Legislative Assembly of Ontario

ANNUAL REPORT, PROVINCIAL AUDITOR, 1992 MINISTRY OF HOUSING

CONTENTS

Thursday 14 October 1993

Annual report, Provincial Auditor, 1992: Ministry of Housing

STANDING COMMITTEE ON PUBLIC ACCOUNTS

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

*Acting Chair / Président suppléant: Owens, Stephen (Scarborough Centre ND)

*Vice-Chair / Vice-Présidente: Poole, Dianne (Eglinton L)

*Bisson, Gilles (Cochrane South/-Sud ND)

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

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

*Frankford, Robert (Scarborough East/-Est ND)

*Marland, Margaret (Mississauga South/-Sud PC)

*Murphy, Tim (St George-St David L)

O'Connor, Larry (Durham-York ND)

*Perruzza, Anthony (Downsview ND)

Tilson, David (Dufferin-Peel PC)

*In attendance / présents

Substitutions present/ Membres remplaçants présents:

Harrington, Margaret H. (Niagara Falls ND) for Mr O'Connor

Also taking part / Autres participants et participantes:

Peters, Erik, Provincial Auditor

Peall, Gary, director, ministry and agency audit branches, Office of the Provincial Auditor

Clerk / Greffier: Decker, Todd

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

The committee met at 1016 in room 228.

ANNUAL REPORT, PROVINCIAL AUDITOR, 1992 MINISTRY OF HOUSING

The Vice-Chair (Ms Dianne Poole): Good morning. I'd like to open this session of the standing committee on public accounts. Our sole agenda item this morning is non-profit housing, Ministry of Housing, section 3.12 of the Provincial Auditor's 1992 annual report.

Normally, when we are compiling a draft report we hold the session in camera, but as we are actually beyond that stage and now, hopefully, at a final resolution of this particular report, unless there are objections from any caucus, I will proceed in open session.

You should have before you -- I believe it was sent out late last week to each of the offices -- a response from the Ministry of Housing dated October 4, addressed to Mr Todd Decker as clerk of the committee, and there are a number of appendices attached to that particular letter from the ministry. In that letter from the ministry, which is labelled exhibit 2/05/027, you will note that the ministry has provided the targets and time frames that we requested subsequent to our last meeting.

I'm going to open the floor. Any comments?

Mr Joseph Cordiano (Lawrence): I think we should proceed by having Ray take us through some of this and do a synopsis for us of what he was able to gather out of this, and perhaps have the auditor comment as well. I think it would be useful to catalogue and go through the series of initiatives that have been undertaken in terms of an action plan and how that relates to what we asked for. I think that would be the best approach to use.

The Vice-Chair: That seems like a reasonable approach. Ray, would you like to first of all take us through the procedure? As members will recall, we sent the draft report to the ministry for a response. There was a response which we didn't deem adequate because it wasn't in the format we required to answer the questions we had asked, nor did it include the dates and time frames we had requested. Ray had sent a letter to the ministry requesting this information, and we're now at the stage where the ministry has responded.

Mr Ray McLellan: Thank you very much, Madam Chair. I'll certainly await the auditor's comments on this letter of October 4 from the Ministry of Housing in addition to some of the brief comments I have.

As the Chair indicated, essentially what we're doing is trying to get a response from the ministry with respect to time lines on our recommendations and in turn its responses. We wanted some elaboration on where the ministry would be going on each of the recommendations and specific dates along the way as to when it would be achieving various aspects of its action plan.

Maybe I could take a few minutes and highlight some of the critical areas in this letter of October 4 to the clerk of the committee. There was some discussion by the ministry of its Jobs Ontario Homes program and the various objectives the ministry is attempting to achieve. They've outlined those objectives on the bottom of page 1 and on the top of page 2 of the letter to the committee.

The first recommendation the ministry deals with is recommendation 3, to do with development costs. In that response, the ministry said to us in July and again in October that there will be a new process to track information. In other words, they would be developing --

Interjection: There's a raccoon.

Mr Stephen Owens (Scarborough Centre): It's non-union labour.

Mr Gilles Bisson (Cochrane South): Let the record show that there is a raccoon in our proceedings.

Interjections.

The Vice-Chair: With the social contract we couldn't afford any labourers, so we had to import a few. Sorry, Ray; it's not that we're not taking you seriously.

Mr McLellan: No, I know. There are other items of interest in here today.

To continue, recommendation 3 was the first item the ministry has dealt with; that's item 1 at the bottom of page 2. I could read our recommendation; maybe that would be a helpful way to go about these proceedings. Our recommendation 3 was as follows:

"The Ministry of Housing should develop a comparative model of the non-profit program to assist in program management and future audits. The methodology should permit management to compare completed projects and those in the development phase on a consistent basis and to report on cost-effectiveness on an ongoing basis. Projected development costs and final capital costs or `actuals' should be maintained on a project basis, with reference to the three main cost components of land, construction and soft costs which would include insurance, for example."

The ministry has outlined on the bottom of page 2 what it hopes to be doing with respect to developing a system to track information on these specific figures in a comparative format. There is discussion also of two current systems that are under development which will accomplish this task. They list those on the bottom of page 2, "the non-profit budget review system" and "the non-profit 1414 evaluation system, which will track/compare/analyse the capital costs." Then the ministry goes on to outline its action plan: "The action plan for the development of the comparative model will be available in early 1994."

Should we stop there and allow members to comment?

The Vice-Chair: I would think if we have the auditor comment on that particular section as we go and then members comment, it may be less confusing than going through the entire thing and then going back and forth.

Mr Erik Peters: Gary Peall, who is with me, has gone in detail through the document because he was responsible for the audit and has prepared a little bit of a report. Overall, there's a time frame now indicated for all the action they have, and it's not an unreasonable time frame, considering the social contract and other constraints that the ministry finds itself in. Nevertheless, there are two or three areas of concern that remain.

The first one is really dealing with the issue of the operating agreements. The indication is that for the co-ops they will have operating agreements in place in March 1994, which is much later than they had previously indicated, and for the private and municipal projects only by December 1994, 14 months from now. This seems to be a much more long, drawn-out process than we had been given to understand when we conducted the audit and than the committee had been given to understand at previous appearances by the ministry, so this is one area of concern: the timing of completion. They may very well be realistic, but judging by the number of units out there, not to have agreements covering the operations would be of concern. We wanted to raise that with you.

Ms Margaret H. Harrington (Niagara Falls): Just for clarification, you said the co-op agreement was March 1994 and the non-profit was when?

Mr Peters: December 1994. That's an extrapolation we made from their response where they said 14 months from now. Most of the co-ops will be by December 1993, so around the corner, but the private and municipal, they indicate in their response, 14 months to go from the date of this letter; we had extrapolated that to be by the end of 1994. That is certainly one area of concern.

The second area of concern: It's more within the purview of the committee to address the issue rather than us from an audit point of view, but we raised the question of relating the needs analysis to the buffer. The buffer, as you know, was referred to by the ministry in its response to our audit report a year ago. They indicated that they were going to continue constructing a buffer in order to overcome potential shortcomings of non-profit housing in the future. At the last meeting at which we had the ministry before us, it indicated to the committee that it had a new methodology in place to analyse and develop need and demand for non-profit housing. Part of the question the committee included in its request was a question I had raised: to relate the new model of dealing with need and demand to the construction of the buffer, whether it had a particular impact.

The answer we have is that no, it does not. The policy -- this is a policy issue and I'm just putting it on the table as such, without any comment by us at all -- is to continue to build units above immediate need, as I understand the interpretation. That is for the committee to discuss, not for us, but it is a question that is before you and you might want to deal with it.

Essentially, the third issue is that when we look at the overall completion date for introducing these matters, if it were in your mind to ask my office to go back in and take a look at the situation in housing, probably the earliest date I would foresee this being effective and cost-effective, judging by the timetable and the action plan that is here, would be about a year from now, in the fall of 1994.

Mr Cordiano: Sorry, can you repeat that?

Mr Peters: The most useful time to go in, from an audit perspective, taking their action plan and timetable into consideration, would be to go back in about a year from now.

Finally, as a concluding comment, I merely mention this to you. As you know, there was a bit of debate going on as to whose model was right as to past cost. It seems, from the response and the way things are going, that that issue has passed. We were going ourselves, within our ordinary rotation, at one stage or another. I'm not sure we can commit ourselves to go in within the year, but certainly we look forward to being able to complete our audits without having to build models; that we're able to obtain actual cost numbers from the ministry without having to guess or use statistical sampling or other sampling techniques or modelling techniques, such as they did and we did.

I felt that was not a very productive way for the committee and for the Legislative Assembly to deal with these issues. We are really looking forward to have the ministry in sufficient shape to know, bluntly, where it has been and where it is going in terms of construction cost of units and costs of units.

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The Vice-Chair: We've actually adjusted the format somewhat. I probably wasn't clear enough. I had thought that Ray could go through the report recommendation by recommendation and at that time the auditor would comment only on that recommendation. But since the auditor has given us a number of his concerns, I suppose we should continue with that. We have Mrs Marland and then Mr Cordiano on the list.

Mrs Margaret Marland (Mississauga South): I agree with you, Madam Chair. We should still continue --

Interjection.

Mrs Marland: I haven't spoken yet.

The Vice-Chair: Until the committee gives me a different direction, I was just going to take the questions in a fairly informal way: first come, first served. If you prefer to do it by caucus rotation, we can certainly do that.

Mrs Marland: I agree with --

Mr Cordiano: I was just saying that we do it normally that way. Don't make an issue out of it. It's not an issue.

The Vice-Chair: Mrs Marland?

Mrs Marland: I agree with your suggestion, Madam Chair, that we do go back and let Ray continue taking us through on the next points. I think that on the first part, though, there are just some questions that I have to the auditor based on his beginning response.

The Vice-Chair: Now, this would be on the developmental costs? I just want to be clear. You're referring to what Ray spoke to or the auditor's comments?

Mrs Marland: Both. The main question we have is that the government is in the housing business and we need to know how much it's costing the people of this province. So in answer to the questions that have been raised since the auditor's report of last year, we're now getting, as I understand, some answers from the ministry, which is what this document represents. But, you know, it's interesting, if we're told that even these operating agreements, which have been of tremendous concern to the auditor and then to us since he brought this to our attention -- we're now looking at some of them still not being available until March of next year, which is, what, a year and a half since the concern was identified by the auditor. Then, even worse than that, we still have some operating agreements that aren't going to be ready until another year, 14 months from now.

Frankly, if that really is the answer from the ministry, that it can't have operating agreements in place until December 1994, then I think we've got to stop right here and decide whether that's something this committee will accept, because I don't accept the answer that it's because of the social contract. I think we're going to find around this province not only this government but every level of government saying, "Well, we can't do this, this and this because of the social contract."

The social contract doesn't mean there isn't any money at Queen's Park to do anything, and what has to happen at Queen's Park is that the government has to prioritize with the money that it has, and I don't think you allow a business component of the government, and housing is a business component of this government, to carry on without its operating agreements in place. It's like saying, "Go and do your thing, folks; tell us 14 months from now that you're willing to have everything down in writing and we will know exactly what it is that you're doing in that particular development," because that's when the operating agreement will be in place.

For me, that's bad enough, to have that void, but what compounds it, as far as I'm concerned, is that while all that is going on and we have this deferred deadline now of when we are going to get the complete information about how the government does its housing business, we still have the government enlarging this business it's in of affordable housing, so-called. It's questionable whether it's affordable at $319,000 a unit, as in some examples my leader, Mike Harris, has been indicating.

We're into a situation, by this response that Ray is starting to take us through this morning, that, as far as I'm concerned, is not an adequate response from the ministry. It's not good enough for me to understand that while they're talking about putting these review systems in, we still will not know -- we're talking about, on the top of page 3, where the action plan for the development of the comparative model will be available in early 1994.

What I want to know is how much the government's housing program is costing the taxpayers of this province and why they are prepared to let some of those programs continue without operating agreements until the end of next year, which is 14 months from now and will be almost two years, I think, if I'm correct. If I'm wrong, Mr Peters, correct me. Is December 1994 two years after your department identified that there was a question about value for money in that particular ministry's program? It was the fall of 1992, wasn't it?

Mr Peters: That's right. That's correct.

Mrs Marland: So we're talking about perhaps two years and three or four months. We're talking perhaps 28 months since the auditor identified, first of all, the question of $200 million, where did it go, and secondly, how much is this program costing?

As a member of this committee, I don't think I can sit here with all the politeness of us referring a report to the ministry and the ministry responding to the report, and yet the bottom line is that we still don't know what's going on. We don't know today what this program is costing the people of this province. In some cases we're saying, "Continue whatever you're doing, because we may not have your operating agreement signed and available until December 1994." Frankly, I don't think that's good enough.

The Acting Chair (Mr Stephen Owens): Are you finished, Margaret? Okay, Joe.

Mr Cordiano: Thank you, Mr Owens -- Mr Chair.

The Acting Chair: "Steve" will do.

Mr Cordiano: The presiding Chair. The two fundamental issues the auditor has pointed out have to be dealt with in order for us to complete the report. They are the most fundamental issues because -- let me deal with the second one first: the question of the buffer.

This is not a policy area, as far as I'm concerned. This is not a question of policy; this is a question of efficiency and effectiveness related to the marketplace. If you ignore that demand and need are a function of efficiency and how you relate to that question of how the ministry fulfils the need, if there is a need, then you simply ignore all economic consideration in fulfilling the need they've identified for a buffer.

If you're going to build units and undertake demand analysis studies and develop a model to do that, which it seems the ministry is undertaking, and then understand that what comes out of that analysis is a verifiable number determining what the demand will be and what the needs are in the community so you have a set requirement, if there is no demand and there is no need in certain communities and then you turn around in the same breath and say, "But on the other hand, we're going to build a buffer for some future need and some future demand," that cannot be justifiable in economic terms, as far as I'm concerned.

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So this is not a policy question. This is a question that very much involves the whole area of economic efficiency, which is after all what we're after in this committee. You cannot justify the creation of a buffer in the absence of demand for this product, because that, after all, has to be the true test of whether there is a true need for this type of housing. If there isn't a need, and that is, as the ministry has stated, determinable by the very fact that there is a model that's created to estimate what that need is, given certain sets of parameters -- I'm not suggesting for a moment that you can identify what need is in its exactitude. There is some variance there. But to this point we have not seen the ministry conduct or undertake that sort of approach to determining the question of need or demand in a community.

The question of a buffer then suggests that this is very much a policy decision on the part of the government to simply build as many units as can be built, given a certain level of funding that it deems to be available for the construction of these units. That number is determined quite apart from any economic consideration. That number is determined as a political consideration, as a policy statement of the administration.

Where the two cross over on this committee I think is exactly at that point, where it becomes economically inefficient or unjustifiable in an economic sense to determine what the demand is and if in fact a buffer is justifiable, given that there is no demand or there is no need. I'm not suggesting that that's the case in every area, but what I'm saying is that we don't have, to this date, a way of determining what the demand is in a number of communities. I think if you're looking at Metro Toronto perhaps you can estimate what the demand will be quite easily. On the surface of it, just by looking at it, you can suggest that there is a need for some affordable housing, for a certain level of affordable housing. What that level is has to be determined. Then you look at other communities where there are vacancy rates that are quite high now; is there a need for that type of housing? And if there is no need, then why are we building a buffer?

So this is the kind of question that I think needs to be resolved, because it speaks to the very heart of the matter about building a buffer. Building a buffer cannot be related back to demand and need. It just tells me that the ministry has decided to allocate 20,000 units, a number it picked out of thin air. Consequently, we're spending a whole lot of money that, to my mind, cannot be easily justified.

That is the first fundamental question that is of great concern to me, and I could not go along with a report that says we're satisfied at this point that the ministry understands that need-and-demand relationship as it deals with the question of economic efficiency and where you allocate units in the province related to that real need and demand. It certainly hasn't been proven, not in this document, and certainly hasn't been related in any other document previously. That's the first issue. I'm not satisfied that the ministry is committed to being efficient and to allocating units on the basis of a model that can be justified economically.

The second issue is operating agreements. I'm going to comment briefly on that, because I think we need to understand what it is that has prevented the ministry from setting up agreements in a timely fashion.

Ms Harrington: On a point of order, Madam Chair: I appreciate the members going into these issues, especially the operating agreements, but it was my understanding that this member in particular suggested that the clerk take us through this document. Before we go into further details, I believe we should have a look at this document -- hopefully, it will only take us 15 minutes or so -- so we can have a full discussion.

Mr Cordiano: That's fine, but I was talking about the two points that the auditor had indicated were fundamental. I agree, and these are points I've raised in numerous meetings, so perhaps I could finish this and then we could go through the document.

Point 14 in the report indicates that the ministry has time lines set with regard to operating agreements. We may want further clarification from the ministry on the reasons it could not have these operating agreements in place prior to this. There isn't an adequate explanation about operating agreements in this document. That's all I have to say about that.

The Vice-Chair: We have both Mr Bisson and Mrs Harrington on for questions. As we have heard from two caucuses, I think we'll hear from Mr Bisson. Then we'll move to Ray's briefing, and I would suggest that we do recommendation by recommendation; Ray can brief us on what our recommendation was, what the ministry's response was, then we'll entertain questions or comments from the members and then go on to the next recommendation, in that order, if that's acceptable.

Mr Anthony Perruzza (Downsview): Why don't we go through all the recommendations and then question or comment on all of them in a group as opposed to going through them individually? We can jot down our own notes as we go through them, and while someone has the floor, why shouldn't they be permitted to address each and every one of the recommendations they choose to address? I think it would expedite the matter.

The Vice-Chair: I guess it's a matter of process and how it's most efficient.

Mr Bisson: Can I be helpful? We started with a process and somehow got diverted. With sympathy for the Chair, there were a number of issues raised by both the Conservative and Liberal caucuses that I think need comment from the government members and from the ministry, and I'd like to get it on the record. Then we can move on and do exactly what you had in mind. I'm not going to take more than three or four minutes to try to get a couple of things straight.

First of all, I would remind members of the committee, both opposition parties, that the management process in place within the Ministry of Housing is a management process that was developed over a period of years, under both Conservative and Liberal administrations. If we're going to criticize, I think we need to look at ourselves a little, because we all at one point had very direct control over the policies of the Ministry of Housing and how the ministry actually did its business. It was when this government came forward in the Ministry of Housing to put a little more accountability into the system that really brings us to where we are now.

I'd like to speak both on the question of the buffer that Mr Cordiano raised and on the question of the operating agreements that Mrs Marland raised.

On the operating agreements, we're well aware that in the past there were no operating agreements. Operating agreements were never called for within the Ministry of Housing on any non-profit or co-op housing project. The way we as government, and both Liberal and Conservative governments before us, assured ourselves that public dollars were being spent wisely was by giving them budgets every year and going through the budgets line by line and item by item and saying, "This is where you've got to do better," or, "This is where you've got to be able to operate your units accordingly." To a certain extent, there was an accountability in the system by virtue of having to go through the budgets every year.

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It was this government that came forward, through the present Minister of Housing, and said we needed to go towards operating agreements as further checks and balances in the system, to make sure that indeed the taxpayers were getting a fair bang for their buck when it came to operating both non-profit and co-op housing. The idea of the operating agreements was exactly what the auditor called for.

One reason it has taken a bit of time to put forward is that operating agreements are a new thing in the province of Ontario. It has taken some time to sit down with the various groups out there, both non-profit and co-op, to negotiate what should be inside an operating agreement.

There's a recognition that there's some concern about making sure there's more accountability than what was afforded by the Ministry of Housing about those groups under previous governments. This government is addressing that and saying we need to go to operating agreements. It is going to take a bit of time to put forward, because we need to be able to negotiate what's in an operating agreement to start with.

I hear what the auditor has said and take that advice for what it is. Yes, we understand and we are moving forward.

On the question of buffers, this is really an interesting one. I look in my community of Timmins, where we built 205 non-profit housing units, both co-op and non-profit, from about 1990 to about 1991-92, because there hadn't been any built in a long time and there was a big, pent-up demand. The Ministry of Housing still refuses at this point to build -- my little plug to the Ministry of Housing -- any new units in that particular community because of the numbers of the CMHC in regard to how it looks at vacancy rates. I can tell you, having gone to a number of non-profit housing units and co-op housing units in my community, they fill up very quickly. There is a demand. There's a waiting list. I've got people coming into my constituency office trying to get into these units because they offer affordable housing units that are quality units at the same time.

Mr Cordiano raises the question of the buffer. What the ministry is trying to do around the buffer -- it's a bit of a new term -- is to take a look at the demand and the need of housing not just in the short term, saying, "What do I need today?" or "What did I need yesterday?" but to take a look over a longer period, 20 or 30 years. We need to make sure we have in our housing stock the required amount to meet the needs of not only today but where we're going to be a little further down the road.

If you look at most non-profit and co-op housing projects across the province -- I'll speak for Timmins, Iroquois Falls and Matheson: There aren't any vacancies. We can build another 150 units in that community and they would fill quite easily, because most of the need has been met by basement apartments that are, in some cases, fairly substandard when it comes to housing that's available to people.

Mrs Marland: Those are the apartments that your government wants to encourage: basement apartments.

Mr Bisson: Well, we can get into that debate. What that particular legislation is about is allowing that to happen but having certain regulations and making sure that municipalities have the right to inspect, because now, as you know, Mrs Marland, if I own a basement apartment or want to build one, I can basically tell the inspector to take a hike. The legislation will ensure that the municipalities have some power to send their inspectors in to make sure those particular units at least meet some minimum requirements.

I would finish by repeating very quickly three things. The system we have in place as of 1990-91 was built over a period of years by both previous governments, so if we're going to start pointing fingers, we need to look at ourselves to a certain extent. It is the Ministry of Housing today, under this government, that is moving on the operating agreements, because we recognize it's something we need to do. It's not going to happen overnight. It's going to take a little time to put together, because it is something --

Mrs Marland: The Conservatives didn't spend $319,000 on one unit.

The Vice-Chair: Mrs Marland, Mr Bisson has the floor.

Mr Bisson: It is going to take some time to put together by virtue of having to negotiate what's in those operating agreements with both non-profits and co-ops. As for the question of buffers, we can get into a long debate about what the actual need and demand is in our communities, because if I look at CMHC numbers they're quite a bit different from what the actual demand is. I think we need to put that into some perspective.

Mrs Marland: On a point of order, Madam Chairman.

The Vice-Chair: Mrs Marland, if it is a matter --

Mrs Marland: No, it's a point of order.

The Vice-Chair: I will recognize the point of order until such stage as I decide it's not a point of order.

Mrs Marland: Did the deputy minister tell us when he was before this committee that all the operating agreements would be completed this year, within a few months of the time he was here? Am I recalling that correctly?

The Vice-Chair: Although that is not a point of order, I would suspect that it is information that would be valuable to the committee. Mr McLellan, would you like to comment?

Mr McLellan: I don't have the documents before me and I'm not on the estimates committee, but I believe last summer the deputy minister did indicate it would be September of this year. I'd have to go back and pull out the estimates. That's my recollection, speaking with people on that committee.

Mrs Marland: I have to wonder what's happened, now that it's not September of this year but December of next year.

The Vice-Chair: I actually was a member of the estimates committee at that time. My recollection is that it was the fall of 1993 when they anticipated they would have the co-op agreements in place, but I don't have the Hansard with me.

Mr McLellan: I can check that.

Ms Harrington: On a point of order: Unfortunately, we don't have someone from the staff of the Ministry of Housing to answer the question of why. Seeing that that person isn't here, I'm wondering if we could proceed through the document we have. Certainly they may want to answer that question.

Mrs Marland: Maybe have them come to another meeting.

The Vice-Chair: As the operating agreements are dealt with under item 14 and there were several comments also about the buffer, which are dealt with in item 16, I'm going to suggest that we go back to our format. I talked to our researcher, Ray McLellan, and he had indicated that probably what would be helpful for the committee and from his perspective would be to go through the recommendations individually, and then just make a decision at that time if there is any further action needed or if we agree with the actions of the ministry. Some of them may go extremely quickly because the ministry has satisfied our concerns and others may require some debate.

Mr Cordiano: On a point of --

The Vice-Chair: Whatever.

Mr Cordiano: Not really a point of order but a point of clarification, trying to be useful. I don't mean to short-shrift Ray's efforts, and I think we should do as you suggest. I just want to say this: Having gone through the document, and we may decide to do this anyway, there are really only those two issues to deal with that are of fundamental consequence.

The others have been dealt with by the ministry. I'm satisfied that there is indeed some initiative in regard to the recommendations that we've made. I can agree with what the ministry has stated with regard to all the other questions. I'm satisfied that they are taking the necessary steps, and the time lines are adequate as far as I can see. There is an effort being made on behalf of the ministry to set some things in motion that I think are satisfactory to myself.

The other two questions are really where we part company as far as what I can agree with. I'm not satisfied on those two matters that the auditor has raised, and I think those run consistently throughout the hearings as being a fundamental difference of opinion between the ministry and myself, anyway: a buffer and the operating agreements time lines. I think there is some question about that.

Unless we deal with those two items and come to a resolution, we're going to have a difference of opinion that I think is quite fundamental and will have to be dealt with before we sign off on our report.

The Vice-Chair: If there is consensus that on the first 13 items in the Ministry of Housing's report the committee is satisfied with its response and the action taken at this time, I'm quite prepared to go directly to item 14, but I would like a consensus that there isn't anything to raise on the other matters.

Mrs Marland: No, I'd like to go through it, and as we go through it I'd still like to give Mr Peters the opportunity to comment. That's what this committee is about.

The Vice-Chair: I did ask the auditor if he had any comment on the first 13 items and he did say not really, that his comments were more on items 14 and 16. But if the committee wills it, I would suggest we go through each one, and we'll deal fairly quickly with some of the ones on which there's consensus.

Mr Cordiano: Whatever you want to do is fine.

Mr Bisson: If the opposition parties are saying they're okay with everything but two items, let's move to the two items we want to deal with and save ourselves a lot of --

The Vice-Chair: I think Mrs Marland indicated she has comments on the others.

Ray, would you like to go back? I think you had completed recommendation 3, other than comments or any discussion from members.

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Mr McLellan: I'll try to move along reasonably quickly, if I can. On item 2 on page 3, recommendation 4, I wanted to say that the committee did not submit recommendation 4 to the ministry for comment because that dealt with a follow-up audit by the Office of the Provincial Auditor. I should just go back, in terms of the report, also to recommendation 2. We did not submit recommendation 2 to the ministry. I should get some indication from the committee how I'm going to deal with these recommendations. I'll just read them quickly. This may be one of the areas where you want me to restructure the report. These two recommendations were not submitted:

"2. The Provincial Auditor should conduct a follow-up audit on the supplementary information, including actuals, to be submitted to the committee by the Ministry of Housing on non-profit housing units for the period 1989-91. The audit should establish the final costs and mix of non-profit residential units, and the differentials between actual costs and the maximum unit price."

As I just mentioned, recommendation 4 was not submitted, dealing with follow-up audits. It reads as follows:

"4. The Provincial Auditor should conduct a follow-up audit on the supplementary financial data on the actual program costs and the unit inventory requested from the Ministry of Housing. Also, the audit should address the ministry's information in the comparison of costs between the public and private sectors, subject to the availability of data."

Whether or not the committee wants to set these two recommendations aside and deal perhaps with a consolidating recommendation at the end, saying that the Provincial Auditor would be requested to go in, I believe he had indicated in the fall of 1994, whether or not we want to deal with that issue now -- if we do, we'll just delete recommendations 2 and 4.

Mrs Marland: Why didn't we submit those two?

Mr McLellan: The committee decided not to submit them because it was dealing with a follow-up audit.

Mrs Marland: Okay. As far as I'm concerned, they're two of the most relevant and important recommendations of this committee.

Mr McLellan: I guess the committee felt we should hold those back, and that's what we'd deal with.

Mrs Marland: That's fine.

Mr McLellan: I think it was more of an informational mission we were on, with trying to gather --

Mrs Marland: What I'm saying is they are --

Mr McLellan: Important.

Mrs Marland: Very important. I understand your answer, why we didn't submit them with these others, but they have to be a very important part. I don't care if you put them together and reword them in one recommendation, but as far as I'm concerned, that's saying to the ministry, "We want to know the cost of doing business, this business that you're in."

The Vice-Chair: The auditor has a comment.

Mr Peters: Just a very brief one: On recommendation 2, we had a lengthy discussion. The ministry had identified something close to 90 person-weeks to determine the information for the years 1989-91, to get this. I at the time made the suggestion to the committee to maybe relent on this one and let them focus on developing a system so they knew what was going on in terms of costing at the present basis. That was the reason for deleting number 2, whether it was worth spending that kind of effort to go into the past, and to resolve which of the models was right based on actual expenditures. So we worked from an audit perspective.

With your indulgence, I would prefer to take a look at the costing system they have in place now, how they know now what it costs them by project and how they are controlling cost now, rather than taking resources out of them, 90 man-weeks, to determine whether they were right or wrong in the past.

Mrs Marland: Does that mean then, Erik, that we'll never know what that program cost for those four years?

Mr Peters: We have accepted that they don't know. Yes, we would not know.

Mrs Marland: So the only way we'd know what that program cost for those four years would be to invest in this 90 person -- what? How long did you say?

Mr Peters: It's 90 person-weeks.

Mrs Marland: In other words, the only way we can find out how much the program cost from 1989 to 1993 is by their spending some money?

Mr Peters: I'm just being informed that they have informed us that they are going to work on this project anyway.

Mrs Marland: Oh, they are going to find out the program costs from 1989.

Mr Peters: Yes, and they hope they have an answer by December 1993.

Mrs Marland: That's fine.

Mr Peters: It's just a question of what we do as far as the audit process is concerned.

Mrs Marland: Okay. So they're going to give us their figures about what they think the program has cost in those four years by the end of this year.

Mr Gary Peall: They haven't endeavoured to give the figures, but they're going to have the data verified by the end of December, as part of getting their system ready to take on the new projects, which will be ready by, I think, about the summer of 1994. So the data should be available in verified form by December. You'd probably have to request it.

The Vice-Chair: We could make that an official request of our committee, that once the data are available, they be made available to our committee.

Mrs Marland: We've been asking for it all along.

The Vice-Chair: We have asked for it in the past, but I would think that if you make an official request, that as soon as it is available they submit it to our committee, it reinforces that we are still anxious to have it.

Mrs Marland: Definitely. When do we do that?

The Vice-Chair: At the end of our morning, hopefully we'll reach the point where we're making a decision as to further action, one of which may be to write the Ministry of Housing with outstanding items or pieces of information that we require. It could be part of that letter.

Mr Cordiano: I think that might be useful information to a point. I don't think it necessarily prevents us or precludes us from completing this report. I would not want to sit here until December to be able to conclude the report that we have before us today. That might be useful for us in an ongoing fashion, to come back to the question of, does the ministry understand historical data and does it now have a database to work from which can be useful in the future? Of course, we look at historical data and say that there were problems with it.

I think we can assume today that having operated without -- I hope Mrs Marland is listening to this. I hope she would realize that having operated without understanding what true costs are is exactly why we are here today and have been analysing this question.

The fact of the matter is that the ministry did not have a good handle on costs, but we still do have aggregate sums that we can point to. We do know how much things are costing in total. We have budgets from the Ministry of Housing. The aggregate sum is at this point quite irrelevant to this issue because what we need to know is, does the ministry have a plan in place, does it have a system in place which will then give it valuable information to make decisions around what is an efficient use of moneys that are allocated for this thing? That's the point at which we have to conclude this report soon, because I say that dealing with the question of the buffer is still a fundamental question.

The Vice-Chair: One of the possibilities would be to have a recommendation that the ministry report back to us subsequent to December 1993, when it has the historical data on costing available. We could deal with it in that way if that's acceptable to members of the committee.

Ms Harrington: I think our first duty as a committee, as Mr Cordiano has said, is to get a report together, and we do have the response of the ministry. It's up to us today to affix it with the preliminary report that we had from last May and table a report and certainly come back, if you wish, to look at the information that's available in December.

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The Vice-Chair: If we seem to have a consensus on that issue, that we will make that request of the ministry --

Mr Cordiano: Yes, there is.

The Vice-Chair: -- and that we will proceed with the report, can we go on to item 3.

Mr Bisson: Hold it. What request are we making?

The Vice-Chair: Just that when the Ministry of Housing completes its analysis of the costing information, historical --

Mr Bisson: The costing system is in place that --

The Vice-Chair: No, the auditor had said that the Ministry of Housing is currently tabulating the historical data on costing from the previous years and that it anticipated it would conclude this around December 1993. So we would just ask that once those data are available, they be submitted to the committee.

Mr Bisson: Okay.

Mr Noel Duignan (Halton North): No problem with that.

The Vice-Chair: No problem? Item 3.

Mr McLellan: The next issue is "Highest and Best Use Appraisal Value methodology. The committee's draft recommendation 5 is as follows:

"The Ministry of Housing should assess the `highest and best use appraisal' methodology to determine whether this approach is achieving value for money in non-profit housing real estate transactions."

The ministry has come back to us on item 3 to say that the Ministry of Housing staff are in the process of reviewing current appraisal methods and that there's a consideration that the appraisal could integrate the various investigative reports required by the Jobs Ontario Homes program, and they're listed in that third paragraph, which include environmental site assessment, planning reports, geotechnical and architectural studies etc.

Then there's an action plan at the bottom of page 3 and the top of page 4, running down to the centre, as to the time line as to how and when they'll be proceeding with that review and assessment.

Mrs Marland: I have a question on this. You know what's difficult -- and I think Ms Harrington has raised a good point this morning -- is that we're going through the ministry response and there's nobody here to answer questions that we have on the ministry response. I have a feeling this morning we're doing this backwards because --

Interjection.

Mrs Marland: Well, you may disagree, but is it fair for me to ask Ray or does the parliamentary assistant want to answer my questions? Ray can't answer my questions about the ministry response. All we've got here is their printed response. So okay, I'll go ahead and I'll ask questions and it'll be interesting to see who can answer them.

The question that I have is this --

Mr Duignan: A point of clarification, Madam Chair.

The Vice-Chair: Mr Cordiano, and then -- it doesn't exist, Mr Duignan.

Mr Cordiano: Just to be fair, Margaret, I think --

Mrs Marland: No, I can only listen to one person, so if you've got the floor I'll listen to you.

Mr Cordiano: I have the floor.

The Vice-Chair: Mr Cordiano has the floor and then --

Mr Cordiano: Thank you. That's very thoughtful of you. I just want to say that we've had the ministry before us quite a number of times and I think it was important for us that this is its final answer to us as to what action it has initiated in regard to that list we put together. This is, remember, after some considerable time that we had the ministry before us answering questions around the auditor's report and a number of other initiatives that had been undertaken by this committee.

I felt it would be appropriate to have our committee now come to a conclusion on this report, given this document that was prepared by the ministry, and this is its final assessment of what it can do in regard to the requests we made and the questions we had for it. This is basically a conclusion of that process. If we have to call the ministry back, I'm sure there'll be significant information, more information that we'll have to deal with and this process continues. So it really is a matter -- in my opinion, I thought that's what we would do today.

Ms Harrington: Madam Chair, just a point of clarification --

The Vice-Chair: First we had Mr Duignan. I should just say to members that although we as a practice use points of clarification, points of information and all these wonderful terms quite often, they don't actually exist. If you wish the Chair's attention, it has to be a point of order --

Mr Duignan: Point of order, then.

The Vice-Chair: -- at which stage I recognize it or don't. Mr Duignan.

Mr Duignan: Joe has said a lot of what I was going to say. We're here to consider a draft report. Normally a draft report is considered by committee, generally in camera and there's nobody else in here, only the committee, to consider the report. I totally agree with Joe. Let's get on and deal with it. Otherwise, this thing will be going on and on for years.

Ms Harrington: Just to clarify, it's my understanding that the staff could have been here but they were told they were not to come. Maybe Mr Cordiano could verify that.

Mr Cordiano: Let me just say, if I may, and this is an awkward position, because I'm normally the Chair on the committee, this is a response to the request we made of the ministry and it really ties back to our report. It's a consideration of the committee to deal with this, and if the committee felt that it was necessary to have the ministry back, then I suppose the committee can make that decision. But I thought that we would deal with what it was on the face of what we had before us in terms of information and then get a consensus around whether we can accept this or move to further action or have the ministry come before us again.

I'm speaking in my capacity as Chair normally, but that's the way I felt it would go.

The Vice-Chair: Just from my past experience in the last six years on various committees, when we get to the stage that we are considering our final action on a report, normally we do not ask ministry representatives to attend to answer further questions. Since we have, on several separate occasions, invited the ministry back to answer outstanding questions, I think at this stage we have to just make the decision whether we accept what the ministry has offered us as its recommendations of solving the problem or whether we don't.

I think at this stage we should proceed.

Mrs Marland: No. I think at this stage I have a right to ask a question, if you don't mind.

The Vice-Chair: Mrs Marland, you certainly have that right. We had dealt with the matter you raised and you did not raise your hand indicating that you had further questions.

Mrs Marland: Actually, I was interrupted, so I felt I still had the floor, if we're going to be a little technical.

We're here to consider the ministry response to our report. You may talk about your six years; I can talk about my eight years and how we deal with a committee drafting a report. What is before us this morning is the ministerial response. If something is changing on this committee, I would like to know -- this ministerial response is only that; it doesn't become part of our report. Is that correct?

The Vice-Chair: Not necessarily. In fact, one of the suggestions has been that the ministry's responses are appended to our report.

Mrs Marland: Then your answer is different than Mr Cordiano's, because he's just said that I was correct. It's not my experience that the ministry's response becomes part of the report. I don't have any difficulty if that's what's going to happen, but I would like that answer. I would like to know now what the direction of the committee is. Will this response from the ministry be part of our report?

The Vice-Chair: I could perhaps answer part of that question from a procedural point of view. On a number of occasions when I have been on the public accounts committee in the past, we have not issued a draft report to the ministry for a response. It is not always the case -- in fact, in my experience it has been the reverse, that we don't normally give them a draft report to respond to. So we aren't necessarily operating with something --

Mrs Marland: So you're saying we haven't done this before.

The Vice-Chair: I'm not saying that we have never done this before. It is not the normal course of events where we issue a draft report, send it to the ministry, get a response and do a final report.

Mrs Marland: Okay. My question is, we've done it in this case and we do have a response; what are we going to do with it?

The Vice-Chair: Just prior to your arrival we had had a very informal discussion about it, since committee had not started, just saying, "What do we do in this particular instance?" There were a number of suggestions, one of which was that we would have our draft report, we would have the ministry's two responses appended as exhibits and the committee would make a fairly brief summary report of what our conclusion was as to the ministry's response and further recommendations. But there has been no formal discussion. I think that was something we were going to deal with at the end, but if you wish to instigate that now, that would be fine.

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Mrs Marland: You were just referring to an informal discussion off the record before we started the committee with Hansard recording that. So that clarification is important.

Okay, if that might be the case, then what we're looking at might be an appendix to our report, which I don't have any difficulty with. Then I have to ask questions on the record in order to get answers on the record about some of these things, and item 3 is where we are.

It says here that, "Ministry of Housing staff are in the process of reviewing current appraisal methods to ensure that adjustments to current market conditions are made."

Obviously the Ministry of Housing staff are well aware of at least the concerns of our caucus about this very pivotal point in the cost of government housing because of the fact that we have some horrible and blatant examples of where land flips have taken place and the cost of that particular project has been escalated because of what has gone on in the process of the project coming to the bricks-and-mortar stage. So I'm not satisfied, personally, with this particular answer, because it doesn't ensure that the public isn't going to be paying inflated prices through land flips. It simply says, "to ensure that adjustments to current market conditions are made."

You see, where they've got into problems is where "a market price" you would think would have been paid, and six months later, when the market didn't necessarily change, an internal organization within a non-profit group was able to sell it internally from one pocket to the other, essentially. The one that I'm trying to recall the name for -- I think it's the Woodgreen community in the east end of Toronto. If it isn't, I apologize to them and their project if I have the wrong name, but that's one of the examples we've had, which I think you, Madam Chair, also were very gravely concerned about in your other hat.

Then we go on to the third paragraph under item 3 in their response, where they say that:

"The appraisal will integrate the various investigative reports required under the Jobs Ontario Homes program. These include environmental site assessments, planning reports, geotechnical and architectural studies. The land value will then be adjusted to reflect the costs associated with the conclusions derived from these reports."

Well, you know, somebody has to pay for those reports.

Mr Cordiano: Of course. But they're being done.

Mrs Marland: The point that I want to make is that when you get into all these consultants, especially if you're looking at architectural studies, you have to wonder where that comes into the actual appraisal of the property. The environmental site assessments very often come under the geotechnical assessments of that property, and we've had some examples where that's the very thing that has been found as a reason not to buy the property. So I don't see those as items that have to necessarily fall under the appraisal of the market value of that land, and I'm wondering if the auditor has any comment on this aspect of the argument.

Mr Peters: Just a very brief one, and that is that the ministry will hopefully watch very carefully the timing of this, because, according to the document it has provided, which is applying to develop non-profit projects, by the time the complete appraisal component is in place we will have about 8,000 proponent calls out there; that's the first and second wave. It will have to be a matter of very sound managerial judgement as to how to deal with proponent calls that come in and require appraisals before the guidelines are completed.

Mrs Marland: You're saying we may have 8,000 proposals out there for -- how many units are we talking about?

Mr Peters: It's 8,000 units out of the 20,000. They outlined that the call will be first- and second-wave. I'm referring to page 11 of this document, in which they outline the waves in which these 20,000 units will be allocated. By December 1993, which we're looking at, the proponent calls will be out for 8,000 of the 20,000.

Mrs Marland: This is one of the points that our PC caucus has been trying to make, that a very large inherent cost in this non-profit housing program is found in all the consultants' fees and studies. I just don't see how this answer fits with our concern. Basically, I think our recommendation 5 was trying to address the fact that we wanted to be sure they got the land for the best price. Their answer is that they're reviewing the current methods, and the second part is that in that review they will plan to have the appraisal integrate all these various reports.

If you look at those four areas they talk about, it's very interesting, because some architectural firms will take on a project and after they get the job, of course, the planning component is part of their responsibility, and obviously soil testing and stuff, which comes under the geotechnical. I just don't know whether you really have to include all those things in the base appraisal price of the land. If we do, that's where these properties end up costing so much in these programs, because everybody jumps on the gravy train and all these consultants think: "This is marvellous, because this is exactly what we're looking for. This is a government money tree."

I'm just placing on the record that I'm not satisfied with that answer to our recommendation 5, their answer in their letter of October 4, 1993, on page 3, item 3. I don't see this answer giving us the assurance we need that it's really going to have the kind of close-reined control on the price of land and how that land price has been appraised, how that land price has been concluded. I just don't see that this answer is going to give us the security on that very important factor in the cost of non-profit housing. I see it as being an answer that gives them a lot of latitude, because they can turn around and say, "Yes, somebody said it was $2,000 an acre, but by the time we did the geotechnical studies and the architectural studies and the environmental site assessments and then of course the planning reports, well, it's not $2,000 an acre any more," it's whatever. I'm simply saying I don't find those costs to be fair in looking at the appraisal methodology.

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Mr Cordiano: On a point of order, if I may: I hear what Mrs Marland is saying with regard to those questions and I think she makes some valuable points, but I think it would be appropriate to have the auditor comment on why it is to his satisfaction that the ministry has complied with what we wanted resolved on this item. I don't think that's been done in its full detail, because with respect to these additional costs, I think it could be said that if any private sector development was moving forward, they would have to incur these costs as well. Could you elaborate on that. Would that be helpful?

The Vice-Chair: Any further comment on either Mrs Marland's or Mr Cordiano's suggestions?

Mr Peall: What Mr Cordiano said is basically correct. The private sector would have to incur those types of studies in arriving at a fair value to pay for the land.

An important thing to recognize with the new program, though, is that site selection is done as a second process after the group has been selected. In the programs we were auditing, the problem was that the site had been selected by the group, often at the same time that the whole thing was being considered, and they were getting preliminary approval to buy land because land prices were rising so quickly. Consequently, the ministry was incurring the interest costs on those lands for the whole time it took to approve the project to go ahead and work out all the details. That portion of the cost is now going to be obviated because they're going to be approving the site after they've gone through with the group and made sure that they can deliver a project.

As far as doing those studies is concerned, I think they are important, because we did identify problems, and it was reported in the detailed report, where they didn't do proper environmental studies and paid too much for land cleanup. The sponsoring group paid too much for the land, not knowing that those costs were going to be incurred after the fact, and of course it's government money that ends up paying for that. Yes, there are costs associated with that, but I think they're necessary if we're going to make sure we're getting fair value for the land.

Mrs Marland: The first few things you said I agreed with. But do you think it's fair that the government -- it is the taxpayers of the province who are going to pay for these studies to be done. What you're saying is that having these studies done secures the next step of whether the project goes ahead or not, so what I'm asking is, if I form my busy bee quilting group that wants to do the next non-profit housing project, I can go ahead and get all these studies done and the government is going to pay for them?

Mr Peall: No, that's not my understanding. As I say, they have to select the group first to make sure they're qualified. Once they have brought forth the concept and the proposal they've got, it then goes into the site selection phase. The ministry is involved with the site selection process. They'll force the group to get their appraisals and go through the hoops of getting the proper assessments done so that all that groundwork is there before the ministry approves the next phase and advances money to go ahead.

Mrs Marland: But the ministry will give them the money to do these studies.

Mr Peall: Yes, they have some development financing that they provide to groups to do that.

Mrs Marland: That's what I thought.

Mr Cordiano: Can I get a point of clarification from Mrs Marland? This is significant.

The Vice-Chair: Okay. Mr Cordiano, then the auditor, and Mr McClelland has comments.

Mr Cordiano: Would she be saying that that kind of initial funding, once approval has been made, shouldn't be considered by the ministry, that that kind of funding should not be available for those groups?

Mrs Marland: You're trying to get me to say that I think those groups should provide the funding, and I certainly don't agree with that. All I'm saying is that you only have to look at some of the groups that come forward to know that there isn't any expertise in the group for the development of multimillion-dollar projects. What is within the group is a community spirit where they want to do something for the community. That's why they often organize and decide that this is what they want to do. I've worked with these groups for about 15 years now, and I know that the intent of the group, as a community group, is based on how their heartfelt concern revolves about people within their community. But I also know that those groups, for the most part, do not have any expertise in land development or buildings and construction.

They know there's money there to do non-profit housing programs, so they come forward, without any expertise, and say to the government, "We want to organize such-and-such non-profit group." At that point, is the government going to turn around and say to them, "Okay, we need this, this and this done on the property before we can approve that piece of property being considered for that particular project"?

Mr Cordiano: Can I just comment?

Mrs Marland: When they do that, when they get to that point, I think the auditor's answer is that now, before they're given permission to look at a specific piece of land for their project, they have to have had all these studies done. I think this is where there is a very major cost to the program. It would also be a major cost to the program, I recognize, if they went ahead and bought something where it was contaminated land. We go back to the Liberal government's Ataratiri project, where we were going to do all this land development on land that wasn't even able to be cleaned up.

Mr Cordiano: What are you saying, Margaret? I don't understand that.

Mrs Marland: I recognize the importance of it.

Mr Duignan: You should look for equal time there, Joe.

Mr Cordiano: Madam Chair, let me just comment on that, because I think if we're going to go through this, we have to go through it in a systematic fashion. I'm speaking as a critic for my party, and I want to understand if there's a disagreement with what's been put forward in each of these areas which essentially the auditor is agreeing with.

This is a new system that's been put in place. It attempts to screen the applicants for their validity as a viable group with some expertise, at which point site approval will be granted, only after the group has been accepted by the ministry, listing a number of criteria it's going to follow.

That is obviously my understanding from the auditor. That, to me, is an improvement over the current system, or what happened in the past where, as was pointed out by the auditor's office, there wasn't that kind of consideration. This is certainly an improvement. It's an effort to reduce mishaps and allocations of land with groups and the escalation of cost. I'm satisfied with this approach the ministry is taking, and I just want to try and get to what Mrs Marland is saying, because I don't understand. Is she unhappy with the ministry's response? What part of it are you not satisfied with? Perhaps I can get a better clarification of that, because I don't follow what it is that we're dissatisfied with. I mean that in all sincerity; I'm not trying to be facetious.

Mrs Marland: There has to be a route to achieve what the ministry wants to do. In the long run, what the ministry is saying here does protect the project down the road, but my concern is that there is an expense to this route if this route is not very closely monitored. If you say to me, with my non-profit group, "Go out and get all these things done, get your geotechnical and your architectural" -- for example, I don't know why you need the architectural at that point anyway, but it's, "Go out and get all these studies done." Then it says the land value will then be adjusted to reflect the cost associated with the conclusions. Well, land value is always directly related to what you can do with it.

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I'm not sure whether there are enough controls in the ministry to say to these applicants to go and get (a), (b) and (c) done, and in the meantime -- I mean, so often they come to you and say, "I've got developer C, and he's going to hold this land for us"; the group wants to get on with it. I'm just wondering whether the government says to them that they can't take any steps until, as it refers to here, planning reports are done. Obviously, planning reports haven't worked.

When Gilles talks about the fact that these problems have existed under every government, it's under the current government that -- I think your minister actually said it started under the Liberal government on that particular example of $319,000 a unit. But that was a planning issue; that was an issue where the zoning density that was permitted was half what the proponent, the non-profit group, wanted to build.

I'm not sure, Mr Peters, whether these answers address and give enough protection to the taxpayers. If you're satisfied --

Mr Cordiano: Is that good enough?

Mrs Marland: Obviously, you see something in these answers that I don't, but if you're satisfied that an example such as the Beaches example of the $319,000 a unit wouldn't happen again now that the ministry has decided to get these studies done first which "include planning reports," then what that says is you're not going to have a non-profit group come forward and spend $2.3 million on four units because it takes two years to go through the planning report stage to get a property rezoned to increase the density to meet the number of units they want to build, and then maybe it's appealed to the OMB and they lose at the OMB. In the meantime, thousands of dollars could have been spent on that project.

If the land value is going to be adjusted to these tools, as it says, and the planning report is going to be one of the tools, that may take years. We've got a perfect example of where that's happened.

I'm simply saying yes, some of these assessments have to be done, but I don't think we can sit back and think, "They're going to be done, and that's going to give us the security." I think there has to be a limit on how much these assessments cost and that they don't have a free rein to hire consultant A, B and C because they've done government work before and they know how to get through the hoops.

The ministry has some kind of pattern. When we know they don't have any operating agreements, I have to wonder what kind of guidelines they have that implement what this third paragraph on item 3 is saying. If you think from your discussion with the ministry that it's going to say to proponent groups, "You've got to get all these studies done, but this is how much you spend on your architectural study, your geotechnical and your planning reports and your environmental site assessments; this is what a budget is for this kind of work to be done," and if there's a cap on that budget and there's a time on that budget -- because certainly that's where the escalation in cost evolves: when it takes a lot of time. I can tell you, in a municipality like Mississauga you don't just breeze through a planning report based on whoever the proponent is. Mississauga is very cautious and very strict about its planning.

The Vice-Chair: The auditor has been waiting very patiently to address this particular point, and then we have Mr Owens.

Mr Peters: To help in answering your question, I just want to reiterate to you what process we went through. We took into consideration -- we combined this, actually, with the other answers; we did not take this particular paragraph in isolation. For example, in item 4 they said they're in the process of putting in competitive procurement practices. In item 5, they were saying they have handbooks on development covering environmental consultant services, architectural services, planning consultant services and development consultant and resource group services. Again, they are planning to have that in place by the next month.

There are also further statements made about detailed cost analysis, operating cost budget norms and standards, all of which seem to be -- maybe not the latter; it's scheduled for completion by June. Taking what was said into consideration gave the satisfaction, but in isolation, each of these steps -- and there is some sympathy, I must admit, for the ministry on our part, actually quite a lot, because we have dictated, by the way we phrased our questions, the sequence, the breaking down into components. They indicated to us already that they had some difficulty in answering in those components. If we are, in a way, taking individual components of their response, we may end up possibly with an unsatisfactory situation which may be resolved through a response elsewhere in the document. I'm not sure whether you have had the chance to read the document in that kind of detail. We have tried to in the little time we had available. It was really by putting those things together that we ended up with some satisfaction.

Mrs Marland: That's great; that has answered my question.

Mr Owens: If Margaret is happy, I was just going to ask her a question with respect to municipal cooperation and the construction of co-op and non-profit housing. I'm familiar with a project, for instance, in my colleague's riding of Scarborough East, where there is absolutely no need to go to OMB and do all the "zoned appropriately." It took these folks six years to get through the municipal process.

My concern is that when you start talking about capping costs, if you have another level of government, for whatever reason -- I'm trying to choose my words carefully -- playing with the process and forcing people into other avenues, then I think there are going to be a number of problems, the least of which will still be no reduction to the list of people who are waiting for affordable housing, whether it's non-profit or cooperative housing units.

Maybe the kind of recommendation I would be interested in, in terms of value for dollar, is how we could take a look, through the Ministry of Municipal Affairs, at dealing with these recalcitrant councils. I have no doubt that Hazel McCallion and her respective council bend over backwards to make sure that Mississauga has its fair share of --

Mr Robert V. Callahan (Brampton South): We'll send a copy of that to Hazel. She'll love you for that.

Mr Owens: I'm sure she will, and I won't start my car for the next two years.

In terms of the value-for-dollar question, there's that unknown variable out there with respect to costs that the Ministry of Housing as well as the proponents have absolutely no control over, so I'm a little bit nervous when it comes down to discussion about capping costs and having set amounts of soft-cost dollars allocated per project.

1150

The Vice-Chair: It appears that Mrs Marland is satisfied with the auditor's response. It's good too that the auditor pointed out not to make the mistake of taking these in isolation, because it fits together as a package.

If there are no further questions on item 3, we'll go to item 4.

Mr McLellan: Item 4, recommendation 6, competitive procurement practices: "The Ministry of Housing should adopt a directive on competitive procurement practices to ensure that administrative procedures are followed to promote economy, efficiency and effectiveness in the development of residential units in the non-profit housing program."

As the auditor just mentioned a moment ago, there is discussion here to follow a competitive approach. The ministry says as follows: "As part of the program requirements, non-profit groups will be expected to hire all technical consultants and service providers by using a competitive approach." This affirms what the ministry had said to us back in July.

It continues on in discussion of the requirements of the sponsor groups and the handbooks, that the "program material will stress the requirements for a competitive approach in the selection of consultants." That's an issue the committee had been quite concerned about during the hearings earlier this year.

Again, we have discussion of the five handbooks that will be distributed and the action plan, on the bottom of page 5 going up to the top of page 6.

The Vice-Chair: Does the auditor have a comment?

Mr Peters: Yes, one very brief one. One item that is not mentioned that might be worthwhile inquiring about is the ministry's policy with respect to turnkey or modified turnkey practices. Maybe, Mrs Marland, that's what you were referring to in some of this. In other words, the turnkey is where the whole project is delivered, and how do they ensure competitiveness in those proposals? That is not mentioned. That is possibly one area where a further question may be raised.

Mrs Marland: Can we add that?

Mr McLellan: In the May draft report, on page 21 we do discuss the turnkey and modified turnkey projects and the competitive nature of these. It is addressed in that second paragraph in the draft report.

Mr Peters: In their response as well?

Mr McLellan: No, not in their response, but in this report.

Mr Peters: That's what I referred to: whether we could ask them to respond to that.

The Vice-Chair: If there isn't any further discussion, we'll go to item 5.

Mr McLellan: Item 5, development consultants. Recommendation 7 reads as follows:

"The Ministry of Housing should adopt a directive to ensure that all qualified development consultants have an opportunity to tender on non-profit housing projects in a competitive format."

In July the ministry had said it would be addressing the fee structure based on services. There was some discussion, when the ministry was here, on that movement to payment of fees based on services rather than total project cost.

The ministry, on page 6, discusses its new handbook, the new fee schedule and what it refers to as "lower development fees." In the fourth paragraph they talk about encouraging a competitive selection process for consultants. At the top of page 7 there is discussion by the ministry of the revised service and fee structure, and the action plan's on page 7 as to the implementation between now and December 1993.

The Vice-Chair: Any discussion on that?

Mrs Marland: In the fourth paragraph on page 6, under item 5, it says, "There will be no mandatory selection by tender but groups will be encouraged to select development consultants on a competitive basis." What does that mean, do you think?

Mr Peters: If I may, the way I read it was that they tried to explain it in the next paragraph, where they said they want to ensure that groups have a choice in the selection and they really encourage them. I would agree with you that is a bit soft.

Mrs Marland: It's a bit scary. You know why? Because --

The Vice-Chair: One point of clarification on that. It does say in here that their booklet is going to have a fee structure, so even though they have the choice of consultants, would there not be a limit on what fees could be charged, which would serve as some protection for the taxpayer?

Mr Peters: I would agree with you. In the previous paragraph they merely use the word "encourage" rather than "enforce."

Mrs Marland: The reason I raise it is that a lot of these fees are going to be over the mandatory $50,000 where the government has a policy of tendering, doesn't it? Does that not apply to these groups?

The Vice-Chair: It would be interesting to have a clarification from the ministry on this. The way I read it was that there was a fee structure so there would be a maximum that could be charged, but if there are two consultants that met this fee structure, for instance, but one of them was slightly higher than the other, they could still choose that consultant if they had worked with him before. The ministry's encouraging them to be most cost-effective, but there may be reasons why they choose a consultant, but they are bound by a fee structure. I may be wrong. That is how I interpreted it when I read it.

Mr Callahan: I got the impression -- I may be wrong and I think we do need clarification from the ministry -- that perhaps they're thinking in these terms. Let's say you had a particular cultural group that wanted to put up non-profit housing. They might look within the framework of their own cultural community, limit the tendering to that group. I don't know whether that's what they mean by it, but I think we should get a clarification of it. As laudable as that might be, because I think there would be an understanding within a particular community of perhaps items that might be needed in a particular non-profit housing establishment that might not be necessarily general across the board, that could possibly create significant additional expense. First of all, you'd have a limited group. You may have limited expertise too, because they may not have been in the field that long and the net result is going to be additional cost.

I think we should get an explanation, but I'd like an explanation that asks if that is the intent of that paragraph. I know it's not politically correct to comment that way, but that's the impression I get. Certainly, we're all aware of the fact that many non-profit applications that are made are made by particular groups of the multicultural community. That may be what they are trying to do: to limit it to those particular groups. I don't know.

The Vice-Chair: It now is quite apparent that we are not going to complete this report this morning, and we will probably follow up with this report next week. Could Ray within the next week contact the ministry and ask it both about the turnkey issue and also a clarification on the development consultant, as to whether the fee structure will impose a maximum fee and therefore the choice of the consultant.

Mr Duignan: I would suggest, as it's getting late, that maybe it would be advisable to have some staff from the Ministry of Housing here next week to answer some queries, or more that may be raised next week, and let's make a conscious effort of getting this thing done next week.

The Chair (Mr Joseph Cordiano): Let me just speak now in my capacity as normal Chair. Perhaps we should have a subcommittee meeting to order our business for the foreseeable future. It was our intention to deal with the health card question on October 21, a report that needs to be completed by us as well. Of course, this always takes longer than you first assume, so I think it would be wise to have a subcommittee meeting to come to some kind of agreement about the timing and the framework.

It was my concern that we don't endlessly deal with this. There are a number of questions that might have loose ends in this report. But, quite frankly, if they are unsatisfactorily answered by the ministry, we simply write our report to that effect, is my view.

We can do whatever the committee wishes, but time is a factor in all of this and we do have to have these reports completed before the next auditor's report comes out, which is in November some time, so there isn't a whole lot of time here to deal with these issues.

Mr Duignan: On Joe's point, maybe you then let the subcommittee deal with the issue.

I move adjournment.

The Vice-Chair: We've had a recommendation that the steering committee will deal with how to proceed with the Ministry of Housing report and the further agenda. I'll adjourn this meeting so we can go and vote in the House.

The committee adjourned at 1201.