Legislative Assembly of Ontario

ANNUAL REPORT, PROVINCIAL AUDITOR, 1992: MINISTRY OF HOUSING

CONTENTS

Friday 10 September 1993

Annual report, Provincial Auditor, 1992

Ministry of Housing

Daniel Burns, deputy minister

David Martin, director, housing branch

Patti Redmond, executive assistant to the deputy minister

Peter Schafft, acting executive director, housing field operations

STANDING COMMITTEE ON PUBLIC ACCOUNTS

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

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

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

Duignan, Noel (Halton North/-Nord ND)

Farnan, Mike (Cambridge ND)

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

Hayes, Pat (Essex-Kent 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 Hayes

Rizzo, Tony (Oakwood ND) for Mr Duignan

Wiseman, Jim (Durham West/-Ouest ND) for Mr Farnan

Also taking part / Autres participants et participantes:

Peters, Erik, Provincial Auditor

Clerk / Greffier: Decker, Todd

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

The committee met at 1010 in room 151.

ANNUAL REPORT, PROVINCIAL AUDITOR, 1992: MINISTRY OF HOUSING

The Vice-Chair (Ms Dianne Poole): Good morning. As members are aware, we have been discussing, over the past number of months, the auditor's comments relating to the Ministry of Housing operations. The committee did send to the Ministry of Housing a set of draft recommendations for comment. The committee has now received those comments and the Deputy Minister of Housing is with us today to make additional comments on the ministry's response.

I'd like to ask Mr Dan Burns, the deputy minister, to begin. I believe he has a colleague or he may wish to introduce other colleagues who are in the audience today. I believe you have a brief opening statement.

Mr Daniel Burns: I'm joined at the table by Mr Peter Schafft, who is the acting executive director of housing field operations and has responsibility for the delivery of the non-profit and cooperative program. I anticipate that there may be times in our discussion when a more detailed look at some of our activities and work plans might be appropriate, and at that point Peter will join the conversation.

I have with me a few other ministry staff who may also be needed to make a productive contribution to the discussion: Shirley Hoy, assistant deputy minister for housing operations; Brad Singh, director of the audit branch of the ministry; Janet Mason, director of the housing policy branch; Dave Martin, director of the programs branch in housing field operations -- they do program design; and Patti Redmond from my own office.

I would like to speak for a couple of minutes to open the discussion. This follows on three days of discussion that we had on March 9, 10 and 11. We were asked to return to the committee in order to have a discussion of the draft recommendations of your report that flowed from our discussion in March. As the Chair has indicated, we have written back to you saying essentially that we think that the recommendations make sense, a couple of qualifications on them but nothing, I think, of major departure. I think I'd like just to open by emphasizing that.

As we indicated in March, we had in place some of the things that the auditor indicated we should, that we had plans to develop many of the others and that we were putting in place plans for the remaining issues that were raised.

We have made progress, we believe, in all of those areas. I indicated in March, in relation to a couple of areas, that we had quite specific goals for particular activities and we'd be happy to revisit any of those that the committee might wish to discuss in more detail.

I will say, however, that since March the ministry, along with other ministries, has had to invest a considerable amount of time in looking at issues of expenditure, planning and control. A lot of the people who do that in our ministry are the same ones who work on the issues that were discussed in March. So we have had to divert some of our resources in order to prepare first the expenditure control plan for our ministry and then to ensure that we had in place what was necessary to implement it. Members of the committee will remember that in our case the expenditure control objective for this year in our ministry was $132 million on the expenditure side, in addition to administering the windup of the Ontario home renewal program, quite substantial amounts of work.

I just want to touch on a few of the important elements of the discussion in March, and of your report and the recommendations: improving our allocation system, improving our capital cost control system, reviewing the use of appraisals in our system, establishing budget norms and standards for non-profit operating budgets, the design and implementation of a new system of accessing non-profit housing. These are all areas that we have been working on which we've made progress on since March, on which the committee has recommended not just our continued work but has recommended that these are important areas from the point of view of the committee and that we should be pursuing them diligently.

To touch on a couple of things in particular, we continue on our work to both upgrade and integrate our information systems so that rather than being able to look into our system only through particular windows, you'd be able to look at it in a more comprehensive way, something we discussed at length in March. We continue to work on that.

We have greatly extended our system for monitoring market conditions, and again, that reflects the importance of that. It's something we discussed at length in March.

We have implemented the conflict-of-interest guidelines we discussed in March. I'd like to repeat what I said in March, that the assessment of the auditor and the material in his report have been very helpful to us in assessing what we need to improve and in helping us to design an approach to it.

A great many of the items of improvement that we talked about are tied to the design of the program that's now being implemented: Jobs Ontario Homes. As each stage of that program unfolds, it contains within it the improvements and reforms we think are necessary and that cover the kinds of subjects we discussed in March.

Just before I conclude -- that's all I really wanted to say by general introduction -- I would like to offer committee members the package of materials that people got who applied for this round of support for non-profit and co-op housing. They contain within them material that covers a lot of the subjects we discussed in March. Many of you may already have had this package, some may not have, but I think for your own records and the records of your staff it might be a helpful package to have. I don't intend to introduce it or discuss it. I just thought it might be useful to your own work.

Mr Joseph Cordiano (Lawrence): On a point of clarification, Madam Chair: This deals with Jobs Ontario Homes.

Mr Burns: Yes.

Mr Cordiano: So it's new information, or is this information that was available before?

Mr Burns: That particular package was published on May 31, so it was not available in March, but it deals with some of the subjects we discussed in March in the current program.

Mr Cordiano: All right.

Mr Burns: I don't think, unless committee members want, that it's necessary or worthwhile to walk through each of the recommendations, from my point of view -- but rather to leave it to the committee to focus on the things it would like to discuss further in this morning's session.

The Vice-Chair: Thank you, Mr Burns. We appreciate the fact that you've left a substantial amount of time for questioning. We will have the questioning in three rotations, to begin with, a 20-minute rotation beginning with the official opposition. Members should have before them the memorandum from Ray McLellan dated September 7, which has a copy of the draft recommendations which were sent to the ministry as well as the ministry's response.

If I could ask members for their indulgence in one way: When you are referring to a recommendation or a response in the brief, could you please give us the page number just to make it easier for members to follow the particular section you're quoting.

Before we begin, did the auditor have any comments?

Mr Erik Peters: No.

Mr David Tilson (Dufferin-Peel): Does Mr Burns have this document that you've just referred to?

Mr Burns: In fact, I have opened my tab to that particular document. That's the one, dated September 7, from Mr McLellan to this committee.

The Vice-Chair: Good. We seem to be set. We'll begin with Mr Cordiano from the official opposition.

Mr Cordiano: Let me start off by saying that I think your recognition of some of the basic concerns this committee has outlined over the past several months and over the past half year, that your general agreement with the direction we're taking and that our concerns are of importance and value to you and the direction we're taking are in agreement with what you think is important -- I think that's great.

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I find a great deal of encouragement in the fact that, number one, you're recognizing there are these problems, and two, that you're interested in doing something about it. That's where I think we stand right now. What do we do about these problems?

Obviously, from our perspective, at least mine, I am very interested in finding out more about that. I think it's important at this point in time to know how and when you're going to implement an action plan to deal with all of the various recommendations we've put forward.

I think it's important, as you've pointed out, that you're undertaking that work, but from our committee's perspective to know just what that means, and time lines and establishing a schedule for when these things can be accomplished and what kinds of resources can be allocated are very critical, because the fact that people agree with concerns and then do nothing about them is really not substantial. It means that the work of this committee doesn't go very far and it means that you're not going to be able to do what has to be done. It means they're basically empty promises.

I think we need to see an action plan and we need to see one that's structured, that's comprehensive, that has very definite time lines attached to that and does another thing for us as well: It gives cost-benefits analysis for those expenditures.

We can go through the details of that, but I want to get your general comments with respect to that, if it's possible and if you agree with that line of thinking; I know it's possible, but from your perspective, first of all if there's any political will to do this. Let's leave bureaucratic will aside for a moment, but certainly the political will must be there for this to be carried forward.

Mr Burns: I'm not in a position to advise you about political will, but I can certainly tell you that there is the administrative will to carry through on the recommendations that we're talking about here today.

To go back through your comments in reverse order, in relation to a work plan, we've actually implemented some of the subjects raised in your recommendations. Others are the subject of work and yet others have a work plan in early stages. We haven't designed a work plan around these recommendations, but rather around the pieces of work as they make logical sense to us.

However, though I can't do it right this minute or for Monday either, I'm certainly prepared to write again to the committee with our work plan material as it relates to the recommendations that are made here. I say that to committee members here. I'm certainly prepared to discuss them, and in a couple of cases I think we actually have work plan material here with us. For example, I think we have our technology integration work plan here and a couple of the others.

Let me assure you that we have work plans to cover these subjects. Some are here today; others are not. If you would like them, I'm quite prepared to write to you with them. I should also say that in our interim letter in the summertime, in a couple of subject areas we did include our work plans. So some of that material we've already given to the committee, and I'm quite prepared to extend that to the entire universe.

Mr Cordiano: I think that's good to hear and I think it's indeed noteworthy that we're making some progress and that there's a willingness on the administrative side, as you put it. In that spirit, I think we can then support you in your efforts to make sure that indeed most of these items are put forward in an implementation plan.

We'll get to details in just a moment, but I think it's important to outline what the intentions are with respect to these recommendations. Again, as you've stated, there's a willingness to do this. In our efforts to be fair and equitable in terms of our constructive criticism then, we would have to size up the time lines and the kinds of resources that you're allocating and determine if in fact you do have the necessary resources. That may very well be a difficult area for you or any other department of the government, but it's in fact an area that needs to be given priority as far as this committee is concerned. Therefore, we want to support you.

But let me get to some of the areas that I would like to touch on with you. You say that, with respect to need-and-demand studies, you have in place a new allocation system. The model will allow you to distribute units according to regional need and so on and so forth. But I would like to get a better understanding of whether this model is workable at the present time and when it will go into effect given the new allocations that were announced by the minister just several months ago and if in fact this model will be used to determine need according to those allocations; if there's a match there.

Mr Burns: In the meetings we had in March we had some discussion of how we tackled the problem of allocations for a group of projects that we evaluated and gave commitments to in December and January. We said at that time that we'd used largely the old system. The proposal call we issued around about the first of June, which you now have a copy of in front of you, contains the new approach.

In an appendix to that, appendix A, there is the regional distribution process which you alluded to specifically, but there are other parts of the material that we issued publicly that deal with other elements of it.

I'd now like to ask Mr David Martin, who's now at my left, the director of the programs branch, which is responsible for program design, to take just a couple of minutes to give you the principal features of that new system. We won't belabour it, but just the principal features.

Mr David Martin: The package you just received does have a description of the new process for the first large -- what we call a wave -- wave 1 of the Jobs Ontario Homes program. You may recall that the first announcement of the first 2,000 units last fall was for the jobs-ready or ready-to-build-very-soon component which has been already allocated and those programs are being committed now.

That used a different process which responded in part to the concerns of various groups, including the Provincial Auditor's report, on where we allocate. That first 2,000 units did have a list of places where we would not, for that small component, authorize groups to go ahead and prepare designs and project proposals.

The package you have covers the first wave of the regular program project proposals, and they have come in now in great numbers as a result of the first announcement at the end of May. So the package you have was sent out the end of May to a variety of groups; proposals have come in as of the middle of August. They will follow a process that's outlined in schedule 2 of that package, which describes some of the requirements for the material. In that package, towards the back is appendix 2, which describes the process we're now using.

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In effect, it takes a different approach than we had with the Fair Share model. The major concern about the Fair Share model was matching the regional or large area breakdown of what is needed to the local requirements for need and demand, and because the local market, the land market, the needs of groups, can change quickly, it was not a good system in order to adapt quickly. So the process that is included in that appendix and the groups have been using and did use in their first applications categorizes in three different categories the kind of information and need-and-demand profile we think we currently have of different communities.

The Vice-Chair: I'm sorry to interrupt. You mentioned appendix 2. Could you hold that up?

Mr Cordiano: You're referring to this document, called Jobs Ontario?

Ms Patti Redmond: It's the stapled part that says schedule 2.

The Vice-Chair: Okay, so not in this document.

Mr David Martin: We'll get you a copy if you can't find it. It looks like stapled rather than cerloxed -- rather than bound. Okay? There are several of those.

The Vice-Chair: Okay, so it's schedule 2.

Mr David Martin: There are several appendices and the one that describes the question we're talking about is appendix A, the distribution process.

The Vice-Chair: So we're looking at schedule 2, "development concept requirements for new construction project."

Mr David Martin: That's right. Towards the back of that is a description. I won't go through that, but I just note that the priorities in terms of allocation are based in good part on need and demand proven by the proponents of the proposal. Rather than have them categorized in a general way like the old model did and have each group basically make its own case as best it could, we've categorized within the province, by municipality, the areas where we think there is proven need, here is where we think we need more information in order to make a recommendation for allocation to that area and areas where it will take a very good case by the proponent to show there is need for the client group they wish to serve. The columns A, B and C, and people are using municipality A, B and C as their own categories, what they have to do for proposals, is in the page after the start. It's about the second page of that appendix.

Mr Cordiano: Can I ask you how to differentiate this model from what you had in place before? Give me some of the significant changes. I can see some of them, but I want you to outline them.

Mr David Martin: The Fair Share model took the whole province divided into 16 planning areas. This was the federal model which we continued to use as part of the new program starting in 1985-86.

It looked at some very large indicators: Core need, which is a national index of need for affordable housing, was used; the waiting list for public and large non-profit providers, where we have good waiting list information, was used; and turnover in assisted housing portfolio generally in an area was used.

That gave a breakdown, a distribution of what total share for families and seniors and singles housing should be assigned to each of the 16 areas. So greater Toronto was one area. Generally, it was the census metropolitan areas, plus all the rest of a region, that we used in our own administrative purposes. So all of southwestern Ontario, except London and Windsor, was a region. That was the old system.

At the local level, given a total of let's say 2,000 units for southwestern Ontario outside of London or Windsor, then the groups proposed projects of a certain number of units to meet what they felt were their needs. The regional staff would make recommendations, aiming to proposals that matched up to 2,000 units. There was not an objective or very well-stated consistent way of measuring each proposal's need and demand. They all had requirements to prove it in different ways. What the new process does is, it takes what we know collectively about a municipality's or an area's housing needs and current demand and expected future demand and puts a lot more rigour than the old system does into the process. In a sense, we're moving from 16 planning areas to many more than that.

I don't think this first wave is the way we'll see this process working in future allocation waves over the next year and a half or two years under Jobs Ontario Homes. This is the first step. As with all parts of Jobs Ontario Homes, we are redesigning as we go. If there are concerns about the material, about the instructions, about how it takes effect, cost guidelines, MUPs and so on, we will change that as we go, and this is one good example. We do not have enough good information on a number of the municipalities to be able to say: "You are category A. You have proven high need; you have done studies before; there's a great waiting-list for families," for example, those kinds of issues. So the principal difference is a lot better information at the local level. That's really the major difference.

Mr Cordiano: Can I ask how much time is left?

The Vice-Chair: Mr Callahan asked that I notify him when three minutes are left; four are left at this time.

Mr Cordiano: Just in the last minute I have, in the short time that we have to go through this with you I can see that we're going to deal with a lot of detail. I think it would be useful, for me anyway, if at some point you can come back to us with a plan that you have outlining in advance all of these things in writing. Then we can go through it at some future date, because I see we're going to have difficulty in going through some of the details in the two days that we have remaining. So I would just ask that you at some point make that plan available to us in writing so we can examine it and then sit down with you at a future date.

Mr Burns: If I might comment briefly on that, as I said in response to your first question, writing to you in those terms, that is in work-plan terms, about each of the areas of recommendation, is fine, and if it's helpful to the committee, we will do that. As for how you would like to discuss that material, whether it's subject-by-subject today or whether it's having had a chance to read a communication from us in another format, as far as I'm concerned that's essentially in your hands. Our position is that we should give you the material you need to understand the issues from our point of view and to have a chance to talk to us about it. As far as I'm concerned, you can consider whatever format you feel is appropriate to your own discussions.

Mr Robert V. Callahan (Brampton South): I'd like to take you back to July 20 in the standing committee on estimates. You were asked about three backlogs that existed. They were backlogs dealing with operating budgets, financial statements and final capital costs for construction. Mr Burns, you told us you hoped to have all of these things cleared up by Labour Day. Have you cleared them up by Labour Day, and if not, how far behind are you?

Mr Burns: We have made substantial progress, but we have not totally cleared the backlog. Mr Schafft has our current status with him and our current plan.

Mr Callahan: I only have a few seconds, so rather than have him read that, I want to know whether or not in the central region you're still at 640 outstanding operating budgets. Are you? How many are you at?

Mr Peter Schafft: Right now, from the backlog we're at 74 for the operating budgets.

Mr Callahan: In total in the province or for central region?

Mr Schafft: For central region, 74. Sorry, 28. I'm sorry; I'm looking at the wrong number. It's 28.

Mr Callahan: If an operating budget is not filed appropriately and on time, do you just give them the same amount of money they had the year before?

Mr Schafft: Basically, what you're doing is using the original budgets that were developed during the development process. You're analyzing those, and you're paying on that and making any particular adjustments.

Mr Callahan: So the answer is yes, you give them the same amount they had the year before.

Mr Schafft: Not necessarily.

Mr Callahan: I'm sorry, I don't understand that. If they haven't filed an operating budget, how can you give them any more or any less than they got the year before?

Mr Schafft: There is a base that you set. You work on that base and make some adjustments to that base depending on whatever situation is going on.

Mr Callahan: So you're giving money out that you have no idea whether or not it's warranted, then, I would suggest.

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Mr Schafft: Oh, we certainly do, based on the initial review and all the materials and the base.

Mr Callahan: Well, if you haven't got a financial statement and you haven't got an operating budget, how in the world can you possibly decide what kind of money to give to that group for the ensuing year?

Mr Schafft: Based on the knowledge and the wealth of information based on standards of what you know are legitimate budgets and based on the review process you've gone through with a group in developing initially a project, one of the first budgets they do, through what we call the 1414 form, is an analysis of the needs required for that particular non-profit, which includes the mortgage costs, those sorts of things. As you may realize, the largest component of a non-profit budget is the mortgage payments. The others are minimal. So you have established a base and you obviously, I agree, can't do financial statements until you do have an approved budget.

Mr Callahan: Okay. You've had six --

The Vice-Chair: Mr Callahan, your time is up.

Mrs Margaret Marland (Mississauga South): You can add five minutes now to each of us. I don't mind.

The Vice-Chair: If it's agreeable, we'll add five minutes to each caucus. Okay. Proceed, Mr Callahan.

Mr Callahan: As of the time of the auditor's investigation, there were 640 outstanding operating budgets that had not yet been provided, and around the province there was a total of 707. So it sounds like you've put some effort to try to clean those up.

What's happening now as you introduce new non-profit housing? Are you immediately demanding an operating budget from them, or are they falling behind again?

Mr Schafft: No. What we're trying to do -- obviously, at the same time you're trying to start on track.

Mr Callahan: You're doing that? I'm not --

Mr Schafft: Yes, we are.

Mr Callahan: So there are none outstanding --

Mr Schafft: There will always be some that are outstanding, but the starting point --

Mr Callahan: How many?

Mr Schafft: I can't -- the starting point being the 1414 creating a first-year budget because there are two budgets. There's a first-year budget and there's an actual establishing of a base budget which comes after the fact. When you're going through the development process now on the 1414s when the projects are committed, that is the budget. We are now using that as the base for the funding for subsequent years.

Mr Callahan: What's the longest time frame that you're allowing for a group to get an operating -- I just don't want to see another 640. If the auditor hadn't brought this to your attention, with all due respect, nothing would have happened. You're now cleaning it up, but we want to keep you on current track because, in my view, if you haven't got an operating budget you don't know what you're paying these people. We saw with the Jobs Ontario situation where you paid all sorts of money out to people and it got zipped. I'm not suggesting they would zip it, but I would like --

Mr Jim Wiseman (Durham West): That didn't happen; that's not accurate.

Mr Callahan: -- I would like to know that we have operating budgets, that we're paying these people appropriately, not less than they require, not more than they require, because the province is in very deep financial problems.

Can you tell us, what's the longest time span between the time of approving or having it on the ground and requiring an operating budget from a non-profit figure?

Mr Schafft: Part of the process is to provide an operating budget to the regional office. That's part of the ongoing process. If there are any right on track at the moment, I don't have that number for you.

Mr Callahan: Just finally, because I'm probably out of time, on page 13 under --

Mrs Marland: You are out of time.

Mr Callahan: Am I out of time?

The Vice-Chair: No, you're not.

Mr Callahan: On page 13 under item 14, you responded to the question that we put to you about developing a computerized database to track market construction prices accepted by developers across the province. Are you with me at page 12 and 13 of the letter of September 7? Are you there?

Mr Schafft: Yes.

Mr Callahan: In your answer you indicated to us -- actually the auditor had noted, "the southern region's success in negotiating competitive prices with the assistance" -- this is your answer, I guess -- "of a computerized database to track market construction prices. Competitive pricing through a computerized database was used to file market construction prices accepted by developers which contributed to competitive pricing and procurement practices in the southern region," and so on.

You've indicated, "The ministry supports this recommendation. The ministry has implemented a computerized data system in one region..." What region is that? Is that the southern region?

Mr Schafft: Basically, it is the southern region.

Mr Callahan: So you haven't done any more from the time the auditor brought it to your attention?

Mr Schafft: No, we have. One of the things is the auditor certainly saw that particular system in southern region. With the changes to some of the programs, with the requirements, obviously, of looking and identifying other issues through public accounts, we are in the process of -- one, we've gone through a number of reviews of that system to see if there's other enhancements required. Some of the regions, including central, southwestern and eastern, have taken parts of that system so far and implemented it, but we do have a process under way for some modifications to that system with full implementation. That does not say we don't have another system in place. You may or may not be aware that there is another system of information available.

Mr Callahan: Would you undertake to give us a written explanation of what else you've done besides the southern region?

Mr Schafft: Sure.

Mrs Marland: I'd like to move to another subject, Mr Burns. It's an example of something that is going wrong in your program, in my humble opinion. I'm referring to an article that was in the Toronto Star written by Frank Jones on September 2, 1993. In this article, Frank Jones is talking about the Robert Cooke Co-op, which is part of the redevelopment of the Goodyear site.

I think it's really interesting to look at the redevelopment of the Goodyear site. I say good luck to the city of Etobicoke and the member for that riding, which is the Health minister, Ruth Grier, because in the redevelopment of that site we have, it seems, exclusively non-profit housing projects and co-ops. It's interesting when the government talks about how regressive our government was in ghettoizing people with the old Ontario Housing Corp model.

In any case, as the critic for people with disabilities, I'm very concerned about the Robert Cooke Co-op in Etobicoke. Apparently, there were 15 units set aside for developmentally disabled adults and I understand the Ministry of Community and Social Services agreed to fund this project at $200,000 a year and perhaps $185,000 in future years for the attendant care that is required by these developmentally disabled adults.

We're told that if the Ministry of Housing doesn't receive the Comsoc funding by September 15, some of these units which were meant for these developmentally disabled people will become market rent units. Frankly, I think that would be very tragic because Robert Cooke, for whom the project is named, was a developmentally disabled person who was beaten to death in an Etobicoke shopping mall in 1979. I'd like to know what the status is of this funding for this particular project.

I must say there's an irony here, because personally I find it heartbreaking that a situation like this can occur when we're subsidizing people in market rent units, people who could afford private sector housing. There's no question that people in the market rent units of co-ops are being subsidized. In fact, we have two members of our government in Ontario who live in co-ops, who are subsidized. They earn in excess of $75,000 and they live in co-ops.

Mr Larry O'Connor (Durham-York): They aren't subsidized.

Mrs Marland: Every person who lives in a co-op is subsidized. I'm not going to open that debate, but at another time I'd be happy to take that debate on with any member of the government. If you don't know how co-ops are built, then you don't understand how they're subsidized.

Anyway, I think the point is that we're wondering again, as we are always wondering in our party, about why we subsidize bricks and mortar rather than helping people.

I would like to know, in the situation of this Robert Cooke Co-op in Etobicoke, what is going to happen. Is there a deadline for September 15 and is Comsoc going to come through with the money that's needed to house these developmentally disabled adults?

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Mr Burns: Mrs Marland, while I'm aware of the situation that you've alluded to, I don't have right this minute the answer to your specific question. I've just asked for a call to be made back to the ministry and as soon as I have that answer we'll advise you. If that's during this meeting, we'll do that. If it's this afternoon, we will call your office and advise you.

Mrs Marland: We're not sitting this afternoon, unfortunately, but I would appreciate the answer as quickly as we can have it.

Mr Burns: We will be meeting again on Monday.

Mrs Marland: All right. Thank you. I'd like to ask a question about taxes. There has been some discussion about the fact that non-profit projects, by virtue of the fact that they are non-profit organizations, are not required to pay property taxes. Can you answer that question?

Mr Burns: Yes. The general situation is that nonprofit and cooperative housing projects pay property taxes within a community on the same basis as other rental property. However, that's the generality. There are a few cases where the housing is run by a charitable organization and that charitable organization has convinced a municipality that it is charitable within the meaning of the Assessment Act and has been given the forgiveness that's permitted under that act to charitable organizations. There are very few of those, in my experience. Essentially, non-profits and cooperatives pay property tax the same way as rental properties do.

Mrs Marland: Yes, but it's interesting that you say the municipalities are being charitable, because the assessment of properties for the purposes of property taxation is a provincial responsibility. The further question that your answer requires is, are you saying that the charitable organizations that run these particular --

Mr Wiseman: It's always been in conjunction with the municipalities. They ask the province to do it.

Mr Tilson: The province makes the decision.

Mrs Marland: Excuse me.

Mr Wiseman: You haven't got it right.

Mrs Marland: The charitable organizations that you have cited as an example that are exempt from property taxes, can you tell this committee whether those organizations have market rent units or are they all subsidized accommodation?

Mr Burns: No, I can't advise the committee of that right now, but I'm certainly prepared to try and answer the question. I can't do it right this minute.

Mrs Marland: Okay. Then that's another question we'll look forward to getting the answer on, because I think it's important to know whether -- I would like to know which projects are not paying property taxes and I would like to know which units within those projects are market rents and not rent-geared-to-income units. If we've got people paying market rent in our non-profit housing program and are not paying property taxes, that would be totally unjust to the rest of the population in this province who pay very heavy property taxes.

Another question I'd like to ask you about is the ownership of non-profit housing. Is it correct, because this has also been my understanding.

The Vice-Chair: Mrs Marland, I'm sorry to interrupt, but yesterday our committee had a fairly full discussion on the fact that our meeting this morning was to be limited to the recommendations of the committee regarding the auditor's report and the ministry's response. I've been trying to allow some leeway, but this is the third area you've gone into which has not been contained in the auditor's report.

Mrs Marland: I don't think we discussed limiting the discussion, Madam Chair, and the report of this committee in general, overall, if I wasn't using up my valuable time now, I'm sure there are sections in that report that I could tie into the overall operation of non-profit housing in this province and that's specifically what I'm dealing with right now.

When we're looking at the subject of non-profit housing, either from your perspective as the deputy minister or our perspective as the Progressive Conservative caucus, which has a great deal of concern about who gets the profit out of non-profit housing, I want to look at the government-guaranteed mortgages. It's my understanding that after these have been paid for, generally perhaps 35 years, and after that massive subsidy, obviously, by the provincial government; namely, the taxpayers of this province, the buildings will be owned by the sponsoring organizations.

What I'd like to know is, first of all, is that true, that the sponsoring organizations will own those buildings after the government and the taxpayers have paid for them, and if that's the case, what will the province do to ensure that the affordable housing remains affordable and accessible to anyone who is eligible in the provincial perspective, not only in the perspective of the sponsoring organization?

Mr Burns: This is a subject we did discuss to some degree in March as well. The answer to the first part of your question is that the projects are owned and presumably in the future would be owned by the corporations that erect and operate them. They're not owned by the province or the federal government, where they fund them, or any other body than the sponsoring bodies.

Secondly, the question of what happens in the future, there are really two parts to that. The one we discussed in March was the one that has to do with the possibility of a future sale of property that was supported in the way that we support projects. Most sponsors have restrictions in their incorporation related to sales, and we have made an explicit restriction, a requirement, under the current program, the materials that I distributed to you. The charter of incorporation papers now say that you can't wind it up and retain the proceeds. They have to be applied to non-profit housing or to an appropriate charitable purpose, in my memory. Is that right?

Interjection: That's right.

Mr Burns: That has to do with windup.

The question of future operations, looking at a situation where someone had retired the mortgage, if the non-profit still had an operating agreement with us in order to provide support for households that needed help still on a rent-geared-to-income basis, then access would be ensured through that contractual arrangement. It would have some similarities to the contractual arrangements we have with private landlords now under the rent supplement program.

However, it's possible that a sponsor would not want to continue any of those kinds of arrangements, in which case they would continue to operate within their charter provisions. The charter provisions lay out that the sponsoring organizations are in the business of providing affordable rental housing. That is their object, and like any corporation, they have to adhere to the objects of their incorporation.

Mrs Marland: But I don't think you've addressed the question about, how are you going to guarantee that the people who are eligible to get into those buildings will be guaranteed and how the selection -- I mean, we know how the selection is done today, and we also know that there's certainly a direct hold on those organizations to fulfil that. I'm simply saying that if the taxpayers have paid for these buildings, and really, essentially, those buildings were built according to the program, then there has to be a guarantee about who's going to live in them.

Mr Burns: As I just indicated, where they're still bound by contract to us to provide rent-geared-to-income housing, they would be bound by whatever access provisions we have for those households, and that's not just for provincially sponsored housing but for federal-provincial housing that's also sponsored by the federal government. If they're not bound by contract to us for other units, what we might call market units, they would be bound only by their charter. But their charters or their articles of incorporation do bind them to the object of providing affordable rental housing.

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Mrs Marland: Yes, it binds them to the object of it, but I'm asking you whether you're going to supervise how they continue to achieve that, and I don't think you've answered that question.

I think earlier this year, while we were in the process of preparing the report that was compiled and referred to you, I asked you a question about the problem of reserve funds for both non-profit housing and co-ops. We're certainly aware of the tremendous problem that a very large number of co-ops are in due to the position, and most of these co-ops are CMHC co-ops.

What is concerning me is that, as part of your 1992 fiscal strategy, you put a two-year moratorium on replacement reserves. I certainly am aware that in Peel that has caused a great deal of difficulty. In fact, to put a moratorium on those reserve funds, which obviously are established for emergencies and repairs, is a very dangerous thing in terms of the maintenance, perhaps in some cases the actual safety of the operation of those buildings.

For us, it's a tremendous concern that Peel Non-Profit Housing Corp, which was the first corporation in this business -- they are the largest non-profit housing corporation in Canada and they have more experience than anybody else -- delayed approving their 1993 budget this year because they appealed to the Minister of Housing about their concern and the fact that they were worried about their ability to finance the future maintenance of their 45 buildings.

I think it's worth noting that there's an irony here, and I dare call it a hypocrisy, on the part of the government that would cap contributions on reserve funds for government-funded housing and yet criticize the private sector landlords for inadequate maintenance, even though rent control legislation doesn't permit the private landlords to pass on the majority of necessary maintenance costs.

So we certainly have a very interesting situation here. In fact, as far as I'm concerned, it's very serious, and I'm wondering what conclusion the ministry is arriving at with regard to financing of these reserve fund contributions. Also, could you tell us whether the provincially subsidized co-ops, as opposed to CMHCs, are in the same difficulty as those co-ops that are subsidized by CMHC? I'm talking about 50 to 60, apparently, that are in very serious trouble.

Mr Burns: I'll touch for a minute on the second part of your question. The federal government for a number of years ran a program of support for co-operative housing across Canada which was tied to a particular financing mechanism called an index-linked mortgage, whose acronym is ILM. ILM program cooperatives, particularly in southern Ontario but to some degree across the whole country, have gotten into some significant financial difficulty and the CMHC and the co-op housing organizations, both individually and in the trade associations, have been trying to work their way out of that. I think a significant part of that difficulty is rooted in the design of the program itself. We don't have a universe of cooperative housing projects facing the same difficulty that's arisen in that program.

In relation to your broader discussion of replacement reserves, this is a very important question, I agree with you completely on that, and we did discuss it for a period of time at our meeting in March. I indicated then and I'll confirm now that the moratorium was a two-year moratorium and our budget plan anticipates restoration of 90% of the funding envelope beginning next year. So let me just say again today that that's still our budget plan, as it was in March.

Mrs Marland: Does that mean it's retroactive?

Mr Burns: No, it's restoration from next year forward, not retroactive.

Mrs Marland: So next year you're going to give them 90%.

Mr Burns: No, I said the funding envelope will be 90%, because --

Mrs Marland: What does that mean?

Mr Burns: I think I said this in March, but I think it's worth repeating again. Historically, the guideline for how much should be placed in our replacement reserve for a particular project was a percentage of the capital cost of that project, irrespective of whether it was new construction or rehabilitation, irrespective of whether there was a high land component or a low one, irrespective of whether it was wooden construction or poured concrete with an elevator. What we are doing this fall, in cooperation with the Ontario Non-Profit Housing Association, of which Mr Maloney, the commissioner in Peel, is the president, and the co-operative housing association, is looking at whether or not there's a better way of defining what's an appropriate amount to place in a reserve for particular types of projects. That's one side of it.

The other side is, we've had very restrictive rules for people like Peel Non-Profit on how they could manage and apply those funds. For example, you said that Peel Non-Profit has 45 buildings. We actually require them at the moment to maintain 45 separate funds and to invest them in the most conservative possible way, and bankers acceptance are very low-interest-bearing accounts. We're also interested in looking at whether those things would be better administered if we allowed an organization like Peel to pool them, to invest them somewhat differently and to earn a better rate of return on them.

We believe that through a more sophisticated assessment of need for replacement reserves and a more sophisticated approach to management of the funds, we can maintain or even enhance the amount of protection that those funds give to the buildings with somewhat less money. So that's our objective.

I should also say that last year and again this year we have maintained in the non-profit program a contingency fund, and any operator, any provider, who reached a crisis that would normally have been handled by reaching into their replacement reserve can approach the ministry. For example, for someone in the early going who has very little in a replacement reserve but has a total collapse of an elevator system, we have been prepared to support those out of our contingency funds. So we have maintained some protection over the two-year period.

I want to finish by confirming again what I said at the beginning, and your comment, this is a very important part of the program funding and an important part of maintaining the long-term integrity of these buildings and these organizations and we acknowledge that.

The Vice-Chair: Mr Tilson has the last five minutes of the Conservative time.

Mr Tilson: I would like you to turn to the first item on the paper prepared by Mr McLellan, which lists the series of concerns the public accounts committee has and the ministry's response to documents. It's dated September 7. The first item has to do with a couple of issues, but the one that I'd like to direct your attention to is determining the greatest need of the allocation areas, which I think was dealt with to some degree earlier with the document in this package that you've prepared for us, which you indicated was published in May.

You indicate of course that you have a concern with the monitoring of the market conditions, as does the public accounts committee. As we indicated in March, this is one of the concerns, and it's still a concern of this committee, particularly when we understand that you don't even call CMHC to determine housing levels. You can correct me if I'm wrong, but that's an understanding that I have.

I'd like you to clarify somewhat the schedule A you've prepared, or this document. I don't even know what to call it, really, but it lists areas of high need, medium need, low need. This morning is the first time I've had an opportunity to look at this. That's been one of the concerns that I have experienced personally and which members of this committee have experienced personally, that there are areas where non-profit housing is being constructed and yet private enterprise is coming to us as constituents and telling us that there are vacancies, that the government has essentially gone into competition with private enterprise, aside from the fact that non-profit housing can't even keep up with the need of the poor because of the long waiting lists to get into that.

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I can tell you that this has happened to me personally, specifically in my riding of Dufferin-Peel and specifically in two areas. One is Orangeville, which is on a high need. I have had landlords who have come to me and have said to me, "We have vacancies." I have also had poor people come to me and say: "We're on a waiting list. Who knows when we're going to be heard?" You're not going to get into Orangeville. We're going to have to ship you up to Shelburne, because that's the only place that we can send you to. On the other hand, I have landlords in Shelburne who are coming to me and saying, "We've got all these vacancies because we're being undercut."

I then turn to other areas. That is a central region and, as I say, I haven't had a chance to study this in detail, but I do know there is an area in northwestern Ontario, the area of Thunder Bay, which is on a high need. Yet I look in the Thunder Bay Chronicle of August 20, where it indicates that city council has agreed to a moratorium on the construction of subsidized housing because there's a glut. I hear similar comments from Kitchener. I don't have a newspaper clipping, but I understand there's a glut in Kitchener, and if I turn to the southern region, they're on medium need.

So these columns of high need, medium need and low need -- it may well be, sir, that I just haven't had a chance to properly understand the documents that you prepared, but I can tell you, particularly when I look at Thunder Bay, you say, according to this document, that there's a high need for non-profit housing in this area, but city council has agreed to a moratorium on the construction of subsidized housing.

Of course, the government then comes through and says, well, the money that Thunder Bay -- I'm quoting from the article of the Thunder Bay Chronicle of August 20 that the money that Thunder Bay didn't take would simply go to some other city's non-profit housing board.

I guess I have the same concern, sir, that I had in March. How do you determine where in the world we're going to put up these non-profit housings when we're having all of these communities all over the province saying, "We don't need them"?

Mr Wiseman: That's not what they're saying in Durham.

The Vice-Chair: Deputy, if you could keep your answer relatively short, we are actually out of time for the Conservative caucus.

Mr Burns: The question of looking in more depth into the method I'll leave aside till Mr Tilson has a bit of a chance to look at it. Either in this forum or separately, I would be happy to give you a better picture of that. So I'll just leave that aside.

We do use CMHC materials and we do talk to them regularly about their data both at the regional office level and nationally. But as I indicated in March, what we were designing was a made-in-Ontario way of looking at our housing need and making decisions. So this one is not a joint design and administration with CMHC, which the earlier system was. That may explain why, if you ask CMHC whether they are asked about every bit of this, they might say no, with a question framed in that fashion. But we do use and rely on their data as fundamentally important to understanding what's going on in individual housing markets.

As we discussed in March, and you're absolutely right, there is a debate in some communities in this province about the amount of rental housing vacancy, its nature, its distribution and its price. It is in order to get at the meaning of that that we've insisted that people prepare a different kind of assessment of their market conditions and how they would fit in than we did in the past.

Mr Tilson: Who is doing that?

Mr Burns: We require proponents to assess their local market conditions on the basis of what are real local markets, not the very large planning regions we used to with the feds.

Mr Tilson: You mean the developers do that? Is that who does it?

Mr Burns: Who actually does it will of course vary by the nature of the community proponent and the scale of the project.

Ms Margaret H. Harrington (Niagara Falls): Certainly, the last point raised is something that I think has to be discussed and clarified for all of the people of Ontario. I hope that we do have a chance to go into that in more detail. I do want to look at a few other things first.

First of all, I would thank you, Mr Burns, for saying, certainly, that the auditor's report is helpful. I think this is a very good approach. I know this goes along very much with the direction that the ministry has been going in for the past two years, certainly with the report Consultation Counts, getting right at the heart of what we are trying to do with non-profit housing and making sure that it helps everyone in this province in the most efficient way possible.

I think it's also fair and almost non-partisan to say that this ministry was faced with rectifying many procedures and loose ends in processes that were left from the previous administration. It's certainly no fault of the staff.

Mr Tilson: Don't blame these guys. You were the ones who made it worse.

Ms Harrington: You have said clearly that you are doing more with less. Cutting $132 million this year clearly proves that. We have to be efficient.

Now, I also wanted to mention that Mrs Marland talked about the Robert Cooke Co-op in Etobicoke. I did want to assure you that this particular question of moving in immediately and also the broader question of supportive housing across this province is of key importance to our ministry. We want to make sure that it works, and I know the minister at this particular time is trying to assure that will go ahead: not just this one project, but in the process we have to look at the broader scope as well.

There are several areas that I wanted to get to. I think the most important, if I recall correctly from last March in our deliberations and from the auditor's point of view, was, how do we compare the cost-efficiency of what the ministry is doing with what has been done in the past? How do we do it in a manner that is fair?

You've addressed this in recommendation 3, which is on page 3. You talk about a comparative model, or at least the committee here has asked the ministry to develop a comparative model of non-profit programs "to compare the completed projects and those in the development phase on a consistent basis and to report on cost-effectiveness on an ongoing basis." The auditor found this very difficult, and I think this is where have we had the most problems this year and in the past. I'm asking you if you could explain a bit more: How are we going to have a comparative model that will work?

Mr Burns: Mrs Harrington, this was touched on a little bit earlier on and Peter Schafft did talk a little bit about the pieces. I think we should give a fuller explanation of that, and I'll ask him to do that in a minute.

But I think I should also say that good tracking of costs in the marketplace in our program is one side of being effective in managing capital funding. The other side is what we called, in the March discussions, capital cost controls; that is, how we regulate how much capital cost is appropriate to a project.

In our world, that's been regulated by something called the maximum unit price for years, which is essentially a federally designed capital cost control system which we had felt was less than fully adequate. We had wanted to use what we think is a subtler and more effective system in Ontario. We tried to convince the federal government to join us, which it hasn't done yet, but we have made some revisions to our capital cost control system on that side as well. The two things combined -- that is, being better informed and, secondly, having a more effective capital cost control system -- are fundamentally important to the program's producing competitive, effective, appropriate capital costs.

I'd like to ask Mr Schafft to touch on both sides of that, because I think they're both important to the general points you made at the beginning of ensuring the effective use of all our capital funding arrangements.

Mr Schafft: Basically, what the auditor did look at previously were some of the systems or lack of systems that we did have. What we have within the ministry are pieces of building blocks that we're putting together. Some we have and some are still under development.

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One of the basic building blocks we do have is called the non-profit tracking system. That is a system that is located basically at the local level, at the local regional offices. That piece basically tracks all the basic what I'll call tombstone data: all the information about projects -- the names, the sponsors. It also has projected dates of completion, interest adjustment dates and some other factors. So what we are using now is using that as a centrepiece or the first component of a building block, so that when a project originally comes in, an application comes in, it gets recorded into that system. You know where it is. You know the sponsors, all that material. So you have that.

The next step begins in the development phase. One of the prime documents, or "the" document, and there's reference made to this document, is 1414. That's really the document by which we analyse all the financial information that is provided by the particular group to the ministry to analyse. That 1414 contains information such as land costs, construction costs, other soft costs -- architectural fees etc. There was a reference made to this earlier. The 1414 system is a system that was originally developed within the southern region.

So the 1414 system is a system that we're doing some modifications to, and it is an adjunct to the non-profit system. It will now allow a regional office to do comparisons, to extract information on different land costs: what prices have been negotiated, what is going on with other non-profits on a comparative basis. There will also then be the ability -- and some regions obviously border one another -- that you can look at some comparative data as well.

The other component of a 1414 makes reference to what's going on in the private sector. There is a system out called Marshall and Swift, and it is a system that appraisers use not only in the public service but also in the private sector. It gives you analysis of average costs for products, materials etc. That again is an item used by the regional offices for gaining information of what's going on in the marketplace, what are average prices.

So we have the 1414 -- that is, the development phase -- and you can get all kinds of data out of that and do comparisons that will ultimately have all the capital costs information. That's prior to, obviously, the final capital cost.

The next building block is basically what we call the budget subsystem. The budget subsystem is one where once the budgets are in, they've been approved, you can start focusing in on norms and standards, what are average costs. You can do comparative values between different groups, different sizes of buildings to see if there is something out of standard. You can look at it on an exception basis, so you have some controlling and monitoring ability to look at exceptions. Right now, in many cases, it was done manually. We can computerize it so you can extract exceptions. As a result of that also is looking at norms and standards and being able to adjust what the norms and standards for costs are.

Ms Harrington: So these are for operating?

Mr Schafft: These are operating. So that's the second phase. That system, the budget system, will be in place within the next few months. It is in the test phase; it's being used in some regions. We're well into that one.

Ms Harrington: I think the bottom line that I would like to know, since I certainly don't know all the technical details, is, would you and the auditor then agree that you have a workable model? Maybe I'll get to ask the auditor that on Monday. Have you come to a point where he can work with you to assess the ministry and what it's doing?

Mr Schafft: I haven't had any direct recent discussions, but I think the basis of the requirements for the auditor was one of having a base of information so that you can do some determination, and once you have that information, then you can work on looking at what objects we want to look at as far as a model.

Ms Harrington: That is in fact what you're telling me you do have.

Mr Schafft: That's what we're working on, so that we have those base figures and access.

Ms Harrington: I hope to get one more question in here, and that is I think something important to me in my riding and probably everywhere. It's tenant placement. Certainly all of us probably get phone calls as to, "How do I get into housing that is adequate for me?"

I believe it must be a common access process everywhere. Maybe it hasn't been in the past. It has to be non-discriminatory. I know we've just been dealing with another bill this week about employment equity so that people are not discriminated against in employment, but hopefully people will not be discriminated against in housing in any way and there will be a common access. Could you tell me, is the process changing, and what stage are we at now?

Mr Burns: This subject was also discussed at our meetings in March.

Ms Harrington: And it's actually on page 11, yes.

Mr Burns: I indicated at that time that the policy objective of improving access in the way you've described was laid out in Consultation Counts, which was published last fall, and that we were now looking at the specifics.

What's happened since March is that we have prepared a consultation document on how to have a common access system that people can understand and access in a simple way and that operates in an equitable manner and we have taken that paper around the province and had quite a lot of discussions with the wide variety of people who are involved in the housing world all over the province. That consultation process is completed and we're now at the stage of doing the detailed design of the access system that we will want to see developed over the next period of time.

I should say in addition to that, parallel to that, in a number of communities there have been some quite interesting early attempts to bring non-profit cooperative housing providers together and provide better access on a joint basis. In particular I'd point to Hamilton, where quite a few people have come together to try and provide much better and more equitable -- in the sense that you suggested -- access in that particular community.

Over the course of the next year you will see that move from articulation of an objective and a consultation document and discussion to a real design and development process in the field.

Ms Harrington: Just to clarify on that point, I know Hamilton has a registry that is being set up as a pilot project to see what its costs are and what its effectiveness is, and I know probably this cannot be done across the province, but what we need to do, and very quickly, is have a process across the whole province that is the same and that provides people with the one-stop shopping, the openness, being able to look, say, in a telephone book to see a whole list of the housing availabilities.

Mr Burns: In our consultation paper we suggested there were certain minimum conditions that have to be met everywhere. That included some way of reading a telephone book that gave you access to the actual operating organizations. I think what you'll find is that certain basic elements and approaches will be universal but that the way it's organized and delivered may vary from community to community. Some communities have 100 providers and some have a dozen, and some have an established cooperative practice now and others don't. So the institutional framework, if I could put it that way, will likely show some variation, but within that there will be some basic common practice to get at the objective you've raised.

Mr O'Connor: I want to thank you for coming today. The report that we're working towards and the appraisal of what's happening so far of course is important to all the members of the Legislature as we try to get more for our dollar and spend a little bit less money or at least limit the amount of money that we're spending and it's a very difficult process.

At the same time, when we talk about housing and housing needs, we have a lot of people, mostly volunteers, doing a lot of hard work in our ridings doing a number of projects. I can think of three off the top of my head. There's the Lions Club in Pefferlaw working at an extension on Rixson Manor, there's a group working in Jacksons Point at a proposal there and as well one up in Keswick. All these people would like to see their project, of course, come out first.

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When I take a look then at a recommendation that we have looked at, recommendation 5, achieving the best possible value for money that we can in appraising these -- I thank you for the packages you handed out earlier, because it will make it easier for these volunteer groups to put together proposals in the future, so I appreciate that -- at the same time, what we as committee members are concerned about of course is the value for money and is the appropriateness going to happen. In your response that we did receive from you in July -- we appreciate that -- you talked about some review taking place and what not. I just thought I'd like to give you this opportunity to expand on that a little bit more, because from a local perspective, as my colleague Margaret Harrington said, there's always a need for access to housing and I guess we're one of the first places people go to when they can't find a place to go to. At the same time, we're one of the first people they come to see when they've got a proposal from the community coming forward to provide some housing. What we're concerned about as committee members is value for money here and providing this very necessary human need.

Mr Burns: I think I should respond to your remarks and question in two parts. In the assessment or appraisal of a project's value or merit in its broadest sense when it first comes to the door, we have tried very hard in this program to be clear about what our objectives were and how we would evaluate the merit in the first instance of a sponsoring group and in the second instance of a particular development. You'll see in the materials in front of you that we've tried to define those things. In the past, I think the method that was used to do an evaluation of proposals in the first instance was not well understood by people who wanted to sponsor housing.

Within that, at the time you're looking at a particular development proposal and its dollar capital costs, one of the things you have to do is an appraisal of the value of the land. Recommendation 5 speaks to the methodology used in appraisals of land value and to a particular methodology and how we accommodate highest and best use, which is a planning principle in assessing the value of land. We had quite a discussion about this in March, and I said in part of that discussion that we were reassessing our practice, we were going to get some external advice, we were going to relook at how it was done and after that to run a bit of a training program, because I also said that our field staff had varying amounts of expertise or training in the use of this particular method or in understanding material that might be submitted by an appraiser. I also said that this kind of work is also done in what was then the Ministry of Government Services and is now Management Board secretariat when they look at real estate transactions.

We have made progress on the subject and have done the things that we talked about in March. I'd like to ask Mr Schafft to talk a little bit about the specifics of what's happened since March and where we are today.

Mr Schafft: One of the major things, of course, under the new program is the different phases of the development process. What in fact we have done is split or separate the differences between a group coming in and land they may have. So the evaluation process initially deals with a group having a concept of wanting to deal with a particular client group. The land aspect becomes a secondary issue once in fact they have -- I'll call it an allocation or in that first phase at the moment.

What we are doing in the meantime of looking at how in fact you assess some of those costs and the values of land: The highest and best use is a principle that is still in effect. It is used throughout the industry, certainly not only in the public sector but in the private sector, so that is still very much there.

However, what we do need and what is absolutely imperative -- again, we talked about it earlier -- is the knowledge of what is land value and what is a reasonable cost to pay and what is going on in the marketplace.

One of the things that we've talked about also is having the ministry having knowledge and information and being able to retain that information as to what is going on in communities, but we're also now putting back -- I'll call it the burden of proof in many cases on the groups that they also have to come in and show us what those costs are and in fact they are reasonable. We then again reassess those as reasonableness. So in that area of the appraisals we are also working on overall guidelines so that in fact all our appraisers do know and have the appropriate tools to evaluate, and part of that goes back into systems development as far as having the information available to do those proper assessments.

Mr Wiseman: I'd like to make a comment first and then I have about 10 questions. I probably won't get to them all.

My understanding of the assessment process is that the municipality asks for an assessment review by the province and the province then participates and does the assessment review, charging the cost of that to the municipality. If the municipality doesn't like the results of the assessment review or if the client or if the inhabitant, the resident, doesn't like it, they have recourse to go to the Ontario Municipal Board. I just wanted to clarify that for the audience to think that somehow or other some groups of people out there are able to get around the assessment process.

Mr Burns: The process you've described I think covers a situation where a group that owned a project felt that their property tax level was unfair and wanted to appeal it. There are other parts of the act, though, that define certain institutions as being exempt from property tax, or the municipality can by bylaw exempt them. The second process was the process that Mrs Marland and I were discussing before.

From my time in a city hall, I'm aware that every year one or two organizations in a place as big as Toronto ask council for a charitable exemption. I'm also aware that in our system there are -- and I don't know how many, but there's certainly a few -- housing sponsors who have convinced their local municipality that they are charitable within the meaning of the act and gotten an exemption. Mrs Marland asked for that and I'll provide it if we can.

In my experience, that process of being defined as a charitable organization exempt from property tax is either a matter of obvious definition or a matter of municipal council decision and not a matter of decision by the assessment review process. That process has to do with whether the absolute level of tax is fair or not in exactly the way you described it.

Mr Wiseman: My next question has to do with the mortgages of non-profit and cooperative housing. According to the auditor's report, some of these mortgages can be 20-year interest-only mortgages issued from funds borrowed from the Canadian pension plan or they can be 35-year mortgages with private sector lenders guaranteed by the province. How many of those types of mortgages are out there now? When will they start to be retired and when will these costs to the co-ops and to the non-profit houses be retired? When will this start?

Mr Burns: I think within the non-profit and cooperative sector the mortgage terms are generally 35 years. Some of them are higher, 40, 45 -- there was a period of time when that was the norm -- and some are lower. When you're dealing with a purchase and rehabilitation of an existing property, you may not be quite as confident about the lifespan of the physical structure in its current form.

In this decade, you would only be looking at those cooperatives and non-profits whose financial arrangements were made in the 1960s coming to the end of their financial arrangements, and there are only a handful of those. In the cooperative housing sector, they're mostly student cooperatives. The bulk of the non-profit and cooperative housing in this province was built and therefore financed in the period of time between 1975 and the present. So the time when the financing arrangements we've been discussing before would end and some new world would arise will largely begin in the year 2010.

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Mr Wiseman: Just on that, what kind of impact has the high-interest-rate policy of the federal government had with respect to adding costs to the operations of these non-profits and co-ops? What kind of impact has that had in refinancing, maybe if they have floating interest rates or whatever?

Mr Tilson: I thought the interest rates were low.

Mr Wiseman: In 1981, the interest rates were 23% for second mortgages.

Mr Anthony Perruzza (Downsview): They're double what they should be. What do you mean they're low?

Mr Tilson: They're down now.

The Vice-Chair: Please. Mr Wiseman has the floor.

Mr Wiseman: Just to give you an idea, in October 1987, inflation was running at 3.2%; the interest rates were 9%. John Crow thought that wasn't good enough, so he jacked them up and shot the dollar to 89.

Mr Tilson: But they were renegotiated at 17%.

Mr Wiseman: There are people who have had to negotiate mortgages at 17% and 18%, thanks to the Tory policies. What impact has this had on costs?

Mr Perruzza: So you're saying to just slip the noose around people and say, "It could be worse," right? Kind of kick the stool out from under then.

The Vice-Chair: If the deputy could keep his response brief. This caucus is out of time.

Mr Burns: Well, Madam Chair, I don't feel particularly qualified to comment on the national monetary policy beyond the views I have as an ordinary citizen of the country. But clearly, the cost of mortgage financing within this program at any period of time is not just a big amount of money; it's a very big concern in terms of managing the program.

What we have done actually over the last number of years is to progressively upgrade the financing process that we use in this program by first creating, three or four years ago, a central borrowing facility that got us much better interest rates, and in the past six or eight months we've been running an aggressive refinancing program and financing program that's bringing us interest rates that are much, much better than we got. That's not just because of the decline in interest rates. We're getting much, much closer to the basic federal rate than we've ever been before.

Yes, it's a huge part of the cost, and at that point in time in the late 1980s when you had both high construction costs and high interest rates, that created a big financial cost within projects. Those have declined and we're trying to go back to those ones from 1988-89 and aggressively refinance the mortgages that they've got to bring the program cost down.

Mr Wiseman: Can you give me an idea --

The Vice-Chair: I'm sorry, Mr Wiseman. It's actually two minutes over time. Just one point of clarification, because I'd hate to have all the property taxpayers flooding the OMB. If a taxpayer, whether corporate or individual, is unhappy with their property taxes --

Mr Wiseman: The have to go to council first.

The Vice-Chair: No, they actually go to the Assessment Review Board. If they're unhappy with that decision, then they appeal to the Ontario Municipal Board or Divisional Court, just to save the OMB from a further backlog.

Mr Wiseman: It already has a big backlog.

The Vice-Chair: Further backlog, yes. The auditor has some homework for the Ministry of Housing which we hope will be ready at the commencement of our meeting on Monday. Auditor, would you like to give them a list? We do have a written copy of this for members and for the ministry representatives, so you don't have to frantically scramble.

Mr Peters: Thank you very much, Chair. The purpose of these questions is essentially to focus further what is brand-new ground. As you know, the ministry has cooperated in a brand-new process by this committee inasmuch as the committee has made recommendations of its own and the ministry has then responded.

In reviewing the responses that were provided, on general discussion with some of the members, our own view from an audit perspective was that it would be very helpful to further this if the ministry could provide action plans and milestones and target dates for those items where the ministry has either indicated that there's agreement with a recommendation, or where action has been initiated, or where the plans are actually in place but these milestone dates are not indicated, so that the committee could in future develop an accountability process between itself and the ministry to help in this very complex area.

These areas are outlined in the list that you have before you. There are 13. I just wanted to read them quickly into the record. They are: controls over the development costs; market adjustment capacity; highest and best use appraisal value methodology; competitive procurement practices; dealing with development consultants; maximum unit price adjustments; detailed cost analysis and capital cost; operating costs budget norms and standards; tenant placements consistently, equitably and efficiently; tracking market construction prices; central management information system, internal audit practices, budgets and financial statements.

There are three very brief further questions which I'd like to raise and, if the committee agrees, to ask you to answer. When is the completion date for signing the operating agreements? I think that has been raised a number of times. Who is scheduled to review the conflict-of-interest guidelines at the end of 1993-94?

As far as allocations are concerned, I have a brief question that arises from page 13 of the document called Program Overview, item 3, where mention is made that the regional housing programs offices will adjust the regional distribution targets based on the previous selection of proposals as well as on the changing regional, local, economic and market conditions. The specific question I have there is that it might be helpful to know what criteria are being used, or standards, to make these adjustments. At the same time, one area that is not mentioned is how demand is being monitored by the RHPOs.

I think that concludes my questions.

The Vice-Chair: I see a lot of winces out in the audience. I think people see their weekends with their families being shot. But deputy, would you like to comment, not as to the substance about it, but whether you would be able to provide this information for Monday afternoon.

Mr Burns: I said at the outset in response to a very similar question, in general, from yourself that I was quite prepared to provide work plan and action plan information on these items; that they were, in ministry terms, organized somewhat differently, because they're all in different parts of the organization. I'd be happy to do that in writing. The request we got some weeks ago was to comment on the recommendations, period. As you know, we wrote back saying essentially that we thought they were sensible, with very few qualifications.

The question of whether I can provide our action plan and milestones and target dates for every single one of these and the answers to the supplementary questions by noon on Monday is something I cannot answer right this minute. I will consult my staff. We will give you, obviously, everything we have that can be sensibly provided and understood within that time frame.

I think I said also that I thought this kind of format, responding to a draft report, was a perfectly reasonable thing. We can talk about how to discuss it as well in the future. I just forecast this because, for example, our action plan on information technology runs on to a fair number of pages and may not be a very simple thing for the committee to just take a quick look at at noon and understand.

So with those qualifications, I've heard the request of both the committee and the auditor and we'll take our best shot at responding to it.

The Vice-Chair: If you were able to provide them by noon on Monday, I doubt if that would give sufficient time for the clerk to distribute it anyway, so perhaps if you could --

Mr Burns: I'm sorry; 11 or some time.

The Vice-Chair: If that is more difficult, even if you could bring them for the 2 o'clock meeting and have sufficient copies for members. Obviously, if it is ready earlier we would appreciate it, but as much as you can provide would be helpful.

Mr Burns: I don't have, obviously, any problem with that. On the administrative side, for us to do the copies, that's perfectly reasonable.

Mr Cordiano: With regard to that action plan, I would like to receive that plan and I then would like to take some time to review it. I hope it's not the intention of the committee to review that plan on Monday afternoon without first having had an opportunity to examine it in some detail and then come back and look at it at some future date. That's really where I would like to see us move as a direction.

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The Vice-Chair: Are you suggesting that we not ask for any documentation for Monday afternoon?

Mr Cordiano: No. I'm suggesting that if the documentation is available, make it available at the earliest possible date. If it's Monday afternoon, that's great. I'm just saying that I personally would not be able to review that at 2 o'clock on Monday afternoon and do justice to any kind of questioning we might have with respect to that plan. I'd like to come back to it, after having had an opportunity to examine it in more detail, at some future date. At least we could get a commitment from the deputy that he'd be prepared to come back and review that with us. In fact, we may be able to prepare some questions for him in advance of his appearance before the committee.

The Vice-Chair: Just before we go to Mrs Marland, might I suggest that, whatever information you do have available, you provide it on Monday afternoon in case there are initial questions. Then the committee may very well decide there is additional information we require at a later date and might wish to elicit that.

Mrs Marland: I would just like to say that I concur with what Joe is saying here. I think there just won't be time to deal with such a serious matter on Monday afternoon. I too will look forward to receiving what has been requested. I would like to see a consensus on the committee that we would invite Mr Burns back again, as Joe has suggested, even if we developed some questions from the committee and then had the deputy appear before the committee. I'm looking for that consensus from the committee. Do we have that?

Mr Wiseman: When would that happen?

Mr Tilson: October, November. Whenever it's convenient for the deputy.

Interjection: Not in this week.

Mr Wiseman: Because we're pretty booked.

The Vice-Chair: No. It would have to happen when the Legislature's back in session, because our time for the remainder of the summer is already booked. We're looking at Health, GO Transit, university accountability and things like that; not that we aren't fascinated with housing, but there seems to be a consensus, judging from the nods, that --

Ms Harrington: I just wanted to say yes, we should have one more day, certainly, to continue this good news story.

Mrs Marland: You really throw out the bait, don't you?

Mr Tilson: That's what you call comic relief.

The Vice-Chair: If members have no further comments, we probably have time for one brief question. I think we'll proceed. I think we'll have time for one brief question and a brief response from each caucus. I'll divide the time evenly.

Mr Cordiano: Very quickly, and perhaps you won't get the chance to answer this, but my colleague wants to ask a question on the waiting lists.

Mr Tim Murphy (St George-St David): There is a thing I get more than anything else in my riding of St George-St David, which has Regent Park, St James Town, a very high public housing, co-operative and non-profit housing component. I get transfer requests in all the time, and there are lots of people on the waiting list as well. What I'm wondering is, do you know what the total waiting lists are for housing? How much of that is made up of transfer requests? How much of it is duplication?

In relation to that, I know the ministry is thinking about a policy of making one waiting list for everybody, and I do have some concerns about that. I'm wondering, do you have that information? Could you provide it to me and the committee?

Mr Burns: I should just reassure you. We're not talking about a policy of one waiting list; we're talking about a common access point. Each individual provider does have a somewhat different approach to things, and we haven't talked about extinguishing that.

The question of transfers is largely a question of the big providers. In your constituency, that would be the Metropolitan Toronto Housing Authority, the Metropolitan Toronto Housing Co, which is seniors, and Cityhome, which are the big ones.

The internal transfer applications are held separately from the external application list. There will be some households on waiting lists for Cityhome and MTHCL that are now in public housing and wanting to transfer out. I don't think it's a huge number, and I don't know whether we know. In another life, Mr Schafft is also the general manager of the Ontario Housing Corp. I think perhaps separate from this discussion, I'd ask him to phone you or your office and have a bit of a discussion about what we know and what we don't know.

Mr Murphy: I did want to follow up though on the waiting-list-in-total question.

Mr Burns: I was not trying to avoid that question. He can also help with that.

Mr Cordiano: Can I just say that --

The Vice-Chair: I'm sorry, Mr Cordiano. The time has expired.

Mr Cordiano: I'll come back to it on Monday, because I'm interested as well. What constitutes a waiting list and how does that allow you to determine demand?

Mr Tilson: Madam Chair, on all of these questions, the question Mr Murphy raised, all the questions Mrs Marland raised, as a member of this committee I would like to hear the answers in this committee, as opposed to personal telephone calls. We may have to wait until the fall to do that but I'd like to hear that too.

Mr Burns: I understood the question as being more of a general nature about our program and not in the context of the committee. However, if the committee wants the answer here, by all means, we'll do it here.

Mrs Marland: Everything that's asked here should be answered here.

Mr Murphy: The waiting list question does feed into the need and demand idea as well --

Mr Cordiano: Exactly.

Mr Murphy: -- because then you're looking at what the list is, how much of it is a duplication.

Mr Burns: That's fine. We will --

Mr Cordiano: We want to figure out a real demand from that waiting list.

Mr Burns: I can't do it in 60 seconds, but on Monday we will be prepared to talk about it in that time frame if people want to.

Mr Murphy: Fair enough.

Mrs Marland: Madam Chair, I won't be here on Monday because I'm chairing another committee, but I'd like the assurance --

The Vice-Chair: We'll ensure you get the Hansard.

Mrs Marland: I would like the assurance that I will get the answers to the questions I gave you this morning that you didn't have the answers for.

Interjection.

Mrs Marland: I need to have an answer to that question.

Mr Burns: I believe at this moment that I will be able to provide answers to all of your questions, but I have to go out and test a couple of them.

Mrs Marland: That's fine.

Mr Burns: Certainly the one first is quite answerable.

Mr Tilson: My question has to do with the issue on page 14 of Mr McClelland's memorandum, dealing with operating agreements. It's a topic that was raised in March; it was raised at the estimates and it's again been raised now.

The concern I have, Mr Burns, is that it's become quite apparent that there are still, even since 1986 when Homes Now started its adventure, a large number, if not most, of operating agreements that haven't been signed. In January, I don't think -- there were very few signed. I think subsequently to that -- the information I have; I don't know where I got it -- there were 28 signed.

The concern when you start talking about operating budgets: the requirements to produce financial statements, the issue that Mrs Marland started to talk about, about what happens when there's transfer of buildings, the changing of policies, of who's going to live in these places -- unless there's an operating agreement, you have no control. You've indicated, and you quite rightfully control -- you have a control with a non-profit corporation, the structure of it is the conditions of it. But if you don't have an operating agreement, you have no control and yet you're guaranteeing about, what, $6 billion total? -- at least, as of the spring, it was $6 billion of mortgages across this province and yet you have no control over these people.

Mr Burns: I think we came prepared today and we'd be quite prepared on Monday to talk about the status of the operating agreement situation.

Mr Tilson: That's fine. We'll add that to the list.

The Vice-Chair: You mentioned earlier, Mr Burns, that you had some documentation here with relation to the operating agreements, or that you could procure it.

Mr Burns: I think, given the way the discussion's unfolded, that if we put a binder, in effect, together, with a bit of context of overview, and then tab the ones we've got, because they're all related to the things that are in your report, give it to you as a consolidated whole, you'd find it easier to use and work through than throwing out a couple of bits of paper right now and then some more on Monday. With your indulgence, we'll work towards a binder on Monday.

The Vice-Chair: That would be very helpful. It's not always that the witnesses like to consider the comfort and organization for the committee, but I think that will be much easier for us to handle, rather than getting miscellaneous bits of paper.

Ms Harrington: I was also going to ask about the operating agreements, because I know we need a time line to get those finished. I also know, when I first started with this ministry three years ago, that was one of the first things we knew was a huge problem which had, as I said before, been left, the loose ends dangling from a previous administration.

Mr Tilson: You've had three years to solve it. What have you been doing?

Ms Harrington: The conflict of interest, which is on page 7, is something I wanted to briefly ask about. Usually what happens is that you find out there is a problem regarding conflict of interest when it hits the press or when it becomes a problem. What I want to know is, how will you evaluate within the next year, or whatever time line you have, that in fact your conflict-of-interest guidelines that you have are working correctly? It's a hard question.

Mr Burns: I think we said in our response, of course, as we did in March, that we have revised the conflict-of-interest guidelines and we've done some training on that in the field and provided it to the sponsors we now know about. The committee recommendation was that we assess its effectiveness at the end of this fiscal year and at that level, the level of recommendation, we think that makes sense.

We have not, however, designed at this minute an evaluation process. The auditor asked just a minute ago in his supplementary questions for our reflections on how would we design an evaluation process.

Ms Harrington: And I want to know, how do you know it will be working correctly?

Mr Burns: That's an element of designing an effective evaluation, trying to measure its performance in the field. On that particular question, unless someone has an incredible brainwave this afternoon, we will likely advise you that we have not designed the evaluation, but any advice the committee itself has or, for that matter, the auditor, on what might be helpfully included in the evaluation process would be helpful. We have not designed one right at this minute.

The Vice-Chair: Mr Burns and Mr Schafft, thank you very much for the attendance before our committee today. The public accounts committee will stand adjourned until 2 o'clock Monday in this room.

The committee adjourned at 1201.