Monday 11 January 1993

Workers' Compensation Board

Brian King, vice-chair, administration

Linda Angove, board secretary and project director, long-term facilities strategy

Vivian Varnam, project controller, long-term facilities strategy

Glenn Cooper, executive director, finance


*Chair / Président: Mancini, Remo (Essex South/-Sud L)

*Vice-Chair / Vice-Président: Cordiano, Joseph (Lawrence L)

*Callahan, Robert V. (Brampton South/-Sud L)

Cousens, W. Donald (Markham PC)

*Duignan, Noel (Halton North/-Nord ND)

Frankford, Robert (Scarborough East/-Est ND)

*Haeck, Christel (St Catharines-Brock ND)

*Hayes, Pat (Essex-Kent ND)

Johnson, Paul R. (Prince Edward-Lennox-South Hastings/Prince Edward-Lennox-Hastings-Sud ND)

O'Connor, Larry (Durham-York ND)

*Sorbara, Gregory S. (York Centre L)

*Tilson, David (Dufferin-Peel PC)

*In attendance / présents

Substitutions present / Membres remplaçants présents:

Farnan, Mike (Cambridge ND) for Mr Frankford

Fletcher, Derek (Guelph ND) for Mr Johnson

MacKinnon, Ellen (Lambton ND) for Mr O'Connor

Marland, Margaret (Mississauga South/-Sud PC) for Mr Cousens

Also taking part / Autres participants et participantes:

Mishchenko, Nick, director, special assignments branch, Office of the Provincial Auditor

Otterman, Jim, Assistant Provincial Auditor

Peters, Erik, Provincial Auditor

Sciarra, John, administrative assistant to Provincial Auditor

Turnbull, David (York Mills PC)

Clerk / Greffière: Manikel, Tannis

Staff / Personnel: McLellan, Ray, research officer, Legislative Research Service

The committee met in closed session in room 151.



The Vice-Chair (Mr Joseph Cordiano): Ladies and gentlemen, I'd like to call the meeting of the public accounts committee to order. We have before us representatives from the Workers' Compensation Board to help us with our discussions today. I would like to welcome you all to our committee and I ask that each of you identify yourselves for the record.

Mr Brian King: My name is Brian King. I am vice-chair of administration of the Workers' Compensation Board. With me is Linda Angove, secretary to the board and the project manager for the facility strategy; Glenn Cooper, the chief financial officer of the Ontario Workers' Compensation Board; and Vivian Varnam, the project controller of the facility strategy.

The Vice-Chair: Welcome. I think it's best if we proceed with any briefing material you may have for us and then allow a period of time for questions after that briefing session. If you'd like to start, I give you the floor.

Mr King: Ms Angove has a brief presentation on the background to the facility strategy.

Ms Linda Angove: This afternoon we'd like to talk about some of the key issues that have been of interest to various groups regarding the head office relocation for Workers' Compensation. Specifically, we're going to deal with our rationale for relocation from 2 Bloor Street East.

Mr Noel Duignan (Halton North): Point of order: Sorry to interrupt; I just can't see the screen because the projector is right in the middle.

The Vice-Chair: Is there any way that we can amplify visibility here?

Ms Angove: I have copies of the overheads. I have additional copies now, if you'd like.

The Vice-Chair: Yes, would you please circulate those, Tannis? Just hand those around.

Ms Angove: We're going to talk about the process for the various aspects of the project to obtain approval from our board of directors: why no existing facility can accommodate the Workers' Compensation Board, the cost implications of this transaction for both the tenant and the investment fund, the benefits of a design-build facility, the service delivery impacts and the potential for efficiency gains. In addition, of course, we'll answer any questions you may have regarding the project throughout.

In early 1990 we took a look at some of the problems we were experiencing at 2 Bloor Street East, because we recognized the fact that our lease there was coming due in mid-1990 and we appreciated the fact that if we were going to relocate, it would take some time to plan that relocation, particularly if it involved a relocation to a facility that required a design-build approach.

Some of the factors that contributed to the decision to relocate included the identification of a number of deficiencies, and some of the key deficiencies are listed here for you. They include inadequate elevator capacity that results in very expensive delays for us; inadequate cabling systems, resulting in excessive downtime for our workstation technological equipment and unnecessary cost with internal staff moves with the relocation of these workstations; inadequate floorplate size, preventing work groups that need to work together from locating on the same floor; inefficient mechanical and electrical systems; lack of emergency power and, actually, the inability of that building to accommodate emergency power, which results in the loss of data and expensive downtime with power interruptions; inappropriate lighting system, which contributes to a high incidence of headaches and eyestrain for our VDT users; and inadequate shipping and receiving facilities.

Mr David Tilson (Dufferin-Peel): Excuse me, Mr Chairman. Speaking of inappropriate lighting, now that we have this material before us, I wonder if we could have the lights back on.

The Vice-Chair: I'll refer that difficult question to the clerk.

Mr Tilson: There we are. Thank you.

Ms Angove: In addition to those deficiencies, we have major problems in accessibility for people with disabilities that include inadequate proximity to parking for mobility-impaired clients that requires them to walk quite a lengthy distance from the closest parking spot to the WCB premises and unacceptable access for persons with disabilities, particularly people who use wheelchairs. Today, someone who parks at 2 Bloor Street East or in the closest parking-lot to 2 Bloor, which is the hotel next door or the Hudson's Bay, is required to take three elevators, one of which is the freight elevator, and he or she must go through the garbage area to get to our premises. We feel that is unacceptable.

With that, we presented to the board of directors in July 1990 a presentation that recommended that we relocate the WCB head office, and it authorized us to conduct an investigation of alternative sites. In the fall of 1990 we tendered and we advertised in the Globe and Mail and the Financial Post. We received 75 inquiries from interested parties and 34 submissions for both existing and new facilities.

Those submissions were subsequently evaluated through extensive criteria for the user, the tenant and the investment sides of the transaction, and we shortlisted down to 13 sites, of which nine were design-build and four were existing facilities. We then went to the board of directors in December 1990 with a short list of four. All of those included design-build options, because we determined that no existing facility can accommodate our requirements. I'll speak about that in a little more detail later.

In February 1991 the board of directors authorized the administration to negotiate an agreement with the proponents of Simcoe Place. Simcoe Place was determined to be the most appropriate site to meet all of our technical requirements, all of our user requirements, our investment criteria, and it was the most advanced project submitted in terms of municipal approvals.

In April 1991 the board ratified the lease letter agreement and authorized the administration to negotiate all related documentation related to that agreement. In April 1992 the board of directors authorized the WCB administrators to execute the documentation to finalize the transaction with the proponents of Simcoe Place.

I want to talk a little bit about why existing facilities cannot accommodate the WCB. You will note that many of them are the same reasons why 2 Bloor Street East cannot accommodate WCB. Specifically, existing facilities are not designed to accommodate a high-density user of space like the WCB; they're designed for speculative office tenants who use much more space than we do per person. We basically put twice as many people on a floor as a typical office tenant. So consequently, as a result, existing facilities do not have sufficient elevator capacity to accommodate not only our staff but over 100,000 visitors to WCB's offices every year. In fact, in 1991 we had 153,000 injured workers visit our premises, and that contributes to tremendous delays for us.

There are inadequate cabling systems in typical office buildings to accommodate our technical requirements. We have the largest imaging installation in North America. As a result, it puts a tremendous strain on the cabling system in any facility, and typical office buildings are just not designed to accommodate that.

Mr Gregory S. Sorbara (York Centre): I'm sorry, what did you say? The largest what?

Ms Angove: Imaging. Much of our claims adjudication work is now done through imaging, so we don't use a paper file. All of the information is on the technological system, on the screen, basically. So when that screen goes down, it means the adjudicators cannot perform their jobs. Delays of any kind are very costly to us, not only financially but in terms of service delivery impacts.

The other problems with existing office facilities is that they have inadequate mechanical and electrical systems. Again, related to the number of staff and the kind of technology we use at WCB, they have inadequate structural loading. Because of the types of functions we have on certain floors, we have to add structural loading. For instance, our mass mailing area requires extra loading on the floor.

The other big problem with existing facilities is that they lack sufficient contiguous space for the operations, so that staff cannot work in close proximity. You will have heard that there are over 20 million square feet of vacant office space in downtown Toronto today and why can't WCB utilize that space. It's quite simple: There is no contiguous space that can accommodate the WCB's requirement.

Today, one would be lucky to find 100,000 square feet of contiguous space. We're looking for 500,000 square feet of contiguous space, and it's simply not available. The space you hear about today is quite suitable for a small tenant -- 20,000, 30,000, 40,000 square feet -- but you need to appreciate that it's spread all over the place; it is not contiguous. As soon as we lose contiguous space, it costs us money.

The Vice-Chair: Just on a point of clarification, if I may: By "contiguous space" you mean space that is adjacent to each other?

Ms Angove: That's right.

Mrs Margaret Marland (Mississauga South): Adjacent floors.

Ms Angove: Adjacent floors, right.

Mr Sorbara: All in one building.

Ms Angove: All in one building, adjacent floors all in one building.

The other problem we have in most facilities is inadequate floorplate size. There are some downtown office towers that do have floorplates of about 25,000 square feet, which is the minimum we're looking for, but most of them don't. That is a problem with many existing facilities, and it's certainly a problem for us here at 2 Bloor.

The Vice-Chair: Floorplate?

Ms Angove: The size of the floor, the perimeter of the floor.

The Vice-Chair: On a single floor.

Ms Angove: That's right. The reason we need large floorplates is to allow staff who need to work together on the same floor to be located on the same floor. As it is today, staff must run between floors, because we can't put everyone who needs to work together on the same floor. Of course, that aggravates the elevator problem and it means people are away from their workstations and are not doing the work. They're running between floors.

Mrs Marland: Excuse me. I would like some clarification for the same reason you did, Mr Chair.

You talked about the use of the electronics. Is it not with the electronic communications plus telephones? I guess I'm a bit confused about why you need all this space on one floor. I mean, are they really getting up and running from their VDTs to talk to each other on other floors?

Mr King: For some time the Workers' Compensation Board of Ontario has had complaints about service delivery: delays, inability to respond to the needs of the customers. In an attempt to respond to those demands for service, the board has broken itself down into 20 smaller compensation boards. About half of those compensation boards are in regional offices. If you go to Thunder Bay, Windsor, Sudbury, Hamilton or Ottawa you will find a compensation board complete unto itself except for some of the central support services that are required to do business.

The need for a large floorplate is so we can have one of our business operations in one cohesive area for all the efficiencies that creates, the rather unmeasurable one being morale, which is very difficult to maintain in an operation of 5,000. Morale affects service delivery, the communication that has to exist so that files don't end up being lost. That causes problems for ourselves and for yourselves as MPPs, who are often the first in line for complaints, so it's really business need requirements.

Mrs Marland: You did say the files are all done on computers.

Mr King: The majority of our files are now on what is called imaging technology, which is electronic files. They can be reproduced on electronic screens.


The Vice-Chair: Might I suggest we just carry on with the briefing session, and apart from points of clarification, we'll ask questions after the entire briefing is over. I think that's probably the most efficient way to proceed.

Ms Angove: If I could just add, the other point is that not all of our business is handled through technology. Certainly all of the claims files are on technological systems, but much of the business is also not on technology and is handled through staff meeting together and working through issues. For instance, policy development would be an area.

Some of the additional costs for WCB in relation to occupying space that cannot support the operation: These are costs that we incur currently at 2 Bloor Street East and we would incur if we were relocated to a facility that could not support the operation, a typical office tower downtown.

Elevator waiting time as a system was not designed to accommodate staff and visitor demand. We have determined through traffic consultants that the time spent waiting for elevators at 2 Bloor Street East is about one hour per employee per week longer than it will be at Simcoe Place. That equates to approximately $6 million and the equivalent of about 100 staff. I will talk a little bit later about what that impact is on service delivery.

The other major cost to us is equipment downtime due to power interruptions and problems with the cabling system. There's also a cost associated with downtime because it damages the equipment as well, so there's a need to replace equipment more when it has been down several times.

Workstation relocation is common at WCB because of the size of the organization. Currently, it costs us either to have the equipment down during the day while we are relocating the workstation, or we pay overtime to have it done at night. It takes us a couple of hours to poke cables through the ceiling. That is something we wanted to rectify at the new facility and we did that through something called access flooring, which I will be talking about later, which basically eliminates those costs.

Other costs include additional equipment and resources as a result of the limited floorplate size. Brian mentioned the loss of economies of scale when you have to have people separated and working on different floors. The more floors you occupy, obviously the more support staff you need and the more equipment you need in the way of faxes, printers, photocopiers etc. Larger floorplates allow us to economize on equipment, staff and resources basically.

In addition, because of the lighting problems that we have at 2 Bloor Street East, we have a major problem with glare on our video display terminal screens that contributes to absenteeism. Research has shown that the glare resulting from lighting on VDT screens contributes highly to absenteeism for VDT users. It's a major problem for us that we again want to rectify in the relocation.

I'd like to talk a little bit about the cost implications of the relocation. From an investment standpoint, the transaction does meet our investment criteria for the investment fund and will provide a favourable return.

From the tenant perspective, basically there's a redistribution of the administrative budget. The net rent per square foot at Simcoe Place will be comparable to the net rent per square foot with our lease commitments at 2 Bloor Street East. In our last year at 2 Bloor, we will be paying $26 per square foot. At Simcoe Place, the current rate based on our latest estimates in the latest financing proposal is approximately $26.90 per square foot. With the parking revenue offset, that is reduced to $25.22 per square foot. So in fact in our first year in Simcoe Place, our effective net rent will be less than our last year at 2 Bloor Street East.

Mrs Marland: Could you just give us those figures?

Ms Angove: Certainly. We will be paying $26 per square foot in our last year at 2 Bloor Street East. The net rent at Simcoe Place, which will be fixed for 20 years, will be $26.90, and that will be offset by our pro rata share of parking revenues, bringing the effective net rent down to $25.22 in the year 1995. By the year 2015, because those parking revenues will increase, the effective net rent will be reduced to $23.67, so in fact our net rent goes down over the 20-year term as a result of the revenues from the parking.

Mr Sorbara: You mentioned the last year of renting 2 Bloor Street East, which is when?

Ms Angove: In 1995, the year that we're moving.

Mr Sorbara: Who's the owner of the building?

Ms Angove: Bramalea and Canaplan.

I mentioned that the net rent is fixed for 20 years and offset by parking revenues. The other point to make is that the operating costs at Simcoe Place will be comparable to the operating costs we are incurring at 2 Bloor. In fact they may be slightly less because of the energy-efficient systems that we will have at Simcoe Place. There will be an increase in overall space leased at Simcoe Place, and that is offset by the reduction in costs associated with the building systems.

I would like to point out that the board of directors requested that we increase average workspace per person because they recognize the problems we are having at 2 Bloor with the cramming of people in the current space. So we have increased the space per person for non-management staff only. I do have a slide on that which we can talk about later if you like. That increase puts us at the very low end of average workspace per person compared to other government organizations and other industries.

Mrs Marland: What is low?

Ms Angove: It's an average workspace per person. The individual workspace is 35 to 55 square feet per person; that's the individual workspace. The average workspace per person, which means the overall workspace divided by the number of staff, is 150 square feet per person. The average for most government institutions is about 220 square feet per person. That does not mean that each person gets 220 square feet or 150 square feet. It means your workstation plus your share of common areas, meeting rooms, aisle space etc. It means that your allocation is approximately 150.

The Vice-Chair: Mr Callahan had a point.

Mr Robert V. Callahan (Brampton South): No, I'm prepared to wait. I was just putting up my hand.

Ms Angove: The overall impact of the cost implications as a result of this transaction is that there will be no impact on employer assessment rates and no impact on the unfunded liability. In fact there is a potential for net savings for the WCB over time. You can see that with the net rent alone. Our net rent goes down over time to quite a bit less than what it is at 2 Bloor.

Mr Sorbara: Just a point of clarification on this page. You mentioned, if I could look at Margaret's notes, the first year of rent in Simcoe Place, which is what?

Ms Angove: The net rent before the parking offset is $26.90. With the parking offset --

Mr Sorbara: That's a little bit more than your last year of rent with Bramalea.

Ms Angove: Not with the parking offset. With the parking offset, it comes down to $25.22.

Mr Sorbara: Could you tell the committee what offer you have had, what you would be able to renew your lease at 2 Bloor Street East for?

The Vice-Chair: The questions, I think, we can leave till after the briefing.

Mr Sorbara: Mr Chairman, with respect, this is an important comparison because the suggestion was made on this page that the rent in the last year of the current lease would be about the same as the first year in the new lease, but the reality of the marketplace in the greater Toronto area is that the first year of a new lease at 2 Bloor Street East would probably be a net rent of zero dollars per square foot. I think that should be included on this page with those figures that were submitted to the committee.

Ms Angove: We have not had --

Mr Sorbara: If I may ask --

The Vice-Chair: Order, please. That, I think, would flow as a discussion that can be following up on the briefing session, so I think I would allow that question to be asked once the briefing is over. Otherwise, we're going to get all kinds of questions. Unless the committee wishes me to proceed in that fashion, I think we'll go forward.

Mrs Marland: No, we'll do the briefing first.

The Vice-Chair: Okay, fine. We'll hold the question that Mr Sorbara asked on reserve and you can answer that following the briefing.

Ms Angove: We'd be happy to address that.

By participating in a design-build option, we've been able to ensure that all the deficiencies that we incur at 2 Bloor Street East and all the costs associated with those deficiencies that contribute to occupancy costs are eliminated. So what we've done in the design-build for Simcoe Place is to add a bank of elevators. There are three podium floors at Simcoe Place. These are large double floors and they have their own separate bank of elevators. They will have three additional elevators, which, as I mentioned earlier, will obviously reduce the waiting time for elevators significantly.


I mentioned that we've added a third podium floor. That allows us to put two integrated service units on the same floor, allowing us to share interview, reception and waiting space as well as to economize with the sharing of support staff, equipment etc.

We've added access floors to house our voice and data cabling. I mentioned earlier the problems we have with pulling cables through the ceiling. With access floor -- this is a six-inch subfloor -- all the cables are housed below the floor. If you relocate a work station, it's like unplugging a lamp and plugging back in. There's no downtime at all associated with it.

The other aspect of access floor is that we currently have a safety problem at 2 Bloor with the number of cables on the floor. Particularly when you jam a lot of people close together, there's a lot of cabling that creates unsafe work conditions. With access floor, all the cabling is housed below the floor, so that eliminates that problem.

Mr Sorbara: Couldn't be worse than it is in this building.

Ms Angove: I haven't been through this building.

Mr Sorbara: Just have a look. All the walls are alive with cables everywhere, some new, some old, some active, some inactive.

Mr Callahan: Maybe we should build a new building.

Mr King: Perhaps the Workplace Health and Safety Agency should come in and check it out.

Ms Angove: Perhaps we could lease you some space.

The other thing we've been able to do is change the base building lighting system that was originally incorporated in the design of this facility. We have found a lighting system that not only eliminates glare on the VDT screen but is quite energy-efficient, to the point where we need half the number of light fixtures that you would in the original base building system. So that will contribute to a reduction in our operating cost.

We've been able to add structural loading where required. We've been able to add washrooms in the high-client-use areas, which is a problem at 2 Bloor as well that I didn't mention earlier.

We've been able to add specific services in the lobby so that if an injured worker comes in and doesn't have a claim number, doesn't know where to go, he can get immediate service in the lobby. That's part of our commitment to improving service delivery for injured workers and employers, and employers will be able to obtain basic services in the lobby as well.

The other thing we've been able to do is add our own diesel generator at Simcoe Place to give us the emergency power that we need to eliminate the problems that are caused as a result of power interruptions and also to extend the life of our equipment.

A final benefit that we have with relocating to a facility that has been designed to accommodate our requirements is the potential for additional efficiency gains. We've been working with a productivity consultant, an individual who has done work in productivity for the past 20 years. He specializes in productivity in the workplace. He is helping us now look at the more basic areas of design of the workplace to ensure that all the decisions we make about designing the workplace for WCB will be made with the productivity factor in mind.

He says that if you did everything right, if you provided a very supportive work environment, the dollar value of the benefits could be up to 5% of annual salary for workers in all job categories. For us, that equates to $3.2 million to $7.9 million annually that one can appreciate the benefits of if the workplace is designed properly to support productivity and to support the operation.

That ends the briefing. I do have additional information on various subjects, but perhaps you'd like to go to questions.

The Vice-Chair: Okay, we'll open it up to questions.

Mr Tilson: Mr Chairman, on a point of order --

The Vice-Chair: I'm sorry. We're going to go to questions. Mr Tilson, do you have a point of clarification?

Mr Tilson: I'm just concerned about the procedure that you're going to follow. Are you going to allow a time limit for each of the three parties or are you going to just let someone start and spend the rest of the --

The Vice-Chair: Well, we can proceed in that fashion, if you like. I think we have ample time left to us to just allow each of the parties on a rotating basis a question each. We can see how far we go with that and then I'll try to divide the time as we see fit. There's at least an hour and a half left to us, so I think --

Interjection: And tomorrow morning.

The Vice-Chair: -- and tomorrow morning, so I think we can proceed on that basis. Mr Duignan.

Mr Duignan: On the same point, I think it may be fair at this point just to allocate a half-hour to each party on a rotating basis, and if there's any extra time after that, then take it on an individual question basis.

The Vice-Chair: Does everyone agree to that? Okay, then we can proceed with the Liberals first, then the Conservatives and then the government. We will have approximately a half-hour, which will bring us to 5 past 3 for the Liberals, and then the Conservatives can take over from there; following that, the government will have its turn. Is that okay? I'll allow Mr Callahan to go first.

Mr Callahan: I'd like to get a handle on a few details. What's the total square footage of this proposed building?

Mr King: The total square footage of Simcoe Place is 700,000 square feet.

Ms Angove: It's 755,000.

Mr Callahan: And you're going to occupy how much of it?

Ms Angove: Seventy per cent of it, 525,000.

Mr Callahan: I noticed that TVO had plans to build and a couple of others in the private sector: Blue Cross, the Ontario Hospital Association and Revenue Canada. Were there any discussions with any of these people about joining in this endeavour?

Ms Angove: No, there were not, but I do understand that the developer responded to a proposal call from TVO -- I don't know about the others, whether they responded to those or not -- where they would put forth a submission to sublease remaining space, but the WCB did not enter into any discussions with any of those organizations.

Mr Callahan: This is a done deal, I gather.

Ms Angove: Yes, it is.

Mr Callahan: When was the contract signed?

Ms Angove: It depends what aspect of the contract you're talking about.

Mr Callahan: We know the board of directors decided on this in March 1991. When was the actual contract --

Ms Angove: All the transaction was executed in June 1992.

Mr Callahan: You've indicated that before doing that you put out for proposals and received 75 proposals from various owners of premises.

Ms Angove: I'm sorry; it was 75 inquiries, 34 submissions.

Mr Callahan: You were looking for a specific type of accommodation. Do you not think it would have been wiser to have had a real estate agent or agents go out and try to locate these for you specifically?

Ms Angove: We felt it was important to follow a public tender to be able to ensure that everyone had an opportunity to submit his proposal rather than approaching specific developers regarding specific sites. We were committed to following a public tender process. We did have the assistance of Royal LePage Real Estate consulting services during that tender process to help us evaluate the submissions.

Mr Callahan: You're saying that out of 34 proposals you weren't able to find one that fit the criteria?

Ms Angove: That's right.

Mr Callahan: I see. Now, how is this going to be funded?

Ms Angove: The financing proposal is currently under discussion.

Mr King: The funding for the building is presently being worked on. It is too early at the present time to give the final indication of how the funding will break down in detail. We have received a proposal, we have responded to the proposal and we haven't received a counter-response at the present time. Let me indicate that it will involve some equity from the WCB's investment fund and it will involve some mortgage.

Ms Angove: If I could just add to that, there's one point I did not mention when I was talking about our rent as tenant. The rent really does two things for us at Simcoe Place: It not only covers our occupancy cost as a tenant, but it also subsidizes the investment side of the transaction. It does double duty, if you will, unlike our current situation, where we pay rent to a third-party owner, Bramalea and Canapen, and we don't see that money again. In this transaction, the rent not only covers our tenancy, but it also subsidizes the investment for the investment fund. I think that's an important difference between any lease situation and the current transaction we've negotiated.


Mr Callahan: I think the Chairman wants a point of clarification.

The Vice-Chair: Just a very brief question on a point of clarification: You said you would have some equity position and then there would be a mortgage flowing from that equity position. Can you clarify what exactly the details of that are?

Mr King: The details aren't yet finally known. I believe it's April 1 when the financial arrangements have to be finalized, and we only received the proposal on financing about 10 days ago, responded to it, and haven't received the counter-response.

The Vice-Chair: Just to get the position clear as to what the WCB will own in terms of its position in this --

Ms Angove: It will own 75% of the office tower and a prorated share of parking related to that.

The Vice-Chair: So that's your equity position in the corporation that's been established?

Ms Angove: That's right.

Mr Callahan: You've indicated in your brief to us that there would be no impact on employer assessment rates and on the unfunded liability of, what, $11 billion, I think it is now? Is that an ironclad guarantee so that employers out there can rest easy that there won't be any increase in their rates?

Mr King: The Ontario Workers' Compensation Board has a pension fund or an investment fund of some $6.5 billion. We have to have real estate as part of that total investment portfolio. Under rules of the Pension Benefits Act, 82% of the total investments have to remain within Canada. Most investment funds of this size have their portfolio broken down between bonds, equities and real estate. The real estate part of our investment branch has many real estate ownership positions. This would be one of the real estate ownership positions they would take, and it would form part of the portfolio of the WCB.

There was an article in today's Financial Post by one of the commercial real estate experts, who indicated that real estate is still a very valuable investment as a hedge against inflation. So what we're doing is similar to what OMERS, the teachers' fund and a lot of the other funds are doing. We're involving ourselves in real estate as part of the $6-billion investment.

Ms Angove: The other thing I wanted to point out, following up Brian's point, is that most workers' compensation boards across Canada own their head office facilities in whole or in part, and some of them have entered into a very similar transaction to this, where the investment part of WCB invests in the office tower that the operations occupy. For instance, Saskatchewan has just entered into that kind of transaction. They have just relocated into a building where they occupy a significant portion of it and their investment fund owns a piece of it. So this is not that unusual.

Mr Callahan: It seems to me that I recall reading somewhere in this material or in the newspapers that the Treasurer was not terribly happy with this whole arrangement and he said he was going to -- I don't know whether he used the word "stop," but certainly look into it. Is the Treasurer any happier now, do you know?

Mr King: I haven't spoken to the Treasurer myself. I can't comment, other than what the media might have reported the Treasurer having said. I believe the chairman, Mr Di Santo, may have spoken to him. I believe it was speculated, however, that the board is a corporate body and that it would probably require the removal of Mr Di Santo and myself as the appointed members of the board if the government wanted to force the issue. The board of directors has been supporting this all along.

Let me just stop for a moment. A very strategic decision was taken in 1990.

Mrs Marland: When in 1990?

Mr King: July 1990.

Mrs Marland: When the Liberals were the government.

Mr Callahan: Is that a partisan comment?

The Vice-Chair: It is a comment out of turn, I might add.

Mrs Marland: I want to be clear about when that decision was made.

Mr Sorbara: The Liberals were in government and things were much better then.

Mr King: A strategic decision was taken as to what to do for future facilities for the Ontario WCB. Contracts were entered into, contracts that probably could have been broken at some point in time without as much downside risk for being sued. None the less, contractual arrangements had been made and the board would have been put into a difficult position.

Entering into a strategic situation like that, do you expose the board to short-term expense of unknown amount by breaking a deal, when in fact what you're really saying is, "We don't vote for the future of Ontario because we think it's not going to recover etc," by breaking this deal? If you look upon this as a very strategic deal that was a good decision in the first place, then does a temporary downturn in the economy make it a bad decision?

Mr Callahan: I want to address that, if I could. I think the biggest problem here is the appearance. When you've got something like $42 billion worth of commercial real estate out there on the verge of being decimated or taken up by the banks under power of sale and you're building a new building, people look askance at that.

I also want to go to the question -- one of the reasons was that you would be closer to transportation. Are you closer to the subway or to transportation than you are now?

Ms Angove: We are more accessible to different types of transportation modes at Simcoe Place than we are at 2 Bloor.

Mr Callahan: What's the closest subway stop?

Ms Angove: St Andrew and Union Station. We will be accessible to both.

Mr Callahan: How far is that from the building?

Ms Angove: Walking? I believe it's about 1,200 feet. It's the same distance to walk from St Andrew subway station to the lobby of Simcoe Place, if you walk outside, as it is to walk from the closest parking space at 2 Bloor to our lobby at 2 Bloor.

Mr Callahan: The subway runs right into the building at 2 Bloor, doesn't it?

Ms Angove: Yes. There is no question that the location at Yonge and Bloor is excellent. We're very happy with the location. That is not why we're relocating.

Mr Callahan: I want to give some time to my colleagues. I've seen Revenue Canada's building on Adelaide Street. It's very much akin to the needs you have. It services in a similar fashion, albeit a different type of activity, but it's small working stations for individuals, a large, full-floor surface. Is that not right?

Ms Angove: I'm not familiar with the facility. They did not respond to the proposal call. I can tell you they likely do not have the elevator capacity, because it would not have been designed to accommodate the traffic flow we bring into a building or the number of staff we have. They would not have access to accommodate our cable requirements, they would not have the lighting system required for our technology and they would not have the emergency power.

Mr Callahan: How can you say that if they didn't respond?

Ms Angove: Because it was not designed to accommodate an organization like the WCB.

Mr Callahan: Then you must have investigated that building, did you, in order to be able to make those comments?

Ms Angove: No. I'm saying that typical office towers like that one are not designed to accommodate the requirements of an organization like WCB. I don't know that Revenue Canada gets 152,000 visitors per year or has the amount of technology that we do or has the emergency power required.

Mr Callahan: They certainly seem to be able to keep track of everybody, so I would imagine they've got all sorts of technology. As far as visitors, I would think they probably receive as many visitors as you people do.

Mr King: I don't know the question --

Mr Callahan: I wanted to know why the Adelaide building wasn't looked at. It seems to me it would be a good swap. You could probably swap it with the feds and get a very much more accommodating arrangement than what you've got now. At least that's my impression. I'm going to yield to the member for York Centre.

Mr Sorbara: How would you describe the real estate market in the greater Toronto area?

Mr King: Awful.

Mr Sorbara: Are you aware that there is more vacant commercial space in Metropolitan Toronto than there is in the city of London, including Canary Wharf? Are you aware that it's that bad? There's more vacant space in Metropolitan Toronto. Do you think it's socially responsible for the WCB, given the current economic crisis, particularly the deflation in value of commercial office space in Metropolitan Toronto, for the board to be encouraging the addition of 725,000 square feet of office space in the Toronto core at this time?

Mr King: Was that a question?

Mr Sorbara: Do you consider it socially responsible?

Mr King: The board made its strategic decision in 1990 to build an office building which would be both an investment for the investment fund plus suit the board's business needs.


Mr Sorbara: Yes, I appreciate that. There are other people who actually started office buildings at that time and capped them because they realized the market had changed dramatically.

How many integrated service units are there at 2 Bloor Street East now?

Mr King: There are 9 or 10.

Mr Sorbara: Isn't it true that each of those integrated service units, like other regional offices, could, as you say, operate independently and needn't be one next to another in one head office building?

Mr King: Yes. We could have a decentralized situation with integrated service units. Our findings are that decentralizing an integrated service unit is far more expensive than having a central location.

Ms Angove: If I may also add, the board of directors felt it was important for us to provide better services for employers as well as injured workers. A number of those units cover a large area, for instance, the construction unit, complex case units for injuries and diseases. If an employer comes in and has a case in Toronto west, but also has a case in the complex case unit, it can come to one location to have those cases dealt with, as opposed to travelling to various offices. So it was important for us to service not only the employers but the workers as well.

The Vice-Chair: Perhaps I could interrupt for just a second. There's been some discussion with respect to the kinds of consultation papers you've had conducted for yourselves in order to make this decision. It would be of great service to us and a great deal of assistance -- I'm speaking on behalf of the whole committee in taking this prerogative -- to be provided with some of those background papers. Having had an earlier discussion with our researcher, we found that there's a lack of information available to us with respect to the kinds of decisions you have made. So if you have any background documentation or papers that you can make available to us, we would request that. It would be very helpful if we could have that.

Mr King: Certainly, we can comply with anything other than what might have come in as a privileged private tender document.

The Vice-Chair: Yes. I'm talking about feasibility studies or consultation papers that were conducted on your behalf. I understand there were three consulting firms that made studies available to you. If you could make those available, we would appreciate it.

Mr Duignan. I'll add time to this if it's a point of clarification on this point.

Mr Duignan: If we going that route, we could have some of the documentation that led to the decision of the board of July 1990 as well.

The Vice-Chair: Back to Mr Sorbara and others. We're out a couple of minutes.

Mr Sorbara: I want to get back to the question I asked in the middle of the presentation, and that is to find out from you what quote you received from your current landlords, at what rate you could renew your lease at 2 Bloor Street East.

Mr King: Obviously, when you're entering into a strategic project like the Simcoe Place project you must provide certain guarantees, as a developer, a banker and a tenant. One of the things that was done at the time the decision was made to proceed was that the WCB would look into no other options while the detailed planning was going into Simcoe Place. It is quite likely, given what's going on elsewhere around Toronto, though, that we could get a very favourable deal on the rental space.

I'm not too sure you have given full account of the previous description of why 2 Bloor is so unacceptable from a business point of view. All one has to do is come to 2 Bloor at 8 o'clock in the morning to see hundreds of people trying to get up in the elevators in the building to see that it is an unacceptable facility for our business. There may be other empty spaces we could get at less cost. I don't believe myself that we could get 20 years or guaranteed business space that will suit our business and provide us with the ability to provide this sort of quality service that Ontario, on the one hand, demands of its WCB.

I sat before another committee of this Legislature explaining why service delivery is not as good as it should be at the WCB and spent a lot of time being criticized because we weren't providing a good enough service. I think what we're tried to show through the brief presentation is that our physical layout does not allow for the kind of service that Ontario demands.

Mr Sorbara: I'll just tell the Vice-Chairman that for two years I was the minister responsible for the WCB in Ontario. On a number of occasions I had meetings in the corporate boardrooms of 2 Bloor Street East at 8 o'clock and I am familiar with the delay. My own assessment of the market is that you could abandon this deal and renew your current lease for zero rent per square foot for the first four years and thereafter perhaps $5 or $6 per square foot for the balance of a 10-year lease.

On that basis, you could move three or four integrated service units out of 2 Bloor Street East and locate them elsewhere at similar rents in the greater Toronto area; that is, at zero dollars per square foot for the first four years and $5 or $6 for the balance of that time. Having done that, you would reduce the pressure on the elevating system and you would reduce the general pressure within the building, even leaving those floors vacant. We have seen no cost figures that the board has generated to solve the problems it has at 2 Bloor Street East other than by building a new palace, which will not help the clients of the WCB but provide optimum conditions for the workers at the WCB.

I want to say to the Chair that I have nothing against improving the working conditions of the workers at the WCB, but this is an extravagant proposal. Renting office space, adding to the glut of office space in the greater Toronto area at this time in this market is socially irresponsible and is not something an agency of the government of Ontario should be undertaking.

All of these problems could be solved and can be solved in a far cheaper way even if you vacated half of your current building and renewed the lease and placed those integrated service units elsewhere. It's just inappropriate for you to be doing what you're proposing to do at this time.

I plead with you to come before this committee and tell us the cost of getting out of this contract, which is not a completed contract, because you've already testified that the financing arrangements have not been finalized. If the financing arrangements are not finalized, there is not a binding contract which, if you breach, will give rise to liability on the part of the WCB.

Mr King: There are three law firms in Ontario that might disagree with you, because that's how many firms are involved from the WCB's side. I myself asked for a third firm to become involved in addition to the firm that was looking at the facility from the point of view of the investor and from the point of view of the tenant. I don't think anyone can tell you with any certainty what the unknown of breaching a contract such as this would be. My own consideration would be that it would be very expensive.

Mr Sorbara: We would like to see evidence as to what the potential liabilities are and the advice of your lawyers, if that could be provided.

Am I to take it then that there was no inquiry made at any time as to what offer would be made by your current landlord, should you determine --

Mr King: Our current landlord made several approaches wishing to enter into that kind of a discussion. They were prevented from doing so by the terms of the agreement. As I indicated, when you enter into an agreement on a development like Simcoe Place, you agree to be somewhat of a constant companion rather than a fickle-hearted person who is going to run and look at other space.

Mr Sorbara: I'm asking you what inquiries were made before you entered into that agreement with Simcoe Place.

Ms Angove: Can I just answer that?

Mr King: I wasn't there yet at that time.

Ms Angove: Bramalea did not respond to the tender call with 2 Bloor Street East as a potential site for WCB, so it was not part of the tender to even consider in the beginning.

Mr Sorbara: Surely, in comparing whether or not you will enter into an agreement with the people at Simcoe Place or renew your current lease, you would make inquiries of your landlord as to what it might cost in a renewed lease on a per-square-foot basis.

Ms Angove: It was our understanding that Bramalea wanted the WCB to vacate that building because it needed to retrofit it. The costs to retrofit that building are approximately $60 per square foot or approximately $35 million to $40 million. That retrofit will not give us additional elevator capacity, it will not give us access floor and it will not give us emergency power backup because They cannot put that in the building.

Why would we have discussions with Bramalea to stay in a building that simply costs us too much money to occupy? It costs us much more than net rent, even if it was zero net rent. There are many costs that we incur with downtime. It's not only loss of service delivery. We're paying people to sit there while their equipment doesn't work. There's a cost associated with that, and it's millions of dollars every year. You may be paying zero net rent, but you're paying a lot of money out of the other pocket for people to sit and do nothing while their equipment is down.

There is nothing you can do to improve that building. We relocated our data centre offsite to try to help improve it. We relocated our microfilm functions offsite. We relocated the print shop and we relocated final files. To the extent we could make that building better for us, we have done everything we can do.


Mr Sorbara: Why haven't you considered relocating some integrated service units offsite?

Ms Angove: Because it costs more money to decentralize and duplicates service that you can offer in a centralized facility. Plus, if you want to give those people the kind of work environment that we require -- I'm talking about an emergency backup system, appropriate lighting, appropriate access flooring etc -- you would pay to retrofit any existing facility in the suburbs, if that's what you're talking about relocating to, and that is very costly to do.

Mr Sorbara: I'm sorry; I've visited many of the board's sites around the province and they do not have the kind of flooring, the kind of lighting you're demanding in the head office. What you say about relocating an integrated service unit is thoroughly inconsistent with the very philosophy of integrated service units, and that is their ability to stand alone and serve comprehensively the needs of the clients, the workers and employers of the board.

I could be satisfied on this whole thing if you could bring us the documentation, the analysis and the costing that you did to solve the myriad of problems that seem to exist at 2 Bloor Street East and the alternative methods of solving those, including staying in the building. We haven't seen anything about that. You made no inquiries with Bramalea as to how much it would cost to stay there.

Ms Angove: We worked with Royal LePage real estate consulting services on that. The individual consultant we worked with is an architect. He worked with us, not only on evaluating the problems at 2 Bloor, but evaluating the potential retrofit cost of the existing site that's submitted in the proposal call. It was very clear that the cost to retrofit far exceeded the cost to relocate to Simcoe Place.

Mr Sorbara: What about moving out some of the integrated service units to a new location?

Ms Angove: We discussed that with the board of directors in July 1990, the pros and cons of remaining centralized versus decentralizing. There was an agreement at that time that it made much more sense to remain centralized. One of the problems in decentralizing the integrated service units in this geographic area is that it's just too small. It's not like the London regional office, where someone can move from one area to another and is still serviced by the London regional office. In this geographic area, you can work in Etobicoke and live in Scarborough, so where do you locate the integrated service unit? Is it located close to the injured worker or close to the employer? What happens when that worker moves? Do you relocate that person to another integrated service unit? It becomes very complicated and an administrative nightmare to try to do it, because the geographic area is just too small.

Mr Sorbara: I'm just suggesting to you --

The Vice-Chair: Mr Tilson has a clarification, if I may interrupt.

Mr Tilson: I just wondered if my name was on the list.

The Vice-Chair: Oh, I'm sorry. Carry on, please.

Mr Sorbara: I'm suggesting to you that the problems of overcrowding and pressure on buildings is because there hasn't been any attempt to decentralize the main office functions from the integrated service unit functions of the WCB, so that within the facility that accommodates a head office you have the very heavy traffic patterns of an integrated service unit. An analysis should have been done and considered for decentralizing those areas, particularly given the terrible glut of office space right through the greater Toronto area.

I appreciate that in July 1990 the board perhaps wasn't aware of the impending crisis in commercial real estate in the greater Toronto area, but that reality having developed, surely to God the Workers' Compensation Board ought to have re-evaluated whether it was doing the appropriate thing, in the best interests of the board, firstly, and in the best interests of the economy of the greater Toronto area and the province of Ontario.

I'll tell you that there are buildings in Toronto of 400,000 or 500,000 square feet that have a current market value of zero. They are worthless. No one will buy them. No one will take over or put their name on the title or take over the management cost of those buildings. If that's the case, the board is investing in a building which, in the absence of the board's tenancy in that building, could not be built and would have very little value given the current and future market, say the next five or six years, in the greater Toronto area. I just want to say to you that I think it's socially and economically and commercially irresponsible of the board to do that.

Mr King: There are private partnerships here who were involved in 25% of the total cost of this project. Presumably if the market feels that this is not a proper project to go ahead, then neither will the financing come forward nor would the private partners be prepared to come forward.

I don't doubt your words that this is a bad time to be going ahead and proceeding with this. I again move it back and tell you that a project that had to come into place in 1995 was begun in 1990. Do you blink at this point in time, as you're suggesting we blink at this point in time, and say that because of the empty space, because there are landlords out there that want us as a tenant, we should proceed to go off our strategic plan, which is minimally a 20-year plan?

Mr Sorbara: What I'm suggesting to you is that the decision of the board of directors of the Workers' Compensation Board was made at a strategically important time for the board of directors, knowing that the province was going into an election and that their decision would not be highlighted or reviewed. In July of 1990 it was apparent to everyone that there would be an election.

The election having taken place and a new chair having been appointed and a new vice-chair having been appointed, the whole question of whether or not to relocate and reorganize the board on a different basis so as not to create an overburdened head office should have been examined on the basis of real, hard evidence and data. That hasn't been done yet, or at least we haven't seen copies of it. Given that that hasn't been done, it should be done and this deal should be put into abeyance or put on hold until that work is done.

I have no further questions or comments, Mr Chair.

The Vice-Chair: Well, I don't know if there's --

Mr King: I don't think there was a question, myself.

The Vice-Chair: You don't have to answer or you don't have to comment. I think there are actually a couple of minutes left for the Liberals, but we'll move on. You can take that later if you like. Mr Tilson is next, and we'll move to the Conservatives' half-hour.

Mr Tilson: As I understand it, you indicated the contract was signed in June of 1992. Is that what you're saying?

Ms Angove: The full transaction was executed in June of 1992. That's right.

Mr Tilson: That's the contract between the Toronto-Dominion Bank and the developer, which is --

Ms Angove: Cadillac Fairview.

Mr Tilson: -- Cadillac Fairview -- and WCB?

Ms Angove: That's right.

Mr Tilson: Was there a series of contracts, or was that the contract?

Ms Angove: No. There are a series of contracts for the investment fund. There's a series of contracts, then, for the tenant, our series of contracts.

Mr Tilson: Are you able to make copies of all of those contracts available to the committee?

Mr King: I will have to take that under advisement pending discussion with the legal people. I simply don't know whether there are some confidential aspects of it, but certainly, if there are not, I'm perfectly willing to share those.

Mr Tilson: What could be confidential? It's a $200-million venture that is quite controversial.

Mr King: Well, $200 million is the figure that was quoted as the high end to the project. It has come in at lower than $200 million once the tenders were let.

Mr Tilson: But we won't know that unless we see the contracts.

The Vice-Chair: Might I suggest, if possible, that if there's some sort of confidentiality requirement, either the auditor look at those contracts in confidence or we can go in camera to look at whatever documents cannot be made public, for that purpose.

Mr Tilson: Well, Mr Chairman, I would propose that whatever contracts they feel can be made available -- I think we're entitled to know what contracts you're not going to make available to us, if there are any, and we could discuss why. Hopefully you would make them all available to us.

Mr King: Hopefully.

Mr Tilson: Now, you indicate that that is when the series of contracts ended, in June of 1992?

Ms Angove: Yes.


Mr Tilson: And the first one was when?

Ms Angove: The first commitment by WCB was in March 1991.

Mr Tilson: All right. And when was the commitment to purchase these lands made?

Mr Callahan: They don't own them. They're leased.

Mr King: They're leased lands.

Mr Callahan: The CBC owns them.

Mr Tilson: So the WCB will not own the lands on Simcoe Place?

Mr King: That's correct.

Mr Tilson: Strictly, all you're going to be doing is leasing those lands?

Mr King: That's correct.

Mr Tilson: And you'll make available to us the copies of all of those leases?

Mr King: With the aforementioned caveat, yes. I don't believe there is any problem with releasing them, but I would like to just make absolutely certain so that I don't mislead the committee.

Mr Tilson: Have those leases been signed?

Mr King: I'm not too sure which leases you're referring to.

Mr Tilson: Any of them.

Ms Angove: The ground lease certainly has been signed, and our commitment --

Mr Tilson: You're going to be leasing, you said, 70% of the building. Is that not correct? Is that what you're saying?

Ms Angove: Yes. Our commitment to lease has been signed.

Mrs Marland: Excuse me. A commitment to lease has been signed?

Ms Angove: That's right.

Mrs Marland: Does that mean the lease has not been signed?

Ms Angove: The actual lease, you're right, has not been signed. The agreement to lease has been signed.

Mrs Marland: That's important to know.

Ms Angove: It binds us in the same way the lease does.

Mrs Marland: Thank you.

Mr Tilson: So the building will be owned by a numbered company? Who's going to own the building?

Mr King: The building will be owned jointly by the WCB of Ontario and by a partnership of Cadillac Fairview and the Toronto-Dominion Bank. They're roughly 12.5% owners each and we're 75% owners.

Mr Tilson: So WCB will own 70% of this building.

Mr King: The WCB investment fund will be 75% owner.

Mr Tilson: Did you obtain the order in council pursuant to section 64 of the legislation?

Mr King: No, the Workers' Compensation Board received at least two and probably three legal opinions that it did not have to seek the approval of the Lieutenant Governor in Council.

Mr Tilson: So you don't feel there's any accountability necessary with respect to this venture to the government?

Mr King: Several days before I started as the vice-chair of administration of the Ontario WCB, the board of directors voted on that stage of the project. Included in that were the legal opinions that they did not have to seek the approval of the Lieutenant Governor in Council.

Mr Tilson: Have you or anyone on the board had any discussions with the current Treasurer or any other Treasurer with respect to this venture?

Mr King: I have had no discussions with the Treasurer. I can't know whether anyone else at the board has had any discussions with the Treasurer. I believe the chairman of the board, Mr Odoardo Di Santo, perhaps had some discussion with the Treasurer.

The Vice-Chair: Mr Tilson, I've just had a request for a point of clarification.

Mrs Marland: Can I just say, if we keep interrupting each other, we don't end up with equal time, and I'm very anxious to ask questions too.

The Vice-Chair: I'm trying to be consistent, Mrs Marland. I interrupted Mr Sorbara on a couple of occasions, and I will add some time to Mr Tilson in order to accommodate reasonable requests.

Mr Callahan: I don't mean to interrupt you, Mr Tilson, but I wanted a clarification on that. I thought you said along those lines that you consider yourself an independent body. If the Treasurer interfered, it would require your resignation and that of Mr Di Santo.

Mr King: No, I believe that was speculation, perhaps by either the media or some third party, not myself.

Mr Callahan: I thought you said that. That was why I wanted clarification.

Mr King: I said it had been speculated that the government would remove Mr Di Santo and myself.

Mr Callahan: Okay. Thank you, Mr Tilson.

Mr Tilson: Has the deed been signed? Has the deed passed between the three groups?

Ms Angove: Yes, it has been executed.

Mr Tilson: Executed and registered on title?

Ms Angove: Yes.

Mr Tilson: When did that take place?

Ms Vivian Varnam: June 1992.

Ms Angove: It was registered June 1992.

Mr Tilson: Okay. Getting back to when all of this started, somewhere there is a reference to 34 proposals.

Ms Angove: Right.

Mr Tilson: Can we have copies of all of those proposals?

Mr King: Those were the proposals given to us in good faith by private developers, and I'm not too sure it would be fair at this point to have their private strategies made public. But perhaps by whiting out who the developer was, if we could make them anonymous, certainly that would be a possibility.

Mr Tilson: I can tell you, sir, that this venture that you have got into is an amazingly controversial issue. I think we're entitled to know whether any of these proposals would have put forward facilities that could mollify your needs. You've explained all the problems that you have on Bloor Street. There may be other alternatives, and I think we would like to know what those other alternatives are that have come to your attention.

Mr King: Those were alternatives that were looked at in 1990. There could in fact be more, given the increased empty space in the greater Metro area.

Mr Tilson: Dealing specifically with the 34 proposals, you will make those available to us?

Mr King: I have indicated that, provided it breaches no legal confidence, I see no difficulty with that.

Mr Tilson: When will you tell us whether or not you'll be able to give us any of the information you are seeking opinion on?

Mr King: Any holding back of information would be very limited and would be related to private contractual agreements of confidentiality, but I believe those to be very limited. I can let you know tomorrow on that.

Mr Tilson: All right. I suppose that would include any impact studies which you make available to us, copies of impact studies, feasibility studies that you may have undertaken.

Mr King: Yes.

Mr Tilson: Did you undertake any impact studies?

Ms Angove: On the 34 submissions?

Mr Tilson: Yes.

Ms Angove: Yes.

Mr Tilson: And you'll make those available to us?

Mr King: Again, there's no wish to withhold anything from the committee. You'll be informed tomorrow.

Mr Tilson: And with respect to reports from independent consultants which you've referred to, would they be included as well?

Mr King: Yes.

Mr Tilson: I guess one of the concerns we have -- it may well have been that, because of the great availability of space, many of these owners of these buildings may have refitted many of these buildings to meet your needs for free or for substantially less than what you're suggesting. Was that pursued?

Mr King: Not since June of 1992.

Mr Tilson: Well, prior to June of 1992?

Mr King: Prior to June of 1992, the crisis in the real estate market was not apparent. It had been looked at in 1990, however, at the time of the original proposals being reviewed.

Mr Tilson: I find it difficult to understand what you're saying. However, I think Mrs Marland will have some questions in a moment. I just have a couple of other questions.

You stated that there will be no impact on the employer assessment rates and the unfunded liability.

Mr King: That's correct.

Mr Tilson: Do you have anything in writing that supports this conclusion?

Mr King: I don't know just what you mean by "anything in writing" -- an actuarial projection, an accounting projection?

Mr Tilson: Absolutely anything, Mr King.

Ms Angove: The consultants' reports will confirm the return on investment.

Mr Tilson: You've made a statement. The employers are concerned that their rates are going to go up because of this tremendous structure that you're putting up.

Mr King: As I had indicated in an earlier answer, the Workers' Compensation Board of Ontario has a $6.5-billion investment fund. About 7% of that fund is to be allocated to real estate under the board's investment strategy. In putting down some money in equity and borrowing the rest, it will not impact the unfunded liability. The amount put down for equity purposes would be money that would be put down on other real estate ventures, because it's part of the board's roughly 7% that's invested in real estate.


Mr Tilson: Someone has told you that there would be no impact on the employer assessment rates. Can you provide us with the written statement or report that made you come to that conclusion?

Mr King: I'm the one who is involved, along with the other board members, in setting the assessment rates. The position of the investment fund making a real estate investment will not impact the assessment rates of Ontario employers.

Mr Tilson: You made a submission, presumably, to the board to advise it that there would be no impact on the employer assessment rates. Can we have a copy of that report?

Mr King: Again, you can have copies of all the reports, and if that is among the reports, you can have it.

Mr Tilson: Was the Downsview site examined as a possible site?

Mr King: We have looked at the Downsview site for some years now in terms of alternatives. The Downsview site simply has not the access. There is no way to get to the Downsview site except with a map. No public transit goes to the Downsview site.

Mr Tilson: We're talking about an amazing cost to put up this building at Simcoe Place. Did you consider a shuttle bus?

Mr King: You mean 150,000 people a year using a shuttle bus, from where? From Union station, from --

Mr Tilson: I don't know, sir. You're the one who's creating this thing. I guess I'm just looking for how you came to your conclusions. So far nothing has been made available to us, and I trust you'll have --

Mr King: Can I make a point here? I don't know of any requests for information that came to us that we didn't respond to.

Mr Tilson: Okay. Well, you've got quite a list this afternoon.

Mr King: Yes, but we have nothing before us. We haven't got anything. I know of no requests, other than that we were to appear. We sent some material over ahead of time, which were the board minutes and the board orders.

Mr Tilson: Mrs Marland has some questions. Could you inform us tomorrow morning what information, hopefully all of it, you could make available to us on this project?

The Vice-Chair: On a point of clarification with respect to the last statement regarding information that was requested, our researcher informs me that we did ask for a copy of the agreement, and that agreement was not made available.

Ms Angove: Who did you request that from?

Mr Ray McLellan: I'd have to go back to get the lady's name. I corresponded with your office just prior to Christmas, the week before Christmas.

Ms Angove: Yes. I spoke with you.

Mr McLellan: I did ask for a copy of the agreement.

Ms Angove: I'm sorry, I don't recall that request. I think we talked about what would be sent over and I did send you the package we talked about. Which agreement are you referring to? There are four leather-bound books of documents.

Mr McLellan: The 1992 signed agreement.

Ms Angove: There are four leather-bound books of documents that were signed in June 1992. Are you asking for all of those?

The Vice-Chair: Does that make up the whole agreement?

Mr King: It would make up the whole agreement to this stage. It wouldn't contain all the necessary consulting reports and background reports that have been requested.

The Vice-Chair: None the less, I think it's been established that we want all and any relevant information made available to us, so I think that would be forthcoming from you, and that request has already been made.

We'll move on to Mrs Marland. She has the floor.

Mrs Marland: It's really difficult to know where to begin. On the surface, from the information this committee has today, I think this is probably the most outrageous example of empire-building I have seen in my 20 years in politics, and I think there have to be a lot of answers given. It's probably unfortunate, Mr Chairman, that we're not dealing, in fairness, with the chairman of the board. Mr King, I gather that you're vice-chairman of the Workers' Compensation Board.

Mr King: That is correct.

Mrs Marland: Does that mean you're paid a salary as vice-chairman? On our agenda you're listed as vice-chair of administration. Does that mean as vice-chairman you're responsible for the areas involving administration?

Mr King: Generally speaking. It's somewhat more complex than that, but I work under the general direction of the chairman in law.

Mrs Marland: Who appointed you to the WCB?

Mr King: The Lieutenant Governor in Council.

Mrs Marland: When?

Mr King: April 1992 -- no, 1991; it just seems like it.

Mrs Marland: So you've been serving on the board for a year and a half at this point, then.

Mr King: Yes.

Mrs Marland: First of all, I want to ask you -- you told Mr Tilson, in answer to one of his questions, about why the board had decided to waive a requirement for an order in council to go ahead with this gigantic investment. You said the board made the decision to waive that requirement based on three legal opinions. Am I correct?

Mr King: Yes. I said two and possibly three.

Mrs Marland: It's interesting to me to read the minutes of the meeting of the board of February 1, 1991, where there in fact is one legal opinion in those minutes, a legal opinion by Mr Atkinson of Aird and Berlis, who said that in his opinion an order in council was not required. Are you suggesting there are two other legal opinions, other than Mr Atkinson's?

Mr King: The previous chairman of the board, Dr Elgie, was acutely aware of that particular question, and I believe he himself sought legal opinion on whether an order in council was necessary and received the legal advice that it was not necessary. Under the terms of the Pension Benefits Act -- we are required to manage our investments according to the rules of the Pension Benefits Act -- we're allowed to invest in real estate, and it was considered that this was to be an investment in real estate.

Mrs Marland: A $200-million investment in real estate at a time when industry and commerce and the employers of this province can hardly afford the workers' compensation rates and payments that they have to make today is a little difficult to appreciate, I guess.

Mr King: Can I respond? I've already indicated that $200 million was the high estimate at the time, and it has come in significantly lower than that.

Mrs Marland: How much lower?

Mr King: Around $180 million, less than $180 million. Secondly, if the board is going to wisely invest its investment portfolio, it's got to utilize different investments, including equities, bonds and real estate. From the investment side, this is not anything other than an investment in real estate.

Mrs Marland: Mr King, I'm not in real estate and I have never been in real estate -- I'm not a realtor -- but it's pretty difficult from a commonsense point of view to appreciate how it's a good investment to spend even $180 million building new office space, as my colleagues have been pointing out, in a city with the kind of surplus in office space that the city of Toronto and the greater Toronto area has today. Obviously, we don't share the same opinion on this $180-million investment.

The thing that really bothers me is when I read in your comments that there would be no impact on employer assessment rates or on the unfunded liability. That may sound good to you. What I would like to see is a decision by the Workers' Compensation Board that in fact does make an impact, to reduce these assessment rates; never mind saying there's no impact to increase them. I would like to see a situation where the board makes a decision on an investment where the unfunded liability situation is addressed. Sure, there's no impact on employer assessment rates. My response to that is that I think it's too bad there isn't.

This answer you gave that when you went shopping for new office space you couldn't talk to your present landlord -- I heard Ms Angove say she wouldn't consider talking to your present landlord because of the type of building, that it just couldn't be --

Ms Angove: And because they did not respond to the proposal call.


Mrs Marland: Excuse me. I understand that they didn't respond. But the point is that we know there are large organizations moving around this city today from one office building to another. For what reason? Again, common sense would tell you that for the most part they move out of one office building into another because they can get, in today's market, four, five or 10 years with nominal rents if they sign a 20-year lease. Essentially, what you've done is to sign a 20-year lease, as far as we can see from the information you've given us, with no "free" rent or accommodation up front.

Ms Angove: Can I comment on that?

Mrs Marland: Excuse me. Just wait till I've finished, because the question really was to Mr King. Apparently, you went to a lot of trouble to get an opinion from Mr Brill. I gather Mr Brill is a professor, author and leading consultant in productivity. If you went to such a lot of trouble to get an opinion from him about the potential for efficiency gains at Simcoe Place, I have to wonder why you couldn't have sought similar counsel about other alternatives.

You mentioned that you can't go shopping. I think your words were that you have to be a constant companion with Simcoe Place rather than appearing to be fickle-minded. Well, when you're shopping with the dollars that are earned by the people in business in this province who in turn create jobs in this province, I'm sorry, you have to go shopping very hard. I'm not convinced by what I've heard today that you actually have done that kind of shopping. You mentioned that you had a consultant, I think, from Royal LePage. Did you pay this person from Royal LePage for consulting services?

Ms Angove: Yes.

Mrs Marland: And you had the opinion of one person.

Ms Angove: No. We also had the opinion of Drivers Jonas as well. They've been involved in providing advice on the transaction since the beginning.

Mrs Marland: Who are they?

Ms Angove: They are real estate consultants as well.

Mrs Marland: You didn't mention them; you mentioned Royal LePage.

Ms Angove: I'm sorry. They have provided basically the same advice. As recently as Thursday of last week, I did a presentation with a representative of Drivers Jonas who confirmed that there are no existing facilities that can accommodate the WCB. That is as recent as last Thursday.

Mrs Marland: No existing facilities that can accommodate your needs in this -- I hate to make the pun, because you're now building with Cadillac Fairview, but I would suggest that maybe there is no existing space available in this Cadillac model.

Ms Angove: No. There is no existing facility that can accommodate this amount of space and meet our locational requirements.

Mrs Marland: Exactly, but you're saying two things here. That's the point I'm trying to make. You have a very demanding list. You are building an empire in terms of a building. You have to admit, when you describe all the facilities that are going to be in this brand-new building you're building, that there isn't anything you've missed in terms of the design. When you talk about --

Mr King: Can I just respond to that?

Mrs Marland: No, I'm sorry. I haven't --

Mr King: You don't want to ask questions?

The Chair (Mr Remo Mancini): Order, please.

Mrs Marland: Thank you, Mr Chairman. When you describe the trouble you've taken to make sure that all these needs are met in this new building, I'm sure there isn't an organization in this province that wouldn't like to have the same option. I'm sure there are ministries within our government that would like to have the same option the Workers' Compensation Board has had.

My understanding of the Workers' Compensation Board is that it is an arm's-length agency of the government. I recall that the last time I was in a position of learning something about the WCB was when the Workers' Compensation Board came before this Legislature's standing committee on agencies, boards and commissions. As an arm's-length government agency, I don't think your board should have had the choice or the option of going ahead and spending $180 million building a brand-new building for its palace when we have other agencies of this government, including ministries as well, I might add, that work, I'm sure, in far less than an average of 150 square feet per worker, that do not have the conveniences of all the equipment.

You talked about the special flooring and all these other options. I'm sure those options are the ideal choice, but in this province in the kind of situation we've been in -- we certainly were in a recession when you made the final decision a year ago, if you said you made it in July 1991. I just don't understand how the board could have been so irresponsible as to make this decision at that time, knowing what the costs were. You said you haven't even finalized how it's going to be paid for. I think that's particularly interesting.

If you have other answers that you haven't been able to give so far to the questions that have been asked this afternoon, maybe you can give them, but if you can tell us --

Mr King: I don't hear a question.

Mrs Marland: Well, you have been asked about the cost, Mr King. If you think this is amusing, I don't. You have been asked about the cost of this building and I'm simply saying that in your presentation you talked about $25 a square foot for 20 years. Then when I read the minutes of your meeting, in fact those are not the words in the minutes of your meeting of February 1, 1991. It says, "From a tenant perspective, the WCB will be assured the security of a long-term fixed lease over 20 years at average occupancy costs comparable to market rental rates."

Does that mean the market rental rates of 10 years from now, if they are more, on average, than $25 or $23, $22, whatever your base rent was, will be what you will be paying?

Mr King: No.

Ms Angove: That's exactly right. I mean, that stays fixed. The $25 stays fixed.

Mrs Marland: Well, one of you said no and one of you said yes.

Ms Angove: If your question is, "Does the $25 stay fixed for 20 years?" the answer is yes, it does. So when other rents are escalating -- for instance, someone who's paying zero net rent for three years, his rent will escalate in the later stages of his lease. That's how developers get back the money they lose in the upfront part of the rent when it's zero net rent. They just get it back later in the rent. If you don't pay it up front, you pay it later. When they are paying it later, our rent will be fixed at $25 a square foot.

Mr King: Could I answer one question you had?

Mrs Marland: Yes, please.

Mr King: You had referred to the building as a palace and you said it has all these options which are presumably unnecessary. Is it the ramps and parking for injured workers that you object to, and the accessibility? Is it the efficiencies that will be provided by access flooring which will allow the equipment to be moved at no cost versus having to go up through the roof at the present time? These so-called options are not things that will lead to workers working in luxury. It is minimal working conditions, business cases which will make us more efficient, and our customers will be able to access us.

Mrs Marland: Mr Chairman, I don't think Mr King needs to insult me by suggesting that I would --

Mr Pat Hayes (Essex-Kent): What have you been doing?

The Chair: Order, please. You'll have your turn.

Mrs Marland: It's very interesting, since people with disabilities happens to be one of my shadow cabinet portfolios, and I really take exception to the fact that you're suggesting I would be opposed --

Mr King: I asked you a question.

Mrs Marland: Excuse me. You're not even letting me answer.

The Chair: Order, please.

Mr Mike Farnan (Cambridge): Oh, my God. Do we have to put up with this, Mr Chair?

The Chair: Every member will have a chance to put forward his or her ideas and ask questions.

Mrs Marland: For you to suggest that I'm opposed to this new building because I might be opposed to --

Mr Farnan: You don't treat the --

The Chair: I'm going to have to add more time to Ms Marland's time if you keep interrupting her.

Mrs Marland: -- ramps for injured workers is a little bit beneath you. That's all I'm going to say. I think the rest stands for itself.

If the government of this province thinks it's okay for the Workers' Compensation Board to spend $180 million to build its own palace on the most expensive real estate in this city, then that's on its back; it's certainly not on ours.

The Chair: Mr Tilson, you have about 30 seconds.


Mr Tilson: There's been much time spent on the tremendous savings there are going to be. Can you give us a financial framework of what this whole venture is going to cost, the revenue which you expect, whether it be for rental or otherwise? There must be a complete breakdown. I appreciate your issue with respect to how it's going to cost less than it is at Bloor Street and that sort of thing.

Mr King: We have reports which give the return to the fund, for instance, under various different scenarios, and our background papers will be distributed to you as per your earlier request.

Mr Tilson: I had one other question. Do I have time?

The Chair: Quickly.

Mr Tilson: The question that many of us who sit in the Legislature have, because of the questions that are given to us by constituents, is on the service delivery with respect to workers' compensation. I, as a sitting member, can tell you that you, not you personally but the Workers' Compensation Board, are described as a monster out of control, that the service delivery, to be polite, is absolutely appalling. There's been a legislative committee that has recently reported on this matter and there has been an internal task force of the board that's reported on this matter, all of which have said the same thing. Virtually every aspect of the service delivery of the Workers' Compensation Board needs revamping. Can you tell me how this venture will solve that?

Mr King: The earlier presentation on the efficiencies to our business, I believe, did cover that. It talked about the fact that when people come to visit us they can get there more easily, which is of itself a service delivery issue, which is accessibility.

I apologize to the member if she felt I was being insulting, and please, I withdraw any comment that you may have found insulting.

Mr Tilson: You can apologize to her later. Meanwhile, you're dealing with my question.

The Chair: The time has expired. We have Mr Duignan, Mr Hayes and then Mr Fletcher. You'll have to divide the time among yourselves in order to properly share it.

Mr Duignan: First, on behalf of the government side, thank you for coming along and making a presentation here today and tomorrow. I just have a couple of questions and then I will turn it over to my colleagues.

When the initial discussions started to take place of exploring the possibility of relocation of the WCB headquarters from Bloor Street to elsewhere -- I understand that took place in the late 1980s some time -- was the government of the day made aware of the thinking of the WCB at that time?

Mr King: I was not present at the time, but I understand there to have been monthly meetings held between board officials and the minister in order to brief the minister on all and sundry matters that were taking place at the Workers' Compensation Board.

Mr Duignan: There have been numerous requests for various pieces of information from you here today. Could that information also be made available to this committee?

Mr King: I'm not too sure that meetings between the board and the ministry in 1989 or 1990 are either available to me or, if they are, whether that has some sort of privilege. I would have to check, in addition to the check I have to do on some of the information Mr Tilson wanted.

Mr Duignan: Thank you. When you and the Chair became appointed to the Workers' Compensation Board some time in April 1991, at that time you undertook an evaluation to see if this was a good decision for the Workers' Compensation Board, and you hired some three independent consultants at that time. Basically, their conclusion was that it was indeed a good investment for the Workers' Compensation Board. Could you maybe go over some of those reasons for the committee?

Mr King: Ms Angove earlier had gone over some of the reasons why this is a good investment. Number one, the investment is guaranteed by the tenancy of the WCB; therefore, we don't pay our rental fees to a third party and get no return. Part of the return on the WCB's investment fund is therefore guaranteed by our rent. It's anticipated that there will be a rate of return to the investment fund from the office tower of about 13%. That is a significant rate of return to our investment fund.

One of the other members who had asked the question talked about the unfunded liability. If we could have a guaranteed investment of all our funds of 13% for 20 years, I think perhaps that would go a long way towards dealing with the question of the unfunded liability. So from the point of view of the office tower as an investment, I don't think anyone could question that, and the documentation supporting that position will be made available to this committee.

Mr Duignan: In terms of dollar value, what would that return in the amount of dollars be every year, roughly?

Mr King: It's over $20 million a year.

Mr Duignan: For 20 years. So in fact, of the initial investment of -- I don't think it's a full $180 million because Cadillac Fairview and the TD Bank are also putting up some 12.5% of the funds each.

Mr King: That's correct.

Mr Duignan: So you're talking about $140 million or $150 million. In fact, for an initial investment of $150 million, you will get some $400 million back over the 20-year span of this agreement?

Mr King: Understand that we're not putting up the entire $140 million or $150 million. We would be putting up only a portion of that. The rest of it would be borrowed money. So we would be making money by borrowing money.

Mr Duignan: No matter what way you look at it, it's still a good investment for the Workers' Compensation Board.

Mr King: It's a good investment for the Workers' Compensation Board. What I've heard by way of critique is that the timing is particularly bad.

Mr Duignan: I can see the mismatch between the board's needs and the capacity of the existing building. It results in a number of inefficiencies and imposes some economic costs on the board, as well as social costs on the injured workers. Could you give us some idea of what these costs are. To what extent would building modifications in an existing building be possible?

Mr King: Ms Angove had earlier pointed out that if you're in a wheelchair and want to come to 2 Bloor, you've got to ride three elevators, one of them being the elevator which takes you up the service area and through the garbage room. There is no modification to 2 Bloor that will deal with the basic structural function. It was never built to have access for injured workers.

In terms of the other areas, we spend an incredible amount of overtime payments in order to get people to come in on the weekend to run cables through our ceiling because we have no access flooring. The amount of time lost because of eye strain and bad morale because of the lighting conditions, the loss of an hour a week per employee who is in head office, all of these things add up to rather enormous business problems for the WCB in giving service to our customers and access to those with disabilities.

That's just a brief summary.

Ms Angove: If I can just show you this, it's part of your handout; it's near the end of your package. This will give you a sense of the service delivery impacts as a result of gaining one hour per employee per week with reduced elevator waiting time only. This does not speak to the efficiency gains as a result of reduced down time. This is just elevator waiting time.

The weekly service impact equivalent of one hour per employee per week translates into an additional 600 calls that our telephone inquiry clerks can make, an additional 780 claims that can be adjudicated by our claims adjudicators and an additional 800 workers who can be interviewed by our voc rehab counsellors. Our revenue staff can respond to 48 more letters, 40 more calls etc. That gives you some indication of the service delivery impact of working in a facility that has been designed to accommodate the operation.


Mr Duignan: Thank you. You indicated earlier that --

The Chair: I just want to remind you, Mr Duignan, that Mr Hayes and Mr Fletcher are waiting. They'll have to divide up whatever time is left.

Mr Duignan: Okay. Besides, as I indicated, being a good investment from the fact the WCB will make about $300 million over 20 years on the initial investment, it also means this new building is designed to meet the injured workers' needs, which the existing buildings do not right now, plus it's to be handicapped-accessible as well.

I notice that the land belongs to the CBC and that you will be leasing the land from the CBC and I was wondering what the land lease cost is per square foot.

Mr Glenn Cooper: It's approximately $5.25 a square foot.

Mr Duignan: Okay, and the $25 you're talking about includes that $5?

Mr King: That's correct.

Mr Duignan: I'll yield to my other colleagues.

Mr Hayes: The workers' comp board has been in the building on Bloor Street since what, 1972?

Ms Angove: Since 1974.

Mr Hayes: Okay, thank you. A lot of these deficiencies you pointed out -- naturally times have changed, the workloads have increased, there's no question, with the new technology and things of that nature. But obviously someone just didn't come along even in 1989 or 1990 and say, "Hey, let's do something new and let's go to a new building." You must have had a lot of complaints from the clients and from the workers and from the management side of deficiencies. You've pointed many out here. This must have gone on for some time. Can anybody indicate to me how long ago this planning process was actually started as a result of finding all the deficiencies in the building?

Mr King: From the point of view of the corporate board, I believe it was indicated in earlier information that in late 1989 people started to look at it. But I think they started to look at it more because the lease in the existing facility was to be up in 1994, and what options were there? Was 2 Bloor an option?

I believe it's probably true, although I wasn't there, that the board itself did not look at 2 Bloor in terms of its impact on service delivery until after this detailed study of where the board could end up being in 1994 was done and an impact analysis had been done about the service delivery.

I want to respond just very briefly on service delivery. Service delivery has been a question at the Ontario WCB for as long as I have known the institution, which goes back into the 1970s. I don't believe it's something that was invented in recent years, the service delivery problem.

I would argue in fact that the steps that are being taken by the chair on appointing a task force and saying, "Help us with the service delivery problem," with the action plan that resulted from that task force report, which has got the place energized now, the stabilization I have been able to create over the past year and a half of the workforce, the attempt to maximize the use of the technology that was introduced, the correcting of errors which may have been made as the board moved from the old entrepreneurial model into modern managed business, all are having an impact on service delivery.

I sat in front of the other committee of this Legislature which was grilling us about service delivery in April 1991. I sat before the same committee some weeks ago, and it was a different point of view on the part of those people who had looked at the service delivery. They congratulated the board for the things we have done over the past year and a half to improve service delivery. It is my opinion that by giving us the tools of a different facility, we will make another huge increase in service delivery improvement.

Mr Hayes: I know you've touched on this but, in my opinion anyhow, we've heard a lot of simplistic or irresponsible estimates that have been thrown out into the public, and it's been in the media several times about the $380 per square foot that it's going to cost. I would really like any one of you here, for the record and to make it clear -- we want to know exactly what it's going to cost and how this individual and others have come up with this $380 per square foot, which I think is really unfair to the board. It's irresponsible to give that kind of message out to the public.

Mr King: I was very disturbed to see people equate the highest possible estimate per square foot for building a building with what you can go out and rent a building for. That was the direct comparison that I saw in the media. I believe the comparison was that the board is picking up space at $380 a square foot when you can rent space for $20 a square foot. Equating the cost of building per square foot versus the cost of the rental is a rather unfair comparison.

The cost to rent a space for 20 years right now may be lower than originally predicted in 1990, but the cost of building would be $120 a square foot. I believe what someone had done was to take the highest estimate of cost of the building and divide it only by the 525,000 that the WCB are going to occupy, rather than the 755,000 that the total space of the building involves. That's where the mathematical error had arisen. Why the error in equating the cost of building versus the cost of rental occurred, I don't know.

The Chair: Excuse me. Did you say -- how much?

Mr King: Some $120 a square foot construction.

The Chair: What figures did you use to come up with $120? What did you divide into?

Ms Varnam: That is based on the gross buildable area of the building, the parking and the shared common areas divided into the total project costs, the current estimate.

The Chair: The auditor has a question.

Mr Erik Peters: I just have a very quick question. You gave us the number of $180 million.

Mr King: It's $177 million, to be precise.

Mr Peters: Over 755,000 square feet, or is 755,000 square feet not the square footage you are talking about? Because on that basis, you're looking at $240 a foot.

Ms Varnam: That's if you're only looking at the cost of the building, but there is also a parking garage and shared common areas and facilities included in that, so the building cost on the gross buildable area is approximately $120 a square foot.

Mr Peters: But to be comparable, to just ask you the question, the $20 a foot you're dealing with is for office space. Therefore, are you now relating total footage to build garages and parking spots with square footage per office?

Ms Angove: That's included in your typical net rent anyway. That would be included in it. But the problem with this comparison is that net rent is paid yearly. You pay $20 per square foot per year. They were comparing that annual cost to the cost for investment over the life of the investment, and you can't compare an annual cost to a one-time cost. That was the problem.

Mr Peters: I totally accept your point. I was trying to reconcile the numbers you have given us to come to the $120. That's what I was trying to help the committee with. I still have trouble with that.

Ms Angove: The $120 was being compared to the $380.

The Chair: I think there's quite a discrepancy there. We've got 755,000 square feet divided into $180 million. That's almost $240 a square foot.

Mr King: That's the usable office space.

The Chair: Even if we include the garage, does that take it down $100 a square foot?

Ms Varnam: The garage is approximately 400,000 square feet and the shared common areas and facilities are about 45,000 square feet.

The Chair: But surely it doesn't cost as much to build a garage as it does the office.

Interjection: More.

The Chair: It costs more?

Ms Varnam: More, yes.

Mr Joseph Cordiano (Lawrence): Could I ask what the actual cost for the garage is?

The Chair: Excuse me. I promised Mr Hayes --


The Chair: I'm going to give Mr Hayes added time, but go ahead, Mr Cordiano, very quickly.

Mr Cordiano: Very quickly, what would be the costs of the garage and the common areas on a per-square-foot basis?

Ms Varnam: I don't have that information available, but I can get that answer for tomorrow. I don't have it off the top of my head.


Mr Cordiano: That would significantly increase the cost of the construction, to bring it up to $180 million, because that's the discrepancy we're talking about, right? Okay.

Mr Hayes: I think what I'll do, so we can allow these people to respond, is give them time and not run our time out; in all fairness let them respond. I will pass on to my colleague here to ask a question.

Mr Derek Fletcher (Guelph): Just a couple of questions. I need the information. How long have you been at the Bloor Street location?

Ms Angove: Since 1974.

Mr Fletcher: In that time have you done renovations to upgrade the facility?

Ms Angove: Yes, we have done some leasehold improvements. To the extent that we could improve the workspace we have. As I mentioned, some of the problems we were having with the electrical system --

Mr Fletcher: Who paid for that?

Ms Angove: The WCB, of course.

Mr Fletcher: Not the landlord?

Ms Angove: No. We relocated the computer centre and we relocated the print shop, the microfilm function. Now, some day-to-day work obviously Bramalea has done, as it does in any building just to maintain it. They have paid for some of that, but in terms of improving our own space, WCB obviously has paid for it.

Mr Fletcher: As far as the Bloor Street location is concerned, could you get a guarantee of a fixed rate over 20 years?

Ms Angove: Yes, we did when we moved in.

Mr Fletcher: When you first moved in?

Ms Angove: Yes, we did.

Mr Fletcher: And it was at $20, was it?

Ms Angove: No, it wasn't.

Mr Fletcher: What was it at?

Ms Angove: Do you know, Vivian? Is it $11?

Ms Varnam: On the initial lease, the initial space, just over 200,000 square feet, it was $7 a square foot.

Mr Fletcher: Okay, that was then.

Ms Varnam: Yes.

Mr Fletcher: As far as the investment you're making at Simcoe Place is concerned, the best time for building or to do something like this is during the time of low interest rates and competitive construction costs. Is that what you've found?

Ms Angove: Yes, the consultant firm Drivers Jonas has told us that construction costs are as low now today as they have been since 1982.

Mr Fletcher: Okay. So according to those rates, you could be saving a lot of money doing it at this time, rather than when the market starts to rebound.

Ms Angove: Yes, absolutely.

Mr Fletcher: Just on that alone, how many jobs are going to be created by building this facility? Do you have any idea? We're looking at construction jobs obviously. Hopefully it won't raise your clientele.

Ms Angove: About 300 to 400 construction jobs and obviously many, many related jobs in manufacturing etc.

Mr Fletcher: In the Toronto area. I've always been one of those people who have said, as far as renting is concerned, you're always throwing money away and you don't see anything at the end of it. At the end of the 20 years, what am I going to see as far as the WCB is concerned with this building? Am I going to see that you own a building or 75% of it?

Ms Angove: Yes.

Mr Fletcher: And that's going to be yours.

Mrs Marland: No, the people of Ontario's.

Mr Fletcher: So on the market that becomes an asset as far as everything else is concerned?

Ms Angove: An asset of the investment fund.

Mr Fletcher: Right. Okay, thank you.

The Chair: Any other questions. Mr Duignan, we have some time left, if you wish, or Ms Haeck.

Ms Christel Haeck (St Catharines-Brock): In the time that you have rented space at 2 Bloor, obviously your office staff increased, at least I would assume, somewhat substantially over the almost 20 years you've been there. Has it doubled? Does someone have a handle on that?

Ms Angove: In terms of number of staff we're at? Yes, it's close to double; not quite, but close. We now lease over 400,000 square feet at 2 Bloor and in some offices very close to that location.

Ms Haeck: With your long-term projections over the 20 years, are you seeing yourself -- because obviously the range of technologies you're using -- again having to increase staff at all? Obviously you will have to to some degree, but in the same magnitude?

Ms Angove: Did you want to answer that, Brian? No, we don't, but we have built a number of flexibilities into this lease so that if we need to lease additional space, we have the option to do that or if we decide it makes sense to decentralize some of the functions, we can sublet some of the space at an attractive rent. We've covered both sides of that.

Ms Haeck: I know there definitely is a concern among the business community. I've had a small employer come in and indicate his concern that he was seeing his rates go up and he felt he was providing you with the means by which you were going to build this --

Interjection: Ivory tower.

Ms Haeck: Ivory tower, yes. I was trying to avoid that, but I guess that's what the constituents are to some degree saying. The thing that really does concern me is that in looking at some of the briefing documents, you get a sense that you've tried to be responsible in the financing of the building, but that's not a message that really has gotten out. In fact, even the message about your moving has been relatively low-key until quite recently. Obviously some people in the ministry have known, but it has not been widely known and you haven't necessarily communicated that well. That would be one comment I would make to you. How would you see yourselves being able to communicate better with some of the employer groups, particularly to assure them that their rates are not going to skyrocket as a result of this building?

Ms Angove: I think it's a very good point. We have had very specific briefing presentations to the employer community over the past two months. They have been able to come in, they have received a very similar presentation, they've been able to ask their questions and we've addressed their issues and concerns personally.

Ms Haeck: You've had over two years to get to this point. How much more planning are you going to have to do? Is this basically done and the shovel is going to go in the ground? Obviously, there is still a certain anxiety about what all this is going to cost. Usually there's a question mark about cost overruns and all those kinds of things. Have you got a pretty firm price?

Ms Angove: Yes, we do.

Mr King: We have a person specifically monitoring all the costs of the project on a day-to-day basis, someone who's working for us in a dedicated way. We're very aware of all of the costs.

Ms Haeck: And it's on track or coming in even better?

Ms Angove: Yes. It has come in much lower than we originally anticipated.

Mr Callahan: You've indicated that the land is leased and you own the building, or this numbered company owns the building. What is the life expectancy of that building?

Ms Angove: I understand it'll be 50 years, something like that.

Mr Callahan: You understand? Is there anything written or is there any professional opinion given as to the life expectancy of that building?

Ms Angove: I should have someone qualified give you that answer, so let me ask Drivers Jonas exactly what they think the life expectancy is. I understand it is at least 50 years; it may be longer.

Mr Callahan: No, no. Has that question never been asked or considered before, what the life expectancy of the building is?

Ms Angove: The reason I say it's 50 years is because we have a 20-year fixed lease with three options to lease for 10 years beyond that, so I know it's at least 50 years. It may be well beyond that.

Mr Callahan: You're not answering my question. We've heard Mr King say this is part of your investment portfolio. Now, you don't own the land; you own the building. I would have thought that because it's part of your investment portfolio, that question would have been asked a long time ago as to what the life expectancy of that building would have been in terms of deciding whether or not it was a good investment for your real estate portfolio. Am I correct that it's never been asked?

Mr King: I cannot answer that question today. I don't have that information.

Ms Angove: It may have been asked by the investment fund and we just don't know the answer.

Mr Cooper: I'd like to add that the projections which have been done from an investment point of view are based on the first 20 years of holding that investment. If you look at today's value of money that you're going to receive 21 or 22 years from now, it really has no value. Therefore, we ignored any return on value after the 20th year. We've only looked at the first 20 years' return on value.


Mr Callahan: You're using the pension funds of the people today, tomorrow and in the future in terms of their benefits to be paid out to them. You're investing those in a commodity but, first, you don't even have any idea how long that building is scheduled to last and, two, it's a lease arrangement. I could maybe have seen this as a wise investment if you owned the land, but you don't own the land; CBC owns the land. Any potential increase in the value of this commodity, in terms of those pensioners, has been lost.

You've got a building that's going to depreciate over God knows how many years -- you don't know how many years. I find it really incredible when you're making an investment like that, which is risking pension dollars. I'd hate to think what's going to happen down the line if this asset is depreciating. It seems to me that all that's been looked at by the Workers' Compensation Board is, first, "Let's have new accommodations, new digs, for ourselves that will meet our needs to the nth degree unlike any other department in the government, even though we're in an economic bad time." Second: "Let's not buy the land. Let's lease it and just make sure we can get $20 a square foot for 20 years, because that's a big investment."

I like to think that every member of this Legislature of whatever political stripe is more concerned about the question of protecting the pensions of those people who have been injured and the employers who paid for those pensions to ensure that their workers, who are denied the right to sue now and have been for a considerable period of time, are protected. I'm sorry; I don't mean to be pejorative, but I just get the feeling that Workers' Compensation has just decided, "Well, so what?" If I'm wrong, then I would have thought you would have looked at the question of what you're going to have at the end of 20 years in terms of an investment.

Ms Angove: We have looked at that.

Mr Callahan: No, you haven't. You told me you guessed it was 50 years. It tells me that you have no --

Ms Angove: I said it was at least 50 years.

Mr Callahan: It tells me that you have not done your homework, that you do not have, nor have you ever had, a professional, qualified statement of how long that building becomes an asset. If that's the case, then I feel you've done exactly what I've suggested to you.

I don't like to be critical of you people, because you're obviously working in a system where there are others responsible for it, but it seems to me that the pension rights and the pension protection of these people should be your primary concern, not the question of whether or not you can get digs that are better than anybody else's. At a time like this, I can't understand why you would even consider it.

I'd like to know what the cost of getting out of this thing is. I want those figures, and hopefully you can have them for us tomorrow, so we can look at them in terms of what the overall saving you say is in comparison to the overall cost of getting out. I don't think the taxpayers in Ontario can afford a Cadillac; I think we need a Volkswagen right now. We'll have to be satisfied with a Volkswagen.

Mr King: In brief response to a question about the future of the pensioners being in jeopardy because of this investment, might I suggest that I was the inheritor of a $10-billion unfunded liability. I didn't invent that, nor did the present Workers' Compensation administration. I believe if you look at the record and if you look at what puts in jeopardy the future payments to pensioners, you might look to the preceding 20 years and see where the unfunded liability arose.

Mr Callahan: Mr King, I'm perfectly aware of that, and what you say is quite true. But the fact is that because 20 years have gone by with an unfunded liability, it doesn't mean we have to add more to it, with greater uncertainty to the benefits those people are expecting to receive, having been denied their rights to sue in court and depending upon a system that -- I don't think there's a member of the Legislature of any political stripe who would say it is one that works very well.

I know you people have worked hard at trying to bring it along, but the WCB was the first thing I heard about when I came down here. I think each and every one of us, as ombudsmen in our own offices, finds the difficulties we have and the frustrations we have in trying to get a file pulled so we can deal with it for these people. For God's sake, if they have to put up with that antiquated system, I don't want somebody to have to believe that their pension rights down the line may be denied them because of poor investments by the WCB.

I have to tell you, on everything you've told us today, you haven't given me one good reason why you should invest that kind of money in a building at a time when people in Ontario are losing their homes, they can't pay their taxes. And you people are prepared to spend $200 million on a palatial mansion to house WCB. Well, I'm sorry. This is one member who can't support that.

Mr King: I'm not too sure one should put any seed or germ in the mind of people receiving pensions from the WCB, as you seem to have done, that this particular investment puts their pensions at risk.

Mr Callahan: I'm not trying to do that, but there's the potentiality. You don't even know what that asset is worth, how long it's going to be worth something; it's going to be depreciated right off the books. If you wanted to go out and do something, why didn't you buy the land, invest in real estate, and maybe 20 years down the line or 50 years down the line you'd have something? That's a funding of a liability. You haven't funded it. You're building a building; the building depreciates. What's the value of it in 20 years? How long is it going to last? It's got a lot of elevators, I understand, but that's about all I can figure.

Ms Angove: I think you will find that the consultant's report will confirm that in 20 years the return on investment is very favourable for the WCB, and beyond that, that return improves over time. It does not depreciate.

Mr Callahan: Can you produce that consultant's report tomorrow. I was surprised that when I asked you the question of how long this building is going to last, you just gave us a figure, "Well, about 50 years." You didn't tell me you had a report.

Ms Angove: I said I can speak to 50 years because I know that's our option to renew the lease.

Mr Callahan: I'd like to see that consultant's report tomorrow as well.

Ms Angove: Fine.

The Chair: I think what I'm going to have to do to make sure everybody gets fair time is go around again. We're going to have Mr Cordiano conclude the Liberals' time, then we're going to go to the Progressive Conservatives, then I'm going to give the government members another block of time. I'm going to make sure that everybody gets their questions on. So with the assistance of the committee, Mr Cordiano.

Mr Cordiano: I will endeavour to be brief. I just want to recap what I think is the fundamental focus of the motion that was brought to this committee in order to investigate this question, and that is coming back to the basic concept of value for money and the decision that was taken largely being an economic one.

Can this decision be justified in today's economic environment, given that the decision was probably initiated in a period, 1989 and 1990, when the economic conditions were quite different from today, economic conditions that would have perhaps favoured this kind of decision back then, given the rental rates and given the kind of leasing arrangements that could have been made back in 1989? Looking forward, this kind of investment probably looked highly attractive at that time.

It's wise to say that given today's economic circumstances and the state of our economy locally, which is quite important not only to this province but perhaps to the whole country, we as concerned legislators would like to have, without any doubt, certainty that this decision is in fact a good economic decision based on some sound economic principles. We're not convinced of that. I don't think anyone is.

Ms Angove: Given today's economic climate, this is a better deal today than it was in 1989 or 1990 simply because construction costs have gone down so much in the last two years that it costs less to build a building.

Mr Cordiano: Well, that may be correct, but there are certain other factors to be taken into account which I think you've overlooked in making this decision. Construction costs may be lower, but the whole cost of a lease versus construction costs or versus whatever other decision you wanted to make -- we're not comparing the cost of construction today to the cost of construction in 1989 and saying, "This is a good decision, given that narrow framework." We're comparing today building versus leasing an existing facility.

You have indicated that other conditions have impinged on your decision, and now we need to verify that. We also need to attach some dollar figures and perhaps something that cannot be equated with dollars: whether that's a priority in these difficult economic times. Because against the backdrop of fulfilling the requirements of your space needs, we want to ask ourselves, could you in fact lease the existing space with the variety of other variables attached brought into that equation? That is with the understanding that those priorities may not be met, but those priorities have to be set against the backdrop of economic conditions. How much does it cost to make those priorities become a reality?

We think it's a question of reordering priorities -- at least, I'm speaking for myself -- and making a decision based on value for money, if you can lease existing space that almost meets your needs or comes close to that. If you can't, then what we're really dealing with is a costly decision versus a non-costly decision with all those other conditions attached to it. That's really, in a nutshell, what I think is the fundamental focus of this question.


Mr King: I think if we start with one assumption, 2 Bloor was not considered by either the landlord or the tenant as being acceptable to our modern business needs. I think of the inability of that building to deal with the temperature, so that we have to move our computer out of it, and of the inability of that building to move people, to move our 150,000 customers. If we were to follow your scenario, I think that at minimum we would have to look whether there was another building in the Metro area which could serve our needs.

Mr Cordiano: Or several facilities. There are a lot of variables that can be entered into this equation. I think that it's always measured against priorities that you set for yourselves, which we may not even agree with you on. We don't have enough details. I'm glad you've agreed to bring forward all of those detailed studies that were done for you and the parameters that you set in place for making this decision and the kinds of priorities that you've listed, which we have some idea of, but what all of those things mean in terms of dollar figures and value for money is the way in which this committee operates. We're doing an audit of your decision on a value-for-money basis, which is entirely the way in which we operate on an ongoing basis on this committee. That's what we're looking for.

Ms Angove: Can I ask you that in looking at value for money you recognize that occupancy cost includes not only net rent but the cost associated with working out a facility that cannot support the operation, the cost associated with waiting for elevators and the cost associated with downtime of equipment? If you include those costs and compare --

Mr Cordiano: Let me just interrupt you. I agree, and it may be entirely appropriate that you need to move. No one is going to question that on this committee. That's not really the question here. The facilities you're at now are not adequate. We all recognize that. The way that your existing facilities present themselves is not adequate. I will speak for myself. The experiences of my constituents will indicate that, and what you're presenting as fact we'll take as fact in regard to that. But I think it's also important to understand that you could make repairs to the existing facilities. You're saying that that's not feasible.

Ms Angove: You can't add elevators.

Mr Cordiano: That's fine. I can understand that and you will bring forward studies that indicate that, or at least cost estimates to prove that fact and validate that. You will also bring forward other information which will validate what we're saying. To this point, we have none of that information and I don't think the public does either. You're simply saying, "Take it at face value that this decision makes economic sense." There are too many doubters out there, starting with this committee.

The Chair: Okay, we're going to continue with the rotation.

Mrs Marland: Ms Angove, who is the consultant to whom you're referring when you say you will bring that report tomorrow morning?

Ms Angove: I'm sorry; which report are you referring to?

Mrs Marland: In answer to Mr Callahan, you said you would bring the consultant's report with you tomorrow morning. I'm asking who that consultant is.

Ms Angove: Drivers Jonas.

Mrs Marland: Okay. Can I be clear? The total square footage of this building is 755,000 square feet.

Ms Angove: For the office space.

Mrs Marland: The gross leasable area is 755,000 square feet. How much of that is the WCB going to occupy?

Ms Angove: Seventy per cent; 525,000 square feet.

Mrs Marland: Okay. Today you do not have any leases in hand for the balance of that 30% of that building?

Ms Angove: That's being handled by the developer, so I really can't speak to potential tenants it may be negotiating leases with.

Mrs Marland: Okay. Are you telling this committee that you're not responsible for the balance of the leasable space in this building?

Ms Angove: Certainly we, as a tenant, are not.

Mrs Marland: How about you as owners? That's what we're interested in here, because you're spending this money buying this building.

Ms Angove: The investment fund is exposed to the spec space, 75% of it; you're right.

Mrs Marland: So are you saying, then, that the investment fund will be liable for the balance of the space that you're not using if it's not rented?

Mr King: We have done projections about the return to the investment fund under various scenarios regarding that speculative space.

Mrs Marland: Excuse me, Mr King. I only have a few opportunities here to ask questions, so I want to be very specific.

Mr Hayes: You should give him an opportunity to answer, Margaret.

Mrs Marland: You have a building that's 750,000 square feet, more or less, and your use of that is 70% of that space. You're one of three parties to building this building, I understand?

Mr King: Yes.

Mrs Marland: Your press release, by the way, says the Toronto-Dominion Centre. Did it mean the Toronto-Dominion Bank?

Ms Angove: Toronto-Dominion Place.

Mrs Marland: Is the Toronto-Dominion Place the Toronto-Dominion Bank?

Ms Angove: Yes.

Mrs Marland: Okay. So if the balance of this brand-new building -- 30% of this brand-new building -- isn't leased, would I be correct in assuming that the liability for the cost of that unleased space will fall on all three parties?

Mr King: That's correct.

Mrs Marland: So you have a liability for 30% of this building at a time when there is a tremendous surplus of office space in downtown Toronto. Are you not concerned about the fact that you may have difficulty renting the balance of this building?

Ms Angove: Only if it's not rented for 20 years. Drivers Jonas has confirmed to us that when it is rented, the investment fund will gain the benefit of those healthy rents during the time that it is rented. They also don't think it will be problematic to rent that space simply because no new office space is being built in downtown Toronto. The trend is to move grades B and C buildings to grade A buildings, which is what this building is. So they are very optimistic about the leasing feasibility of the spec space.

Mrs Marland: You've talked today about the rent, the $25-per-square-foot rent. Is that dealing totally with the building cost or does that guarantee that rent will be applied to the land lease as well? I'm glad Mr Turnbull's arrived because he's the expert in commercial real estate in our caucus. But you don't own the land, so I assume you have a land lease.

Ms Varnam: That's correct.

Mrs Marland: Is this guaranteed rent on the land as well as on the building?

Ms Varnam: It includes the cost of the land lease.

Mrs Marland: So your land lease is locked in for 20 years?

Ms Varnam: Yes.

Mrs Marland: Go ahead, David.

Mr Cordiano: Let me --

Mrs Marland: I'm just yielding to Mr Turnbull.

Mr Cordiano: We're just having some trouble hearing.

Mrs Marland: I'm sorry. I yield to Mr Turnbull.

Mr David Turnbull (York Mills): Let me ask you, how much did you pay for this building?

Mrs Marland: They paid $180 million.

Mr Turnbull: You paid $180 million and it's 700,000 square feet?

Mr King: It is 755,000.

Mr Turnbull: So how much is it per square foot? Have you done the calculation on this?


Mr Turnbull: How much is it per square foot?

Ms Angove: It depends which part you're looking at. Vivian, why don't you explain it?

Mr Turnbull: Take the whole building, because you've bought it.

Ms Angove: The office tower, the parking and our share of common areas.

Mr Turnbull: I'm not talking about the parking; I'm talking about the office tower.

Ms Angove: We own part of the parking. We're paying for the construction of the parking.

Mr Turnbull: Give me a number. How much is this per square foot?

Ms Varnam: When you take the gross buildable area of the tower, the parking and the shared common areas and facilities, it's $120-per-square-foot construction cost.

Mr Turnbull: Is that finished? Is that with leasehold improvements or is that just the raw construction?

Ms Varnam: That's the shell.

Mr Turnbull: How much do you propose per square foot to finish it off?

Ms Varnam: I don't have that offhand. We do have that information. I can have it tomorrow.

Mr Turnbull: Is this a land lease?

Ms Varnam: It's a land lease.


Mr Tilson: Considering the amount of equipment that you're going to be putting into that building, that's a very relevant question.

The Chair: You can only have one member of the committee at a time holding the floor and you can only have one set of questions being asked at a time. I don't mind members helping each other out. Mr Tilson, if you --

Mr Tilson: Yes, Mr Chairman, I think the question that Mr Turnbull asked is quite relevant, because of your reason for moving there -- you've talked about cables and cost of equipment. I think we need to know that. If you could have that available for us tomorrow, we'd appreciate it.

Ms Varnam: Yes, I've made note of that.

Mr Turnbull: What alternative buildings did you look at by way of leasing?

Mr King: There was a lengthy explanation before you arrived regarding a public tendering process that took place in 1990, some 34 different proposals being brought forward, it being short-listed down to four proposals and the present one being chosen. We had previously volunteered to bring information tomorrow on the nature of the proposals that were brought forward in 1990 for a new facility for the Workers' Compensation Board.

Mr Turnbull: I would suggest that at these sort of rates you could have bought outright, including the land and buildings, in other locations.

Mr King: What you might be able to negotiate today probably does differ from the 1990 negotiating situation.

Mr Turnbull: The year 1990 was already in the recession. Real estate was already in the dumper at that point. I'm a commercial real estate broker and believe me, I know.

Interjection: Trust me.

Mr Turnbull: It was very low. We'd certainly trust us a lot more than your government. How on earth could you pay that kind of money when there are all kinds of buildings available for less money and without land leases?

Mr King: The documentation supporting the proposals that were brought forward in 1990 has been promised to the committee.

Mr Turnbull: I intend to scrutinize that very carefully, because that's a ridiculous price.

Mr Tilson: Mr Chairman, I have a question. How much time do I have?

The Chair: There are approximately 28 minutes left and I've got to ensure that the government members get at least 20 minutes.

Mr Tilson: Mr Chairman, a question I have to the clerk or to yourself as Chair: There have been comments made by Mr King and others that their legal opinion felt it was unnecessary to obtain an order in council pursuant to section 64 of the Workers' Compensation Act.

The Chair: Yes, I was curious about that myself.

Mr Tilson: I've read that section and the section is quite clear, I believe, just looking at the wording of it, and I don't imagine that the board representatives, the way they've been reacting this afternoon, are going to provide us with their legal opinions. If they are that's fine, but --

Mr King: I've already volunteered that.

Mr Tilson: Okay, that's great. Then we'll have our legal opinions tomorrow. Mr Chairman, does this committee have access to legislative counsel, that we can receive an opinion on that issue from the committee's point of view?

The Chair: We'll have the clerk answer that question. The answer is yes, and we're going to get an explanation as to how it works.

Clerk of the Committee (Ms Tannis Manikel): There are various lawyers attached to the legislative research service, and in the past on other committees I've gone and asked them to provide legal opinions to the committee. If that's this committee's request, I can do that as well.

The Chair: Yes, I think we can start there if it's the wish of the committee.

Mr Tilson: Do you require a motion, Mr Chair?

The Chair: We usually work by consensus. Let me put it this way: The public accounts committee has asked the board representatives to bring forward their legal opinions which would indicate that they did not have to deal with section 64 or that they were somehow exempt from section 64 or that whatever they were doing did not fall under section 64, any one of those three. So they're going to bring forward their legal opinions.

Mr Tilson wanted to seek assistance and get outside legal opinions. We have lawyers in the legislative library research department we can call upon to get legal opinions and it doesn't cost us anything. They're already on the payroll.

Mr Hayes: I'm sorry, Mr Chair. Don't we already have three legal opinions? Did I hear that correctly?

Mr King: Two, and possibly three.

Mr Hayes: They could bring those opinions forward.

Mr Tilson: To be fair to my inquiry --

The Chair: Yes; please go ahead.

Mr Tilson: -- I did not ask for outside legal opinion. I'm aware that there are legislative counsel available to committees. My question is, how does this committee have access to those? Do we simply ask them?

The Chair: We just ask them.

Mr Tilson: I assume there's no problem. It's not going to cost anything further to provide that opinion?

The Chair: I wouldn't think so.

Mr Tilson: Do I assume the consensus is that the clerk can request legislative counsel to provide that opinion?

The Chair: Unless I hear some objections.

Mr Duignan: Will legislative counsel be making the decision based on the same information that was available to the two, possibly three, other lawyers before?

The Chair: I don't know what information was available to the other lawyers. That's a question I'm not able to answer at the present time.

Mrs Marland: It's right here in their minutes. It's right here.


Mr Cordiano: Perhaps I could clarify since I was in the chair at the time. I think it was made clear that all the relevant information and any information leading up to those decisions would be made available to the committee. Therefore, unless we get something different, you would make available all relevant information for those kinds of opinions to be gathered at this point.

The Chair: Maybe your request is premature. Would you want to wait until you saw the other documentation before you --

Mr Tilson: Mr Chairman, all I can say is that I've read section 64, which I think is available at the front desk --

The Chair: Yes, we have copies.

Mr Tilson: You could read that and you will see how clear I think it is. I'm in doubt whether or not those opinions are correct.

The Chair: I appreciate that.

Mr Tilson: It may well be that they have their opinions based on a set of facts, but the question is, has section 64 been complied with? I believe we're entitled to receive our legal opinion, not necessarily the opinions from other outside sources.

The Chair: That's a fair request. Requests such as that have been made before. We'll try to get consensus.

Mr Farnan: I'm not disagreeing, but I'm just going to move deferral of the request until such time as we get the information that's brought forward by the delegation.

Mrs Marland: May I speak to that? Mr Chairman, am I correct that we only have tomorrow to deal with this matter?

The Chair: Let me put it this way: We have four weeks set aside for the work of this committee to do a number of things. Some of the items we have on our agenda may not take as long as we think at this stage. I believe we have flexibility in the four weeks that have been allotted to us to come back to this subject if we believe there's a need.

Mrs Marland: In fairness to the committee, in answer to our questions this afternoon, Mr King suggested there had been more than one opinion on this matter. He suggested that the former chairman had received an opinion. In the minutes of the board's own meetings on February 1, 1991, as I referred to earlier, Mr Atkinson from Aird and Berlis gave his opinion and gave the answer as it pertains to the provisions of the Pension Benefits Act.

I think what we're asking is simply that while we will have further information on Mr Atkinson's opinion from the WCB tomorrow, and perhaps another opinion it's going to bring, what we are requesting is that legislative counsel have the lawyers look at their interpretation of section 64 as it pertains to the argument that the WCB is bringing. Frankly, I would like to have the benefit of our own legislative counsel, who are independent of the WCB.


The Chair: I appreciate that request. I'm not even sure that if we make the request immediately, even today before 5 o'clock, we'll be able to get an answer by tomorrow morning. That may not be possible.

Mr King: Can I give you some assistance in answering that?

The Chair: Please.

Mr King: As Ms Angove has said, there are four volumes which go to make up this particular agreement and I don't believe it feasible to ask any lawyer to give you an opinion based upon the amount of documentation in a hurry. In other words, I'm trying to help you understand that even if you gave it to legislative counsel tonight, all they would do, at best, I think, would be to get a verbal explanation of what the arrangement is, because they simply couldn't read all the documentation in a hurry.

The Chair: Mr Farnan, did you want to conclude with something else, or is your point concluded?

Mr Farnan: I think the point is that I think all members of the committee would probably not have objection to the request. I think the timing, as you pointed out, Mr Chair, is appropriate, and I don't think a day's delay and we see what comes forward tomorrow -- we can make a deliberation on this tomorrow.

The Chair: Are you in concurrence with that?

Mr Tilson: I have no problem. There may be some doubt as to what we're even going to receive tomorrow. The board representatives are going to seek counsel on what they will even produce.

The Chair: Okay, that's fine. That's a subject matter we'll come back to tomorrow. I think everyone understands what we're trying to get at. My question would be different in that regard, but I'm going to hold my question until the government members have concluded their questions. I'm assuming that, Mr Tilson, Mr Turnbull, Ms Marland, you're finished?

Mr Tilson: I have one further question, if I have time, Mr Chairman.

The Chair: Okay, one last question, very quickly.

Mr Tilson: Mr King has made some comments that one of the issues they're proud of on this is that it is a good investment. I have concern with that statement, particularly when just very recently the Workers' Compensation Board had a major loss of over $100 million when it transferred $400 million to the Euromart to be placed in foreign stocks and bonds. There was a loss on that. Had the fund kept the money in Canada and invested in low-risk Ontario or federal government bonds, it would have made at least $100 million in interest, but that wasn't the case. This is a report I have from the Globe and Mail of December, which I'm sure you're aware of.

Having said that, obviously, the investment abilities of the Workers' Compensation Board in the past have been questioned. I assume you have had someone advise you with respect to the investment potential of this area. You shake your head yes. When you're providing information to us tomorrow, can you provide us with a copy of that opinion?

Mr King: Yes.

Mr Farnan: I suppose the people of Cambridge would want me to be quite direct and quite simple in addressing this question to you. It's true that you're leading off this initiative at a time of recession, and you've stated that it will improve the board's efficiency. I'd like you to answer this question fully for my constituents. Is it possible that this new building will (a) save the board money and (b) improve efficiencies? I'm sure my constituents want to know the answers to those two questions.

Mr King: Number one, we need a new facility in 1995 when the present lease at 2 Bloor Street East ends up. We have to have a place to do our business. We may be able to get short-term rental of space broken up into smaller portions than the 525,000 square feet around the city of Toronto. That will decrease our efficiency. That will make our service delivery worse rather than better.

The investment, if it isn't made, simply means that we find a different place for certain investment dollars of the WCB. They would not get as great a return as they would in the Simcoe Place development.

From the tenant side, as I've already described, we may be able to get short-term rent at less cost than the approximate $25 a square foot guaranteed for 20 years that's in this deal. It would fractionalize our service and make our service worse. So in simple answer to your question, the present plan will improve service, it will not put the board at financial jeopardy and it will improve the board's investment performance.

Mr Farnan: Some of my friends in the construction industry are certainly interested in this particular project. Those whom I've talked to have talked in terms of the creation of potentially 300 to 400 construction jobs. Would you elaborate on the potential for job creation with this project, please?

Ms Angove: In speaking with the developers, they have confirmed that is the number of construction jobs that will be made available in constructing the base building. Certainly, there will be additional jobs that will be created as a result of finishing out the space. I'm sorry; I can't give you the numbers associated with that. There will also be a number of manufacturing jobs that will be supported by the fact that we are purchasing materials to construct the building. So there are many, many areas where jobs will be created as a result of the project.

Mr Farnan: Critics have slammed the WCB for building at a time of recession. I think I tend to agree somewhat that being a time of low interest rates and having competitive construction prices would appear to make it a good time to build in actual fact.

Ms Angove: Absolutely.

Mr Farnan: Would you consider that a lot of the questions being placed to you today and maybe throughout this whole dialogue is an attempt to compare apples and oranges? On the one hand, you want to talk about comparative costs, and while you're talking about comparative costs on the one hand, you're talking about a building with grave inefficiencies, and you want to compare that with a new site where you're going to have great efficiencies.

Ms Angove: That's right. You're absolutely correct. The whole premise of relocating to a facility that has been designed to support the operation is to improve efficiencies. People have implied that the various upgrades we are incorporating in the building are luxuries. They are not. They are all being implemented in the project to support the operation. They are requirements of the WCB that may not be requirements of other government agencies, but they are specific requirements of the WCB.

They have all been thoroughly researched by design consultants. We've worked with the architects and we've worked with the mechanical, electrical and structural engineers on the project to confirm our requirements and to determine the best course of action to follow in determining what it is we need in the new building. So whether it's lighting or access flooring or elevators, it's all been done through consultants who are experts in the field.

Mr Farnan: I have one final question. This concerns the clients of the WCB. I think all members of the House are working with individuals whose lives have been put into a certain sense of turmoil. Indeed, we would want an efficient operation to be serving them. I'm concerned about the workers' stress within the WCB, I'm concerned about the case load and I'm concerned about the turnover of staff. Often when I phone or my staff phone, we find the file has been transferred to a new worker. Is this related to the building you're currently in? Does the turnover of staff at the WCB have a direct relationship to the working conditions you're in at present?

Mr King: I looked over some figures on the number of injury claims that are being put in by Ontario Workers' Compensation Board employees. In fact, there is an increasing number of claims related directly to the facility we're in, the crowding we're in, the eye strain. As I recall, we project to the end of 1992, at the time I read the report in the fall, something like 80 claims for our own employees related to working conditions, so it is a very significant problem.


Mr Farnan: If there is one thing that would benefit me in my job, and I'm sure a client of the WCB, it would be that when you enter into a relationship with the board you would have a case worker who will be there three months from now after you initiate your case, and hopefully might be there six months and nine months later. My experience is that in reality the turnover of case workers is so great that this, in my view, is the greatest inefficiency of all, because people have then to get up to speed with the client and the case they have to take on.

I believe whatever can be done to reduce staff turnover and to create efficiencies is a positive thing. Even if that costs a few dollars, I would not object to a few dollars extra being spent so that the clients, the Cambridge men and women who have to deal with the board, can be dealt with effectively.

From what I'm hearing, the rent will be comparable with market rents, will be in the range of market rents.

Mr Sorbara: Market rent is $2 a square foot.

Mr Farnan: We're talking about a 20-year contract. So much that has been said on this issue is from outer space. We have a motion from Mr Cordiano which talks about a cost of $380 per square foot. Obviously, if you want to do this kind of irresponsible throwing out of figures, you can't have a serious debate.

The reality of the matter is that if you mortgage your home over one year, you'll find that the square footage costs are astronomical, but we mortgage our home over a lifetime.

Mr Callahan: The Treasurer must have changed his view, has he?

Mr Farnan: Indeed, the question I would put to the delegation is very simple: For the constituents of Cambridge, will the rent represent, roughly, comparable market value rents over a long-range period? We're talking 25 years, I believe. Is that a reasonable assumption to make?

Ms Angove: Absolutely. In fact, over the 25 years, our rent could well be less than market rent.

Mr Farnan: The people of Cambridge will be delighted to hear that. I hope you're right.

Mr Duignan: Following my colleague's line of questioning, we've had some wild accusations made, especially from the Liberal opposition, that this move would cost $380 per square foot. We know from our meeting here today that it's not going to cost anywhere remotely close to that. Strangely enough, I picked up a press release by the Tory opposition here today and there's some wild accusations in here too.

Maybe the vice-chair of the board could explain to Mr Tilson why the board can't stay in its present location and why the present building can't be brought up to the same standards as what the WCB wants or needs.

Mr King: I think one thing that has been missing from the discussion today is that this was not a move invented by the WCB bureaucrats or the board of directors. In fact, we went out to the customers of the WCB. We talked to the injured workers, we polled the injured workers and the employers with respect to the location, with respect to the use of the present facility, and the response we got is that they wanted to be in the downtown area and they wanted to be near transportation. It isn't just the WCB bureaucrats.


The Chair: Order, please. I can't hear the answer.

Mr King: Sorry. I'm told it was not a poll, it was a survey. I'm not too sure.

Mr Tilson: That's only 8% of clients.

Mr King: The fact of the matter is that our present facility is totally inadequate for our business needs. It isn't so that we can have bigger offices. In fact, all of the executive at the WCB will be getting smaller offices, including the vice-chair of administration and the chairman of the board. It is to make the working conditions of the employees of the WCB tolerable and healthy; it is to improve the service delivery to the employers and the workers of Ontario; it is to become the most efficient and effective compensation board that we can become, and we cannot do that in our present facility.

Even the landlords of our present facility didn't believe they could provide a proper building for us because they didn't even bother tendering or coming forward at the time we asked for tenders on alternatives or on our future as a tenant. So for all the reasons we've discussed today, it's vital that we be able to provide the service that Ontario wants, and we need a new facility in order to do that; we need an alternative facility in order to do that.

Mr Duignan: Thank you for the answers. As he indicated earlier to an earlier question, the fact is that the return to the pension fund on this investment will be close to $300 million over the 20-year span. Most important, it also improves the service to clients, which is badly needed. I have some other questions I want to ask; maybe I'll hold off till tomorrow. I will let my colleague ask his question.

Mrs Marland: Did you know the Treasurer tried to stop this?

Mr Hayes: He asked for a legal opinion. There's a difference.

Mrs Marland: He wanted to stop it, Pat. Maybe you didn't discuss it in your caucus.

Mr Hayes: Mr Chair, these seagulls over here just won't stop.

The Chair: Order, please. Ms Haeck.

Ms Haeck: There was a question raised earlier about the performance of your investment fund. All of us who have watched the business climate of late would say that probably there is a general downturn and not too many funds are doing well. What is the performance rating of your fund in relation to other funds out in the market?

Mr King: There had been an earlier reference to a presumed loss of money on the European market. In its last measured year, the Ontario Workers' Compensation Board investment fund measured in the top 7% to 8% of all investment funds of the same sort, so the return by the Ontario investment branch is to be commended. The return of the office tower down on Simcoe and Front is projected by independent evaluation to bring an anticipated average rate of return of 12.8%, which is a good rate of return today.

Ms Haeck: I have a question for the auditor, if I may ask him the following question: According to an auditing definition, what is an asset?

Mr Peters: It's any property, good or chattel that you own.

Ms Haeck: From one of the public accounts conferences I attended, I understand that assets get valued in different ways. Can you provide a valuation over a period of 20 or 50 years of the kind of building that the WCB is undertaking, as Mr Callahan had suggested earlier?

Mr Peters: Let me just answer, first, to the "you." As auditor I cannot, but there are appraisers who probably can provide such appraisals and can also provide projections, although the projections, as you would appreciate, are opinions.

Ms Haeck: Somewhat speculative, one might suggest.

Mr Peters: That's right. You might get a variety of opinions.


Ms Haeck: In fact, evaluating something in a consistent fashion as the market was suggesting -- I think Mr Cooper was suggesting that 20 years was pretty much the norm for an evaluation and that to extrapolate it to 50 was somewhat unusual.

Mr Cooper: That's correct. My point was more that in evaluating the return Mr King spoke about at 12.8%, that's looking at what the value of the building may be after 20 years. The valuators tend to use something like 20 years. If I asked you how much a dollar is going to be worth 21 years from now, most people would say, "Nothing, because inflation will take it away in 21 years." It's normally 20 years as a maximum when we look at evaluating a building. If we get return beyond 21 years, it's a bonus; we do better than 12.8%.

Mr Fletcher: Just a couple of things. If this building is built and everything starts running, this is going to benefit people across Ontario, not just in Toronto. Someone in Thunder Bay or someone in Sudbury is going to see the benefits of this, is that correct?

Mr King: Yes. The head office of the Workers' Compensation Board is contained in the proposed new facility, including our information services, which goes out to all of the regions; including our personnel and human resources, which goes out to all of the regions; including our communications branch, which goes out to all of the regions; the many corporate parts of the WCB which will be improved through the move to this office building, and that will show improvements out in the regional areas.

Mr Fletcher: So it's an investment in Ontario, it's an investment that the Ontario taxpayers are going to see a benefit from.

Mr Callahan: Is this a commercial?

Mr Fletcher: It's a lot better than Suncor or the SkyDome. Let's look at fiascos and some dumb moves. Let's face it. The two over there made some goofy moves in the past. What we're talking about is investments, and we're seeing an investment that's going to benefit the people of Ontario, not an investment that's going to cost the people of Ontario.

The Chair: Any other questions from the government members? Mr Hayes, do you have any questions? You have time.

Mr Hayes: We're trying to avoid the mistakes that previous governments made in the past, to the benefit of representing --


The Chair: Thank you for your question. Mr Sorbara has a question.

Mr Sorbara: I have a couple of questions. The vice-chair and others have tried to make the case that this is a good investment for the investment portfolio of the Workers' Compensation Board. If the Workers' Compensation Board were not a guaranteed tenant of this building, if you were proposing to invest in the building without the security of a tenant paying, initially, $26 and change per square foot, would this be a reasonable investment for the Workers' Compensation Board investment fund? In other words, if you were not a tenant of the building, would you be investing in Simcoe Place were there no secure tenant of the type that is now securing the construction price?

Mr King: I don't think I would invest in an empty building going up right now.

Mr Sorbara: You wouldn't invest in commercial real estate in the greater Toronto area right now, is that right?

Mr King: I would receive the counsel of the professional real estate people in our investment division. If you want an answer, likely there wouldn't be investment in commercial real estate in Toronto right now.

Mr Sorbara: So the only basis upon which you can say this is a good investment for the board is that the board itself turns it into a good investment by becoming the principal tenant of the building, isn't that right?

Mr King: That's very true, and that's what makes it such an advantageous situation for the Workers' Compensation Board. We turn our need to have 525,000 square feet of building in order to do our business into a way to pump up the return to our investment fund.

Mr Sorbara: Unless there were alternatives to fulfilling your need for space.

Mr King: From an investment point of view, we would have to find an alternative to whatever amount of money we are going to be putting up by way of equity, the rest of which will be borrowed.

Mr Sorbara: Can I ask why the chairman of the board isn't here today and whether he's going to be appearing during these hearings?

Mr King: I can't speak for the chairman of the board for tomorrow, but he was quite ill for the last several days. Last week he missed three days; quite sick.

Mr Sorbara: During the period when I was Minister of Labour -- that was 1987 to 1989 -- there were ongoing discussions about new facilities for the board upon the expiry, or even before the expiry, of the lease. Those discussions took place between me as Minister of Labour and the chairman of the board, at that time Robert Elgie, and the vice-chairman of the board, at that time Alan Wolfson. The understanding was that the board would not proceed until the government had considered and reviewed the matter of new space by way of a report of the then minister -- that was me -- speaking to his cabinet colleagues the Premier and the Treasurer, at that time Robert Nixon.

My impression from the way in which this matter has developed is that there was never any discussion between the chair, the vice-chair or the senior administration of the board and the current Minister of Labour and the government. That is to say, it appeared that the proposal to build the new building in downtown Toronto took the government by surprise.

Can you tell us what discussions you had with the Minister of Labour about this proposal, what discussions you had with the Treasurer about this proposal, and whether you ever sought the approval of the government, which after all is a major tenant in the downtown area of Metropolitan Toronto, what discussions you had with the government through the Minister of Labour, the Treasurer, the Premier or the cabinet about this proposal and whether you received the approval of the cabinet to proceed with this proposal?

Mr King: You know some history I'm certainly not aware of. It's my understanding, however, that the previous government was aware of the board's intention to move ahead into a build situation with a developer. You weren't minister for ever. I can only assume that the practice I inherited when I arrived in the spring of 1991, which was for a monthly meeting with the minister for briefing purposes, took place. In so far as seeking approval is concerned, to the best of my knowledge no approval was sought from the government by the Workers' Compensation Board. To the best of my knowledge, the Workers' Compensation Board did not seek the approval of the provincial Treasurer. That's based upon my knowledge of the situation.

Mr Sorbara: Prior to the signing of the contracts, did you advise the Minister of Labour of your intention to enter into a contract of this sort?

Mr King: I assume that the previous Minister of Labour, who would be your successor, was advised by Dr Elgie and Mr Wolfson of their intention to proceed to sign the agreement I inherited when I arrived at the Workers' Compensation Board. I have monthly meetings with the minister to tell him what the items are on the board agenda for board deliberation and he was aware that we were to proceed.

Mr Sorbara: Let's just get our history clear here. The board of directors considered investigating this move in July 1990, three months before the government changed. When I left office, there were ongoing discussions and periodic reports to me as minister as to what the executive of the board was considering or contemplating, or what avenues it was thinking of investigating. There was a clear understanding that the board would not proceed without the concurrence of the government, but the contract you signed was signed not during our term in office, but almost two years after our term in office ended.

What I'm asking is whether you or the chair ever advised any minister in government that you intended to enter into the agreement that you entered into in 1992. Did you ever advise the government you were going to do this?

Mr King: In terms of the final agreement in June 1992, our monthly briefings of the minister would have included that. You're going to have to speak to the previous chair and vice-chair, whom you probably appointed, as to what they told the government.


Mr Cordiano: There's no documentation surrounding that?

Mr King: These are verbal briefings of the minister. I don't know whether you received written briefings or not.

Mr Sorbara: Was any advice ever given to the Minister of Government Services, who is a major tenant on behalf of all government departments, ministries and agencies? Was there ever any advice given in writing from your office that the Workers' Compensation Board intended entering into a binding agreement requiring the board to participate in a $200-million building project in 1992? Was any advice ever given to the Minister of Government Services, to the Minister of Labour, to the Treasurer or to any other minister in the government of Ontario prior to entering into that agreement?

Mr King: To the best of my knowledge, the only one who would have been aware of it would have been the Minister of Labour through regular monthly briefings on what the board was doing.

Mr Sorbara: Was there ever any written advice from your office to any minister or from the chairman's office to any minister that the board intended entering into such an agreement?

Mr King: I would have to have the files checked, sir. I'm sorry, but I --

Mr Sorbara: Could you do that and advise us accordingly?

Mr King: I don't believe so, but I couldn't know for certain.

Mr Sorbara: Do you not think it would have been appropriate? Given that the government of Ontario is a major tenant in the greater Toronto area and certainly in the downtown area, do you not think it would be appropriate for you, as vice-chair of the board, to at least advise in writing, formally, the Minister of Government Services that you are contemplating entering into a binding agreement requiring you to participate in a $200-million office development in downtown Toronto?

Mr King: My personal view is no.

Mr Sorbara: Notwithstanding the fact that the Minister of Government Services and the government itself were re-examining the government's complete strategy in terms of the leasing of space in the Toronto area, and that it had a program of relocation of several ministries outside of the Metro Toronto area to other communities like St Catharines, Thunder Bay and Sault Ste Marie, you don't think it would have been appropriate for you to advise the government formally that you were contemplating such an agreement?

Mr King: The government was advised through the regular monthly meetings with the minister that the board was proceeding with the facility strategy which had started in 1989.

Mr Sorbara: Was there anything in writing from your office or from the office of the chair advising the government formally that you contemplated entering into this agreement?

Mr King: To the best of my knowledge, no.

Mr Sorbara: So you never advised the government formally that you were going to enter into an agreement requiring you to participate in a $200-million development in downtown Toronto at a time when the vacancy rate in downtown Toronto was bankrupting many, many land development firms, including your current landlord?

Mr King: To the best of my opinion, no.

Mr Cordiano: Could I ask, Mr Chairman, one brief supplementary?

The Chair: A brief supplementary.

Mr Cordiano: I would ask that if in fact there was any written agreement or written documentation informing the minister or informing anyone in the government, you make that available after you make all other documents available to this committee that we've already requested.

Mr King: I have indicated to you that to the best of my knowledge there was no written communication.

Mr Cordiano: I understand that. I just want to make sure that any written documentation is made available to this committee so that it would form part of the information package that we receive.

Mrs Marland: Certainly, we are aware that the Treasurer, Floyd Laughren, asked that the option of cancelling this palace construction for the Workers' Compensation Board be investigated. That was reported in all the Toronto newspapers, that Mr Laughren wanted to see if this project could be stopped, as of last November, two months ago. Obviously, at that time the Bob Rae socialist government was concerned enough about this project that the Treasurer asked to have the option of cancelling the contract investigated.

Mr King, would you like to tell this committee what your role was in investigating that option, and could you tell us what direction you received from Mr Laughren, the Treasurer, to see if you could get out of building this building?

Mr King: You, fortunately, know as much of the provincial Treasurer's opinion on the matter as I do, because I have never spoken to the provincial Treasurer. I merely read the same press reports that you read. No approach was made to me asking how we get out of the deal or can we get out of the deal.

Mrs Marland: Maybe not you personally, but obviously this is a question directed to you as a representative of the board. I think the newspaper account refers to the fact that the request was going to be made of the board, perhaps through Mr Di Santo. Although you may not have spoken with the Treasurer, have any of your board members or your staff spoken to the treasury staff or the Treasurer himself on this matter of cancelling the contract?

Mr King: At the bureaucratic level in the board, which we represent, I'm unaware of any discussions that may have taken place with the treasury officials. Please understand that I have been trying to determine whether the board has options. One does not have to be particularly acute to realize what the situation is in real estate at the present time.

Possibilities are being explored, but this is getting into a pretty arcane area, to ask what might the costs be to breach a duly signed contract. The best you could probably get is a range. It may cost X dollars if you come in breach of the contract, but anything I'm doing in that regard is in my capacity as vice-chair of administration, and at the time when it comes to advise the board, as I must advise it from time to time, if any of them start asking the same questions this committee is asking, I have the thing under consideration, but not in response to a question from the provincial Treasurer.

Mrs Marland: I'm encouraged to hear you say that you too have been looking at this option. If you have been looking at this option, then are you saying you don't think it's a good deal any more?

Mr King: No, that is not what I'm saying. I think that any good manager has a range of options laid out before him so that if asked certain questions you can give responses. I show no weakness in my support of the position, but I'm aware that others may question very strongly the board's decision to move ahead on Simcoe Place, and as a good manager, I feel I should have some intelligent response to those sorts of questions.

Mrs Marland: You're saying that to your knowledge no one, either a staff member of the board or a member of the actual board, had any conversation with the Treasurer, Floyd Laughren, or any of his staff on cancelling this contract.

Mr King: I believe that the chairman of the board probably was in touch with the Treasurer. What they spoke of I don't know.


Mrs Marland: So does the chairman of the board operate in an autocratic style where he would make decisions solely on his own without going to the rest of his board, or certainly to you as vice-chairman?

Mr King: I believe the present chairman of the board is probably the most democratic chairman there has been in many years and that he involves the board in almost everything we do.

Mr Sorbara: You didn't know Robert Elgie.

Mr King: I'm a good personal friend of Dr Elgie.

Mr Sorbara: Odoardo is more democratic than Bob Elgie? I don't believe it.

Mrs Marland: So what you're saying is that what we read about in the press, and two of the dates of the clippings I'm looking at -- one was the Toronto Star, December 1, 1992. The headline says, "NDP Seeks Legal Call on Killing WCB Deal."

"Ontario Treasurer Floyd Laughren has asked for a legal opinion on scuttling the province's $150 million" -- they're complimentary to you here on the amount -- "commitment to build a Workers' Compensation Board headquarters that opposition members have branded a `ridiculous venture.'

"But Laughren yesterday cautioned `there may be legal obligations that are very, very difficult to get out of.'"

The suggestion here is that Mr Laughren, the Treasurer, was looking at the option of getting out of this contract, and it would be difficult to imagine for a minute, knowing Mr Laughren as I do and having the respect for him that I do in terms of how he goes about doing his homework, that he would make this decision in isolation without speaking to anyone at your board.

Mr King: I indicated to you that I believe he and the chair of the board, Mr Di Santo, had some discussion. I, by the way, read very carefully the Hansard record of the Treasurer's comments, and I believe if you check, you will not find quotes from the Treasurer in the article you just read. I believe the media perhaps had put certain words into his mouth related to the Hansard proceedings, and if you go back and you review your Hansard, I think you'll see that.

Mr Sorbara: I just have a supplementary to Ms Marland's question, if I might, Mr Chair.

The Chair: I was going to wrap it up very shortly. It can be a very short supplementary.

Mr King: Yes, I was going to ask --

The Chair: Mr Fletcher has some questions, I have some questions, our Provincial Auditor has some questions, so one brief supplementary.

Mr Sorbara: You were saying to Ms Marland that you were looking at options. Just assuming for the moment that the agreement is tight and binding, notwithstanding that the financials haven't been worked out, but that there is legal liability, at least theoretical legal liability, do you honestly believe that those who would be suing the Workers' Compensation Board, namely, the Toronto-Dominion Bank and Cadillac Fairview, would be going after the Workers' Compensation Board, and by extension the government of Ontario, for the last drop of legally binding blood in the event that the board in its wisdom chose to not complete this deal? Do you realistically think Cadillac Fairview would undertake that sort of strategy, at a time when it is trying desperately to create a better business climate in the province of Ontario?

Mr King: Cadillac Fairview, as an example, maybe has some empty space and might be prepared to talk to us about getting out of this deal. I think the party that might be most aggrieved would be the CBC, because this may be the only game in town for it for the next 10 years. That's probably the group that would be most anxious to have their lawyers talk to our lawyers.

Mr Sorbara: Do you really think that the public of Ontario and Canada would tolerate the Canadian Broadcasting Corp trying to force the Workers' Compensation Board into building a building which currently is not advisable to be built in the province of Ontario? Do you think the public would tolerate that, the new Prime Minister of Canada, whoever she or he might be, that this would happen? Is it not more realistic to think that a proper decision could be made to simply bring this deal to an end now and work out the details about how the pieces would be picked up and put back together?

Mr King: One always hopes that people would sit down and rationally discuss issues. Having dealt with some of these parties in the past, I believe all of them have large law firms on retainer and I'm not too sure it would become such a rational discussion as you're suggesting.

Mr Sorbara: My suggestion to you is that it's just not reasonable to think that sort of lawsuit would ensue.

Mr Fletcher: Correct me if I'm wrong. Is it a statute or under the legislation that the Workers' Compensation Board has to be located in Metro Toronto?

Mr King: Yes, the head office of the board has to be in Toronto.

Mr Fletcher: In other words, looking outside the city for space would be -- could you do that?

Mr King: Presumably, if we had a head office of four people. These are lawyers' questions.

Mr Fletcher: I was just thinking of the relocation of other ministries such as Mr Sorbara had raised, where Agriculture and Food went to Guelph or somewhere else, and the registrar general to Thunder Bay. I was just wondering, as far as that's concerned, right now it's saying that the location has to be in Toronto.

Mr King: That is correct.

Mr Sorbara: Guelph already got a head office.

Mrs Marland: Just for the record, in the Globe and Mail on November 19, 1992, there is a quote attributable to the Treasurer:

"`I'm concerned about it,' he said in an interview, noting that he has spent the past two years trying to get departments and agencies to accept the financial squeeze facing the government.

"Mr Laughren has asked senior WCB officials for a meeting to explain why they want to move into a new building at Simcoe and Front Streets."

Mr King: That may very well have been the meeting I suggested occurred between the chair and --

Mrs Marland: He was concerned about it.

Mr King: I never suggested he wasn't concerned. I'm saying he never asked me for a legal opinion.

Ms Angove: He also got up in the House and confirmed that he did have a legal opinion that confirmed we are in a legally binding transaction. That was from the Treasurer.

Mrs Marland: That's fine, but he sought the legal opinion because he thinks it's a rotten deal. He doesn't want to spend this money on behalf of the people of this province, and an arm's-length government agency is still the people of Ontario's money.

The Chair: Thank you. That should do it for committee members. I have a couple of short questions and our Provincial Auditor has a number of short questions. If you're unable to answer them today or don't have the information, I'd appreciate it if it could be noted and the material could be made available.

Mr King, as the vice-chair of administration, do you sit in on the regular briefings of the Minister of Labour?

Mr King: Yes, regularly. I miss occasionally, because I have a lot of other things to do as well.

The Chair: Have you ever attended a meeting where the Minister of Labour was briefed on this transaction; that is, the discussion before this committee today?

Mr King: In all honesty, I would have to check my calendar to see if I attended the briefing on this particular issue. I simply don't recall whether I was there last April, but I can certainly answer that tomorrow.

The Chair: Would you agree that a matter of this magnitude probably caused more than one briefing of the minister to take place?

Mr King: Well, the minister has staff who can brief him. For instance, we provide issue sheets to the minister on various items at his request or the request of his staff, so I'm sure he's been briefed by his own staff on the matter.

The Chair: You believe then that information which emanated from the board office, some of it even from your own office, could have ended up in the hands of the minister's personal staff and then into the minister's office.

Mr King: Once a month, we discuss what the board is generally doing and what's on the agenda for the board of directors' meetings.

The Chair: Mr King, I'm assuming you would probably have more knowledge on this subject matter, or maybe the people with you today would probably have more intimate knowledge on this subject matter than, say, the chair of the board, who has overall, global responsibilities for the operations of the board.

Mr King: Most certainly. The board is a multibillion-dollar operation and this is one part of that multibillion-dollar operation.


The Chair: It would be appropriate then for me to assume that either yourself or any of the people with you today would have been in on the briefings that would have been given to the minister. I'm trying to narrow down the scope of people who have the capabilities to answer a list of questions that an energetic minister like Mr Mackenzie might have.

Mr King: I can certainly determine who was at the ministry briefing. I'm not certain, in this particular province, what the client-solicitor privilege or the bureaucrat-politician situation is and whether or not --

The Chair: I'm not asking for any detail. I just want to know whether or not you or anyone else at the table today sat in on briefing meetings of the Minister of Labour and exchanged information and answered questions. I haven't asked yet about confidential briefing documents or maybe some political comment that the minister might have made or some confidential information you might have given to the minister. All I want to know is who at the board would have attended these meetings in your absence, made representations to the minister and answered the minister's questions.

Mr King: I'll have to provide that information tomorrow. Just a quick poll here: None of the three with me today recalls having personally attended the briefing at the ministry, but I should be able to get that information for you tomorrow.

The Chair: It's my intention to call that person or those persons as witnesses.

Mr King, would you say that the relationship between the Workers' Compensation Board and the Minister of Labour is friendly, cordial and professional?

Mr King: Yes.

The Chair: Why then, if that is the case, would you seek legal opinion to extract the Workers' Compensation Board from the requirements of section 64 of the Workers' Compensation Act, which reads, "Subject to the approval of the Lieutenant Governor in Council, the board may purchase or otherwise acquire such real property, as it may consider necessary for its purposes, and may, with the like approval, sell or otherwise dispose of any such property"?

Why would the board, with your knowledge and acquiescence, and the people with you today -- if you have that kind of relationship with the minister, with these words being as clear as they are -- seek outside legal opinion that would allow you to circumvent the protection of the public that is in this legislation?

Mr King: I think I had indicated to you earlier that I wasn't the one who sought that advice. To my knowledge, an opinion was sought for the board of directors prior to my coming to Ontario, and in addition to that I believe I indicated earlier that Dr Elgie sought his own personal opinion to make sure that he was on clearly solid legal grounds to proceed with the matter.

The Chair: So the legal interpretations we are going to receive from the board tomorrow, hopefully, will show by date that the relief sought by the board in regard to section 64 was done by Dr Elgie?

Mr King: That's one of them, and the other one would have been done for the board of directors. I don't know to whom it was addressed. I'll have to find out.

The Chair: Do you have any idea what that date might be?

Mr King: Some time in 1991.

The Chair: In 1991, the Minister of Labour was Bob Mackenzie, the same minister we referred to only a minute ago, where we all concluded that the board's relationship was friendly, cordial and professional. If that is the case --

Mr King: I'm sorry; there's a 1990 opinion as well. It may have been after the election that Dr Elgie sought an additional opinion. I don't know. I haven't talked to him in particular about this.

The Chair: Have you yourself reviewed section 64?

Mr King: Yes.

The Chair: How do you read section 64?

Mr King: I read section 64 that the board should not purchase or dispose of real property without the permission of the Lieutenant Governor in Council.

The Chair: Do you not agree that what you are doing in the construction of this new headquarters is in fact just that?

Mr King: The interpretation that the lawyers put on it is that this is an investment --

The Chair: I'm asking your opinion, Mr King. I'm asking your opinion as the vice-chair of administration.

Mr King: It's not the most comforting position one could be in, but it is a valid investment for the Workers' Compensation Board investment --

The Chair: Please, Mr King, I didn't ask about whether the investment was valid or not. I want to know how you, as one of the chief and senior administrators at the WCB, interpret section 64, and then I want to know whether or not in your view the proposed head office is in fact part of section 64, that there should be compliance with section 64.

Mr King: First off, I don't believe there is non-compliance with section 64. But you asked me whether I was totally comfortable, and I said no, I'm not totally comfortable --

The Chair: I didn't ask you if you were comfortable; I asked you whether you agreed with it.

Mr King: -- but I think we're in a legally correct position. There is a difference.

The Chair: We only know whether we're in a legally correct position or not when something is litigated in court and an officer of the court -- a judge or a panel of judges -- renders a decision. The fact that a lawyer, a group of lawyers or anyone else says something is legal or illegal doesn't mean anything until it's adjudicated. That's why to me it's important to know how the senior administration of the board is thinking and whether it's adversarial. To me it appears to be adversarial, because I look at section 64 and to me it's very clear: You can't buy any property and you can't dispose of any property unless you get approval of the Lieutenant Governor in Council, and that is the cabinet and your minister, the Minister of Labour. So I view the situation as a little bit more adversarial than I would have hoped it would be.

Mr King: Can I give you a bit further? I had indicated earlier to the committee that I arrived in April 1991, as did Mr Di Santo. The week prior, the board of directors had unanimously voted to proceed with this project -- unanimously. It's our job to give advice to the board of directors, and we are prepared to do that. The board of directors then moves ahead and makes decisions.

There was a difficult time period of accommodation or getting to know each other between Mr Di Santo and I and the board, as I believe they may have been suspicious about the socialist tendencies of Mr Di Santo and Mr King. Actually, I believe the committee that questioned my appointment questioned me about my beliefs. I believe the board was jealously guarding the new facility as a good business deal against people who might have wild left-wing ideas and try to -- I mean, I'm trying to give you the climate that was going on.

The Chair: I appreciate that, Mr King, but I can only deal with what I have before me and what's written in law.

Mr King: Yes, I appreciate that.

The Chair: That's why I want to deal with section 64.

Would you agree with me that this transaction is not an arm's-length transaction?

Mr King: In what sense, sir?

The Chair: In that you're spending funds to build a building and then you're renting the building to yourselves, causing further expenditure of funds.

Mr King: In my view, this is the Workers' Compensation Board pension fund making an investment in a real estate transaction, and it is the Workers' Compensation Board as a tenant making a long-term lease at advantageous terms.

The Chair: Mr King, how long have you been a public servant?

Mr King: Something like 20 years.

The Chair: So you have great experience with what would be considered an arm's-length transaction or a non-arm's-length transaction.

Mr King: Yes.


The Chair: With all your years of experience, would you agree with me that this could be considered a non-arm's-length transaction?

Mr King: I have a difficult time as the one in the middle between the tenant on the one hand and the investor on the other saying what the interest of the corporation is when the investor is making an investment and the tenant is making a decision to move in.

The Chair: Let me see if I can help you. I perceive an arm's-length transaction to be that you own a building, you and I have no personal relationship or family relationship or any other business relationships, and I come to you and say: "I wish to lease X number of square feet. Give me the market rate or better and we'll see if we can do business." That is an arm's-length transaction. Would you agree?

Mr King: Yes.

The Chair: Right. Now, you and I have a pension fund we own together -- it's for a group of individuals -- and we both have something to do with it. Then you and I and a third party decide we're going to build a new building, we're going to use the money from that fund that we have something to do with to help finance it, then we're going to rent it to ourselves. Do you consider that an arm's-length transaction in the true sense of the word?

Mr King: There is a veil or a wall up between the two positions. I'm the one who's sort of the wall.

The Chair: How can you be the wall if you're here before us answering all the questions?

Mr King: Because you asked me to come.

The Chair: You were sent by your chair because he was unable to be here due to ill health. Surely he sent you because he thought you were the most capable person to answer these questions.

Mr Duignan: On a point of order, Mr Chair: It is my humble belief that as Chair of the committee you should be in a position of impartiality. If you want to continue cross-examining the witnesses like this, maybe you should vacate the chair.

The Chair: As a former Chairman of the committee that worked on committee rules and House rules and having served under Michael Breaugh, the former esteemed member for Oshawa, who helped set up a lot of these traditions, I am doing no differently this afternoon than what Mr Breaugh did as Chairman for innumerable years here in the Legislature.

Mr Sorbara: I'm wondering if I could put in a request for a supplementary to the questions you've asked.

The Chair: I gave everybody lots of time for questions. I told the committee members two or three times that when you had finished all your questions I had a series of questions. Some people view them as adversarial; I'm sorry to hear that. Then I said that the Provincial Auditor had a short series of questions.

Mr Farnan: On a point of order, Mr Chairman: I have no objection to your asking questions. However, in fairness, I would think there are many members around the horseshoe here who would envy a time allocation equal to what you are enjoying.

The Chair: I checked the clock.

Mr Farnan: I would say to you that only in the area of time allocation maybe are you abusing the office of Chair. With 15 minutes remaining, I would suggest that five minutes be allocated to each caucus.

The Chair: I have no problem with that. I foresaw your point being asked and I appreciate the point you made.

Mr Farnan: Maybe it's time for the auditor to make a statement.

The Chair: I've done a quick tabulation and I have not used up any more time than any other individual member. As a matter of fact, I could name three members who have used up considerably more time than I have, which was their choice, which was the choice of the individual caucuses and the choice of this committee. I will make sure I do not use up any more time than any other members of the committee, but thank you for allowing me to do so.

I also want to ask Mr King, would there be a more appropriate person, other than yourself, who could answer the question about whether or not this is an arm's-length agreement?

Mr King: As I'd indicated to you, in order to make sure I can determine what options are available to us, not because I think it's a bad deal but because I think others might ask that question, I have retained for my own purposes a set of counsel in order to advise me on the matter, and I suspect they may be the ones, who are not working for either the investor or the tenant but for myself, who might be better able to answer a question like that.

The Chair: Thank you. The Provincial Auditor has some questions, and then we're going to have five minutes for each caucus, if they wish it.

Mr Peters: I'm asking my questions essentially because the motion on the floor is whether we should do a value-for-money audit. My questions are really aimed at getting some information that might help us to determine whether such an audit is appropriate and how we should proceed.

The first one, following up a little on these questions: Could you somehow develop for us, not tonight but at the next session, the legal framework within which the Workers' Compensation Board accident fund makes this investment, in the overall, so that there is a legal view as to what is arm's length and what is not arm's length, and how the fund is managed as opposed to how the board is managed, as a separate management, these sort of questions, to just determine what the legal framework is within which this operation takes place.

Mr King: Yes, we can do that.

Mr Peters: The second one, similarly, is whether you could also outline, maybe in a fairly concise form for the members to understand, the financial framework --

Mr King: I can't hear the question.

Mr Peters: I guess we lost the Chair for a moment -- what the financial framework is like, how the fund's flow is going to operate, what funds will flow to whom from whom. In this connection is a very specific question: You made reference to the borrowing, that the Workers' Compensation Board will borrow funds for this investment and not all the funds will be funded. The question is, does the board have the power to borrow? If you wouldn't mind addressing that particular question.

Mr King: Yes.

Mr Peters: The last one is just again on the value-for-money basis, because it might influence it. Once the decision was made to use the accident fund for the funding, did that in any way limit the extent of your search for alternatives? You can answer that directly if you wish, but I wanted to raise that question because once in your testimony you referred to the fact that the existence of the contract stopped you from doing certain things.

Mr King: Yes. The alternatives were no longer explored after the March 1991 meeting of the board of directors where the board directed the administration to proceed to negotiate the final items in the agreement with the partners: Cadillac Fairview, Toronto-Dominion Bank, Bramalea and CBC. It would have been from March 1991. Other alternatives were not looked at after that.

The Chair: Mr Callahan.

Mr Callahan: I just want to get this clear. The act prevents you from borrowing or purchasing land without consent of cabinet. Let's not use "Lieutenant Governor in Council." I always find that's deceiving to the public. It's the cabinet, the government.

What you did was, you set up a numbered company, which has the power to borrow, as an Ontario company does, which borrows the money to build the building along with its partners and thereby gets around WCB's no-no of doing these things without government approval. Isn't that right? And then WCB leases the building from that numbered company.

Somebody must have gone to a lawyer and asked that question, because it's a neat one. It's like, "How do we get a building built without having to go and get government approval?" The lawyer says, "Well, you can't do it under the act because it says you've got to have government approval." "So how can we do it?" "You can do it by setting up a numbered company," and the numbered company does the things I've just suggested. They become the inviolate corporate veil that you can't pierce, that has all the powers to borrow, to build and all the rest of it, and WCB just becomes a long-term tenant of that numbered company. That's exactly what happened, isn't it?


Mr King: Our investment fund or pension fund does not invest in real estate as the Workers' Compensation Board. It invests through numbered companies because if we go out and purchase an investment, we don't necessarily want it known it's us because it may affect price, it may affect whether someone is foreclosed and a few other things. So all of our investing on the real estate side is through numbered companies.

Mr Callahan: Okay, but that in fact gave you the ability to bypass the government, which is what was done.

Mr King: Look, this all happened before I got here when you guys were in there.

Mr Callahan: I know. No, no. When I say, "gave you," I'm talking in terms of the royal "you" -- not you "you," but the WCB. So, just finally, if it turns out that they're wrong -- I mean there's a principle in law that you cannot do indirectly what you can't do directly. It seems to me that's exactly what has happened here. You have done indirectly what you cannot do directly and as nice as that legal opinion may be, I think if it were to be found, it's more than just because of your pension fund that that's the reason it was done.

The people on the other side of the coin may very well find themselves faced with that proposition being thrown at them by a judge, that you've tried to get around the government. It's clear you did because the Treasurer didn't know about it. The Treasurer is reported as disclaiming any responsibility for this that he's going to talk you out of buying it and suddenly I see the government members over there praising the accolades of this whole thing. So I have to decide that the Treasurer has changed his mind. He's now in favour of it.

Mr Sorbara: Just following up on the Chair's questions and back to section 64, there is a sense that there is some qualification on the efficacy of this transaction because of the absence of cabinet approval, notwithstanding that the building is being invested in through the investment fund. The board becomes the tenant and there is a non-arm's-length transaction. As a real estate lawyer, I would look at the title and I would read section 64 and I would say, "Hmm, maybe there is not good title in the lease because the board has not done what it's required to do under section 64."

Now this matter, having been raised, can be cured very simply. The Workers' Compensation Board, subsequent to your arrival and before the deal is signed, can go to the cabinet and say: "Look, we are about to enter into this transaction. We think we have structured it in a way that does not force us to get your approval as the cabinet under section 64, but we would be airtight in this deal if we got cabinet approval. So would you please approve this to make sure that this real estate transaction cannot be challenged by any title searcher down the road?" Did you give that advice to the cabinet, to the chair or to anyone that cabinet approval be sought just to ensure this transaction could be airtight?

The Chair: Mr Sorbara, your time is up.

Mr Callahan: That's a good way to do it. I think Floyd will give it to you now.

Mr King: I cannot tell you in honesty whether I discussed this with the chair. It certainly went around in my own mind as to whether this possibility should be explored.

Mr Sorbara: Would it not be a good idea now to go to the cabinet and get its approval just to ensure that the deal is not attacked under section 64?

The Chair: Mr Sorbara, your time has expired. If there's an answer, I'll allow the answer. If there's no answer, we're going to move right along.

Mr Farnan: I think it's time we moved on to the next question.

The Chair: You're absolutely correct, Mr Farnan.

Mr Tilson: We'll ask the question. Do you not think it would be wise to receive permission from the cabinet?

Mr King: It probably would have been easier. I maybe don't understand the culture in Ontario, not having come from Ontario.

Mr Sorbara: The culture?

Mr King: Yes, the culture. Where I come from, the workers' compensation boards enjoys a true arm's-length relationship from government. I've served as chairman of the board in two different provinces and I never received an order from a minister.

Mr Tilson: Did they have numbered companies where you came from?

Mr King: To invest in real estate, we did.

Mr Tilson: Did you? Who are the shareholders of this numbered company?

Mr King: The WCB owns the shares.

Mr Tilson: I'm sure they are. Mrs Marland has a question.

Mrs Marland: Mr King, as the afternoon has proceeded, you have said that you can't answer some of the questions because you were not here at the time. However, did you not say that this final contract was signed in June of this year?

Mr King: That's correct.

Mrs Marland: Are you proud of that? I mean, you were here in June of this year. You've been here since April 1991. You said the final contract was signed in June of this year. You can't hide behind the shroud of "I wasn't here." You were vice-chairman when this contract was signed six months ago, and six months ago the economy of this province and the situation of available leased space in the greater Toronto area was the same as it is now. So are you proud of the agreement to build this 30-storey building on land that you don't own in the most expensive real estate in Toronto?

Mr King: I am personally not apologizing for anything I did during the period of time I have been here. I am proud that the WCB of Ontario has come up with the best possible business case for itself both as an investor and as a tenant. Unfortunately, the timing could probably not be worse.

Mrs Marland: Are you proud of the fact that you may have violated section 64 of the act?

Mr King: I believe it was sheer speculation that the board is in any violation of section 64. I have two and possibly three legal opinions from rather august law firms that we are not in violation of section 64. Rather than speculate, I believe your colleague suggested maybe legislative counsel might look at it before we begin pointing fingers about people in violation of the law.

Mrs Marland: And you're bringing those opinions tomorrow.

Mr King: That's correct.

The Chair: Mr Fletcher and then Mr Hayes.

Mr Fletcher: I'll defer to Mr Hayes.

Mr Hayes: Thank you, Mr Fletcher. Mr Chair, there have been a lot of accusations thrown back and forth and at the board and also at the Treasurer. Just for the record, because there are comments about whether the Treasurer was concerned at one time and is not concerned now, let me read from Hansard. This is from the Treasurer in response to a question from Mr Offer.

"It was my understanding that before the present chair of the board took his job at the board, an agreement had been reached, and I think unanimously, by the directors of the Workers' Compensation Board, including all of the employer representatives on the board, that such an arrangement should be struck and that they should proceed with the construction of a new building."

He also goes on to say: "I think you should separate my responsibilities from those of the board of directors of the Workers' Compensation Board.

"I did ask for a legal interpretation as to what extent what had already been done was legally binding on the board of directors. I didn't make any commitment to approve or disapprove of the project, because I'm sure the member opposite would not want us to become engaged in an expensive lawsuit if that was to be the final outcome. I've simply asked for a legal interpretation to determine just what the status is of the obligations already undertaken by the board of directors of the Workers' Compensation Board, not by me."

In other words, I believe the question is that the concern the Treasurer did have was that something had already taken place, a decision to do something before the present chair was even here or probably before even this government was here, and the Treasurer was finding out if he could really get involved, whether it be legally or not. I think that should certainly be put on the record.

Mr Tilson: He was here in June 1992.

Mr Farnan: Just a couple of quick questions: Prior to your arrival at the board, Mr King, and the arrival of Mr Di Santo, would it be fair to say that something of a head of steam had been generated around this issue and that in fact the activity around this issue increased with the imminent prospect of your arrival?

Mr King: I had indicated that the week before I was appointed and took office, the board of directors unanimously voted to proceed to the detailed negotiations on the project. I want to agree with one of the members on my right, however, that I accept responsibility for the decision at the present time. I'm not trying in any way to duck from that. You inherit something but then you have to make it your own. We inherited a unanimous opinion by the board of directors that they wanted to proceed with this building. We could probably have counselled that they stop and not proceed with it. I repeat what I said earlier, however, notwithstanding what one hopes is a short-term significant problem with commercial real estate in Toronto, that from any strategic point of view, this is a good decision from both an investment and a tenant point of view.

Mr Farnan: I think the point I'm trying to make is that the decision is not a decision in one day, one week, one month or a year. It's a decision that has some kind of continuity over several years and indeed over several administrations, I would suggest. I think the point that has to be emphasized, certainly to my community in Cambridge, is that if you are to walk away from this kind of decision, there are very serious consequences. Is that not the case?

Mr King: At this point in time, if we were to become in breach of contract, it would have very significant financial implications for the WCB.

Mr Farnan: The final summation then would be that you have a project that can provide accommodation at approximate market rental value but that would have severe consequences to the taxpayer ultimately were you to walk away from it.

Mr King: I stress the early part of our presentation. This is a good deal for both the Workers' Compensation Board as investor and the Workers' Compensation Board as tenant. It will improve the service to the public of Ontario, the employers and the workers of Ontario. It is a good deal for Ontario.

Mr Farnan: All of the worker reps and all of the business reps on the board unanimously supported the project?

Mr King: They unanimously supported the project in March 1991. There was one demurring vote in May 1992.

The Chair: Time has expired. The committee is adjourned until 10 am tomorrow.

The committee adjourned at 1803.