ONTARIO FLUE-CURED TOBACCO GROWERS' MARKETING BOARD
ONTARIO FOREST INDUSTRIES ASSOCIATION
ENVIRONMENTALISTS PLAN TRANSPORTATION
INCOME MAINTENANCE FOR THE HANDICAPPED COORDINATING GROUP
ONTARIO ASSOCIATION OF INTERVAL AND TRANSITION HOUSES
MUNICIPAL ELECTRIC ASSOCIATION
ONTARIO NATURAL GAS ASSOCIATION
CONTENTS
Thursday 25 February 1993
Pre-budget consultations
Ontario Flue-Cured Tobacco Growers' Marketing Board
Albert Bouw, chair
George Gilvesy, vice-chair
Ontario Forest Industries Association
Marie Rauter, president
Martin Kaiser, policy manager
Environmentalists Plan Transportation
Lyn Adamson, representative
Thomas Samuels, representative
Income Maintenance for the Handicapped Coordinating Group
Laura Stambler, chair
Scott Seiler, coordinator
Harry Beatty, legal counsel
Ontario Association of Interval and Transition Houses
Kathryn Gregor, member, lobby committee
Trudy Don, staff member
Municipal Electric Association
Keith Matthews, president-elect
Doug McCaig, chair
Tony Jennings, chief executive officer
Ontario Natural Gas Association
Rudy G. Riedl, chair, gas supply committee
Bernard Jones, consultant
Mike Bermon, first vice-president
Gary Lowes, chairman, finance committee
Paul Pinnington, president
Propane Gas Association of Canada Inc
René Chartier, director, government affairs
W.L. Kurtze, managing director
R.B. Callow, president, Budget Propane
Ontario Trucking Association
David H. Bradley, president
Ontario Home Builders' Association
Stephen Kaiser, first vice-president
Phil McColeman, president
STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS
*Chair / Président: Hansen, Ron (Lincoln ND)
*Acting Chairs / Présidents suppléants: Waters, Daniel (Muskoka-Georgian Bay ND); Dadamo, George (Windsor-Sandwich ND)
Vice-Chair / Vice-Président: Sutherland, Kimble (Oxford ND)
Caplan, Elinor (Oriole L)
*Carr, Gary (Oakville South/-Sud PC)
Christopherson, David (Hamilton Centre ND)
Jamison, Norm (Norfolk ND)
Kwinter, Monte (Wilson Heights L)
*Phillips, Gerry (Scarborough-Agincourt L)
Sterling, Norman W. (Carleton PC)
Ward, Brad (Brantford ND)
*Wiseman, Jim (Durham West/-Ouest ND)
*In attendance / présents
Substitutions present / Membres remplaçants présents:
Arnott, Ted (Wellington PC) for Mr Sterling
Conway, Sean G. (Renfrew North/-Nord L) for Mrs Caplan
Dadamo, George (Windsor-Sandwich ND) for Mr Christopherson
Frankford, Robert (Scarborough East/-Est ND) for Mr Jamison
Harrington, Margaret H. (Niagara Falls ND) for Mr Jamison
MacKinnon, Ellen (Lambton ND) for Mr Ward
Morrow, Mark (Wentworth East/-Est ND) for Mr Sutherland
Sola, John (Mississauga East/-Est L) for Mr Kwinter
Waters, Daniel (Muskoka-Georgian Bay ND) for Ms Ward
Clerk / Greffière: Grannum, Tonia
Staff / Personnel: Campbell, Elaine, research officer, Legislative Research Service
The committee met at 1005 in room 228.
PRE-BUDGET CONSULTATIONS
The Chair (Mr Ron Hansen): Good morning. This is the standing committee on finance and economic affairs, hearing pre-budget consultations.
ONTARIO FLUE-CURED TOBACCO GROWERS' MARKETING BOARD
The Chair: I'd like to welcome the first group, the Ontario Flue-Cured Tobacco Growers' Marketing Board. Would you identify yourselves for the purposes of Hansard and members of this committee? We have one half-hour. You may begin.
Mr Albert Bouw: I'm Albert Bouw, chairman of the Ontario Tobacco Board.
Mr George Gilvesy: I'm George Gilvesy, vice-chairman of the Ontario Tobacco Board.
The Chair: Please leave some time at the end of your presentation for questions from the committee members.
Mr Bouw: First, thank you very much for giving us the opportunity this morning, ladies and gentlemen. We appreciate the opportunity any time we can to talk about the plight of the tobacco industry, especially in front of people who have to do with finances. We have a short presentation we'd like to make, and then there will certainly be lots of opportunity for questions, if there are going to be any. So if I may, I'll just proceed and go through the document we have.
We anticipate that in the near future, your Treasurer will be presenting a budget for the 1994 fiscal year. At this time, we would like to express our concern on behalf of our producers, as well as many thousands of farm families who depend on our industry for their livelihood. The communities in which we live, comprising some 300,000 people, are heavily impacted by the tobacco industry. When we talk about 300,000 people, we're basically talking about the four major counties where the tobacco is produced, being Elgin, Norfolk, Brant and Oxford.
Direct farm-gate sales in Ontario for 1992 will approach $277 million. From this farm-gate base, exports of unmanufactured and value added products in 1992 will reach an estimated $400 million, bringing very valuable business into Ontario. If we apply an 8.5-times economic multiplier, the spinoff effect of the tobacco growing industry approaches $2.35 billion. In aggregate, tobacco production provides very substantial and important numbers to the province of Ontario as well as to our communities, in spite of our current economic plight.
As I said previously, talking about the 300,000 people in mainly those four counties, those numbers are pretty significant in terms of economic impact to those communities. I think the present government has already agreed to do an economic impact study on our particular area. I understand that's been approved; I don't believe it has yet started. One thing we would say on that, if we might, is that before the government makes any further decisions on anything about our particular industry, that study should be started and carried out. I think it's going to be very revealing, that any further negative impact on our industry would distort that to even a greater extent. Our understanding is that there has been agreement to go ahead with that study, but I believe it has not yet started. I also understand that the study will be broad, and in terms of the membership on the study, it will be people from the particular areas who can give direct input into it, as well as both levels of government, I'm told -- the federal and provincial will be involved in it -- and a panel of about 20 to 25 people. We're looking forward to that starting. We spoke with Norm Jamison earlier this morning about that particular issue, and he advised me that it still had not commenced. Again, until that's completed, I think it would just distort things even more if there was further taxation or further legislation before that's completed.
To continue, there's a little background on the numbers I've related from Peat Marwick Stevenson and Kellogg; there are backup statistics at the back of the brief that you could probably read at your leisure at a later time. But to give you a few of the highlights, Canadian consumer expenditures on tobacco products totalled $10 billion, or $3.86 billion in the province of Ontario. These are 1991 numbers, by the way; that study is now being updated. Tobacco taxes collected totalled $7.1 billion for the country, and for the province of Ontario $1.255 billion. Employment generated by the industry was 57,500 person-years in Canada, and 27,420 for the province of Ontario.
When we look at tobacco taxes in this province versus some of our neighbouring US states -- again, there's a schedule attached at the back for all the states and Ontario -- taxes in Ontario on a package of 25 is $4.38, versus Michigan at 89 cents, New York state at $1.11 and Kentucky at 55 cents.
From April 1, 1989, to April 1, 1992, federal and Ontario taxes on a pack of cigarettes increased 104%, while the consumer price index increased only 14% during that same period.
Governments have created a situation similar to prohibition, with approximately 80% of Canada's population living within 100 miles of the US border. As well, Canada has signed a free trade agreement with the US, with the intent to harmonize economic activity and to reduce tariffs on goods moving across the border. The exorbitant tax increases imposed in the spring of 1991 by the federal government of 83 cents a pack and the Ontario government of 45 cents a pack caused many consumers to seek alternative sources of supply, and they found these in many ways:
-- Contraband products smuggled into Canada by organized crime. I think we all are starting to realize that that is very well organized, that the structure is there.
-- Illegal trade on Canadian native Indian reserves; a very big issue.
-- A prohibition-style response by the population to tax policies.
-- Increased thefts of cigarettes from variety stories, trucks and so on. I think we're seeing in the media every day now that store owners are being held up. A lot of times now they don't take the cash; they take the cigarettes. It's more profitable. Store owners are having to put bars in front of their windows and install alarm systems. They're getting very nervous to be storekeepers. There's obviously a cost to all those things as well, because every time there's one of those robberies, particularly for tobacco products, law enforcement officers are called, and there's a cost to the community. So when we talk about economic impact, it's more than looking at the direct effect on the grower or the effect on one or two supply industries. It goes much further than that, to the cost of law enforcement, the cost of the judicial system.
-- The sale of raw leaf products, particularly in Quebec, and this trend is spreading to Ontario. You may or may not be aware that in the province of Quebec it is legal, because of the tax system there, to sell tobacco in the raw form. In every store in the province of Quebec, it's readily available. It was not a major issue until about two years ago. Now that tobacco's being either bought off our markets -- and some of that is happening: It's being directly purchased off our markets.
We have recently offered a reward of $10,000, because unfortunately, although our farmers are very honest and honourable people, sometimes greed does set in. People from out of the province are coming to our farmers, knocking on their doors and saying, "I'm prepared to offer you $3 or $4 a pound for your tobacco," versus receiving between $1.50 and $2 a pound for that same tobacco at auction. So the opportunity all of a sudden arises. It is illegal to do that in the province of Ontario: to sell tobacco other than through our exchanges. We will be finishing our market on Monday. By all our surveys for this year's crop, we are coming significantly short of what the crop size should have been. We can only attribute it to one area, and that is the area that's being sold out of the province.
To backtrack, the surveys that we ourselves do and that the companies do -- as a matter of fact, we had a Price Waterhouse capacity study done recently. That also supported the numbers we had in terms of how much tobacco should have been there this year; it's not there. It's left the province, basically for this illegal trade.
The Chair: Al, can I ask one thing? Can you grow your own tobacco here in Ontario?
Mr Bouw: It's an issue we're now dealing with. Federally, under the excise, you can grow 15 kilos for your own use per adult. Provincially, you need a licence from our organization, and we operate under the authority of the Ontario Farm Products Marketing Commission. Provincially, you need a licence from our organization and need to hold quota. So now there's a tussle between the RCMP and the OPP on who's who and who's right. We've now followed that further, as a matter of fact through the Farm Products Marketing Commission. They've taken it to legal, because we're getting so many inquiries about that particular issue that we need to get a definite answer. But technically you need a licence to produce a plant of tobacco in your garden, which can only be issued by our organization.
Also on that, we have been working with the RCMP the last several months. Yes, they have made some arrests, but it's basically people that are making their own cigarettes. That's important as well, but that's like somebody making their own soup at home. It's an issue and it's growing and we should be aware of it, but the real culprit, if I could use that word, is the supply of the product. That's why we put up the $10,000 reward: to try to apprehend the people that are actually supplying the product.
You probably saw lately on most of the media that one 50-pound bale of tobacco is worth $100 to George and me as growers, but to the guy who gets hold of that same bale of tobacco, it's now worth $1,500 after he gets done with it: He cuts it up into strips of tobacco and sells it in 200-gram packages and is doing quite well.
Gentlemen, on that issue, it's very serious in the province of Quebec. As a matter of fact, in Quebec -- I'll come to that in a minute -- 40% of its sales are now illegal tobacco. It's not quite as bad in Ontario yet, but it's coming.
Just to continue, a recent study conducted by Lindquist Avey Macdonald Baskerville calculated that one in nine packs of cigarettes smoked in Canada in 1991 were smuggled. One in 10 of these smuggled packs was foreign; in other words, US brands, or now we're even getting brands coming out of the UK. Table 4 of this study identifies the total contraband tobacco market. I won't go through the numbers, but you can certainly see from the 1986 billions of sticks and the dollars to the 1991 billions of sticks and the dollars. It's pretty staggering.
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The huge increase in 1991 was a direct result of exorbitant 1991 tax increases. According to this study, the loss of tax revenues to the federal government was $549 million in 1991 and the loss of tax revenues to the provinces amounted to $494.9 million. As I was saying before, right now the province of Quebec's revenue on tobacco products is down $350 million. As I said, 40% of the market there now is illegal product, and that's growing, and it's starting to happen here.
In conclusion, the current tax structure is a windfall to organized crime. It is causing Canadian product produced by Ontario farmers to be potentially replaced by foreign products. We have a real problem with that particular issue as growers of the product. I think we all have to accept the fact that Canadians are going to smoke. They may all have to do it outside on the step if they're going to smoke, because they can't do it in a building anywhere, but if they are going to continue to smoke, we want that to be Canadian product, the product we grow, not product that's grown by our competition somewhere else in the world.
And that's starting to happen. For example, 555 is a BAT product out of the UK; I'm sure any of you who are smokers have probably seen that product already. Also, another one called Putters is now on the market very strongly; it's made on the St Regis Indian reserve. They're making their own cigarettes now and distributing it for about $22 a carton. There are others; I'm just citing a couple. Again, that takes away from the product we grow.
Because of regressive taxation policies on tobacco products, organized crime has stepped in to capitalize on the tax differential between Canada and the US. Federal and provincial politicians and law enforcement agencies are unable or unwilling to deal with resultant criminal activities, and as such, appear to be condoning the smuggling trade. When we talk about unwilling, we have seen some documentation to that effect, because they're simply afraid. On some of these reserves, apparently things can get quite heated.
The Lindquist Avey Macdonald Baskerville report specifically states that the RCMP has admitted it cannot control this problem. In addition, punitive taxation measures have made it socially acceptable for otherwise law-abiding citizens to illegally take advantage of the tax-free status of tobacco products on native Indian reserves.
The direct results of Canadian tobacco policies are:
-- Increase of thefts and robberies at variety stores.
-- Increase in cost of policing.
-- Involvement of motorcycle gangs in Quebec and the potential for violence and harassment. Again, you might have seen a news program this week in which motorcycle gangs in the province of Quebec are physically threatening those producers. The producers are buying guard dogs and rifles to protect and arm themselves. For example, our counterpart association in the province of Quebec last summer was broken into, and the secretary, the only person there on that particular day, was pinned up against the wall by these people, demanding the list of producers in that province so they would know where they were all located. That's the level this is getting to.
-- Illegal movement of tobacco. We've discussed that.
-- Increase in cross-border shopping.
-- Loss of agriculture production jobs. In spite of some people's comments we may have heard recently about that particular issue, if you were to come at harvest time to Tillsonburg and Simcoe and Delhi and all the little communities in between, you'd see thousands of high school students and university students working in those tobacco fields so they can pay for their educations. The gentleman who made some comments last week -- I think he really doesn't know what he's talking about.
-- Loss of manufacturing jobs.
-- A dramatic increase in smuggling, especially on native reservations, where profits are invested in weapons, planes and high-speed boats.
-- Embarrassment to our governments from an international perspective because of the ineffectiveness of law enforcement agencies to deal with the smuggling problem.
Was this the intent of government implementation of tobacco taxation policy?
There is a solution. The only real solution to the multitude of problems caused by oppressive tax policies in Canada is to harmonize the Canadian tax rates with those of our immediate neighbours to the south. As long as there is a difference of $3.25 to $3.50 per pack, the problem will continue. It is unrealistic to believe that New York, Michigan and Kentucky would increase their taxes to taxation levels of Ontario. The only solution is a rollback of taxes in Ontario.
In conclusion, we would like to thank the committee for its recognition of these problems by introducing no new tobacco taxes in last year's budget. It is imperative that taxes be rolled back to prevent further escalation of contraband products, which erode the financial contribution to the economy of those legally involved in the tobacco industry.
The Chair: Thank you. You didn't bring any bumper stickers for the members here. Mr Sola.
Mr John Sola (Mississauga East): I'm interested in this fantastic increase in lost federal revenues from 1990 to 1991. When you take a look at the number of sticks, it's five-fold, but when you look at the monetary value, it's eight-fold. I'm wondering what the federal projections were of revenue increases as compared to the actual revenue they received. I would think that increasing the price was a retrograde step when you take a look at how much money they actually lost.
Mr Bouw: I could answer this way. Obviously, I don't know the dollars that the government was looking for. I don't think the government recognized the potential of this smuggling problem. I think they assumed that marking and coding packages in a different manner, more enforcement -- in the province of Quebec, they hired 60 tobacco police, if I can call them that, and I believe the government now has a magic wand that can detect cigarettes through the door of your car. I think they felt they could probably control this issue. I think they've recognized since then that it doesn't work. I don't think they anticipated that kind of loss.
The Chair: Mr Sola, I'm going to have to go on to Mr Carr. We don't have much time.
Mr Gary Carr (Oakville South): Thank you for the presentation. It's nice to see you again.
I don't know if you remember that I asked this question in Brantford at one of these hearings, going way back, when you came up and were kind enough to do a presentation regarding our exports to other parts of the world. As we're facing some of the problems here, what are your thoughts in terms of being able to expand our sales into the US? I think last time we talked a little about Japan, which has a high population. Obviously, we've got transportation costs. Is there anything we can do to take our product and start exporting it to other parts of the world where there's a lot of smoking? What are the impediments to that, in your mind?
Mr Bouw: Thank you for that question. In fact, as an industry, we recognize that consumption in this country will continue to decline. I guess we accept that as a given. I might add that since we made the decision a couple of years ago to recognize that, we've pursued export markets much more vigorously than in the past, and we have had some success. Also, I think cigarettes made here were normally only made for Canada. Manufacturers are now looking at making cigarettes for other countries as well; they're a totally different type of cigarette than what we're used to here. So there are some successes there of that happening.
Sometimes, our industry is kind of betwixt and between on a lot of issues. We never like talking about good news, because somebody won't like it when we have good news in our industry, so we keep a fairly low profile. The $400 million in exports kind of speaks for itself that it is working, although sometimes people would rather it didn't work.
Mr Carr: Thank you, and good luck.
Mr George Dadamo (Windsor-Sandwich): Gentlemen, thank you for your presentation this morning. I'm trying to frame a question so I don't offend anybody; I know it's a sensitive issue. I have become a non-smoker in the last year and a half, but smokers' have their rights too.
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I know you're not here to blame government and put it all on the shoulders of government, but at some point many years down the road, when that tax money disappears -- and we need the tax money, God knows. Kids are becoming hip in high school: It's not cool to smoke any more. We know more information now. When my father started at 13 in the old country, the doctor said to him, "It's fine to smoke," as ludicrous as that sounds in 1993. That's not the case: We know it's not good for us.
But what do we do down the road when the numbers dwindle and people are quitting not only because the taxes on cigarettes are so high -- and 15 or 20 years from now, a pack of cigarettes will be $15 -- but people are dropping out because they know that eventually it's going to kill them? Then what do we do?
Mr Bouw: I don't really understand your question. Where are we going to get the revenues from?
Mr Dadamo: When we need it, and we'll need it more then than we need it now. Then where do we find the money?
Mr Bouw: We'll probably have to put a GST in the province of Ontario or something like that.
Mr Dadamo: What is your organization doing to prepare for 20, 25 years down the road, when you're not going to have that many smokers and the only place you're going to be able to smoke is in your car and in your house?
Mr Bouw: I guess our organization always has kind of one foot in the grave and one foot out. Because of who we are, we live in a glass house. We try to plan for five years, but that's difficult, so in terms of looking ahead 20, 25 years, we haven't done that, and I don't think we're going to do that either. We're just trying to survive. It would be great if we're still here 25 years from now, from my point of view, but we don't have that comfort, that people want us to be around that long. So we deal with our issue on an almost daily but certainly on an annual basis, with, as I say, one foot in the grave and one foot out, because we don't know what taxation or legislation is coming towards us. It's very difficult to answer that question.
Mr Gilvesy: I think there's also a difference between us being around and people continuing to smoke. We may not be around, but the same amount of Canadians still may be smoking. I think those are the realities we face.
Mr Dadamo: Thank you; I appreciate it.
The Chair: The clock has run out. I'd like to thank you for appearing before the committee. I had a few questions, Al, but they won't let the Chair ask the questions. Maybe you could send them bumper stickers. What do the bumper stickers say? "Tobacco pays our bills." I've got a few in my office.
Mr Bouw: Thank you for your time. We appreciate it very much.
The Chair: Thanks, Al.
ONTARIO FOREST INDUSTRIES ASSOCIATION
The Chair: The next group to present is the Ontario Forest Industries Association. Would they come forward, please? Nice to see you again.
Ms Marie Rauter: Likewise.
The Chair: I enjoyed your convention on Sunday night, and the hospitality hour.
Ms Rauter: Thank you very much. I'm glad some of you were able to attend.
The Chair: Next week I'm going with Len Wood to see how trees grow in the north.
Ms Rauter: That's great. What part of the country are you going to?
The Chair: The north shore of Hudson Bay and James Bay.
Ms Rauter: They don't grow very fast up in James Bay.
The Chair: For the purposes of Hansard, could you introduce yourselves, please, and could you leave some time at the end of your presentation? As you can see, the members of the committee like to ask questions. I guess it won't be tobacco, but about trees this time.
Ms Rauter: I'm Marie Rauter, and I am president of the Ontario Forest Industries Association. I have with me today Martin Kaiser, who is the policy manager of our association.
I really welcome this opportunity. It's the first time we have been here for this particular presentation. I will give a very short presentation and then, hopefully, have some opportunity for questions.
You have our brief in front of you. As we have a very restricted time, I don't want to go through it. I do not have a written presentation I will give per se, but I would like to focus on some of the goals and some of the recommendations we have for you.
I guess I'd like to maybe introduce our association a little bit and talk to what we are in Ontario and who we are. As an association, we represent the pulp and paper companies across this province, some of those very large companies. We also represent some very large sawmills and we also represent some of the very small sawmills, some of the family-owned sawmills, some of them fifth-generation. Some of them came here in the early 1800s and still are operating today.
We reviewed a document entitled Renewing Ontario: A Plan for the Economy, produced by the Treasurer of Ontario, and in that document he indicated that Ontarians want good jobs that pay well, that are cost-competitive businesses that attract investment and that we're able to compete with the best in the world.
I'd like to talk to a couple of those points in terms of us as an industry. We do have good jobs that pay well. The average wage in our industry is $41,000 before benefits, and that's approximately 46% more than the average industrial wage in this province, so it's a very good-paying industry for people to work in.
Also, in terms of the importance of this industry, some of the figures are that we employ 77 out of 100 jobs in northwestern Ontario and 32 out of 100 jobs in northeastern Ontario, so we're a very important player in the north. But we're also a very important player in the south, and that's something that sometimes goes by the boards with people from southern Ontario, in that there are two related industries. One is the secondary manufacturing industries -- about 60% to 65% of the value added products are actually produced in southern Ontario -- and also the support industries that provide the equipment and the materials for the forest industry. For example, we have some of the high-tech industries in southern Ontario or some of the pollution control equipment companies in southern Ontario, and they actually produce the equipment for the resource industry.
We are also the largest contributor to the balance of trade for Ontario. We contribute an average of $2 billion a year to Ontario's balance of trade.
So if we have a healthy forest industry, we believe we can also have a healthy Ontario. We think that's very important, so we'd like to make some recommendations on how we think we can go forward and perhaps bring us to better times. At the bottom of page 3, I'd just like to go through some of the goals we would like to talk to.
One of the suggestions we would make for government is to conduct a benchmarking exercise to assess how the Ontario system measures up against those in competing jurisdictions. We are an export industry, and three of our major cost components are wood fibre -- most of that wood fibre comes from crown land -- the other is labour, and the third is energy. Energy, through Ontario Hydro, is a very expensive component for us; we are the second-largest energy users in this province. So if you have a benchmarking exercise where you can see how this jurisdiction compares to other jurisdictions, that will give you a handle in terms of where our competitive advantages or disadvantages might be.
We also think it's very important that government assess the impact of its legislation, regulations, policies and programs on the competitiveness of its companies in our domestic and in our export markets. It's very important that we have this. For example, we have recently come up with some draft effluent regulations for the pulp and paper industry. We're very concerned that all of the regulations brought forward be based on sound science, so that we truly have sustainable development which is a balance between the environment and the economy. When any of this legislation or these regulations come through, that has to be examined for every single one of them: How does it contribute to that balance? There are other areas we know all of you are concerned with. Some of them are the costs of the WCB programs and some of the impacts labour legislation will have on our competitiveness in the future.
Another one is to focus on establishing, with the appropriate interest groups, the objectives for the province -- What are the objectives of this province? Where do we really want to head? -- and not on the means that industry might use to achieve some of these objectives.
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I'd like to jump down to some other ones. Another one is to promote competition between the provinces and require government agencies within Ontario to. Only when you have some of that competition are you then able to really make things a lot tighter and a lot more efficient and, at the bottom line, benefit the people of Ontario.
One that's very dear to our hearts in terms of where we think some improvements can be made for cast savings -- and there'd be cost saving on the side of both government and industry -- is when you're providing some of the essential services as efficiently or more efficiently than those provided in other jurisdictions. We're at a time now where we cannot afford to be inefficient, and we do applaud the Treasurer's statement where he says, "The government is taking a hard look at some of the internal operating costs" -- I'll refer to this again with our last point -- "in reducing the cumulative impacts of the multiplicity of initiatives."
Currently, within one ministry, the Ministry of Natural Resources, we're involved with, or should be involved with, approximately 60 different initiatives. Many of them require input, require consultation, and we have some very real concerns with the timeliness of the consultations, the meaningfulness of them and the effectiveness of them.
I have an example here. Many of you are familiar with the timber environmental assessment hearings. Those were five years of hearings. There was opportunity for everyone in Ontario to make a presentation to those hearings, and one of the issues that was discussed was the consultation and the planning process for the Ministry of Natural Resources. That board will be coming down with a ruling later this spring.
Also within the Ministry of Natural Resources, it commissioned a study to develop a comprehensive forest planning framework; that would be an umbrella for developing. A draft of that report has come out in the last few weeks and that also talks to a consultation process, and that consultation process is very similar to the one we proposed at the environmental assessment hearings.
The Ministry of Natural Resources has invited -- here's the invitation list -- 75 different agencies to come to Toronto for a two-day workshop with all expenses paid -- travel, accommodation, meals -- to discuss a planning process for the ministry. We think there are more efficient, more effective ways of doing this.
We have a new minister in Natural Resources, we have a new deputy and we have a new policy adviser, and we are cautiously optimistic that perhaps some of these things will be looked at. What we would suggest is that in terms of a sustainable development program, we practise sustainable development instead of just talking about it. We would like to see perhaps a reallocation of resources so that we are truly practising sustainable development.
What you have in front of you that we handed out today -- it's from our annual meeting last week -- is a code of forest practice. As an industry, we are committed to consultation, we are committed to working with different stakeholder groups, but this is an example where we brought representatives in from different groups -- we had a native on our committee, we had somebody from the financial community, environmental group, wildlife group -- and in less than a year and with very few meetings, we came up with a code as to how our companies will practise forestry in this province. Every single company has signed on to it. It was prepared by this external group, with some industry representation, and it was accepted 100%, without a single word change from any of our member companies. That is an example where we were committed to consultation -- but it has to be meaningful, it has to be effective and it has to be timely.
Some of the things that we see go on are none of those. This is a particular ministry we're familiar with. We have no idea whether the same kinds of things are going on in other ministries. But we think that if we're going to tighten our belts, there are some very real opportunities to do so, to make some of those consultations more effective.
If you flip the page to page 5, you will find some of our suggestions for recommendations of what you might want to take a look at into the future.
The first one is that we do not believe taxes should be increased. We feel they need to be decreased. We must be competitive, and in order for our particular industry to be competitive, we have to be on a level playing field. If you were to take a look at our operating rates in Ontario compared to some of our competitors in the United States, we are operating at a 6% to 7% reduced rate from what they are, because they are more competitive than we are in many of these areas.
We also believe that government costs should be reduced. Any deficit is a future tax burden for many of your children and for generations to come, and we feel that there are many opportunities for government to work with industry to try and reduce government's total costs. This planning process and some of these consultations are one of them. Duplication of services is another. Constant reiterative checks are another. There are many opportunities, and rather than just transferring some government costs to industry, we feel we can work together and reduce costs for both of us.
We also believe that government-owned, -controlled or -regulated services must be exposed to the disciplines and rigours of competition. We do need to try and make those systems much more effective.
We also feel that in terms of the public, government accounting procedures should truly reflect the true fiscal position of the province and not allow techniques such as deferring costs and off-balance-sheet accounting.
We feel that perhaps today people's expectations are beyond government's ability to pay. We think as an industry we have tremendous opportunity for growth. When the literacy rates of this world are anticipated to increase considerably, there are other jurisdictions that are willing to take advantage of some of those opportunities. We feel Ontario has a real ability to take advantage, and we'd like to be part of that growth and we'd like to work with government to make sure we're part of that growth. We feel that if we are a healthy industry, we can also be part of the road to recovery for this province. If you take a look at the Price Waterhouse report that we also commissioned in this past year, you will be able to see some of the impact we have on this province. I thank you very much.
Mr Ted Arnott (Wellington): Thank you for your presentation. You indicated in your brief that your industry generates about $2 billion annually through exports.
Ms Rauter: That's the balance of trade.
Mr Arnott: Okay. The Premier has stated very clearly that he intends to fight the NAFTA trade treaty. Do you think that's an appropriate policy for the provincial government? Secondly, do you think it's in the best interests of the people who are engaged in your industry for the provincial government to be pursuing that policy?
Ms Rauter: We have always had free trade, so we're supportive of free trade because we've always been an export industry and we've always been able to compete on many of those international markets.
One of the things with the free trade agreement we currently have with the United States is that that agreement gave us one additional opportunity that we never had the last time with the countervailing of softwood lumber. The last time around, we did not have the opportunity of this binational committee to sit down and take a look at whether what the Americans were doing was actually fair or not. So we're supportive of it because it does give us that opportunity. That committee is now meeting and we're very optimistic that we'll ultimately win. Ontario is much further ahead now than it was a couple of years ago, because originally we had a 15% tax we had to pay; we've reduced that now to less than 6%, and once this binational committee is through, we're hoping we'll be able to reduce it to zero.
Mr Arnott: So you'd agree that bringing the rule of law into international trade treaties, as opposed to the whole thing being governed by domestic politics, is an improvement on the present situation?
Ms Rauter: We certainly support free trade, because as an export industry, we are dependent on the global marketplace.
Mr Arnott: Would you agree that the Premier's approach to this issue is irresponsible?
Ms Rauter: I'm not prepared to say that.
Mr Sola: That was a political answer.
Ms Rauter: I'm learning.
Mr Carr: On pages 3 and 4, you talk about something that I think all parties could support: assessing the impact of legislation, regulations and policies. To me, regardless of political stripe, that would seem like a natural thing to do.
Ms Rauter: I think so.
Mr Carr: Knowing that, and without pointing fingers at any of the three governments that have been around over the last few years, why doesn't that happen in the province?
Ms Rauter: That's a very good question. I don't know whether in the past it's really happened with very many governments in very many jurisdictions. But when you're into what we would call a recession and what I suppose some people would actually call a depression -- if you're unemployed, you certainly might be calling it that these days -- you're going to have to take a harder look at things. I think we are now at the point where we have to take a very hard look at everything we do. It was easy in good times to meet all of those people's expectations and spend and meet their needs, but when you're really trying to tighten your belt, you have to look everywhere, and I think one of the first places you need to look is with every piece of legislation. This is the time you really have to take a look in the mirror and see whether we're headed in the right direction.
Mr Carr: One of the reasons that people say governments don't do it -- again, I don't want to be political by pointing a finger at this government in particular -- is that they don't want to see what the results are, that they really don't care. I don't think that's the case. What's your thought about it? Do you really think governments are starting to appreciate, like you said, that all the social programs we have are not going to be there regardless of what government is in place? This is a perfect example: We've got a socialist government that can't implement the things it would like to because there isn't the money for it. Do you think people are starting to realize that now?
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Ms Rauter: My past chairman once told me something when I was doing my budget: He said you have to differentiate between what you need to have and what it's nice to have. I think we're at the point where we need to re-examine and determine what the government's mandate is, in totality, provincially and federally. What is the government's role in ensuring that the people of this country and this province have what they need to have? Maybe we're going to have to take another look at how we can deliver what it's nice to have, but we have to make sure we have programs that give us what we need to have. In order to do that, we're going to have to get down to some bare bones and we're going to have to restructure a little. Industry is willing to help government and work with government to do that. We think there's tremendous opportunities in this province, and we'd like to be here for a long time to come.
The Chair: I'm going to have to go on to Mr Wiseman and then Mr Waters.
Mr Jim Wiseman (Durham West): I'm reading page 3 of the Price Waterhouse report. It says that in 1991, the Canadian dollar reached its highest level against the US dollar since 1978 and averaged 87.3 cents US compared to 85.7 cents US in 1990. In fact, the Canadian dollar was 72.5 cents in 1987 prior to the free trade deal and had a low of 69 cents. What's the ratio of profits to the lower dollar in your industry?
Ms Rauter: I don't know if we actually have a number on that.
Mr Martin Kaiser: We do. On page 4 of the Price Waterhouse report, you'll note --
Mr Wiseman: I guess I should have read a little further.
Mr Kaiser: There are other figures there. A change in the exchange rate of one cent has an approximate pre-tax earnings effect of $21 million for the Ontario primary industries.
Mr Wiseman: So the high dollar was really not a very good idea for your industry, not to mention the high interest rates that went along with it.
I'm what some people would call a tree-hugger.
Ms Rauter: Me too.
Mr Wiseman: But I also think there are a lot of jobs involved in this, and I'm really concerned -- I'd like you to maybe try and put some of this to rest. For example, the urban forest, as it's now being called, in terms of recycling: We export an awful lot of pulp to Chicago, to New York, and they are now moving to the position where they're saying 85% or 90% of their newspapers are going to have to be recycled material. Basically, what I see there is that they're going to build de-inking plants close to the source. They'll de-ink it, add in raw pulp in the ratio that's necessary to give strength to the newsprint, and then sell it back out. I'm concerned about that, because I see that as causing a downward shift in demand for our raw pulp. Maybe you can comment on how we're trying to position ourselves for that.
Ms Rauter: That is just another opportunity, and we'd like to take it as an opportunity. In southern Ontario particularly, we have several of our companies that operate, for example in Thorold, St Catharines, that use recycled paper, primarily from the Toronto area. That means we can stretch some of that raw fibre that's in the north further for other products. If you take a look at global growth in terms of forest products, it is that there may be a shift, and recycling just presents another opportunity by which we can expand that fibre and use it for a variety of different products.
So yes, there may be some mills that will be put on the Hudson River outside of New York City and outside of Chicago. We will take advantage of some of that in Ontario. Many of our mills already have the de-inking facilities, and some additional ones are building de-inking facilities so that we will be able to cope with the regulation for recycling content. But that means the fibre that is left in the tree in the bush will then be available for other products.
I'd just like to address your comment of being a tree-hugger. That's another of the reasons we did this code of forest practice, because a lot of people are very concerned: They hear about the forest being barren and scattered and destroyed, the Amazon of the north and a whole bunch of other things. We feel that through good forest management practices, it truly is a renewable and a sustainable resource and, if properly managed, it will supply us for many, many years to come and will provide an opportunity for people, for whatever use they want to make of the forest. So we're very supportive of good forest management practices, and we think this code is one that will be a starting point for some of the people who call themselves tree-huggers, to perhaps give them a little better comfort level.
The Chair: I'm sorry, you've used up your time and you've used up Mr Waters's time also; your colleague didn't get a chance to ask one question. I guess Mr Phillips is passing, because he asked all the questions on Sunday night, so I'm going to Mr Conway.
Mr Sean G. Conway (Renfrew North): I want to thank the presenters for a very interesting brief. Time is short. I've really got several questions, but time to ask only one. You've issued a clarion call here to all of us to understand that it's not business as usual, that we really have to turn our attention to some of the fundamentals in this economy. Let me be direct. One of the oldest and most significant pieces of legislation enacted by this province is the Crown Timber Act and the regulations that attach to it. There are many in the academic community in this country and a substantial number of people in the Congress of the United States who would argue very strongly, and in some cases rather successfully, that the province of Ontario has developed over the decades a very bad habit of giving away, well under value, the timber resources on crown lands. As you know, of course, this was the essential argument advanced by interests in the Congress a few years ago that led to the imposition of the hated export tax.
Briefly, as it's not business as usual, could you comment on two things? First, are we giving away, in your view -- or let me put it another way, because I know your argument is that we're not giving it away. How is it that we are not giving away, under value, the timber resources from the crown lands of the province? Secondly, has the time come, as it's not business as usual, for this province and Legislature to fundamentally re-examine the principles in the Crown Timber Act?
Ms Rauter: For the first one, with respect to whether we are giving the timber away, no, we do not believe we're giving the timber away. We have forest management agreements, and if you were to take a look at those forest management agreements, there is a contractual arrangement between the crown and the particular company. I guess it's a landlord-tenant relationship, really, that forest management agreement. The amount of money that the crown is giving for some of the renewal programs was equivalent to some of the moneys it was spending when it was responsible for renewal. It's balanced with stumpage, and the stumpage fluctuates according to market conditions, and then the government gives some money for renewal programs.
If you were to take that balance and if you were to compare it with other jurisdictions, that's one of the reasons -- because we took it to a conclusion -- that that countervailing for the United States has been dropped from 15% down to 5%. A good chunk of that is because they're talking about log export values with British Columbia; if you were to take that out of it, we would probably be at a de minimus state and not have a countervail tax at all. That's even playing with the American rules, so I would question whether anyone could say we're giving our stuff away, if we can play on an American football field and still come out with the de minimus if we were to take that log export away. We can't be giving it away.
With respect to taking another look at how we should be doing things, the forest management agreements have been in place now for 13 years since the first one. We do think it's time to take another look at how we do business. We have made approaches to the new minister that we would like to sit down and determine whether there's a more effective way that we can meet the goals of government while meeting the goals of industry and ensuring that we have sustainable forestry. We feel there's some urgency to that, and we would hope that within the very next few weeks we will be getting some responses. Bud Wildman, as the previous minister, called a meeting in December and recognized some of the urgency. We hope this minister also recognizes the urgency so we can move forward.
The Chair: Mr Conway, we've just run out of time. I'd like to thank you for your presentation before this committee.
Ms Rauter: Thank you for the opportunity.
The Chair: You're quite welcome.
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ENVIRONMENTALISTS PLAN TRANSPORTATION
The Chair: The next group to come forward is the Environmentalists Plan Transportation. I'd like to welcome you to the standing committee on finance and economic affairs. We have until 11:30. As you saw, the other presenters made their presentation and left some time for the committee to ask questions; maybe you could do the same. Could you also, for the purposes of Hansard, identify yourselves for the committee?
Ms Lyn Adamson: My name is Lyn Adamson. I'm representing Environmentalists Plan Transportation, along with Tom Samuels. I'll first make the presentation and then Tom will be adding additional information at the end of that.
Thank you for the opportunity to speak with you today concerning the links between the environment and the economy, and budget directions which Environmentalists Plan Transportation and many others in the environmental movement would like to see happen. It has been well documented that environmentally appropriate solutions to problems are more cost-effective in the long run than proceeding along traditional paths. For example, we know that energy efficiency not only reduces pollution but makes industry more competitive and reduces household expenditures.
We know that environmental solutions to such things as waste disposal and treatment, agricultural productivity and forest management are more effective in the long run than chemically based approaches. We know that reducing and eliminating air pollution reduces the economic costs associated with respiratory disease, crop losses from acid rain, losses in sport fisheries and so on.
However, the negative impact of the automobile in Ontario has not been fully recognized. In environmental terms, the auto produces fully a third of greenhouse gases generated in the province, assists in promoting urban sprawl, results in unacceptable levels of toxic emissions, contributes to the depletion of the ozone layer, and also consumes vast quantities of non-renewable resources. In 1990, more than 280 deaths and 42,000 injuries resulted from traffic accidents in the greater Toronto area. Serious health effects, including asthma and other respiratory illnesses, are caused by ground-level ozone and other pollutants. These result in tremendous health costs for society.
We are generally not aware that the use of the automobile is also a serious economic drain on the province and on households. According to the former Ministry of Industry, Trade and Technology, Ontario loses about $5 billion each year as a result of auto imports. The figures for the last few years are as follows: 1988, $6.309 billion; 1989, $5.778 billion etc. It's more than $5 billion each year from auto imports. Please note that these figures exclude vehicles for the transport of goods and motor vehicle parts and accessories.
Extrapolating this economic drain based on population growth and using the 1990 figure as a base, by 2030 AD, the accumulated drain on the province from imported autos will exceed $100 billion. This is the equivalent of about 1.75 million job-years.
Using automobiles is also costly from an energy point of view. Aside from the environmental effects of refining, transporting, burning or disposing of fuels, the province must import virtually all of its fossil fuels. Based on information available from the former Ministry of Energy, Ontario imported about $2.8 billion in motor fuels in 1988, and oil prices are currently low. The following points should also be noted:
-- Consumption in Ontario will increase as economic activity recovers from the recession.
-- Canada is quickly running out of inexpensive crude oil.
-- World consumption will increase dramatically in the next decades as a result of population growth and economic growth in the developing world.
-- As a result of the above, Ontario will be exposed to higher world energy prices.
EPT has taken the $2.8 billion and extrapolated it to 2030 AD, including factors for population growth, a variety of price changes per barrel -- also assuming that natural gas will, in the long term, have a dampening effect on prices -- and including an assumption that vehicle efficiency doubles. Under this scenario, the accumulated loss of capital to Ontario by 2030 AD would reach about $51.6 billion. This is the equivalent of about 860,000 job-years.
Clearly, there is an economic benefit to reducing the dependency on the automobile in Ontario. Reducing these imports is a true generator of new employment: It does not merely redirect dollars within the economy but produces a net increase in capital for the province.
In response to the threat of global climate change, the emission of toxins from vehicles and the consumption of agricultural and natural areas as a result of auto-dependent urban sprawl must be drastically reduced. North Americans are the greatest contributors to environmental damage in the world, and therefore we have a responsibility to take a proportionate share of the reductions in energy use and greenhouse gas emissions. EPT recommends that a reduction target of 80% in CO2 emissions be adopted by this government.
EPT recently released a study called The Liveable Toronto Area. It's available to all MPPs on request; it's a lot of paper, so we want to know that you'd like to read the full study before we send it to you. But we have distributed a summary -- we gave Tonia copies of a summary of that report -- which put forward very strong arguments for actually reversing the modal shares of auto and transit trips in the greater Toronto area within 25 years; ie, moving from 74% to 13% for all trips by auto, and from 16% to about 64% by public transit, by the year 2020 AD.
The economic bottom line is that by investing about $36 billion in public transit infrastructure improvements in the GTA over a 25-year period, along with supportive land use improvements, the GTA will generate about $88 billion in savings in auto and fuel imports by 2030. It should be noted that of the $36 billion, only $13.7 billion would be new taxpayer investment. The remainder would be redirected funds. On the last page is a summary explaining how those funds would be redirected.
The results would be a net gain of about 65,000 jobs, dramatic increases in financial flexibility for thousands of greater Toronto area households, and an accumulated positive impact on the provincial budget of about $21 billion.
We recommend that similar strategies to The Liveable Toronto Area study be developed for other municipalities across the province in a joint consultative process.
EPT is encouraged by the work of the Commission on Planning and Development Reform in Ontario, which promotes environmentally responsible land use, and by the recent allocations for expansion of the rapid transit system in the greater Toronto area. EPT feels that the very serious environmental, safety, social and economic issues related to our dependence on the automobile warrant that budget planning for 1993-94 and beyond go further than these welcome measures already announced on behalf of public transportation.
Measures should include implementing relatively low-cost improvements over the short term, while at the same time planning for further expansions to rapid rail systems such as metros and light rail transit. We believe that funding should also be set aside for planning and implementing reductions in auto dependency in municipalities outside the greater Toronto area.
In particular, given that the goal must be to reduce auto use dramatically even in the face of population growth, we urge that no more funds be spent on expanding the road network except for local roads serving high-density development. Transportation researchers have found that increases in road capacities encourage increases in traffic volumes. Any extra road space eventually fills itself with additional traffic, and the expanded road system itself faces intolerable levels of congestion, congestion which causes billions of dollars a year in costs to business because of that road dependence.
On a related issue, EPT feels that intercity rail systems and rights of way need to be protected. Ontario has lost about a third of its track in the last 20 years, a trend which is contrary to the direction we need to follow. The potential availability and attractiveness of rail can support auto reduction strategies, linking Ontario's communities in ways which support the environment and which make transportation accessible to those individuals who do not drive for social, economic or environmental reasons.
About 25% of our population will be over 65 in the year 2030. The overreliance on the automobile discriminates against children, seniors, those with disabilities and those who cannot afford a private automobile, severely curtailing the mobility of at least 30% of the population, because the more we rely on cars to get around, the less those people who do not have cars can get around and the less available are the rapid transit alternatives.
The severe impact of automobile dependency is one of the critical issues which will affect our lives and those of our children. We must look at the longer-term gains rather than the short-term cost, and shift from a consumptive mode to an investment mode. This means reducing the economic drain of automobile dependency and the global environmental decline which threatens long-term stability.
Thank you for the opportunity to speak. I now introduce Tom Samuels, who will give some specific recommendations.
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Mr Tom Samuels: EPT recommends a couple of short-term actions that we feel can address the problems as referred to by Lyn. First and foremost, we recommend that the province announce commitments to reducing automobile dependency, environmental damage, exposure to energy shortages and price increases and the loss of agricultural land in natural areas.
We also recommend the undertaking of intergovernment discussions on proceeding with long-term strategies to limit urban sprawl, improve land use practices and fund improvements to public transportation.
Concerning the province's proposed transportation capital corp, EPT has some specific recommendations for this. We recognize that this corporation is an ideal opportunity to ensure a balanced mix of transportation modes for the province, with related economic benefits also for the province.
We have three recommendations that we feel should be the first tasks undertaken by the corporation. First, the corporation should acquire, by buying, expropriating or leasing, all abandoned railway lines to hold for future interurban rail services. We also believe that the corporation should plan and implement province-wide systems of express transit lanes on existing highways and roads. Third, we believe that this corporation should plan and implement a province-wide system of rail lines, developing tracks and managing a system of railways to be provided for rail operators, much in the same way as provincial highways are made available to their users.
Further, for short-term actions:
EPT calls for an undertaking of comprehensive public educational programs and campaigns to ensure these measures.
We also recommend that transit-supportive land use practices be supported by legislation, including requirements for such things as minimal densities of 15,000 for greenfield developments.
We also recommend that the province declare an interest in preserving land in the GTA not already designated for high-density developments.
Bear with me; there are only a few left.
Ms Adamson: These are from our full report, if you get a copy of our full report.
Mr Samuels: But this will give you the gist of where we stand.
We also recommend undertaking a multimedia bike-to-transit campaign; further, an announcement of a moratorium on construction of new highways, as Lyn mentioned, as a result of a policy to reduce the number of automobiles, and divert funds to public transporation improvements.
We also recommend a reduction in municipal road grants and increased income taxes on GTA residents and increased gasoline taxes in order to fund transit improvements and discourage auto use.
We recommend the creation of an annual sustainable urban design contest to generate interest in and attention to the benefits of infill development and other transportation design.
Finally, we recommend that the province strengthen its emission standards and enforcements for cars and trucks and adopt California-like emission standards.
If you're interested in finding out more details about those recommendations, as Lyn mentioned, we'll be more than happy to get you a copy of this report.
Mr Daniel Waters (Muskoka-Georgian Bay): On your last point, I didn't realize how far behind this province is on enforcement of emission standards. I was wondering if you had any further comment you wanted to make on that. I know that my brother-in-law, who happens to live in Ohio, has to take his vehicle in every year. Every resident of that state has to have his vehicle taken in and checked for emissions and pay the fee. The state doesn't; the individual has to. If you own a car in that state, you must pay.
Mr Samuels: It's the same in Colorado as well. That's because of the high altitudes. But what has to be understood here is that even if we have reductions in emissions or higher standards for emissions, if there's an increase in car usage, then that cancels out any benefit we gain from reducing car emissions. So at the same time as you call for reductions in car emissions, you also have to call for a reduction in car usage. Otherwise, the two programs are conflicting and contradicting each other.
Mr Waters: I know Mr Wiseman has a question, so I'm going to try to get through this very fast. I represent an area of central Ontario, and we have the two main east-west and north-south links: Highways 11 and 69 run through my area. What I'm seeing is the offloading of transportation by rail and by ship on to the highways. I think that's almost planned, so that the federal government doesn't have to worry about its responsibility for rail upkeep. They offload it on to the provinces and the municipalities. How can a province such as Ontario, or all the provinces combined, stop that?
Ms Adamson: You're talking about stopping the loss of the rail lines?
Mr Waters: Stopping the loss of the rail lines and -- really, what's happening is that in freight, where you used to send it by rail or by ship, you look at the roads now. They don't do it by rail or by ship; it's transcontinental trucking. They're hauling steadily on the roads, which is destroying the roads. You used to have tandem axles; you now have five and six axles under a truck. That's doing more damage to the roads and creating more pollution than the train or the ship.
Mr Samuels: And our response to that is to build wider highways to further encourage that scenario you depicted.
Ms Adamson: But you're asking what we can do. I think the province of Ontario has to undertake measures, and also work with the federal government -- we'll have a new federal government -- to level the road-rail playing field so that we aren't heavily subsidizing truck traffic, which we are at the moment, and heavily accommodating it, where we are seeing the loss of rail lines. For example, the rail line to Lindsay has just been sold, the rails themselves, to -- are they going to South Africa or somewhere? They're going some other place in the world instead of us keeping them.
There's also great potential for the steel industry in reviving rail as that link. Also, there's a method of transportation in rail that has not been used here but is being picked up in the United States and elsewhere: the self-propelled rail trains, which you can do very small-scale, so that you can link up from small communities to larger communities to the larger interurban corridors.
Mr Waters: Feeder lines.
Ms Adamson: Feeder lines, that's right. Let's put a freeze on loss of any of these rail lines. Especially, once you lose the corridor -- you sell the land -- then you can never re-establish that link, so that is definitely something the province can do.
Mr Wiseman: We might also want to think about changing the way we tax corridors for rail as well. I don't have a whole lot of time --
The Chair: One minute.
Mr Wiseman: -- but that might be an issue you want to look at, in terms of market value assessment on rail corridors.
Interestingly, in your brief you talk about Kingston Road having light rail transit that used to go all the way out to West Hill. That was discontinued and eliminated when we went to the nonsense of Don Mills-type planning: you know, sprawl.
Something you might want to consider in terms of your projections is moving Ontario away from a carbon-based fuel system for automobiles to a hydrogen-based system. If you take a look, in 1981 -- both previous governments ignored this -- there was an extensive study done by Dr Scott from the University of Toronto, who is now in BC, about using hydrogen as an alternative source for vehicles. The emissions are zero in terms of contaminants, because it's water.
I think other groups agree with you. In my community, the Seaton community liaison group talks about compact urban form and how to build a community that would be more in line with the kind of transportation you're talking about. So I'd just like to thank you for coming, because much of what you say is what I agree with. Not to end on a down note, if we don't change by 2021, we are moving into what I consider to be probably cascading ecological, environmental breakdown --
Ms Adamson: Irreversible.
Mr Wiseman: And which will lead to major, major problems.
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The Chair: Mr Wiseman, there were no periods in that sentence. You carried on for that one minute really well.
Ms Adamson: Could I just make one point about hydrogen and the alternative fuels? There can be some work done on alternative fuels. That's fine. But it doesn't answer the space issues created by the automobile in urban settings. In urban settings of the greater Toronto area, it's just absolutely so much more efficient to move people by good rapid-transit systems --
Mr Wiseman: I agree with you.
Ms Adamson: -- and promoting cycling and walking in connection with those, which is also a health benefit to people in terms of getting their exercise naturally in their day-to-day travel.
Mr Wiseman: There's a hydrogen-powered car --
The Chair: Okay, Mr Wiseman. Mr Phillips, you'd better take the floor, or he's going to talk right over you.
Mr Gerry Phillips (Scarborough-Agincourt): Thank you for the presentation. Where are the best models that we might consider that have adopted your principles and been successful with them?
Ms Adamson: What would be a model for these principles?
Mr Wiseman: Toronto in 1910.
Mr Samuels: Actually, that's a very good point. If you look at old pictures of Toronto around the 1920s, even up to the 1940s, there's an incredible balance of modes of transportation, primarily pedestrian, transit and cycling, and the car does not dominate the scene.
In the world today, northern Europe: places like Germany, Sweden, Denmark, Switzerland and the Netherlands. The Netherlands are just the gurus of this. They're 25, 30 years ahead of us, and we have to look at those cities and those places and those countries as examples of how we can have a better system here. There are wonderfully successful systems being implemented throughout northern Europe.
Ms Adamson: We didn't bring slides to show you. We do have slides demonstrating these walking paths, the cycling paths, the transit systems as well.
Mr Samuels: I'm a volunteer, but I'd be more than willing -- I have a slide presentation that takes about seven to 10 minutes that offers a very clear vision of what's being done in Europe and what's been done there, and how we can apply it to the Toronto environment and context. I'd be more than happy to present it to this group or individuals, whomever. The clerk has my phone number and name.
Mr Phillips: You mention a lot of economic benefits by cutting back on the use of the auto and all the auto imports. I guess the engine that drives the Ontario economy, whether we like it or not, is the auto sector; that is the engine. I think we make somewhere around 17%, 18% of all of Canada-US auto parts or finished auto products. You suggest there would be substantial economic benefit, but I would suspect that if there was, on any broad basis across North America, the kind of decline in the use of the automotive industry that you project, it would take a fair bit of energy by us to replace those jobs with other jobs.
Ms Adamson: I think we would say that a lot of jobs can be created in making rapid transit vehicles; bicycles, probably, as well.
Mr Phillips: Bicycles?
Ms Adamson: Sure. Let's look ahead and see what's coming. We know the automobile has to be phased out, for all the reasons we're talking about -- it has to slow down -- and then gradually look at the conversion of our industrial base. We could be a leader around the world -- there's no question about it -- in terms of supplying rapid transit vehicles and systems. When you promote mass transit, there are many permanent jobs created. When you're building roads, you're creating a lot of temporary jobs.
Mr Samuels: If I could further that, on the net result -- that is, the net economic loss in terms of jobs -- our researchers found that Ontario spends approximately $5 billion annually to pay for imported automobiles, and combined with the $2.8 billion lost to the economy each year for motor fuels, this is the equivalent of losing at least 133,000 jobs each year. So in the end, that idea is really not factual.
Ms Adamson: What you're saying, too, is that 17%, 18% of the North American market is supplied in Ontario, and that most of that is for export. So what we do now won't directly impact it; there will be a phase-in period that's going to gradually effect -- in other words, our automobile industry isn't directly tied to our use of automobiles in Ontario. I think -- I've lost my point here.
Mr Samuels: Well, I haven't heard that point, but it makes a lot of sense, actually; it's a good idea. But if we can implement these measures for reducing the automobile in our province, because the jobs are created by making automobiles for somebody else's backyard, it's not going to --
Ms Adamson: It's a gradual shift.
Mr Samuels: It's a gradual shift, and it won't really affect us.
Mr Phillips: Okay, that's great.
The Chair: I'll have to go on to Mr Carr. Is that C-A-R?
Mr Carr: It's two Rs -- no, one in "Gary" and two in "Carr."
Thank you for your presentation. There were many people who voted for the NDP government because they were strong on the environment, and I hate to say this, but you have already lost the fight. You may know that a week ago, a week and a half, whatever, the Premier made a major announcement on funding for capital projects. In many respects, the fight's been already lost. We now are going to have a corporation that's going to build the roads. We've got plans in place to build more by having tolls, and so on. I think it's fair to say, with all due respect -- because I appreciate a lot of what you're saying -- that the fight's already been lost with this government.
Why do you think there's been this change in terms of this NDP government's policies? They were so strong on the environment, and they basically changed to say: "We're going to build roads, and we're going to pay for it in tough times by having tolls," a complete reversal. Why do you think that came about?
Ms Adamson: The road lobby.
Mr Carr: The road lobby's got the Premier's ear.
Ms Adamson: I'm afraid so. I don't know. I can't guess.
Mr Samuels: Also, what about the fact that NDP, Conservative, we're all, in the end, human beings, and we've all grown up with this fantasy of the car. Even the poster for the car show down at the CNE is this exotic, very seductive car. I mean, it's so attractive that I want it. We're all coming in with this psychology that the car is --
Ms Adamson: A ticket to independence.
Mr Samuels: It's a ticket to independence, and it's more. In suburbia, you have your car in front of your dining room window, so while you eat you can look at your cars. It's so integral to our psyche. And that's why one of our recommendations was an education campaign. Any change has to come from educational initiatives, and that's where we have to start.
Mr Carr: What do you suggest we do? I appreciate that you made this presentation, but now that things have changed and we're building the roads and the money's already been allocated and the companies are already lining up, what do you see happening in terms of turning it back? We're already down that road. He's already made the announcement. The funding's all in place. Once we've got these roads, the next logical thing is to say, "We can't change, because we've just spent billions" -- and that's what we're talking -- "to build these roads." What do you see happening?
Mr Samuels: I just had an idea on that. Part of the financing for these roads etc is coming from private initiatives, I understand, and a lot of the private funding will come because the private companies or industries or individuals are interested in their own parcel of land they have. If, with the roads, we can somehow discourage the urban sprawl through controlling densities, forming guidelines for urban development form, then maybe that can somehow put a curb on what could potentially be quite catastrophic.
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Mr Carr: As you know, the theory has always been that if we build an infrastructure of mass transit, it'll be able to pay for itself and so on. The problem we've got is that a lot of our mass transit -- to take an example, Toronto's has not; it's subsidized. Why do you think we haven't been able to --
Mr Samuels: TTC ran in the black as opposed to being in the red until they had to start servicing suburbia and the urban sprawl.
Ms Adamson: I think what's underrated is the massive subsidies to the automobile. I don't think people who drive automobiles realize that beyond the $7,000 a year or whatever that they might pay to maintain their car, society as well subsidizes by thousands of dollars each car, so we understand from the studies we've read. So billions of dollars per year, according to Pollution Probe in its study, The Costs of the Car, are being spent. And this cannot even begin to measure the environmental impact. We are grossly subsidizing the automobile, and I think people don't realize that. Certainly, if there was use less of the automobile there would be greater use of transit, and the subsidies required by transit would decline.
The Chair: I'm going to cut it off there, Mr Carr. Our half-hour's up. I'd like to thank you for coming before this committee. I think the clerk was going to get the telephone number, but if you've got it handy, maybe you could give it to the members of the committee.
Ms Adamson: You can get us at 397-3073 or 393-3074.
The Chair: I didn't see an address either. Could you give the address?
Ms Adamson: Yes, 155 College Street.
The Chair: Just around the corner. Thanks for coming before the committee.
Ms Adamson: Thank you very much for your interest.
Mr Wiseman: Keep up the good work.
INCOME MAINTENANCE FOR THE HANDICAPPED COORDINATING GROUP
The Acting Chair (Mr George Dadamo): I'd like to ask the next presenters to please take a seat, if you would be so kind. Welcome to the finance and economics committee. The way this works is that 30 minutes are allotted. Of course you have time to make your presentation, and please allow time for the members to ask questions of you. I'd like to introduce the Income Maintenance for the Handicapped Coordinating Group. Please, for the records and for Hansard, identify yourselves.
Ms Laura Stambler: Laura Stambler. As chair of the Income Maintenance for the Handicapped Coordinating Group, I'd like to introduce my colleagues: Scott Seiler, coordinator; Harry Beatty, counsel.
Mr Scott Seiler: The first item on the agenda: Rate increases for this year have been postponed until the spring, and we would basically like to put our point of view across that rate increases must be brought up. People are at least 60% behind or under the poverty line right now, and with a lack of rate increases this year, it will put people who are on social assistance and people with disabilities even further behind financially than they are now. It's very important that rate increases are not, this year, kept to inflation, because we have to do some catching up. If we're 60% behind, I think we have to do a little bit of catching up to what the established poverty rates are. If a poverty rate is $25,000 for a family of four and we're only making $6,000 to $8,000 a year as a single individual, we're not doing very well.
Ms Stambler: May I elaborate? Social assistance rate increases were delayed by an additional three months this year, for the first time in a decade. Then the increase was only 1%. With the delay, the real increase is only 0.75%. This is not acceptable and not something the disability community would expect from this government. We urge the government to consider an additional increase during the 1993-94 fiscal year.
Social assistance rates are an easy target in difficult financial times. If they are eroded, however, the inevitable result will be an increase in the consequences of poverty for disadvantaged people. In the disability community, these consequences include family breakdown, major health problems and institutionalization. Evidently, social consequences like these cost the government much more than a fair increase in social assistance rates.
Mr Seiler: My next topic of conversation will be employment services for people with disabilities. The major funder of employment services for people with disabilities in this province is vocational rehabilitation services. VRS is still having many problems with long waiting lists, anywhere from two to six months, and in some areas even up to two years. I know they are trying to deal with the waiting list issue, but it's been very unsuccessful.
There are a lot of other problems around employment services for people with disabilities. There's a fundamental issue around people not being able to access training because the very pension they're on, FBA, uncategorically says: "You're unemployable." Then you do not get referrals, for instance, to VRS and other services that could provide employment training or employment-like services.
We also have some very significant cabinet leaks that have happened in the last while, regarding mandatory employment services and mandatory training for people who are on social assistance. Many people with disabilities in this province will not be able to participate in any form of training. They will not be able to do this, because they are either institutionalized, for whatever reason or for whatever disability, or because they are unable to work at a particular time, not because they are not going to be able to work at all.
Also, we have so many issues, such as employment equity, that have a bearing on the employment of people with disabilities and the training of people with disabilities. It's very important that things like employment equity are followed through on, because you can train people, but as long as there isn't somewhere for them to actually work and a way for them to get into jobs, then they are not going to be employed anyway.
Things like STEP, the supports to employment program, were really a detriment to people on social assistance getting any form of training at all or getting a job, because if they have to wait for three months before they can actually get assistance from the system through STEP, then really there's no point in it at all. It's a waste of time and money for everybody.
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Mr Harry Beatty: The third item that we wanted to talk about today is the disentanglement process involving the municipalities and the province, because we see a major concern for people with disabilities in the draft agreement that has been reached. Essentially, the problem concerns the supplementary aid program.
There are two special needs programs, supplementary aid and special assistance, which are delivered by the municipalities under the General Welfare Assistance Act. They are special needs funding programs for which people on family benefits, people with disabilities and people on other programs are eligible. But even if it's for someone on family benefits, for the special needs items they have to do to the municipal social services department notwithstanding that they get their social assistance cheque from provincial program.
Supplementary aid and special assistance cover a number of very important health-related and other items. For example, for people in need, it would cover the 25% of assistive devices not covered by ADP through the Ministry of Health, and for items that are not covered by ADP it would often pay 100%: special dental services beyond the basic plan offered by family benefits -- it's not unusual for people with disabilities to have exceptional dental needs -- nutritional supplements, transportation allowances. For example, we know that a bus pass for people who have come out of a psychiatric hospital to attend a day program was cut in one community in Ontario.
Large municipalities like Metro Toronto and Ottawa have had substantial supplementary aid and special assistance programs, but smaller municipalities have often had a very limited one or perhaps none at all. In some of the northern or rural counties, if people with disabilities or others go to the municipal social services department, they may just say: "Well, we don't have the funding. We don't have a program."
Accordingly, our group has recommended for many years that this be a provincial program, and we had hoped that it would go to the province as part of disentanglement. However, that hasn't happened, and the program continues to be under pressure. Some items, for example, were cut by Metro Toronto last year. It was on their agenda even to cut what we regard as essential health-related items, but, after some intensive lobbying, that hasn't happened yet.
We've attached a news story from the Cobourg Star as an example of something that is happening locally; where, although no decision has been made, clearly the municipality believes that due to budgetary constraints it may have to cut this program.
What we are urging is that supplementary aid and special assistance be looked at in the context of the disentanglement process and that, if possible, these become provincial programs.
The newsletter called Update on Disentanglement had a statement in it indicating that there would be agreements in order to protect current levels of service under this program. As we've already pointed out, though, even if current levels are protected, the program is simply not available in municipalities that don't feel they have the tax bases to support it.
Perhaps we can turn it over to questions, unless my colleagues have another comment.
The Chair: We'll lead with the Liberals; Mr Conway.
Mr Conway: Thank you very much for your presentation. Time is always too short in these opportunities, so let me just pose to you one question, because you make a very strong claim for additional assistance. The government of Ontario is apparently broke; we have no money. All that we've got is committed. Actually, it's overcommitted: According to all the reports, we're overcommitted by about 20%. I think you've got a very valid claim for some additional money. From whom do we take this money, and how do you help us take it from the "haves" to people who clearly don't have enough?
Mr Beatty: Clearly, we haven't come and pointed to another group and said, "Take the money from them." Clearly what we have tried to emphasize in our presentations to this committee for a number of years is that the real longer-term solutions are to look at the various programs, particularly around employment. We know there are people with disabilities who are highly motivated to work. If there wasn't such a threat of losing the benefits, perhaps for ever, when you attempt to work, more people would perhaps get into the workforce, as Scott addressed. In terms of taking money from the "haves," I guess that's a tax problem.
Mr Conway: You see, our problem right now is that if we listen to folks out there, they don't want us to raise taxes much beyond where they are. If we listen to our bankers, increasingly foreign bankers, they're telling us: "We're not keen to loan you more money. Well, we are, but the rates are not going to be very attractive and boy, you've got a very heavy appetite for borrowing." We seem to have played out our tax-and-borrowing options. We're now left with very legitimate demands from people such as yourselves, but we've kind of got ourselves into this box.
I want to do something for you, but I want to be honest and say that in the short term, we appear not to be able to raise taxes. Even my friends -- you know, Floyd Laughren's a good guy and a very bright guy, and he says he can't tax the corporations more, he can't tax the middle class more. The Premier's going on daily about the deficit worry, and it's a legitimate one. So are there things we're doing out there, for example, that we should stop doing, and redistribute some of those dollars in support of some of the very good things you've --
Mr Seiler: One thing that has to be done is an awful lot more work with groups such as ours and other groups out there in all of the different areas of service, looking at where there are problems in areas of service, where services are working and where they are not working, and revising services. Those are all ways in which you can save money: If you have a service that really doesn't work very well and you're still providing that service, then why are you doing it?
Mr Conway: Can you give me a good example? Because I'd like to cancel something and give you the money.
Mr Seiler: I think that has to be done through more appropriate consultation than this. It has to be thought out very, very well and very soundly. For instance, last year at this very venue a lot of suggestions made, and none of them were followed up.
Mr Arnott: Thank you for your presentation. I'm interested in your comments on the assistive devices program. I had a constituent who contacted me about two weeks ago. To briefly tell you the story, about eight years ago this couple was on vacation in the United States, they were in a terrible car accident, hit by a drunk driver. The gentleman is now, eight years later, around 29 years old, and he's a quadriplegic. His wife looks after him at home, and they applied for assistance through the assistive devices program for a wheelchair. They were denied assistance. They were told: "Unless you're able to propel the wheelchair yourself, you get nothing from the provincial government. Go to social assistance or go to service clubs or whatever." I couldn't believe it. I was absolutely startled that that's a feature of our wonderful assistive devices program. I'm just wondering if perhaps we should be expanding it. Would it be possible perhaps to reduce the level of support, such that everyone who required assistance for a wheelchair got at least some support? It appears to be discrimination based on the severity of your injury.
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Mr Beatty: In fact, we have raised this specific issue, because it had been brought to our attention, with the Ministry of Health. In meeting with the assistive devices program officials, it appears they are trying to review, particularly the fact that ADP is paying for some quite low-cost items: walkers and so on. Of course, we'd like to see all of these health-related things paid for, but clearly an electric wheelchair is a much bigger item than some of the smaller items. Perhaps some things can be done in that direction.
I would agree with you that the rule seems discriminatory. It's just another example of how so many of the policies make it difficult for people who are trying to be more independent. In this case your constituent and his wife are making a big effort -- it's always a huge effort -- to ensure that he stays in the community. When you get the cumulative effect of saving a few thousand dollars here or there on these programs -- and another thing we point to, and we're hearing a lot about it, is cutbacks in home care -- pretty soon the family gives up. They say, "We can't cope." Then there's an institutional placement, and then government is paying in the thousands and thousands a year.
That's the kind of thing we keep trying to talk about, that if the real impact of the programs were looked at, it isn't always a saving to take 10 or 15 hours off somebody's home care or to turn somebody away when they need an electric wheelchair. If the result is a significant percentage of cases in which it'll just become too much, then the government winds up paying a per diem for the person which, if it's a chronic care hospital, could be several hundred dollars a day.
Ms Stambler: I'd like to elaborate on what you said, Harry, and go back to the question posed by Sean Conway. We represent a range of disabilities, visible and invisible. Speaking as a person who works for people with psychiatric, mental or emotional difficulties, statistics tell us that -- going back to your original questions, Mr Conway -- care in the community costs a fraction of care in institutions. Your question was a political one, but I can also answer it in terms of real statistics. Care in the community, especially for people with psychiatric, emotional or mental disabilities, costs a fraction of what it does in institutions. So if you're looking for a valid way and a sound way of cutting costs, look to care in the community.
Mr Seiler: I think the ADP is a really important issue for people with disabilities. For instance, I've met people who get many, many things from ADP and have a really good relationship with the system and how it works and get what they need. Then I know people who, because they're a year too old, can't get anything; they end up actually having to use expensive support systems that are out there in the community, when, if they had the assistive devices, they wouldn't need those expensive supports. You're looking at something that will cost $2,000 or $3,000 up front and the person will have a use of it for quite a long time, whereas you're bringing in somebody that costs $10 to $15 an hour for 20 hours a week to do the same thing.
That's the type of thing where you can also save money as well. These are also the things we said last year and the year before and the year before. These are not new solutions; these are old solutions. This is what frustrates us, that we have given these solutions, and we've been given them for years.
The Chair: We'll have to move on. Ms Harrington, and then Mr Waters. Can you share your time?
Ms Margaret H. Harrington (Niagara Falls): I certainly am hearing your sense of frustration. I know that in my riding as well we have the same problems of inequities with the assistive devices program. One thing I'm hearing very strongly from you is that we share a very common direction in the goal we're trying to get at. It's so important that we have your input, that we work together. That's probably got to improve from what it already is.
I want to let you know that the goal of our government in the social assistance reforms is to have an active system instead of a passive system, which in the past has kept people on the margins of society, kept people out of economic life. What we want is to change that system to an active system. Just to clarify what our goal is, it's to empower people as much as possible, and I think that's your goal as well.
Just last night in my riding, I had Elaine Ziemba speaking to my riding association. She very clearly explained the role of trying to get disabled people into the workforce and gave some very interesting examples of how they've participated in the workforce and have been wonderful employees, inspiring almost the whole company to get moving. So I do want to let you know that employment equity is something we want to work very closely with you on.
My question was about the opportunity planning. We're very serious about that as well. Would you have any advice to us about how to carry through with better planning opportunities?
Mr Seiler: I work on the employment project team, who are the people who really developed the concept of opportunity planning. We thought opportunity planning must be voluntary, simply because you cannot expect people, in a coercive system, to be able to properly attend programs. This is not a punishment. This is something for them to improve their lives, not something they're forced into. People with disabilities, as a whole, want to go out and work. For the general population, I know that's the case with almost every single parent or single employable I've ever talked to. Their goal is also to go out and work, be trained or do something. I don't think we need a punitive system in this province to do opportunity planning. In fact, I think it will make the system not work.
Mr Beatty: I believe the system has to respond much more quickly than voc rehab does now. It has a really negative effect on rehabilitation, if people are interested in taking a course or an employment opportunity, and the assistance to allow them to do that -- you're told you have to wait four, six or even eight weeks for an appointment. I think the VRS people, in many cases, do the best they can. It's just badly underresourced. Clearly, though, if somebody has an employment opportunity, someone with a significant disability who needs the rehabilitation support there and then, the employer isn't necessarily going to wait two or three months for the opportunity planners to get moving. So I think it has to be a very quick response. Too complex or bureaucratic a system I don't think will work.
Ms Stambler: May I just make a point here to answer Ms Harrington's initial point, and to elaborate on a point that Harry made? We constantly find, as consumers, that systems are designed for the bureaucracy or for the system rather than arranged around the person, the person you want to empower, the person I want to empower. I think we want to look to a system that is designed around the person, the individual, who really knows best what they want, and not someone slotted into some make-work program: something that's personalized, individualized and designed to empower a contributor.
The Chair: Mr Waters, you have one minute left.
Mr Waters: I'll try to make this very short. I think I'm going to pick up on Mr Conway's and your last comment, ma'am; that is, efficiencies, and how that works.
I come from small-town central Ontario, and I look at what I see in any and every one of my towns. This list you've provided of your members is probably just part of the number of administrations for each one of these in each town within my riding. Each one has their own administration, their own office, their own office supplies, then I look at the service. I guess what I'm saying is, is there not a better way of doing it: one administration, one community program to deliver them throughout the community? But I can tell you, governments are very much afraid of these minor bureaucracies that are built up in each community, because you're looking at all these people who lobbied for these things. How do you deal with that and how do you change it to make that more efficient so that the money goes to the consumer, not to establish 10 or 12 or 15 administrations with photocopiers and fax machines and staff and all of that in each community?
Mr Seiler: I think you've got a very good point. We in the employment project team, for instance, looked at this issue very strongly, and we decided that we would recommend that the dollars be attached to the person -- I can tell you that government would not buy that -- and that agencies would be really working for the person, not for any particular government bureaucracy. It would be like a fee-for-service. You would have a chit with your training dollars or whatever the service would be and you would go out and purchase your own service. That's the type of system we looked that. That way, people get what they want, they have choices.
If we call ourselves consumers, we are not consumers when we are forced into using specific services that are specifically designated for specific groups. That isn't choice; that's just us being given something that is there. But what if the program down the street that is for another particular designated group is even better and we want to get into it? We should have these kinds of choices.
And yes, you're right. There are a lot of mini-bureaucracies. I think you're going to see even more bureaucracies with things like OTAB.
The Chair: That's downstairs. I'd like to thank you for making the presentation before this committee today.
This committee's recessed until 2 pm sharp.
The committee recessed at 1203.
AFTERNOON SITTING
The committee resumed at 1405 in room 228.
ONTARIO ASSOCIATION OF INTERVAL AND TRANSITION HOUSES
The Acting Chair (Mr Daniel Waters): I'm going to call this afternoon's meeting to order. I believe the first group before us is the people from the transition homes -- interval and transition homes; I stand corrected and I should have known that from my community. What we've been trying to do is, if you would leave enough time for some interaction with the committee after your presentation, it would be appreciated. The floor is now yours.
Ms Kathryn Gregor: You have before you some of what we're going to talk about this afternoon. My name is Kathryn Gregor and I'm with the Atikokan Crisis Centre. For those of you who don't know where Atikokan is, it is in the Rainy River district and it's somewhere between Thunder Bay and Fort Frances. Trudy Don is with the Ontario Association of Interval and Transition Houses and works in Toronto.
I'm here today speaking to you as a member of the OAITH's lobby committee. I noted with interest, when I took on the responsibility of speaking to you today, that there had been allocated 15 minutes for this presentation. It seems to be established practice to allocate incremental amounts of time and resources to the provision of direct service to assaulted women and children, and we fundamentally struggle with that. Be that as it may, it is my hope that our discussions today will convince you to take action to enhance those services.
This government is currently spending a great deal of money on preventive family violence initiatives and we applaud the government for that effort. However, untold amounts of money are also being spent to deal with the aftermath of family violence. Young offender institutions are filled with offenders who have been victims of childhood physical and sexual assault or abuse. It is estimated that up to 80% of inmates at women's correctional facilities have been victims of sexual and physical assault. The cost of dealing with the aftermath could well be in the hundreds of millions of dollars. Add in related health, police, court and social assistance costs, and I'm quite sure that the final figure would be staggering and unacceptable.
We, as a society, have developed a curative response to violence, a response that has proven to be ineffective at protecting women and children, a response that does not effect consequence for the perpetrator, but for the victim.
It's also my understanding that OAITH has come before this committee on numerous occasions to attempt to impress upon you the need to improve shelter funding. We have repeatedly requested that the committee consider and approve the alternative funding formula proposed by OAITH to the Ministry of Community and Social Services. Adoption of this strategy would enable us to expand our public education work within our communities to work directly with assaulted women and children, advocating on their behalf in the courts and providing them with a safety network in an attempt to keep them and their children alive.
Thirty-seven women were murdered by their partners in 1991 in Ontario. Thirty-seven lives were destroyed because our society continues to ignore the magnitude of the problem of violence in our lives and the reality of male violence. I know that at the end of my address to this committee, you will ask me to place a dollar figure on what it would cost this government to adopt the alternative funding formula. I would suggest to you that it is your responsibility to make that determination. It is up to this committee and this government to decide what price they will pay to keep women and children safe in this province.
I would also like to suggest to the committee that our society cannot afford to continue to tolerate the level of violence aimed against women and children. The costs are unacceptable now and will only escalate in the future. I am referring to the level of human suffering endured every day by women and children in this province and in your communities. The following lists some of the tragic realities of male violence:
-- Assaulted women are more likely to attempt suicide. In one study of 225 female suicide attempts, 83% were made by assaulted women.
-- A study by the Addiction Research Foundation found that women who are assaulted by their male partners are 74% more likely to rely on sedatives and 40% more likely to take sleeping pills than women who are not assaulted. This substance abuse occurs after the assaults, and I'd like to make that point very clear. I'm not talking about women who are substance abusing before the assaults; it is a direct result of the assault.
-- Forty per cent of wife assault incidents begin during the time of the women's first pregnancy.
-- In 1987 the Ontario Ministry of the Attorney General reported over 16,000 domestic assault occurrences. A total of 93.5% of resulting charges were laid against men. During these attacks women suffered bruises, broken and cracked bones, back and head injuries, loss of hearing, impaired eyesight, malnutrition, burns, disfigurement and death. These women are not invisible. They're your next-door neighbours; they're probably your relatives; they could be someone who's even closer to you than that. These women are real and they're suffering these effects every day.
-- It is estimated that as many as 80% of children of abused women witness the abuse of their mothers.
-- In one out of three families where the mother is assaulted, the children are also directly abused, either physically or sexually.
-- Children of assaulted women rate significantly below their peers in areas such as school performance, participation in organized sports and activities, and social involvement.
-- Violent behaviour is learned. Some studies indicate that between 40% and 60% of assaultive men witnessed wife assault during their childhood.
The cumulative effect and associated costs of male violence cannot be explored in 15 minutes. I can assure you, however, the effects will be long-term and costly beyond belief. We, as individuals and community members, can take steps to help stop the violence. However, you are the ones who have the legislative authority and mandate to protect women and children. You have the power to make a true and lasting difference.
In order to effect real change and clearly demonstrate your intolerance of violence against women and children, we are recommending the following:
-- Implement the alternative funding strategy developed for shelter operations. The Ministry of Community and Social Services has that information available.
-- Legislate the provision of services for survivors of male violence.
-- Recognize the important role played by shelters in their support of abused women and children.
-- Recognize that protecting women and children from male violence must remain this government's top priority.
-- Recognize that the cost of tolerating male violence far outweighs the cost of enhancing protection to and assistance for battered women and children.
In 1990, Health and Welfare Canada stated in a publication on wife assault, "It is time for more of us to care." Caring is not enough. Battered women and children require you to do much more than that. They require you to consider and adopt the recommendations made here today to assist them in their efforts to live free of the violence.
I'd like to thank you for your time and also we'll accept any questions you may have at this time.
The Acting Chair: Before we go to questions, I would like to make it clear to you that everyone who appears before the committee gets an equal amount of time, so in no way are we showing favouritism or anything. It was agreed to by the committee that everyone would get a half-hour in total, and in your case, you've left ample time for people to interact with you and ask questions. I'll start those questions with Mr Arnott or Mr Carr.
Mr Carr: On page 4, you were very clear in your recommendations of what needs to be done. I think there was a lot of hope that particularly with the former Minister of Community and Social Services, with her background, some of these things would be implemented. I was just wondering, from your experience, and it's very clear and concise what you've laid out, why do you think that hasn't happened when you had so much -- if anybody knew what it was like, the former minister did. Why do you think it hasn't come about, some of the recommendations here?
Ms Trudy Don: I have to respond to that one. I've appeared before this committee from 1982 until today on numerous occasions, and frankly I have to state that none of the previous Comsoc ministers ever responded very favourably to our requests. I don't think it's an exception of any government.
Mr Carr: But because of the background of the minister, I think you thought it would probably change, and I just wondered --
Ms Don: Well, yes, and I also know that there has been some improvement made. I think there's just such a wide area that needs to be tackled that -- I think I have to make it clear, I don't see that this is the only committee that needs to take this on; I think it's an issue that the entire government has to take on. I know there's a shortage of money, but that's always been a -- I've never yet and I don't think I'll ever live in a time when there is no shortage of money. When we want to send troops to the Gulf, we find the money suddenly.
Ms Gregor: We were very strong in our message that if this violence is not stopped and not dealt with, the long-term effects will be staggering from a financial perspective. It's very much like the long-term costs of continuing to allow, without consequence, drinking and driving. We look at that and wonder why the government will not bring in similar legislation about wife assault. The courts are very clear about what they have to do with drunk drivers and there's no ifs, ands or buts about it. We would like to see something in place. The province made a very clear statement about zero tolerance for drunk driving, and we'd like the very same emphasis placed against wife assault and the tolerance for wife assault; we'd like zero tolerance.
Mr Arnott: Thank you very much for your presentation. I'm sorry I was a little late getting here and missed the first bit, but I've gone over the earlier part that I missed.
You state, "This government is currently spending a great deal of money on preventive family violence initiatives and we applaud the government for that effort." I assume you mean by that the advertising promotional campaign to discourage family violence. How effective has that campaign been, in your opinion? It's so difficult to measure whether or not it's having a direct impact, but do you think it has been effective?
Ms Gregor: I think it has to be married to a very strong message that there will be consequences. I know that I struggle with some of the advertising where it's, "Will you please stop the violence" type of thing, where it's --
Mr Arnott: That's what I was getting at. Do you think the tone is appropriate to achieve the effect we're looking for?
Ms Gregor: I think that from a public education perspective, there is at least an admission that it is happening and that it's not just happening to a very small segment of the society, so people are understanding that a lot clearer now because of the public education strategy.
Mr Arnott: Do you think it's influencing in a positive way the behaviour of the individual men who are abusing their wives and their children?
Ms Don: As you say, it's very hard to measure that, and the only way you could measure it is by figures from the police to see whether in fact fewer assault charges are laid and we haven't got any recent ones. I think the most recent one is the one that Kate quoted from 1987.
I think -- you know, my grey hair -- there definitely has been a change since I first became involved 20 years ago. I remember coming before this government back in 1974 and I was told it only happened in bad old Toronto, that it didn't happen anywhere else. So there has been a change, there's been an acknowledgement this is an issue.
My concern is that we can acknowledge it and we can see there's a change, but we don't seem to be stopping it. That's my biggest concern. We can all speak the right language, but if women and children are still being abused it really doesn't matter. It doesn't really make any difference whether you say it with the right language or the wrong language. It still hurts. That's my biggest concern.
Mr Arnott: I agree with you and I haven't the slightest idea what the government has spent on this campaign.
Ms Don: I don't know either. You can find that out easier than I can.
I think we also have to acknowledge -- and I know I sound like I'm -- it seems to me important that I don't think this is a political party issue. I really feel I want to emphasize that because if we look at this as a party issue, we'll never get to an answer. This is much bigger than that.
Mr Arnott: I don't mean to be --
Ms Don: The whole public education campaign started way back.
Mr Arnott: I don't mean to be putting it in those parameters. I'm just trying to get at the effectiveness of the advertising promotional campaign and if perhaps some of those resources would be better utilized in making sure that adequate services are there for people who need them.
Ms Don: I don't think you can move dollars from one place to the next. You just have to put a whole lot more dollars into it. I want to see much more done in education in the school systems, within the whole educational system. it's just a matter of the infusion of a large amount of funds.
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Ms Gregor: Again -- I hate to keep repeating myself but I will -- unless there is consequence to an act, the act will continue, and unless for anyone who uses violence, but particularly men who use violence against women, unless there is a consequence associated with that action, why stop? I really note with interest that there isn't one female face on this committee.
The Acting Chair: I was going to take that up with you, by the way, and I regret not saying it earlier on. Unfortunately, due to committee and work -- this morning there were women on the committee and all parties have had women in here at different times, but they all have many commitments. Unfortunately, some of them have subbed out to fulfil other commitments, but indeed there are normally women actually from all parties in all of the committees.
Ms Gregor: It's very important to me to have women in those positions to make decisions about where moneys are going to be spent to support women.
The Acting Chair: Any further questions? You have about a minute, minute and a half. No? Mr Morrow first, I believe.
Mr Mark Morrow (Wentworth East): First of all, let me say that I like what you have here. I can support all five recommendations, and I like the analogy that you used about a drunk driver. Wife assault is a crime; we should be treating it that way, a lot stronger than even we are presently. The aspect of education, you're right, there does have to be more done.
I meet with interval and transition homes in my riding of Wentworth East, and we've done a lot of talking over the past two years about core funding. Has that been resolved as far as you know?
Ms Don: No. In fact, I think one of the issues I wanted to raise here too is that I've personally been very concerned about the whole disentanglement exercise, what the effect of that's going to be on us. As you know, the service for abused women is not a mandatory program, it's not legislated. So individual municipalities could opt out of it if -- I think beyond the funding formula that we prepared, I also would like to go back again to the recommendation back in 1982, an all-party agreement that legislation should be brought into place to deal with the funding of services for abused women. This goes back 11 years now, and it wasn't something that one particular party recommended; it came from a three-party agreement.
It feels very uncomfortable for me that we are still looking at something that is optional, that we can say, "Well, maybe these women need it and these don't." We do have mandatory programs for children's services, safety for children, but for adult women we don't look at it as being mandatory, and it really concerns me.
Mr Morrow: It seems like the funding issue is really haphazard. Some get it, some get more than others.
Ms Don: Yes, that's right.
Mr Morrow: I guess basically what you're looking for is one set across the province. I would really hope this committee takes your recommendations very seriously.
Ms Don: We tried it last year. We made the same recommendation and nothing's happened.
Ms Gregor: I'd just like to say for the record that our shelter had its funding pulled by the municipal social services board in terms of its joining with the Ministry of Community and Social Services in a funding arrangement on a per diem basis. So it can happen and it is happening.
Mr Wiseman: This is an issue that is becoming of greater and greater concern to me, because my community doesn't have any -- 120,000 people and there's no place for battered women to go, and children.
It seems to me that the decisions are being made at a regional council level. To what extent do the district health councils play a role in any of this? I have to understand the politics of this so I can understand why it is that two communities with 120,000 people receive zero funding in terms of shelters for women.
Ms Don: Search me. I don't know. You people like to ask this. I don't think there is a rational answer to that question. That's what makes it all so crazy-making. It's so discretionary across the province. I got a phone call this morning from somebody saying, "How should I set about to open up a new shelter?" in whatever particular area it was.
She said, "I've been to my municipal council, I've called the ministry etc and I just get the runaround. There's a great need for a service here," and I have to tell her, "You're doing everything you should be doing but there is nothing mandatory that forces your community to go along with this."
Mr Wiseman: But the funds come from a regional level and in my community --
Ms Don: They're cost-shared on the GWA primarily, so it's like your 50-30-20 cost-sharing. I also know that certainly a couple of years ago since the capping of Canadian assistance that there has been a problem with keeping up with those kinds of funds.
Mr Wiseman: We're funding now almost 70% in Ontario because of the federal cutback.
Ms Don: That's right, and I appreciate that and I understand that. I do get concerned, though, when I'm always hearing it's because of the deficit we can't do this and because of the deficit we can't do that. I came across this wonderful publication the other day which said, "The deficit made me do it," which I think is absolutely appropriate. It doesn't make sense to me. As I say, I read in the paper about when they were building SkyDome, they said it was going to help me as a taxpayer of Toronto eventually. Well, it sure has helped me, right?
Mr Wiseman: Yes, I'd like to see that day. I hope I'm alive when it does.
Ms Don: Yes. So it doesn't make sense to me, and I certainly do understand economics etc. But if there is a choice to be made, if there is a will to make a choice, then --
Mr Wiseman: My next question has to do with the advertising that --
The Acting Chair: And very quickly, Mr Wiseman.
Mr Wiseman: -- Mr Arnott was talking about. I would think that because of the advertising the number of women who would be applying for shelter and help would increase because, fundamentally, if I'm right about my assumption here, it's that some women actually believe that somehow or other they are responsible.
That is not a correct belief, in my opinion, but when they find out that perhaps it isn't their fault and then they start to say, "It isn't my fault and therefore I should seek help," the advertising would lead to an increase in the number of women actually asking for help. Is that the case?
Ms Don: My answer has to be a rather wishy-washy one. The problem is that they're at 100% occupancy rate all the time. It's not going to make any difference.
Mr Wiseman: So you don't really know if you're getting more.
Ms Don: I think what the shelters are telling us is there are more phone calls, there are more requests for information, more requests for referrals.
But I think the other part of that answer is one of the concerns we've had from the beginning. It's exactly what you're asking: Are we going to be able to provide the services that we pretend are there by the advertising? I do think that the last few years the direction of the advertising hasn't been as strongly on women getting out if this is what's happening; it's been more towards men taking responsibility for their actions, and I think that's good.
The Acting Chair: Thank you, Mr Wiseman. Mr Phillips.
Mr Phillips: Does your organization represent all of the shelters in the province?
Ms Don: Pretty well.
Mr Phillips: And how many would there be?
Ms Don: We have 87 shelters. We have a few more that actually are still associate members, but they have only been open for the last couple of years.
Mr Phillips: That's essentially all of the shelters in the province, 87?
Ms Don: Yes.
Mr Phillips: And how has that grown over the last two to three years? How many new shelters would we have, just roughly?
Ms Don: Well, let me put it this way: When we first formed this organization in 1977 we had seven. By 1982, when we appeared before this government, we had I believe 22 shelters. Since 1984-85 there's been an incredible influx. I don't know if you remember; the family resource centres were opened at that time. There were 14 of those that all opened -- was it 1986? -- in 1986 or 1987. Since then and since 1989-1990, since the CMHC haven project we've had quite a number more opening, so that we're now at a total of --
Mr Phillips: A total of 87. Is that right?
Ms Don: Yes.
Mr Phillips: And just in terms of some idea for us of the kind of resources we're talking about -- I know that in your report you said, well, that's for us to find out, but can you just give us some idea of how much money currently is allocated and what may have happened over the last four or five years to that, just so we have some idea of what we're talking here?
Ms Gregor: I don't know how much money is being poured into the shelter, to support shelters and second-stage housing programs now. I know that some shelters, as has already been stated, are operating with outreach workers, with court advocates, with public educators etc. Some are just operating with the bare essentials. In terms of how much it's costing now and how much we're proposing it should cost or how much money should be put in, I can't give you any solid figures.
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However, with more public awareness I think what needs to be clarified is that we do get more phone calls and we do get more requests to go out and do public education. We do have community women who don't come to the shelter but call us on our crisis lines, so the demands on our service, as Trudy said, which people think is there -- and it's not properly funded; we don't have the staff -- the demands on the service increase. Unfortunately, I can't give you concrete figures.
Mr Phillips: Can you just give us the highlights of the alternative funding strategy, because frankly I'm not totally familiar with that.
Ms Gregor: Basically the alternative funding strategy spoke of minimum staffing levels at shelters and minimal services provided at shelters, and they include -- and I have a list for you here -- shelter and security for women and children, so you'd have the place where women can go, emergency shelter; crisis intervention and support to women during the time of crisis and period of adjustment, and that includes emergency transportation.
We have that emergency transportation system in Rainy River district where, if a women is in danger, we have volunteers who will attend with the police at a safe place and bring that women and her children to us. Not all shelters have that.
Ms Don: We don't have it anywhere else but in northwestern Ontario.
Ms Gregor: There you have it. There's the answer. There's nowhere else other than northwestern Ontario.
Crisis intervention and support to children during the time of crisis and period of adjustment; follow-up support to the family in establishing a stable lifestyle in the community; outreach support and referral, including crisis telephone; public education as it relates to shelter services; administration of the program and finances; court support; housing advocacy.
It's a long list, and I can say with confidence that I don't think any shelter in the province has this unless it's doing heavy fund-raising, and that takes energy in itself. I guess I find it obscene that women and children have to fund-raise, that we have to fund-raise at all to support women and children. I struggle with that fundamentally.
The Acting Chair: You've got about two minutes, Mr Phillips.
Mr Phillips: The legislation of the provision of services, what did you have in mind there?
Ms Gregor: Just as we have the Child Welfare Act which protects children from abuse and neglect, we feel that for victims of violence, particularly female victims of violence, support services should be legislated; that shelter programs should not be discretionary, they should be mandated. Just like there's a universities act for every university in the province and a hospitals act for every hospital in the province, there should be legislation that supports the maintenance and enhancement of services through the shelter program for battered women and children.
Mr Phillips: Thank you.
Ms Gregor: You're welcome.
The Acting Chair: I thank you very much for appearing before the committee today. I know that we will be taking your presentation into consideration and we'll indeed make some recommendations coming out of the whole committee hearings. So thank you for appearing.
Ms Don: We'd like to leave you with our letters to Bob Rae. We had this out last fall at our November lobby, and I hope you all have had a look at it just for your enlightenment. These were letters written by women in shelters.
The Acting Chair: If you wish to be recorded, you have to go to a mike because Hansard can't pick it up.
Ms Gregor: I'm generally told I speak loud enough I don't need a mike.
These are the stories from the battered women themselves from across the province, and they tell you what they need. They tell you we need court support workers, we need outreach workers, and they tell you that the police need to charge and the courts need to deal with these matters, so that's in the women's words themselves.
The Acting Chair: Thank you once again for appearing before us.
MUNICIPAL ELECTRIC ASSOCIATION
The Acting Chair: The next group to come before the committee, invited before the committee is the Municipal Electric Association if they're present. If you could introduce yourselves for Hansard so that we can identify who is there as we go back over our records, it would be much appreciated.
Mr Keith Matthews: I'm just returning this person's purse.
The Acting Chair: What has been the practice is if you could keep it to about 15 minutes so that there's time for interaction with the committee it would be appreciated so that they can get their questions in.
Mr Doug McCaig: Thank you very much, Mr Chairman. I think that our president, Keith Matthews, just displayed the honesty and integrity that we have from our organization when he brought that purse back. I want you to recognize that.
Mr Matthews: But I've still got her wallet in my pocket.
Mr McCaig: Good afternoon. My name is Doug McCaig and I'm the chair of Ontario's Municipal Electric Association, also known as the MEA, and the chair of the Fort Frances Public Utilities Commission -- that's just down the road from Atikokan. With me here today is Keith Matthews, our elected president, who is also the general manager of Brampton Hydro. We also have Tony Jennings, our chief executive officer, and he's here for intellectual support because he knows everything about our organization.
I want to start our presentation by thanking you for this opportunity to speak to you today. Given the condition of the economy, we feel it is very important you be aware of the views our members hold so strongly on the current state of Ontario's electricity system and the effect on the customers we serve.
I hope we can offer you some advice today that will be of benefit to both electricity ratepayers specifically and the economy in general. I'd like to pass it on to Keith Matthews at this time.
Mr Matthews: Thank you, Doug. Allow us to begin with a brief explanation of what the MEA is and who we represent. The MEA's members are the 311 municipal utilities that deliver 70% of the power generated by Ontario Hydro to 75% of Ontario's electricity customers.
Since the 14 municipalities banded together to create the Hydro Electric Power Commission in 1908, Ontario's public power system has evolved into the network that we have today. Each utility is headed by commissioners elected or appointed by their community to serve their community. This makes our members very aware of the needs of their customers, both residential, commercial and industrial.
In recent years we have seen many factors combine to drive up the price of electricity. But probably one of the largest single factors contributing to the financial problems currently facing Ontario Hydro today has been the interference by government.
I'm not singling out any one political party, but collectively and individually, these government interferences have slowly added to the cost of electricity through programs or policies designed to achieve objectives that were really not related to the delivery of electrical power.
It's our opinion that if Ontario Hydro is allowed to get back to the basics of wholesale electricity supply instead of being used as an agent of social policy, we'd all be a lot better off. There are signs that this is already happening. We hope that the appointment of such an experienced and independent person as Maurice Strong signals the government's recognition of these facts.
Given the length and depth of the recession, it's no wonder our customers are telling us that their number one electricity issue is rate increases -- we're hearing that loud and clear. Ontario has historically enjoyed reliable electricity at a cost that's been lower than most other jurisdictions, but of course in recent years that edge has been substantially eroded.
We are here today to urge that each action the government may be considering for this year's budget be carefully evaluated in light of the tremendous strain Ontario's electricity system faces today. We're also here to suggest a specific strategy that could help improve the stability of our electricity system and hopefully increase the competitive edge of our province's industries.
Before I hand the mike back to Doug and he gets into the details of this strategy, I'd just like to make a couple of further points.
You may be aware that Ontario Hydro announced there would be a 7.9% increase in wholesale electricity rates for 1993. The actual increase for the cost of power to the municipal utilities wasn't 7.9%; it was an average of 8.2%. Yet the increases that our members are passing on to their customers this year averages only 6.9%. We've tightened our belts and we've found ways through various efficiencies -- delaying projects and other means -- to help our customers out. When you consider the fact that 80% to 90% of our costs are for the purchase of power from Ontario Hydro, which leaves us very little room to manoeuvre, then these achievements become even more impressive, and for the same reason, please understand that this feat could not be easily repeated.
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At the same time, we've been urging Ontario Hydro to reduce rate increases, and under Mr Strong that organization has taken a number of unprecedented steps to reduce costs. They've already frozen hiring and cancelled some major projects, and Mr Strong is expected to announce even further spending cuts in mid-March. According to recent announcements by Mr Strong, $1 billion must be cut from the corporation's $7.4-billion annual operating budget to allow increases at or below the cost of inflation in coming years.
So the municipal utilities are doing their bit. Now Ontario Hydro appears to be responding to us and to customers across the province. It's now time, we suggest, for the government to take a turn in helping to reduce Ontario's electricity bills. I hand it back to you, Doug.
Mr McCaig: Thank you very much, Keith. I'd like to point out before I proceed with the formal part that just about everything that is being presented here has been presented to the government before by just about every one of our 312 utilities.
There are two areas of hidden taxation where rate reduction can easily be accomplished. I say "easily" not because I want to ignore the revenue shortfall that the Minister of Finance must deal with, but because these two simple decisions can be made in a straightforward manner.
The first area is the water rental charge. I don't know if you're familiar with it, but this is the fee the government places on the water that passes through Ontario Hydro turbines. The second is the debt guarantee charge that the government introduced in 1990. While there may be some value to this charge, there's no indication it's as high as the one half of 1% that's now being charged on the $35 billion of Ontario Hydro's debt.
Combined, these charges represent more than $250 million that's being borne by our ratepayers. I'd like to point out to you that $83 million represents 1% on the electricity bill. If the government were to lift these fees, it would reduce Hydro's wholesale rates by as much as 3%. We think it would send the right signal to all Ontario Hydro's ratepayers that the government is willing to do its part to help keep Ontario competitive.
Finally, I should add that the MEA was pleased with the Ontario government's response to two issues: the federal GST and the recent market value assessment proposal submitted by Metropolitan Toronto. In both cases, decisions were taken that helped avoid placing an additional burden on electricity ratepayers. We appreciate the government's acknowledgement that there can be no additional costs, hidden or otherwise, placed on Ontario's electricity bills. However, the federal government and Metro Toronto have not forgotten these issues, and they may well be brought up again. We urge the government to stand firm on your positions on these matters.
Mr Chair, this concludes our formal presentation. We now welcome any questions that come from the committee. Thank you very much.
Mr Wiseman: Thank you for your presentation. I have a number of questions. Before I start, though, I sat on the committee that listened to the presentation of Metropolitan Toronto on MVA, and I think that one of the things that struck me about the Hydro issue, as well as the other corridor issues, is how counterproductive their thinking was in terms of those kinds of taxes, and to compound that in terms of the railways and hydro, to think that Metro Toronto could impose an assessment burden within its boundaries that would impact on taxpayers throughout the entire province, to me was not what I thought was in the spirit of what market value assessment or what the reassessment should do. I will tell you now that I will not vote for any market value assessment proposal that comes from Metropolitan Toronto to this Legislature that will impose a burden outside of Metropolitan Toronto in terms of having revenues and taxes and increased costs come from my constituents, so you can take that one to the bank.
The Chair: Mr Wiseman, stay on the subject, please.
Mr Wiseman: That is. It's right in their brief.
The next thing is a couple of questions in terms of costs. In my two municipalities, Ajax and Pickering, there are two: the Ajax Hydro-Electric Commission and there's the Pickering Hydro Electric Commission. I'm starting to see more and more people send me in notes and letters about "Why do we need two?" Both of them have built brand-new facilities, and they're saying, "Wouldn't it be more cost-efficient to have one?" I wonder if your membership is looking at perhaps that angle of cost-cutting.
Mr McCaig: Being the expert politician that I am, I'm going to deflect that question to our CEO over here.
Mr Tony Jennings: Thanks a lot. The current legislation and the past practice has built the municipal utilities around the municipal structure. There are cases, in Waterloo region, for instance, where the municipalities have gotten together and the utilities serve more than one municipality.
There have also been some studies done recently in some of the county studies that raise some concerns on the other side. The question is how remote you want the decision-making from the people who are voting for, or in some cases appointing, the commissioners, and how far you want to travel from your work centre. Northumberland, for instance, was talking about something to cover the whole Northumberland area. You either are going to build the same buildings and have them managed from a more remote setting with less local variation, probably, or you're going to have response times reduced.
There was a Hogg report done back in the 1970s, or what's called the Hogg report, which looked at it and could come up with no firm rules as to what the optimum size was. Certainly we have some small utilities that need a fair bit of support, but there are no easy answers. Keith may well, from direct experience --
Mr Matthews: Back in the late 1970s, in the region of Peel, there were some studies done under the Hogg report and there were some rules in the Hogg report. The studies looked at the alternatives: having three lower-tier utilities, Caledon, Brampton and Mississauga, or having a region of Peel utility. From the projections of customers and costs etc it appeared that there were some marginal cost savings to the customer if you had an upper-tier utility, but they were so small, and the political will just wasn't there to implement that. Each municipality very, very strongly wanted to retain control over its utility.
The Chair: A real quick question. Mr Phillips.
Mr Phillips: Your recommendation on how you might improve the rates would cost the Treasurer $250 million, and I think all of us appreciate the challenge that the Treasurer has in trying to manage the finances, and $250 million is a fair amount of money. Realistically, there are relatively few new sources of revenue. I think virtually everybody has come before us and said, "No new taxes," and I think that might be your message, at least in some of the other lives you lead. What's your advice, then, if in fact the Treasurer can't raise more taxes. Is it that this is a worthwhile increase in the deficit, to take the deficit up another $250 million, as it it would be seen by your organization, that it's worth that amount of spending?
Mr McCaig: I think I'm going to answer that partially and then I'll pass it on to Tony, because I know he can add to it. Looking at it from the perspective of encouraging industry at this particular time, there's a great deal of concern on the part of industry in this province with the cost of electricity. I think you're all very well aware of the fact that last year Hydro Mississauga had a great campaign on about getting the rate reduction down, because it was losing industry because of the rates. Now, I'm not going to jump up and down and say it's all because of the rates, but there's a definite play in there.
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If you want more commitment on that, I would suggest you look to the northwestern part of the province where the paper mills are. This is the hue and cry we're hearing from them, about the cost of electricity. I realize there's a focus on taxation, but I can also suggest to you right now that there is more of a focus on the electricity rates. With that, I'll pass it on to Tony.
Mr Jennings: Let me try a slightly different angle on it from a personal perspective. First of all, to answer your question specifically, yes, I think our members would say that it's a good investment, at least on an interim basis. There are some signals that are necessary etc, but the supply of electricity is the only public service that consistently carries its own weight financially and has for years. It's illegal, under the legislation, for tax dollars to be used. It's similarly illegal at the municipal level for the revenues derived from electricity sales to be used for other purposes.
Electricity has to run like a business. It's also something that is increasingly an essential service in our world today and it's one that the local consumer, whether it's a business or a residence, has significant control over, so they can do what they can. One assumes that most of them have some sensitivity to that, particularly the large businesses that Doug mentioned that are worried about job loss.
Given that, as opposed to the general tax roll, the general debt, where there are quite a wide variety of options -- none of them easy, I'm sure, but still a wide variety of options that the Treasurer can look to for cost control -- it seems easy from our standpoint.
Mr Phillips: Just a couple of questions: Of the $250 million, how much of your revenue comes from industrial versus residential? The second question is sort of relevant, I hope. One of the issues on the horizon for us with Hydro and electricity is many organizations looking to generate their own power. This puts, I think, Hydro in a very tough spot. It puts the government in a tough spot and it's a tough one to resolve. I realize it isn't exactly on the budget today, but indirectly it is. I wonder if you've any advice for us on how you would --
Mr McCaig: Yes, we do. On the second question first, our particular organization is trying to negotiate right now on that very issue. We don't believe that in the province of Ontario at this particular time with the excess power, anything should happen on the NUGs, on the non-utility generation. But if it does happen, we would strongly recommend that it be open to bid to all the municipal utilities to put in for it so we make it fair and even. Also, it would be democratic principles at work. Those that could give the best deal would get it if there is an excess of power. We're in the process of doing this now. That's our position and that's the one that we're going to stay with, I think.
Mr Jennings: Let me quickly respond. The current situation, unlike a few years ago, is that we've got more power than we can sell, or Ontario Hydro has. Ontario Hydro was formed and still acts as a pool for the municipal utilities. So if somebody buys their power elsewhere -- and no question, there are situations where they can get it cheaper -- the rates for everybody else in the province go up. It's our belief that there's a lot of cost control that can be done first to bring it down, and once the economy picks up and we get back to the kind of economy we had a couple of years ago, then there will definitely be opportunities for examining other supplies etc.
Mr McCaig: About the question on how much --
Mr Matthews: I think it's about two thirds industrial and one third residential.
Mr Arnott: Thank you gentlemen for your brief. I share your concern about Hydro rates. I know many people in the riding of Wellington share that concern as well. You seem to be quite optimistic about the prospects for stability of rates if Mr Strong's planned cuts are able to be implemented. You said $1 billion worth of operating budget cuts out of a present budget of $7.4 to keep rate increases at the rate of inflation for the next coming years. Do you have any suggestions where Ontario Hydro would best be able to cut in terms of operating costs?
Mr McCaig: Do you want to handle that?
Mr Matthews: We have made presentations to Mr Strong's task force. We haven't been able to put any specific numbers on any of the suggestions we have given and, frankly, I don't know if our suggestions would add up to $1 billion, but the variety of issues that we have presented, I think, have been listened to. Some of the examples that were given were to stick to the core business. On a lot of the other functions Ontario Hydro traditionally has been responsible for such as the regulatory part of the business, the electrical inspection, the demand-management aspect of the business, maybe they should be separate entities.
Mr Arnott: Just over a year ago your association was very, very concerned about the planned demand-management initiative, $6-billion expenditure over 10 years. Are you satisfied to the extent they've retreated from that rather ambitious goal?
Mr McCaig: I would like to point out a couple of things. You asked, does the MEA have some specific suggestions about how to reduce the operating debt and this sort of thing? I think we have had them for several years now and they've been at the Ontario Energy Board hearings for everyone to see. Unfortunately, we never got the necessary ear from everyone that we should have gotten.
We were suggesting, years ago, higher rate increases, and I'm going to quote it from our economist, "so our children did not bear the brunt of our mistakes." Unfortunately, ladies and gentlemen, we weren't listened to. The grandchildren's era is here, whether we like it or not. That is where the problem lies, that there was not enough of an ear being given to the people who really know the business. We represent 75% of the output of Ontario Hydro. I have to admit, and as chairman of this group this is the last presentation I'll be making on behalf of the MEA, it's always been neatly brushed aside. We've been given lipservice and I've seen it happen several times this year.
I have to say to you that the core of industry in this province is energy. If we have industry, we have jobs. The gentleman was mentioning taxation versus rates. The more jobs we have, obviously we're going to have more of an enjoyment on the taxation and the rates, but it disturbs me as an individual -- and you are hearing from Doug McCaig from the bush, Fort Frances -- that we do not, as a group, get enough of an ear from the government or anyone else. I honestly feel that not so much myself, but the group we have, the CEO and his staff, are much more the experts on energy throughout this great province than anybody else. I'll leave you with that.
The Chair: Time has expired. Thank you for your comments and your brief.
Mr McCaig: Thank you very much, Mr Chairman.
The Chair: Have a safe trip home.
Mr McCaig: I'm staying for a while.
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ONTARIO NATURAL GAS ASSOCIATION
The Chair: The next group we're going to hearing from is the Ontario Natural Gas Association. Would you come forward, please. I'd like to welcome you to the standing committee on finance and economic affairs. If you don't mind, just before we get started, would you introduce yourselves from left to right.
Mr Rudy G. Riedl: I'm Rudy Riedl. I'm vice-president, gas supply, for Consumer's Gas and I'm chairing the gas supply committee of ONGA.
Mr Bernard Jones: I'm Bernie Jones. I'm an independent consultant who's working on a kind of staff relationship with ONGA.
Mr Michael Bermon: My name is Mike Bermon. I'm senior vice-president, finance and regulatory affairs, at Union Gas. I'm also first vice-chairman of the Ontario Natural Gas Association.
Mr Gary Lowes: My name is Gary Lowes. I'm the senior director of finance for Centra Gas Ontario. I'm here as the chairman of the finance committee for the Ontario Natural Gas Association.
The Chair: The other gentleman back there, does he want to take a seat over here? Is he going to be involved with the presentation? Would you like to take a seat up here, please, and introduce yourself.
Mr Paul Pinnington: My name is Paul Pinnington. I'm the president of the Ontario Natural Gas Association.
The Chair: Welcome. We have a half an hour until 3:30. In that period of time, if you can leave some time at the end of your presentation for members of the committee to ask questions, we'll be starting off with Mr Sola as soon as we're done. You may begin.
Mr Bermon: Perhaps I could just give a few introductory remarks on behalf of the members of the association. We have prepared a brief entitled Increased Competitiveness for Future Prosperity, 1993. This document has been distributed to members of the committee. Mr Lowes has prepared an overview of the brief and he will take us through that in a few minutes.
By way of introduction, if I can be brief, the Ontario Natural Gas Association is an industry organization with over 330 corporate and individual members representing natural gas transmission, storage and distribution companies, producers, marketers and brokers, and individuals, all of whom serve Ontario's multibillion-dollar natural gas industry.
With your permission, I would ask that Mr Lowes now proceed to take you through the brief.
Mr Lowes: Thank you, Mike. This is the sixth annual brief on Ontario budget matters submitted by the Ontario Natural Gas Association or ONGA. Our primary focus continues to be the health of the provincial economy and the government's fiscal situation and public policies.
In last year's brief ONGA proposed a number of public and private sector actions to stimulate economic recovery. The main theme of our 1993 pre-budget brief is the urgent need to improve the competitiveness of the Ontario economy for future prosperity. Lower interest rates and the lower external value of the dollar will help stimulate the economy but they alone will not be sufficient to restore prosperity. Two additional requirements are increased economic productivity and public debt reduction.
ONGA has consistently stressed in past submissions the importance of raising productivity, a priority that's now widely recognized. For several years ONGA has warned that a slowdown in the Ontario economy would drive the budget deficit to well over $10 billion unless actions were undertaken to control spending. The debt burden is already too high and is reaching crisis levels.
The Ontario natural gas industry is making a contribution to increasing productivity through conservation, efficiency and a more cost-effective use of energy. There exists additional scope for natural gas to accelerate economic recovery and facilitate sustainable development.
The areas we'll address today, and which are discussed more fully in the brief submitted to the Treasurer and to this committee on February 15, are:
-- economic outlook with particular emphasis on the productivity problem;
-- Ontario finances and the debt problem and strategies that could be implemented to resolve this problem;
-- taxation, with particular reference to the topics addressed by the working committees of the Fair Tax Commission;
-- energy and energy competitiveness and the role that the natural gas industry is playing and could play in ensuring the ongoing competitiveness of Ontario.
Turning to the economy, ONGA believe that the Treasurer's medium-term forecast of 4% growth for the economy is optimistic. The pace of recovery has been slow and there continues to be a great deal of uncertainty over future prospects. ONGA expects that sustained high unemployment will be a serious drag on the economy and we forecast that the Canadian economy will grow in the 2.5% to 3.5% range for 1993 and that real growth over the next five years will average 3% to 3.5% per annum in both the Canadian and Ontario economies.
The Treasurer would be well advised to plan on lower economic growth when assessing the affordability of expenditures. Key issues that need to be addressed are low productivity growth and high public debt.
In the past ONGA has stressed the critical importance of increasing the productivity of the Ontario economy to improve our economic competitiveness and to raise our standard of living. As shown on this table -- and I apologize that it's not as clear and as big as it could be -- Canada is losing ground in the area of productivity. The total factor productivity of the Canadian business sector has not grown at all since 1979. In comparison, other G-7 countries, with the exception of the US, have shown significant gains.
Clearly, Canada and Ontario must invest more in people, physical capital and technology in order to raise productivity and to be globally competitive.
ONGA has identified the following recommendations to increase productivity:
-- keep to an absolute minimum the number of new regulatory measures that increase business costs;
-- place a priority on private sector research and development and encourage more R&D in Ontario by foreign-owned firms;
-- support measures to improve Ontario's energy security and energy options that lower energy costs and help the environment;
-- continue to support worker retraining and skills development and work to secure improved federal-provincial trust and relationships in this very critical area;
-- promote a positive and attractive environment for business; and
-- examine whether or not enough is being done to promote Ontario-produced goods and services and to sell Ontario as a location of choice for new investment.
ONGA is pleased with the positive steps that have been taken by the government on research and development and innovation, including broadening eligibility for the R&D superallowance and revamped research programs. We are also encouraged by the funding for worker training programs. An adequate supply of skilled labour is needed to attract business investment. ONGA cautions that ongoing performance reviews and audits of these programs are necessary to ensure their goals are met. This is unlikely to happen without a higher level of federal-provincial and industry cooperation.
Increased investment must also be encouraged by creating a strong investment climate. While progress has been made, Ontario is still vulnerable on skilled labour availability, labour costs and incentives and is becoming increasingly exposed on high energy costs.
In summary on this issue, the Ontario economy is crawling out of the recession and the medium-term outlook is only for modest growth. Therefore, every effort must be made to increase sensible investment on worker and management skills, plant and equipment, R&D and infrastructure required to boost productivity over the long term and to create a more positive environment for business investment.
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ONGA strongly believes that Canada and Ontario have a critical problem with public debt. Sustained economic growth will not be achieved without substantial progress in reducing the debt burden.
As shown on this table, Canada's public debt ratio has risen dramatically since 1983 and is now totalling 50.9% of nominal GDP, the highest of all G-7 countries with the exception of Italy. Also, as this next table shows, Canada's total public and private international indebtedness as it relates to GDP is extraordinarily high at 40.4%. As shown on this table, Canada's indebtedness has reached unsustainable levels.
It is clear that we cannot go on creating budget deficits. The Treasurer has noted that economic recovery alone will not solve the province's financial problems. Based on the Treasurer's own economic forecast and current taxation policy, the operating budget deficit would continue to widen in the absence of spending cuts.
Last year ONGA recommended a budget aimed at restoring business and consumer confidence and which avoids tax increases. Business and consumer confidence is still low; therefore, we repeat our recommendations that the 1993 Ontario budget must avoid tax increases.
Tax increases would dampen economic recovery and result in net economic losses. ONGA is concerned that ad hoc expenditure cuts are insufficient to balance the operating budget. ONGA proposes the following measures to bring control over the mounting debt problem:
-- a requirement that the operating budget be balanced within three years, with no net tax increases;
-- a requirement that, once balanced, if the operating budget subsequently runs two consecutive annual deficits, the level of operating spending be required to be automatically frozen until the deficit and any borrowing connected with it are eliminated;
-- once the account is balanced, the setting aside of funds from operating revenues to pay off, over a 15- to 20-year period, that portion of the existing debt reasonably attributable to accumulated operating budget deficits;
-- a requirement that a portion of budget revenues sufficient to retire debt incurred for capital investments be placed annually in sinking funds.
A commitment by the Ontario government along these lines would send a strong message and dramatically improve public and investor confidence.
The mounting debt raises a serious question of intergenerational equity. ONGA maintains that borrowing a portion of the funds required to finance capital spending on an economic and social infrastructure that benefits present and future generations is justifiable but that government borrowing to finance current operating spending is wrong.
To conclude this section, in light of only anticipated modest growth over the medium term, strong action is needed to eliminate the Ontario budget deficit, a necessary step to resolving the Canadian debt problem and avoiding undue hardship on present and future generations.
Turning quickly to the area of taxation, the Fair Tax Commission has received reports from all its working groups. ONGA wrote to the Fair Tax Commission in August 1992 giving the natural gas industry's reaction to reports on the corporate minimum tax, tax treatment of real estate gains, retail sales tax and goods and services tax harmonization and the environment and taxation.
At that time we argued, and we continue to argue, against a new corporate minimum tax and against a land speculative tax and we argued for greater harmonization of the federal-Ontario sales taxes and for balanced use of regulation and taxation in the achievement of environmental goals.
ONGA believes the case for another corporate tax is weak. Deferral of taxes through tax preference strategies can help to achieve socially desirable economic goals. Imposition of another form of minimum tax would water down the economic benefits of tax preference and discourage capital investment activities. ONGA understands that the Treasurer will shortly be issuing a discussion paper on the corporate minimum tax; however, ONGA firmly believes that on the basis of the evidence, the books should now be closed on this subject.
In the matter of real estate gains taxations, there may be some merit in the future federal-provincial review of the overall taxation of real estate. However, the remarkable reduction in property values over the last several years and sharply curtailed inflationary expectations surely place the taxation of speculative property gains at the bottom of the tax policy priority list.
In regards to retail sales tax and GST harmonization, ONGA has, subject to one caveat, agreed with the working group that base broadening should be an interim step to full harmonization of the taxes making compliance easier and reducing administrative costs. Our caveat was that residential energy, which is a necessity like food and shelter, should not be taxed.
The Environment and Taxation Working Group of the Fair Tax Commission released its second report in December 1992. ONGA agrees with this group's observation that the primary purpose of environmental tax incentives and disincentives is to modify behaviour to achieve environmental goals, not to raise government revenues.
ONGA agrees with the "polluter pays" principle and that tax instruments should not be seen as substitutes for effective regulation and should be used to complement regulations. ONGA believes that Ontario should proceed cautiously in this area to avoid undesirable economic consequences. We agree that the creation of a special task force to begin to flesh out possible tax options could be a useful step.
On the issue of energy taxes, carbon taxes and ad valorem taxes, it is ONGA's view that the provincial and federal governments must strive to better coordinate environmental programs. Under no circumstances would it make sense for an individual province to go it alone and impose energy and carbon taxes. It should be noted that Ontario natural gas industry is very active in the area of energy conservation, which is good for the environment. The industry is developing more efficient technologies and is promoting natural gas vehicles and the use of natural gas as electricity generation.
With respect to local government taxation, the association is still reviewing the working group's recommendations. However, ONGA cautions against major reforms and property assessment pending more information on the impacts of fairness and on the economy.
ONGA's overall impression is that, with the exception of local government taxation, the taxation system in Ontario is working relatively well and is reasonably fair. Improvements on the Ontario tax system can be made; however, future changes must neither increase the overall tax burden nor impair the competitiveness of the provincial economy.
Ontario is a heavy energy user and secure supplies of energy at reasonable cost are essential for our economic competitiveness. ONGA believes that Ontario has entered a higher-risk, higher-cost era in electricity demand and supply.
ONGA, at the recently terminated Ontario Environmental Assessment Board hearing into Ontario Hydro's demand-supply plan, tabled evidence on the options that natural gas provides.
Load displacement gas-fired cogeneration can help companies and industries fighting for survival to stabilize and reduce their costs of electricity.
Load displacement non-utility generation will assist companies and industries to remain globally competitive, which provides stability in investment, jobs, income and tax-revenue generation.
Purchase non-utility generation and fuel switching to natural gas will help boost economic recovery by reducing costs. Ontario industries must have reliable electricity and other energy supply at reasonable cost in order to stay competitive.
The use of natural gas as a substitute for electricity has many benefits:
First, all of these natural gas options produce substantially lower emissions than coal-fired generation and produce no solid waste; they reduce the need for competitively damaging energy and carbon taxes.
Second, the gas options are highly energy-efficient and thus help to conserve energy by using less energy to produce power and heat.
Third, their availability on relatively short lead times enables electricity demand-supply imbalances to be corrected incrementally without the excess and waste of scarce human, material and financial resources associated with megasized electricity supply projects.
Fourth, energy consumers are given a wide range of choice of energy-conserving options to meet their particular needs and can choose the site-specific options where they meet these needs.
A key feature of gas options, while providing environmental and economic benefits, is that they can enhance Ontario's energy security by reducing demand on the Ontario Hydro system and by diversifying the fuels and technologies used in electricity generation.
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Overall, deregulation of gas markets has markedly enhanced the ability of the Ontario natural gas industry to help reduce the risks of electricity demand-supply and to help provide secure, reliable supply at the lowest feasible cost over the long term. The overwhelming response from the private sector to Ontario Hydro's initial request for proposals for non-utility generation is clear evidence of this.
For several years ONGA has documented the growth and potential of the natural gas vehicle market. It has been estimated that the NGV industry in the 1991-1998 time frame will contribute more than $800 million directly or indirectly to provincial GDP and generate almost 15,000 person-years of employment.
ONGA cautions that the NGV market is still immature and continues to need government and industry support if it is to deliver the potential, economic and environmental benefits.
To conclude this section, secure energy supplies at reasonable costs are essential to Ontario's economic competitiveness. With Ontario entering a high-cost, higher-risk era in electric power, it is fortunate that a range of natural gas options are available that can reduce energy supply risk and lower costs. These natural gas options will provide substantial economic benefits to Ontario provided that government and regulators promote competitive energy markets and that government supports the development of NGV.
In summary, the outlook for the economy is for modest growth. Without substantial future gains in productivity, the Ontario economy will continue to lose competitive ground. Without concerted, trilevel government action to cut the public debt and reduce reliance on foreign borrowing, the investment required in plant and equipment to make gains and productivity relative to our trading partners will not be forthcoming.
The 1993 Ontario budget should avoid tax increases and a deficit/debt reduction plan along the lines of the one proposed in this presentation should be implemented. Major changes to the Ontario tax system are not warranted at this time. With few exceptions, fairness does not appear to be a substantive issue. The economy needs a period of tax calm. Natural gas options are available to help Ontario energy consumers lower energy use and contain energy costs, thereby assisting industrial competitiveness. Thank you for the time.
Mr Sola: Thank you for a very interesting brief. You make quite a few very profound statements that I think we all agree with, but I think you went through it so quickly that I'd like to ask one key question, and that is, how? I think you've skimmed over it, but on page 1, in the foreword, you say, "Two additional requirements" discussed in this brief "are increased economic productivity and public debt reduction."
I think we all agree with it, but I think we need a more detailed explanation. First to see whether it's feasible to implement. You know, quite often in this committee, we get a lot of proposals and then we are left to juggle a dozen different balls and try not to fumble any. On page 5 it says that ONGA recommends that the government propose and that the Legislature implement "(a) a requirement that the operating budget be balanced within three years, with no net tax increases." Again the question is, how, with a capital H.
Mr Jones: Perhaps I could begin the response. Let me preface my remarks by saying that if you were to take the existing debt levels of governments in Canada and project them for seven years to the year 2000, the public debt reaches approximately $1 trillion. There is no sign, at the moment, that that trend is being reversed. A debt of $1 trillion means that for every man, woman and child, the debt then is equivalent to something over $30,000. That is a terrible burden to leave for future generations in addition to the burden that we're leaving for the correction of environmental problems and the demographic problem that's feeding through the system. Nobody understands yet the interaction between levels of wealth and the impacts of demographics on the demand for public services.
The point is that there's no flexibility left in this system to respond to the kind of major challenges that are going to be coming in the future. So what we've done, in looking particularly at the government situation, is to say that clearly something new is required. We're not experts in the operation of the Legislature and the government -- that's your business -- but we do feel there are some essential elements of a plan that, even if they're not exactly what we've said -- and in some ways I think we'd be surprised if they were -- we do feel that these constitute some basic principles that would have to be addressed in a kind of plan like this.
If you say, "How is it possible to cut $3 billion to $4 billion perhaps from spending for each of the next three years," we don't have the answer. There's nobody in this room who has the answer. The point is that it's going to be very important that over the next three years people begin to find the answer, and it is going to mean effectively that members of society, hopefully with the most disadvantaged protected, are going to have to take less. Speaking for myself, and this is just a personal observation, I've seen an income effect in my own family which is quite dramatic, and it would not be inconceivable, for example, that instead of freezing salaries in the public service there would be cuts in salaries in the public service, cuts in salaries for teachers and so on.
It requires some pretty profound action. We're busy enough as business people trying to deal with the second issue of productivity, but we do say that the problem is that serious.
Mr Carr: I appreciate that and the comments, and as you probably know, the debt is even worse when you figure in factors like Ontario Hydro, which aren't included, and the unfunded liability of WCB, which is $11.3 billion and it goes up $100 million a month. When you add that all in, I hate to tell you what the number is, but it probably doubles it, so you're looking at different figures, but it will hit probably $60 million for every man, women and child, so it's even more discouraging.
The problem you've got, and I'll sum it up very briefly, this government got elected last time by saying, "We can have all the spending, but don't worry, somebody else will pay." The impression they gave is the corporations would pay a corporate minimum tax -- as you know, we only get 7% of our revenue from corporations -- and the rich would pay. But when the last budget came they put a surtax on anybody making $53,000, because the people at the high end don't get you very much revenue. So basically, a lot of people thought we could have that spending.
In the two years that I've been here, I've seen a big change in this government's attitude towards spending, as well as in United States, all the way around the world. But when it comes to spending, how we need to do it is to change the way even this budget operates.
I wanted to see what you would think of something like this. Instead of doing what we do now, which is people coming in and presenting ideas, if the government, any government, was going to say, "We are going to spend, based on what our revenue projections are, to balance the budget, $40 million, $30 million, $29 million, whatever it may be; now, Mr and Ms Public, you tell us how we're going to spend it," so the process isn't based on numbers last year with inflation but that we take a look at the bottom line, expenditures that we can afford, would you advocate that that's the way the government should do it? Should the Treasurer come out pre-budget and say, "This year the province, based on the revenue projections, is going to spend $45 billion and now the public can tell us where we're going to spend it," and then worry about whether the cuts are going to be in what area? Would you like to see the whole way the budget process -- and just very quickly to add, that's how Britain, John Major's government, ended up doing it last time -- would you be in favour of a program like that, and do you think that would help, or do you think we're just skirting around the issue, not making the tough decisions, by doing that?
Mr Jones: The first point I make is I guess that government cannot abdicate its responsibility to effectively in the end make the hard decisions. The other thing is that it would seem to me that a minimum requirement right now is that spending is frozen for three years, the level of spending is absolutely frozen, which begins to address your point. That's one message that goes out and it says, in effect, that there will be no increase in spending and that position will be held until revenues catch up. It will take longer if the economy remains weak; it will take a shorter period of time if the world economy recovers and Ontario enters another boom period, but we don't know how long that's going to be.
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As far as the dialogue with the public, the government has been reaching out and it has had all kinds of discussions with various interest groups in the community. I don't know what kind of information they're getting back -- I mean, I could speculate or guess, depending on where people are coming from. It'll sound naïve, but I think it really is almost kind of a job for the Legislature to focus on this problem and, with the government, try to work out a solution.
Mr Carr: One of the areas that --
The Chair: I'm sorry, Mr Carr. I have to go on. Ms Harrington.
Mr Carr: Oh. Thank you very much.
Ms Harrington: Thank you very much for your presentation. I think you really are looking at the heart of our economy, and that is productivity and debt reduction, and you're certainly not just dealing with your own interests but everyone's interests. I appreciate your steps to increase productivity. I think you're right on with all of those, the research and development, the training, the promoting of consumer confidence.
I'd like to zero in on what you have said there which says, "ensure energy security," and you follow that by saying "lower energy costs can help the environment." I think we really have to learn from the past, and I want your opinion on this. I think it's fair to say that 10 or 15 years ago we had industry probably coming to this Legislature or lobbying Hydro and government to get into megaprojects to ensure energy security in the future. That's the way things were thought of, probably, in those days; we must ensure supply for the future of Ontario. It seems to me now that there's a whole different look at this, and that is that smaller things help the environment but they're also good for industry, sort of cottage-type industry, and I'd like to have you address that. Has there been a complete change in thinking, and is smaller sometimes better than larger?
Mr Jones: ONGA presented evidence to the environmental assessment board hearing and to Ontario Hydro's demand-supply plan. I'm reading the latest document prepared by Ontario Hydro on the options available to it for reform, and it looks as though Hydro agrees totally in terms of the advantages that natural gas options have. They can be put on stream in much shorter lead times; they come in a much greater range of sizes, so that you can have a better matching of supply and demand. If you forecast demand at a certain level and it turns out to be either higher or lower, you can quickly gear up, assure the lead time options, to fill or close down or reduce your supply. So it's much easier to balance things. If you get into the large megaprojects like Darlington, it takes so long to get them on stream that by the time you're well into that process, if conditions change, you're stuck. At least you're stuck when demand is on a downtrend rather than an uptrend. They're not the only arguments. Even on nuclear technology, Hydro is making a case that now it is able to build smaller units than before.
So I think from the point of view of the economy, it's important because you can diversify, you can put the power closer to where it's needed and you can cut the demand for transmission lines and that kind of thing and you can also, relative to coal, using gas, dramatically reduce emissions. So that's an additional advantage, and we have copies of that available to the committee if you'd like to have that evidence which could be helpful.
The Chair: Okay. Thank you, gentlemen, for your presentation. We've run out of time.
Mr Bermon: Thank you, Mr Chairman.
PROPANE GAS ASSOCIATION OF CANADA INC
The Chair: The next group to come forward, I guess being in close to the same business, is the Propane Gas Association of Canada. Would they come forward, please? I guess you could say you're brothers in business, then.
Mr René Chartier: Cousins only.
The Chair: Cousins only. Not that close a relationship, eh? I'd like to welcome you to the standing committee on finance and economic affairs. We have until 4 o'clock and in that period of time -- my watch is a little bit slow here, so don't worry about that one up there. Perhaps you wouldn't mind, before you get started, introducing yourselves for the purpose of Hansard and members of the committee. You may begin.
Mr Chartier: My name is René Chartier. I'm director of government affairs for the Propane Gas Association of Canada, and our offices are located in Oakville.
First of all I'd like to thank Mrs Tonia Grannum and her colleague Monica Marshall, your staff, Chairman, who arranged this meeting for us.
My colleagues with me today are the president of Budget Propane from Aurora, Ontario, Mr Bob Callow; the managing director of the Association, Mr Bill Kurtze; and the president of Carling Propane, Mr Alex Goerk of Rexdale, Ontario. Mr Bill Kurtze will be our spokesman this afternoon.
The Chair: Okay, thank you. Go ahead.
Mr Bill Kurtze: On behalf of the Association and its 165 member companies, I would like to thank you for the opportunity of appearing before you today. We had the honour and privilege of appearing before, I guess your predecessor, or maybe certain of you last year, and at that time we provided a report card on the propane industry in the province of Ontario. I would say the report card for the industry today is not too much different than it was a year ago, or for that matter, probably not too much different than it was in 1980.
In 1980, we saw some 3 billion litres of propane sold per year. Today, we see approximately the same thing. What's changed is the markets in which the product is sold. In 1980, sales were almost exclusively into the traditional heating-cooking markets stretched across the breadth and depth of this province. Today, fully 40% of the sales are in the auto propane market. In the last 13 years, this market has grown from essentially zero to the point today where there are some 170,000 vehicles that currently traverse Canada's roads; in excess of 60,000 right here in the province of Ontario.
In terms of our overall refuelling infrastructure, the last 13 years have seen industry spend upwards of $200 million, putting together its refuelling and servicing conversion infrastructure, which today consists of some 5,000 outlets across Canada, and 1,700 here in the province of Ontario.
I hasten to add that the effort put forward by industry was not done alone. Governments have been, and I guess continue to be an integral part of the process. Federally to 1984, and even today here in the province of Ontario, a system of grants, sales tax credits, road tax differentials and certain research and development funds were put in place. These policies were enacted to assist this country and this province to reduce their dependence on foreign oil. Little did we know what the future held in store. What started out basically as a conservation program is today shifting to an environmental policy and could, I submit, become a major job creator and overall economic stimulant.
I submit to this committee that we are both at a crossroads. For our part, as Canada's number one and Ontario's number one alternative fuel, we must prepare for the future of propane as an environmentally friendlier alternative. This involves not only continuing our programs of developing vehicle and refuelling infrastructure technology which will allow us to meet ever increasing and ever more stringent environmental standards, but will also allow us to build a demand to a level sufficient to encourage original equipment manufacturers, be they vehicle manufacturers or after-market conversion equipment manufacturers to expand their program of building propane-powered cars and trucks.
For your part, we submit there is need to devise an act, a strategy, which will put in place an appropriate set of regulations, mandates and incentives to ensure a cleaner environment, while always recognizing the current economic constraints that exist in this province and this country.
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Our submission, Mr Chairman, committee members, proposes a method whereby both can efficiently, effectively and, as I said, in these tough economic times, we believe, at no incremental cost -- and I repeat the phrase, no incremental cost -- accomplish our collective goals. The assumptions surrounding the model that you will see in your submission when you have the opportunity to review it in detail are multifold. At the highest level, there are basically two assumptions. Firstly, what the model proposes is an alternative fuels proposal, not a propane proposal. Secondly, there is a need to involve governments, primarily federal and provincial, but governments at all levels and all government departments, primarily energy, environment and finance. It is because of the involvement of finance that we appreciate and welcome the opportunity to appear before you today.
What I would like to do in the time remaining is to very quickly review the basis of that model, and then answer any questions the committee members may have. Firstly, we believe that it is not possible for any one policy or program to adequately handle all the emissions reduction needs of a single province or country. In an attempt to provide this committee with meaningful direction with respect to alternate transportation fuels, we have crafted a general policy framework, including specific goals which will allow this province to commence the process of solving its environmental transportation problems.
As a starting point, we have chosen the Canadian government's decision to limit greenhouse gases in the year 2000 to those levels emitted in 1990. We recognize that, particularly for such areas as the Golden Triangle and the Windsor-Quebec corridor, other emissions, including ground level ozones, are of equal or greater importance when compared with greenhouse gases. We submit to you that the recommendations in the model contained herein will provide reductions in those areas as well, and should a specific model need to be created, that can be done.
Suffice it to say that one of our basic assumptions is that that segment of an economy which contributes a problem should also contribute in the same proportion to the solution. When one looks at greenhouse gases and the transportation sector, it contributes approximately 32% of overall greenhouse gas emissions. It should therefore contribute a similar level to the solution. Mathematically, when one works through all the equations, what this equates to is that the transportation sector should contribute approximately 2.4 percentage points to the overall greenhouse gas emissions reductions.
How can this be accomplished? Studies are currently showing that alternative transportation fuels, particularly the gaseous fuels, are able to contribute up to 20% to 25% reduction in overall greenhouse gas emissions. Mathematically, what this equates to is that if we're to achieve the greenhouse gas emissions reductions that this province and this country are looking for and, secondly, if alternative fuels are to be the sole contributor to that solution, purely for the transportation sector you would need to convert, to change from gasoline to gaseous fuels and other alternative fuels, some 690,000 vehicles. Overall for Canada, this would equate to some 2.1 million vehicles by the year 2000.
What our model has done is to look at the various types of vehicles in the marketplace to determine whether or not that level of conversions is reasonable. We have focused on basically three areas: (1) government and government-controlled vehicles; (2) corporate fleet vehicles; and (3) the general public, because clearly it is only through involvement of all that we can achieve our objectives.
Particularly, as we said before, in this economic climate, where Canadians are struggling to recover from the worst economic downturn since the Great Depression of the 1930s, many individuals and companies will not convert, even if that conversion is at no cost, requires no cash outlay and can be recovered from fuel savings.
If conversion goals are to be achieved, therefore, it is likely that conversion to alternative fuels will in some fashion have to be made mandatory. While we can support such a move, the support is based on the caveat that the strategy must be structured so as to place no undue financial burden on any individual or organization in question. Therefore, not only must conversions be mandated; they must also be accompanied by the most politically and economically cost-effective incentive possible.
What we've tried to do is develop a model and develop a series of recommendations which will in fact accomplish that goal. We have also directed the committee to examine not only alternative fuels and alternative fuelled vehicles, but the types of those vehicles. For example, when one looks at original equipment manufacturers versus after-market converters, when one looks at mono-fuelled vehicles versus dual-fuelled vehicles, we have structured an incentive program based on accelerating the rate at which those vehicles can be written off. We have developed a program which would focus on and direct people in those directions.
As I've said, the association has for some time been an advocate of an incentive system which would look at accelerating the rate at which individuals can write vehicles off for tax purposes. For companies, this could be accomplished as a straight write-off. For individuals, this could be done either as a reduction in taxable income or in the form of a tax credit.
Within the context of alternative fuel neutrality, we recommend the province of Ontario and this particular committee give serious consideration to a strategy which is harmonized with industry, the federal government and, for that matter, other North American initiatives.
As a strategy to improve the equity between existing alternative fuels, we have recommended a series of programs wherein the retail sales tax rebate currently in place would be the same for all alternative-fuelled vehicles. As a strategy for after-market converted vehicles, in association with the federal government, purchasers of after-market vehicles would be given a specific level of accelerated write-off, depending on the type of alternative-fuelled vehicle and whether it's mono-fuelled or dual-fuelled.
Thirdly, we would see the provincial government taking a lead in establishing and announcing these policies, not only by putting them in place with legislation but also by itself adopting a vehicle purchasing policy which favours mono-fuelled vehicles, which favours OEM-produced vehicles and which favours certain levels of after-market converted alternative-fuelled vehicles.
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Fourthly, as a strategy to improve the alternative fuels refuelling infrastructure we would also see, in association with the federal government, the province permit alternative fuels refuelling industries to accelerate the rate at which they can write off their infrastructure. This would not be of significant benefit to the propane industry. As we've said before, their refuelling infrastructure is currently in place, but clearly if we're to achieve our alternative fuels goals as a province and as a nation, we're in a situation where certain other alternative fuels must further develop their infrastructure.
In conclusion, if I can leave you with two numbers I would like to leave you with the following: If we look in the province of Ontario and look at the model itself, we're in a position where on Table 13, which you can review at your leisure, we have provided a cost-benefit analysis which looks not only at the cost of accelerated write-offs in terms of the province's share but also at the additional provincial sales and corporate income tax which would be received as a result of this program. You're in a position where there's one number and the number is 0.81 as a total benefit. Undiscounted, the cost of this program, when one looks at the cost minus the benefits, is for all practical purpose a break-even.
The second number that I would refer this committee to is the person-years of employment which would be created as a result of working towards the objectives that we have set out. Over the period to the year 2000 -- and the model takes you to the year 2000 -- you could well see some 69,000 person-years of employment that are created. To develop the numbers on this -- and we would be pleased, Mr Chairman, at some future point, if it was the desire of the committee, to give you the bases of all the numbers -- we have used Statistics Canada's models and we see some 69,000 person-years of employment between now and the year 2000. Overall, we believe the model is an alternative fuels model. It is a model that is cost-effective for government. It is a model that will look at stimulating person-years of employment, particularly in that 18-to-24 age bracket which is most critical to this province's future development.
Mr Chairman, that concludes my comments, and we would appreciate any questions you may have.
The Chair: Fine. I was just looking at your chart on page 8, 1984. That was the year that I bought my propane vehicle. I think quite a few people were. Mr Arnott.
Mr Arnott: Thank you, gentlemen, for your thoughtful and detailed presentation. I'm sure many of the suggestions you've made will be of some appeal to the government's agenda.
I wanted to ask you something about the pricing of propane. At the present time, there's no government regulation of the price of propane. Is that correct?
Mr Kurtze: Neither at the producer level, the wholesale level nor the retail level.
Mr Arnott: But typically, in a given winter the price does fluctuate to some degree, does it not?
Mr Kurtze: That is correct.
Mr Arnott: Could you explain to me why that is the case?
Mr Kurtze: Yes. There are, I guess, basically two points: Propane is traded as an international commodity, not too dissimilar to crude oil. Its benchmark price, like west Texas intermediate crude oil, is based generally in two centres in the United States: Mont Belvieu, Texas, and Conway, Kansas. From there, you back off transportation costs to Sarnia or to Edmonton. What you tend to see as demand increases, particularly during the colder winter months, is the supplies firming up substantially. You then tend to see increased demand and, under a free market system, you see a movement upward in the price. When one looks at the producer level, what you have seen in the past one to two months clearly across Canada, most specifically for your own purposes in Sarnia, is a movement upward in the price.
The second factor is this: Particularly at the street level, you have some 1,700 outlets here in the province of Ontario chasing some 60,000 vehicles so you're in a position where there's a high degree of competition that exists in the marketplace. Secondly, the majority of these vehicles are fleet vehicles, which have very rapid communication among them, so if the price moves at one location, very quickly that price is going to move at all locations. You see a lot of price wars because of the relatively large number of outlets chasing a relatively few number of individual companies, so there's a lot of downward pressure at the retail level. What you tend to see is a lot of price fluctuation with the minimums and maximums of that price fluctuation being the upward pressure put on based on high demand during the winter months and the downward pressure put on on the street level based upon price wars.
Clearly, the customer gets the major benefit from the protracted price wars that exist within the propane business. But that gives you your min/max and then from there of course the individual organization's price based on individual corporate pricing policies.
The Chair: I have to go to Mr Waters.
Mr Waters: My question, as a person who operated a propane-powered vehicle in a commercial setting, is temperature. I'm looking also at the people who are coming up behind you, which is the trucking association. As in a lot of these committees, people are going in different directions, but one of the problems that I used to run into was that, once it got cold my propane vehicle didn't work unless I took care of somehow the tank and the supply route to warm that up. But the second thing was the loss of power that I suffered in my vehicle, and it was a gas-powered vehicle prior to that.
I'm looking at propane, because propane is a lot cleaner fuel than gas and probably diesel. Is it viable for heavy equipment operations or, let's say, a coast-to-coast hauler?
Mr Kurtze: At this point in time, and with due deference to the gentlemen who are sitting behind me --
Mr Waters: They haven't even smiled.
Mr Kurtze: I don't have a mirror where I can see.
But at this point in time, there has been some experimentation done with the heavier diesel engines, and I would say that to date the technology is not there where you can, on an economic differential -- and recognize that with alternative fuels and propane, the main reason is economics that people change from one fuel to the other -- based on economics, at this point in time I would say no. Clearly, there is research and development being done to try to make the engines so that you can do it economically, but right now I would say no.
The Chair: Make it a real short one.
Mr Waters: If we were to take your discussion on alternative fuels and infrastructure and allowing people to put it in and giving them fast write-offs -- let's look at hydrogen as an alternative fuel. If we did that and allowed that infrastructure and helped people put it in, would that give us the type of power and would that be more applicable?
Mr Kurtze: Hydrogen is still in its infancy, and I think there's a considerable number of problems. The one benefit you have with propane is it's here, it's now, it's today; it can start making the contribution that's necessary. Hydrogen may well at some point in time in the future be something that's viable. At this point in time, like certain other alternatives -- batteries and things along this line -- it's not nearly at a stage where it can start to solve the problems that we have both environmentally and economically. It can't do it today.
Mr Bob Callow: If I could just add to that point, I wouldn't like it to be left on the table that there's a loss of power in vehicles with respect to propane. It has to do with the design and the technology, and it's certainly come a long way since perhaps your conversion was done.
I would also note that in the US there are a lot of people in the trucking industry who operate in a fashion we would not recommend, but they use it to increase the power of their line haul trucking installations. I would say that that's not something we would recommend, but certainly that's something that they do; so from a power point of view it's there.
Mr Kurtze: Technologically, liquid fuel injection will do that for you. Secondly, it's got an octane number that's 100-plus as opposed to 89 to 92 for regular to premium.
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Mr Waters: This is for charging with propane?
The Chair: Okay. Well, when I had mine converted, I think they said 15% less power, and the thing is that I went to a V6 instead of a four-cylinder to give me the extra power. I think you lose 15% in mileage, but when it's figured out it's about half the cost of gasoline. But that was 1984.
Mr Kurtze: And you're seeing -- just one more, Mr Chairman -- liquid fuel injection starting to develop, and with liquid fuel injection as opposed to gaseous fuel injection -- take propane injected as a liquid -- you'll see a disappearance. I would say you're probably more in the neighbourhood of 5% today, and with liquid fuel injection you could probably see that disappear. In fact, I think, as this gentleman has pointed out, it will be better than.
Mr Sola: I'd like to refer to page 2 of your executive summary, the second paragraph, where you state: "If conversion goals are to be achieved therefore...ATFs will have to be made mandatory, at least for government, institutional and corporate fleet vehicles." The next sentence states that, "The association can support such a move...based upon the caveat that the strategy must...place no undue financial hardship on the people or organizations in question."
I'd like to ask you how you would achieve this. I would assume if an institution or a corporation had some financial hardship the government would pick up the difference. Now, if the government finds itself under financial constraints in the conversion, how would you solve that problem?
Mr Kurtze: I think, overall, when we looked at the model, what we said was this: Using an accelerated write-off -- and you can see when you look at the model in detail -- you should be able to solve that problem, because depending on the rate at which the number of years over which the individual can write the vehicle off, you can remove that financial hardship from the individual.
So, for example, if you went into the leasing market and leased the vehicle, that accelerated write-off would then go to the lessor; that saving could be passed through to the lessee; hence you would be in a situation where you would not have undue financial hardship.
I guess our view is to create an environment which, when created, will let business do what it does best, and that is to sell its product and to create the employment and tax results from that sale of the product. When you look at government specifically, how government would do it, we believe government should take that leadership position in demonstrating that, in fact, it is party to its own policies by converting some of its vehicles. We clearly recognize that government has no ability to write off from a tax standpoint, because it does not pay tax; ergo, you can't give yourself a tax reduction.
We do, however, believe that in order to sell its policies a government should be in the position where it supports those policies through its own efforts. We believe the fuel savings that governments will receive will more than pay for the cost of its conversion to the alternative fuel.
You can't dividend government; you can't give it a tax incentive, because it doesn't pay any to begin with. But you can give it the fuel savings the same as everybody else.
The Chair: Okay. Time has run out. I hate to cut you off, but we have Mr Bradley coming up from the Ontario Trucking Association. Maybe he's singing from the same hymn book you are. You're welcome to stay and listen to the next presentation; maybe the clerk's got an extra copy here. You might be interested in recommendation number 5 on page 4. I'll just tell you that, if you can't stay around that long.
Mr Kurtze: We'll ensure that we do.
ONTARIO TRUCKING ASSOCIATION
The Chair: Mr Bradley, and your associate, could you come forward, please.
Mr David H. Bradley: Just me today.
The Chair: Oh, just you, eh? I thought you had someone there to back you up in case you didn't have all the answers.
Mr David H. Bradley: Well, he's just going to see who comes in behind me. I have to say that with the price of fuel running where it is, I had to come alone today, and the rest of the guys had to stay back at the shop looking after business.
The Chair: Did you bring your violin, too? I'd like to welcome you to the standing committee on finance and economics. You've been here enough times that you know how it works. You have a half-hour. In that half-hour you may have your presentation and leave some time for the members of the committee to ask questions. As you know, they're eager as beavers to ask you questions. So you may begin.
Mr David H. Bradley: I look forward to that, and thank you, Chairman, and members of the committee. You know, when you draw lots to attend these meetings you hope you don't get the 4 o'clock slot, because it usually slides into closer to 5 o'clock and everybody's exhausted.
You have our brief. I had spent a considerable amount of time putting together a presentation that was spot on 15 minutes, but I'm going to scrap that and just talk to you today about where I see things. In my comments I'm going to try, even though I'm obviously here from self-interest and representing a specific industry, trucking, to put my comments into the context of broader overall economic activity, and I think we're somewhat qualified to do that for a couple of reasons.
One is that trucking is a derived-demand industry. The level of activity in our industry really reflects overall economic activity in the province. We're also a pretty good leading indicator of economic activity. Our industry is usually the first to go into recession and one of the first to come out of recession as well, so you can usually gauge what's happening in the overall economy by what's happening in trucking.
I guess, as a starting point, yes, I have been here before, and I'd have to say that I would classify a lot of what I have to say this year as déjà vu. I seem to have been saying it before, and I don't think that there's been enough change, really, in the overall activity levels in the economy and there obviously hasn't been a change, at least on the improving side, with respect to the government's fiscal situation. So that constrains a lot of what we may or may not be able to do.
One thing that is slightly different is that I'm able to come to you this year and say that things are getting better in our industry, and I think, as well, getting better in the economy, and one is a reflection of the other. Before we pull a Statscan and say that the recession is over, I would urge a high degree of caution. The kinds of improved activity levels that we're seeing in our industry are very choppy, very uneven and very tenuous. The old benchmarks don't apply any more. What was a good month necessarily isn't a good month now, or what was a bad month may be a good month. We really need to still put some more months behind us to be able to say or predict whether we're on an upward trend or a downward trend, but things are in general -- it's difficult to generalize in our industry -- somewhat better this year than last.
However, that has not as yet been translated into any sustainable improvement in the financial performance or prospects for the industry, and to show you what I mean by that, in 1992, the operating ratio in the trucking industry -- which is expenses over revenues, which is something we track -- was an even 100, and that's before interest and taxes. What that says is that for every dollar we were earning in revenue, we were spending, so nobody was making any money.
The improvement this year, for the first half of 1992, which is the only publicly available data right now, shows an operating ratio of 99. One might argue that's an improvement, but obviously that means that in general the industry in Ontario is still running at a loss and the financial situation remains perilous.
Against that backdrop, we've tried to come up with some proposals for the budget this year that will not only impact prospects in our industry, but first, we think, impact prospects for the economy, which are important. We set a number of objectives in developing our budget proposals, but the primary one that we set, and we think that the government should set this year, is to build confidence and to make the recovery that appears to be under way sustainable. It is very shaky right now and any ill wind could blow it back in the opposite direction.
We need to have the consumer participating in the recovery that's under way. We won't have sustainable recovery if we simply depend on exports or the American consumer to get the job done for us. We have to start building aggregate demand here and that has not yet happened. I think people are still very, very concerned about employment and whether they're going to have a job a few months from now.
In trucking over the last three to four years in Ontario, we estimate that we've lost about 20,000 jobs, and the improvement in activity levels that we've seen to date have not brought very many, if any, of those jobs back.
We also felt that the budgetary proposals or recommendations for this year should enhance the competitiveness of Ontario industry and of the Ontario economy and not detract from it, should enhance productivity and should be fiscally responsible. The government is in a fiscal straitjacket. We recognize that. We don't want to debate how we got there and what not. The fact is we are and we've got to get ourselves out. That doesn't mean we should stop spending altogether, but we think that we have to look at where we're spending and make sure we're getting the biggest bang for the buck for the citizens of this province.
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That's something that is no different than any business, any family or any individual in Ontario has had to do over the last few years. We've all had to tighten our belts and we've all had to cut back on certain things and make sure that we're still putting food in our bellies and shelter over our heads. I know the Treasurer has some programs now under way in that regard and I'd urge you to carry on.
I think it's really interesting, coming from a private sector industry that's had its brains blown out in the last few years, to see with those who have survived this period when they really had to put their nose to the grindstone just how efficient and how productive they could become. I don't think the government's efforts yet -- particularly when I understand that the spending forecast for this year is going to be 4.8%. I don't know that there are many households in Ontario that can say they can increase their spending 4.8% this year. So I still think there's a lot of work to do to look at how we're spending money.
Finally, obviously I think the budget proposals have to be socially responsible and consistent with the social agenda that Ontarians wish to see in terms of the environment, employment and those kinds of things. 1 categorized our proposals in three areas: what to avoid, what to introduce and what to revisit.
In terms of what to avoid, and I would say this is our chief recommendation to the committee and to the government this year, no new taxes; no tax increases. We recognize the fiscal problem the government has got, but this is not a political issue. You can look at all the grass-roots tax movements that have started up in the last few years, some of them even within our industry, but it's a fundamental economic issue.
People cannot dig any deeper into their pockets. There is no scope for further tax increases, either on business or the consumer. If we want to sustain the recovery, if we want to assure we have recovery under way, we can't snuff it out, and we can't avoid risking snuffing it out at this point. That would be our chief recommendation to the government.
In our brief, we provide some numbers, and it's interesting to note that over the last several years the growth in taxes as a percentage of budget has far outpaced spending on food and shelter, and it is really, I think, a dangerous thing for us to be continuing to follow down that path.
Specific to trucking just for a moment, as an aside, there are a couple of new taxes that are being talked about in a variety of forums, whether it be the Ontario Round Table on Environment and Economy or the Fair Tax Commission. There's been some attention paid to carbon taxes and to weight distance taxes on the trucking industry. I don't think we have the time today to debate the tax policy issues surrounding that, but there are some very real ones. Once you cut away the rhetoric and what not, I think the government has to address before it takes a serious look at those types of taxes -- also, here and now, in this year, given the competitiveness situation our industry faces and the economy of Ontario faces, I think it would be very unwise for Ontario to proceed down that track at this time.
In terms of what we should do, one can look at the tax side of the ledger and that's only one side. There's the benefit that Ontarians get in the programs. The treasury department can bring out all kinds of studies which show that for Ontario corporations and Ontario individuals, our taxes are broadly comparable to our competition and ta-da, ta-da.
Rather than get into that, we are prepared, and always have been, as an industry, to pay our fair share. We think we do despite what some of our critics might say. But we've gone out on somewhat of a limb this year, and we proposed to the government late last year that we were prepared to support the introduction of highway tolls for new construction on new projects, provided that certain conditions were met.
There would be an alternative highway, the tolls would come off as soon as the construction is over, the funds would not go to general revenues and they would be targeted specifically to important projects like Highway 407. We're pleased that the Premier and the Minister of Transportation, a couple of weeks ago, made that announcement. From what we've seen of the text of their speeches, we think our conditions have essentially been met. We only hope that over the long run, those conditions will be followed through on and this will not be viewed at some point as another cash cow for this government or any future government that might come along.
In addition, we think that some of the things that would help the trucking industry could be more broadly applied to industry rather than the hammer and penalty approach that's been brought forward on certain things, or the insatiable desire for revenues leading to certain types of tax increases.
We think -- and we think it's consistent with Keynesianism and good economics or whatever else you want to call it -- that right now industry needs incentives to invest. In our industry we're falling significantly behind the eight ball with respect to our US competition where they have faster depreciation rates, something the previous group was referring to, and our equipment is aging out on the highways. If the government is really serious about wanting to get newer, more productive, safer, more environmentally friendly equipment on the highways, then it needs to work with us.
We think we need to look at the restoration of investment tax credits, accelerated depreciation on certain equipment, and we think that a measure that was introduced during the 1981-82 recession, a temporary exemption from the retail sales tax on certain manufactured goods, would be warranted now, and would not only assist our industry as a user but also increase aggregate demand for the manufacturers and distributors here in Ontario.
While we've done no study of it, we would argue that the tax revenue loss that you might have occur from that would be more than made up. Some people in our industry might actually start paying some corporate income tax, because they might actually start showing some profit again. That's a difficult choice when you're looking at the fiscal imbalance the government's got, but we think we need to do something to stimulate economic activity.
In terms of some things to revisit, you shouldn't be surprised that I'm coming to you again today to argue that the government of Ontario, for competitive and fairness and equity reasons, should revisit its decision of a couple of budgets ago to increase the diesel fuel tax by 31.5% on our industry at a time when it can ill afford that, and there's really no scope for absorbing that kind of a cost increase. I've never bought that this was an environmental measure. It certainly hasn't had any beneficial impact on the environment. It was a tax grab. I think we all know it. We think it's never too late to address that, particularly given the tenuous situation we still find ourselves in.
I'd also point to the fact that Quebec seems to have recognized that. Quebec seems to have recognized the need to maintain a domestic transportation industry. It was just last month or the month before that government announced a 2.2-cent-a-litre reduction in their diesel fuel tax, which now leaves Ontario in the unenviable position of having the second highest diesel fuel tax rate in North America after Newfoundland. It's two to three times our rate here, compared to what it would be in the neighbouring US jurisdictions that we have to compete with. You recall that the increase was introduced in two stages, because the Treasurer was cognizant of the fact that our industry was in recession, so he wanted to stage it to lessen the blow. Well, we're still in recession, and the blow has not been lessened at all, and we'd like that revisited.
In addition, we're completely disappointed with the Ontario tire tax. It's a sad day to have to pay $5 for every tire and have to pay an additional $7 to $12 to have the thing disposed of. I don't think there have been more tires strewn along the sides of Ontario's highways than there are now.
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We're very disappointed at the lack of action that's arisen out of the scrap tire task forces and whatnot that the government has set up, and very little of the funds that have been collected -- about $40 million a year -- are actually spent on resolving that problem.
As a commercial transportation entity, we're also disappointed that our industry pays the tax and the commercial airlines, which we have to compete with in part, do not pay it for the tires on airplanes, that tires used in production machinery are not required to pay the tax, yet we're an essential part -- we provide the distribution part of the manufacturing process. Without trucks, the manufactured product doesn't move, and that concerns us.
We think from a tax policy point of view where equity and fairness is supposed to be one of the tenets of any tax policy, there's a good argument to be made for the trucking industry to be exempted from that tax.
Notwithstanding that, you might be interested to know that we recently obtained a legal opinion which clearly indicates that the tire tax is constitutionally invalid. When the provincial government introduces the tax -- the act clearly says it's a tax on consumption -- in an industry like trucking, you're also taxing the consumption that takes place outside of the province of Ontario. There's no prorating of the tax, and that is unconstitutional. The province does not have the power to do that, so again we would argue that the application of that tax to trucking, and frankly to motorists at large, is not constitutional and therefore we think the government really has no choice but to rescind it.
I note as well that in the Ontario Fair Tax Commission report looking at environment taxes, the authors of that report also chastised the government for the performance on the tire tax and felt the moneys weren't going to what they were supposed to go to. It's too bad. I know you need $40 million a year, but when a tax is illegal and unfair, we think something needs to be done.
In wrapping up my comments, it is déjà vu, but we have another chance to set the economy on the right track. If the economy is set on the right track, our industry will benefit as well. I look forward to this year's budget. We look forward to the kind of measures on the spending and on the tax side that will stimulate economic activity, allow the province to move forward again and create jobs and create taxpayers. That's the way out of this fiscal mess. We're hoping for a better 1993 and a much stronger 1994 as a result.
I thank you for listening to me and I welcome any questions you might have.
The Chair: Mr Dadamo.
Mr Dadamo: Thanks. One of these days you'll say that right.
Mr Bradley, thank you; always outspoken and very charismatic. As a former parliamentary assistant to two ministers of transportation, we've been together several times.
I know that you touched on tolls. I was waiting for you to, but when I asked to ask the question, you hadn't yet touched on tolls. I know it was announced in the last month or so. Do you want to elaborate a little bit more on highway tolls in this area.
Mr David H. Bradley: One thing we don't want -- this is why I say we went out on a limb -- is new taxes. The government of Ontario is already taking about $800 million more a year in road-related taxes than it's spending on the highways, so we believe the money is there to look after the system that's already in place in terms of maintenance and expansion. But at the same time, we're realists, and with some self-interest we recognize that to wait 25 years for Highway 407 was just absurd.
The economy could not afford that. Anyone who sits on Highway 401 in the morning recognizes that. There was a study by Metropolitan Toronto a couple of years ago, in the late 1980s, which indicated that the costs of congestion in Metropolitan Toronto were about $2 billion a year. This is on goods movement alone, and that's not something we can afford if we think we're going to be able to compete with the Americans and the Mexicans over the longer term.
At one time, Ontario's highway system was a jewel and gave us a competitive advantage. We've lost that competitive advantage now when you compare it to the interstate system. We said: "All right, we've got to look at it a different way. We're prepared to pay so long as it's targeted to a specific project and to accelerating the construction of that," and we'll be quite happy if we see Highway 407 by the year 2000, which is what the Premier indicated the timetable would be.
Mr Dadamo: It'll make some sense that some of the American truckers who will use this particular area will be paying some taxes too by way of tolls.
Mr David H. Bradley: Yes, it will be a user-pay system.
Mr Sola: You've touched on the fact of your competitive position and that you're afraid of additional taxes affecting that, but I'd like to ask how you stand right now competitively vis-à-vis Quebec, which you mentioned in your brief has taken measures in regard to its tire disposal or something. With the reduction in the value of the Canadian dollar in comparison to the US dollar, I think that should have helped you in that regard, and maybe also your competitive position in comparison to Manitoba.
Mr David H. Bradley: A competitive position involves a lot more things than taxes, as you can imagine. I think we're broadly competitive with the other provinces. Compared to the United States, though, there are some great differences. If you compare it to New York or somewhere like that, again, on balance we're not in too bad a position and the reason is, quite frankly, the US social security and health care costs are so exorbitant that they outweigh any of the advantages they might have on depreciation, fuel tax and the like. But that's not where our competition comes from; our competition comes from places like Arkansas, Mississippi and the right-to-work states in the south, and there we have a competitive disadvantage and a significant one.
You raise the issue of the dollar. Yes, the correction in the value of the Canadian dollar has been the single most beneficial thing that has happened to our industry in a long, long time, and it has worked to narrow the gap. It's not closed the gap. The people we go up against, the top two or three US carriers, are the size of the entire Canadian trucking industry, and therefore they have some pretty formidable economies of scale they can throw at us. The dollar has had a significant beneficial impact.
There is something else I caution the government on. When you talk about the US, Clinton, the new president, has introduced a series of proposals for increased taxes. I would caution the federal government of Canada and any provincial government against thinking that if he raises his taxes, they will close whatever modest gains we might get by raising our taxes here. I think that would be a disastrous policy. All the Clinton proposals will do is narrow the gap and I wouldn't want to see that taxed away. We need to be competitive.
Mr Arnott: Thank you, Mr Bradley. I believe you said that your industry has lost 20,000 jobs since the recession, approximately.
Mr David H. Bradley: That would be our estimate, yes.
Mr Arnott: You said that you employ about 200,000
Mr David H. Bradley: About 200,000.
Mr Arnott: So that's a 10% loss.
Mr David H. Bradley: Yes.
Mr Arnott: How much of that loss can be accounted for, would you estimate, through the recession versus American competition?
Mr David H. Bradley: That's very difficult. We had significant job losses post-1988-89 when we entered into the deregulated environment and that was accentuated by the recession. I can't tell you whether it would be half and half, or whatever, but we were hit with a double whammy. We had the supply-side shock of deregulation and then that was followed by the demand-side shock of the recession. It's very difficult and I couldn't begin to pretend to separate the two.
Mr Arnott: Your organization is part of the better roads coalition that's been advocating toll roads for a number of years now.
Mr David H. Bradley: With conditions.
Mr Arnott: Right. Do you trust the government to maintain those conditions?
Mr David H. Bradley: Everything they have indicated to date, we're satisfied with. As I say, this is not a partisan statement at all, but I would urge anyone who might be sitting in government in the future to heed the conditions that have been put forward.
The Chair: Time has run out. I'd like to thank you, Mr Bradley, for appearing before the committee.
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ONTARIO HOME BUILDERS' ASSOCIATION
The Chair: The next group to come forward is the Ontario Home Builders' Association. Would you come forward, please. Mr Kaiser, you can talk to two members from Niagara, since you didn't get the meeting at the office, and Peter's downstairs; you can talk to him after. You'll have three of them. Okay?
Mr Stephen Kaiser: Thank you, Mr Hansen.
The Chair: I'd like to welcome you to the standing committee on finance and economic affairs. We have until 5 o'clock. In that period of time, after your presentation perhaps you can leave some time for questions from the committee. If you don't mind identifying yourselves for the purpose of Hansard and the other committee members, you may begin after that.
Mr Phil McColeman: Good afternoon. My name is Phil McColeman, and I am actually a renovation contractor from Brantford, Ontario, and also president of the Ontario Home Builders' Association. With me is Stephen Kaiser. Stephen is a home builder from St Catharines and is first vice-president of the Ontario Home Builders' Association.
I'm going to briefly describe the state of the housing industry in Ontario and then outline our main concerns that the home building industry wishes to see addressed in the upcoming budget. When I'm finished, Stephen will talk about some specific steps we believe the Treasurer can take. Our remarks will last for about 15 minutes and hopefully we'll have plenty of time for questions.
Four years ago, our industry was building nearly 100,000 housing units a year and creating jobs for close to 300,000 people. For the last two years, we have seen our industry building a little over half that number of houses. As a result, somewhere around 150,000 jobs have been lost. As someone who's trying to keep a small company in business, I'd like to be able to sit here today and say we could see some light at the end of the tunnel, but I can't do that.
The other sectors of the economy are beginning to show some early signs of recovery, but the housing market is weaker now than it was a year ago. I direct your attention to the table on page 4 of our submission. There you will see that for the summer months of 1992 we had the lowest number of starts of any summer in the last four years. The market seemed to be improving in the early part of 1992, but when interest rates went up in the late spring, the increase killed off our recovery. Rates came back down in July, but the new home market never responded.
This introduces our primary concern, which is the size of the provincial deficit. The housing industry is very dependent on low-cost money or capital. The cost of money affects both the demand side and the supply side of the industry. On the demand side, mortgage rates are an important factor in determining the strength of the housing market. Rates go down; consumer interest goes up. Rates go up; consumer interest goes down. It's that simple.
On the supply side, our industry carries very expensive inventories for long periods of time. A builder will have to finance building lots during the time he or she is marketing and actually building the houses. A developer will have to finance land holdings for even longer periods of time. Raising interest rates even a couple of points can add tens of thousands of dollars to the cost of a serviced building lot, and at the margin it can affect the economic viability of the project.
This is why we are extremely concerned about the size of our provincial deficit. Just last week, the Treasurer acknowledged that the size of the deficit could affect the province's ability to raise capital in bond markets. I can assure you that these difficulties will be felt just as acutely and even sooner in the housing industry. An operating deficit of $10.9 billion, or whatever it really is, is too high. A deficit of $9.9 billion is too high. You can't keep deficit financing one fifth of your operating budget year after year and expect to stay in business.
Just to summarize, before I turn things over to Stephen, here are the key points that I've made. We see a housing market that's even weaker now than it was a year ago. We see a set of economic stimulants for the housing industry, namely, the 5% down payment and RRSP provisions, along with lower interest rates and lower prices, that are going into their second year and thus will not be as effective as they were in the previous year. We see additional problems on the horizon if the deficit cannot be brought down to more manageable levels.
Stephen is now going to talk about some of the things that we think can be done to address these problems.
Mr Kaiser: Good afternoon. Phil noted two things that give us a sense of direction in terms of what the budget should try to achieve: One is that economic stimulants for the housing industry might be getting a bit stale; the other is that the current size of the deficit threatens the availability and cost of financing. If you only had to worry about the deficit, life would be a bit easier; at least you'd have more choices.
But the fact that stimulants for consumer demand are getting used up rules out tax increases. Any more erosion of consumer buying power will kill off any chance of a recovery. This leaves you with spending cuts. We are not experts on every area of government spending, but we can tell where close to $1 billion a year is being wasted in housing; this is in the non-profit housing program.
Our proposal is to immediately replace the non-profit housing program with a system of shelter allowances. To see how that would work, let's consider a single person in Toronto who is making $18,000 a year. The average subsidy for non-profit housing units in Toronto is $15,000 a year. The average market rent for a one-bedroom apartment is $609 a month. If a person is making $18,000 a year and rents one of these units, he or she would spend a little over 40% of his or her income on housing. An annual shelter allowance of $2,000 would bring that figure down to 30%.
Now what do you get for $15,000 versus $2,000? For most of the people in Ontario who need assistance, the non-profit housing program gives them a waiting list, and if they are lucky enough to get a unit, they still have to live where the limited number of units happen to be built. The shelter allowance on the other hand can be made available immediately, and the person has the choice of living anywhere a market unit is available at lower cost, more flexibility and greater immediacy.
We're not suggesting that shelter allowances will meet every housing need in this province. The extremely destitute, the infirm and those with special needs require the kind of supportive assistance that is provided in social housing. But the majority of people in non-profit housing projects do not need this degree of government intervention. For them, the subsidies are an extravagant waste.
It is sometimes argued that the non-profit housing program has created employment opportunities over the past year. While this is true, low-cost substitutes could have had a similar effect. A properly administered shelter allowance program supplements income. This fills in the valleys and thus supports the demand for low-cost housing that could be delivered by the private sector. We believe that shelter subsidies could stimulate demand for private sector housing.
There are a number of other proposals for stimulating this demand, and given the weakened state of the market, the government may want to consider some of these. In this regard, I direct your attention to a program of tax rebates that has been proposed by the Greater Toronto Home Builders' Association.
To summarize, the government should do nothing further to erode the purchasing power of the consumer, and this means no tax increases. The deficit must be reduced substantially. This means cutbacks in spending. Non-profit housing is one area where substantial savings could be realized without any detrimental effects.
Thank you for your attention. Phil and I will be happy to answer any questions you might have.
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Mr Sola: Thank you. I'd like to touch on the non-profit housing aspect that you've just mentioned. When I look at your brief, I see that you're saying the average monthly subsidy is $1,250 in Toronto and that the average rent for a one-bedroom apartment is $609 a month for a person making $18,000. Is this for the same apartment? Is the shelter allowance double the rent?
Mr McColeman: Yes. This was pointed out vividly in the recent Provincial Auditor's report when the Ministry of Housing non-profit group was audited.
Mr Sola: In other words, if you live in this apartment that should be renting for $609 a month and you are being subsidized, you are paying $1,800 for that apartment?
Mr McColeman: Let me explain the situation. Non-profit housing -- and it's a system that has gone back several governments in terms of its shape and magnitude -- is delivered in a fashion that is totally inefficient. It's delivered with such a level of bureaucracy between the government which is to deliver it and the person who gets the unit that all of those extra dollars between the market rent and the actual subsidy are going to fund administrative, management, architectural and other functions that groups have been set up to administer.
Also, we are taking the average one-bedroom rent, so there are ones lower and ones higher than this. I don't know whether it's a comparison that can be made in the sense of apples and apples for unit for unit. However, we must tell you that it is almost double what someone could pay if they went to get a market housing unit today in Toronto. These are not our numbers; these are the auditor's numbers.
Mr Sola: When you talk of waiting lists, I know that in my region of Peel there are over 10,000 names on the waiting list for subsidized housing, so I know exactly what you're talking about. I see it in my constituency office on a daily basis.
But you also mention abuse of the system. First of all, how extensive was your study to come up with these figures and, second, could you give us some idea of how extensive abuse of the system is?
Mr McColeman: We believe the system is not geared to targeting the people who are in need of assistance. It is geared to a broad range of people to have publicly subsidized housing as their right. We have not done the studies. The government itself has done the studies. These are not our numbers as a result of our studies. We observe it from two points of view. Some of our members build this form of housing for the government. They contract it.
I can give you a firsthand example, if you'd like. I myself have a piece of land in Paris, Ontario. I was approached by a person who was an architect coming out to see me because he knew I had a piece of land that was zoned correctly that could go into multifamily housing, and he told me that the program was a bonanza. Those were his actual words. I don't think he realized I was president of the Ontario Home Builders' Association at the time, by the way.
We in turn have looked and asked questions at the ministry and we continuously find that it is overpaying at every level when it produces the housing. More dramatic, however, is the subsidy level once the housing is built. It's scary. It's approaching $1 billion a year once the existing allocated units are built. It will cost the taxpayers of this province over $1 billion per year ongoing subsidy cost.
This program, we feel, should be targeted at the people truly in need, the people who need the rent, the supplement to bring their income up to achieve a 30% expenditure on housing. You could cover a lot more people, do away with the waiting lists and providing housing for a lot more people if you took that approach. That's what we are suggesting today and what we have previously suggested to the Treasurer.
Mr Sola: Is this experience consistent throughout the province, or does it pertain more to high-density areas like the Golden Horseshoe?
Mr McColeman: It's consistent right across the province. The number that we give you is $1,250 on average they're paying subsidies per unit in Toronto. The number outside of the greater Toronto area is $1,040 per unit.
Mr Sola: It's pretty close. Thank you.
Mr Arnott: Thank you, gentlemen, for your presentation. I think you know that our Progressive Conservative caucus agrees with your philosophy of phasing out rent controls at this time of low inflation and fairly decent occupancy rates and replacing those with a system of rent supplements.
You've touched on the auditor's report with respect to non-profit housing and how profitable non-profit housing can be to certain consultants and so on. I just want to ask you one thing. One concern I have about the phase-out of rent controls, and I'm not sure if I'm correct in this, but I am somewhat concerned about the confidence of the private sector to step in and again build most of the apartment units we're going to need. Is that confidence going to be there or is there going to be a residual fear that the next government perhaps might slap the rent controls back on again, such that the level of construction that we will need would not be sustained?
Mr McColeman: I believe that if you open it up to the marketplace, people will supply product to that marketplace. Already we're seeing vacancy rates approaching 6% and 7% in some communities. In my community right now the vacancy rate in the private market is 6% for housing units, yet they're building all kinds of non-profit housing units.
I think I'd like to make just a clear distinction. We're not talking today about rent controls and doing away with them in what we're saying, although we do support that position. What we're saying is, is this government is truly interested in making sure there's a recovery and reducing cost, reducing expenses? The Treasurer says he is. Here is a part of government spending that we know about very well and this is how this government can begin to reduce expenditures and achieve the same goal. The same social good can be achieved.
Mr Arnott: But if there's a time to phase out rent controls with minimum inconvenience to tenants, this is the time.
Mr McColeman: It could well be. I don't know how I would link the two into what we're proposing today. All I'm saying is today we are saying here's something concrete that you can do without removing the social good. There'll be a lot of arguments around not taking away rent controls. This is not taking away the subsidy.
Mr Arnott: Okay. One other --
Mr Kaiser: If I could add one point, you're talking about the private sector building rental housing. At the current point right now, the government is competing against the private sector with the market rent units that are in the co-ops, therefore it's not economically feasible for the private sector to take on the government and compete at the rents that the government puts those units out for on the market, but which are subsidized behind the scenes by the taxpayers of this province.
Mr Arnott: One other question. You have in the past been supportive of allowing people to dip into their RSPs without penalty for the purchase of a home and reducing the down payment to 5% for CMHC-approved loans, and those have been established. Have you seen an appreciable impact on housing starts in Ontario that you can trace back to these two changes?
Mr McColeman: It's definitely so. We saw the impact of them last year bring about some starts.
Mr Arnott: Is that sustained over time?
Mr McColeman: It has not sustained itself over time. That's why we're suggesting today that even although those programs have been extended, they will not be as effective as they were when they were first introduced and there was also a noticeable increase when they were due to expire, so people said, "We better get in now before they take them away," and then it got extended. So there was demand and there will continue to be demand. We've asked for the extension of it, which the federal government has continued to support. We think it's probably a levelling off of the use of the program that will continue to occur.
Mr Waters: I guess maybe because I come from central Ontario I have a whole different view on things, but what I find is that our housing starts are directly related to the housing starts in Toronto. In other words, if you're not selling houses down here, we don't in central Ontario, and what that comes with is jobs.
When you see the likes of the GM van plant and that closing and all those people being put out of work, correct me if I'm wrong, but I think that that has a far greater effect on the number of jobs or housing starts within the Metro region. Those major layoffs where these people are running to Mexico and places like that I think have a far greater impact on housing starts than interest. We've already dropped the interest rate, dropped the down payment. Everything's down. Wouldn't you say that that has more of an impact than social housing?
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Mr Kaiser: I can answer that question for you. I discussed that in the boardroom with a large builder this morning at his office, and you're correct. We've got a lot of things in our favour in terms of the market. We have the RSP plan, we have the 5% down payment, we have mortgage rates which are falling, and what we don't have yet in the marketplace is consumer confidence.
But what we're talking about today is with the non-profit program and getting those dollars and switching around so there are people out there who can rent rental units. That's a different type of thing than the housing market that we're examining as a whole. If we're talking of a recovery, I think we're on the verge of recovery if we can get consumer confidence.
Mr Wiseman: I'd like to digress a minute. You're talking about taxes, and I think urban sprawl is one of the major contributors to the increase of municipal taxes and the costs in Ontario. The fact of the matter is that in downtown Toronto there are schools that are empty and having to be closed and there are schools in Scarborough, some of them in the southern part, the older neighbourhoods, that are underutilized, while at the same time as builders sprawl across and are being allowed to by elected municipal councils, so it's not entirely your fault that these costs are added.
The costs for transportation, the costs for sewers, the costs for maintenance of all of these institutions, the costs for hiring teachers, the costs for building schools and the costs for maintaining and running these schools all contribute on an ongoing basis. So that every time you build a subdivision, you increase the taxes to everybody else in the community. Not only that, the densities that are being built in these subdivisions are not at a level sustainable enough for those costs to be recovered, so it will continuously increase taxes on taxpayers who are already there. Perhaps you can comment on that.
The second thing is, if we continue to gobble up our prime agricultural land, which is within the viewshed of the CN Tower, we are going to find ourselves in some very serious environmental and food delivery problems in the future. I'd just like you to address those two problems in the last five minutes or so.
Mr McColeman: I'll engage the first question, which is the intensification and urban sprawl question. I think we have seen with respect to the way the government has seen fit to introduce levies as a way that infrastructure is being paid for so that it does not fall on to the backs of existing taxpayers. The levy system that this provincial government instituted, inherited and then went ahead with -- said it would never go ahead with but yet did -- is a way that infrastructure is paid for when sprawl occurs.
Mr Wiseman: Of course that's going to be challenged in court, isn't it?
Mr McColeman: Our association is challenging the educational component of that because school boards under that bill are allowed to levy against houses as well. In fact in the greater Toronto area it's a well-documented fact that levies on a single building lot can reach close to $20,000. Over $19,000 in the cost of a building lot is a taxation to pay for all the infrastructure you mentioned as paid for by others.
I don't think today, however, we're here to discuss the benefits of intensification versus sprawl. I think that builders as business people respond to the market demand. What the market demands is what we build. We don't specifically go out and say, "Oh, we're going to build and eat up agricultural land." We build what people say they want to live in and it's always been that way, so we don't fuel where we're going. The market fuels where we're going.
Certainly the Sewell commission in its recommendations is leaning towards heavier intensification and planning and development, and maybe that's where we're going. However, you've got to remember that we are people who are trying to etch out a living in this industry by building something that people will buy. Therefore, we simply respond to the market demand of what is desirable to most people. I think we can each do a reflection on what we live in ourselves and what our expectations of housing are and then analyse the situation of whether that's good or not.
But I don't think we're here to talk about that. I would hope we're here today to suggest to the government that there is a huge financial problem hindering the recovery of this industry in this province, and that is the fact that we have such huge debt and deficit spending going on that that is hurting our industry.
Mr Wiseman: Well --
The Chair: I'm sorry, Mr Wiseman. The time has run out. I'd like to thank you for appearing before the committee today. That's so you don't get offtrack.
Mr Wiseman: I wasn't offtrack.
The Chair: Okay. I'd like to thank you for coming before the committee here today. It's nice to see you, Stephen.
Our hearings will resume on Monday, March 8, at 1 pm in room 228 here. So you can take a week off.
Interjection: Merci beaucoup.
The Chair: Okay, fine.
Mr Waters: What week off? Maybe a week out of committee.
The Chair: A week out of committee. That's correct, Mr Waters. Okay. This committee is adjourned.
The committee adjourned at 1657.