Wednesday 30 January 1991

Pre-budget consultations

Ontario Chamber of Commerce

Adjust Ontario

Ontario Border Communities Task Force on Cross Border Shopping

Afternoon sitting

Edward Kolodzie

Ontario Social Assistance Reform Committee Network

Toronto Home Builders' Association

Ontario Council of Agencies Serving Immigrants

Tenants Non-Profit Redevelopment Corp

Donald Warne



Chair: Wiseman, Jim (Durham West NDP)

Vice-Chair: Hansen, Ron (Lincoln NDP)

Christopherson, David (Hamilton Centre NDP)

Jamison, Norm (Norfolk NDP)

Kwinter, Monte (Wilson Heights L)

Phillips, Gerry (Scarborough-Agincourt L)

Sterling, Norman W. (Carleton PC)

Stockwell, Chris (Etobicoke West PC)

Sullivan, Barbara (Halton Centre L)

Sutherland, Kimble (Oxford NDP)

Ward, Brad (Brantford NDP)

Ward, Margery (Don Mills NDP)


Curling, Alvin (Scarborough North L) for Mr Kwinter

Fletcher, Derek (Guelph NDP) for Mr Wiseman

Also taking part:

Haeck, Christel (St. Catharines-Brock NDP)

Martin, Tony (Sault Ste Marie NDP)

Clerk: Decker, Todd


Anderson, Anne, Research Officer, Legislative Research Service

Rampersad, David, Research Officer, Legislative Research Service

The committee met at 1012 in committee room 2.


The Chair: I would like to begin this morning's hearings with the Ontario Chamber of Commerce: Don Eastman, chairman of the economic policy committee; Art Smithard, member of the economic policy committee, and Tom Corcoran, president. Welcome. If you would begin, please.

Mr Corcoran: Thank you, Mr Chair. Can we assume that we have a half-hour beginning now?

The Chair: Yes.

Mr Corcoran: Good morning, ladies and gentlemen. It is our honour and pleasure again this year to be speaking to this committee. We represent an organization of business with 60,000 members across the province of all sizes of business entities, all sectors and all geographies. As an organization, we certainly applaud the whole process that we see under way, including this repeated theme of consultation. I would just comment on consultation, that that is provided that it is consultation at the policy formulation and implementation design stage and not just advising us about implementation plans.

The presentation we would like to make this morning breaks into two parts. The first part will be presented by Don Eastman, who is the chairman of our economic policy committee. The major points we would like to make are that the business community needs confidence builders at this point in time, not more burdens, and therefore a major point is no new taxes. The second point is that we feel that the public sector can lead by example in terms of wage settlements that should be no greater than the rate of inflation. We have comments to make on the fiscal stimulation policy and the harmonization of the PST and GST.

The second part of our presentation this morning is a theme that we have presented before. It has to do with the consistency of accounting of government books. Art Smithard, who is also a member of the economic policy committee, will handle that portion of the presentation.

Mr Eastman: At this point, as we enter 1991, Ontario finds itself in the midst of a serious recession. The coming budget should have two major objectives. First of all, end the recession and restore a positive, dynamic provincial economy that provides productive employment opportunities for our citizens, income for people who enjoy the goods and services of our market economy and tax revenue to support the important services provided by the public sector. The second major objective should be to alleviate the personal hardship being imposed by the recession without damaging the prospects for economic recovery.

Let me stop here to assure you that under the current circumstances the chamber will not be calling for a balanced budget this year.

In order to cure the recession, it is first critically important to understand what caused it. There is a great temptation to run out and treat symptoms. We would remind you of the medical dictum, primum non nocere, above all, do no harm. The current recession has been caused by deliberate policy on the part of the Bank of Canada. It purposefully set out to increase interest rates and artificially increased the value of the Canadian dollar in order to increase unemployment.

While we may think that policy is wrongheaded and misguided, the Bank of Canada is not being malevolent. One of the major responsibilities of the bank is to maintain the purchasing value of the dollar by controlling, if not eliminating, inflation. Its only tool for doing this is to restrain economic activity by increasing interest rates and the exchange rate of the Canadian dollar. The current recession is the bank's response to a disturbing increase in inflationary pressures. Both the consumer price index and the wage settlements began what the bank considered to be a dangerous escalation.

In order for Ontario to play its part in restoring the economy, it needs to reduce the inflationary pressures in the province and permit a growth-oriented monetary policy. It also needs to rebuild business confidence that Ontario is a good place to be in business. It has been frequently observed that this is a made-in-Canada recession. It has also been a made-for-Ontario recession. The growing inflation problem that the bank is trying to cure has been centred primarily on Ontario.

The recession that the bank has created has had a direct and immediate impact on the market economy. Unfortunately, its impact on the public sector tends to be minor and slow. In the market economy, companies are disappearing and downsizing. Bankruptcies have become distressingly common. Many private sector employees now find themselves without jobs. Unemployment is rising and so is the load on the province's social services. As a result, spending requirements are rising at the same time that tax revenue is shrinking. While the market economy is bleeding, the public sector is largely continuing as though the party was in full swing.

The public sector has been a major part of our inflation problem. We have seen tax increases that have been a major component of the consumer price index increases. We have also had significant legislated cost increases that have impacted on business and then flowed through the consumer price index. We have also had public sector wage settlements that have tended to significantly exceed market sector increases.

At this point in time, we desperately need the provincial government to stop being part of the inflation problem and become part of the solution. One of the problem areas has been public sector wage settlements. They are high-profile settlements that have a double impact: They provide a target for private sector employees and they also increase government costs and result in higher taxation needs. How do you tell steelworkers that due to economic conditions, ie, negative profitability, that they have to accept less than the teachers' increase or put their job at risk? And this just after they get their tax bill for much higher education costs.

Most provincial tax initiatives and legislated cost increases flow through the cost of goods and services to ultimately show up as increases in the consumer price index. The provincial government has taken the lead in protecting the public service employees from its higher taxes, pay equalization costs and the costs of its higher environmental and workplace safety standards by indexing its wages and pensions to the consumer price index. The province needs to stop exempting public service employees from paying their fair share of Ontario's social programs.

The inflation bias that underlies our economy has been terribly destructive at a human level. Currently, we appear to need a substantial cushion of unemployment in order to control inflation. That is tragic both for those who lose their jobs and for those economically disadvantaged who are less employable. Following its long march back from the 1982 recession, the economy was finally beginning to provide opportunities for those people in 1989. They now, in 1991, find a large and growing barrier of employable unemployed standing between them and their reasonable job expectations.


In addition to this province's responsibility in reducing inflation to permit a growth-oriented monetary policy, Ontario needs to look carefully at business confidence. In order to be positive, dynamic and self-sustaining, economic recovery must be driven by the market economy.

The business community's confidence in this province has been shaken and eroded by a variety of legislative initiatives, tax increases and new taxes. Business costs have been seriously increased in what has appeared to be an arbitrary and capricious manner. That erosion preceded the current government, but I think I can fairly say that last fall's election has not exactly eliminated business concerns.

The initiatives that the government has taken since the election have generally not been helpful. We have seen trailer-length legislation, extended parental leave, rent control legislation, pre-emptive cancellation of the Hamilton expressway. None of these actions has shown much sensitivity to the impact on business nor to a consultative process that would have permitted an expression of business concerns.

Business confidence may not appear to be particularly relevant to the pre-budget process. However, until the market economy recovers, the province is going to find itself seriously short of taxation revenue. Anything that slows the economic recovery will exacerbate the revenue problem.

In the area of taxation, the Ontario Chamber of Commerce welcomes the creation of the Fair Tax Commission. However, we are apprehensive about the potential makeup of the commission and its terms of reference. We are looking for a commission that has the ability and mandate to look past the point of tax collection to understand who ultimately pays our various taxes and is sensitive to the impact of taxes on economic activity.

The truly regressive taxes are those taxes and government actions that increase costs and reduce productive employment without providing balancing benefits. In terms of unnecessary costs, one of the most regressive taxes we have right now is the provincial sales tax. Whether we like the federal goods and services tax or not, it is now a fact of life. By integrating the provincial sales tax and the federal GST, we could save substantial business compliance costs and government administration costs. The total effective tax load would be reduced with no loss to government revenue, and in fact government funds available for productive social spending would be increased to the extent that government administrative costs are reduced.

In the area of fiscal stimulation, the Treasurer has announced a $700-million spending program to help stimulate the provincial economy. In a normal business cycle recession, this would be an appropriate response. With a monetary policy recession, it is counterproductive. Until the Bank of Canada fundamentally alters its current policy, stimulative spending by this government is like trying to fill a bathtub with a teaspoon while the Bank of Canada has the plug pulled.

The Treasurer has identified the economic infrastructure of the province as a priority. We agree with that assessment, but the first thing we have to do is to get the plug back in the tub. Until then, government spending does not stimulate anything, it simply squeezes out personal and business spending.

In the meantime, rising obligations under existing social programs and reduced taxation revenue threaten to produce an ugly deficit even without the benefit of new spending initiatives. Extreme caution in spending is required or we will quickly create a deficit hole so deep that it will appear to be insurmountable.

We are never keen about new taxes or tax increases. They would be particularly harmful in the current environment and should be avoided. I think we would doing our members in the chamber a disservice if we did not remind you that we have consistently recommended that this province run surpluses and pay down its debt in good years so that it could be more responsive to social needs during tough economic times. We wish that advice had been heeded.

I would like it turn it over to Art on the accounting essay.

Mr Smithard: Thank you, Don. Good morning, everyone. In the chamber's presentation prior to the preparation of the 1990-91 Ontario provincial budget, we stressed the importance of the province adopting the recommendations of the Canadian Institute of Chartered Accountants public sector accounting and auditing committee.

The CICA has conducted a vigorous study of government financial reporting practices and has brought forward a series of recommendations designed to make government financial statements more understandable and useful to the readers. We feel that it is essential that the province of Ontario take action to implement these recommendations. Incomplete or misunderstood financial information can lead to inappropriate economic decisions both by elected representatives and by the public at large.

The government of Ontario is extremely thorough in its approach to the establishment and maintenance of financial standards for the thousands of public companies that operate in the province. Last year, the Ministry of Financial Institutions spent $35.6 million to ensure that Ontario investors were protected by rules and regulations that recognize the complexity of modern business undertakings.

It is ironic that the government itself struggles with an accounting approach and financial reporting practices that would be more suitable to the 1890s than the 1990s. These problems were highlighted during the recent election when no one seemed to know if we were headed for a surplus or a deficit.

The financial operations of an enterprise the size of the government of Ontario are extremely complex. It is accurate to say that the government is the largest enterprise in the province and therefore should be a leader in implementing accounting processes and financial reporting practices to ensure that its citizens are well informed. The most important of the required changes can be summarized as follows:

The need for consolidated financial statements: At present the province produces financial statements for what it describes as government operations. This is a ubiquitous label and is not to be confused with all of the operations that the government and its commissions are involved in. In a more fundamental sense, it does not represent all of the operations that are undertaken on behalf of the citizens of the province and for which the citizens have final financial responsibility.

The most striking example of this problem relates to the determination of how much the taxpayers really owe. Last year's budget forecast an accumulated deficit of approximately $39 billion for government operations. However, the outstanding value of province of Ontario bonds is substantially more than that.

These bonds are sold on the basis of the government's ability to raise money through taxation and represent the extent to which the taxpayers are in debt to holders of provincial bonds. Even this total does not include the unfunded liabilities of pension funds and the Workers' Compensation Board, which would appear to add an additional $7.5 billion to the total. Consolidated financial statements are required if we are to be in a position to understand our true debt position.

The adoption of a more modern approach to financial management would lead to a better understanding of the many assets that make up the infrastructure of the province. The maintenance of these assets and their replacement and modernization have a great bearing on Ontario's ability to maintain its productive capacity. This requirement goes far beyond the simple recording of assets and accumulated depreciation on a balance sheet.

It is significant to note that the province of Alberta continues to make progress with the presentation of consolidated financial statements for that province. In addition, the state of New York continues to extend its reporting of the state's fixed-asset base.

Another requirement that should be given serious consideration in the preparation of the government's budget and in its financial reporting is to more clearly delineate between fixed-program spending and those items for which the government has some degree of spending flexibility. At this time, it appears that fixed-spending programs such as health, social services, education, together with interest payments on public debt, account for 79% of all spending. In addition, a significant portion of the remaining 21% of government spending relates to long-term commitments in the form of wages to employees and the cost of essential government services. The end result of this situation is that the government has very little room to manoeuvre and virtually no financial ability to undertake spending programs.


A clearer statement of the government's financial position through the use of consolidated financial statements, coupled with a more precise statement of its spending commitments and flexibilities, would lead to a better-informed decision-making process. Such a process would also produce a more stable base of information for making longer-term financial forecasts prior to undertaking new spending commitments.

We recognize that these requirements cannot all be achieved in this budget, but we urge the government to end the delay of its predecessors and make progress towards implementing a more modern and sophisticated form of financial management on behalf of the taxpayers of Ontario.

Mr Sterling: I am really happy that you have raised the whole idea of the financial accountability of governments and also the agencies of the government, in that the transfer -- I do not know what it is but somewhere between 73%, 74%, 75% of the money goes to other agencies to spend the money on our behalf.

I asked the Treasurer, when he appeared in front of this committee the very first day of our hearings, if he would agree to sit down with the Provincial Auditor and set forth a method of reporting to the public on his expenditures and on his revenue, etc. He agreed to do that and I hope that is going to be one of the recommendations of this committee.

Having served the longest in the Legislature of any of the members of this committee, having served as a minister of the crown and having watched in opposition, it is my conclusion after 13 years as a member of the Ontario Legislature that accountability does not serve the sitting government. In other words, there is no desire on the part of those in power, normally, to be accountable in a clear and simple fashion for the people to understand. Many of the actions of government lead to dispersing the responsibility so that the public cannot really understand what is going on.

During the last administration we had an example of preflowing of money, some $400 million one year and I think $350 million another year, where the Treasurer inflated his deficit during non-election years and then brought that money back into the election year so he could declare that he had balanced the budget when we were facing an election. I think that is nothing more than political opportunism in terms of not declaring to people when in fact you had done better, and only developing the books so that you could present a political statement rather an accountable statement.

I hope one of the recommendations of this committee will be that the Treasurer and interested parties -- and perhaps this will be something for our committee to consider after we have finished the pre-budget consultations -- set down in black and white what is fair to both sides in terms of reporting and how often those reports should be made and how timely, because right now we are having trouble getting the Treasurer to give us our third-quarter statement of what has happened. There seems to be no question that we are in a real spin in terms of the overall deficit, but he is stalling in producing that information. We are going to try to get it out of him, I believe, tomorrow.

In terms of the financial reporting, one of the things that has concerned me is that we have hospitals and school boards that are spending more money on our behalf than some provincial governments. Does your concern go to those agencies as well?

Mr Smithard: The recommendations CICA has put forward primarily focus on the operations of the provincial government, and they would clearly show the transfers the government makes to other agencies, either municipalities or the hospital system. Again, there is a follow-on piece by CICA that will be making recommendations for municipal governments.

I think one of the real difficulties in looking at government accounting and financial practices is that there is really not much cohesion between the federal, the provincial and the municipal levels of government. Practices are quite different and it is very difficult to track things through the entire process. I think traceability and accountability is something that needs to be improved, particularly when you consider the size of transfer payments that take place in the Canadian economy.

Mr Sterling: Could I ask you a specific question about the $700 million the Treasurer has talked about in terms of stimulating? I understood at first that you were saying he should not spend this money, but on the second part I was not certain whether you were softening that stance. In that it is estimated that somewhere in the neighbourhood of $40 million of the $700 million would be spent in this fiscal year -- that means before 31 March -- and that economists have come in front of this committee and said that we are likely to pull out of this recession in the third quarter, it seems to me that by the time that $700 million is in fact in action in terms of providing employment, etc, we are already going to be on the uphill climb towards economic recovery. Are you saying to the Treasurer that it is better to keep the deficit down than spending the $700 million?

Mr Eastman: There are a couple of points tied in together. First, I guess we are not opposing spending the $700 million per se. I think what have been identified are some legitimate areas where the money should be spent, but it is a mistake to believe that this somehow stimulates the economy, because you have in the current circumstances the Bank of Canada with strict control of the money supply. That means it is really controlling in total the amount of money that can be spent; not who spends it but how much will be spent. So to the extent that this province decides to spend more, it means that somebody else spends less, because of the way the monetary policy has been exercised.

It is important that you cannot stimulate a fiscal policy unless it is accommodated by the bank, and this will not be. When the bank does ease off, I think you will find that there will be a lot of personal and business spending ready to come in. In the business spending there are some other concerns, but I think the first thing is that you have to ease the monetary policies.

In terms of when we might expect an economic recovery, which was the related issue you had in that, we sincerely hope we are going to see a fundamental recovery under way by the third quarter. So far, that is in a sense more of a wish than a forecast, because at this point we still have not seen what I would term any fundamental easing of the monetary policies that got us into this situation. You have seen a drop in interest rates, but if you look at the value of the Canadian dollar, it has really changed very little. One of the reasons it has changed very little was partly because of the petrodollar influence but, more important, because we are still maintaining a better-than-400-basis-points short-term interest rate spread with US rates. That is not easing at all, in my book.

So I think the jury is still out as to whether we will have a third-quarter recovery and how strong it is. I certainly hope we are going to see it.

Mr Sterling: You mentioned that you were concerned about the high wage settlements in the public sector. Are you in favour of price and wage controls in the public sector at this time?

Mr Eastman: In the private sector, wages and prices are controlled by the market.

Mr Sterling: I said public sector.

Mr Eastman: Yes, I know. In the public sector there is no effective similar control, and you have to have some other form of control instead. I hear a lot of people all excited about wage and price controls for the public sector. The alternative is for it to be uncontrolled. and that is not acceptable. The only question is: How do you control it and how do you really create a fair situation so that you do not have negotiations taking place in isolation and separate that really are not rooted in economic reality?


Mr Jamison: You did not really deal with my question within your report, and it seems to be a significant problem at this time: cross-border shopping. I am interested in your thoughts on that. The other point is that it is interesting that you have almost great concern over how the Fair Tax Commission would be structured. I would be interested in finding out how you felt it should be structured specifically, and the cross-border shopping impact at this time on the economy.

Mr Eastman: Cross-border shopping is a very messy, complicated topic. There are a number of things impacting on cross-border shopping. Currently it represents a growing loss of taxation revenue for the province. How much that is, I am not sure. I think one of the things that would assist with the cross-border shopping problem would be the integration of the GST and the provincial sales tax, because currently you have the problem that the provincial sales tax is effectively not collected on goods coming in from the United States. If you roll in the provincial sales tax and fully integrate it with the GST, you then have a mechanism whereby that will be collected at the border. That is only part of the problem; it is not all of it, but it does catch part of the problem.

There is a whole bunch of other issues there, including the Sunday shopping part of it. The extent to which you have the flow-through of a lot of other business costs in taxes has meant that when people are looking at prices on either side of the border, Canadian prices really do not look all that attractive, even after you have blacked out some of the more obvious tax impact. So that one is a messy issue and deserves a lot of attention.

Mr Jamison: I thought that many of your members across the province would be within range of that cross-border shopping situation, and I thought you might have more to say on that in your report. I was fairly surprised that you had not.

Mr Eastman: We will have some further material coming on. That is an active topic of research for us currently.

The Chair: We have a presentation at 11 o'clock this morning from the Border Communities Task Force on Cross Border Shopping.

Mr Jamison: The second part of my question was that you showed some concern about the Fair Tax Commission and how it should be structured. I would be interested in finding out how you feel that tax commission should be structured, as you zeroed in on the structure of the committee.

Mr Eastman: Again, the word here is "apprehension," not "opposition." I think the concept is a great one. We are concerned that when we see the makeup of the committee we can be comfortable. We have a sense that that committee, because of its makeup, has the capability of having an objective look at the whole taxation issue and has the depth of understanding not just to look at it superficially but to really look at it through the whole set of underlying causes.

Mr Jamison: You have no specific recommendations?

Mr Eastman: Not at this point.

Mr Sutherland: We have heard in the last few days from the public school boards, we have heard from the colleges, we have heard from the universities. Every one of those groups or their representatives who have been in have called for significant increases in educational funding through the entire system. You have commented in your report about where you think deficits should be, financing and that. Even in this time of recession and with a deficit, would it be your advice that if you were thinking about spending more money, increasing the deficit, education would be the area to do it, in terms of those colleges, universities, public and high schools and skills development?

Mr Eastman: I have some concerns about education. I think education is critically important, probably our most important public asset, our most important public investment. If I look back and I see what has happened to the rapid progress of technology over the past two decades, it has primarily been in information technology. Our ability to process and manage information has increased incredibly, both in what we are able to do and the cost-effectiveness with which we are able to do it. When I look at that, it means it should have been able to translate into an education system that is able to do quite a bit better than it has, using less funds than it has. I think there is a tremendous opportunity for the education system to be much more effective in producing an output and using less funds to do

Having said that, I think post-secondary education has been a bit starved for funds. If you look at where the funds have been going and where the funding problem has been in terms of absorbing money, it is the elementary and secondary school level.

Mr Phillips: Just a comment, and then a couple of questions. One is that in your document, on page 5 at the bottom, you say, "...if we did not remind you that we have consistently recommended that the province run surpluses and pay down its debt in good years.... We wish that advice had been heeded." I guess you may not be familiar with the numbers. We did heed the advice and I would be happy to sit down with the chamber, because four or five years ago the deficit was running at $2.6 billion on a budget of maybe $26 billion. Each year it went down. There was a surplus last year, as you probably know. I think any reasonable person would say that this year, without the recession, there would have been a substantial surplus.

I do not want your members being unfamiliar with those numbers, because our reputation is at stake. I just assure you that the advice was heeded -- heeded by taking the taxes up, okay? I recognize that -- none the less, a surplus, paying down the accumulated deficit, and I think anyone would acknowledge that this year we would have had a substantial surplus had we not had the recession.

But my question really is twofold. As one of the members said, we have had now five different economic forecasters here, three banks and the conference board and Infometrica, and they are all predicting that in the mid to late calendar year, this calendar year, Ontario will pull out of the recession and then see some substantial economic growth next year and from there on. I know you have partially answered it, but because there is a bit of art and a bit of science in this thing, I would be interested in how your members see and therefore how the chamber sees the economic future of Ontario unfolding.

My second is a little more detailed. I agree with you that there are a number of unfunded liabilities around that are not on the books, whether they be pensions or workers' compensation, but also I think we look at capital in a different way from the private sector. We pay capital out of current; we do not amortize or depreciate our capital. I think the Treasurer has signalled that he may be looking at a different way of funding capital. I was wondering if you had any advice for the committee in terms of whether we should be trying to put a figure on the capital assets there and funding some form of depreciation. I think you are looking at it in quite a different light. So those are my two questions and my comment. I would be happy to sit down with whoever in the chamber prepares the numbers to make our case.

Mr Smithard: I will take the last question first, because that is the easy one, dealing with capital and the treatment of it. Today in the provincial accounting process everything is handled on a cash basis. Normally in business and in provinces and states that have introduced capital accounting, the entities have segregated their expenditures between current expenses, things that will be consumed this year, and things that will have a value into the future.


The state of New York, which undertook a very lengthy study of this, started in 1981 with its study. They started phasing in their investments in 1987 and that is continuing to this time. What they attempted to do was to identify those investments that the state or the province make which are really important to the future of the enterprise. I think that if you do that and if you establish a depreciation study base as to how long these assets are going to last, how much money you have to put into them to keep them operational and how much money it is going to take to replace them when the assets are worn out, this is vital to the wellbeing and the ongoing success of the province.

We urge you to move in that direction as quickly as possible. It is not something that can be done overnight. It would probably take 10 years if you started today. It is a big job. We are not talking about counting statues on the lawn at Queen's Park; we are talking about the important assets that the province has that make up the productive infrastructure of the province.

Mr Phillips: They do, eventually, depreciation --

Mr Smithard: They are starting into that, and I believe that they have completed depreciation studies on things like computer equipment and motor vehicles, sort of medium-term assets. They have not, to the best of my knowledge, been able to complete depreciation studies on things like highways and bridges, but I believe it is their intention to do that.

Mr Corcoran: Let me comment on your comment and the second question. Our position with the Treasurer for at least the last three years was that prudent businesses do not plan on the basis of a continued projection of a growth market. I understand from your footnote that had it not been for the recession, but that was our whole point, that in times of economic prosperity that is exactly the time to be paying down.

Mr Phillips: That is why we went to a surplus.

Mr Corcoran: On the second point, if you were to be speaking to business people outside of Ontario, they would be saying, "Oh, you mean Ontario's recession?" For people throughout Ontario, business people throughout Ontario, we have been made aware of the optimistic view of a third-quarter recovery by the Treasurer and by financial institutions. But I would think most prudent business people that we speak to are not making decisions based on a third- or fourth-quarter recovery in terms of a decision that will only have to last for three to six months. They are making decisions that will last for the long term.

The good news of that is that if there is a recovery in the third quarter, all companies, the majority of companies, will have a lower fixed-cost base and will be well positioned for recovery. I do not see anybody making decisions on an assumption that there will be a recovery in the third quarter at this point.

Mr Phillips: Do you survey your members at all? I am just wondering if there is any tracking that is done in terms of --

Mr Corcoran: We have not made a statistical survey, but we do have a quarterly board meeting. We have had at least three or four passes at them with what we would call our Ontario recession.

Mrs Sullivan: I think the comments you have put forward on the accounting methods are very interesting, and Mr Phillips really asked a question that I was very interested in on the capital side, but I also wanted to go back to some of the matters you have raised in the fiscal stimulation section of your brief. One of the things you mention is that the government should exercise extreme caution in spending. Of course, spending includes not only actual dollars put out but forgone income as well.

The federal chamber has taken the position that incentives to business should stop and that you can do very well on your own, thank you very much. I would like your comments on that, given, for instance, the recent initiatives which in fact have been welcomed, particularly by the manufacturing sector in terms of the Ontario current cost adjustment moving to 30%, an initiative which was taken by the previous government and which this government has indicated it was going to continue.

Mr Eastman: I think one of the important aspects of that one is the issue of tax stability, because many of the manufacturing industries have done their planning based on that commitment. It was then quite appropriate that that should be followed through with on the capital cost allowance.

The Chair: Excuse me, could you move forward and speak a little bit more into the mike? They are having trouble back there with the recorder.

Mr Eastman: Sorry. I think the capital cost allowance is one of these items that should be properly addressed by the Fair Tax Commission, because one of the problems we have is that we wind up with the conception that somehow this is one of your taxation expenses, forgone revenue.

In fact, one of the problems we have with corporate income tax is that because there is no assessment of the impact of inflation, the full amount that is available for capital cost depreciation winds up being substantially less than the real amount that should be available. In a sense you have two offsetting factors going on there. So I think that in terms of your attitudes you have two biases, and it is appropriate that that should be addressed by the Fair Tax Commission.

Mrs Sullivan: Okay. Well, in that case the Ontario current cost adjustment moved from 15% to 30% as of I January. This should have been of significant benefit, I think something of the value of $150 million or something. Does the Ontario chamber hold the national chamber's position? Do you concur with that point of view?

Mr Eastman: In terms of generally eliminating the direct subsidies assistance business, yes, we do.

Mrs Sullivan: How can you apply that concept then, when we are very clearly looking in order to be competitive over the next period of time, with massive needs in research and development, which clearly will not be done by business alone? How can you bring those positions together when on the one hand we know there is going to have to be immense co-operation between government and business? Is business prepared to carry that load on its own?

Mr Smithard: I can give some insight into that in the sense that many businesses make substantial contributions in the R and D area. I am with Bell Canada, and the Bell Northern Research consortium puts a tremendous contribution into research and development in a very strategically important area to Canada. I think there are other firms that also invest heavily in research and development.

One of the problems we have in terms of measuring that is that the definition relates to the tax law. In other words, the definition of research and development is not sort of defined by people who are interested in research and development per se; it is really defined under the tax law, and you get a lot of strange things caught up in it as a result of that. That is a difficulty that we have, and in part it gets tied up in the tax credit process. I think your point is well founded, and that is that the government does need to continue to give good recognition to R and D tax credits.

Mr B. Ward: Just a quick question before I make a comment. I have just gotten back from Cornwall after the last couple of days on a skills development issue with the Minister of Skills Development. In talking to the people in Cornwall about the economic conditions that exist there, talking with my colleagues from Windsor, from the Sault -- I know what is going on in Brantford;my colleague Norm Jamison is suffering some tough times in Simcoe -- the feeling I get is that our provincial economy is undergoing a fundamental restructuring.

In the recession of 1981-83 we were reducing the manufacturing base in size, but with new economic growth would bring back the labour force if not to the same employment levels, even more so. What is happening now, in my opinion, is that the restructuring that is occurring is in our manufacturing base, that the plants that are laying off, closing up, are gone for ever. They are relocating or centralizing their operations for whatever reason, but they are gone for ever. I would just like a comment from the chamber's perspective, if that is its view on what is going on in this recession for the province of Ontario.


The second point I would like to get their opinion on is on page 4. They mention under "Business Confidence" that "In order to be positive, dynamic and self-sustaining, economic recovery must be driven by the market economy." I was just wondering, from your point of view, the Ontario Chamber of Commerce, everything being equal and if we heed your advice, how do you envision the market forces leading to economic recovery? I am assuming by market economy you are talking about it being driven by the private sector rather than the public sector.

I can relate to the very severe depression we had in the 1930s where every year the business leaders were saying that recovery was just around the corner -- "Allow the private enterprise system to do its job and the pressure will be over" -- yet year after year after year it continued. I was just wondering how you envision our recovery to occur if it is driven by the private sector.

I wonder if you can comment on those two. First of all, in your opinion are we undergoing a fundamental restructuring of our economy in the province? Second, how do you envision the private sector leading us out of this recession?

Mr Eastman: Clearly there is some fundamental restructuring taking place. The timing of the recession is really tragic because it is occurring at the same time that people are looking at the restructuring that would be appropriate under the free trade agreement. To try to do that in a circumstance where the Canadian dollar is artificially held at 86 cents and where you have a general depression of business confidence in this province at the same time, that does tend to steer some decisions elsewhere. That will be permanent. That reinforces the need to get out of this recession as quickly as possible.

In terms of the role of the market economy, it was serving this country and this province extremely well in terms of driving the whole economy up until the time that the Bank of Canada said: "Hey, the party's got out of hand. We have to stop it." When the Bank of Canada does make a fundamental change in policy with competitive interest rates and the lower value of the Canadian dollar, and if at that point you have a continuing problem with the lack of investment and activity from the market economy, that needs to be addressed then, but at this point I do not have any real concerns that we will not see a recovery once we can get monetary policies in place.

Mr B. Ward: You are fairly confident that once the Bank of Canada eases the monetary restrictions we are under with the high-interest-rate, high-dollar concept, the private sector will be able to lead us into recovery provided everyone gets his economic house in order, so to speak, in your opinion?

Mr Eastman: I do not think there is any doubt about that at all as long as there is, in conjunction with that, a restoration of business confidence that this is in fact a good province to be in business for a variety of reasons.

Mr Christopherson: I realize the lateness of the time. I had a number of questions, some have been asked; I will just ask one very quick question if I can. Most of the people coming before us over the last couple of weeks have been indicating with a fair bit of confidence that effective the beginning of the third quarter of this year we should start to pull slowly but steadily out of the recession. I would just ask if the Ontario chamber is also of the opinion that that is what is going to happen. Is it your sense that your membership is planning to respond with that kind of timetable in mind?

Mr Eastman: I think there is a tendency, once you are in any recession or boom, for people to believe that it will continue for ever. If you were to go out and ask our membership right now, I am not sure that you would fund a great many of them, particularly in the smaller businesses, who really do see that upturn coming. When you start talking to the large businesses, those that can have their own economic staff, etc, then you do have a view that yes, recessions are temporary things and you come up the other side of them.

A concern I have is that most of those forecasts for a third-quarter recovery are econometric-model forecasts. There are some things that are fundamentally different about this recession, including the fact that there is some restructuring taking place.

At this point we still have, in my view, an adverse monetary policy. There is normally a fairly significant lead time between the time you have a change in monetary policy and the response in the market economy. You have some things like housing starts that can respond fairly quickly; car sales can respond fairly quickly; with business investment, depending on its size and nature, the lead time on that can be from six months to 18 months, two years.

In a sense, if you want a third-quarter recovery, you virtually have to have almost an immediate change in the current monetary policy. If that happens, then I would be comfortable that we would see it happen.

Mr Christopherson: Good. Thank you for your presentation and your brief; we appreciate it.

The Chair: On behalf of the committee I would like to thank you for making your presentation today and thank you for coming.


The Chair: Our next committee hearing is Adjust Ontario; Marnie Hayes, Fiona Knight and Richard Yampolsky.

Ms Hayes: Good morning, Mr Chair and members of the committee. I would like to thank you for the opportunity to appear before you this morning on behalf of Adjust Ontario.

My name is Marnie Hayes, as mentioned, and I am a community and legal worker with Metro Tenants Legal Services. With me are Richard Yampolsky, who is the executive director of FoodShare, and Fiona Knight, who is the program director with FoodShare.

Some of you may be wondering what Adjust Ontario is. It is an organization, a sort of network of social service and community agency groups, that came together in about June 1990 with a list of demands to alleviate poverty in Ontario.

We believe that the root causes of poverty must be looked at in order to alleviate poverty, and that there is a whole package of reforms that must take place in order that poverty is no longer in our midst. For example, there is no point in increasing the minimum wage while at the same time having incredibly high prices for rental housing. Therefore, there is a whole package that we would like to present to you this morning which includes an increase in the minimum wage, an increase in social assistance rates, an increase in child care rates, an increase in non-profit housing and mandatory employment equity legislation which includes funding for public education.

We believe that the time of recession is not a time to hold back on public policy, social and anti-poverty initiatives, but it is a time to go ahead because now is the time when homelessness, poverty and hunger are at their height. To quote the NDP's Agenda for People, which was a preelection package, now is the time that "families no longer have to choose between paying the rent or eating."

With respect to housing, we believe that the lack of decent, affordable housing is one of the two primary causes of poverty in Ontario, concurring with the Transitions report of the Social Assistance Review Committee.

Currently there are about half a million tenant households that spend more than 30% of their income on rent, and there are over 190,000 people in Ontario who are forced to rely on food banks to eat. It is estimated that the average food bank user spends approximately 70% of his income on rent. In the Liberal government report, More Than Just a Roof, for the International Year of Shelter for the Homeless, it was estimated that families that spend more than 50% of their income on housing are at risk of becoming homeless should their economic circumstances take a turn for the worse.


Currently the public housing waiting lists have grown to 44,700 people in 1990, which is an increase of more than 60% since 1987. In Metro Toronto alone it is estimated that there are approximately 20,000 people who are homeless.

The need is clear. The number of non-profit housing units has to be increased in Ontario. We consider housing to be a right, like education and health care, and it is the responsibility, in this case of the Ontario government, to provide affordable housing for its citizens. The question is, how should that housing be provided and where should the government allot the funds to create more affordable housing? We say that co-operative housing and non-profit housing are the most viable solution because non-profit housing is affordable housing that remains affordable over time, unlike housing in the private market which is subject to inflation and speculation.

Housing production is good during a time of recession because it creates employment. Each new housing unit that is created creates 2.2 person-years of employment, giving living wage jobs and at the same time much-needed housing.

It is true that it is very expensive to provide programs for co-operative and non-profit housing, but we ask this committee to be in agreement with the 1990 report of the standing committee on finance and economic affairs, which recognized that non-profit and co-operative housing are important elements in addressing the issue of affordable housing.

We are going to move on to the issue of social assistance and minimum wage.

Mr Yampolsky: With regard to social assistance, since their inception Ontario's social assistance programs have always been predicated on the notion that some people were or are more deserving than others. We have seen over the years the development of benefit rates that differed for employable people. families with children and disabled persons. Not only has this meant that tens of thousands of people have been forced to live in poverty, but the general population, through this segmentation that has taken place, has been made to believe that there really is a hierarchy of deservedness among those people who constitute the poor. Disabled people are more deserving than employable people, and everybody knows that children, the innocent victims, are the most deserving of all. What we have really done is that rather than look at the whole issue of poverty, we have segmentized or segregated the various aspects of poverty.

Benefit rate structures have never had any bearing on the reality of what it takes to maintain oneself and one's family in dignity. The theory behind keeping social assistance benefits low has been and still is to this day to create a disincentive for people who rely on social assistance and to make income from paid work more attractive. As we found from the statistics released by the Social Assistance Review Committee, only 9.5% of people in, I think it was July 1988, were actually employable. So we are looking at about 45,000 people who were recipients at that time -- I presume now the numbers are higher -- beneficiaries of social assistance, who were actually employable. About 90% were actually sole-support parents. Children made up 41% of this, yet we were punishing them at the same time.

This whole theory I was just talking about around the disincentives also does not address the reality of those people who are simply unable to work. Single parents who can neither secure nor afford child care or who choose to remain at home with their children are penalized and forced to live in poverty because of these choices and because of the lack of available support programs. Disabled persons, many of whom are unable to work, are also forced to live in poverty.

I do not think anybody in this room could really disagree that benefit rates are woefully low, given the low-income cutoffs established by Statistics Canada and the Department of National Health and Welfare, as well as various social planning councils across the country. Social assistance recipients in Ontario still fare no better than 55% to 74% of these standards.

With the release of the Transitions report by the committee in September 1988 the details really did come to the fore, and I am not going to bother going through all of them. But the minor tinkering with the implementation of Transitions by the previous government and since October 1990, I guess, has really meant that the clear vision still exists for Transitions. I was before this committee a little over two years ago as well, talking around the implementation of Transitions and the need to act on it.

What we are really beginning to see is that while the vision still exists and while there are many of us who still use it as a very clear vision to really address systemic poverty issues in the province, the political will is still lacking. To date, only 25 of 66 recommendations contained in phase I of Transitions, in the very staging program, have been implemented in any way, shape or form. To give credit where credit is due, the current Minister of Community and Social Services has asked -- they are supposed to be reporting back either today or tomorrow -- about the non-legislative aspects of Transitions that could be implemented, and to her credit has requested that the non-legislative side be fast-tracked.

In April 1990 the standing committee on social development of the Legislature had a series of hearings on food banks, and the report back from that recommended the provincial government "implement the balance of the social assistance rate increases called for in the first two stages of the SARC reforms (including two years of indexation)." We have yet to see this.

We know the cost of maintaining approximately 10% of the provincial population in poverty is increasing. Increases in health care costs and judicial and social services can all be attributed to increases in poverty levels, and yet we continue to advocate that, by eliminating the number of people in poverty, we will obviously see a corresponding decrease in expenditures in other areas.

The recession is not the time to stop social assistance reforms. This period should see an unprecedented increase in social assistance payments. This should not merely be because of an increase in welfare case loads, as we are seeing in every municipality across this province. but must instead also dramatically see increases in the level of benefits paid to people in need.

I believe it was Mr Ward who was talking about the actual restructuring that is taking place. The comment around my workplace is that we are now no longer talking about the haves and the have-nots, but we are talking about a new category and that is the used-to-haves: "I used to have a job. I used to have a house." In many cases it is "I used to have a family" and "I used to have support." We really are seeing a very different sense of restructuring that is taking place right now, and without both financial and social supports there are an awful lot of people who are going to fall between the cracks.

The other part we have really begun to notice in terms of people who are in need of social supports is that in the early 1980s it really was to a large extent a blue collar recession. It was an industrial base that was eroded, again with high hopes that it would come back. We were talking about layoffs. We are now no longer talking about layoffs; we are talking about job loss, jobs that are not coming back. What we are beginning to find from people who are contacting us for assistance is that they had been until recently at least middle-income, middle-management men and women who had what they presumed to be safe, secure jobs or career paths that they were really looking at. It is a very different sense of the economy right now, and without the social and financial supports for these people we are dooming an even greater number of people.

The previous presenters were talking about the third quarter of this period, being the recession, seeing the upturn in the recession. We had been talking for a year and a half before everybody finally admitted that there was a recession, that we were in the midst of a recession. We do not see this recession ending for at least two years.

We tend to be at the cutting edge, for lack of a better phrase, of where the social supports are needed for both people on social assistance and the working poor. We tend to get the calls from people needing assistance. We were getting an awful lot of calls starting at the beginning of last year, and they really starting picking up probably in May and June of this past year. We do not see this relenting at all. Generally if there begins to be an upturn, we will see the demand for our services decreasing. In fact what we are seeing right now is an ever-increasing number.


I would also like, before passing it on, to just touch briefly on the issue of the minimum wage. No one, I do not think, in this room could argue that the minimum wage has not lost its purchasing power since the mid-1970s. During this period, the provincial workforce has increased and the economy has grown dramatically, but wage rates have ostensibly fallen. Currently the purchasing power of the minimum wage is approximately 80% of what it was in 1975. I think everybody is fully cognizant of the growth of the working poor in Ontario.

As the workforce has grown, so too has the percentage of absolute numbers of working people who constitute this new buzz-word of the late 1980s called the working poor. In the past few years the number of people requiring assistance who constitute the working poor has increased dramatically. We are now looking at approximately 18% of people who need assistance every month from emergency food programs across Metro Toronto, and we correlate across the province as well, who constitute people who are classified as the working poor.

The current government in both its Agenda for People platform and in its inaugural throne speech committed itself to increasing minimum wage rates to 60% of the average industrial wage. Just for those of you who do not have calculators, this would increase the minimum wage to roughly $7.25 a hour. Although we do not doubt the sincerity of the commitment, we and the people in Ontario who still have jobs and who are working at minimum wage really need to know the time line that this government is talking about for implementation. Is it within the upcoming budget so that people have hope in the short term or is it at the end of their term as a further election promise in which case they can anticipate another few years of poverty?

We are looking at this committee to recommend that these increases and the time line be spelled out very clearly.

Ms Knight: In the early 1980s the report Day Care Deadline was released. This deadline has since passed. Child care advocates, parents, child care workers, trade unionists, teachers' organizations, women's groups and others concerned about child care in Ontario have since undertaken a further review of the progress made towards any establishing of a universally accessible, publicly funded, high-quality, comprehensive, non-profit child care system in Ontario.

Despite increased government expenditures, there has been little improvement in the delivery or funding of child care in Ontario. In fact the situation has deteriorated for many children and care providers. Adjust Ontario supports the position that now is the time to put public non-profit child care services and their development on a sounder footing. The following proposal is a framework for a new child care system in Ontario, a new decade for child care.

The key elements of this system will incorporate each child care program being fully funded by the provincial government and the provincial government will be entirely responsible for cost recovery through a separate administrative system. Another element is that the provincial system will be non-profit. Existing for-profit programs could become part of the provincial system by converting to nonprofit status.

The provincial system will be comprehensive in that it will allow for a range of regulated services, including but not limited to full-day group care, private-home day care, before- and after-school programs, parent-child resource centres and services for shift and seasonal workers.

The development of this system is a provincial responsibility. To achieve the goal of universality, targets and time lines will have to be planned and implemented provincially. Last but not least, local community planning of services will be an integral and vital part of the development of these new services.

Funding of this system: Currently about 65%, in numbers 75,000, of the 117,000 licensed child care spaces are non-profit or publicly operated. At an average cost of $6,000 a space, the current full cost is estimated at $450 million. An additional $50 million is required for existing subsidies in the commercial sector. Current for-profit spaces receive fee-subsidized spaces. No new public funding should be available to commercial programs under the new system.

Additional costs of other child care in the 1990-91 budget, including services for physically and developmentally disabled children, parent resource centres, capital expenditures, pilot project, research and development, were allocated a further $60 million. Therefore the total cost assumption for stabilizing the current services is $560 million.

Several options, as estimated by the Ontario Coalition for Better Child Care, can finance this restructured system. The province of Ontario should maximize recovery of the federal cost-sharing currently available through the Canada assistance plan, called CAP, by using maximum federal income eligibility guidelines for the purpose of determining reimbursement.

Using these criteria, it is assumed that the cost of care for 72% of children at an average of 70% of costs would be eligible for cost-sharing under CAP. In dollar figures, the cost-sharing for 75,000 non-profit spaces will be $227 million. In addition, the current subsidy to the commercial sector of $15 million brings the total to $277 million. The federal share of these costs would be 50% or $138.5 million.

To generate this reimbursement, Ontario would need to spend at least $138 million. Given that the Ontario budget of 1990 anticipated spending $257 million on child care, it seems reasonable to assume that this amount would still be the provincial contribution.

Added to this will be the revenue generated from parental contributions, calculated through a new Ontario child care contribution using an income-testing model, estimated at $150 million. The total anticipated revenue would be $545 million. Given these calculations, it only takes an additional commitment of $15 million to require the province to accomplish fundamental restructuring of child care in Ontario. We therefore request this committee to consider the following recommendations:

1. Fund 10,000 additional subsidized spaces and create 10,000 new spaces for non-profit and publicly operated services;

2. Implement and fund pay equity adjustments for all child care workers who have not found a remedy under the existing pay equity legislation on the same schedules as other public sector workers;

3. Take action to restructure the child care system as outlined by budgeting an additional $15 million to the $257-million commitment in the 1990 budget.

This is just a small investment for the big return of the future of Ontario: our children.

Ms Hayes: I would like to speak briefly to the issue of employment equity. It is clear that discrimination in employment denies women, persons with disabilities, visible minorities and aboriginal people the opportunity to compete fairly in the job market. Women continue to earn two thirds of men's wages, aboriginal people have twice the average unemployment rate and people with disabilities have unemployment rates as high as 80%.

It is the hope that this government is going to implement employment equity legislation. We ask that this committee recommend that in the budget there be money for an employment equity commissioner to institute an educational program so that employees and employers can learn about the issues of employment equity, and that will focus on guidelines to assist the process and the development of the employment equity plans of the government and to develop formulas to establish goals and timetables.

In addition, we ask that this committee see that policies are introduced that ensure accessibility for the disabled, especially in the distribution of the $700 million announced in the throne speech, that it be allocated to necessary maintenance and renovation of public sector facilities and that the distribution of all government grants for construction and renovation projects be considered.

That is basically our presentation this morning. Are there any questions?

Mr Stockwell: Basically pretty much everything you spoke to was dealt with in the Agenda for People, which is the policy statement that the government had during the election. Since they have been elected, they have been doing the backstroke with respect to introducing a lot of these programs and fulfilling a lot of their promises. They have given a lot of reasons and rationale as to why they cannot, including the recession and the debt. Are you buying into this, or are you telling us today that this government is obligated to fulfil An Agenda for People, to deal with a lot of the issues you are talking about today, regardless of the economic climate we are in right now?


Mr Yampolsky: I think from our presentation today it is very clear. I do not think you are wrong in terms of seeing some of the similarities between what the community has been calling for for the last seven to 10 years and An Agenda for People. By our presentation today, what we have said, and what I said very clearly around the minimum wage legislation that we are looking for, is we want the timetable.

We are saying the same thing around their commitments around child care. The government has committed itself to X number of spaces and we are saying, "Fine, let's see them." We also hold very clearly to the position that the recession is no excuse; that, if anything, the recession is really the critical time when social spending has to increase as there are more people in greater need.

Just as an aside, because I suppose either it will come up or it is at the back of a number of people's minds, there is is the whole issue of the cost-sharing with the federal or provincial arrangements under Canada assistance transfer payments and the 5% ceiling or the cap on the Canada assistance plan that is affecting Ontario. I guess it is also critical to remind legislators that prior to the CAP arrangements with Ontario in the mid-1960s, Ontario paid 100% of costs.

I understand that there are political implications with Ontario spending what tends to be called 100% dollars as opposed to 50% dollars or 50-cent dollars, but it really is critical now, as we see food bank lines increase, as we see more and more people losing their homes. Really, it has reached the perverse stage where food banks and bailiffs are the only ones doing booming business.

Mr Stockwell: Surely the question, though, is in fact you see the backtracking taking place but you are going to hold firm to those promises that they made in the election. I do not agree with everything you say, but I agree with the fact that if someone makes a promise and produces a report like An Agenda for People, it is your job now to come forward and ensure that the government was not simply just making this up to get elected.

Mr Phillips: Just to follow up on that, because I am relatively sensitive to this. as you know, I was Minister of Labour and I had responsibility for the minimum wage. I do not know whether any of you were among the picketers who kind of went after me, sponsored by the Labour Council of Metropolitan Toronto.

I am quite sensitive about An Agenda for People because I think that is one of the bases on which the new government got elected and one of the bases on which we were defeated, in spite of the fact that the budget of the Ministry of Community and Social Services went up dramatically. I think it was up 20% this year. I think we put $500 million into implementing the Social Assistance Review Committee. But that was not, I think, fast enough.

I guess what you will have to count on us for is to monitor An Agenda for People. An Agenda for People did not say we are in a recession, so I do not think the new government can get off the hook on that. I gather the Treasurer is now saying he has a windfall -- surprise, surprise -- of $1 billion, which brings the revenue maybe -- I do not know; we will know tomorrow -- back up to what we thought it was. A $2.5-billion deficit is an unusual one because, as I say. it now looks like government revenues, in spite of the recession, are not going to be down the $1 billion that was predicted right after the election.

We will be watching An Agenda for People. I think the timetable was in there. On your minimum wage, the timetable was in the agenda. I think it was over four years. On the child care it is over two years. On the housing it is over two years. I think the new government will simply be monitored on the basis of An Agenda for People. I guess you are at a committee that can help you do that, in spite of the tough economic times.

Mr Yampolsky: With respect to the way it was laid out in the agenda, though, to state the minimum wage would be raised to 60% of the average industrial wage within four years does not help us because the whole lump sum can be done in the final period.

Mr Phillips: They would not do that.

Mr Yampolsky: It was two years?

Mr Phillips: It says over four years.

Mr Yampolsky: Yes. Minimum wage was over the course of four years. What we are really looking to, and I think what people in Ontario are really looking to, is the staging process of this. Is it going to be nickel-and-dimed? We saw with the last government -- I think it was a 40-cent increase in one lump sum. Are we looking at those kind of increments? What are the incremental benefits for people who are earning minimum wage, and over what period of time can they really look to it? On the other side, I think employers have to know that.

Mr Phillips: Yes.

Mr Yampolsky: I think it is critical in terms of any kind of economic planning, particularly for the small business sector that they are looking at, to know what kind of incremental costs they are going to have to look into.

Mr Phillips: Just for your information, I was the minister and I tried to move it up. The argument I got was that it would result in fewer jobs. That is why the old government took it up at the rate it did. I can recall -- eyeball to eyeball with maybe one of you or not -- the new government saying, "No, no, it should go up to 60% of the industrial wage." I think the new minister has made an announcement in the House about it, so we will be watching that.

Mr B. Ward: I have two questions and I hope you can answer them to the best of your ability.

The first one is that during these tough economic times we have been getting a feeling from organizations which perhaps take a conservative look at things that in fact we are spending too much on social programs, that with the recession we should be cutting back our commitment to social programs because of the cost. There is a feeling in some individuals that people who are on social assistance, UI, or whatever the program is, could work if they wanted to. Could I get your answer to that? Should we be cutting back at this time, and if so, why, or if not, why not?

The second question concerns the minimum wage. The criticism about increasing the minimum wage is that we would be destroying our competitive balance in the global economy with our competing provinces or our southern neighbours. What answer do you have to that, that by increasing the minimum wage we will not be harming our ability to perform as an economy?

I guess I have one more question. There is what I call a conservative view that the Holy Grail is a triple-A credit rating as a province. Do you think we should be concentrating on that more than on having adequate social programs for the working people in this province during these tough economic times?

Could you just touch on those three areas so I am clear in my mind what your organization feels we should be doing during these tough economic times?

Mr Yampolsky: I will attempt to tackle the first and the third, the one around spending cuts and should we be cutting back, at the same time as dealing with the whole issue of a credit rating.

It is our really firm position that no, there should not be any cutbacks in social programs at this point in time -- in fact, if anything, there should be dramatic increases. I think, from a purely economic perspective, if you look at a cost-benefits analysis of it, by cutting back on social assistance programs or any type of social program -- and I leave health out of social programs because it is its own entity at this point in time -- by cutting back on social spending you will see, and I think we have begun to see, an increase in crime.

You will see an increase in health care costs being incurred. It is no mystery and no great surprise that poor people are more reliant on the health care system than middle and wealthier Ontarians. That is purely because people who are not in poverty can afford to live in safe and secure surroundings. They do not have to deal with coldwater flats, and yes, we still have cold-water flats in the 1990s. They can afford to feed themselves and their children properly, adequately and with nutritious food. They do not have to suffer, as we are seeing right now, an increase in the number of children who are suffering with rickets. That has not been seen pretty much since the postwar period, but there really is a dramatic increase.

They can, for the most part, afford to provide their children with breakfast so that their children can go to school and can succeed in terms of behavioural issues and behavioural problems. A longitudinal study was actually done in Boston. They correlated academic scores and school feeding programs or school breakfast programs and actually found the academic scores of the children who were having proper nutritious breakfasts went up on average 9.5%. So we are really looking at investing in both the current generation and in future generations of Ontario by increasing that.


We also have to look at the fact that by increasing income support programs, you really will see decreasing reliance on the health care system. It is our contention as well that as the recession deepens, there will be an increase in crime. There will be people who will be desperate to provide for both themselves and their families. I am not saying that that is why we are seeing such a dramatic increase, but I have no difficulty stating publicly that I think certain people turn to crime because they just cannot afford to pay for themselves or cannot afford to take care of themselves.

In terms of a credit rating, I do not think that an increase in social spending would really necessarily see a dramatic attack from Standard and Poor's and everybody else on our credit rating. I do not think one thing has anything to do with the other.

For me it relates as well to your question around the minimum wage, that by increasing the income of all Ontarians, both through minimum wage and income support programs, you also increase their ability to consume goods and services across the province. That also, to my mind, begins to put people back to work, because as demand for goods and services increases as people have income in their pockets, there is going to be the corresponding response from the other side, which is we are going to have to meet the supply based on the demand that is coming up. More and more people are going to be called back to work.

Mr B. Ward: If I can clarify, in your opinion, by increasing the minimum wage we would not experience job loss, but in fact we may experience job gain because of the --

Mr Yampolsky: Yes, provided we are not prepared, ascertain governments have been and are prepared, to lose our entire industrial base within Ontario. If we are prepared to relinquish our industrial base and simply look at Ontario and particularly the greater Toronto area as being a service sector economy, then I do not know if I would stand this firm.

Mr Hansen: The question I want to ask is if it is possible, before we make our reply, that we get a photocopy of the written speeches that are there, because by the time Hansard comes out, after we write the report, it will be of little use to us.

Ms Hayes: We have a written brief.

Mr Hansen: Because I lost on some of the figures there as you were reading them out.

Ms Hayes: Yes, we have it all. Everything that we said is in writing and we will have that brief to you later on today or tomorrow.

Mr Hansen: Okay, that will be fine. Thank you.

Mr Yampolsky: The printer broke down.

Mrs Sullivan: I think that your intervention today was a useful one and I agree with my colleagues that new promises were made and a new government elected and I hope that you will hold them to those promises.

I want you to review some of the information that you provided relating to child care. Just as a preamble to my question, over the past five years we have seen about 200 to 225 million new provincial dollars going into child care for subsidized and new spaces, and Ontario in the last budget, I think, committed about $260 million to child care. With the request that you are making, I think that new spaces or subsidized spaces would add an additional $65 million, let alone whatever the additional costs are of operating spaces that exist, including the pay equity suggestions that you made.

Where I am having trouble following your argument is your suggestion that only 15 million new dollars would be required. It seems to me that you are underestimating the change in federal transfers through CAP. We understand that in this fiscal year there is going to be $310 million less coming from the feds for the CAP program and in the next fiscal year $510 million less.

As a consequence, the province's share to maintain and to add new spaces will have to go up. As you have indicated, at one time the province carried the whole load of child care. I am wondering if you are asking of the new government that despite what happens with federal transfers, the province take the load and provide those spaces with or without extra funding from the federal level.

Ms Knight: The new spaces are not in question. The new spaces were actually following through on the election promise and the number of spaces that had been requested before, phased in over so many years. That was the 20,000 new spaces.

The funding arrangements would occur within a restructuring of funding. The restructuring of funding would take away an administrative layer that now happens at the municipal level, which costs in some cases municipally -- I know in Toronto -- 100% municipal dollars. The readjustment from needs testing to income testing would bring about additional revenue from parental fees. That is all worked out within a brief presented by the Ontario Coalition for Better Child Care last fall and various meetings have been held to discuss where the restructuring and where the money would come from.

The capping of CAP, yes, has had a substantial effect on what moneys would be available in the future for child care, but we still see it as provincial leadership, especially within Ontario, where Ontario, British Columbia and Alberta are particularly affected, that some protest be made against capping CAP and that should come as a provincial initiative.

Mrs Sullivan: Of course. there already is a court case. That still does not answer the question, should Ontario then make up the extra funding requirements?

Ms Knight: Yes.

Mr Curling: As this government came into power to govern, I have become more sceptical about the fact that it can honour some of the promises or commitments, as it would call them, to bring about the programs that it wants. We all knew during the election that there was a recession on the way. But I also feel that not only governments have a responsibility to carry out changes, but also organizations like yourselves to deliver. Sometimes I am quite sceptical about organizations. Some of the organizations are delivering in this way, and I will be specific.

You spoke about co-ops being a very effective affordable housing program. Yes, I believe that too. I think that the concept is great. I just wondered too if you are looking at your programs and finding out who are the people who are in the co-ops. You talk about income tests and needs tests. It seems to me the complaints I get all the time -- of course they have their own special lists, who gets into those co-ops, and if you look in there, there are quite a few people who can basically afford housing outside in the private market itself. The people who are in need, more so, do not get in.

The other part I would like to touch on -- my colleague touched on the child care thing very eloquently, the concern that she has -- is the part about employment equity. Again in that area, when those things come into place, whether it is affirmative action, whether it is pay equity or whether it is employment equity, the people whom the needs are addressed to are excluded.

As I hear you speak and as I hear government speak, it comes in this pecking order. It says, "Woman" and the call becomes woman and then it becomes a certain type of woman. Then it becomes disabled, then it becomes native. They become the people in discrimination, the people of a visible minority. Every time a program is started, then those have to wait back for those in need more. I think those who are for housing are going to have to stay back and wait a longer time for those in need, because the others will get in front.

Do organizations like yours see yourselves re-evaluating your process to find out -- after the governments, whoever they are, put their programs in place -- whether the real people who are in more dire need have access? You have that responsibility and I am hearing a sort of quiet, mum, low protest -- because the protest was pretty high in the time of the Liberal government. I do not want to use the word "protest." Are the words and the advocacy as strong now as they were then?


Ms Hayes: With respect to non-profit housing, we are asking that 20,000 units of affordable non-profit housing be provided by the government over two years, including co-op, municipal non-profit and private non-profit.

We believe that co-op housing is in fact a very positive and good form of alternative housing for not just low-income people but also moderate-income people who cannot afford home ownership; that is, as we see a growing number of people in Ontario who cannot afford to buy a house but who want some form of security a co-op provides that.

There are certain politicians whom we see who have in fact occupied co-op units, who make a large amount of money, but statistics by the Co-operative Housing Federation of Canada have shown that they are a very minute number of people who occupy co-ops. People who can afford to buy houses generally do. People who cannot afford that can live in co-ops.

Each co-op generally has 50% rent-geared-to-income units and 50% market units, and we believe that the government should be committed to providing a range of housing for all income levels, not just poor people, not just home owners, but all ranges. We believe that co-ops are a good, democratic form of non-profit housing.

Mr Curling: Fifty-fifty. Let's address that. You said 50%. You were asked the per cent that are rent-geared-to-income. Do you not think that should be considerably increased, to 80% rent-geared-to-income?

Ms Hayes: Well, I guess it does address the budgetary issue, because we strongly feel that co-ops should maintain the mix of incomes within their tenure for many different reasons because of the fact, as I just said, that a range of housing should be provided and the government should not just politically not think about those people who are not able to afford home ownership. We do not think that 50-50 is a skewed number.

Mr Yampolsky: Co-op housing is not designed to replace the Ontario Housing Corp. It is not designed to be solely targeted, as it was early on throughout OHC, strictly at low-income people. I think some of the experiments of OHC -- some of them very close to here, within spitting distance of this building -- that were set up and targeted specifically at low-income individuals -- we have seen the social implications of that.

I think when we turn around and look at other developments such as the one on the Esplanade, which has a mix of incomes, a multicultural mix that exists there -- and I could speak best, I think, of the co-ops within Metro Toronto. When you look at the co-ops around the Christie and Dupont area -- yes, some of them are targeted specifically at women, some are targeted at immigrants and refugees -- they all have a mix of income levels. What that provides within a social context is the support for those people who might not necessarily have certain skills and abilities to work alongside on a day-to-day basis with other people.

To a certain extent, if I really wanted to sound incredibly paternalistic and patronizing, I could say the poor people were learning from the rich people. I would not say that, but by turning around and segregating all poor people into housing co-ops, you are going to create nothing but an awful a lot of the ghettos that we saw develop through the housing corporations in the United States. I look to Buffalo for that example.

I just want to touch on your other issue, Mr Curling.

Ms Hayes: Let me just finish something on that topic.

Mr Yampolsky: Sure.

Ms Hayes: I just want to add one more thing on the co-op housing. As I mentioned, we all know that women make approximately two thirds of the wages men make. A single mother who may be making a living wage but not making poverty wages would have the opportunity to live in a co-op and share resources, as Richard was mentioning, and skills with others in order to improve her life. That is an example of people making just above a certain amount of income.

Mr Yampolsky: With regard to your other question, I used the term "the hierarchy of deservedness" when I was talking about social assistance, where we talked about disabled more than employables and children above all else. I think you are right in your concerns around women or disabled women or visible minority women coming before whomever and both the segregation that we make within various social issues as well the divisions that come from that.

I think our position has been very clear. It is that we oppose this hierarchy. If you are going to deal with an issue, then you have to deal with it. I think that the reason it is spelled out in very clear and concise language, be it aboriginal people, whomever, and various categories, is that these people more often than not are forgotten. They are not talked about explicitly.

What the community has done by adopting the language that it has is bring to the fore the explicit demonstration that these are the groups we are talking about. We are not talking about predominantly men. We are not talking about predominantly middle-income, middle-management, upper-management people. We are talking about people who have not been availed of a number of opportunities.

I can see you are pressed for time.

The Chair: Yes, I am going to have to cut you off. We are half an hour over already. If you would like to pursue your questions with the deputation in the hall, that would be acceptable.

I would like to thank you for your presentation today and I hope you will get that brief to us as quickly as possible, because we do need to see it.

Ms Hayes: May I make a small observation?

The Chair: Actually, no. I am sorry, but we have another deputation that has plane connections to make and we must move along. Thank you for coming.


Ms Logan: My name is Gail Logan. I am general manager of the Sault Ste Marie Chamber of Commerce and I am here today representing the Ontario Border Communities Task Force on Cross Border Shopping. I would like to introduce the other representatives here at the table with me this morning. On my left is Rob Schihl, who is the president of Shop Ontario, Niagara. On my right is Bob Gale from Niagara Falls.

Before I start reviewing the brief, I would also like to recognize the other individuals and the communities who are here today regarding the issue of cross-border shopping: from St Catharines, Noel Buckley and Tony Commisso; from Niagara Falls, Glen Gandy; from Fort Erie, Glen Walker, from Windsor, Mark Jacques; from Sarnia, Mike Harold; from Cornwall, Mike Metcalfe. I would also like to recognize two individuals who are here in support this morning, Tony Martin, who is the provincial member of Parliament for Sault Ste Marie, and Steve Butland, who is the federal member of Parliament for Sault Ste Marie.

The Ontario Border Communities Task Force on Cross Border Shopping is very pleased to present this pre-budget submission to your committee on behalf of its member communities of Cornwall, Fort Erie, Niagara Falls, Kingston, Port Colborne, St Catharines, Sarnia, Sault Ste Marie, Thunder Bay, Welland and Windsor. Through its various affiliations, this task force represents over 6,700 businesses in Ontario and these businesses employ more than 175,000 people in the aforementioned communities. Our purpose here today is to share information and ideas with your committee in the hope that you will recommend fiscal policies that will benefit the provincial Treasury, Ontario's businesses, our communities and all residents of Ontario.

With the assistance and support of the Ministry of Industry, Trade and Technology, small business Ontario branch, this important task force has been meeting regularly over the past year to discuss the common and growing issue associated with the anomalies that encourage Canadian shoppers and, in particular Ontario shoppers, to divert their business to United States border cities and which discourage US residents from spending in Canada and Ontario. We call this the cross-border shopping problem to reflect the two dimensions. It has been plaguing this province and our country since 1986.


The issue is larger than one single trade sector, community or government body. It impacts such diverse areas as retailing, tourism, manufacturing, agriculture, border communities, provincial and federal revenues. It is important to note that all of these players are implicated in both the causes of the problem and the potential solutions.

We feel that the cross-border shopping problem is a symptom of non-competitiveness, and improving competitiveness may well be the pervasive economic challenge for Canada, and in particular Ontario, through the 1990s. Any solutions to this problem will require the active involvement of all interested and affected parties to become a part of the competitive team.

There have been published reports indicating the traffic count of same-day visits to and from Ontario has gone from a net inflow in the second quarter of 1987 of 1.4 million people to a net outflow of 1.5 million people in the second quarter of 1990. This is addressed on appendix 2 included with the brief. In addition, the number of people making same-day trips to the United States from Ontario continued to increase by 30% in 1990, and we anticipate the same or an even higher increase for 1991.

Estimates of lost retail sales in Ontario for 1990 are as high as $600 million. This translates to approximately $50 million in lost sales tax revenue to this province. This is a major blow to our retail industry and imposes many negative side effects on government, business and our communities. These lost sales have and will continue to reduce and/or eliminate retail and service sector jobs in this province. The results are devastating, including tremendous business and personal hardship through bankruptcies, lost employment, lost taxation revenue, and it places an even greater strain on our social programs, which are currently operating beyond the maximum affordable level.

Recent expansion of retail shopping opportunities and also the establishment of new outlet malls in US border towns have increased the difficulties faced by Ontario businesses. A number of these new and/or expanded facilities have been specifically targeted to attract the Ontario consumer, for example, in Buffalo, Niagara Falls and Massena, New York. In addition, there has been a marked increase in the volume of advertising by US retailers and hospitality providers in Ontario advertising media. US shopping districts which were previously depressed are now doing a brisk business with the assistance of Ontario consumers.

Ontario consumers are making significant purchases in the US of gasoline and groceries, liquor, beer and cigarettes, along with big-ticket items such as automobiles and auto parts, boats, building supplies, clothing and linens -- the list goes on. Border cities in Ontario are showing signs of depression, and retail stores and service sector businesses, along with supporting businesses, are closing at an alarming rate.

There has also been a sharp decline in US tourists visiting Ontario during the past two years. Many reasons have been cited by these visitors, including the high cost of gasoline, meals and beverages -- all items which are subject to considerable taxes.

Traditionally, Ontario residents have shopped in the US for good bargains; however, until recently these purchases have been offset by Americans visiting the province. Trips by Ontario consumers have been considered very worth while because of the significantly lower price of gasoline in the United States and because provincial taxes are not collected on their purchases at border entry points. In addition, in many instances federal taxes and duties are waived on these purchases. The result is that Ontario businesses are placed at an extreme competitive disadvantage relative to their US counterparts and applicable tax revenues are not being realized by the province.

Recent studies in border communities have estimated that every $100,000 in lost revenue results in one lost job.

As an example, Sault Ste Marie's lost revenue of $140 million for 1990 as a result of cross-border shopping is equal to a loss of over 1,000 jobs in our community.

The Ontario Chamber of Commerce adopted the following resolutions at its annual meeting in May 1990: "that legislation be implemented immediately to bring about the harmonization of the collection of the GST and provincial sales tax," and also "that the provincial government negotiate with the federal government the implementation of a cost-effective system to collect provincial sales tax on goods entering Ontario and declared at border crossing points."

With a harmonized tax collection system for PST and GST, the federal government would be responsible for collecting all provincial sales taxes along with the GST and any duties at all border entry points. Numerous and important benefits are associated with the harmonized tax collection system. The collection of PST would add significant revenues to the provincial Treasury and assist in reducing the enormous provincial deficit. Estimates on provincial taxes currently lost as a result of cross-border shopping could be as high as $115 million for 1991. Both levels of government would realize significant cost efficiencies through one administration and auditing system.

If consumers were required to pay all taxes and duties on declared goods entering Canada, then the cost difference between purchasing in the United States and Canada would be minimized. In addition, a single tax system would provide assistance to the business community through ease of collection and remittance to one agency, reducing their time spent and their administration costs.

The Ontario tourism industry would also receive a much-needed boost by offering refunds on both taxes to visitors before they leave the country. Tourists would simply present their sales receipts to the duty free shop at their point of departure and the provincial sales tax would be refunded along with the GST.

A harmonized PST and GST collection system would assist Ontario businesses in maintaining a competitive edge against their US counterparts during these very difficult economic times and ensure continued employment for Ontario residents in the retail and service sectors, along with increased provincial revenues. This recommendation puts all players in a win-win situation and provides a level playing field for Ontario business.

The Ontario Border Communities Task Force on Cross Border Shopping agrees wholeheartedly with the aforementioned Ontario chamber resolutions and we urge this committee to include these recommendations in the next provincial fiscal budget.

Regarding gasoline-tax-reduced zones, retail pricing differences in various border communities throughout Ontario appear to vary only by several pennies per litre. You will notice on page 4 we have included a breakdown of the average gasoline retail price per litre in Canadian dollars: the pump retail price in Ontario, approximately 57 cents; in the US, 40 cents.

Border communities in Ontario have lost sales in excess of 295 million litres annually. This is alluded to on schedule 2 of the brief. By reducing gasoline taxes, a large percentage of that business can be recovered. This can be accomplished by reducing the taxes in zones starting immediately next to the US border, commencing with a 10-cents-per-litre reduction and then reducing the increments by 2 cents per litre as the distance from the border increases. This is outlined on schedule 1 of the brief.

I apologize for the numbers there. They were boxed.

The revenues lost on gasoline sales is quite significant, as outlined below. Total lost revenue is in the neighbourhood of $116 million-plus, and that relates to lost revenue for provincial taxes, federal taxes to dealers for refining and marketing.

On page 7 we have shown calculations for gasoline tax projected revenues with a reduction in tax. You will notice the 1990 gas sales in border communities of 664 million litres realized a revenue of in excess of $156 million in provincial and federal tax revenue. We have calculated a potential for 1991 gas sales in border communities of 959 million litres, totalling potential tax revenues of $167,825,000.

As you can see from the calculations above, a reduction in gasoline tax through a zoning formula will realize more taxation revenue for both the provincial and federal governments. In addition, it will assist border communities in addressing the cross-border shopping problem by correcting the major discrepancy in pricing which exists between Ontario and the US. It currently causes Ontario consumers to make significant purchases of gasoline outside of the country.


As mentioned earlier in this brief, the Ontario Border Communities Task Force on Cross Border Shopping recognizes that action to tackle the challenges associated with the cross-border shopping problem requires the co-operative efforts of both the public and the private sectors.

The business community recognizes its role in addressing this complex problem and wishes to engage government support to address the issues under its control; that is, taxation. Individual communities and businesses in border communities have already adopted a number of business strategies to assist in addressing the cross-border shopping problem. Marketing initiatives, including training and retraining of retail and service staff to provide better customer service, more aggressive marketing campaigns targeted to the local shopper as well as the potential visitor, interest-free loans to consumers sponsored by business and lending institutions, cross-merchandising of products and services, special promotions, better exchange rates for US currency and other initiatives are currently under way or are soon to be implemented in border cities throughout Ontario.

The benefits associated with a change in the provincial government's fiscal policy are tremendous. The provincial Treasury would realize in excess of $115 million in tax revenue. That relates to provincial sales taxes, excise taxes, income taxes, etc, that would be recovered. Ontario businesses would continue to employ thousands of residents in the retail and service sectors and potential visitors would be more encouraged to take advantage of vacation experiences in our incredible province, Ontario.

Resolving the problem of cross-border shopping is critical to the province and this country, as many jobs and substantial revenues are at stake. Ontario businesses are and will continue to play their role and their part in the solution by improving customer service and competing more effectively. Government must also play its part with the introduction of more efficient and equitable fiscal policies.

The cross-border problem is a symptom of a serious competitiveness problem. However, it is only one of the many powerful forces operating in the same direction: the advent of free trade with the United States, the US-Canada-Mexico trade discussions, the coming of the common European market in 1992 and many other global political and economic changes. Canada, and particularly Ontario, cannot hope to ignore or escape these forces. The private and public sectors must participate in a common effort to boost competitiveness, and the time to build that team is now.

On behalf of the Ontario Border Communities Task Force on Cross Border Shopping, I would like to thank you for the opportunity to present our submission this morning. We would certainly be happy to answer any questions.

Mr B. Ward: I would like your comments on three issues. On the first issue, has the implementation by the federal Conservative government of the GST helped or hindered your particular retail sector in relation to the shoppers who are going to the US? The second question is, would a lower Canadian dollar assist your efforts? The third is, as far as enforcement of our borders to ensure that duties are collected is concerned, because it is federal jurisdiction, should that be looked at, strictly enforced duty collection, but then that creates problems because of increased lineups and the discomfort that causes to the consumer? Perhaps you could touch on those three issues -- the GST, the high Canadian dollar and greater enforcement, whether you would see that as one avenue of helping or hindering you.

Ms Logan: You are talking about federal government fiscal policies in this regard.

Mr B. Ward: I just want to get your feeling on it.

Ms Logan: Regarding the federal government's GST, I think it is fair to say that the business community has had difficulty with implementing the GST and consumers are having difficulty with it, but they understand that it exists and that they are going to collect it. In terms of the cross-border shopping problem, it has created additional hardship for Ontario business because it encourages consumers to spend their dollars in the United States.

Federal government fiscal policy relative to the high Canadian dollar certainly would help.

Collection of duties and enforcement: We have a situation in Sault Ste Marie with our bridge. It is a two-lane bridge and we have a number of entrances into our community. If the federal government goes ahead with its Customs 2000 program and implements some of the changes to access into the country through express lanes, duty-free lanes, etc, that will certainly help avoid the problem of lineups when you are looking at enforcement or collection of duty.

Mr B. Ward: So you think that would help.

Ms Logan: Yes, we could be urging the federal government to implement that program.

Mr Sterling: I just wonder if your group is aware of the revolt that is going on in Ontario now. I am talking about the revolt that Bob Rae talked about that was going to take place, after he was elected as Premier, against the GST and whether or not Bob Rae is going to --

Mr Curling: A revolution.

Mr Sterling: -- the revolution we are having here in Ontario that was led by Bob Rae, and whether or not the whole basis of his revolt seems to be that he is not going to harmonize the GST and the PST. I agree with you that I think the harmonization makes a lot of sense, but I am not certain that this government can give up the revolt that we have seen take place since September in terms of dealing with the GST. Excuse me for being a bit facetious about the whole thing.

I notice that in your brief you say that the federal government would be responsible for collecting the PST and the GST. Do you think it is reasonable that because half of the tax, roughly speaking. is going to be PST, that the provincial government should pay for half the collection?

Ms Logan: Our task force would certainly like to work with this committee and with the provincial government in coming up with the best system of collection. We certainly feel that harmonization would be the best system, but if there is another fairer and more equitable system that reduces cost, reduces time, we are certainly willing to discuss and come up with an alternative recommendation.

Mr Sterling: One of the problems that you face here in order to bring forward and take some action -- it is very easy for any provincial government, as we did when we were there as Conservatives. as the Liberals did and no doubt the NDP is moving to it, to place all its problems on another level of government. One of the problems we have in this committee is that we can only make positive recommendations and get positive action if in fact the Treasurer of Ontario does some things that are within his own mandate to do.

In my view the carrot to the federal government would be, "Look, you are going to undertake this very unpopular task of collecting tax at the border." What government, what politician wants to be the tax collector? Nobody does. You have to be realistic in what all of this goes about. Therefore, I think that your brief would be very much stronger if you made recommendations that in fact the Treasurer of Ontario would be responsible for taking action for.

The harmonization is one thing, but the other part of the fact of the matter is that any government which implements a collection at the border is going to be very unpopular. There are a lot of consumers who like cross-border shopping, so why would the federal government, heading towards an election, consider angering these people who are coming across the border?

It is logical and it is reasonable, but it is akin to many of the other things that groups come in and talk about. I think it would be reasonable for the provincial government to provide half the collectors at the border. Why would they not have the provincial government people helping them out at the border collecting this tax? I think that would, in a lot of ways, save the federal government if we are willing, as a province, to take some leadership and responsibility for collecting this tax.

The other question I have is that I represent the riding of Carleton in eastern Ontario and my whole riding would be more than 50 kilometres from the border. There might be a small portion of it that could be within the other zone. How do I explain to my people in my riding, the 90,000 people whom I represent, that the people who are living closer to the border are not paying their fair share of taxes?


Ms Logan: Currently the residents of this province are subsidizing those who are going across the river and purchasing gasoline. We know from our Ernst and Young study in Sault Ste Marie that gasoline was the driver. That was the primary trigger for why people were going across the river and making these purchases. In addition to the gasoline they were purchasing other items. In a very pointed question to consumers, we asked them, "If gasoline were equally priced or more favourably priced, would you be shopping to the extent and the level you are?" The response was no. They would prefer to shop, to spend their dollars in Ontario. Unfortunately they want to make their dollar go as far as they can and they have to spend it across the river.

Mr Sterling: I understand the problem, but I have a constituency to represent. They are not any more interested in paying taxes than the constituencies your group represents, which are all border towns. How do I explain to my people that you have a special break? I guess the answer would be in terms of an overall reduction in the amount of tax on each litre of gasoline so we could be competitive in that area. I think that would be a more reasonable response.

The 24 cents per gallon or per litre that we pay in Ontario: Can you answer how much of that is federal and how much is provincial?

Mr Gale: Currently we have the GST now. but 8.5 cents is excise tax. 11.3 cents is provincial tax and on top of that you have GST at 7%. You would take your wholesale cost. You would add 8.5 cents federal excise tax --

Mr Sterling: It is 24 cents basically that we are dealing with.

Mr Gale: Approximately.

Mr Sterling: You are saying that 11.3 cents of that is provincial.

Mr Gale: That is on no-lead gas.

Mr Sterling: I do not think a penny or two is going to make a difference.

Mr Gale: I agree.

Mr Sterling: The difference is 14 cents a litre. basically.

Mr Gale: The difference I tabulated last night at 6 o'clock. I am from the Niagara region. I am a retailer-wholesaler in the Niagara region and throughout Ontario. Taking a lot of facts into consideration, with the US dollar at C$1.17, $1.21 is the best price that I know from people to be able to buy in Niagara Falls, New York, yesterday. Converting it all over -- trust my figures, I hope -- with the American tax, the difference in tax is 11.69 cents Canadian litre.

If you take the cost in Niagara Falls -- I am talking Niagara River border. I apologize for not being up to date on Michigan or taxes around there, but around the Niagara border right now, in Fort Erie it is about 53 cents retail price -- 54 cents in Niagara Falls. The difference right now with the American price at $1.21 works out to 37.8 cents a litre. That is in Canadian dollars, Canadian litres -- 37.8 cents if you go over the border. The difference, add on the 11.19 cents, brings you up to about 49 cents and change, 49 point some-odd cents. For the difference of five cents a litre there, people are not going to go over the river in droves.

I note that there is no doubt Canadian businesses are going to cut some of their profits on some of this, but the volumes have gone down so much in local things that the only way you can justify it is by increasing your price. Otherwise you close the stations.

Mr Sterling: Do you know, of the 10 cents of tax in the United States, how much of that is federal and state tax?

Mr Gale: I have it broken down here if you wish to write it down. This is US gallons. If you want all their taxes --

Mr Sterling: No, just the percentages. You have 10 cents per litre of tax in the US, in your brief on page 4. Is it six and four or is it nine and one, or do you know?

Mr Gale: I only have what happened yesterday. I do not have that brief. I know federal excise tax in the United States --

Mr Sterling: Try and keep it as simple as possible.

Mr Gale: I cannot break it down. I have to talk US gallons; I am sorry.

Mr Sterling: It does not matter whether it is US gallons or not. How much is federal and how much is state?

Mr Gale: Okay, they have different taxes. Federal excise tax over there is 14.1 cents a US gallon. Everything else is state tax except for a superfund and tank-testing tax they have of 0.4 cents, approximately, a US gallon.

Mr Sterling: Forget that one. What is the total of the state tax?

Mr Gale: Approximately 14 cents.

Mr Sterling: So it is half and half, then?

Mr Gale: Approximately.

Mr Sterling: Okay. You mentioned that the cost of gas down in your area is 53 or 54 cents. The cost of gas in Ottawa is somewhere around 63 to 65 cents a litre. How do I go back to my people and explain that we are going to give a break to people who are paying 54 or 55 cents a litre? That is very difficult for me as a provincial politician.

Mr Gale: Will that affect them, though? You people in Ottawa, will that affect you? They are not near a border point so I do not think this will affect them at all.

Mr Sterling: They are paying 65 cents a litre in gasoline. The news that you would like the provincial Treasurer to come out with is that they are giving some kind of break to border towns. Their gas is going to go from 53 cents to 48 cents a litre.

Mr Gale: The bottom line on this, we propose, is that you will generate more tax dollars because of this. That is why we say it. So if you present it that way, I think they will understand it. If it does not do that, then I agree with you, we are totally wrong.

Mr Sterling: I think the other factor that you perhaps are -- I think there is a good argument in what you are putting forward, but I think that most of the populated area of Ontario is within 200 kilometres of the border anyway, so therefore your argument may have more validity if in fact the population was spread farther north into the province.

I just would have a very difficult time supporting your proposal in my constituency and explaining to my constituents that the people down in that area are getting a break of five, six, seven cents a litre and the price was dropping from 53 or 54 cents a litre down to 45 or 48 and we were still expected to pay in my area, my 90,000 constituents, somewhere around 65 cents a litre.

Mr Gale: What we would hope for is the way it is explained, that it will generate more tax dollars. It will not affect them at all because it will generate more tax dollars. That is what we are hoping. We feel gas --

Mr Sterling: Would my 90,000 constituents get a check in the mail from the Ontario government?

One of the problems when you set up tax regimes which are not universal across the province of Ontario is that you get immediately the problem of people looking over your shoulder at what is happening in the other area. You get enough problems in this province by giving northern Ontario a special break on gasoline and licence fees and that kind of thing, but in general people will support that because of the great distances people in the north have to go and it affects relatively few people.

Anyway, I am interested in your proposal. I think, quite frankly, what we should do in Ontario and Canada is that both governments should reduce their gasoline tax to all of the people and get their revenue some other way.

Mr Sutherland: I am not from a border community. I am, I guess at the closest, an hour and a half away from Sarnia, but I am constantly amazed at how many people within my community make weekend shopping trips across into the United States, into Michigan, into New York.

I guess the question I want to ask very simply is, do you feel that many people in Ontario are no longer willing to pay the price of being Ontarians or being Canadians in the sense that in many ways some things are more expensive here because we have a much different value system of what we feel is important, that makes us different from the United States, makes us Ontarians, makes us Canadians, and the values we have placed on different things? Is it your sense that people are no longer willing to pay that price?

Ms Logan: I would not suggest that they are not willing to pay the price. I think we, as communities, and the government, etc. have to communicate to them what in fact they are paying for, where we are different in the kinds of things that we do have that are better here in Ontario or in Canada versus the United States.

You talk about weekend shopping trips. Weekend shopping trips in some cases will continue, depending on the area. We are talking primarily about the day-tripper or the same-day visitor who is going over, sometimes a couple of times a week, but at least on a weekly basis and making significant purchases. There is a difference between the vacation traveller and the same-day tripper.

Mr Sutherland: I guess I just want to clarify. I get the sense that there are more people, though, at least in my community, who are not going for strictly a vacation. The sole purpose of going away for the weekend is a full shopping trip, to load up as much as possible in that weekend to bring back. If they are able to avoid the duty, then they are doing great. I know the main impact is right on the border communities, but what I am trying to say is that I also think it is growing even in the interior of the province and that concerns me as well.

Mr Schihl: If I could just add to that point, I live in a community called Port Colborne. It is about a half-hour from Fort Erie. I did a quick survey check of all the banks and asked the question, "How much American money do you sell on a weekly average?" Out of the nine banks that we have in Port Colborne. every bank sold to the maximum that it could sell in American funds. So with a little, tiny community a half-hour from the border, we are talking of a very conservative figure of about $7 million leakage from that community. That is just the hard cash that is purchased. Let's not discount the travellers' cheques and use of credit cards, the amount of cash that is exchanged all over the border. So we have, yes. an awful lot of shopping going on.


A lot of the clerks told me that in dual-income families, where the husband and wife both have a paycheque, one cheque is devoted specifically to US funds. Many families in my surveys are saying they are saving upwards of $300 a month by shopping in the United States. It is difficult for us to sell them on the fact of shopping locally until we can get some of these items that have a lot of price differential, gasoline being one. We have to get rid of these loss leaders that are pulling our people across the border. We have to get more on an even playing field.

We address them on the social aspects of our country. The diehard cross-border shoppers do not really want to listen to that point. It is not low-income or middle-income families. We are seeing high union workers who can afford these products taking their paycheques across the border. So it is quite a mystery. quite an equation. We have identified specific things that we can change locally in our communities and some external things that we will need the government to help us with.

Mr Phillips: I sympathize very much. I think you are kind of on the leading edge of the challenge for the future and I think you have stated it well in your brief on page 1. You feel the cross-border shopping problem is a symptom of non-competitiveness and improving competitiveness. I think you are putting it into a broader context, but there is no doubt, in my experience, that you are facing a crisis. I think what you are recommending to us are kind of short-term solutions while the country and the province get at some of the longer-term solutions. Our party just spent the weekend in Niagara Falls, Ontario, so I think we learned first hand of some of the challenges.

First, I would not mind a comment on something that is not in your brief, a side issue and that is mail order, which may not impact on you, but I gather it is a big growing industry coming out of the US.

In your brief you say $600 million, which surprised me, how low it was, but I think you said $900 million when you were speaking. I was surprised it was only $600 million, because my impression is that it may be greater than that. Was it $900 million you said when you spoke?

Ms Logan: I thought it was $600 million.

Mr Phillips: Did you? Okay. In the brief it is $600 million; I thought it was $900 million.

Frankly, I do not know enough about the details of this to know to what extent this is an enforcement problem versus a kind of -- you need some tax changes. You may assume more knowledge on our part, on my part, than we have. Could you just explain for us, if someone takes a day trip, which seems to be the major number, what are the legal requirements in terms of declaration and payment of duties and taxes?

Ms Logan: Day-trippers do not have exemptions under federal law. They are required to declare the items that they are importing to the country. You must be out of the country for 48 hours before you receive a $100 exemption. From what we understand in talking to the federal government, depending on the situation going on at the border on any given day -- the border has to deal with, of course, the customs and immigration issues, it has to deal with the duties issues, it has to deal with gun control, drug seizures, any number of other items besides people returning to the country with goods -- there seems to be a level of tolerance in terms of goods that are coming back. Some days it may be $10, other days it could be $30 or $40. Again, from what we understand, it relates directly to what is going on at the border at that particular time.

Enforcement is part of it, but we have also talked here about the necessary changes that have to happen with taxation. We have talked about the need for business to do its part in terms of marketing, customer service, etc. It is a problem that has to be tackled by all individuals involved. Our task force has had discussions with the federal government. We will be presenting this brief to the federal government as well and we will continue on all fronts hopefully to get everyone talking the same tune and working on this problem together, because that is the only way that it is going to be solved. There are roles for each one of the players to take.

Mr Phillips: I was surprised your brief did not talk about enforcement. My vision is that an awful lot of people in your jurisdiction, Niagara Falls, on Sunday morning buzz across and --

Mr Gale: I do not think we can complain, sir, about enforcement.

Mr Phillips: Enforcement is not a problem?

Mr Gale: I am not saying it is not a problem. It will always be a minor problem, just as there are problems in all industries. But it is not the one we are trying to tackle here.

Mr Phillips: So it is just basically your two recommendations are --

Mr Gale: It is easy to say we need more officers.Obviously, money has to pay for it. I think they are doing a fine job in what they are doing. They seem to be clamping down more. They have the computers in there now, I understand, and they have all systems there. Mind you, officers are not collecting provincial tax and that, but they have all the systems. But that is not what we are clamping down on now. That is something that I think is a minor problem compared to what we have come up with here.

Mr Phillips: Okay, good, so it is just the two, the provincial sales tax and some --

Ms Haeck: Relief on gasoline.

Mr Phillips: Temporary relief on gas?

Mr Gale: I am sorry to interrupt you there. Just to fill you in, in Quebec -- I am not sure if it has been brought up -- there is relief along the provincial borders there for a 20-kilometre distance up to 4.8 cents a litre, just to let you know.

A year ago, with the last government in, I sent a letter to Michael Wilson and Robert Nixon, both passing the buck to each other saying it is the other one's fault. But really I stressed on the provincial level because this was a provincial thing done by Quebec. I have understood through verbal communication that this is working. I understand it is a problem with enforcing and that is what Robert Nixon said, and it will be. There is nothing we can do. But I understand that people in Hull, Quebec, and other border points in Quebec located in that area still will buy their gas there.

Mind you, if you are going to Ottawa you will buy your gas there. It is cheaper. Just like here; if you are going to Buffalo, New York, anyway you are going to buy your gas. What we are trying to do is keep the people in here and not use gasoline as the reason they are going over to buy everything else. That is why we suggest the gradual system, so that somebody in Hamilton might say, "Okay, in Grimsby it might be a bit cheaper or in Sault Ste Marie." I do not know how you go in, but for one thing, we are trying to get the incentive away from them to say, "While we're there, we'll buy everything else."

Ms Haeck: I have had, in one sense, a bit of an advantage because I come from St Catharines. Mr Commisso, who is sitting in the audience, made this presentation to the St Catharines chamber of commerce.

If I may also raise the issue of dealing with the gasoline prices in the north; the opposition members here, during the legislative session we just came through, made the issue of the price of gas in the north a major issue for our government. I know our Energy minister is seriously working on this issue to address the issue of the price differential. I have to concur with Mr Sterling that obviously setting up any kind of system whereby it looks like a border community is reaping a massive benefit is not going to deal with even some members of the trucking industry who have to travel in the north. It is a concern for them to realize that the prices are different. I raise that with you as maybe a means of however we are going to be able to sell something like this, but the cost of gasoline really is a major concern for northerners.

Mr Gale: May I address that?

Ms Haeck: Sure.

Mr Gale: One of the problems I have here with the north and with the pricing, as you know, is that there used to be probably about 15 major oil companies 30 years ago. Now Petrocan has swallowed up Gulf, Esso, Texaco, whether good or bad. I think competition caused a lot of problems with pricing in the north. If you can bring gas with GST in at 47, 48 cents a litre over the Buffalo border that is selling for 60 some-odd cents in Ottawa and there are no other taxes to be paid along the way, somebody is making some money there.

Does competition bring it down? I do not know. That is not an issue to be discussed here. But I think there are a lot of problems with competition. Petrocan, Esso and Shell are the bosses in petroleum. I am not trying to get a petroleum pact here. I am an independent. But you know the chartered banks run the banks. The three big guys run the gasoline. I am not saying that you could not undercut them, but I have a chain of gas stations in the Niagara region. If Esso wanted to go in at 10 cents a litre for about a month, I would be out of business pretty quick.

Ms Haeck: The other question I have relates to a concern that you have not mentioned here but alluded to in some respects. A lot of the local farming community has come to visit me. I have obviously had opportunities to hear presentations from them in other arenas. They are very concerned about the effects of free trade, as well as the importation of food and the controls that are put on that, be it via the free trade agreement or the whole issue of grocery shopping. That, in many respects, is not addressed here, the kinds of controls that we can put on the importation of food into this country.


Mr Schihl: We have addressed the free trade agreement in another report to the federal Liberal task force on the economy. It was very brief and it just mentioned that perhaps in lieu of what is happening with this phenomenon of excessive cross-border shopping, perhaps the free trade agreement in areas of agriculture can be focused more upon in lieu of this, what is happening, and perhaps the free trade agreement could be looked at and adjusted in lieu of what we are seeing happening now. That is about all the study that we --

Ms Haeck: How do you even deal with the questions farmers are raising, that the foods they grow are controlled by, say, the pesticide usage and what have you and however they may be sold in the stores? The food that is coming across the border either in large container trucks or in fact by individuals does not need any of those controls.

Mr Schihl: I am afraid you are out of my area of expertise as far as that sector is concerned.

The Chair: Can I interject at this point? The subcommittee has decided to bring to this committee a recommendation that we hold full hearings on the cross-border shopping at a future date. What we are looking for here at this point are specific recommendations that can be put to the Treasurer that would give him some guidance in the immediate budget. While all of these issues are extremely important, perhaps we could have those brought up at those future hearings that we do intend to have, provided the committee agrees to have them. So if I could just have the last question from Mr Hansen.

Mr Hansen: I am from the Niagara area; I know exactly what is going on. We touched on a few things, but one thing that I do not think came out is that Mr Sterling has to realize that in the area he lives in, if he is going to have tourists in the Ottawa-Carleton area, if we cannot get them across the border they are not going to be spending tourist dollars in Ottawa-Carleton. So it is very important that people are able to get in easily enough, not have to wait two hours to get across the bridge. The rumours are down in the States, "Don't go to Niagara Falls or Fort Erie because you'll never get across and you don't know what the price of gas is up there in Canada." What we are having is a ripple effect all the way through the States.

I think my mend Tony Martin, also from Sault Ste Marie, depends on tourist dollars. I think the tourist dollars in Niagara Falls are drying up. I have heard so many times that the people who come to the Canadian side from the American side fuel in the States, come over and look around but go back and eat and stay at a motel or a hotel in the United States. I think I would like you to comment on that. This is why I am sort of bringing it up, because I do not think the rest of the people of Ontario know the seriousness of the problem we have at border towns.

Mr Schihl: Yes, for the Niagara region, to speak on behalf of the Niagara region, we are heavily dependent upon tourism, the tourism dollar. It is, I believe, two thirds of our economy. We are seeing tourism happen, but really it is now growing stronger from Toronto to Buffalo with these cross flights, using the airport systems. We are seeing more and more weekend getaways of Toronto people to Buffalo and Buffalo people to Toronto. It is like leapfrogging over the Niagara region that needs those dollars.

We are not seeing the American licence plates. We are seeing them at border communities, maybe more in Fort Erie and Niagara Falls, but as we go just 20 minutes to areas of Welland, Port Colborne, St Catharines, we just do not see them. That has been brought up in many respects, that they do fill up there, come over, maybe take a bit of a scenic drive, but if it gets down to spending money they just hop back and spend their money in their own communities. The cost of meals, accommodation, liquor, cocktails and beer are a lot more expensive than what they are dealing with and they just do not see it as an appealing thing.

So the tourism industry is drying up. I have friends who have motels in Niagara Falls who are seeing these closures. We are seeing small businesses close. We are here to fairly cry out that the areas such as the Niagara region and many border communities need help. Jobs lost really mean reductions in the amount of income tax that the government can collect from people who have $50,000 jobs who lose those jobs because of plant closures and are then on the social system. The amount of income tax that can be reaped from that person has declined significantly, and we are seeing many of these jobs being lost.

Mr Hansen: One final question, and I think it is important that we talk about tourist areas. Tourist areas have had Sunday shopping. What is going to happen to the area right around the falls? Let's say Welland is part of the area. What will happen if there is no Sunday shopping in the grocery area? Can you just give the committee an idea of what is and what is up and coming?

Mr Schihl: I am really not a retailer. I have been working in this position as a marketing person trying to make some sense out of what to market here. I am afraid I cannot make a statement on Sunday shopping. I know there is more and more of it happening in the United States, and I think there are more and more Canadians travelling across the border to take in some of these shopping excursions on Sundays.

I think for Canadian businessmen to survive into the 1990s, they will have to perhaps practise some methods of doing business that are disturbing to them. They have to adapt and change, and perhaps being agreeable to open up their doors on Sunday may be part of that.

Mr Phillips: That is up to the government.

Mr Schihl: Not unless the government approves it, certainly.

Ms Logan: Just in closing, we really appreciate the opportunity to speak with you today and to bring you information on the seriousness of the cross-border shopping problem. We appreciate that you are going to form a subcommittee, if that is approved, to look into this closer. We would be very happy to provide input and be available as a resource to that committee. You can certainly contact myself or any other representatives from the Ontario Border Communities Task Force for that input.

The Chair: Thank you. I am sure we will be in touch, and thank you for your presentation today.

The committee recessed at 1248.


The committee resumed at 1347 in committee room 2.


The Vice-Chair: Would you like to start by introducing yourself?

Mr Kolodzie: My name is Ed Kolodzie. I am from the city of Oshawa. I am here as a private citizen. My credentials are varied. I am a professional engineer. I also act as a consultant to the Federal Business Development Bank in areas of small business. I lecture part-time at a couple of the colleges around and do some private consulting. I have also been offered a position as a professor in one of the community colleges in the greater Toronto area starting next fall. I am a former regional councillor of the Durham region. I sat on regional council for 10 years. My thrust on regional council was productivity improvement and cost reduction, and that is my thrust today.

I would like to start by quoting Bob Rae. Last Saturday he said: "The first phoney path to go down would be to respond to every crisis by simply throwing as much money as you can at it and saying, `By God, we are really at it now.' That is not going to be the approach of our government." I was very delighted to hear that, because if he is not going to throw money at the problem, then he is going to solve the problem some other way, and I hope to present you with some ideas today.

I might mention that I spoke to this committee a year ago. I have brought my presentation from a year ago and the report of a year ago. There are only two common threads of the membership. All the membership has changed and just the two research officers are still here -- maybe they can remember me -- David and Anne. They are the only ones still here.

I also spoke to the cabinet about I S years ago under the PC government, so this is the third time I have tried to get my message across, each one with a different party in power. I suggested quite strongly last year that they make some changes, and the changes have come about: We have a new government, so maybe somebody paid attention.

One of the major points -- it is on the first page of that small handout -- is that if you consider the career lifespan of a civil servant to be approximately 40 years, if you take increasing wages and benefits at about 6% and if you take the average salary of about $30,000 a year, the accumulated cost of each civil servant will be $5 million. That is the accumulated cost, because at 6% money doubles in 12 years. At 6% money doubles in 12 years. That is one of the first points I want to get across: At 6%, money doubles in 12 years. When I play the role of an academic, to get things across I usually say them three times to make sure it gets home. Some of this is explained in a number of published articles which I will hand out to you at the end. Conversely, if you eliminate a position, the savings are phenomenal; they are just phenomenal. You cannot deny those figures. I have used some very basic points.

So what do you do? You have to reduce the head count. You have to reduce staffing. You must do that if you want to control the deficit. It is that simple, reducing head count. How do you do it? There are some pretty drastic ways of doing it and there are some simple ways of doing it. The first thing I strongly recommend is that you put a freeze on all hiring for the next 12 months. Any new positions recommended, can them; if any people leave, do not replace them, and you get some control.

This can be done. When I was on city council in Oshawa, we did it for about five years. We brought our head count down about 10% while our productivity increased. I did some comparisons with other municipalities in the region and I found out that the town of Scugog was the most productive. They had the fewest civil servants per capita in the population. So that is one point: Put a freeze on hiring for the next 12 months.

You can do some retroactivity. You have done it with the landlords. So retroactively to I October 1990, use that as a staffing level. Maintain the staffing level of each ministry at the October 1990 levels; how many civil servants were on staff, not how many positions. That could be your target.

The next point: If you put similar ministries in groups of three or four, you can reallocate staff resources between the ministries. If somebody has a vacancy one place, it can perhaps be filled by somebody in another place who is not too busy. It is easy to be busy, but what do you accomplish? We can all be busy, but what do we accomplish?

The next one is a bit of a loaded one. Can you not put one elected person in charge to give the final authority to monitor staffing levels? Say, every Monday morning produce a report or tabulate a report, "This is the staffing level." Yes, you can. We did that at the city of Oshawa. We monitored every month. I wanted to put it in every week, but I was happy to get it in every month. There is a little objective every month to try to bring the staff down to certain levels.

You can also place similar action on the agencies that come for a handout. There are a lot of them. They are lining up behind me and before me. They want money. I have not come for money. I have come to help you control the deficit, to reduce the deficit, and that is different. My background is industrial engineering. I got a scholarship to a university in the States. I worked at General Motors; it provided me with a scholarship. I had some exposure to different professors, and at the age of 19, 20, they taught me certain things. I have been able to keep these in mind and try to get it across to the younger people. Why is that?

I will interject. I took this out of Saturday's Toronto Star. I will have to show this to you. These are the positions the civil servant bosses are asking to be filled right now. Some of the jobs titles are very creative. Why do they want these positions filled now? Very simple: to have a higher head count for the new budget year. These positions are on the books but they are not filled. They want to fill them by, I guess, I April. That is why you have to go back to 1 October with the staffing levels. Some of these positions are replacement, but I think a lot of them are newly created. They represent probably $1 million per year: $55,000, $58,000, $59,000, $56,000, $44,000, $55,000 all kinds of them.

In conjunction with that, remember I was saying you have to not only control the civil servants in the province, but you have to control the agencies where you are giving out the money. In the same paper, I took a list of all the agencies that depend on a handout, or part handout, from the provincial government. In Saturday's Toronto Star -- these are the ones. I might have to stand on this chair. In Saturday's Toronto Star --

The Vice-Chair: Sir, could you get up to the mike? It is important that it is all recorded.

Mr Kolodzie: In Saturday's Toronto Star, there are about 40 positions representing another $1 million or $1.5 million per year -- not a single position advertising for a productivity specialist. Nobody asking for an expert like me to control staffing levels. Why? Why? Why? Lack of knowledge. People do not know the principles.

Going down to the next point, if it is absolutely necessary to hire a person, as in an emergency -- what is an emergency? You can create an emergency pretty quickly but, still, is it necessary? Somebody says, "Okay, we need a person because of this, this and this." Have the minister approve the position -- the head honcho of the ministry, not the deputy but the minister. Then, if you really want to take it further, have this committee approve each position, the Vice-Chairman of this committee approve each position. That would give a lot of power to the elected people, and that is where the power should be.

As I said, I was on council for 10 years. I know what it is like. Regional council, for those who came in late.

That would change the tone. Then, if you work it properly, each position should be justified by work measurement techniques. They probably are not even practised around here. Just the one that shouts the loudest gets the position.


Positions can be easily justified, but are they necessary? Ministries are advertising right now to fill positions. I gave you that big list of positions there. They are advertising now to fill them before the new budget year so staffing levels can be a higher base. It is done; I know it is done. Nobody is advertising for a productivity expert. Does anybody understand principles of work measurement, of productivity improvement? Not too many people around here do, because it is not practised.

What is productivity? What is work? Can you answer the question: Is it necessary? You can do a job very productively, but it is useless if nothing happens to the work. What is work simplification? It has been around for 60 years, five simple steps. What is efficiency? What is a job work standard? What is a good method? What about span of control? Do you understand what that means? What is a level of bureaucracy? Eliminate levels of bureaucracy; do not create them. Widen the span of control.

Bob Rae has a pretty wide span of control, 29 or 30 cabinet ministers, all reporting to him. Each cabinet minister has one deputy and the deputy has two assistants or three assistants and each assistant has one or two people. Those are extra layers of bureaucracy. Narrow spans of control. You can set an objective: span of control of every manager must be seven, eight or 10 and you can work towards that. As people retire or quit, then you reorganize or reallocate the people to reduce the number of bureaucracies. Remember, if you measure work, you will have less work to measure.

Those are my points. I hope you note a couple of questions. There are 40 articles in here elaborating on different points I have made, especially this one about how each civil servant is going to cost you $5 million -- each one -- in accumulated costs.

The Vice-Chair: Mr Curling, did you have a question?

Mr Curling: I did not have, but as I have been asked: You said the bureaucracy should be reduced. In reducing the bureaucracy, do you feel there are any programs that should be cut in the process?

Mr Kolodzie: No. You reduce bureaucracy; you do not have to even touch the program. You can still have the program. The bureaucracy that remains will be more efficient and they will be happier to have less time to complain.

Mr Sutherland: Your presentation is interesting. You talk about what you did at Oshawa but, with all due respect, I am just wondering if you have a full grasp of the size of the provincial government. Oshawa is one of -- what? -- over 800 municipalities in this province. For a government to be able to serve people and keep some degree of accountability -- because, as you know, we transfer a lot of funds to different organizations, agencies, municipal organizations -- for the public to have trust that we are keeping accountable unfortunately requires some bureaucracy and, unfortunately, sometimes that may seem extremely large.

There are a couple of questions I have. While you point out $5 million over his career for each civil servant, you are basing that on a 40-year career. You must realize that many people come and go and are not going to work a full 40 years, so it is not always the $5 million.

Mr Kolodzie: But the position is still there.

Mr Sutherland: Okay. I guess the other point I want to make on this issue is -- sorry, I think you --

Mr Kolodzie: What is your question?

Mr Sutherland: I am getting to it. Sorry. I lost my question. Go on, and if I can remember -- my apologies, because I had several.

Mr Fletcher: I think you are proving his point, Kimble.

Mr Sutherland: Oh, I know. Your point about having one elected official to look after all the human resources.

Mr Kolodzie: Do I understand the size of bureaucracy?

Mr Sutherland: Yes.

Mr Kolodzie: Yes. It is about 80,000: tremendous potential for cost reduction, to wipe out the deficit, tremendous potential. How many hours of work do they work? How many weeks a year do they work? People want to feel they accomplish something every day. They are happier.

Mr Sutherland: I do not disagree with you about that. I remembered my question.

The Vice-Chair: One question.

Mr Sutherland: Okay. You made the point that there should be one elected official to look after that. As you know, we have a committee sitting next door, government agencies, that is responsible for how many appointments?

Mr Stockwell: Five thousand.

Mr Sutherland: Approximately 5,000.

Mr Kolodzie: One person to monitor.

Mr Sutherland: My point is that with 80,000 people -- when you were in Oshawa, could you monitor half the population of the city of Oshawa?

Mr Kolodzie: It is how you organize, how you do it You can do it. GM does it. They have 250,000 people and they are reducing their staffing levels and increasing productivity, in Oshawa, at least. They are producing twice as many vehicles with half the number of people.

The Vice-Chair: Okay. Thank you for your questions and thank you for your time in appearing before the committee. We will look at your major points and study them in committee.

Mr Kolodzie: I know what you will do with it.

The Vice-Chair: They all are important, sir.

Mr Kolodzie: I understand. but I had to come up and make my pitch. I hope something stuck with somebody.


The Vice-Chair: Would the chairperson, Mr Hayday, come forward? You are from the Ontario Social Assistance Reform Committee Network.

Mr Hayday: Am I correct in assuming that the written copy of my brief has been circulated?

The Vice-Chair: It is on its way around.

Mr Hayday: Thank you. While I do not intend to read my presentation, I did want to provide you with another way of thinking about it, so the written version is maybe of some help. One never knows how these presentations fit for you as a piece, in terms of that which it follows and that which it precedes. I know you are facing a difficult time in terms of making some judicious recommendations about where to steer the budget for the province in a way that would be helpful over both the short term and the long term.

My specific interests have to do with those aspects of the budget which pertain to social assistance or, as it is more commonly known, the welfare system in the province of Ontario. Briefly, let me tell you that the Ontario Social Assistance Reform Committee Network is a coalition of organizations and individuals that came together as a follow-up to the release of the Transitions report, which was released under the chair of George Thomson and represented a review and a series of recommendations for an overhaul of the welfare system in the province.


There are a couple of interesting facts which I want to provide you with an overview of, just by way of setting the stage. Social assistance case loads in the province of Ontario have grown for 10 years. They began to grow significantly during the previous recession in the early 1980s, they continued to grow during seven years of record economic growth in the province and they have accelerated even more dramatically in the last nine months.

This forces us to look at some serious questions about whether or not we are developing systems that share both the economic wealth and the financial opportunity in the province in a way that is equitable, in a way that systemically makes sense. If we see case loads grow during recession and then we see case loads grow during boom times and then we see case loads continue to grow during recession again, it forces us to wonder about what our system is doing.

Certainly there are many complex factors, and I simply want to present some recommendations that pertain to a few of those complexities as we begin to try to unravel that problem. The Transitions report, which many of you, I suspect, have copies of, if not had an opportunity to read through at some level, runs some 700 pages. It has 274 recommendations and weighs about three pounds. It is hard to wrap your mind around something that is of that complexity, which only represents one aspect of Ontario's budget.

Briefly, that report spoke to three aspects that I would like to highlight. It spoke to eligibility, to adequacy and to opportunity: who is eligible for assistance in the province, how adequate is that level of assistance and what kind of opportunity is there in our safety net to help people rebound from a necessary period of time of support into something that is more mainstream, more helpful and more of a contributing factor to the economy of the province.

Now the Thomson report or Transitions, as it was known -- a name we have protected -- spoke significantly to that latter aspect. The system had to have opportunity. The first wave of reforms addressed some needed concerns in terms of eligibility and adequacy. But as a colleague of mine has pointed out, in some ways what we have done is created a waiting room that is larger, that is more comfortable, that can accommodate more people, but we have not built any exits out of the waiting room. We have not built opportunity mechanisms that help people move as they declare themselves off of the system and into some sense of reliance.

We know as a related topic from the findings of the Ontario Child Health Study that children who are living in families where there is a working parent, albeit a working-poor parent. have a much better life trajectory ahead of them than a child living in a welfare family when you hold the dollars exactly constant. The same amount of money gainfully earned as opposed to earned in a dependent manner leads to significantly different life chances for the children in terms of everything from school completion to psychiatric disorder. It is not just the level of income; it is the source of the income.

I think that has to create some sense of urgency as we plan for the economic recovery of the province and we look at the marginalization of something in the order of 13% of Ontario's children who are dependent upon a welfare system that does not have sufficient spring.

With that as an introduction, I would like to speak to what we propose would be some of the ideas we have which we think this committee could provide some support for and some leadership for in its deliberations. We have in our network activities forged some partnerships with private and public sectors, recognizing that no single sector has the solution. The public service, as I suppose you have just heard, does not hold the solution, nor does public spending on its own represent the total wealth of the province or the total sum of ideas for innovation in the province. We know that we need partnership and we have crafted some of those early examples which we think bear replication.

Let me set out in practical terms one more fact. In rounded dollars, a single parent who is dependent upon social assistance in the province will receive somewhere in the order of $15,000 a year, not counting other transfer payment services which they may need or avail themselves of. If, through a series of projects that help individuals join or rejoin the workforce, you have something as low as even a 20% or 30% success rate in terms of helping individuals move back into some kind of contributing labour force participation -- it does not need to be an 80% success rate to be cost-effective. As low as a dedicated 20% to 30% success rate is a cost-effective system if those resources are devoted specifically to what we have described as an opportunity planning function. But if you do not plan the function, if you do not organize the resources to accomplish that, it is simply a pile of words to say that a 25% success rate would be cost-effective.

Some of the examples that we have begun to put together are on a project known as Upstart, which is, I guess, a play on the words "start up." Upstart is a joint venture involving two non-profit organizations, one public sector, one private sector, specifically set up to fast-track individuals from social assistance into jobs that have career options rather than what might be described as service sector jobs that are more closely related to minimum wage and not necessarily to real economic growth in the province.

That kind of project has an appeal for a number of the organizations we are working with that are forecasting a labour shortage in certain white collar positions. But the partnerships have not previously been forged. We would recommend that the Treasury monitor the success of that kind of project and in fact consider replicating it in other parts of the province.

We know that the success of projects such as Upstart depends on innovation as well as some serious addressing of the barriers to participation in the mainstream of society, a mainstream that requires adequate housing, adequate child care and an adequate sense of future. Some of the current barriers to that are conundrums which I suspect each of you individually would find some disbelief about if I could show you the detail.

I will not take your time to show you the detail now. I guess I will invoke some sense of trust about that, but suffice it to say that rental agreements within the Ontario Housing Corp represent myriad complexities and categories which someone with a university degree would find daunting to understand and to maintain some confidence that one's rent would not be jacked up within 60 days of taking gainful employment.

Although the letter of the law says that, the clawback regulations are so timed and so intrusive that there is a perception that if you declare income, nay, if you actively seek income, you will be pricing yourself out of a housing market. We think that the rest of the province is entitled to some kind of lease protection, if not three years, something less than that, but certainly something more than 60 days; 60-day leases do not inspire a lot of confidence in one's ability to afford housing in the province. That is one example.

A specific recommendation then is that we are suggesting that the OHC look at multi-year agreements. We know that there are some programs which have been declared announced by government in previous times, such as the supports to employment program, but we know that the actual spending of those dollars and the release of those dollars has been delayed while case workers scramble to deal with increased case loads and do not have a vision yet for what opportunity planning and employment planning might look like. We have allocated dollars but no mechanism through which to spend them, no promising options that are being pursued. It is an example of a solution whose time has come and needs to be put on the ground, needs to be put in motion.


Child care is another area where we know that the 30% of social assistance recipients who are single parents would benefit from some combination, some partnership, in thinking about child care. Child care in the workplace will not be afforded by a fully funded provincial system. My colleagues with the Ontario Coalition for Better Child Care may not agree with me on that, but those who are trying to balance the books of the province know that we are going to need some creative partnerships in order to move forward on this.

I would ask the committee to consider what incentives there are for businesses of a medium or large nature, much less small businesses, to participate in the child care solution. Are there tax incentives? Are they sufficient? Clearly, that is an area of recommendation that we would want you to extend your influence in.

Income tax thresholds is another area where there have been problems. As recently as two years ago, if you were dependent upon social assistance in the province and you began to move off of that system, your tax-back percentage was 80%. In fact, when you added in the costs of working, everything from transportation through to clothing, then we looked at a marginal tax raise that was actually punitive. For every dollar you earned, you were looking at losing something in the order of $1.05 beyond the first $150 of retained income. Now that has been changed in the last year to a 66% tax-back ratio.

I would urge the committee to examine those numbers carefully and wonder whether or not each of us would be motivated to work for a 66% tax ratio. Some of us may be in that but I suspect not many, and I wonder about the equity and the sense of having a 66% clawback by way of helping someone move transitionally from social assistance to independence.

We know that opportunity planning has been attempted in at least two jurisdictions -- I am on page 5 if you are keeping score. The regional municipality of Ottawa-Carleton has virtually unilaterally decided to take opportunity planning into its own hands and not wait for the province to take the lead in this area.

They are experimenting with the kind of idea which I suggested earlier in my presentation of reducing case loads for a certain number of the workers in income maintenance and actually asking, training, encouraging them to move to the employment planning, opportunity planning function so that they move out of the role of welfare police and income administrator and intake worker into someone who is actually helping someone address the individual barriers that are interfering with their life opportunity.

There is a sense to that we have found no argument with, but nor have we found adequate political or governmental support to take those kinds of risks. We think the time has never been better to test some of those entrepreneurial notions since we know that the other mechanisms are not working, certainly not sufficiently.

The province of Alberta has actually differentiated some of the functions within its income maintenance staff, and we think that this may be one of those times when Ontario does not have to lead the pack. It could actually examine another jurisdiction's activity and see if there were some opportunities to replicate that in this province.

We know that the Ministry of Community and Social Services should not be alone on this and we would recommend that third-party funding, transfer payment agency funding, dedicated funds related to opportunity planning, be considered. We think that separation of goals and third-party funding may provide you with some of the models that you need to do business differently and build some spring back into the system.

We know that there are examples of programs, such as the Calmeadow Foundation, that have used the guaranteed loan program to stimulate small-business development among people who are dependent upon social assistance, people who would not normally qualify for a guaranteed loan in a bank because they have no equity. Their equity is their motivation, their interest in change, but not their property.

We think that the Calmeadow Foundation has had sufficient success that the province might consider a guaranteed loan fund for those high-risk applicants who in effect are borrowing against the province but without opportunity and may have innovative ideas that cannot be funded. We think that is another area that ought to be considered.

We know that there is also in British Columbia a healthy communities fund, which allows for the diversity of different neighbourhoods. Toronto is not like Kapuskasing nor is it like Windsor or Sault Ste Marie. Yet each community may craft a different solution and require access to some seed grant which would allow the kind of local community economic development that would benefit many of the people who will otherwise end up on social assistance rolls.

Similarly, the province yesterday announced through the ministers of Health, Education and Community and Social Services the start of a program called Better Beginnings, Better Futures. This is an integrated model of healthy child development where the child is seen in the context of the family in the context of the community.

There are no dollars allocated at this time to expand that program with a community economic development aspect, yet since these nine communities are all economically disadvantaged communities, this would be an example of where it would be sensible to top up a promising model and maximize the effect.

Lastly, I would recommend to the committee that a project such as the Ontario SARC Network deserves the kind of seed dollars that would be required to continue to craft these partnerships. We have seen encouraging innovation come out of this kind of partnership. It has been done on volunteer sweat thus far. That is not to say that volunteer component will not continue, but we think that it makes sense for the province to take some risks, especially during the times where our prospects are dim, and begin to come at some solutions from a different and perhaps more entrepreneurial manner.

Mr Curling: That was an excellent presentation, well thought out, and it seems to me you are quite up to date with many of the concerns. Not only did you bring your concerns forward but also some solutions as to how we can go about this.

I just want to ask a question. I know you have answered in regard to housing, when those tenants in Metropolitan Toronto Housing Authority housing reach where they would no longer require subsidy that yes, they can gradually move out into the mainstream, but do you feel that a more aggressive approach would have to be used to get them out into that mainstream?

A lot of counselling has to be done because basically MTHA is like a nice safety net. It is a sort of comfort zone in case the salary goes down again. They will catch up because the waiting list is so long. We have seen three generations of people living in MTHA, so it is not doing the things that it should be doing, in other words, carrying them on to the mainstream. Do you think there should be a more forceful effort to get them out of MTHA into the mainstream?

Mr Hayday: We certainly think that the portability of a shelter subsidy has been a significant improvement in the social assistance system. Certainly it is a lot easier to make that portable than to make the housing stock portable.

I am not sure that the individuals I have worked with and I have met who are tenants in Metro Housing would choose to have that as a life address, but they are not aware that there will be sufficient transitional supports to enable a relatively safe transition to the private market. I am not sure that we have addressed that aspect of the system.

Mr Fletcher: Just on the child care issue, and I agree with you that we do need more child care spaces, but is it tax dollars that we should be throwing at the situation or tax incentives? Is it not like a catch-22 in trying to raise funds and yet giving them away when we cannot raise funds? Should not corporations or industry be encouraged, rather than through taxes. to set up day care centres at the workplace? There should be another way than just throwing the money at it. Maybe it is the climate that we have to set up. I have a problem with throwing money at some of these problems.

Mr Hayday: I would not be recommending throwing money at something.

Mr Fletcher: I know.

Mr Hayday: I think that it would need to be carefully thought out. I am sure you would agree with that. I think that there needs to be some balancing between the net benefit, from all three parties concerned -- the province, the employer and the employee. If we can negotiate a scenario where there is a win-win-win, then I think that is worth looking at so that the incentive is balanced by opportunity for those individuals who may most need it. as well as some kind of guarantee of a career track rather than a burger-flipper job.


Mr Fletcher: I understand.

Mrs Sullivan: I was quite interested in your report and it took me back to the days of the Social Assistance Review Committee report release, when we had the anomaly of social activist groups and Conrad Black standing together on platforms being in support of the report.

Like you, I absolutely 100% heartily agree with your recommendation relating to the income tax threshold. As you know. the previous government over a period of time indeed did lower those thresholds and I would hope that the next government will continue that initiative substantially. I think it was an important one.

I was quite interested in two things in your report that I am going to put together -- the Upstart program, along with the STEP program. We have had some substantial testimony from three or four groups relating to the barriers that still exist as people enter the STEP program and they talked about them very practically, not only the change in social assistance dollars that come to them but. additionally. lack of support for things like clothing for the job or safety clothing if that is necessary, or for suits and ties if that is necessary, depending on what is happening. They have talked about this very much as a part of the financial need that has to be taken into account in bringing those programs in place.

How have you dealt with that in the Upstart program? Have you talked about it at all? Is that something that is on your agenda?

Mr Hayday: The Upstart program as it starts will very specifically be functioning in the downtown Toronto core, so there is one kind of job and one kind of thinking-through of what is required to support individuals in that kind of sector.

This province is so diverse that 1 think one of the things we trip over is that before we put a change in place, it has to meet the test of lowest common denominator in every region of the province. We do not seem to build in the kind of regional discretion and entrepreneurial aspect that recognizes the many cultures, geographies and labour markets in the province. It seems to me that is the area of the STEP program, to vest more discretion at the level of the actual client-worker relationship so that those kinds of barriers do not require a province-wide change.

We do not need to have regulations on safety boots for working in a computer centre in downtown Toronto, but if we wait until we have all of those regulations thought through. the opportunity may have passed. Whereas if we vested the discretionary authority at the level of the worker, we would be following a trend which is emerging in the labour and corporate sectors in terms of quality circles, flatline structures. There is something we could learn from that in terms of vesting discretionary authority and we have not done it.

Mrs Sullivan: Is the opportunity planner the place to do that? This is very much a follow-up, because that means there has to be more money to go into that area.

Mr Hayday: It is a place where you might win and you have not done it yet. You have not done it substantially yet.

Mr B. Ward: On page 6, the provincial healthy communities fund that BC has implemented. your recommendation is that we follow suit on a similar program. I am not familiar with this concept. You really do not put a price tag to your recommendation. Do you envision that if this province agrees that this is a good concept to head into, the initial allowance should be that $750,000, or should it be more or less? Could you expand on this concept in greater detail than what is in the brief?

Mr Hayday: What underlies this fund is some research which is absolutely compelling now that says that our health status is more tied to our income than to availability of health care and our life expectancy is equally tied to that. The Canadian Institute for Advanced Research has recently released a number of international comparisons which show that beyond dispute.

The healthy communities fund recognizes that and recognizes the need to invest in local community economic development and other alternatives. I would recommend that if the BC fund is seen as an initial pool to start from, then you adjust it on a per capita basis for Ontario rather than replicate the exact dollar figure. So assume that is the per capita figure and adjust for population.

Mr Phillips: I appreciate your very thoughtful comments. I guess over-arching this is kind of an assumption that the SARC report will proceed with the new government. Then you have got a number of more specific recommendations, I think, and one recommendation in here, on the over-arching one, is to make a strong commitment to the long-term reform. That is, as I said, the major recommendation, I think.

Just in terms of some of your specifics that I think are quite good -- I will try to get all my questions out because I know you do not allow supplementaries.

Mr B. Ward: Just say "and."

The Vice-Chair: We have half an hour.

Mr Phillips: I have one question on the health one -- and I agree with you, by the way. We have all sorts of evidence that says that the major determinant is more poverty and income than the quality of ultimate care. But I thought the health innovation fund was something that could be used for that.

"And" the second question is just, I gather the funding for your organization expires soon, and there is a recommendation here to fund, but it is not clear what sort of funds you are talking about. The committee might like to be made aware of that, because I think the Fair Tax Commission, no doubt, will look at your recommendation on the income tax thing, but that may take two or three years. Do you have any cost estimates on your recommendation to move the income level up before one is taxed?

That is my one question with three parts.

Mr Hayday: We do not have the resources to calculate the net revenue loss with a threshold adjustment and would recommend that that be something that be undertaken by ministry staff, who have adequate resources. That is part one of my answer.

Part two of my answer is that the Premier's Council on Health Strategy, now known as the Premier's Council on Health, Wellbeing and Social Justice, may well be a vehicle through which to fund some of these innovations, but expert reviewers are more likely to recommend that we try something which has worked than that we try something which shows promise. Since we do not have many markers to point to and say, "Well, this works and this works and this works," we may have to take some risks with the fund, and it would be useful to have that will expressed by this committee, that some of these risks be taken with those seed dollars.

Mr Phillips: That is a fund that is available but that you think you may have difficulty accessing currently.

Mr Hayday: I think that we have not fully understood the link between social determinants and health status previously and that it would be important that we underline that point. That has been a problem previously. That is one of the reasons why we continue to run out of funding.

The Laidlaw Foundation has allocated over the last three years anywhere from $125,000 to $250,000 per year for a range of activities. It has decided, I think, that it wants some partners. It does not want to be the only organization that is looking at the long-term economic recovery in the province.

The Vice-Chair: Thank you, and thank you for appearing.



The Vice-Chair: Mr Keenan, would you introduce your colleague and the group that you represent, please.

Mr Keenan: Thank you, Mr Chairman, and good afternoon, ladies and gentlemen. As the Chairman mentioned, my name is David Keenan and I am president of the Toronto Home Builders' Association. To my left is Stephen Dupuis, who is vice-president of government relations of our association. I wish to express our thanks for your inviting us here today.

The opportunity to present our recommendations with respect to the upcoming provincial budget is one that we spent quite a bit of time to investigate and analyse and determine a course of action. Over the next half-hour we would like to accomplish basically three objectives: first, to detail the economic impact of the residential construction industry; second, to describe the current oppressed state of the industry, and third, to put forward the Toronto Home Builders' Association's recommendations with respect to the upcoming provincial budget. At the conclusion of our presentation we would be pleased to take any questions which you might have.

First, I would like to deal now with the economic impact. The residential construction industry is the largest industry in Canada. In 1989, spending on new residential construction totalled over $24 billion. Renovation spending totalled almost $19 billion. The $43 billion spent on housing generated over 400,000 person-years of construction employment. For every one of those 400,000 construction jobs created by home building and renovation, more than two spinoff jobs were created in the manufacturing, trade and service sectors.

Focusing on the greater Toronto area for a moment, spending on new residential construction alone totalled $5 billion in 1989 and provided some 40,000 construction jobs. When indirect employment is taken into account and the renovation sector is added in, the residential construction sector emerges as the dominant source of employment and growth in the greater Toronto area.

The state of the industry: The residential construction industry in the greater Toronto area has been in a state of recession since the spring of 1989. We have prepared for you a special report on the state of the industry and I would like to highlight for you some of our findings. In 1990 sales by Toronto Home Builders' Association members were the worst on record. Sales totalled approximately 8,000 units, down from approximately 18,000 units that took place in 1989 and 36,000 units that took place in 1988. In 1982, as a benchmark or a reference point, and that is the low point of the last recession, just over 12,000 new homes were sold. Interestingly enough, our record in this downturn is below what we saw in 1982.

Sales-in-hand figures indicate that the first half of 1991 will be a write-off. A survey of 15 builders reported 757 sales in hand for the start of 1991, compared to 4,698 in 1990, an 84% decrease. It is an indication of where the industry is going in the current year.

For every 100 construction workers on the job in June 1989 there were 43 on the job in June 1990, a year after, and 29 on the job in November 1990. Based on sales-in-hand data and estimates from the trade, it is expected that only 15 of those 100 workers will be on the job by March 1991, just two months away. A survey of 17 municipalities in the greater Toronto area shows that the value of residential building permits issued in 1990 dropped by over $2 billion, or 46%, compared to the activity in 1989.

The largest industry in Ontario is currently firing on one, maybe two, cylinders. Many manufacturers and trades are trying to come to grips with the unbelievable devastation in the industry. Example: A gentleman by the name of Primo Fantin, a Mississauga carpentry contractor is perhaps a typical reaction that we see. In an interview in the Toronto Star last Saturday he told of how his company has dwindled from 80 people before the recession down to four today.

"I had to lay off 20 men," according to Mr Fantin, "before Christmas, many of them employed with us for 20 years. That was the worst part. It was just terrible."

Apart from the human costs of the widespread unemployment, all levels of government are feeling the effects of the downturn.

The municipalities are feeling the pinch as they wrestle with the difficult choice between increasing taxes or cutting services to compensate for the loss of revenue from levies and building permit fees.

The province is feeling the effect as its deficit continues to grow, largely as a result of overly optimistic projections of housing starts. In the spring provincial budget, the former Treasurer brought in a balanced budget based on 80,000 housing starts. Actual housing starts, however, came in at below 63,000 units.

The federal government is also experiencing revenue shortfalls, coupled with increased unemployment insurance costs as the industry's payroll is being transferred to Ottawa. The province and municipalities will soon begin to feel the secondary impact of these workers as they exhaust their unemployment insurance benefits and begin to draw social assistance.

Our greatest concern, however, is a serious loss of industry capacity which is currently taking place. Manufacturing capacity is shrinking rapidly and we are losing skilled workers to other industries and other provinces. When demand recovers, this capacity will be extremely difficult to regain and will inevitably lead to a serious escalation in prices, similar to that following the 1981-82 recession.

The current level of sales is well below the number of units required to accommodate future growth in the Toronto area. Our market analysis projects an average annual demand of some 22,000 new housing units in the Toronto census metropolitan area in the 1991 to 1996 period, almost three times the current level of sales. We believe these projections to be conservative, based on the fact that they were generated prior to Minister of Employment and Immigration Barbara McDougall's announcement of substantial increases in immigration levels.

Our recommendations: We must face up to the fact that we have a crisis situation on our hands. I believe that we can no longer sit back and wait for the situation to pass. The time has come to take proactive measures and leadership measures to ensure economic recovery. The association's recommendations with respect to the 1991 provincial budget are designed with one objective in mind -- to restore the self-esteem of the thousands of unemployed construction workers by getting them back on the job.

In order to kickstart the residential construction industry, we believe that the upcoming provincial budget should focus on the creation of jobs through a massive commitment to infrastructure, increased non-profit housing allocations and the adoption of the Toronto Home Builders' Association's Let's Build Ontario program for first-time home buyers.

I want to address infrastructure funding, if I may. The recent speech from the throne included a $700-million commitment to infrastructure funding. We believe that this is an important step in the right direction. However, in view of the seriousness of the current situation, we recommend that the upcoming provincial budget double this commitment as a minimum.

Investment in infrastructure should not be looked upon solely as a short-term solution to the current high levels of unemployment but as a means of addressing the substantial infrastructure deficit which currently exists, as well as the inevitable demand for new infrastructure that is necessitated by growth.


The long-term impact of ignoring the infrastructure problem will be a continuation of the boom-bust housing cycle. One of the primary causes of the high land costs in the greater Toronto area has been the lack of serviced land. The Greater Toronto Area Urban Structure Concepts study has found that the capital costs of supporting growth in the GTA over the next 30 years will be approximately $75 billion. This represents a 42% increase in average annual expenditures over the recent levels that were established.

There is also obviously a strong link between a well maintained infrastructure and the environment. The Ontario Sewer and Watermain Contractors Association has warned that Ontario's water and sewer systems are facing a crisis which could cause long-term environmental damage. The association has found that Ontario's water and sewer systems are approaching an advanced age, with some components actually older than Confederation. They have estimated the replacement value of the current water and sewer systems at $50 billion and recommended that an additional $300 million should be spent annually to maintain an adequate system.

Investing in infrastructure is a win-win situation. From the provincial perspective, the government will benefit from increased revenues, from income and sales taxes as well as decreased social assistance costs. Investing in infrastructure will also ensure orderly growth and stronger environmental protection. The building of infrastructure at this time will also be extremely cost-effective as a result of the intensive competition for contracts.

From an industry perspective, an investment in infrastructure will generate much needed employment and go a long way towards evening out the boom-and-slump housing cycle which is so disruptive to our workers and to our businesses.

Non-profit housing: the Toronto Home Builders' Association recognizes the importance of non-profit housing in the continuum of housing supply. We wholeheartedly support Minister of Housing David Cooke's decision to extend the Homes Now deadline. This change will keep alive many projects which could come on stream fairly quickly while approvals are being gathered.

The association also supports increases in non-profit housing allocations at this time. The construction of nonprofit housing will generate sufficient employment in the manufacturing sector and among the construction trades. It also makes a great deal of sense to build non-profit housing during the countercycle to the market, when it is possible to supply as much as 25% more units for the same money because of the competitive nature of the contracts.

While we are supportive of increasing non-profit housing allocations, we are concerned with the levels of allocations which are currently being proposed, that is, the 20,000-unit figure. We believe there must be a much healthier balance between the non-profit sector and market sector.

As an industry, our goal is to capture as large a share of the affordable housing market as possible. If we can address this market as an industry, substantial government resources will be freed up to pursue other important goals on its agenda.

In order to achieve this goal, we must work with our members to ensure that they target to the 30th income percentile, not the 60th -- that is, of the income strata. However, we will also need the co-operation of the province and municipalities in terms of infrastructure funding, streamlining the development approvals process, reviewing developments standards and, most important, challenging the "not in my backyard" syndrome out there, particularly in the current year with the upcoming municipal elections. I am getting sick and tired of it: Every time I try to bring a project forward, they say, "We can't do it, because we're going to face an election in the next six to eight months."

Let's Build Ontario: We would also like to put before you today a program which would stimulate employment in the construction industry through the provision of affordable housing for first-time buyers. We have called the program Let's Build Ontario. It would involve co-operation between government, the industry, mortgage insurers and mortgage lenders. The way in which Let's Build Ontario would work is as follows:

First-time home buyers would be able to purchase new homes with a 5% down payment. The province, through the Ontario Mortgage Corp, would provide 5% or more second mortgages at no or low interest rates. CMHC or the Mortgage Insurance Co of Canada would provide mortgage insurance. The financial community would provide 90% first mortgage financing. We, the builders, would provide job-loss insurance to the purchasers.

Programs like that were initiated back in the late 1940s and the 1950s, and I am sure many of the parents of us here today were able to get their first house through programs that were initiated at that time.

We believe there are many consumers out there who would love to take advantage of the many new-home values which builders are offering. Unfortunately, the tremendous lack of consumer confidence which has resulted from the recession, fear of job loss, the goods and services tax, the Gulf war, etc, has paralysed the consumer's will to purchase.

By joining us in the Let's Build Ontario program the province would send a strong signal to the public that it has confidence in this economy, in the province of Ontario. By supporting Let's Build Ontario, the province would also be acknowledging the strategic importance of the residential construction industry and would raise the spirits of thousands of unemployed construction workers.

The province of Quebec recently recognized the importance of a healthy housing industry by allocating $170 million over four years to encourage first-time buyers to buy new homes. Quebeckers who buy new homes until 30 September this year will have a choice of a guaranteed mortgage rate of 8.5% for three years or a subsidy equivalent to 4.5% of the purchase price to a maximum of $5,000.

Interestingly enough, the President of the United States, in his state of the union address last night, also mentioned housing and the importance of providing housing for first-time buyers to stimulate the economy south of the border.

The provincial role in this program would be to make available a pool of mortgage funds which will be recovered as the mortgages are paid off or as the units are sold. The small per-unit investment by the government will be returned several times over in jobs and revenue. By bringing forward some of the pent-up demand for new housing, this program will also militate against the rapid price increases which followed the last recession. Across Ontario, we believe that up to 10,000 units could be sold through this program.

We have been careful not to suggest expensive tax deductions or direct grants to home purchasers, as we do not wish to exacerbate the government's current fiscal position. We are also recommending that this program be limited in duration. In light of the massive unemployment and the loss of industry capacity, however, we believe that the Let's Build Ontario program is necessary at this time.

In conclusion, our message to you can be summed up in three words: jobs, jobs and jobs. In the upcoming provincial budget, we urge you to take job creation to the top of the provincial priority list, particularly through increases in infrastructure funding, more non-profit co-op housing allocations, and by joining with us in the Let's Build Ontario program.

On behalf of the members of the Toronto Home Builders' Association, I would like to thank you, the members of this committee, for your attention. I would be pleased to answer any questions if you do have any.

Mr Fletcher: Your comments are well appreciated, especially about the municipal governments right now. I agree with a lot of what you are saying, but you do know the economic climate right now: There is not a heck of a lot of money to throw around. I do not mean throw around literally; I mean to pump into the system. We have pumped $700 million in. To double it -- we do not have the money and we cannot just keep throwing money at some of the situations. You do realize that I do sympathize with you.

Here is my question. This morning I thought I had heard about a bit of a recovery in the real estate market. I know you are not in real estate, but I think I did hear this morning on the news that there is a bit of movement now in the real estate market. Did you hear that?


Mr Keenan: I am not aware of a particular press release or article on that. But in a meeting I had today at noon with our sales and marketing council, the report I got back is that there are a lot of people coming to the sales offices. They are kicking tires, to use the analogy, but they are not committing to a purchase contract, not because of the war but particularly because of the uncertainty about their jobs in the future.

Mr Phillips: I am trying to get one question in. When the Ontario home builders were here -- Steve, were you not with them?

Mr Dupuis: Hi.

Mr Phillips: I can remember their brief, given the committee's recommendation in terms of the debt and deficit, being quite worried about that. But your recommendation calls for doubling the $700 million to $1.4 billion, and another $300 million for sewers and water mains, and another unspecified commitment on mortgages. It is one of the challenges the private sector has always had, that when the going gets tough priorities change a little.

I have really two questions: One is that I think your advice to us is that this is not the time to worry about the deficit and that we should be looking at these numbers. Second, I am always curious about how that 25% reduction in cost for non-profit construction takes place. Is that because people are prepared to build at a loss, or is it that all the profit goes out of it? How can it drop that much in that short a time?

Mr Keenan: I see two parts to the question. Let me refer first to the last part, that is, the 25% reduction.

I can refer you to a business school. Whether it is the University of Western Ontario, the University of Toronto, any of the business schools will tell you that the essential to survival in a recession is cash flow; not profits but cash flow. So a contractor today would scramble to the best of his ability to link up a contract in order for that contract to generate cash flow so he can make his debt commitments. If it means no margin or a minimum of margin or taking a loss, he is prepared to do it in order to get him through the business.

The second part: In the last two weeks I have been approached by two contractors who have been in business for over 20 years. They sat down in my office with tears in their eyes in concern that they were going to lose their businesses. They have gone from labour forces of 150 down to just the family that is running the business and saying, "How can we survive?" What they are looking for is any type of business at all that a framing contractor or a forming contractor can get his hands on in order to give him some cash flow to make that commitment at the end of the month. In the meantime, he has mortgaged his house to the hilt to free up some cash in order to make these commitments. That is how serious it is.

Mrs Sullivan: I am very interested in your recommendation relating to infrastructure and the figure you use of $300 million. I think in this year's budget there is about $250 million already committed for sewer and water construction, and in this budget there was a proposal for a water and sewage corporation, which would lever up a lot more money. I think it would be beneficial and the Treasurer might want to take note of that.

I wanted to specifically talk to you about your proposal for Let's Build Ontario. You are talking about I 0,000 units. Would you have a limit on the market price of units that would be eligible for participation in the program?

Mr Keenan: Yes, we are working within the affordable housing guidelines as set by the previous government of $160,000.

Mrs Sullivan: When you are looking at that, one of the things that occurs to me is what happened in Burlington, my community, where, for instance, a builder was able to build affordable units at really the high part of the market, and when the municipality refused to allow the next development at that same price range to come on stream, all of a sudden those units became non-affordable again. What kind of protection can you see being built into a program like this? That is one part of the question. The other part is: What do you think the commitment has to be? Are you talking about, through the Ontario Mortgage Corp, a commitment comparable to that in Quebec of $ 175 million or $ 170 million? What dollar figure do you see the Treasurer putting into the budget?

Mr Keenan: We talk about 10,000 units as a target figure. Whether we have sufficient lands serviced and ready to go -- we are not quite sure whether in fact that target can be reached. Consequently, the provincial commitment of funds would have to be determined on our assessment of how many units we can actually bring to the marketplace in the next three months.

In the mortgage business, it is perhaps setting aside $175 million, but it is not money that is spent, it is money that is invested with a return potential. That is what I want to emphasize here. It is how you look at it. It is not money being given away, it is money being invested in families, invested in housing.

The Vice-Chair: Mr Curling.

Mrs Sullivan: Excuse me, but I want to go on. You are talking about investing in the next three months. The budget will not be out until May.

The Vice-Chair: It is just that we are short of time and we have quite a few on the list. It is half an hour, unless this committee wants to authorize me for one hour for each of the rest. I have no problem.

Mr Curling: Because of the time, I will go straight to my question. I think this presentation is a very good one and I commend you for it. The problem I have with this, though, is that you emphasize new homes. I would have liked to see the home builders' association coming in more to talk about things like rezoning, basement apartments being fixed up, because the industry there was quite vibrant. You had good sales in 1988 of new homes, and many people who bought larger homes could have easily put basement apartments in, but I know we run into the rezoning aspect of it.

Home repairs is a big industry. I think they need that kind of support, because the industry itself is not only limited to new homes. Sometimes when I see the housing industry, it reminds me of the car industry, which tells you that you must change your car after two years or three years or it is obsolete. New home buyers and what have you, starter homes, all those types of things throw it in a situation where it is a disposable kind of society itself; no expansion and all that. Was there a deliberate process on your part not to mention more about that part of the industry, about basement apartment improvements and home repairs?

Mr Keenan: It is a very good question. I would like to point out two parts to it. First, the renovators' council of the Toronto Home Builders' Association is a very active committee, focusing essentially on existing stock. They are growing in numbers, and also with respect to a code of ethics under which they will work in order to provide consumer protection. They are part of these numbers. In other words, they are part of the economic impact.

Similarly, it is a question of jobs. More jobs are created and retained in the new home sector than in the rehabilitation or the renovation sector. That is why the focus has really been, as I mentioned earlier, on jobs. It is the new home sector that generates the majority of the jobs.


Mr Sutherland: I thought there were a couple of interesting points you made in here. We have had the banks in and we have had other forecasting groups in predicting that we are going to recover in the third quarter of this year. I was quite interested in the note you made about the loss of manufacturing jobs, the loss of skilled people. It seemed to me there was some sense that you felt that you were expressing that there was not as strong an ability to recover this time around because we have lost a lot of those manufacturing jobs and a lot of those people out of the province. One, am I correct in what I am gathering out of that, and two, if that is the case, do you see us recovering in the third quarter of this year, in general and specifically in your industry?

Mr Keenan: I think the committee is asking a lot of very good questions. Answering this one, obviously there are two parts. The first one is, is there a recovery down the road? Definitely there is; with interest rates coming down there is. We could see a recovery. The housing sector, however, is somewhat paralysed as we go into this year. That is on the supply side; not the demand side, the supply side.

It goes back to one of my earlier comments. With the NIMBY syndrome out there, it affects the supply of lands whereby you can build smaller, affordable product. So answering your question, we would have difficulty getting enough supply out there to have the real impact of this economic recovery take place. As the report submitted to you suggested, we have to also, at the provincial level, look at streamlining the development process in dealing with that very issue on the supply side. I emphasize that point because it is the exact same problem that occurred in 1983-84 as we came out of the last recession. There just were not sufficient lands available to deal with the demand side through the supply side of the equation.

The Acting Chair (Mr B. Ward): Serviced land.

Mr Keenan: Serviced land.

Mr Jamison: My question to you again deals with the recovery, but in a different light, that if we do in fact come into a recovery of sorts in the second half of the year -- the housing market in Toronto, I do not have to tell you, has been overheated at times. Then it cools down. Right now it looks pretty dreadful as far as your ability to participate is concerned.

We talked about getting involved in co-op housing and those types of programs to help supplement your industry. My question is whether or not, if in fact a significant rebound takes place, the allocation of co-op housing would take place on an ongoing -- you would not just receive 20,000 starts right off the bat. Obviously the question in my mind is that it is more profitable for you as a builder, or it would seem to me to be more profitable for you as a builder, to build other types of housing, and how that would possibly interfere at that point with a commitment on the part of yourselves to co-op housing. Would we be assured that you would not put that on the back burner at that point?

Mr Keenan: The industry does not want to have the swings that took place in the 1980s. The topic of everybody's conversation in the housing industry in 1987 and 1988 centred on delayed closings and houses that were not completed on time with the features in them. That is not what this industry wants. We want a more level playing field. We want to see the dramatic swings up and down removed from this industry. Also, what will happen is we will get rid of the speculators. We will get rid of those profit-takers who are out there. I think that is what you are really asking, how we can get rid of that. What we are suggesting is that if we can get this industry back on an even keel, then we will not have to deal with those more questionable practices.

The Acting Chair: I would like to thank you for the presentation. It was very worth while and we will take it under consideration as we continue our deliberations.


The Acting Chair: Next is the Ontario Coalition of Agencies Serving Immigrants; Howard Sinclair-Jones, executive director. I believe you have a couple of people with you.

The Vice-Chair: Would you care to introduce your colleagues and the group you represent?

Mr Sinclair-Jones: My name is Howard Sinclair-Jones. I am the executive director of OCASI. The correct name is Ontario Council of Agencies Serving Immigrants. I have with me Paulina Maciulis who is the program co-ordinator for OCASI, and Aruna Ogale who is executive director of ACCES for New Canadians. Could I ask how much time we have?

The Vice-Chair: You have about half an hour, until a quarter to four.

Mr Sinclair-Jones: I know you are running a bit behind. Perhaps we could talk for about 15 minutes and then we would be very happy to answer questions. We have tabled a brief, this thing, which I think has been distributed. It includes six major areas of concern: access to services for immigrants and refugees in Ontario, settlement and integration programs, community and social services, social assistance, immigrants and the labour market, and finally, employment equity. We will deal with these in turn. I will be dealing with the first two issues and then I will pass to my colleagues to deal with the others.

First of all, though, by way of introduction to OCASI itself, some of you are very familiar with OCASI. I know Mr Phillips. We have met before in his previous capacity. Others would not be so familiar. There is a very large network of community-based agencies all over Ontario which provide assistance to newcomers, to refugees and to immigrants. We have 116 member agencies and they go everywhere from Kenora to Kingston, Ottawa, Windsor, a very large number here in Metro Toronto; more than 70 of our agencies are in the greater Toronto area. It is a very extensive network and it provides a very broad range of essential settlement services and social services to newcomers.

Each year our agencies provide assistance to more than immigrants in Ontario, immigrant clients, people who were not born in Canada. The services include language and orientation classes, individual family counselling, interpretation, translation, information and referral, legal assistance, employment counselling and job training, and health care services.

Basically, these agencies play an essential and fundamental role in the delivery of social services in Ontario and in addition they play important roles in advocating for their constituency, for the immigrant communities of Ontario and in making links between newcomers and Canadian institutions.

Another important thing to stress is that the services OCASI members provide go far beyond the initial reception and settlement services. They include a wide range of innovative programs, employment preparation, preventive programs in the mental health field, family counselling, programs for seniors and especially a wide range of programs aimed at a particularly disadvantaged group, immigrant women.

One thing we would like to stress is that the community-based immigrant service agencies are extremely cost-effective. They are innovative and because of their flexibility they can be immediately responsive to the changing needs and changing demographics of the province. They have developed a wide range of skills in these areas. This has occurred as a result of much dedication, assisted by a tremendous voluntary commitment, despite the fact that the funding they have received over the years has been truly inadequate. In short, our member agencies are the essential link in helping the many thousands of newcomers participate in the economic and social life of Ontario.


In terms of the concern of access to services, immigration to Ontario has been a fundamental aspect of the province's economic growth and development and for many years our member agencies have raised the issue of lack of access to appropriate services for immigrants and for minority communities. Some of our key access concerns include systemic racism and discrimination in Ontario's public institutions and through the economic structure; the incredible waste of expertise and talent and qualifications of immigrants and refugees due to discriminatory practices on the part of professional associations, educational institutions and other regulatory bodies; the lack of a comprehensive language training strategy at either the provincial or federal level. I should add that this is particularly a problem here in the province of Ontario. The language training system in this province is extremely complex and some would say chaotic in terms of who is responsible for what and this creates tremendous difficulties.

There is the inaccessibility of hospital services, family services, the community college system and other public institutions to non-English-speaking Ontarians, and also the lack of immigrant and minority representation on the staff and boards of public institutions.

OCASI over the past several years has supported the development of Ontario's multicultural strategy. However, we strongly feel that meaningful implementation of the multicultural strategy has been sadly lacking and the existing problems stand in stark contrast to some excellent statements of principle.

In this regard we would like to make the following recommendation, that the provincial multicultural strategy be reviewed to ensure that implementation strategies include defined and measurable objectives, the development of appropriate new programs with the allocation of realistic budgets, and we recognize that this probably requires the reallocation of existing funds rather than the creation of new money. We are fully aware of the difficult economic situation the province is in. We wish to see a re-examination of existing resources to ensure that grants and contributions are fairly and equitably distributed within the field of immigrant services. We wish to see clear lines of authority and responsibility for implementation of the multicultural strategy, and we believe that this implementation strategy must include mechanisms for community accountability.

That is in terms of the question of access.

In terms of the second one, settlement and integration of newcomers, we believe that a strong system of community-based settlement services and language training programs is essential. Increased immigration to Ontario, together with a long history of underfunding of our agencies, requires an urgent and major increase in resources for immigrant settlement and integration.

According to the Ministry of Citizenship, Ontario is the initial place of settlement for 52% of immigrants to Canada and it has been estimated that roughly 75% of all immigrants end up living in Ontario within six to nine months of arriving in the country, so we are talking about something like three quarters of all immigration flow to Canada eventually residing in Ontario. Although the Ministry of Citizenship is the major provincial government source of funds for our member agencies, it remains a very small department with a budget which is far from adequate considering its vital mandate in the areas of race relations, human rights, multiculturalism and immigrant settlement.

OCASI supports a strong role for the Ministry of Citizenship as an advocate within government to the general public for immigrant access and participation, but we are concerned that its continued existence should not be used to legitimize the marginalization of immigrant service needs by other provincial ministries which have very much larger budgets.

Meanwhile, the federal government's support for immigrant settlement services and language training is insufficient and fails to recognize that this province is the major destination for newcomers to Canada. Ontario receives only 25% of federal funding for language training programs and just 45% of funding for newcomer settlement, despite, as I said, something like 75% of newcomers eventually residing in the province.

Our recommendations in this area, settlement and integration, are as follows: that a major increase in funding be provided to the Ministry of Citizenship's Ontario settlement and integration program to sustain and enhance operational support for community-based agencies which provide settlement and integration services to newcomers, and further, that legislation be enacted to provide the status of a mandated program to the Ontario settlement and integration program; second, that the Ontario government actively pursue a federal-provincial agreement on immigration as a means to ensure that an adequate range of settlement services and language training is provided to newcomers to the province.

In this respect -- I should just add this -- we are particularly concerned following the announcement of the federal-Quebec agreement on immigration of a few weeks ago. That followed an announcement by the federal Minister of Employment and Immigration of a major increase in levels and an allocation of new funding for the settlement and integration of newcomers. It would appear that the subsequent announcement of the Quebec agreement has moved a tremendous amount, virtually all of that new money, towards the province of Quebec, so we are going to be expecting a substantial increase in immigration numbers with no increase from the federal level for services.

I will pass to Paulina now.

Ms Maciulis: I am going to address two issues, both of them under community and social services, so it will be community and social services and social assistance reform.

The member agencies of OCASI exist partly because the so-called mainstream community and social services system in Ontario does not meet the needs of immigrants and refugees in the province. New immigrants and many times people who have arrived here many years ago use the services of community-based immigrant service agencies because OCASI agencies have specific knowledge and expertise and are culturally sensitive and equipped with appropriate language capabilities. The essential role of OCASI member agencies in the provision of community and social services requires the recognition and support of the Ministry of Community and Social Services. Existing funds must be reallocated and redirected in an equitable manner.

Recommendations on this issue are that the Ministry of Community and Social Services in its policy development, program design and funding allocations recognize the crucial role played by community-based immigrant service agencies, and that the Ministry of Community and Social Services develop a program of operational support for community-based immigrant service agencies appropriate to the mandate of this ministry to provide funding for services such as needs assessment; community development; access facilitation such as escorting, interpreting and translation services, and information and referral; crisis intervention; counselling for non-English-speaking individuals and families; general orientation and information related to social assistance; social support programs for non-English-speaking seniors; social support programs for isolated and vulnerable adults; special programs for disabled people within the immigrant communities, and pre-employment programs for immigrant and refugee social assistance recipients.

In the area of social assistance reform, OCASI worked closely with the Social Assistance Review Committee to establish a Multicultural Advisory Group on Social Assistance which brought together representatives of 15 organizations which serve immigrants. The multicultural advisory group reviewed the presentations and briefs which raised issues concerning immigrants and poverty. There were over 100 submissions on that issue.

Based on comments made over and over again by agencies and individuals across the province, a clear consensus emerged from the many presentations and briefs: that the social assistance system is not meeting basic needs for food, shelter, health care, clothing and transportation; that the social assistance system lacks sensitivity and compassion and that discrimination is pervasive and systemic; that the social assistance system lacks consistency between and even within municipalities -- communication between the benefit system and recipients and community organizations is ineffective and in some cases non-existent; that the failure of the system is exacerbated for specific groups which face discrimination on the basis of their immigration status, such as sponsored immigrants.


OCASI supports the vision and thrust of the Transitions report. The SARC report links together in a positive way the challenge of combating poverty with that of building a multicultural Ontario. Transitions contains a progressive vision for Ontario. Its recommendations for major reform of social assistance and important new measures to assist the working poor are of an urgent priority.

Implementation of the Transitions report will help the clients of OCASI member agencies and all low-income residents of the province. We welcomed the release in 1988 of the Transitions report. We are, however, disheartened by the slow progress in implementation of its recommendations. Virtually no action has been taken with reference to SARC's excellent recommendations for improving access and quality of services to immigrants. OCASI emphasizes in particular the problems faced by family-sponsored immigrants in need of assistance who continue to be denied eligibility.

All Ontarians need adequate resources to deal with day-to-day living costs and emergencies. People need support in order to move towards self-reliance. Immigrant women need access to child care, to English classes, to vocational counselling and to skills training opportunities.

A recommendation on that point is that the Ministry of Community and Social Services actively and expeditiously move forward with the implementation of the Transitions report of the Social Assistance Review Committee. I turn now to my colleague.

Ms Ogale: The organization I work for is ACCES for New Canadians, which stands for Accessible Community Counselling and Employment Services for New Canadians.

I am going to digress a little bit from the brief that you have, but basically it will just touch on everything. We have just completed a survey that OCASI conducted for 1989 and what we found was that the member agencies -- there were 107 member agencies at that time -- served 420,000 people. That is a 50% increase from the previous year, which was 1988. The survey also indicated that for the people coming to our agency, their biggest areas of concerns were ESL, or English-as-a-second-language training, and employment assistance. The people we are serving desperately need assistance in making sure that they can find jobs, and the only way to find jobs is making sure they have some type of skills training and English as a second language.

It is no secret that the effects of free trade and the recession have been hard on a lot of Canadians. I think, just because of the nature of the way our economy works, it is even harder on visible minorities and those who are new to Canada because of the excess baggage they carry, mainly that they do not speak the language, that their degrees may not be recognized and whatever. This is having a disastrous effect on thousands of immigrant workers and their families, and especially on immigrant women who are even being further jeopardized. A lot of them were in a marginalized industry as it was, and now these industries are closing down. So something has to be done in terms of retraining these women to get them into other types of sectors.

We are also seeing more and more problems with the older immigrant worker. As the gentlemen who gave their presentation before were saying, a lot of immigrant workers, especially in the agency I work for, are Portuguese. They worked in the construction industry. They always thought they would have a job. They worked for 15, 20 years. They never really felt they had the need to learn the English language. Suddenly they are out of work for the first time. This whole issue has to be addressed in terms of developing their English-language skills, developing some sort of other skills training, because they need to get back into the workforce. Given their age and given their situation, it is likely that they might not be going back into the construction industry.

Many immigrants, especially immigrant women, require additional support in terms of career counselling, language, employment, skills training and job placement programs in order to compete effectively in the marketplace. We have to make sure that we provide for this.

I know recently the Ministry of Labour announced that $25 million extra would be put forward. We would like to ensure that this money is going towards all sectors including the immigrant working population, which means that basic skills development is important, literacy is important; but when you are dealing with immigrants and refugees you are also talking about ESL. You are also talking a lot of times about first-language literacy. We hope that in this $25 million the needs of this group are also going to be looked at.

As Howard said earlier, we know there is not a lot of money and we know what our economy is facing right now, but we really feel that perhaps there should be some relocation towards the community sector because we are very, very cost-effective and we provide services that are very necessary and that perhaps have not always been provided.

We do have some recommendations:

"That a long-term perspective on language, literacy and skills training and the development of community resources for skills development and labour adjustments be supported;

"That expanded provincial funding is needed to promote community-based language and skills training for immigrant women;

"That the ministries of Education, Skills Development and Labour ensure that their market adjustment and skills development programs respond to the specific needs of immigrants and refugees in Ontario;

"That the Ministry of Labour, in implementing the recent announcement of additional funding for labour adjustment in response to plant closures, develop components which are specifically targeted to workers with special needs such as non-English/non-French-speaking workers;

"That the Ministry of Labour increase the number of agencies funded as help centres which have a capability of providing services to immigrants and refugees" -- I might add right now that in Toronto there are only two help centres that cater to the immigrant and refugee populations; and

"That, as the province renegotiates the Canada/Ontario agreement on training, efforts be made to explicitly advance the province's multicultural strategy; and further that the agreement recognize and enhance the role of nonprofit community-based organizations in the face of continuing privatization."

I would also like to address the issue of employment equity. Underemployment and unemployment are major problems affecting immigrant communities in Ontario. A recent report that was conducted by the Canadian Civil Liberties Association reinforces what OCASI has always known, that systemic racism is indeed an enduring feature in our economy. The association studied 12 out of 15 private employment agencies in Toronto, Ottawa, London and Kitchener-Guelph. In all of these areas, the agencies agreed to comply with an employer's request to refer only white people for jobs.

Mandatory employment equity legislation is necessary to address the barriers of racial discrimination in hiring and job promotions. In addition, specific measures are required to ensure that foreign-trained professionals and tradespeople have equitable access to employment opportunities in the province.

OCASI supports Bill 172, a private member's bill introduced in the last session of the Legislature. The bill would provide for employment equity for women, people with disabilities, native people and members of visible minorities. As Premier Rae has stated, "The bill is a result of extensive consultation with affected groups and would go a long way towards making Ontario's workforce reflective of the human wealth of the province."

The Task Force on Access to Professions and Trades provides a framework for ensuring that Ontario's economy receives the full benefit of the wealth of skills and talents possessed by immigrants to the province. The task force recommendations detail effective measures to counteract discriminatory rules and practices.

We would recommend, under employment equity:

"That the mandatory employment equity legislation be adopted to promote equitable employment opportunities for women, visible minorities, people with disabilities and aboriginal peoples; and that implementation of the legislation be accompanied by cross-cultural sensitivity training in the workplaces of the province;

"That, without further delay, legislation be enacted to implement the recommendations of the Task Force on Access to Trades and Professions; and

"That employment agencies which contravene the Human Rights Code be forced to terminate their business activities in the province."


Mr Phillips: Thank you for what I think was a very thoughtful brief. In my experience on the other side, probably the best investment the province makes in its spending program is in these services. I am not sure I have seen everything the government spends its money on, but I always felt, for the reasons you outlined, that dollar for dollar this was our best investment because you are very efficient, effective and you get an awful lot of volunteer help as well that I think really provides value. So I think on that you certainly have my support, and as I say, to the extent that I can influence the other members, I can assure them that the members of OCASI really do provide excellent value.

I think you have raised a lot of other very important issues that are somewhat non-budgetary. They are important issues that the government will wrestle with and I can assure you that I will be watching it, because things like access to trades and professions are very fundamental; the employment equity is very fundamental -- I will forget some that I will not mention -- and I think your advice on the Ministry of Citizenship is an extremely important one that I agree with. That is, it is an advocacy ministry; it should not be allowed to marginalize individuals. I think the government and the province must reflect the diversity and not think of it as isolated in any one ministry. I happen to think we were making some good progress on that as a former government.

I guess I did not even want to ask a question other than just to say that I can vouch for these organizations and the work they do, to say this, that the issues you raise in here are absolutely fundamental to the province and the future of the province and will be the subject, I think, of some really good debates in the months and years ahead. So as I say, I thank you for an awful lot of work that went into that and I hope that at least over the short term the government can provide adequate funding. It probably will never be quite as much as you would like, but I hope it is enough to do the job.

Mr Sinclair-Jones: May I just comment? I thank you for your comments; that is very complimentary coming from an ex-Minister of Citizenship. We had our battles before with Mr Phillips.

I would add, though, that I personally do believe that all of these issues are in fact fundamental budgetary issues. They do not appear immediately in the equations, but the economic benefits of immigration are phenomenal. I feel that there is a major imbalance between the potential contribution of immigration to the economy of this province and the contribution which the government makes directly in the initial assistance to newcomers to the province and the continuing ability it gives them to participate fully in the life of the province.

I mentioned earlier that we are not really requesting new funds, but we are asking for a serious examination of the existing allocations in the field of social services. Why should the Ministry of Citizenship have a budget of only $60 million, when one has other ministries with budgets of $4 billion that are not delivering in terms of social services to a multicultural population? We should be looking at that. So I would say there are serious budgetary implications to some of the --

Mr Phillips: I guess my only point, for this committee wrestling with everything it is going to wrestle with over a week, was that some of the issues you raise are very important philosophical issues. How do you change what you call the mainstream organizations to provide the services and what is the best way to do that? They are very crucial recommendations. I am just saying, with all due respect to my colleagues and myself, you will not get thoughtful, measured responses in the one week we have to prepare our total budget response. The best I suspect we can do is to try to make some comment on funding for you and have those debates as you would want them, with the proper time and attention given to them.

The Vice-Chair: I am looking at your report. and one recommendation is the splitting of the costs between the federal government and the provincial government on the funding. I think it is very important that we have a good working relationship with the federal government to the point where immigration increases could increase the budget of the Ontario government, unforeseen if they change the numbers of the number of people coming into Ontario. So we could set a budget and yet if they increase the immigration figure. it could throw the budget way out of line. I just wanted to make that comment. It is a good recommendation.

Mr Curling: It is a good point that you made and if I can follow from that one, that is the exact point I am going to make. This is the sort of copout that governments will do actually between governments and in governments themselves. The Canada-Ontario agreement on training itself, we saw it coming, you know, where the federal government is reneging on its responsibility.

Now, as a provincial government, do we stand back and then tell the federal government that the transfers of funds are not coming our way? I think there are things that they can do, as a matter of fact. As you said with the ACCES program, it is in a deliberate discriminatory way that our people in professions were treating our immigrants coming into that. They are wasting very good professional skills that can be plugged in because of their qualifications seen and the Canadian experience, that type of stuff. They were excellent people when they were being interviewed as immigrants coming into the country, because those are the qualifications. but as soon as they arrive, those qualifications work out to nothing. Now in saying all that, I think that you cannot ease up even on the government of the past, but if we had moved a bit faster maybe we would have got some of those things in place.

The present government, in this budget we are addressing, can look especially at the ACCES program, you say, and implement that very quickly. They can also give enough money within your groups in order to have good counselling, because you are down there in the grass roots knowing exactly what is happening. I feel that the pressure, if you want to call it that, should be placed very strongly in this committee and I am glad you see us working very co-operatively and that is a strong recommendation we should take, that at this time, as you know, immigrants are the last to hire and the first to fire. In our constituency office you can see the other people are coming in, losing jobs, losing their homes and then, as I said was stated by the presentation earlier on, the payroll moves from the private sector to Ottawa or to Ontario.

So I am saying to you too that the pressure you must place must continue not only from here. but we still have time that it can be reflected in the budget, that adequate funds are placed, immediate ones, and then you follow up on the others, equality. etc, etc.

Even with human rights themselves, and I do not want to give a speech, the Ontario Human Rights Commission has to be looked upon very seriously, whether it is dealing only with women's issues or with all the issues. Do not put the discrimination issues on the back of the shelf to be dealt with.

Would you then say, sir, which would be the priorities to put pressure on? Would you feel that the ACCES program -- and I am not blaming it on the federal government transfer of funds -- is the one to be addressed immediately?

Mr Sinclair-Jones: If you ask for priorities in a time of financial difficulty, I would --

Mr Curling: There is no financial difficulty. You have money; Ontario has money.

Mr Sinclair-Jones: I think, just coming back to one major difficulty which community-based agencies have in the delivery of essential services, that there is sort of a systemic discrimination against the agencies, not just against the immigrants they serve. In terms of the major delivery ministries, the Ministry of Community and Social Services and the Ministry of Health, it has been virtually impossible for small, community-based agencies to obtain funding from those ministries to provide services which are the mandate of those ministries. They are not necessarily the mandate of the Ministry of Citizenship and they are not necessarily the mandate of the Department of Employment and Immigration at the federal level. They are on Comsoc's back. You try to get a grant from Comsoc if you are a small community-based agency based within a particular ethnocultural community and it is extremely difficult.

That is something that towards a year or so ago we were beginning to make some inroads into and we wish to see this government really begin to examine that question, the opening up of programs such that all groups which are able to provide services within a particular ministry's mandate are eligible to receive funding under those mandates.


Mr Sutherland: I want to pick up on this point about funding and talking about the impact of this budget year. The federal Minister of Employment and Immigration has said -- is it an extra 200,000 a year? Is that the correct figure?

Mr Sinclair-Jones: No, we are moving towards a total of 250,000 a year over a five-year period.

Mr Sutherland: And the current total is?

Mr Sinclair-Jones: It is not far off 200,000 at the moment.

Mr Sutherland: Increasing it by approximately 50,000 a year. I was wondering if you could give some feeling about what the impact is going to be? You have said 75% of the immigrants end up in this province. I support the increase in immigration and the federal government doing that, but I am very concerned about what impact it is going to have on the provincial budget. They have made, it seems, a rather arbitrary decision to do that, but from your indications they are not providing the support services that are going to be necessary to integrate these people into the Ontario community. I was wondering if you had some estimate of what it would be for an extra 50,000 people or 75% of that extra 50,000, what extra amount your organization as a whole would need to try to accommodate that.

Mr Sinclair-Jones: In percentage terms of the total immigration budget, very, very little. Part of the difficulty is that the total federal funding to community-based service agencies helping immigrants is only a tiny percentage of the overall immigration budget. The major program is a program called ISAP, the immigrant settlement and adaptation program. That is only 3% of the federal immigration budget. The vast majority of the federal immigration budget goes on enforcement, on immigration law, as opposed to helping people settle and become productive, even though the whole rationale for immigration is demographic and economic growth. It is a real contradiction.

Mr Sutherland: So we have a real question here that the federal government is not providing the support services to integrate these people properly.

Mr Sinclair-Jones: Correct. And it is not providing in terms of job training, employment training, counselling. We are not just talking about initial settlement. We are talking about a whole range of activities which assist people to become economically productive.

Ms M. Ward: I want to ask you to expand or clarify for me this section on immigrants in the labour market and your last recommendation about the Canada-Ontario agreement on training. You say, "And further that the agreement recognize and enhance the role of non-profit community-based organizations in the face of continuing privatization." Are you speaking there of training and skills programs that are provided by these agencies? I wonder if you could give me some examples.

Ms Ogale: You want examples of programs?

Ms M. Ward: I just want you to expand a little, if that was really what you meant, on the provision of programs by the community agencies. I have heard in the past that there have been problems with funding, that it is not continuous. The funding may be granted for a short period of time, maybe only for a year, and by the time the agencies get the people in place -- it takes a period of training and so on -- by the time it is operational the funding is gone again and they are in the position of being in a state of uncertainty for some months again.

Ms Ogale: The funding that skills training programs get is year to year, so every year you apply. I know of at least one program that was serving South Asian women, which is not operating now even though it was very successful, simply because the money was not made available this year and you have to reapply.

What we are saying is that because we know our communities best, especially because most of these skills training programs are for women, we know their specific language needs, we know how they can learn and what they need to learn, that it makes sense that we be involved in that training process. It seems that more and more of the money is being given perhaps to industry or whatever to carry out training, and it seems to us that workers who are already marginalized are probably going to be isolated from those training programs. So because we know these populations best, it makes sense to have community-based training programs that can deliver services in the community, because they are cost-effective and they reach the right population.

Mr B. Ward: I think my questions have been asked but have not got the answer I am hoping to get.

First, as parliamentary assistant to the Minister of Skills Development, I hear what you are saying about the emphasis that should be placed on that aspect of skills programming in this province and give you this assurance, that on item 5.6 on page 12 I will make the minister, Richard Allen, aware of your concerns. Hopefully, they can be dealt with to some degree in the upcoming negotiations.

What I would like to focus on is 5.4 -- 5.4 and 5.5, I guess, which pertain to the help centres. In Brantford we have a help centre, but we also have an Ethnoculturefest. It is an independent organization but does receive funding from the province to deal with counselling, etc. Are you suggesting that this province, when it comes to assistance for unemployed, etc -- I am relating to Brantford again -- rather than not having the best program available because some funding is going to Ethnoculturefest and some is going to the help centre, should be concentrating on the help centre and ensuring that the support system is in place at the help centre to deal with unemployed immigrants or ethnic people who perhaps do not have a full understanding of the system? Is that something we should be looking at? Is that what you are trying to get at with SA and 5.5 on page 12?

Ms Ogale: Actually, access for new Canadians into help centres funded as a help centre. What we are suggesting is that there perhaps needs to be more done in terms of the help centres and in terms of the non-English population. A lot of help centres do not necessarily look towards the needs of a specialized group. We are not saying take money away from one and give it to the other, but perhaps expand funding or look at the different things a help centre should be doing. I know, for example, that our help centre will be seeing 3,500 people this year, 3,500 people is an awful lot for one help centre to see. Clearly, there is a need for another help centre within Toronto, but there is not one.

Perhaps what we are saying is that there need to be more specialized help centres, not just ethno-specific ones because all help centres right now are overextended simply because of the large numbers of unemployed people in Ontario. I think that is what we are suggesting, that you look at that.

The Vice-Chair: Thank you.

Ms Maciulis: If I can make a little comment. Mr Ward mentioned Brantford, and a help centre existing in the same locality. I would say we are not supporting the ethnocultural centre against the help centre or vice-versa I feel that in those communities normally those organizations work together. If they do not, I think the same population would push them to work together for the population.

Mr B. Ward: If they are not, they should be.


The Vice-Chair: Mr de Klerk, I believe? I just want to check; sometimes someone else has been substituted. Would you introduce yourself and your colleague and the group you represent? You have a half an hour, to 4:30.

Mr de Klerk: My name is Jack de Klerk and with me is Felies Einhorn. We are with the Tenants Non-Profit Redevelopment Corp. We will tell you a bit more about what we are about and what we are asking. I appreciate and I will say at the outset that it is a difficult task you face, because you have just been talking about immigrant services and social services and we are going to ask that you now switch gears, not entirely but to a great extent, into the whole area of housing, which is another, some might say, black hole.


Mr Curling: Could be a white hole, too.

Mr de Klerk: Yes, I was thinking of that as the words came out of my mouth. It is a hole.

The Tenants Non-Profit Redevelopment Corp was incorporated in 1989 as a result of efforts of the Federation of Metro Tenants' Associations and the Co-operative Housing Association of Ontario. The organization was given a mandate to work with tenant groups and assist them as much as they could in converting their apartments into non-profit co-operatives. We were given a start-up grant from the Ministry of Housing, its sector support program, in June 1989. Shortly after that were told that we had a reserve allocation to convert 500 units under Homes Now. To date we have completed two acquisitions and a third is in progress. When we complete it in March of this year we will have used up our entire 500 units.

Our organization has received support from the Minister of Housing, and to the minister and to the government we want to express our support. We want to encourage the government, though. to follow through to a greater extent on its commitment before the election to make acquisition, rehabilitation or conversions a significant part of the social housing program.

Converting existing rental housing into non-profit coops makes a lot of sense. Affordable housing will be preserved, the housing stock will be preserved, security of tenure will be guaranteed and subsidized units will be available to those in need.

These objectives can be met through other legislative programs. What we want to stress is that the conversion program is much more cost-effective from a financial accounting point of view. And as true as that is, we want to say that the real reason, or the most compelling reason, for doing conversions is that it allows people to take a much greater role or to have more control over their living environments.

Tenants today remain second-class citizens. As a class they do not have access to the economic opportunities available to home owners. A recent Canada Mortgage and Housing Corporation study showed only 7% of tenant households in Toronto -- it did not give or I did not see the figure for all of Ontario. For southern Ontario they indicated that it was on average about 20%; it varied, really, from municipality to municipality. Only 7% in Toronto could afford to buy a home.

Tenants pay proportionately higher municipal taxes. More important, there is a lot that happens in and about their homes over which they have absolutely no control. Will their building be sold? Will the rents go up again? Will the repairs be done? Will the harassments of the superintendent be confronted by the owner? Will something be done about the security problems faced by women? The list does go on and on, reflecting the fact that most of what happens in a rental project is far beyond the reach of the average tenant.

Creating co-operatives, on the other hand, can have a very positive impact on the personal development of the tenants and the community through the process of empowerment. We have stood on the sidelines applauding the political developments in eastern Europe. The people there have recaptured their own lives and their community. It is time to be serious about encouraging similar changes here.

Before I get into the background, I want to say that where we are going in our submission is asking the government to set aside more funds to allow these conversions to take place. It is critical, I think, given the time we are in right now, the economic situation being what it is, that the government act now to make the opportunity of converting apartments into co-operatives more widely available.

The idea of doing conversions is not new. In fact, since co-operatives were first established in this province, conversions have been part of the program delivery. In Toronto there about 20 co-operatives created by converting apartment buildings into co-operatives. In the past 15 years during which co-ops have been developed, circumstances have changed dramatically. In the past few years, conversions were taking place only sporadically and under two very significant conditions, first, that rents had to be set at a level that compared to market rents and, second, that the property had to be renovated to an almost-new standard.

These conditions had the effect of discouraging the developers of co-operatives. As well, administrators of housing programs by and large indicated a reluctance to support these particular projects. Perhaps most important, the tenants found that the conditions were strong disincentives. Why would a tenant support a conversion if his rent was effectively going to be doubled and if he perhaps had to vacate his apartment for a few months and then move back in again, in the meantime settling somewhere else? It really discouraged tenants from supporting this at all.

The combined effect of a decade of rent regulation and the Rental Housing Protection Act has been to make conversions less attractive from the perspective of the previous programs. However, tenants have maintained the desire to gain more control over events and activity in and about their homes. Rapidly increasing rents and poorer maintenance convinced tenants more than ever that changes are needed. Most tenants would prefer not to be fighting with their landlord over issues of common sense and daily life. As a result, pressure has increased to develop alternatives.

The announcement in the budget of 1988 of a housing program to create 30,000 new social housing units -- if I get this wrong, Mr Curling, you should correct me; you will remember this -- through new construction, acquisition of existing units and leasing existing units spurred the discussion of alternatives. The government of the day was convinced that program criteria for conversions would have to be changed if acquisition targets were to be met.

The co-op conversion working group met Ministry of Housing officials for months to work out details of the new conversion program. The allocation of units to Tenants Non-Profit Redevelopment Corp reflected the changes to the program. It was understood that tenants would not support conversions that resulted in rent increases larger than those allowed by rent review, nor would they support renovations that resulted in tenants being evicted.

In effect, Homes Now established that conversions could be done by limiting rent increases to the kind of increase that would follow in rent review if the acquisition was a private-market one, and renovations would be phased in to capture the remaining usefulness of building structures and to protect against the kind of extensive renovation that resulted in tenant eviction.

The essence of how Homes Now works is set out in the pro forma which follows. The building is purchased by Tenants Non-Profit Redevelopment Corp with the assistance of a mortgage from the Ontario Housing Corp -- the money comes from the Canada pension plan -- for 100% of the cost of acquisition and renovation. Existing rents are applied to cover the borrowing and the operating costs. Generally there is a shortfall. The amount will vary, depending on what the costs and the rents are. The same holds true for any private acquisition, of course. The shortfall in a private-market transaction is a financial loss. As Tenants Non-Profit Redevelopment Corp, or any other non-profit, cannot write off financial losses against other income, subsidies are required to carry the projects. These bridge subsidies, as they are known, generally decline over a number of years, depending on their original size and the proportion operating costs are of income.

The pro forma is set out and I will just review this quickly.

If you assume an acquisition cost of $40,000 a unit -- forgive me for being somewhat Toronto-centred here, but that is where I work and that is really what I am most familiar with -- $40,000 per unit is not an unrealistic cost today to acquire a building. Just for your information, a year ago you would have paid probably between $65,000 and $70,000 per unit for the same unit; that is how much the market has come down since that time. Six months ago, and I am speaking very specifically in the time period before the election, that same unit probably would have cost $55,000. It was quite clear the recession was having a very dramatic effect on the marketplace over the past year and, not surprisingly, the election of the NDP government and the government's announcement with respect to its plans for rent review have to a certain extent accelerated the decline of values.


It is a reflection of the fact that a lot of the value has been created over the years because people were speculating on rental income streams, and to the extent that is curtailed, then the value is less and some people, because they bought right at the last moment and paid top dollar, are facing some fairly hard decisions about what to do with their investment.

With a $40,000 cost, the soft costs were about $5,000 per unit and the renovation costs -- I have given two examples, one of $20,000 per unit and another of $10,000 per unit -- those renovation costs will essentially make sure that the building has some up-to-date fire equipment, that there are some energy conservation expenditures for the windows, probably an upgrading of appliances and a small amount of in-suite things. It will make sure the roof is up to date and, if there is an underground parking garage, will make sure that it is in good shape, for a total capital cost of about $65,000 or $55,000.

The interest rate from Homes Now right now is about 10.5%, maybe a little bit less today. But those costs result in financing costs of about $570 a month in the one example or $480 in the second.

The operating costs on average, and again these numbers vary -- if you do less renovation your operating costs are presumably going to be higher, so those amounts are reflected there -- if you assume a rent of $550 for a one- or two-bedroom apartment, and -- it might be a bit on the high side for a one or a bit on the low side for a two but in any case that is the number I picked. you will get a shortfall of $370 on the one hand or $330 on the other. You can see the $10,000 difference in renovations results in a different shortfall of about $40 a month. That shortfall of course is a bridge subsidy that comes to the projects from the government under the Homes Now program, and this subsidy would apply to every unit.

There is another subsidy which the members will perhaps be somewhat more familiar with, that is, a rentgeared-to-income subsidy, which would be available to tenants or occupants of a housing project who are paying more than 25% or 30% of their income on their rent. If you apply and you are eligible, then the government would subsidize your rent, and in this case we would be talking about the rent of $550. If you had an income of, let's say, $1,000 a month, you would obviously be spending 55% of your income on your rent. The government in this case would subsidize your rent so that you would only have to pay $250. They would give you a further subsidy of $300.

Typically, what you will find is in the normal co-operative housing project, the rent-geared-to-income subsidy levels are about 40% to 60% of the units. Just for your information, the average tenant household, or one out of three of the average tenant households, pays more than 30% of its income on its rent.

That is the pro forma that I wanted to just evaluate for a moment.

There is some difficulty in doing an evaluation of Homes Now because although the project was announced in the budget of 1988, the first unit allocations were not given until the summer of 1989 and only now in fact are the first projects coming on stream. Our allocations, because we are buying existing units and not building new units, are some of the earliest ones to come on. If a group got an allocation to build a new project in, let's say, the fall of 1989, they would be hard pressed, unless they had rezoned land already, to be even getting shovels in the ground at this stage. So it makes it very difficult to evaluate the program as a whole.

I think there are two points that should maybe not be so much considered as just made note of. The first is that I think as a delivery mechanism, Homes Now can be fine tuned. There is no doubt about that.

Second, there is need for an ongoing program evaluation. I think part of the problem people have had is that there have not been a lot of purely provincially funded programs. In fact, Homes Now is the first one. We need to let it run a little while or to get all the projects in, and then evaluate it while we are doing another batch of them. It is a real problem if you just stop everything and then do an evaluation, and then once the evaluation is complete say, "Okay, now we'll go on to something else." The providers in the meantime do not have any work.

It is critical, if you want to have an ongoing supplying sector, that in fact the programs are continuous. It is like a construction worker. If you are not building, you are out of work. Similarly with housing projects, if you are not delivering projects, then the organization is going to go under.

So in terms of evaluation, those are two things. I am not going to suggest for a moment even that this committee undertake that evaluation; not right now at least. Probably it is more appropriate to leave that to the Ministry of Housing. I simply want to make those points because the assumption is that if you are going to do an evaluation, you are only doing it because you intend to continue a program. If you are going to cut the whole thing anyway, there is not much point in doing an evaluation. The decision has already been made.

So we assume that the government intends to continue having a social housing delivery program, and we encourage this committee to come out and say that in bold print, if you like, because I think it is something that those of us who are working in the co-operative housing sector and the non-profit housing sector need to hear. We need to be encouraged to say, "If times are tough right now, we are committed to making sure that housing programs will continue."

It is even more important for the people who depend on the provision of social housing for their homes. There are lots of people, as I indicated, fully a third of the tenant households in Ontario, who pay over a third of their income on housing. If in fact those people do not believe there are going to be housing programs in the future, then they are going to start despairing about what the future holds for them. They need to be confident that there will be programs in the future.

I think it has to be clear that affordable housing can only be delivered on a non-profit basis. If there is room in the system for speculative housing, then it may be affordable to the first-time owner or the initial provider, but if there is room for profiteering in it and room for speculation, then the affordability will be lost in short order.

Part of the need then for social housing is for housing to come under the control of the people who live in it. I would like to make this point, I guess, that supporting conversions is as much a social program for community development as developing new housing is an employment or an economic stimulator kind of program. I want to stress that we think that is an important thing. If people have control over their housing, then it has lots of positive social repercussions.

The purpose of supporting these programs I think needs to be looked at. Homes Now to date has committed 500 units to the Tenants Non-Profit Redevelopment Corp. Another 775 units were converted in the City Park project in Toronto. In effect, in the past two years, 1,275 tenant households won the lottery to get control over their homes. If the government keeps its commitment in An Agenda for People, then another 20,000 units of social housing will be generated annually, of which 4,000 will be conversions.

This amounts, I submit, to nothing but an enriched jackpot. It will take a lifetime before a significant portion of the tenant population has control over its own affairs. That problem needs to be addressed by this government. It needs to be addressed in terms of making opportunities available to more tenants. We do not suggest that the government go crazy in giving money away to buy out all the private sector.


Two observations I would like to make relate to the issue of how quickly we should proceed. The first is that we need to take the time to develop better mechanisms than the Homes Now model. This may include better financing instruments. For instance, there are now mortgage instruments that are considerably cheaper than the 10.5 interest only mortgages provided by Homes Now. The federal index-linked mortgage costs about $7 per hundred. That alone is about 30% cheaper than the Homes Now mortgage. If you go back to the pro forma, the financing costs of $570, if you reduce that by one third, then you are going to be more than halving the shortfall that you show on the bottom line there. In other words, if you take $150 or so or $200 off of the $570, then you are going to reduce your overall shortfall by $200 or so of the $300.

The other observation that I would like to make is that the acquisition cost today is less than 75% of what it was a year ago. This has resulted partly because of the recession and partly because some of the landlords had speculated that their property values would increase for ever. They gambled and now they are deciding, or their bankers are deciding for them, to sell. In short, now is the time to buy. In order to take advantage of the economic climate and to begin the process of empowering tenants, the government must make a firm commitment now to make funds available to convert privately owned rental housing into nonprofit co-operatives.

I stress non-profit. We are not interested in promoting the conversion of existing apartments into condominiums. Those funds must not replace funding for construction of new affordable housing; rather the object is to keep the housing occupied by tenants today affordable so that they do not have to move into new projects to get subsidized apartments. If long-term affordability is to be realized, if housing stock conversion is to be realized and if our democratic ideals are to be practised, then greater financial commitment must be put in place.

The costs are not great. The examples used above indicate that the annual cost is less than $4,500 per unit at the outside. Obviously 10,000 units would represent a cost of about $45 million. There are substantial benefits. First, as rents increase annually, the subsidy would decline. Second, there are significant savings in terms of social welfare costs if rents are controlled in the long term. We have agreements with the Ministry of Housing to take referrals from the local housing authority for a fixed percentage of the vacancies.

Increasingly, the cost to government with respect to other services, such as rent review, municipal inspections, and landlord and tenant disputes, will decrease dramatically. It is possible to reduce the actual costs of the program even further if grants are made available for energy conservation improvement, if the government gave loan guarantees for provincially sponsored, index-linked mortgage security and if other improvements are made.

Tenants and the co-operative sector are committed to improving conversion programs. We need government commitment to fund them. Communities fostered by conversions establish new directions for social development, encouraging people to take responsibility for their own lives. They lead people in the direction of learning to live together. The object is to get people to outgrow the conflicts that always arise when someone else controls your home and treats it and you like a commodity.

We ask you to consider this unique time as an opportunity at not too great a cost to invest in our future. The budget commitment is needed now and we ask this committee to recommend it now.

Mr B. Ward: I have a question of clarification, I guess, on the funding of your organization. I understand that you received a startup grant from the Minister of Housing from the previous government, which was a good initiative. How do you fund your organization now?

Mr de Klerk: Part of the Homes Now program and all co-op programs, federally and provincially, has provided for what are called "organizational expenses." Basically what happens is we are like a consultant and we get a fee for doing the conversion. We share that fee -- it is 2% of the maximum project capital cost -- with the organization that sets up the co-operative, that does all the training. Usually there is about an 18-month or two-year contract that exists between the resource group, consultant group and the co-operative group. So we are sharing part of that.

Mr B. Ward: Okay. When you use up your allotment, though, does that mean you are out of business?

Mr de Klerk: Yes, we depend on projects in order to continue our operations.

Mr Curling: I am sorry we only have five minutes, I will get right to the point then.

I got rather frightened when I read this in many respects. I see affordable housing being delivered by the private and the public sector or in co-operation with coops. You almost seem to be saying that affordable housing can only be delivered through co-ops, and that part frightens me in a way.

The other part that really frightens me, I hope that the amendments to the rent review process that are coming in do not scare and frighten the owners of rental units into saying, "By golly, the government is coming at me. I have to settle for what I can get now," and then the co-ops or the other groups pick it up. That is what I am getting from here. It says, "Grab it now, because those banks are on these guys," when we thought that the co-operation between landlords and tenants and government was working out a way to deliver affordable housing.

Do you still believe that the private sector has no place in this market for delivering affordable housing?

Mr de Klerk: Well, I think that the private sector cannot deliver, nor can anyone else deliver, affordable housing without government assistance. That much is clear. It costs well over $150,000 to deliver a modest two-bedroom apartment and, in order to carry that, you would have to charge a rent of over $1,500 a month. That is not affordable. However it is done, it is going to need government subsidy. That is the point I think that a lot of people have made over the years.

The question then is, if the government is going to invest, how do you make sure that that government subsidy that is put in is not walked off with by someone in the future in terms of flipping a building or so forth? I am not saying the private sector cannot do it. What I am saying is that the current economic realities dictate that they will not do it.

Mr Curling: The co-ops' component of the tenants in there would be 50% who pay market rent and the other 50% are rent-geared-to-income, so you are not solving the problem in a very quick way anyhow, because that co-op can only take 50% market rent and the other is rentgeared-to-income.

Mr de Klerk: Basically it is reflecting what is there. What we are concerned about here -- and I want to just address the issue of what is the effect of the government's position with respect to rent review and what it has announced -- the people who are bailing out are not the people who have owned property for 10 or 15 years and who have paid down their mortgages and who have maintained those buildings well. Those are not the people who are in trouble.

The people who are in trouble are the people who bought buildings that have flipped three or four times in the last five years, at the encouragement of rent review, because rent review continued to pass on those financing costs. Those people purchased at the top of the market, and whatever the government would have done, as the market began to decline, those people were in trouble. It is just an economic reality that when you buy at the top, you are in the toughest position to survive.


The Vice-Chair: Yes, I have to agree that your supplementary filled in the question a lot better.

Mr Phillips: I have three questions, I guess. One is, honest to gosh, I thought the minister already had announced the program for the next couple of years, so I thought that was finished.

The second one is, just using your pro forma, just so I understand it better, the rent number you show there is not the market rent, that is the average rent that is being paid?

Mr de Klerk: Well --

Mr Phillips: Let me get all my questions in. The Chairman only allows me one question.

Mr Curling: We have learned.

Mr Phillips: I am trying to get an idea of just what we are looking at over an annual cost for a 100-unit building, whether the $550 is the average rent or the market rent and whether there is then something else we should think of, what geared-to-income supplement we should think about, just to get some idea. because one of the challenges in this program is that it seems like an annual expenditure. It is not like a one-time expenditure. I realize rents go up at some stage.

My third one, if you could just help me out a little bit, is: When I was in government, I had some concerns about using the co-operative funds to purchase existing facilities, because I felt that we are trying to get more units on the market. So I had kind of simplistically thought I would rather put our money into the construction of new facilities, and I realize there must be strong arguments I could not even get out of here.

So maybe those three things: first, the minister's announcement; second, the numbers, and third. the benefits of buying existing versus new.

Mr de Klerk: I will leave it to you to figure out. if the minister says something like. "But there is no money in the budget." what that means. Presumably there has to be some money in the budget in order for the minister to in fact give effect to the pro rams he has announced. That is one thing.

The other thing is, what I am asking the committee to do is to make a recommendation to the government apart from any standard government program that exists. If the government says, "We want to create 20,000 units, new or conversions. over the next year." that is fine. What we are saying is, consider something in addition to that.

The reason to consider something in addition to it is the market right now -- and frankly, I am relatively indifferent as to why the market is the way it is; I do not understand those things a whole lot better than most people. What I do know is that prices are down, and it is not only for existing apartment buildings, it is also for land. You can buy land today at probably half the price it was a year and a half ago. So if you are going to have a housing program next year or two years from now or three years from now, it would make a lot of sense to buy the resources that you need to deliver those things now because you are going to save yourself a whole pile of money by doing that now.

Mr Phillips: The problem, by the way, is that I think also jobs, jobs, jobs. So for the government, that will be the challenge.

Mr de Klerk: Right, but let's say that figure that is going to come out is $1,000. It is notional, right, but if it is $1,000, and if in two years it is going to cost you $2,000, then you are going to say, "That's a lot of money and I don't know if we can do -- ." So you are going to be losing jobs. If you could do twice as many for the same amount, you will create twice as many jobs. So by having the resources available because you bought them cheaply, it will give you more to work with in two years. So you will get more jobs. That is the one thing. We are asking you to do something special now because of what the economic situation is.

The Vice-Chair: I would like to thank you for appearing. If Mr Phillips has any more or if you would like to talk to him and consult with him a little bit more --

Mr Philips: I will get them independently.

The Vice-Chair: Thanks for appearing. We are running a little bit behind. We will have a meeting of the committee here after our last delegate.


The Vice-Chair: Mr Warne, would you introduce yourself? Whom do you represent?

Mr Warne: Shall I distribute these?

The Vice-Chair: Yes, please.

Mr Warne: Introduction: my name is Donald Warne, from Whitby. I assure you that I come with a brief brief because I know at this time of day you do not want to do a lot of discussion, but I have one point.

I should say something about my bias at this time. I am in favour of more taxes. So this is the point of my whereases. The shape of my brief has something to do with my long years in the church; they always had this shape. You came with the "whereases" and the "therefores." So perhaps the structure would be for me just to briefly go over each of the seven "whereases" and then the "therefore." Is that a satisfactory procedure?

1. "Whereas poverty is a major problem in Ontario. with over 700,000 needing social assistance, over 300,000 of these being children;

2. "Whereas in Metro Toronto alone over 100,000 must rely on food banks, with nearly half that number being children;

3. "Whereas the SARC report, Transitions, shows ways in which the poor can begin to take responsibility for their own lives" --

I pause at this point to indicate that as a volunteer in the social planning councils of Newcastle, Oshawa, Whitby, I spent six years on the board of directors. It was at that time that the SARC report was being prepared and our social planning council prepared a brief to the government committee. I was the one who came to present that brief, and through that experience I became an aficionado for this report.

I was enthusiastic about the way in which the government and the committee were moving and it seems to me that reflected a widespread feeling across the province. The approach and the results were commendable. I know that people like Grant Devine came down to Oshawa. He was surprised to find that in Oshawa we have food banks. It is a surprise that in those energetic and prosperous years of the 1980s we, in the social planning council of Newcastle, Oshawa and Whitby, saw vast social problems that seemed to encompass wealth. It was a predicament for us.

Number 4, and I realize now I am facing some of you who were in that government, is not exactly to condemn that government. I realize that a budget of 1990 came down from on high from Mr Wilson and may have caused some of this.

4. "Whereas the previous government gave only minimal financial support to the first of the five stages of the implementation of the recommendation of the Transitions report;

5. "Whereas the full implementation of the five stages of the SARC report will require the government to spent at least $2.5 billion more on social assistance and income supplementation;

6. "Whereas the federal government's elimination of the capital gains tax up to $100,000 or $500,000 has provided a major tax loophole mainly to the benefit of the very wealthy;

7. "Whereas there has been no significant creative investment from this tax, but rather severe side effects of speculative spins in such areas as the real estate market" --

I pause at this moment to comment again upon the presentation you just received. It seems to me that part of our difficulty in the last six or eight years has been this speculative spin, part of which is the result of an abolition of capital gains tax up to $100,000. It seems to me that if we had not had that abolition of capital gains tax, some of the problems that we face now would have been more readily dealt with. I myself pay capital gains tax, as most of you probably do. I have always had the feeling that a tax on that capital gain was an unfair tax. I did not deserve the capital gains as my total income.


Capital gains is partly the result of the whole community. Certainly some of us may be shrewd and make investments. It is something like a lottery. Some of us are lucky in making our shrewd investments. We think Nova is going to go up and we buy Nova. We sell at the top, $11, and then it goes back down to $8 and we are so happy. We have a capital gain, but it is really the whole community that is involved in any capital gain.

So I see that capital gains should be considered as income. You will see in my "therefore" I am considering the whole capital gain. If the capital gain is considered as income, then it seems to me government will not be able to say to those of us on social planning councils: "Look, I haven't got the money. We haven't anywhere that we can get money." People do not want more taxes; higher taxes would discourage business. I say that the capital gains tax is in a special category.

The reimposition of capital gains is not going to discourage business, it is going to discourage a lot of speculation, but it seems to me it will put business on a firmer basis. I am not a statistician, but I think that we in Ontario, even though the federal government does not agree, we could therefore impose a capital gains tax which would enable us to say: "Look, SARC, it's a wonderful program." We can, without disturbing all those business people who are afraid of higher taxes, go ahead with these memorable changes to set the poverty cycle on its heels. I think Ontario has the legal ability and it has the right to do that.

So my "therefore" is simply to get to the other side of all our social problems and say yes, we can have the money and we can, if we wish, devote that money to a program that even Conrad Black says is a worthy program. We can enable people to enter into that feeling of self-sufficiency and we can solve so many of our social programs. I am open to your questions and comments.

Mr Phillips: Obviously you have been deeply involved in it. That is a thoughtful presentation. Just a couple of quick questions. On the capital gains, I had thought they had eliminated the $500,000 and that it was down to $100,000. My other one was that you mentioned the minimal financial support to the first five stages. Are you aware of what level of minimal support that was?

Mr Warne: I know it was supposed to be $450 million, but it was not really.

Mr Phillips: It was more than that. We put in $540 million. If you look at the Comsoc budget, which has doubled in the last five years, you will find $540 million in there for them.

Mr Warne: I guess my documents come from another reading. The Campaign Against Poverty did a critique of the announcement Mr Sweeney made. There is a whole page of ways in which it seems as though many of these funds are already included. Many of the objectives that $450 million would create had not been reached. So I am doing a different reading on that budget.

Mr Phillips: I am saying that if you examine the budget, you will find, I think, $540 million in it now. That is only phase one. The new government has promised to fully implement it. When we are talking dollars, they are real dollars. You will find advocates here understandably will make their case as strong as they can, but I know from the finances, having wrestled with where we find the money, if you have examined the budget, you will find $540 million in there for phase I of the SARC report. But I had thought the federal government had moved the capital gains from $500,000 --

Mr Warne: Well, my recollection is that the$500,000 was retained for genuine farmers, and I did not expand this to say that if a farm is going to continue in farming there should be some special consideration given for that, especially when generations pass.

Mr Phillips: When the $500,000 came out I think there were a lot of people worried about it. I think they changed it to exclude everybody but farmers. So, effectively, I think now it is $100,000. It does not change your point.

Mr Warne: No. This is why I worded it as $100,000 and $500,000.

Mr Phillips: Yes, it does not change your point at all, and I think it is a thoughtful thought. I had better get out and see if I can find my $100,000 capital gain somewhere. You have not benefited from it yet, have you?

Mr Warne: Not the $100,000. Yes, it would be a conflict of interest if I had completed my $100,000. No, I am silly in a way, because perhaps in the next five years I could use that $100,000. It is silly in a way, but I really do not want to.

Mr Phillips: That is a thoughtful thought.

The Vice-Chair: Thank you, Mr Warne. We will consider your submission.

An hon member: Are we to have a meeting now?

The Vice-Chair: We will hold it off until tomorrow. We do not have any of the Tories here.

Mr Curling: That is all right. They do not count.

The Vice-Chair: They missed a lot today.

Mr Curling: We were talking about social programs, that is why.

The Vice-Chair: We will meet tomorrow at the end, at 4:30 or 5, whatever time we get finished.

Mr Christopherson: You are in the chair tomorrow?

The Vice-Chair: No, no, I am not in the chair tomorrow.

The committee adjourned at 1647.