it the Ministry of Transportation and later on will it be the transportation capital corporation that will make these kinds of assessments on behalf of the taxpayer? One of the reasons I'm saying this is that I did have communication from members of the public -- in fact, contractors -- who were somewhat concerned about the integrity of the whole bidding process and so on. I think there were some questions raised there that are valid ones. I'm sure the government would want to make very, very clear that everything is aboveboard and so on. Who is looking and who will be ultimately choosing then, or making the recommendation to cabinet, because obviously it will be cabinet, but in terms of the ministry, who is doing that assessment as to which bid is the better one?
Mr Salerno: Right. Of course, no bid is in yet. The bids will finally come in in November. That's the plan at this time. There is an interministerial committee established, headed by the Deputy Minister of Transportation, and including the Ministry of Finance and the Ministry of Economic Development and Trade, and the provincial facilitator is also involved. There are a number of ministries represented in this committee, a high-level committee that will ultimately select or at least make recommendations to cabinet, as you said, between the two consortiums. Financial advisers have also been retained, as well as a traffic and revenue consulting team. The process is being reviewed by a broad number of people.
The Chair: Mr Arnott has the final question.
Mr Arnott: Presently, the Ministry of Transportation looks after many construction jobs on the provincial highways. I understand that, the way it's generally done, there's a five-year plan for construction that is adhered to and there's a great deal of discretion, I believe, on the part of the minister in terms of making priority decisions on what projects go ahead first.
Now, you've told the committee that this new transportation capital corporation will eventually take over all the financing for all the highway construction in Ontario. I just wonder where that leaves the minister in terms of his authority as minister to make a decision on a priority project.
Mr Salerno: The ministry and the minister will continue to set all transportation priorities. It will be the minister who goes forward to treasury board for approval of the capital budget. Where the process will be somewhat different is that the minister will have, once the corporation is established, input from the capital corporation in ways that should facilitate the financing of projects. Perhaps the minister could make a, let's say, more compelling argument for additional financing of projects when the minister goes to treasury board. But the final decision in terms of priority setting will be the minister's.
Mr Arnott: The representation on the Ontario Transportation Capital Corp board, does it include the Deputy Minister of Transportation?
Mr Salerno: Right now, the board has not been established and those decisions haven't been made as to the board's composition.
Mr Arnott: The Deputy Minister of Finance sits on the Ontario Financing Authority, I believe, as a statutory chair. There hasn't been any arrangement with respect to the Ministry of Transportation?
Mr Salerno: No.
Mr Arnott: Okay.
The Chair: Mr White has a question and it is the final question.
Mr Drummond White (Durham Centre): I think many of us have been impressed with the kind of timetable that you were elucidating earlier. In my area, which has been transportation-starved -- that's Durham region -- we have a grand total of some six lanes of access to Metro Toronto -- no, eight; excuse me. We're promised eight, the same ones. The eventual arrival of the 407 is something which has been long awaited, and you were indicating that this would be sped up through this mechanism. Aside from the work of the provincial facilitator, what is the timetable that you were elucidating?
Mr Salerno: For the 407?
Mr White: Yes.
Mr Salerno: The 58 kilometres from Highway 48 to 401 in the west end are now anticipated to be completed by the year 1998, from the year 2015, as was under the current plan. Essentially, that was dictated by the availability of financing. This is clearly a way to accelerate financing for this project.
Mr White: So the speedup of some 17 years -- we could see a similar speedup in the eastern part, to the connection of 115, and it wouldn't take until the year 2021 or whatever it is?
Mr Salerno: I think it was 2050 before it finally got --
Mr White: It was 2050?
Mr Salerno: It was 2020 or 2045; I know it was after I was somewhere else.
Mr White: Long retired.
Mr Salerno: Right.
The Chair: Thank you. We have one final presentation, Mrs Stewart?
Mrs Stewart: Have we time?
The Chair: We always have time.
Mrs Stewart: We have time; all right. If I can introduce Robert Watson, who's director with the Ministry of Finance currently, he may be able to answer a couple of questions on the Ontario Financing Authority. I think Mr Cousens had a couple of questions in terms of the impact of moving the borrowing activity of the province into the financing authority and what kind of costs that might have.
Mr Robert Watson: Your concern, sir, was with the cost or the control?
Mr Cousens: The control? No, the cost is the main issue.
Mr Watson: The purpose of the Ontario Financing Authority would be to coordinate the borrowing of the province and the capital corporations and arrange the scheduling and coordination so that there isn't a conflict; also to coordinate the timing and access of capital markets; also to manage the provincial guarantee; and also to assist the capital corporations in financing on what is referred to as non-recourse debt, for example, where there is a source of revenues like toll revenues or water and sewer rates, where they are supporting the debt, so that does not impinge on the credit of the province.
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The Chair: Fine, Mr Cousens?
Mr Cousens: I think so.
The Chair: Mr Phillips.
Mr Phillips: There's probably few things as fundamental as sort of the management of our debt and the legislative scrutiny of the debt and how it's all managed, and here we are about to approve turning this over to an independent, arm's-length agency, a schedule 4 agency. They are intended to be self-sufficient. They operate outside the consolidated revenue fund and have their own directors.
We are about to approve taking away from the Legislature something that one normally thinks is fairly fundamental to the public and the public scrutiny, and that is keeping an eye on the debt, the debt management and our credit rating and all of those things. There must be some overwhelming rationale for doing that before I think a Legislature would turn over that authority, remembering the schedule 4 agencies are independent, arm's length. They are set up for those reasons.
As I say, what we're giving up as a Legislature is the day-to-day scrutiny of it, the ability to deal with it as we would anything in the consolidated revenue fund, and I've yet to hear the compelling reasons why we should give up that in return for something that's as nebulous and as tenuous as what I've heard to date from the presentations of where the advantages are. Maybe you could help me a little bit. What's the compelling rationale for taking this out of the consolidated revenue fund and out of the day-to-day scrutiny of the Legislature?
Mr Watson: The borrowing program, the financing program of the province, would be disclosed in the budget as it is at present, the requirement for the capital corporation similarly, so the Ontario Financing Authority would be acting as a coordinator or in some cases arranger of these finances.
Mr Phillips: So can you tell us what's going on? I realize I may be being unfair to you, but what is the big advantage to the public in moving this out of the direct consolidated revenue fund and into an arm's-length agency controlled by an outside board of directors?
Mr Watson: Well, there's a reporting relationship between that board of directors -- it's chaired by the Deputy Minister of Finance, and then that corporation reports to the Legislature through the minister.
Mr Phillips: I know that, but what's the advantage to the public of setting this thing up?
Mr Watson: The idea is to have an agency that is specialized in the financing activities in terms of cash management, financing arrangements, relationships with the rating agencies, and these sorts of things, to avoid duplication of that in each of the capital corporations.
Mr Phillips: That presumably already kind of exists within what's now called the Ministry of Finance. What's unique about this thing that it gives a benefit you couldn't have leaving it where it is?
Mr Watson: The approach that was felt would create this coordination and especially expertise in the best fashion is to have it in the Ontario Financing Authority.
Mr Sutherland: If I could just add one comment, though, to what Mr Phillips said, I think he said we're taking away the day-to-day accountability from the Legislature. I don't agree with that statement. The Minister of Finance will still be responsible and accountable on a day-to-day basis as the Minister of Finance would be now through question period, whatever, and also through the existing committee. So I don't think that statement is fair to say we're taking the accountability out of the Legislature.
Mr Phillips: It's like workers' compensation; it's the same thing.
Mr Sutherland: No, it's not like workers' compensation because, as you know, workers' compensation is not a schedule 4 agency, and there's a much different degree of accountability mechanism in schedule 4 agencies than there is with some of the other agencies, particularly the Workers' Compensation Board.
Mr Phillips: Not according to their own definitions of schedule 4 agencies.
Mr Cousens: Will your data appear in estimates? Just on what Mr Phillips is asking about, you have your committees, it'll report to two committees, public accounts and general government or agencies or something, but will we see it in estimates? The answer is no.
Mr Mammoliti: How can you ask a question and answer it at the same time?
Mr Cousens: Confirm whether or not it's true. Will it appear in estimates?
Mrs Stewart: If I might submit, the annual budget will clearly demark the amount of capital investment the province will be undertaking in the medium-term plan, whether it's a part of the corporation's investment plans or the ministry's investment plans. Generally, through the estimates committee process, any information that relates to the financing of any of the activities for which a minister is responsible can certainly be queried at that time through estimates committee.
Mr Cousens: With all due respect, you can ask the questions but you won't get the answers. If the data are not provided through the estimates procedures and in the documents, then the committee can rule you out of order, as has happened with the IWA, but it doesn't fall under schedule 4 agencies. The concern I have is the removal of the authority from the legislative arena.
Mr Hope: It does if you look at page 16 of the presentation. She made it very clear in the presentation on page 16.
The Chair: I think we've gone through the four agencies. That completes the committee's work for today. I would remind committee members that we commence public hearings tomorrow morning at 10 o'clock and would ask all members to be here at 10 o'clock so we can get started in a timely fashion. I would ask also that the subcommittee spend a few minutes after this meeting so we may talk about Bill 40. The committee's adjourned.
The committee adjourned at 1710.