ONTARIO HOME BUILDERS' ASSOCIATION
ASSOCIATION OF MUNICIPALITIES OF ONTARIO
ONTARIO REAL ESTATE ASSOCIATION
FEDERATION OF WOMEN TEACHERS' ASSOCIATIONS OF ONTARIO
ONTARIO NATURAL GAS ASSOCIATION
Contents
Wednesday 19 February 1997
Pre-budget consultations
Ontario Mining Association
Mr Patrick Reid
Mr Peter McBride
Ontario Home Builders' Association
Mr Ron Sarginson
Mr Al McLean
Ontario Hospital Association
Mr John Lind
Mr David MacKinnon
Mr Bob Muir
Conros Corp
Mr Navin Chandaria
Association of Municipalities of Ontario
Mr Terry Mundell
Ontario Real Estate Association
Mr Richard Wood
Mr Terry Trembinski
Mr Jim Flood
Federation of Women Teachers' Associations of Ontario
Ms Sheryl Hoshizaki
Ms Sandra Gaskell
Ontario Natural Gas Association
Mr Paul Pinnington
Mr Bernard Jones
Mr Kenneth Smith
Citizens for Public Justice
Mr Gerald Vandezande
Mr Rick Tobias
STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS
Chair / Président: Mr TedChudleigh (Halton North / -Nord PC)
Vice-Chair / Vice-Président: Mr TimHudak (Niagara South / -Sud PC)
*Ms IsabelBassett (St Andrew-St Patrick PC)
*Mr JimBrown (Scarborough West / -Ouest PC)
*Mr TedChudleigh (Halton North / -Nord PC)
Mr JosephCordiano (Lawrence L)
*Mr Douglas B. Ford (Etobicoke-Humber PC)
*Mr TimHudak (Niagara South / -Sud PC)
*Mr MonteKwinter (Wilson Heights L)
*Mr TonyMartin (Sault Ste Marie ND)
*Mr GerryMartiniuk (Cambridge PC)
*Mr GerryPhillips (Scarborough-Agincourt L)
*Mr GillesPouliot (Lake Nipigon / Lac-Nipigon ND)
*Mr E.J. DouglasRollins (Quinte PC)
*Mr JosephSpina (Brampton North / -Nord PC)
*Mr WayneWettlaufer (Kitchener PC)
*In attendance / présents
Clerk / Greffier: Mr Franco Carrozza
Staff / Personnel: Ms Steve Poelking, research officer, Legislative Research Service
The committee met at 1002 in committee room 1.
PRE-BUDGET CONSULTATIONS
The Chair (Mr Ted Chudleigh): Welcome to the second week of the public hearings in the standing committee on finance and economic affairs.
ONTARIO MINING ASSOCIATION
The Chair: This morning we welcome the Ontario Mining Association, Mr Patrick Reid and Mr Peter McBride, no strangers to this committee. Gentlemen, welcome back. We have half an hour to spend together, and if you'd like to use up the first part of that time with a presentation, we will fill in the rest with questions. Your questions will begin with the opposition.
Mr Patrick Reid: Thank you, Mr Chairman. Always a pleasure to be back here. I'm not going to read our submission. I will touch on some highlights, but I just want to share with you what I'm doing today. This morning I had breakfast, me and 70 or 80 other people, with the ambassador for Mexico, and this afternoon at lunchtime I am attending a luncheon put on by the Canadian Indonesian Federation.
I guess the point I want to make is if you don't believe we're in a global economy and there's global competition and everybody is out there beating the drums for investment and industry and economic development in their countries, all you have to do is look at somebody's schedule during the week and see how much effort other countries, nations around the globe, are putting into attracting investment and the subsequent economic development.
Because we have been here before and most of you have been on this committee, you already know that Ontario's mining industry is one of the most advanced, knowledge-based, high-tech industries. More than 85% of the mining workforce uses advanced technology: very large in computers, remote control sensing, more than $40 million invested annually in pure scientific research and development. About 1,000 people, or 5% of the workforce, are employed in engineering and scientific research and development positions. We're also a predominantly Canadian-owned business, and the foreign exchange that we earn from our industry helps Canada's balance of payments.
We are also probably the highest value-added industry, adding value of about $184,000 per employee, almost twice the level of the manufacturing sector as a whole. We are a serious player and contributor to Ontario's economy.
As part of your package, you have received the latest edition of the Economic and Fiscal Contribution of the Mining Industry in Ontario. You'll see in there a number of charts and information that will give you a pretty good economic snapshot of the Ontario mining industry.
We represent 45 member companies, including the producing mines and suppliers of equipment and services in Ontario. A lot of these same companies are global players, both in terms of the mining companies themselves and the suppliers of equipment and services. Ontario, and Toronto particularly, has become the mining finance capital of the world. I was just talking to someone yesterday who has some mines in South America and in Africa, and they're setting up shop in Toronto because this is the place where they can access capital to develop these mines.
We contribute about $6.6 billion in personal and corporate income and over 100,000 jobs in the primary industry due to the economic multiplier. One fact you might be particularly interested in is that direct taxes paid to three levels of government amount to $377 million, representing 58% of the industry's pre-tax profits. A good part of this goes, or comes, to Queen's Park, about $212 million in direct taxes. It also pays about $47 million annually in property tax assessments to municipalities, and there are about 50 towns and cities that have a significant part of their economic vitality related to mining. Those are in both northern and southern Ontario.
The mining industry is generally supportive of the many actions taken by the current government in terms of improving the competitiveness and productivity of industry generally in Ontario. The move from a command economy, to proscriptive instead of prescriptive regulations, is very welcome in the mining industry. At both the federal and the provincial levels we still have our deficits and our debts are still too large, and they still must be paid down to improve Canada's and Ontario's long-range economic performance. We also applaud the recent Mining Act improvements that you're no doubt aware of.
Now we'd like to talk about two particular concerns that we have that are related, first of all, to municipal governments. There has been not so much a shell game, but a downloading from the federal government to the provincial government to the municipal government. This, as most of you know, because you've been around long enough, is not something new that was just invented. It's been going on for some years. The Ontario government has passed legislation allowing amalgamations, particularly in northern and southern rural areas, and we're concerned about what effect this may have on municipal taxes as they relate obviously to mining operations.
We already have situations with mining companies where the boundaries of some municipalities have been expanded to take in mining operations, and the mining facilities receive no services but they are taxed municipally. In most cases we haven't strongly objected to this, but we are concerned that these amalgamations may be being done strictly for the purpose of taking in mining operations or natural gas pipelines or things like that without necessarily municipalities looking at what it is they should be doing and what services they should be providing to their citizens.
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Another concern is the fact that some municipalities are requesting that underground mining facilities be taxed. Some of you, I presume, may have been down a mine, and you'll know that primarily what is underground are shafts and tunnels, both to mine the ore and get it out of the ground. The only two facilities that are generally underground are lunch rooms and refuge stations, which are put down there obviously for the convenience of the workers but also to act as refuge stations in case of fire, and they are one and the same.
The other thing that is underground, other than shafts and tunnels, are machine shops. There is heavy equipment underground and to bring that equipment up to the surface for maintenance and servicing would be an extremely time-consuming and costly operation, so there are machine shops underground. There are some municipalities, I gather, that think the mining industry is moving shops and offices underground to escape surface taxation. Nothing could be further from the truth.
We're concerned that the provincial government's efforts to keep tax levels either going down or at the level they are at may be stymied if municipalities all of a sudden start increasing taxes at the other end. If this happens in terms of the mining industry, obviously that will not improve our competitiveness.
Our other major concern is uncompetitive electricity rates. Uncompetitive electricity rates are a weak link in the government's plans and efforts to market this province and attract job-creating investment dollars. In our industry, 10% to 20% of our costs can be for the electrical bill that they receive. The two largest industrial customers of Hydro are two mining companies. We're suffering a competitive disadvantage relative to our competitors in other parts of the country. Only Nova Scotia has higher electricity rates per kilowatt than Ontario, and you'll find all this in the brief. The Macdonald commission recommended in A Framework for Competition that there be privatization and that we move towards an open, competitive electrical energy market. We support an open, competitive electrical market in Ontario and we hope that the government will move on this very quickly.
The last page or two of our brief talks about what we contribute in terms of workplace health and safety, skills training, pollution prevention, mineral exploration and the industrial rates that we pay. Capital projects are also mentioned on the last paragraph.
I'm going to end just by reiterating that we hope this committee will recommend that underground workings of mines not be taxable for municipal or provincial purposes and that we urge you to begin the introduction of competition and customer choice into the province's electricity market. Thank you for the opportunity to speak to you, and we'd be glad to answer any questions, Mr Chairman.
The Chair: Thank you very much, Mr Reid. We'll open a five-minute round, five minutes each, with the official opposition.
Mr Monte Kwinter (Wilson Heights): Thank you very much. As always, it's a pleasure to have you here. I'd just like to talk on a theme that I talk about every year that the mining sector comes here. As you know, I have some involvement in the mining industry, and it seems to me that everybody says the geology in Ontario or in Canada is as good as any in the world, yet there's a relatively low level of exploration taking place here. How do you account for that?
Mr Reid: Exploration was up to about $160 million last year, I believe it was, up from $40 million or $50 million in the past few years. There are two or three reasons, I guess: one has been uncompetitive taxation; overregulation; and the fact that Canada generally became seen as a politically risky country to do business in. Interestingly enough, after the Windy Craggy situation in British Columbia, a lot of people left Ontario and Canada and went somewhere else because of the arbitrariness basically of that confiscation of mineral properties.
The other answer is, as I mentioned, a lot of other countries around the world, particularly Third World countries, have changed their mining laws and their investment laws, as you would probably be the first to know, Mr Kwinter, to welcome investment in their natural resource sector. They've changed the laws to provide security of title and tenure, they've opened up their laws to allow profits to be repatriated, and there's just an awful lot of competition out there.
I think, frankly, things are improving in Ontario. We've got five or six prospective mines that hopefully, if the price of metals stays up, will open, and there is a lot more exploration going on in Ontario than there was. We still have high taxation rates though, but we still have great geology.
Mr Kwinter: Also, I'm quite interested in your comments about the uncompetitiveness of our hydro. Ontario has always really prided itself on having, as one of its competitive advantages, its hydro supply and its hydro rates. I find it quite surprising to find that only Nova Scotia has higher rates. I'm interested in your comment about the chairman of Hydro when you say even he is advocating things. I think that's a contradiction. He was put in there to literally privatize Hydro, so I don't think he is the stumbling block. I had a conversation with him not too long ago. I think he feels the government isn't moving fast enough. Do you feel there is, from your discussions with the people at the ministry, a chance that they will become more competitive?
Mr Reid: Perhaps I could ask Mr McBride, my colleague who spends a good part of his time on energy matters, to respond to that.
Mr Peter McBride: We're part of a group called the Stakeholders Alliance, which I think is one of the most incredible coalitions I've ever seen. It involves big electricity customers like us in the mining sector, small electricity customers represented by the Canadian Federation of Independent Business, independent power producers through IPPSO and the Municipal Electric Association and its members. So you've got consumers, power producers and distributors all saying -- and I want to separate, I think, privatization from competition. I don't think they're interchangeable in electricity markets. But I think rates can be improved. Competition can lower rates. We've seen that happen elsewhere.
I think what we're looking for is a message. What Bill Farlinger at Hydro is looking for is a clear signal from government to get on with the job. The last time the Stakeholders Alliance met with him, I think he was feeling a little bit frustrated that the green light isn't shining at Queen's Park.
Mr Kwinter: That's exactly the message I got from him in my conversation with him about 10 days ago.
The rehabilitation of mines: Has there been any movement in the amount of money that you've got to put up front to make sure that when you're through with the mine, the tailings are put back or whatever happens? I know that was a bone of contention, that that was in fact stifling the ability of some of the mines to function, because of the high cost of providing that kind of financial backup. Is that still an issue?
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Mr Reid: Yes. Financial assurances are required under the Mining Act, and we are still in negotiations with the Ministry of Northern Development and Mines and the treasury, who's represented here today behind us, on amounts and different types of financial assurance instruments. I think we're making progress. At the moment I don't think we see it as onerous, but we haven't fleshed out the whole regime yet.
If I may, while I think of it, I believe you also got this booklet in your package. There is an article in here about Elliot Lake, which some of you will recall was related to Ontario Hydro as well, the uranium capital of the world for a while. Both those mines are shut down, and both Rio Algom and Denison have done an absolutely superlative job in reclaiming the tailings and shutting those mines down. In fact, they're winning awards for the reclamation they have done. Many environmental groups have been up there to see what they have done and have been quite impressed.
We in Canada and in Ontario have the ability and the knowledge to safely and environmentally soundly shut down mines, just as you're pointing out. We just don't want to be crippled with upfront requirements before we can get the mine open and producing.
The Chair: We'll move to the third party.
Mr Tony Martin (Sault Ste Marie): It's good to have you here this morning. I come from northern Ontario. My constituency is Sault Ste Marie. Of course, Algoma Steel is dependent very much on you being able to do your job in a cost-effective and efficient manner so they can get their raw material. I grew up in Wawa, which is a mining community, so I have some empathy and sympathy and some knowledge of some of the challenges you face. Certainly this morning you raise very clearly two of them, and that's where I want to ask some questions.
Before I do that, I want to say it's also good that you come and share with the folks here, who perhaps don't fully appreciate sometimes the contribution that the economy of northern Ontario makes to the whole economy of the province, how intricately connected we are and how what we produce in the north grows exponentially in terms of value added as it comes south. When we ask sometimes for some consideration and for some return, it's not without some basis in terms of what we give. It's good that you make the case. I'm not always able to because I'm limited in my knowledge and experience in that respect.
Today you raise two questions that I think are very important. One of them is the question of taxation and the impact of the recent push to amalgamation and the downloading of costs that previously were carried by the provincial government. Up to now you've talked about the chase that's on for municipalities to try and get you into their web because they have to provide services as well. Perhaps you could expand a little bit more on your concern re the recent initiatives of the government, how you see that impacting on you and what it is that you could suggest the government do to take some of the pressure off.
Mr Reid: As I said, the Municipal Act was amended to allow municipalities to amalgamate -- we're primarily talking northern Ontario, but also southern Ontario -- and frankly I think that's probably a good thing, but I guess it gets to be what your motivation is.
We're just concerned that we see a lot of municipal boundaries being drawn that wouldn't make geographic or service-centred sense from our point of view. We see them being drawn to take in taxable entities such as mines, natural gas installations or whatever. We're concerned obviously that the taxes will rise for the mining company that's located in that geographic area that is not really going to receive any services. In fact, the employees may not even be living in or receiving any services either from this new municipal area.
Mr Martin: You also raise the question of uncompetitive electricity rates, and I think that's certainly another big issue for any big company, particularly in northern Ontario where your options are limited. You're suggesting here moving to a more private-sector-oriented delivery of electricity, actually, that development of electricity might provide you with a better competitive advantage.
Just the other day I sat and talked with Sandy Adams who's the CAO at Algoma Steel now. We have a privately delivered source of electricity in our area, Great Lakes Power, owned by Brascan. In that instance you would think there would be some advantage, and there is some small advantage. They try to be competitive with Ontario Hydro or just below. This is a private sector operator who has access to some pretty reasonable sources of electricity in terms of cost, yet they're still way above what Algoma feels is necessary for them to get a reasonable return on their investment. Algoma figures that Great Lakes is probably pulling in about a 100% profit margin on what they're selling them. They were having a meeting in a week or two to try and negotiate that.
The question I would have is, if we did in fact move to a private-sector-delivered system, what's to guarantee us that we would get the kind of advantage that you're suggesting, given that experience? Also, why is it that in a situation where we already have that conglomeration, we can't find a way for those companies to work together so that everybody wins in the end? Outfits like Algoma and St Marys and Agawa in our community might be able to take advantage of that and actually sell their product at a better rate and maybe even attract some further industry to our neck of the woods because of that. It's not happening and perhaps you can explain to me why.
Mr McBride: There are two pieces of legislation that are serious barriers to that that really need to be changed. One is the Power Corporation Act and the other is the municipal utilities act. People should not be fearful of competition in the electricity market. And again, it doesn't have to be privatization. I think we're looking for competition.
If one looks at the natural gas evolution to a marketplace, shall we say, from a total monopoly, which started in 1985, it has been evolutionary. It's been regulated and monitored. The National Energy Board did a study that's just been issued that basically shows that both consumers and producers benefitted from an evolution to an open marketplace. The reality, though, is that if Ontario doesn't get in line with what's happening south of the border and with neighbouring provinces, we're going to be left behind. One thing I'd like to emphasize too is, Ontario Hydro is a monopoly in an age when it's inefficient.
The Chair: We'll move to the government party. Mr Ford, did you have a question?
Mr Douglas B. Ford (Etobicoke-Humber): Yes. Good morning, gentlemen, and welcome. I'm sort of green at this business of mining. I've been down in gold mines, coal mines and everything else, but I'd like to know the inner workings of these types of things when it comes to the political situation in such countries as Chile or places like that. What is the difference between operating in Ontario and operating in one of these other countries, say Chile or Indonesia? I hear in Indonesia Bre-X and all this type of thing. Is there conflict in these other areas politically and everything else, and is it a risky business to function in these other countries or in Ontario, from an investment point of view?
Mr Reid: There's no simple answer. Every situation, every country is different. Let me share with you an anecdote. As a former member of this Legislature used to say, if it isn't true it should be. The apocryphal story that used to go around a few years ago was that when a mining guy goes to Chile and he's met at the airport by the Chilean minister of mines, he says: "I'm here to help you. What do you need?" In Ontario you walk into a government office and say, "I want to start a mine," and they hand you two volumes of books with all the regulations and rules in it and say, "After you've read all that stuff, come back and I'll see if I can answer any questions you've got." There is a more welcoming attitude in a lot of these places than there is in Ontario and Canada, although again I hasten to say I think it's improved.
There always is political risk. By the way, you can get political risk insurance. There are companies out there which every year come up with a list of countries that are -- you know, they rate them. A few years ago Canada was fifth or sixth on the list, and that was largely because of the Windy Craggy situation in British Columbia.
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Mr Ford: I always concern myself with the rules and regulations of mining here because I believe there are a few hundred years of resources still left in either Ontario or Canada, whatever way you want to look at it. I think these resources should be developed so that we can work on paying these debts we seem to be encumbered with all the time through social benefits and that type of thing, but we should have a little freer hand to let people explore, to let people mine, and have certain rules and regulations about the cleanup after.
That is my concern. While we have these resources -- or do we leave it in the ground for the next generation or the generation after? This is maybe what's happening now; we're not giving these permits out so readily. Maybe I'm wrong. Like I said, I'm green in this business.
Mr Jim Brown (Scarborough West): I have a little bit of background in the mining business and I share with Mr Kwinter that we've got great rock in Ontario, we've got great geology, but a lot of the money doesn't come here; it goes to places perhaps less risky such as Kazakhkstan --
Mr Kwinter: Kurdistan.
Mr Jim Brown: Kurdistan. What can we do to get more of it here? I know that flow-through shares were still being used in Quebec to encourage money to be put into the ground in Quebec. The federal government used to have it and of course abandoned it. Quebec kept it; I think they've still got it. What are your views on flow-through for Ontario and what more can we do to get money into the ground in Ontario?
Mr Reid: Flow-through shares were very popular; however, they became maybe too popular. It cost the treasuries of the federal government and the provincial government too much, which I gather is the reason they were cut back. That might help.
As Mr Ford said, there are two basic reasons Ontario isn't as attractive as it might be. One is the sheer amount of legislation and regulation relating to the mining industry. We're probably the most regulated industry, perhaps not as much as the chemical but pretty close, and a lot of it is unnecessary in our view. But that's changing and that's improving.
The other thing, frankly, is the tax levels. In our submission we said that 58% goes to one level of government or the other. A lot of other areas, countries, have a less onerous tax regime. You'll hear this; it's not new. We've got to get the tax rate down to compete with a lot of other jurisdictions.
The Chair: Thank you very much. I appreciate the Ontario Mining Association taking the time to make its presentation to us. It's very important that we hear from this element of our economy.
ONTARIO HOME BUILDERS' ASSOCIATION
The Chair: We now welcome the Ontario Home Builders' Association, Mr Ron Sarginson and Mr Al McLean. Welcome to the committee, gentleman.
Mr Ron Sarginson: You must bear with me. I have a Calgary cold which I just inherited a few days ago.
The Chair: They're tenacious this year.
Mr Sarginson: I know. Somebody said it goes right to the bone, and believe me, it does.
Good morning. My name is Ron Sarginson. I am president of the Ontario Home Builders' Association and a house designer in the Ottawa area. With me is Al McLean. Al is the first vice-president of OHBA and a developer in St Marys.
For those of you who are not familiar with OHBA, we are a volunteer association of companies in the home building industry. We have approximately 3,400 member companies in 34 locals around the province.
I understand that today we have half an hour. Our prepared remarks are relatively brief, so there will be plenty of time for questions. I am going to give you a general overview of the housing industry. I hope my comments will provide some context for the statistics you see reported in the newspapers. Then I will turn things over to Al. He will talk about some of the implications of what I have described. He will also outline some specific recommendations for the budget.
The numbers that are commonly reported in the press these days are all very encouraging, and indeed, our members are more optimistic about the year ahead of them than they have been at any point in the 1990s. But there is another story lurking behind these numbers. I am one who prefers to see a glass half full rather than half empty, but responsible policymaking requires vigilance. It is nice to dwell on the good news, but we need to pay just as much attention to what is not happening.
I would like to direct your attention to the graphs that have been attached at the back of our remarks. If you look at these, you will note that 1996 was pretty much an average year for the 1990s. In fact, it was a little below average. The next two graphs split out single detached housing and all other types. These begin to tell the story of what is going on.
Let's talk about the single detached housing market first. In the autumn of 1989, it fell sharply in the Toronto area. The rest of Ontario followed in 1990. Since then, this market has been pretty stable. The only exception was in 1995, and 1995 was the worst year for housing since the end of the Second World War. The recovery in 1996 was welcome news, but it only brought us back to the average level.
Let's look at what was happening in the multiple-family market during the same period. It fell in two stages. The infusion of non-profit units delayed the first decline by a year or so until 1991. Then there was another sharp drop in 1993. This occurred as the non-profit building program began to wind down. Since then, the multiple-family market has been stable.
The result of these trends is very important. Consumer demand and industry supply have not kept pace with real housing needs. Pent-up demand has been developing for several years now. At current levels, pent-up demand represents over two years worth of production. That equals over 100,000 households who have not had their housing needs met. In fact, it equals a lot more than 100,000 families. The 100,000 figure represents the houses and apartments that need to be built. Meanwhile, the families or households creating this pent-up demand are living somewhere. So every house that needs to be built represents two things: one is a family or household that does not have its own home; the other is the family that is accommodating the first one. This 100,000-unit figure also represents something else. It equals 300,000 person-years of employment in the industry.
I guess I'll turn things over to Al, who will talk about the implications of all this.
Mr Al McLean: Good morning. Ron has given you a pretty good overview of the state of housing in Ontario. To put it in a nutshell, we could say that 1996 was an average year, and average is not good enough. There is one more figure you need to complete the picture. In most cities and towns in Ontario, over 35% of renters can afford to buy a home. This figure is important for a number of reasons, but the main one is that these renters are occupying the only source of new rental supply we will have in Ontario for the rest of the 1990s.
If people who require low-cost rental accommodation are able to get the housing they need, it will be for one reason: Current renters decide to buy a home and leave their apartment. The reason for this is that very little additional private sector rental stock will come on the market for several years. If all the necessary changes affecting rental housing went into effect today, it would take investors two or three years to prepare business plans, arrange financing, get approvals and complete construction.
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So the key housing policy issue that faces this government is determining what it takes to get renters out of their apartments. It is obvious that a lot of variables enter into a lifestyle choice as important as this one, but the factor the government can control, at least to a certain extent, is an important one: It is the economic comparison between renting and owning a home.
Our message today is that government can do a lot to make ownership more attractive by lowering the costs that are imposed on housing through taxes and regulation. Every time you lower the cost of a house by $1,000, you make housing affordable to thousands of additional families, and you make home ownership even more attractive to renters who can already afford to buy.
Can $1,000 make a difference? If you could always add another $1,000 to the price of a home, everyone would be living in million-dollar mansions. When you are talking about marginal effects, people who are on the threshold, $1,000 does make a difference.
The government has already taken several important steps in this direction. The planning and approvals process has been streamlined, at least on paper. Some building code standards have been returned to cost-effective levels. Other changes to the building code have been proposed. Restrictions on the use of development charges were introduced last fall, and the government is actively supporting acceptance of alternative development standards that help lower the cost of subdivisions. All of these changes should be supported by anyone who is concerned about the state of housing in Ontario, and even more change should be encouraged.
Now I would like to make some specific recommendations:
First, our membership strongly supports the government's agenda of fiscal restraint and deficit reduction. We survey our members on a regular basis and support for deficit reduction has remained consistent. So the message is to stay the course.
Second, the property tax assessment of rental housing should be made more equitable. This would lower rents and could work against the strategy of making ownership economically attractive, but a long-term housing strategy requires construction of more rental stock. This inequity accounts for a third of the gap between economic and market rents, so it is very important that it be eliminated.
Third, the use of development charges to finance school construction should be ended. This practice was introduced in 1989 to offset a reduction in provincial grants. The current government understands the negative impact of development charges and has stated that residential property taxes should not be used to finance education. Let me suggest that this reasoning leads to one conclusion regarding education development charges: Their use should be discontinued.
Fourth, the GST: This tax distorts between new and resale homes and between ownership and rental. As far as housing is concerned, it is a fundamentally flawed tax. Our recommendation here is twofold: (1) the government of Ontario should strongly lobby for reductions in the rate of the GST with the objective of eventually eliminating the tax, and (2) the government of Ontario should publicly and clearly state that it will not harmonize its retail sales tax with the GST under any circumstances.
To sum up, there are a lot of positive signs in the market but the industry is still depressed and clearly underperforming. The government's agenda of easing the tax and regulatory burden on housing is vitally important and a key to encouraging renters who can afford ownership to buy a home. This strategy will produce the only source of rental units for the rest of the 1990s and it will help create thousands of jobs in the housing construction industry.
Finally, the home building industry strongly commends the government on its handling of the economy and the progress it has made towards eliminating the deficit. Thank you for your attention.
Mr Martin: I apologize that I missed the first of your presentation, but I don't think I missed the gist of it. You certainly make some valid points. However, in listening to you I can't help but think there's a hole in this, a piece missing.
I would say as humbly as I can that to suggest that the reason people aren't buying homes is because it's somehow more appealing to them to stay in a rental situation or because there were more non-profit rental units coming on the market seems to me to be a bit narrow in terms of an analysis of what was happening and is happening.
It seems to me, and you can tell me if I'm wrong, that two of the reasons people have bought homes from time to time over the last few years is, number one, the fact that interest rates have gone down. When interest rates go down, I know for myself personally I'm more likely to go out there and look at the possibility of maybe making some purchases, and I will do that. Number two is if I have a job that's secure, if I know it will be there for a while and I'll be able to make the payments. There are two things that are happening out there right now that sort of cloud that picture for me.
I would suggest that with interest rates where they are and some of the initiatives of the federal government, for example, allowing people a 5% down payment in some instances as opposed to 10%, would be an incentive, but what's happened in this province by way of a dampening of the domestic market for anything is the cutbacks in government spending and the jobs that were out there in the government sector, which are significant. In my own community it's well over 1,000 jobs now, good-paying jobs, secure jobs gone. Have you factored that into the equation you've presented here this morning?
I know you've given the government kudos for cutting back, but it's my read of it that if anything has slowed what could potentially be really a booming housing market as opposed to, as you say here, one that is not booming, it is the cutbacks actually by the provincial government for the purpose of giving this tax break. Could you comment on that.
Mr McLean: That's a fairly involved question. I'd like to comment, first of all, that you're entirely right. The low interest rates prevalent today are certainly having a positive impact on the housing market. The federal government's initiatives in terms of the 5% down have in fact allowed nearly 500,000 Canadian families to purchase a home who might not otherwise have done so over the last few years, and the RRSP initiative is also good.
We feel the primary item lacking, and you've hit on it, has been consumer confidence. This has been a very long-term down trend in confidence which has only recently turned upwards and we anticipate that will be positive for the housing market. We think it's clear the consumer is more confident in the fiscal management of this government and in their future under this government.
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Mr Martin: You mention that the "industry is still depressed and clearly underperforming." I don't know anybody, to be frank with you, out there who is renting or living in a home that is not adequate to their need, for example, three or four kids in a two-bedroom or a three-bedroom, who wouldn't like to get something that would be a bit more spacious or whatever. The right factors have to be in place.
I know from talking to the folks on my street and in my community that because of the very negative impact on their life and on the potential for them re some security into the future, this issue of where the jobs are going to be, not only for themselves but for their children and their ability to even pay for the education of the children, is causing them a problem in terms of buying big-ticket items, and certainly a house is a big-ticket item.
There still seems to be, for me anyway, a bit of a contradiction in your support for the government in its cost cutting to produce the tax break and the impact it's having on the economy out there. Given the level of interest rates and some of the other factors I've mentioned, it should be booming at this particular point in time. I don't know how you can put those together and suggest that there is an upturn or a positive climate. It's not what I'm hearing and feeling and seeing in my own community.
Mr McLean: In terms of the 100,000 figure -- and I think you're very fortunate if you don't know people who perhaps have adult children at home who in the past would have been out on their own -- if we turn to the graphs on page 6, we will see the urban housing starts, the top graph, and although we don't have the overlay, and I apologize for that, if we had an overlay over that, we would have seen a population growth line going through there that would start in 1987 somewhere just under the 60,000 and would now be up in the sort of 65,000 range.
This is the sort of demographic demand for housing in the province. We overbuilt in the late 1980s. That overbuilding was taken up by around 1991 and on into 1992, and since 1992 we've had a continuing disparity between the units going on the market, being built in Ontario, and the population which would like to be housed in those units.
That was one part of your question and I'm afraid I've --
Mr Martin: How can you not see the contradiction in what this government has done singlehandedly to depress a market that could be exciting and booming at this point in time with your support of those initiatives and the impact it is having, I know, on your industry, by your own admission to some degree here in your presentation, which is that the "industry is still depressed and clearly underperforming"?
Mr McLean: The industry is underperforming. As we said earlier, it's a question of confidence. We believe that the proper fiscal management of the economy and the reduction in taxes and levies which have been proposed or which we are proposing will increase that confidence in the consumer and lead to a better housing market.
Mr E.J. Douglas Rollins (Quinte): Thanks, gentlemen, for coming in. I believe that in the last year we've seen some 20% or 25% growth depending on how you want to multiply those figures out. It takes us back to the forecasts of 1992, where we could reach those this year if the forecasts are fulfilled.
It's funny that we continually get this tax cut situation, yet the more dollars a person has in their pockets, the more they're apt to spend, and when they spend that money, they're more apt to spend it on big-ticket items, and there's no question interest helps.
One of the things I would point out to you is that this government did a land transfer tax last year to encourage people, and up until this year 9,370 people have applied for that land transfer tax to support them in buying that first house. Was that not one of the big compliments for this government, what it's done to encourage those housing starts?
Mr Sarginson: Certainly, that was a great initiative and it really did give a kickstart to the industry. I understand it's coming to an end at the end of March. A lot of people did take advantage of it; it was a great incentive. I know it's being closed in March and I think we are going to support the government in doing so because the money has to come from somewhere in the end. Again, we compliment the government on providing this initiative. We didn't ask for it; it's a great thing. Thank you very much. This industry of ours is against taxation and regulation, and any little incentive that we can come up with would be great, but I think we'll agree that it's time to sunset it.
Mr Joseph Spina (Brampton North): Thank you, gentlemen, for your perspective on budget issues. Just quickly, you mentioned some positive things that we have done in terms of our policies and regulations and so on: the development charges, changes to rent control, changes to education and the property tax and so on. These items were all positive, in your opinion, towards giving an incentive for more housing development; also between the land transfer tax and some of the development charges changes that we can run.
I just want to correct a little statement you made, and that is, if it "reduces" the cost of housing by $1,000, that's a big incentive. I think that's what you meant to say, because I think you said "if you add $1,000." Anyway, that's okay. I just wanted to clarify that.
In all fairness to Mr Martin's comment, the housing market, you said, dried up in 1991-92 because of the oversupply and basically the heated market in 1987 to 1989. If this province lagged two years behind the other provinces in terms of the recovery from the early 1990s recession, if the policies that we are implementing now would have been put into place in 1991-92, would you have seen less of a dip in 1994 and 1995, particularly the 1995 market, and perhaps by this time we might have been on a more even keel or a more consistent development market? That's the first part.
The last part is, a lot of the construction that was done in 1991 to 1993, for the most part, was it not government-funded construction? I think that was the distinction that maybe Mr Martin was concerned about. He's saying that government cuts affected jobs in that way because now there is far less government-funded construction, as opposed to creating a positive environment for housing construction in the private sector, which is what we're trying to do.
Mr Sarginson: So 1991-1993, you're referring to the subsidized housing?
Mr Spina: Yes.
Mr Sarginson: Certainly the program cost the taxpayer a lot of money and the government wanted to get out of the business of housing and put it back into our hands, which is good to see. It was an expensive program for all of those here in the province.
To answer your first question, would it have helped? Of course it would have helped but it wasn't the only -- at that time, I don't know. I'm just saying that any little initiative the government can do at any point in time helps. It probably would have, but maybe it's just one of those things.
Mr Spina: It's a little speculative.
Mr Sarginson: Yes.
Mr Gerry Phillips (Scarborough-Agincourt): I was curious about one of your comments, and I found this very helpful, by the way. You indicated that your industry feels that very little additional private sector rental stock will be on the market for several years. Is that as a result of talking to your membership? How did you reach that conclusion?
Mr McLean: If I could speak to that, there has been a long-term drought of private sector rental accommodation going on the market. We believe, talking to our members, that the primary reason for this is the rent control legislation that has been in effect. When we speak of confidence, it isn't just consumer confidence; it's also builder and developer confidence. There was a lack of confidence in the security of investment in investing in private sector rental accommodation that was rent controlled.
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The changes that have been made in the rent control legislation, the changes that we are proposing and that have been made, and more changes that we hope may be made in the property tax assessment and the unfair taxation of apartments -- in some municipalities we see four to five times as high a taxation rate for apartments as for private homes. If we can effect these changes, they will encourage builders and developers to come back on the market.
We mentioned economic rent versus market rent. We have to close that gap a little.
However, even if all these things are in place, even assuming that the work that has been done so far and the work that is still to come provides a proper framework for building, it still takes a number of years. If you have a piece of property, there may be rezoning; there is certainly design; there is financing; there is construction; so we see a minimum of two to three years before these initiatives could have a significant impact on the private rental market.
Mr Kwinter: In your statistics, I assume that when you say "Toronto" you're talking about the GTA, as far as housing starts are concerned?
Mr McLean: Yes.
Mr Kwinter: If you take a look at what's happening in the resale market today, I assume in the GTA, although certainly in Metro Toronto, it is red hot. There are articles virtually every day talking about what is happening. How is that impacting? Is that a negative or is that a positive for the house building industry in this area?
Mr Sarginson: I can say that some of our builders are competing with themselves lately. The houses that they sold in the past, they're fighting against the resales. It's having a negative effect, yes, because we are competing with the resale.
I'm from Ottawa. You're talking about the Toronto area. In Ottawa the resale market is very slow. New construction is increasingly coming on stream, but in both areas builders are competing with themselves. By that I mean the builders are competing with their own product coming on stream, with the older product selling at a cheaper rate. What we're seeing is more taxation, more regulation coming on stream to the newer product and it's driving the prices up. If you say in Toronto it's a hot market, I'm not aware of that.
Mr McLean: Yes, it is.
Mr Sarginson: Good, I'm glad to hear that, but I know the Ottawa market is very slow.
The Chair: Thank you very much. We appreciate the home builders' association appearing before the committee today, for taking that time.
ONTARIO HOSPITAL ASSOCIATION
The Chair: Our next deputant is the Ontario Hospital Association. We welcome Mr Lind, chair; Mr MacKinnon, president; and Mr Muir, past chair of the Ontario Hospital Association. Welcome to the committee, gentlemen.
Mr John Lind: Good morning. My name is John Lind. I am a trustee of St Marys Memorial Hospital in St Marys and also the chair of the Ontario Hospital Association. With me I have Bob Muir, CEO of the Lake of the Woods District Hospital in Kenora and a past chair of the Ontario Hospital Association, and David MacKinnon, president of the association. I'm going to be asking David to make the presentation and then we will be pleased to answer your questions after that.
Mr David MacKinnon: Thank you very much for the opportunity to speak to the standing committee on behalf of the hospitals of Ontario. We very much appreciate the opportunity.
The message I wish to give today is quite a simple message. It is that the government's current policy towards the restructuring of hospitals and the health system as a whole is flawed and must be fundamentally changed before irreparable damage is done. We believe that unless the changes are made, the people of this province will face reduced access to care and the quality of that care may also be affected. We believe that these two things must not be allowed to happen.
We don't make these statements lightly. They reflect a broad consensus, after the last year or so of working with reductions; a broad consensus both within the hospitals themselves and at the OHA board level. Nor do I make these kinds of comments because hospitals wish to argue for the maintenance of the status quo. On the contrary, as members of this committee will know, in previous years the Ontario Hospital Association has strongly supported hospital restructuring, in large part because the improvements that the physicians and the hospital staff and nurses in hospitals have made make significant restructuring and savings possible. But we argue that this restructuring must be done within a realistic time frame and with adequate upfront investment.
We also want to argue today that the restructuring of the broader health care system must be done in a way that is supported by evidence, and not driven by ideology or abstract visions. Restructuring must recognize the reality of the change that is already happening in the system, and much is happening, and it must build on the successes already achieved, and many successes have already occurred.
I'd like to focus on three key issues in this presentation. The first is that the hospital budget reduction target for 1998-1999 should be achieved through hospital restructuring; that is to say through mergers, consolidations and closures and not by the damaging across-the-board funding reductions that we have seen in each of the last two years.
Second, the current planning and policy directions with respect to the future of the health care system are flawed. We believe we must approach the planning of the system in a better way and in particular based on pragmatic and evidence-based efforts.
Third, and more positively, we believe that, working together, there are some steps that we can suggest that will permit us to do much better than we're doing and that will still permit the government to achieve most, if not all, of its essential fiscal targets. So there is a better way and we would like to describe what that is.
Let me speak first about hospital budget cuts. In November 1995 the government announced a $1.3-billion, three-year funding reduction for Ontario hospitals. The 1996-97 reduction was 5%, or $365 million; the 1997-98 reduction translates into just over 6%, or $435 million, and the proposed 1998-99 reduction is close to 8%, or $507 million.
Through the Savings and Restructuring Act, the ministry also established the Health Services Restructuring Commission, with the mandate to accelerate hospital restructuring. The reason the OHA supported this effort, and this is a key point, is because of its expectation that a large proportion of the required savings to meet the government's fiscal agenda would result from mergers, consolidations and closures, and not across-the-board budget cuts.
As I mentioned earlier, OHA and its members have been and continue to be supportive of restructuring in the hospital sector. Restructuring has been made possible by the successes of hospitals in introducing new technology, drug therapies and innovations in the delivery of patient care. These have led to reductions in lengths of stay, a significant shift in outpatient and ambulatory care, which reduces the need for conventional hospital facilities and for beds and buildings of all types.
Despite these successes, and those successes are dramatic, major problems are emerging in Ontario with respect to the management of the hospital restructuring process. We are, a point we emphasized at our convention last fall, in a situation where one of the largest public sector restructuring projects ever undertaken in Canada -- and that is what hospital restructuring in Ontario is -- that very large, centrally important project to Ontario, is at risk.
The key problem, as you'll gather from my previous comments, is that the timing of the commission's work does not coincide with budget cuts. Only two final reports have been issued -- in Sudbury and Thunder Bay -- and the savings in those communities will not be realized immediately. Preliminary reports for Lambton county and Pembroke have also been issued. Reports on the major urban centres of Toronto, London and Ottawa are expected over the next few weeks.
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The result of this timetable is that virtually all our hospitals are faced with severe funding reductions before they know the results of the commission's decisions. We believe this makes absolutely no sense. Hospitals are issuing layoff notices and making service reductions only to find out later that perhaps the hospital won't even exist or that it will exist as part of a new corporation or that it will actually be expanding and will have unnecessarily disturbed the lives of many of the people who work in it as a consequence. If one walked down Bay Street and asked the people doing business restructuring in Ontario whether they would make a series of fundamental budget decisions about the businesses they were restructuring and then do the restructuring, they would say, "No, never," but that is in effect what we're trying to do in Ontario in the hospital industry.
We have looked at the effects of the cuts, particularly the impact of the further 7% reduction for 1998-99. We have looked at it with great care and concluded that even with aggressive utilization management, savings from clinical efficiency and significant organizational consolidation, the hospital industry will not be able to achieve the $1.3 billion within the three-year time frame without significantly affecting and reducing access to health care services.
Equally important for the committee to recognize is that hospitals cannot absorb the upfront costs of restructuring, particularly the very significant severance costs, which will run into many millions. We are pleased to hear that the finance minister intends to establish a contingency fund to assist in this area and we expect the hospitals will be able to access this fund.
There are many labour relations issues attached to hospital restructuring, many of them very difficult for the managers dealing with them. Most important of these are the provisions in collective bargaining agreements that prevent hospitals from contracting out indirect patient care services to achieve savings.
This is best illustrated by a recent arbitrator's decision prohibiting Sunnybrook Health Science Centre from contracting out its dietary operations at a potential annual cost saving of $1.3 million because to do so would result in the elimination of 13 jobs. Sunnybrook now has to find those savings elsewhere, quite probably from direct patient care.
I would like to draw the committee's attention to a few other issues. The first of these is the issue of administrative costs in hospitals. The government, in our view, continually misstates the potential for savings hospitals could achieve through talking about things such as administrative efficiencies and reduction of waste. I should say that the government figures on administration in hospitals unfortunately include physical plant costs, food services, laundry, housekeeping, medical records and other essential services, which in almost any other line of business would not be classified as administrative. These, as a result, have inflated many of the administrative costs to a level of approximately three times what they actually are.
We have examined this issue of administrative costs in some detail. The evidence that's available to us, which is considerable, suggests that we're doing quite well in relation to all other Canadian hospital experience and our ability to manage our administrative costs is comparable with the same numbers for leading US health management organizations.
The result of all this, though, is that any notion that savings of the kind now contemplated can be made from further administrative efficiencies is in our view misguided. It is our view now that the only way to achieve major savings in hospitals will come from clinical efficiencies or organizational consolidation. Those are the two options open to us.
A further issue, one that's often overlooked, is that hospitals are something other than enterprises which heal people. Hospitals, in our view, are essential to Ontario's technological competitiveness. Some members of the committee, I think, will have seen that. Mr Kwinter, you may have at various times come across that as minister of industry. Many of the hospitals, including Mount Sinai, the Hospital for Sick Children, Sunnybrook Health Science Centre, the London Health Science Centre, to name only a few, are active in advanced materials, advanced computerization and visualization, robotics, electronics, and of course direct medical research of all types.
The federal Minister of Finance acknowledged this important role of hospitals yesterday and I would ask the committee to consider whether it would wish to do the same. Inclusion of hospitals in the programs of the provincial centres of technological excellence would be an important first step in this regard.
In summary, for this first of my three issues, OHA strongly urges that the committee recommend to the Minister of Finance that the government reconsider its proposed 7% reduction for 1998-99 and that the government take out only those savings that can be obtained through hospital restructuring; second, that the government make changes to the Hospital Labour Disputes Arbitration Act to remove collective agreement provisions which restrict a hospital's ability to determine who does which work, including contracting out.
I would now like to turn to current health care planning in Ontario. In our opinion, that planning is second-rate. The first problem is that much of the planning being done is not evidence-driven. For example, about two thirds of the money being taken from hospitals this year is being redirected to other programs in the belief, and "belief" is the word I would emphasize, that the work can be done either better or cheaper outside hospitals. The trouble is, there is no conclusive evidence that this is the case. In our view, hundreds of millions of dollars have been redirected within the envelope without definitive evidence that the programs on the receiving end can deliver the service any better than hospitals.
We have no objection to funding changes taking place where it can be proven that somebody does something better or a combination of better and cheaper than we do, but we object pretty strongly to the level of redirections being undertaken because a very detailed survey of the literature available to us suggests that the evidence behind them is at best inconclusive.
The second argument, which I've already mentioned and will just touch on again very briefly, is that the government is proceeding with cuts that are essentially across the board. They're not completely across the board, because they do vary somewhat in accordance with a formula that we have agreed upon with the government. But across-the-board cuts are not what were promised by Mr Wilson when the process started. In fact, the person who delivered the clearest warning of the danger of across-the-board budget cuts was Mr Wilson, then the Minister of Health. He clearly warned about the mediocrity such cuts would bring, but we have for almost two years been locked into this policy and, to use the minister's words, we now run the risk of ending up with "mediocrity in the system."
It's one thing, from our point of view, to make honest mistakes in the absence of knowledge; it's quite another to do something even when we know and had advance warning that this was not at all a wise thing to do.
A third problem with the planning of the health system may be even more insidious. It is a tendency among leaders within the health care industry to talk about their visions and to present neither evidence nor choices to justify them. In the last two months Ontario hospitals have been visited with three major visions about the health care industry: the National Forum on Health; the committee of federal and provincial ministers of health; and the Ontario Health Services Restructuring Commission. And that's only the crop of visions for the last two months. This has been going on for nearly 30 years.
A good example is The Vision of Ontario's Health Services System, recently released by the Ontario Health Services Restructuring Commission. In my view, it's quite a remarkable document. It says little or nothing about the dramatic technological possibilities which can improve patient care and which are transforming the practice of medicine as we speak. It does not report at all on greatly improved coordination among health providers in all parts of Ontario. It does not report on the recent emergence of the Ontario Health Providers Alliance as a strategic alliance between many of the major health care organizations and associations in the province. It doesn't talk about the managerial capabilities or financial coherence of any part of the system. Arguably, it proceeds directly to a series of organizational options without dealing with any of the major forces that are shaping and will shape the future of the health services system.
Aside from the problem of dealing with the monthly crop of visions, we think this approach is dangerous because it has a profound potential to encourage public policy based on emotions, preconceptions and ideology rather than facts. Facts, as someone very famous once said, are better than dreams, and I think we need to pay a fair bit more attention to them.
There is a fourth problem with the system. I've spent much of my professional life lending or investing money or advising on it and making the kinds of decisions needed in any financial institution. However, even after that, I'm aghast at the rigid methodologies and benchmarks we are applying in determining how the health care system is to be reconfigured: how many acute care beds there will be, how many long-term beds and so on. But this is a human service system affecting the real lives of real people, not a paint-by-numbers picture. You can't deal with it that way.
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I'd like to give you an example of the consequences of making decisions about the size of the system and the number of beds in this way. The example involves social admissions to hospitals. The commission's restructuring decisions on the number of beds in each community are being made on the assumption that people will be admitted to the hospital only if they need acute medical care, and not because they simply need help and support. This could have profound social impact.
I'd like to tell you about one of many thousands of such cases we see every year. Recently, an unemployed man on the west coast was offered a job on the east coast, where his family lives. He had run out of his luck but he did have a job offer and his family was a few thousand miles away. He decided to hitchhike back east. He waited for 24 hours in one of our cold prairie cities in January temperatures and was subsequently admitted to hospital there suffering from exposure to the cold. The hospital did what it could. Caregivers helped him to get warm again and looked after him briefly, but he was soon on his way again. After tremendous hardship, he was driven by some caring soul to a doctor in a northern Ontario community. He was cold, underclothed and undernourished. The doctor treated him, the hospital gave him some meals, found some clothes and sent him on his way when they thought he had a chance.
There are several ways of looking at this, as members of the committee will immediately observe. First, some planners would say that hospitals have no business admitting people like this because they are desperately down on their luck, like this man; they should send them somewhere else. In many communities in Ontario, there's nowhere else to send them. These same people might say that another common problem that hospital managers face, that is, providing respite capacity for women and children from abused families, also should happen elsewhere, but again, sometimes the number of possibilities elsewhere is limited.
The other way to view these cases -- and there are, as I say, many of them -- is to view the problem as citizens view it. They're the customers and they think hospitals have a responsibility to reach out and respond to people in those kinds of situations where there aren't alternatives. They believe that hospitals have always been symbols of compassion. But everything we are doing in our planning will make it difficult for hospitals to continue to be places of care and refuge in the many thousands of cases where people in our system need that care and refuge and do not have much personal support or other alternatives to find them.
Earlier, I described much of our planning for health services as being second-rate, but it's really deeply troubling. The combination of failing to collect evidence before setting policy, proceeding with policies that even those implementing them know are erroneous, substituting pronouncements for careful planning and managing complex human and social services using rigid mathematical models is dangerous. We can get into a lot of trouble that way; many societies have. Any student of the 1960s would know how dangerous that path can often be. We think we can do much better.
I'd like to conclude my presentation by just outlining a few ways in which that can happen. First of all, we believe there are alternate strategies for the health system planning and restructuring that should be adopted that avoid most if not all of the problems that I've summarized.
We recommend first that the government call a halt to further across-the-board funding reductions, and for the 1998-99 fiscal year take out only those savings achieved through hospital restructuring. We do not believe the government should push the envelope still further in terms of budget restrictions, possibly at very great human cost, when we have no fundamental assurance that access to care and quality can be maintained and when we have no decent business plan in place to guide those restructurings.
Second, we recommend that to assist with the halt in the third-year cuts, decisions to redirect funds from hospitals to other health programs be made only where there is conclusive evidence to support those decisions. We further recommend -- this is an important recommendation -- that no new bureaucracies and agencies, such as mental health agencies, be created within the health care system of Ontario for the foreseeable future. One of the things that has struck me as a comparative newcomer to this system is how many new organizations are getting up and getting started. Care committees have been started, there are district health councils all over Ontario producing reports, there's the commission itself, there's a whole range of community care access centres and mental health agencies that have been started up. One of the odd things about this is that this constant process of creating and staffing new bureaucracies, which takes away from the front-line staff, is quite at variance with the general approach the government is taking in other sectors. We would like to see it consider a moratorium on the creation of all new organizations and bureaucracies for the foreseeable future.
Third, we would recommend that the government make changes to the Hospital Labour Disputes Arbitration Act to remove collective agreement provisions which restrict a hospital's ability to contract out.
Fourth, we urge that the government and the commission approach the issues of hospital restructuring in rural Ontario in a different and more flexible way that recognizes the unique needs and concerns of people in rural and isolated communities.
Finally, we recommend that the government develop policy and legislation that will facilitate the integration of the health system through the voluntary cooperation of health providers and building on the important examples of success already in place in many parts of Ontario in terms of creating broadly structured health enterprises.
It is critically important in our view that these steps be taken, that all decisions with respect to the reform and restructuring of the health care system be evidence-based and that they result in genuine improvements to the care people receive. If we cannot answer with clear evidence the question of why we are doing what we are doing, then we shouldn't do it. If I were to summarize my presentation in one line, that would be it. I think that's the line with which I would like to conclude my presentation.
The Chair: That leaves us with about two minutes per party for questions. We can start with the government side.
Mr Tim Hudak (Niagara South): I had a very quick question directed to Mr MacKinnon, if I could, and then I'm sure some of my colleagues may have another question. I appreciate your comments, Mr MacKinnon.
My particular concern is about these small community hospitals. I attended the OHA -- I heard your remarks. I wondered if you had any advice to this committee as well about hospital restructuring with respect to the small community hospitals. How do they differ from the urban centres?
Mr MacKinnon: They differ fundamentally in two respects. First of all, there generally tend to be fewer other alternatives to their services in smaller communities. Second of all, they're very much more important to the whole community in the sense of organizing volunteers and providing a whole range of options. We recommended to the government last summer that it consider appointing additional members to the restructuring commission so that this process could proceed quickly, to avoid the kinds of concerns that are now occurring in most parts of Ontario. We will be making further suggestions as to how this can happen more quickly. It is our view -- and John may want to comment, because John represents a small hospital -- that this process, as we're embarking upon it, is needlessly controversial and there are alternatives.
Mr Lind: I agree with David. The small hospitals in the small rural communities, especially in the north, are very sensitive to geography and the types of customers they have. So we can't use a cookie-cutter approach, as David mentioned earlier, to look at restructuring and downsizing small hospitals. Also, small hospitals have a great economic impact on the communities, depending on the size of the community, and sometimes that is a plus when industry is looking to locate in some of these areas.
The Chair: We move to the official opposition.
Mr Phillips: I'm trying to sort of get a flavour of your presentation. I've always found the OHA presentations in some respects almost understated, but as I read and listen to you today, you're sending to me, at least, a signal of some very severe concerns. You use words like "seriously flawed," unless it's changed there is "irreparable damage," "the quality of care," "projects at risk" "second-rate" etc. I get from your presentation a sense of, at least as I listen to it, significant concern by the OHA. I guess I'd like you to confirm that. Also, what does it mean in human terms? I think we tend to get involved in the number of beds and patient length of stay and all that sort of thing. What are we looking at in terms of the human impact to people in Ontario, if I've interpreted your tone properly?
Mr Bob Muir: I'm a practitioner and I've been in the health field for 28 years, both in government and as a planner and as a hospital administrator and so on. I can tell you that the system -- and people like myself and others I know in the system have not said very much over the last number of years because we knew that a lot of it could be managed. The point, though, is that I think there's real concern at the moment that the system is coming apart at the seams.
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For example, no one seriously thought that the small hospitals formula would be implemented in its entirety this year. Second, you have very senior people in the health system at the moment who are privately and not so privately saying that they're seriously concerned about being able to keep the infrastructure together. The size of the cuts in the ranges we're dealing with are substantial, so in human terms it means that people -- I don't want to be an alarmist, but as an I think responsible individual who lives in this province both as a citizen and a practitioner in the health field, I have serious concerns about being able to keep the managed arrangements together; in other words, the ability to ensure that the system that people are used to and practise in 24 hours a day can actually stay together in many parts of the province. I think I echo a lot of other people who, two years ago, wouldn't have said that.
The Chair: Thank you very much. We'll move to Mr Martin.
Mr Martin: I would suggest, as Mr Phillips has, that you have in fact understated the problem. Where you say the quality of care "may decline" and that people of this province "will face" reduced access, they're already doing that: They're already facing it and it has declined.
The frustration for me, representing a community where I see that happening, is that I know the stories. You've probably in the last couple of weeks been aware of the Mauno Kaihla story out of Sault Ste Marie, out of the Plummer Hospital, a very definite example of a reduction, a diminishing of the quality of care, and we have other stories like that. We've had at least three people I can point to in the last couple of months out of Sault Ste Marie who have died waiting for heart surgery because the waiting list is now up over 250 in Sudbury. That's happening. That's what's going on. I rise in the House and, for suggesting that the minister is lying to us when he says there are no cuts -- each day we ask about the cuts to health care and get removed from that place for doing that.
Mr Gerry Martiniuk (Cambridge): It's for acting in an unparliamentary way.
Mr Martin: The stories we could tell and that I'm sure you could tell from talking to your members are quite startling and disturbing. Why won't you go so far as to say that the quality of care has in fact deteriorated and people are facing reduced access to care in this province right now by way of the cuts that have already happened?
Mr MacKinnon: There is no question that the comments we are making today represent, for the OHA, a very major departure, and I would hope that both government and opposition members would accord it greater weight precisely because of that. This represents a very significant consensus in the hospital community of Ontario that after a couple of years of intense efforts, some very successful efforts, to achieve the government's goals, we now think we cannot do it without significantly and seriously impacting on people.
We also, though, have a responsibility. This system is a system that 13 million people rely on each year for visits. It's still functioning in a quality way and people are working very hard to make it work. In any big system there are always going to be a few problems, and we are worried about that. Even one problem perhaps is too many.
I hope you will accept this consensus reflected in this document that after years of working very hard to cooperate with the government to achieve its goals, we don't think that we can carry on in the same way as we have in the last couple of years.
But there is an upside to it. The steps we've recommended at the end achieve nearly everyone's goals. Some of them are difficult, but it's entirely possible, with some imagination, for some of the policies that have governed this system to be changed.
A wonderful historian, Barbara Tuchman, wrote a wonderful book on folly in government over the centuries. She called it The March of Folly. In her view, the true test of statesmanship is whether one can be open to new evidence, absorb it carefully even when it contradicts deeply held belief, examine policy in the light of the new evidence and redirect it as required. Ms Tuchman is a distinguished historian. Her view is that this reflective process is the highest practice of the art of government, not driving on regardless.
The Chair: Thank you very much. We appreciate the Ontario Hospital Association's presentation in the health care area, a very high priority indeed for this government and for the people of Ontario. We appreciate your presentation before us this morning.
CONROS CORP
The Chair: Next we have Conros Corp. Mr Chandaria, will you come forward, please. Welcome to the committee.
Mr Navin Chandaria: I would like to thank you for inviting me to participate in this important committee to express my views. I am an entrepreneur who by my own choice immigrated to this great country in 1975. I would like to share with you today some of my thoughts on public policy.
Together with my brothers, we have built a sizeable business employing about 400 people. While we enjoy a leading market share in Canada, 90% of our production is exported to the United States and Europe. Among other industries, we produce Northland Firelogs. So far, we have competed vigorously in the United States and positioned our products on most major retail shelves in the US market.
During the 1980s, my company transferred jobs from the United States to Canada, moving production facilities of a business we bought in the US to Canada. Last year, we opened a new factory, but this time, and for the first time, it's located in the United States.
Unless something changes, we will continue to see migration of jobs. In fighting to grow our businesses, we have no choice but to export more; the Canadian market is too small. What better location can one dream of than to be next to the world's largest consumer market? We cannot ignore the fact that every country does the same thing, that is, export, export and export, and especially to the United States.
Japan has understood this extremely well. The reality is that we no longer have a market protected to ourselves. We have to compete with countries that have low labour and raw material costs. Inefficiencies and waste by the government result in higher taxes. These taxes are ultimately borne by individuals and businesses. To then ask our businesses to compete in the global marketplace is like tying a sack of sand on the back of our Olympic swimmers and asking them to compete with the rest of the world.
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It is my suggestion that our government should consider the following:
(a) Government must continue to downsize and eliminate jobs that do not add real value and let the private sector create the jobs.
(b) Government expenditures: Governments should introduce incentives for saving and not for spending maximum as per budget. Businessmen reward people who can buy better and spend less, whereas government departments seem to thrive only if they use up their budget to the fullest.
(c) Reduce taxes: Governments must realize that they too have competition. Tax holidays, low property taxes, zero sales tax, zero business tax, job creation grants, research and development grants are most commonly available south of the border. How can a Canadian dare to compete with all that, plus the made-in-USA seal?
I must say that I am encouraged by many changes that our present government has implemented during such a short period. One specific suggestion that I would like to make is that Ontario should maintain as low a corporate tax level as possible. Factories that have moved south of the border are there because it makes business sense and they have to be closer to the marketplace. Low corporate taxes may encourage many multinationals to consider moving their headquarters and research facilities to Ontario, while leaving the factory jobs south of the border.
I want to encourage the provincial government to continue its program of deficit reduction and reducing taxes. Any policy that creates a positive environment for the private sector to create jobs and wealth will make this a very strong province. By reducing the burden of taxes on businesses, you will free up capital for us to invest in creating value added jobs and opportunities for all the people of Ontario.
Thank you for listening to me.
Mr Kwinter: Thank you, Mr Chandaria. It was a pleasant surprise to see you here.
Mr Chandaria: Yes. Good to see you, sir.
Mr Kwinter: I saw your name and didn't realize who you were. I'm delighted to see you again. We have discussed this before. If you recall, we talked about your Northland logs and the problems you're having competing. Your process isn't a particularly high-technology process, but it depends on, as you say, low costs in order to be competitive. When you move to the United States, when you're opening up this latest plant, what are the very specific advantages you're getting there that you're not getting here?
Mr Chandaria: I must correct one area. One of the reasons why we are very successful with our product is because we employ technology both in production and the end result, the product itself. We are the only ones who have clean-burn technology in the entire world, and they're all patented.
On your question as to what incentives we have south of the border, when you look at the taxes, the property taxes, business taxes, they are one tenth of what we pay over here. Secondly, we have a 10-year tax holiday from the local state where we don't have to pay taxes. They have very lucrative job creation grants available. Research and development moneys are easily available. We don't have to fight as hard over there as we have to over here.
Even more important, everybody should note, is that to raise capital was so easy for us. We raised capital by the issuance of bonds locally over there, which is tied into the tax incentive. In the final analysis, we are closer to the market. We save freight. We all forget that we're next to the US market, but at the same time we still have to consider the freight to the markets. I hope that answers your question, sir.
Mr Kwinter: The reason I asked the question is that I'm trying to identify what you perceive as a competitive advantage and virtually every one of these things the present government has said they're not going to do. They've made it almost a matter of pride to say we are not going to do any of these things any more. I have to admit not all of these things have ever been done in Ontario, but certainly some of them have. Particularly the Minister of Economic Development, Trade and Tourism prides himself in saying there are no longer going to be any government handouts to any industries. If they can't make it on their own, they're not going to make it. Do you see that as a serious deterrent to industries locating in Ontario, particularly like yourself, coming from other countries, setting up a business here to access, as you say, the largest market in the world?
Mr Chandaria: Let me share with you my views on that. I agree, our government does not need to hand out. Firstly, under NAFTA I know it becomes more and more difficult. You can't subsidize.
What I would like everybody to understand is, by the time we make our first $1 profit, what happens is the government takes a portion of that. Nobody has bothered to look into the whole process that by the time we've paid the first $1 profit, we have firstly created jobs whereby government saves the money of having to pay unemployment benefits. We pay health taxes, which have now been put on the corporations, the employment tax, the property taxes. I'm sure if somebody were to do a study, by the time we get the first $1 as profit, probably a few dollars have been paid in taxes. What every government does is look at that $1 profit rather than all the other benefits they have got.
We're not asking for handouts, but what we are saying is, leave that $1 profit we made to us. Don't tax it or tax it very little so that we can use that. What happens on the other end? The government collects the tax on our $1 profit, then it creates jobs for bureaucrats to hand out and spend that money. Who does it go to? Somebody who wants to put up a new industry and has the one-foot-thick pile of paper to justify the project. How many projects really take off out of all those which are based on government money?
If we have managed to earn that $1 profit, let us be the ones to also spend it to create more jobs rather than going and looking for somebody else, rather than taking it away from us and giving it to somebody else who may or may not be able to create the jobs.
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Mr Martin: I apologize for not being here for the fuller part of your presentation, but I think I get the gist of what you're saying from your conversation with the official opposition. I appreciate some of your comments re the competition out there in the States, particularly because they're our closest neighbour. I think sometimes this isn't said enough, but you're saying it here this morning. Perhaps I missed the context, but you'll help me with that, I'm sure.
In the States, governments are involved in many forms of concessions to business to attract them. I know, from having close association in Sault Ste Marie with Sault Ste Marie, Michigan, and Marquette and from attending some of the conferences that go on, that government finds ways, in spite of NAFTA and other regulations that are now in place, to attract industry by offering them all kinds of incentives. I want you to comment on the question my colleague raised about the competitive edge there that is being taken away now very significantly in Ontario because of this government's ideological view that government should not be in any way involved in that kind of activity. Then I have another question, because we have a six-minute round here.
Mr Chandaria: My comment to that is that I don't think government needs to give money and a grant for a business like ours to prosper. I don't think they need to do that. What I'm really saying is: Reduce taxes. If people take that income personally, then tax them, but as long as they leave it in the corporation, don't tax, or at least reduce the tax, because what happens? For our next project, we need to go and look for money from financial institutions. What you're doing is taking away the profit we made. You're already taking away many times that much profit indirectly.
Mr Martin: You're not seeing a reduction in taxes on the income generated by business and what some of us call loopholes and that kind of thing as a government incentive to business? You don't see that as the same thing? You can give out grants or you can give tax breaks. It's the same thing: It's more money in your pocket so that you can do other things and perhaps be more profitable. I'll leave that, and you can comment on that, hopefully, in a minute.
The other thing is this issue of taxes. I get the sense from listening to a whole lot of people that there's this feeling out there that taxes are actually money into a big black hole somewhere, that it somehow leaves the economy, it disappears, it's in a Swiss bank account or perhaps goes to gold-plated pension plans for MPPs or something.
It seems to me that one of the competitive advantages Ontario has and has had traditionally over the years, and many economists and studies will say this, is a first-class education system that provides good, well-trained employees; a first-class health care system that provides all kinds of advantages to businesses because they don't have to pay for the kind of health care coverage for their employees that they do in the States; and a first-class infrastructure. We had the Good Roads people here a while ago, last week or the week before, talking about how important it was for us to maintain, and you mentioned getting our goods to market. It's important to have good roads.
That all takes money, and that money, unfortunately, comes from taxes. All of us contribute, and we try to find ways to make that as equitable and as fair as possible. If we take away government's ability to collect taxes from those who make the most by way of a tax break, which is what you're suggesting, doesn't that in turn cut into our ability to maintain the education system, the health care system and the infrastructure that we have in place, and doesn't it also cut into the ability of the customer, who at the end of the day is probably your most important ally in any business you would have, to actually buy your product?
Mr Chandaria: Let me address that one, sir. We must not forget that we live in a global economy. It's not what it costs me to produce and my overhead just because we want to provide the first-class health system and the first-class everything to our employees; what really matters is that when we go to Wal-Mart to sell the product in Bentonville and say, "Look, our costs are high because I have to pay so much on each case of firelogs that I sell to our government to take care of our people," they don't want to know that. Either we're competitive, we have a great product, or we're out. The Canadian market is not big enough for any industry to be sustained on.
Mr Martin: But the domestic market in Canada is of a significant enough size to warrant outfits like Wal-Mart coming to our country, because they know there's a market out there because our people are able to buy. They're able to buy because they have jobs.
Right now in my own community we've lost over 1,000 jobs in the last year and a half. Those are people who are no longer going to be buying from you, because this government has, rightly or wrongly, decided this is the tack it wants to take. It's not just a question of competitive advantage -- and I think that is an important thing to consider -- it's also a question, in my mind, of having a consumer who's able to buy, plus having for you employees who are looked after and who are well-trained, and having for you, paid for by the government, an infrastructure that helps you get your product to market. Don't you agree that's a factor as well?
Mr Chandaria: I hear what you are saying, but the reality is that our market is not of an economical size for most plants to survive on. Most plants in the United States, just by running over the weekend can fully supply the Canadian needs. They really don't need our market, and most Canadian manufacturers don't even consider Canada to be an important market, rightfully so.
Mr Martin: Why is Wal-Mart so anxious to come in, then?
Mr Chandaria: They are here to grab the retail dollar.
Mr Martin: Because there's a domestic market.
Mr Chandaria: They've expanded fully in the United States.
The Chair: Thank you very much. I'm sure that philosophical debate could go on a long time. We move to the government side.
Mr Jim Brown: You're in my riding, and I'm going to have to come out and see you. I had a small business, a small manufacturing company, for 20 years. I agree with you completely. I never wanted a $10 handout from the government that would cost $90 in bureaucratic administrative fees; just save me the $100. I think that's what you're saying. Instead of paying $100 in tax so that $90 can go into bureaucracy so you can get $10 back, forget it. Leave the $100 in your pocket, because you can spend it better than the bureaucrats. Is that true?
Mr Chandaria: Yes, sir. I'm glad you've been on our side of the table and experienced it. Thank you, sir.
Mr Jim Brown: I've been on the other side and, like you, I've had to put up with the bureaucracy and, like you, I've looked at the high cost of running things. Mr Martin talks about the fine education system. We sure spend a lot, but graduates would come out and couldn't spell, couldn't run computers. What do you do? I'm curious what states you considered and where you are located in the States.
Mr Chandaria: We are located in Alabama. Our plant is in Birmingham.
Mr Jim Brown: There's another thing I'd like to touch on too before the time goes. You touched on all kinds of things. You touched on capital, the supply of capital at competitive prices to you as a businessperson to expand, to improve your technology, to hire more people. You said it was easier in the States than it is here in Ontario. I've been through this as well. We have a committee, access to capital for small and medium-sized enterprises, and we're working on that, but I'd like your comments on that area, perhaps how we could improve it, how severe a problem it really is for job creation.
Mr Chandaria: Let me share something on that with you, sir. We know that in Ontario we have institutions which have hundreds of millions of dollars lying in their coffers which were supposed to be given out to the industries or businesses to create jobs. How many people are able to lay hands on that, and what bureaucracy is involved in getting that money? I don't have all the details in front of me now, but I'll be very happy at any time to share with any of you what experience one has to go through to get that money. What I have found is that those moneys are easily available to somebody who can write a one-foot-thick project rather than somebody who can write a two-page project and make sense. You always find business people don't have time to write those thick projects. Successful business people will not be able to do that.
Mr Spina: Mr Chandaria, thank you very much, and I wish you well. You'll be happy to know that whenever I'm not burning the natural stuff, I only use Northland, for your specific reasons.
Mr Chandaria: Thank you.
Mr Spina: I just wanted to emphasize one of the points that you made. It hearkens back to both the opposition points. It has to do with government grants, government guaranteed loans, government handouts for business. I equate that to the 65 tax increases that both these two governments have implemented over the past 10 years; 33 by the Liberals, 32 by the NDP. To me, you're raising taxes in order to be able to fund these handouts. To me, it would be far more beneficial, and I think this is what you're getting at, if we offered tax incentives -- and there were 10 various tax breaks, particularly to industry, in Mr Eves's budget of last year -- and if we controlled government spending. Is that, therefore, not the far better incentive to create that job-creation and business-development environment than increasing taxes and then turning around and handing the money out?
Mr Chandaria: That is the best way to create the jobs. In fact, you're eliminating the process of finding which person we should give the money to when you already have somebody who's earned that money and proven again and again that, "Look, guys, we can make sales, we can increase profit, we can export." We are a small company. We are heading closer to $100 million in sales; very tightly run. Many times, we have to live without things that we can't afford too, just to be able to be in business and sell the product competitively. Every time we have to send money to the government, tax money, we wonder where it goes, and we don't have time to get it back. We're entrepreneurs. Give us money or the capital, which is scarce; give us that, make it easy for us to get to it. We don't want extra. Leave what we have earned, and we will create the jobs.
The Chair: Thank you, Mr Chandaria. It's been a pleasure to have you before us today. Thank you very much for attending.
We have circulated a document which is the answer requested of research. I would point out that the last page is missing. It wasn't printed off the machine for some reason. That will be forthcoming. Hopefully we'll have that for you this afternoon. We will recess until 3:30 this afternoon.
The committee recessed from 1204 to 1528.
ASSOCIATION OF MUNICIPALITIES OF ONTARIO
The Chair: We have with us as our first deputant this afternoon, the Association of Municipalities of Ontario, Mr Mundell, president. Welcome to the committee, sir.
Mr Terry Mundell: Thank you very much, Mr Chair. It's a pleasure for me to be here on behalf of the Association of Municipalities of Ontario to speak to you before the 1997 provincial budget.
I can tell you that right now I think you can appreciate what is probably uppermost in the municipal sector's mind is the financial elements of the Who Does What reforms which were recently announced. Our sector is very much bracing for change, a tremendous change which will be coming forward to us.
The sector's and the association's position on the taking of education off property tax is one which we have supported, but we have paid a very high price at this point in time to have that removed. Requiring municipalities to take on a greater share of provincial social services, health and social housing is far too high a cost for education finance reform. It's simply replacing one set of problems with another, and it is unacceptable.
This position is based on the very sound principle that income redistributive programs should not be funded with property taxes. Municipalities currently pay 20% of the costs of general welfare assistance, and even 20% is too much.
During the last recession, escalating general welfare assistance costs diverted municipal resources away from critical local services, away from infrastructure investment. Municipalities want stable revenues to fund priority services. They want stable property taxes to encourage investment and foster economic growth. The proposed Who Does What reforms undermine both of those goals.
The proposed changes to the funding of welfare, long-term care and social housing institutionalize serious financial liability for municipalities and property taxpayers. The financial risks associated with these important provincial programs should not be borne by property taxpayers. Municipalities need stable revenues to meet local responsibilities. If local funding obligations for provincial programs brings financial instability to municipalities, everybody loses.
The provincial government has a clearly stated commitment in the Common Sense Revolution that decisions made by the government will not result in increases to local property taxes. Municipalities intend to hold the government to that promise and are prepared to help the government keep that promise.
We need long-term solutions that promote strong, vital and independent local government in Ontario. We need to work together to ensure that the business of local government continues to capitalize on local innovation and sound financial practices like balanced operating budgets.
As the cornerstone of stable municipal revenues, assessment reform and quality assessment services are a priority for municipalities. In some communities the impact of the assessment reform will be substantial, and in others assessed property values are relatively current already. The province-wide reassessment that is currently under way will be the foundation of all provincial-municipal reform scheduled for 1998. Its success is critical and the Ministry of Finance bears a tremendous responsibility in that respect.
AMO will address the specifics of Bill 106 when it is comes to standing committee hearings. There are, however, some observations that we would like to offer now.
The draft legislation advances a fair measure of municipal autonomy for local tax policy decisions. That autonomy is appropriate and municipal governments are prepared to account for local decisions that reflect local circumstances and local priorities.
The flexibility for local decisions on tax policy, the phasing in of shifts in assessment values and a local option for current value are critical to the success of assessment and property tax reform.
The province's decision to shift the responsibility for assessment services back to the municipal sector did not come as a surprise to municipalities. Like the Who Does What panel, however, municipalities believe that the transfer of costs and responsibilities for assessment services should occur after the new and untested assessment framework has stabilized.
When responsibility for assessment services is transferred to the municipal sector, we need a model of delivery that balances the government's objective of a uniform province-wide system with the municipal objectives of quality, efficiency, flexibility and full cost recovery.
Municipalities in Ontario have experienced a very dramatic decline in provincial funding since 1990. In 1997, municipalities will manage the second part of the two-year $700-million base reduction in municipal support grants. The government has indicated that the remaining $666 million in grants will be eliminated in 1998. The loss, which has not been accounted for in the Who Does What balance sheet, will have a substantial impact on municipal finances.
With the elimination of provincial funding, municipalities are left with funding responsibilities for a range of provincial programs and diminished funding to meet those responsibilities. Even in 1997, municipalities will be hard-pressed to fund the municipal share of child care, homes for the aged and welfare. While municipalities have planned for the eventual elimination of municipal support grants, they did not expect funding reductions to coincide with substantial new service and funding responsibilities. Any increase in health and social services costs has the potential for increased property taxes.
It is time that the province and municipalities began exploring new forms of financing for key services. Incentives like tax points or access to revenues collected by the province can help municipalities to offset pressure on mill rates. Incentives can be linked to performance measures or demonstrable efficiencies.
A clear example is fuel tax revenue. The tax was implemented to tax the users of our roadways. The fuel tax should be dedicated to roads in its entirety, whether they are provincial highways or local roads. If the province plans to transfer another 4,000 kilometres of provincial highways to municipalities, they need to transfer access to adequate revenues for critical infrastructure investment and maintenance. Tying the fuel tax to roads is just common sense.
The province needs to foster an environment where entrepreneurial activity is rewarded. Activities which remove charges from the tax bill while preserving services improve the transparency of service costs. Collecting 911 charges on the phone bill instead of on the tax bill is an excellent example.
Municipalities are also seeking a renewed provincial commitment to the Canada-Ontario infrastructure works program. Ontario needs a renewed tripartite federal, provincial and municipal partnership for investment in key municipal infrastructure projects. As municipalities prepare to assume responsibility for even greater infrastructure responsibilities, the infrastructure works program will represent a critical investment in, and a major commitment to, sustainable jobs and sound economic development.
There are also critical components of municipal revenue that the province is currently jeopardizing. The proposed new Development Charges Act will shift a substantial share of growth-related capital costs for new development from the developers on to existing property taxpayers. Development charges are a critical component of growth-related capital funding for services ranging from sewer and water to police and libraries.
Municipalities believe that development should pay its own way. Communities should not be mandated to subsidize development. The proposed legislation will further destabilize municipal revenue and diminish the capacity and tolerance for growth in our communities.
Municipalities are accustomed to managing expanding responsibilities with declining resources. Improvements in efficiency have accounted for more savings. Provincial regulations and red tape, however, continue to stand in the way of more effective and cost-efficient service delivery.
There are issues tied to current collective agreements that stand in the way of restructuring. Successor rights and seniority provisions mean that new municipalities that result from restructuring are encumbered by outdated collective agreements. Newly created municipalities should be allowed to freely negotiate arrangements with their workforces. The concept of a common labour pool should be recognized in the case of amalgamations to ensure that the service of non-unionized municipal employees is recognized and that their seniority is respected.
Outdated collective agreements also stand in the way of effective alternative service delivery strategies like contracting out and intermunicipal service arrangements.
The portability of OMERS pensions is also an issue. If employees are permitted to participate in OMERS once services are transferred to non-municipal employers, contracting out would become a more attractive option for both municipal employers and employees.
Interest arbitration continues to be a problem for municipalities. Past practices of arbitrators have been to award increases that are higher than those freely negotiated with other municipal employees. Proposed legislation for fire services addresses many of the outstanding problems with arbitration. Additional amendments to the Police Services Act should be introduced to further harmonize municipal labour legislation.
It is still too early to analyse the success of schedule Q of Bill 26, which requires arbitrators to consider a municipality's ability to pay for awards. The criteria set out in Bill 26 should be strengthened to ensure their application rather than just their consideration in order to avoid potential service reductions or increased property taxes.
Restructuring is not a panacea. It is not a magic pill that will cure decades of overly complex and entangled provincial-municipal financial arrangements. Municipalities have been seeking a rationalization of provincial and municipal roles and responsibilities for many years. We have only just had a glimpse of the government's vision of Ontario in the 21st century. Some aspects of that vision are shared by municipalities. Other parts of it are not shared. In any event, municipal structures and boundaries will adjust to match new realities. Form necessarily follows function.
But restructuring needs to be about more than redrawing municipal boundaries. It needs to be about changing expectations. It needs to be about engaging property taxpayers in discussions about the services they want and need and the services they are prepared to pay for. It needs to be about new ways of doing business, where innovation, efficiency and competition are rewarded.
The province is responsible for comprehensive provincial policy and the broader systems that link us all together. Local management, local decisions and the identification of local priorities are the business of municipalities. There is a common trust inherent in that relationship, and that trust is being compromised by the proposed Who Does What reforms.
We hope this government realizes that what is in the best interests of municipalities and property taxpayers is also in the best interests of the province of Ontario. Municipalities are already a major service provider, and the provincial government's principal partner in service financing. Overall property taxation in Ontario will exceed $14 billion in 1997, an amount almost equivalent to the sum of provincial personal income taxes.
Municipalities have led all orders of government in terms of accountability. Full public access is assured and decisions are made in open forums. Elected municipal officials are not bound by party politics. The interests of municipal taxpayers are the interests of municipal governments.
People want public services that are flexible and responsive to changing needs. They want local innovation and models of service delivery that match the circumstances and priorities of their communities. They want to see investment in local services that promotes long-term cost-effectiveness. They want to benefit from economies of scale and they demand that all levels of government work together to use their tax dollars effectively.
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Municipalities are up to the job of providing those services in our communities, but we need to ensure that municipalities have stable revenues to match those responsibilities now and for the long term. We need to ensure that municipalities will be in a position to account for the quality and cost of those services.
Currently, municipalities provide police services at a cost of $1.5 billion, and in 1998, $182 million in OPP costs currently paid by the province will be transferred to many rural and northern communities. These new costs will have a substantial impact on the finances of affected communities. The announcement that more municipalities would be required to pay for policing did not come as a surprise. The transfer of these new costs in 1997, without the offset of savings arising from education finance reform, would have been unacceptable. In 1998, the government must ensure that those savings are sufficient to meet all new responsibilities, including police services.
Municipalities have been advocating for improvements to the governance of policing in Ontario for decades. The proposed amendments to the Police Services Act will allow municipalities to control the cost of policing in their communities. By abandoning an outdated model of governance where municipalities paid the bill but had no control over the costs, the government has substantially improved accountability for police services in Ontario.
Police services are an excellent example of a critical public service system where provincial interests and province-wide standards are reflected in local decision-making and local management responsibility. Local control over costs completes the picture of a service system that meets the needs of the people who rely on these services, the women and men who deliver them and the governments that account for them.
The government's proposed realignment of long-term-care funding flies in the face of this model. It also flies in the face of a comprehensive, cohesive and appropriately funded health care strategy for Ontario's communities.
Municipal governments want to be clearly and directly accountable for the services our citizens demand and for the sound management of local government. Where municipalities fund services, whether it's 10% or 100%, they must have appropriate controls over the expenditure of property tax dollars.
Where municipal governments deliver and finance provincial programs, we need to share accountability for those programs as well. Yet shared accountability is not an option. Municipal governments are accountable for property taxes, even when those tax dollars are spent by the province. That shared accountability means that municipalities must share in decision-making and policy and program design, and in the setting of province-wide standards of service.
Municipalities are not anticipating any significant impacts in the province's 1997 budget. To effect any further reduction in municipal revenues at this time would be disastrous for municipalities, and it would send an ominous signal to property taxpayers who are already bracing for 1998.
Much must be accomplished in 1997 if municipal governments and the province are going to prepare for major reform in 1998. To begin with, municipalities need an accurate accounting of the financial impacts of the proposed Who Does What reforms. People are not interested in debating the numbers. No one can accurately predict that property tax savings can be achieved by the year 2000.
What people want to hear is that the government's decisions are based on a sound policy rationale and a careful analysis of the financial implications for taxpayers. It is time that the government made that information available to municipalities and taxpayers.
Alternative strategies must be explored. The government has said that its bottom line and the basic tenets of reform are not negotiable. There are better ways to get the same bottom line, ways that rationalize and disentangle services and protect property taxpayers from potential tax increases. We intend to discuss these alternatives with the government over the coming weeks.
The array of impacts is very broad. Farming communities will be hit hard by the government's decision to shift the cost of the farm tax rebate to municipalities. Communities with high social assistance caseloads, especially urban communities, will see their budgets taken over by welfare. Long-term-care costs and social housing costs will eclipse the funding of important local services in many communities. In northern Ontario, policing costs and a limited assessment base will put serious pressure on municipal finances. Regardless of the details of the major reform, there will be substantial differential impacts that will need to be addressed. Ontario is not a one-size-fits-all province.
Contingency funding will be critical to the success of any reform package, but contingency funding will not work unless municipalities have substantial input into the design, implementation and management of the funds. We also have to look very carefully at the adequacy of the funding. Where reserve funding needs to be in place over the long term to protect against cost escalation, we must ensure that it is not vulnerable to future provincial constraints. At the same time, contingency funding must not become a model that fosters ongoing reliance on provincial funding.
Municipalities understand the fiscal imperatives of this government. Municipalities want better government at less cost. In fact, we coined the phrase.
Ontario's municipal governments want to work with the provincial government to restore public confidence in government in Ontario. We want to work together to ensure that taxpayers have a clear understanding of who does what and who is accountable for what. Taxpayers expect both levels of government to work together to ensure that their hard-earned tax dollars are directed to the services they need and are prepared to pay for.
Municipalities and the province have many common objectives. Key among them is we work together to improve the economic outlook for Ontario and for Ontario's taxpayers. AMO and the government must work together to ensure that it happens. It's a simple equation. We need the province to work with us to ensure that provincial cost savings are not achieved at the expense of property taxpayers. By working together, we can achieve needed savings for the province and for municipalities. By working together, we can provide the people of Ontario with better government at lower cost. Together we can embark on a course of sustainable and commonsense reform. We do not need to compromise the principles of good government to get there. Thank you very much.
The Chair: Thank you very much, Mr Mundell. We'll begin a three-minute round of questions with the opposition.
Mr Phillips: We've been trying to understand the implications of the Who Does What moves in terms of cost to municipalities and cost to government, and actually our caucus has been travelling around the province talking to municipal leaders and things like that to get a feeling on it.
The numbers we have suggest that the government has taken about $5.5 billion off property tax in the form of education and children's aid and women's shelters. The government has said itself it's adding $6.4 billion. That was the government's estimate. We feel that they have understated municipal transit and GO, according to I think the Hamilton-Wentworth people, social housing capital costs. I don't think there's any money in for transferring 4,000 to 5,000 kilometres of highway to municipalities, which we think could be another $100 million. Sewer and water are $100 million. That is, in our opinion, a net added cost of about $1.355 billion offset by, as you point out in your brief, the $1-billion fund, minus the $666 million. So our estimates are that they've added $1 billion. Frankly, we're having trouble getting that confirmed, because we have to use estimates from municipal leaders.
Has AMO been able to assess what the impact is in terms of the net-net-net cost of all this, and could you share with us that estimate?
Mr Mundell: I truly wish I could share that estimate with you. At this time, it has been very difficult for us to ascertain the exact impact of the Who Does What announcements which were made by the government. We still do not know the implications of road transfers. We don't know the implications of the social housing announcements. We're still uncertain of some of the long-term-care funding issues and FBA. At this point in time, there are more questions than answers.
I can say to you that best estimates across the province created by municipalities have not shown that the municipal sector is in any way, shape or form in a position of net benefit though. We are still pressing the government to try and get information so that we can ascertain what the real impact is, but right now, there are more questions than answers.
Mr Phillips: To get your comment on the philosophy behind it -- I think in your opening page here you indicated some real concerns about transferring social services, health, social housing, on to property tax, and frankly, I think you're not alone; people at the board of trade, the United Way and many others have -- how strongly do the municipalities feel about that and how big an issue is that, the transferring of long-term care, social housing and social assistance on to property tax?
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Mr Mundell: I think across the province, in my discussion with municipal leaders, the sector's position is one which is consistent. We do not support income redistributive programs being funded from the property tax base. I have not had a municipal politician tell me otherwise yet. That position is clear.
Some of the issues around some of the other portfolios, we get into some real discussions in and around accountability and the ability on our behalf to control or be accountable to the property taxpayer for the dollars which we are raising, a substantive concern in our ability to provide the services that our ratepayers want and be held accountable for them.
The Chair: Thank you very much. If we could move to the third party, three or four minutes.
Mr Gilles Pouliot (Lake Nipigon): Three or four minutes. I thank you kindly.
Mr Mundell, this is an unprecedented second term as president of AMO, so when it comes time to not only get along with people but really understand the system and the fine lines, you would be a fine person to engage in consultation. You know very much how the system works.
I too have some 10 years of -- I can't say exposure, but the ability of our taxpayers to give confidence -- a little over 10 years before I came to this place, and I thought it was to be better because of the area of responsibility and the jurisdictional capacity. I've been here 12 years. Now I don't know where to go. I'm not going to the big House.
I see the government, Mr Mundell, and I need your expertise, but first help me. How many municipalities do you represent through AMO?
Mr Mundell: We represent over 90% of Ontario's population.
Mr Pouliot: So that would be 90% of a total population of approximately 11 million people -- big time -- you represent. When we talk about AMO, we talk about municipalities, grosso modo about representation. You know that the government has eased the portion, appearing to give money back, but they really don't, the education portion of some $5.4 million. That's the end that gives, but there is an end that takes, and there is a discrepancy which is well over $1 billion. In other words, when we're talking about industrial, not so much; when we're talking about residential, a lot. These are the people who will take the hit, the home owners. There's a shortcoming of well over $1 billion, and you know that the municipalities don't have the same ability to borrow as that of a senior government, provincial or federal, of course. Where are they to take the money, if they live in a small community outside Metro, to make up for the shortcomings?
Let me give you a real example, the fascinating world of sewer and water. If you have one that is running by reputation -- and needs to be, because automatically, when we turn the tap on, we expect clean and safe water, a normal reaction, a normal, most reasonable request. It costs millions, even in the smallest of municipalities. If these people are downloading -- when I say "these people," the government of the day, with respect still -- if they are downloading on municipalities and saying, "You're on your own now, and we'll cut through the red tape," where are the people going to take the $4 million to $5 million with a population of 3,000 to 5,000 people? Where are they going to take that money?
Mr Mundell: Thank you very much for the question. In my 16 years, about to be 17 years, in municipal politics, we have viewed many different situations. My community presently is involved in that particular issue. It's a small community outside of Metro, outside of the GTA, with about 2,500 people, and just in fact did vote to restructure itself to a larger community. We're looking at installing a sewage treatment plan in that community, which will be about $12 million.
Those dollars, from the estimates we look at right now and all the changes that we see, will not be able to come from our community and it looks at though we will be in a position of not being able to fund that particular plant, which will hamper our abilities to attract commerce, economic growth, jobs for the people of our community and foster a quality of life which is acceptable to those in the community.
Mr Pouliot: If you have a more fortunate state of events in a neighbouring municipality, standards will be compromised.
Mr Mundell: I think the issue which we have right now is that municipalities generally are looking for stable revenues, a stable resource base, a situation where they can do long-term planning, can make decisions on long-term capital requirements, so that we can, in effect, put in the types of services that our ratepayers expect. To do that you need to be accountable and in control of the dollars which are raised on the property tax. With the proposed reforms which have been announced by the government under the Who Does What packages, we believe our ability to have a stable resource base across Ontario is seriously undermined.
Ms Isabel Bassett (St Andrew-St Patrick): Thanks for your presentation. I'm happy to see that AMO wants to work in cooperation with our government. I wonder if you could just briefly tell what tools are most required to fulfil our common goals, and secondly, what key changes you want to see.
Mr Mundell: I think we all want, on both sides of government, provincial and municipal, to build a system that has long-term sustainability. Our concern right now is that the system that we are building with the reforms presented does not create long-term sustainability.
We want to be able to build a system where municipalities can plan for the future, where we don't have to rely on continual funding from the province, but recognizing that one size does not fit all around Ontario, that there are some areas which may not have the resource base to do that. We need to have a system where we're accountable for the dollars we raise off the property tax base and where you are accountable for the dollars you raise off the income tax. We don't think we have that just yet.
Mr Ford: We have 800 municipalities across Ontario, as you're well aware, and this government claims that with the reduction in the education tax and maybe the downloading, as you call it, of the other responsibilities, there's going to be a wash on that. What's your opinion?
Mr Mundell: As I responded to a question earlier, I think the situation we have right now is that we do not have all the numbers. We believe there is still information which we are hoping the province will supply to us, which will enable us to go out community by community to show exactly what this means. Some examples: the road transfers -- we don't know the numbers, where they are, how much, the conditions of the roads; FBA; dollars for social housing. The elimination of the block grant was not included in the initial calculations. There is a lot of work to do in the detail yet.
Mr Ford: I realize that, so most of what you're saying here, and probably most of the negativity going around, is speculative. You haven't got final figures, so that's speculative. Is that not right?
Mr Mundell: I think what we are doing is speculating, the same as the province is, I guess, if you can. The numbers which were presented to us during the announcement showed that wash, but reality tells us that there are areas which are not in those numbers. What we need to do and what I think the taxpayer wants us to do as levels of government is to work together to get beyond the numbers so that we can start to understand what this really means for the taxpayer, really means for the services to our communities.
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Mr Spina: I'm finding a couple of contradictions here. One is that you're saying that the municipalities have a lot of difficulty making the estimates. Frankly, I'm sitting in Brampton, in the region of Peel, and I have estimates from both the city government and the regional government telling me that they feel they have a very confident handle on what is coming in, what is in the exchange that is happening between them and the province.
Let's face it: As a municipality you know how much revenue you're collecting for the school board, that you'll be entitled to collect. You know right now that when there are provincial grants being shared with the municipalities, they're being paid to the municipality, they're not being paid directly to the sources out there. You know the amount of the costs that are coming to you from the province when in the past that money came from the province, and now you'll have your own revenue for that.
The point is that you're talking about accountability, you're talking about a long-term reliance on the provincial government. The reality is that you, as the municipal governments, are far more accountable to your local taxpayers than the province is and, secondly, you're already reliant on long-term provincial funding. That's what we are trying to exchange with the municipalities so that you don't have that long-term reliance on provincial funding.
Mr Mundell: Once again, I think the key to success is that we build a system which has long-term stability. We are very concerned that this is not the case and that's why we want to talk to the government about some of the details of the reform: to try and get at some of the nuts and bolts, if you can. There's a financial agenda. There's also an operationalizing agenda to make sure that these types of things work. But if you can tell me what the road transfers are across the province now, if you can tell me the dollars for social housing, to upgrade that stock across the province on an individual basis, if you can tell me some of those numbers, I think we can have those numbers --
Mr Spina: You control the social housing now. Why can't you get the numbers?
Mr Mundell: Excuse me. I think if we had those numbers, then we could truly do some service to the numbers so that we know they are accurate. We need the information from the province. We don't control the roads numbers. We don't have them.
The Chair: Thank you very much. We appreciate your appearance before this committee. I'm sure that as things unfold those numbers will become available.
ONTARIO REAL ESTATE ASSOCIATION
The Chair: Our next deputant is the Ontario Real Estate Association. We welcome you to the standing committee on finance and economic affairs, Mr Wood, Mr Trembinski and Mr Flood.
Mr Richard Wood: Good afternoon. My name is Richard Wood. I'm the president of the Ontario Real Estate Association.
OREA is a non-profit trade association, currently celebrating our 75th anniversary, that represents over 40,000 real estate brokers and salespeople throughout Ontario.
With me this afternoon is Mr Terry Trembinski, chairman of our association's government relations committee, and Mr Jim Flood, OREA's director of government relations.
We appreciate the opportunity to be with you this afternoon and to share with you a few of our thoughts on Ontario's economy and the upcoming provincial budget.
First of all, let me give you the good news. The real estate market in Ontario is on a roll and 1996 was by far the best year of the current decade. Early indications suggest that 1997 will be even better. We attribute this to a combination of low interest rates, pent-up demand and rising consumer confidence. These factors, together with a very moderate price appreciation, should mean a good year for home buyers, home sellers and realtors. We believe the government of Ontario can take a good deal of credit for the happy circumstance we find ourselves in.
In our numerous budget submissions over the years, OREA has consistently called upon government of all parties and at all levels to live within their means and to reduce their deficits through spending restraints. We therefore support the government's goal of eliminating the deficit and reducing the debt and we respectfully urge them to stay on course.
Low interest rates, which are one happy byproduct of deficit reduction, mean that tens of thousands more Ontarians are able to pursue the dream of home ownership. That's good for consumers, good for governments and good for realtors.
OREA would also like to register its support for the tax cut announced in last year's budget. We believe taxpayers make better spending decisions for themselves than do governments and we take the government at their word that they can meet their deficit reduction targets and provide a tax cut in provincial income tax rates. We therefore see no contradiction in advocating both a tax cut and a deficit reduction.
I would now like to call upon my associate Mr Terry Trembinski to make a few comments with respect to specific measures we would like you to consider in the upcoming budget.
Mr Terry Trembinski: As Richard mentioned, we are generally pleased with the provincial economic environment but, like all groups, we have a few suggestions that might make the current situation even better.
First, we would like the government to consider eliminating the 20% land transfer tax incurred when a non-resident buys a recreational or agricultural property. We believe this policy is outdated and inconsistent with the government's effort to attract tourism and new investment to Ontario.
Recently the government launched a new multi-year campaign called Market Ontario which is designed to attract new investment to the province. It seems to us inconsistent for the government to suggest they welcome investment by non-residents in factories, plants and services and encourage the resulting job growth but penalize that same investor who may wish to buy a summer cottage. We note in this regard that our neighbours in Quebec recently eliminated the tax they placed on recreational property and we suggest that Ontario do likewise.
There is a second reason why we believe that the 20% tax should be eliminated. Simply put, it creates distortions in the real estate market. For example, identical cottages located on the same lake are often taxed differently. One property may be assessed as a principal residence and taxed accordingly, while his neighbour may be deemed a recreational property and therefore attract the 20% tax. Needless to say, this distorts the market value of those individual properties.
The latest information provided to OREA would suggest that the 20% tax nets the government something less than $10 million per year. That is a small price to pay to eliminate a glaring unfairness in the tax structure and to demonstrate that Ontario really is open for business.
Second, OREA would like to go on record as opposing the harmonization of provincial sales tax with the goods and services tax. We have heard the minister's assurances that no discussions on the matter are currently taking place, but it seems to us an issue that simply won't die. Tax harmonization in Ontario would result in the application of PST to realtors' fees and it would dramatically increase the cost of new housing. Neither are acceptable to this association. We urge the government of Ontario to resist overtures in this area and recognize the federal initiative for what it is: a political smokescreen.
Finally, we would encourage the government to consider the complete elimination of the employer health tax. Last year the Minister of Finance announced that employers would be exempt from tax on the first $400,000 of Ontario payroll.
OREA believes that payroll taxes such as EHT deter job growth. In our view, there is no reason why employers should be forced to fund such a large portion of the health care system. We believe that the increased exemptions announced by the government last year indicate they share our concern. We simply suggest they eliminate the employer health tax, not just for small businesses but for all businesses.
We have a number of other comments that are contained in our written submission and we will leave you to review that material at your leisure.
Mr Wood: We want to conclude by offering the government our continuing support for their deficit and debt reduction initiatives, for their emphasis on cutting spending and for the other initiatives to encourage housing affordability. Thank you once again. Should you have any questions, we'd be pleased to answer them.
Mr Pouliot: Gentlemen, it's nice to hear words of enthusiasm -- I won't say "vis-à-vis the government." We can deal with that too. We have perhaps, with respect, some opinions that differ. I must commend you. You've been through a lot. Market conditions were not what you would have hoped and you've persevered. Not only were housing prices at a disadvantage from your point of view, no doubt, but your ability to churn, to exchange was also being impeded severely. The market wasn't moving, things were dead. You had a combination, and you've stated the reversal in your presentation, of high interest rates, less confidence in the economy, still a rate of relatively high unemployment. The future looked bleak.
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Now, and I'm happy that you've mentioned it, partly due to the existing conditions and partly due to the efforts of the government -- and I'm sure they're responsible for the Dow surpassing 7,000. I'm sure that they are responsible for the low interest rate. I'm sure on a daily basis that Mr Eves talks to Mr Greenspan: "How are the kids, by the way, but more importantly, how are you?" They all take their little share when things go good and they are nowhere to be found when things go bad, but among politicians, I'm told, it's a normal reaction.
You have mentioned that the stars are -- I express myself in a different fashion -- aligned in a perfect fashion. You have low interest rates, prices are not exaggerated. I imagine that's by virtue of a built up inventory. The higher end is still selling at a most reasonable price. There is consumer confidence. You've also mentioned that the government will endeavour to balance its budget. You have lauded the government for a 30% tax cut. I mean, Houdini didn't have that many rabbits in the hat. But I see that you're consistent in your presentation that you're on a roll here and the treadmill knows no limit with you. In fact, you've become insatiable.
You still want them to balance the budget. You would like a big tax decrease. You would like harmonization, you would hit the lower end, and that's where the bulk of your activity is; look at your mean. If they can all do this -- as long as we are pleased.
I have two questions for you. What will the interest rates be next year? I promise not to tell anyone. It will be our secret. If you were to gaze at a crystal ball -- because I'm a potential buyer -- what will the interest rates be next year and the year after? What will the price of housing vis-à-vis percentage increase be this year and next year?
Mr Jim Flood: I don't know exactly how to answer that. I don't talk to Mr Greenspan.
Mr Pouliot: No, but you talk to me. I've got your little card, and if I want to buy a unit, you have to tell me what your expertise is, what your best guess is, do you not? Otherwise, I'm going to go to him and he'll tell me.
Mr Flood: I would expect that 12 months from now interest rates are going to be probably within one point of where they are right now.
Mr Pouliot: Lower or higher?
Mr Flood: An educated guess, maybe a little bit higher than they are right now.
Mr Pouliot: What about your inventory of housing? Will you have less housing available to sell?
Mr Wood: I would tend to think the inventory of housing should remain quite stable. As you know, the land transfer tax rebate that the government of the day implemented in its budget of last year certainly encouraged new construction and that has certainly been satisfying the needs of our consumers. At the same time, Canada Mortgage and Housing calls for an increase of approximately 17% this year. That, together with existing housing, I'd certainly think will meet the mean.
Mr Pouliot: Will the price of housing be higher? Should I buy now?
Mr Wood: I can tell you as an industry that we see the growth and appreciation veering very moderate. We do not see an exaggerated growth that maybe we did, for example, in the 1980s. We think it's going to be moderate. It could very well be in the 3% to 4% range if we're lucky.
Mr Pouliot: So one, two and then of course there will be such an important component of pricing, the CPI basket. Inflation will remain very low. I don't have to scan the futures market on soybeans, terms and words that mean nothing to me, the price of crude, the core inflation, the non-core inflation. So inflation will be pretty well the same, will it not?
Mr Wood: We would certainly assume so.
Mr Pouliot: So I'll wait until next year. How am I doing for time? These are my friends here. I like brokers. They churn things, coming or going. I like these people.
The Chair: You have one quick question.
Mr Pouliot: One quick question. If we were to assume that demographics is everything -- for instance, I look across the table. No one is immune, but there are more of them; those people are aging.
Mr Rollins: The same way you are.
Mr Pouliot: It waits for no one. What is your association doing to promote the changes that there are in here? What changes -- that's off the record -- do you see in terms of supply and demand in housing? Will the houses be smaller? Will people go to condominiums? What will they do?
Mr Flood: I think your forecast is pretty accurate. The demographics would suggest that the population is getting older. Move-up buyers will, I think, continue to move up, but they will probably be looking for better-quality housing, as opposed to bigger housing.
Mr Pouliot: So any one of those fine people across, my distinguished colleagues, you can put them into a smaller place, like 3,500 square feet, but it will be nice. Right?
Mr Flood: If you're looking for the trend, I think the trend is probably towards smaller housing in the future.
Mr Jim Brown: You note in your report that interest rates are so critical to confidence to get people to buy a resale or a new home, and I guess what you said is that pretty much everything we've done in Ontario has had a major influence on keeping interest rates low. The other thing is, you've said too if we keep the faith and we keep doing it, rates should stay low. What will that mean next year in terms of resales, in terms of percentages, if rates stay within the 1%? It's going to stay a hot market?
Mr Flood: We think that given the current conditions, 1997 is going to be a very good year. To the extent that any government does anything that results in increases in interest rates, it will hurt the market. It doesn't make any difference whether it's the government of Ontario or the federal government, the health of the market will depend to a very great extent on keeping interest rates low. One of the keys, as you folks know, to keeping interest rates low is to keep government deficits down.
Mr Jim Brown: So in your opinion, if we keep doing what we did, and maybe even do it a little bit better, rates should stay relatively where they are right now?
Mr Flood: Hopefully.
Mr Jim Brown: Just another question. You know, we're reforming the rent control legislation. Do you have any opinion on what that will do to housing development in Ontario?
Mr Flood: Just a couple of general thoughts. One, we support the government's proposed changes to the rent control regime, Bill 96. We are not yet convinced that the bill goes far enough in terms of creating conditions that will allow developers to build a sufficient quantity of new supply to ensure that tenants get the amount of choice that they need out there. Bill 96 we characterize as a good step in the right direction, but we're not yet convinced that it's going to solve the whole problem, particularly as it relates to new construction.
The Chair: Mr Spina, do you have a question?
Mr Spina: Yes, just quickly. Thank you, gentlemen, for your presentation. I'm encouraged and pleased because what my real estate friends tell me has obviously been borne out on a broader scale by you province-wide.
What I wanted to ask you was, we're getting a little bit of inconsistency here. This morning we had the Ontario Home Builders' Association and they were -- I'm probably pre-empting Mr Kwinter's question.
Mr Kwinter: You're absolutely right.
Mr Spina: They were very concerned because they said housing starts were at the lowest in 1995, and they felt it would be probably two to three years before it comes back.
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You are extremely optimistic. Your opening statement said that the housing market is rolling, and I appreciate the fact that you're primarily in the resale market. Correct me if I'm wrong. I guess my question is that if the resale market is doing very well, doesn't that automatically stimulate proportionately the construction market?
Mr Flood: The answer to that I think is yes. In our submission you'll note a quote from an official of Canada Mortgage and Housing Corp that essentially says that. I can't tell you too much about the home builders and the level of new construction. That's their area of expertise. I get a sense that they may be in the happy position this year of being able to build just about as much product as they can. It's my understanding that they're already starting to worry about things like potential labour shortages.
Again, I would defer to the home builders on new housing construction, but I think that relative to the last two or three years the home builders are going to have a very good year in 1997. Whether or not it will be a record year, I don't know. I guess it depends on the base.
Mr Kwinter: Mr Spina, you're absolutely right, you did pre-empt some of my questions. Just to answer your question for you, the home builders were in today and they forecast for 1997 48,000 homes. Compare that to 1992 where it was 55,000. You've got 48,000 as opposed to 55,000 in 1992. There's no question it's better than it was last year and the year before that and the year before that, but when you listen to them, they say, "There are a lot of positive signs in the market but the industry is still depressed and clearly underperforming."
The other problem I have is that our mandate really is to try to recommend to the Minister of Finance what we think, as a result of what we've heard from the various delegations that have come here, he should be doing to address some of the concerns. We do get conflicting representations, and I'll give you an example. The agricultural sector came in and said, "You've got to harmonize the PST and the GST," and the manufacturing sector has come in and said, "You've got to harmonize the PST and the GST." Those two combined make up more than half of the economy of this province.
We then have the home builders. They haven't been in here yet, but I know the position of the restaurant association and I know the position of the real estate boards. They don't want it. They absolutely don't want it because they feel that what is going to happen is going to be applied to commissions and all kinds of other things and it's only going to increase costs to the purchaser, which is going to have a driving effect on what happens.
The challenge that we have is, how do we apportion the various weights? Is it more important that we keep the real estate brokers happy? Is it more important that we have the agricultural sector happy and growing so that people can then through the agricultural sector buy homes, notwithstanding that it may be a hit on the real estate brokers but at least they'll be selling houses? These are the challenges that we have. Do you have any recommendations on that?
Mr Flood: It's more important to keep the real estate association happy.
Mr Kwinter: I'm a broker, you know, and I agree with you. But notwithstanding that, that is the problem that we have.
Mr Wood: If I may answer that as well, I really do believe that by satisfying the thoughts of the realtors we are preserving one primary thing that we want to provide for every person who resides in this province, and that's adequate shelter. That's the primary objective, and by not harmonizing it does help us continue down that line and make affordability better for everyone to have that.
Mr Kwinter: Right now -- and I saw an article in the paper this morning -- the real estate market is, particularly in Metro, very, very hot. Brokers are having some of the best years they've had for years. Yet again we have the home builders complaining that, as a result of that hot market, they're competing with themselves because houses they built two or three years ago are coming up for resale and they're cheaper because it cost them less to build them then than to build them now. It is a self-defeating kind of a market for the ultimate provider of new stock.
Brokers, regardless of whether they're in the securities industry or the housing industry, when the market is down or the market is up they keep on turning over houses and they get their commission, so it doesn't make any difference. They like it better when there's a hot market because there's a lot more product on the market. But the guy who ultimately builds the stock, the house builder, whether it be multiples or singles, they're the ones who are still not really benefiting from this increased economic activity.
That is a concern to them -- and it isn't just them, but an ancillary group, the Canadian Construction Association, on commercial and industrial had exactly the same complaint. The road builders were in here having exactly the same complaint. So what you have is various segments of exactly the same general sector enjoying different benefits from what's going on. Again, as I say, I don't know what the answer is, because it's a challenge. I'd be interested in hearing your comments.
Mr Flood: I don't know what we can tell you that would address the concern of the home builders. It is, at its simplest, a function of supply and demand. If the home builders feel they're competing against themselves, that almost suggests the logical answer is don't build anything new; you won't have to compete against yourself. But I don't quite presume -- that's not the reaction they would have to the question. All I can suggest is that any actions that create an environment that is good for the resale market is in our judgement also going to be good for the new home market, and probably the other way around. We're fans of the home building and development industry. They're the people who build our stock. We see eye to eye, I think, on all the issues at a macro level. There are obviously going to be differences of emphasis and you may have isolated one area.
The Vice-Chair (Mr Tim Hudak): On behalf of the standing committee, I'd like to thank the Ontario Real Estate Association for your presentation. Have a good evening.
FEDERATION OF WOMEN TEACHERS' ASSOCIATIONS OF ONTARIO
The Vice-Chair: The next deputation comes from the Federation of Women Teachers' Associations of Ontario. I believe Sheryl Hoshizaki and Sandra Gaskell are appearing before the committee. Welcome to the standing committee on finance and economic affairs.
Ms Sheryl Hoshizaki: My name is Sheryl Hoshizaki. I'm the past president of the Federation of Women Teachers' Associations of Ontario. With me I have Sandra Gaskell, who's the deputy executive director of the same organization. We represent approximately 41,000 women teachers who teach in the public system predominantly, in classrooms across Ontario.
We're presenting today to record and document what we believe the impact of the changes already in the budget has been on children in the classrooms in Ontario. You have before you our document. I'm not going to go through it and read it to you, but I would like to make some highlights.
We're here, as I said before, because we want to present to you the impact these changes have had on children's lives. We also want to present to you the impact we have had on changing this in children's lives. We believe we can make changes in children's lives if we have the political will and we choose to do so.
None of this is necessarily new, if you've read the newspapers. Everybody has, I'm sure, partaken in the debate around the myths and realities and how pictures are presented on behalf of what governments have deemed special interests. However, we'd like to present to you again and once more. It being a fact that we come from a background of teachers, we believe that if we don't get it the first time, we can teach and we can teach again.
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The myth of the mere fact that states simply our education system is broken is wrong. It's just simply not true. It's not because we believe as teachers in Ontario that it's perfect; I want to get that very straight. It's just that what happens is the rationale built by this government behind that statement forces us as teachers in Ontario to defend the system as it presently exists. That, unfortunately, takes all the time and energy of teachers in Ontario.
On page 2, you have presentation of specifics that demonstrate that in Ontario we do have a high-quality education system. I'm not going to go through that; however, I want to highlight the third point. I think this is very important, because I know that not only provincially but nationally as well as internationally, countries are focusing on a citizenry of readers. It demonstrates that Canada as well as Ontario has competent readers.
Moving on, I don't want to ignore -- because probably one of the questions will be around the testing that we know has received a great deal of publication. Testing definitely does measure a portion of student competence, but it's not the only thing that measures student competence and we can't allow standardized testing to be the only measurement in our schools, just as testing in this room would not demonstrate to us the potentials or the academic or intellectual levels of everyone in this room. So we can increase and improve the test scores; there's no doubt about it. It is revealing for us. We know how to do that. We can teach to tests. But in addition to that, what we have to recognize is that the comparisons used in the test do in fact have certain comparative flaws.
First of all, you have to always look at the children you test. I won't go into it, but I think it's really important that we have to recognize the children we're testing in Ontario and the comparison of children who are tested in other countries is just not comparable. The myth that Ontario spends too much money in education has given reason for significant cuts in education this past year. What we must focus on in this myth is how it has been determined. The fact that the Ontario government believes that Ontario spends too much in education is truly dependent on the fact of comparisons to other provinces, and again it's based on faulty comparisons, one example being that it's very difficult to compare one province with other provinces on an average when you don't include that province in the average or you exclude other provinces in the average. That's not really sophisticated mathematics.
At the same time, on page 5, if you look at the top, I think it's really important -- this is a very important point on the comparisons of how much Ontario spends per pupil -- the money that was not included in this comparison was the money spent in capital costs. There's also what we refer to in education as phantom costs. They were not included in the costs of education in other provinces, but were included in the costs of education in Ontario. That again distorts the comparison figures.
However, given that, as a province we should not apologize for what we spend on education. We believe, if you look on page 5, there are areas that -- Ontario is the largest province in the country. It educates over 40% of the student population. These students represent a broad range of abilities and are accommodated within the system. That simply costs money.
I won't read the other two points, but we can't ignore the fact that Ontario has a graduation rate of 75%. It costs money to keep kids in school.
Again, Ontario received almost 30,000 immigrants under the age of 18. It costs money to educate and prepare new Canadians to participate in Ontario society.
In the whole picture, what Ontario spends as a portion of the general economic health and wealth of this province -- and you look at Ontario's gross provincial product, that being 7.6% -- its education spending is only at 2.4% above the national average. That is not an embarrassment, nor should there be an apology on behalf of this government or this province. Ontario quite simply does not overspend on education, but what's more important, with further cuts to education we can critically undercut and underfund education and we will not be presenting and preparing for the basic costs of education for children to be given opportunities.
The myth that education cuts outside the classroom do not hurt students' education is probably one of the most fundamental problems that we're dealing with right now in Ontario in educating children, and that is the lack of understanding of what it takes to educate a child in Ontario, that learning does not occur only in the classroom and that the classroom does not stand alone. On page 7 it talks about how the Minister of Education and Training released the document -- I'm sure it's not new news to you -- and it focuses on the three categories.
In essence, what we're saying here, and maybe this assists you and you can remember back to your school days, classrooms do not stand alone. I talked to a teacher this morning who teaches in Timiskaming. She has 28 students in grade 7. Four of those students previously had 80 minutes of special education assistance; they now have none. Two of them were in behavioural programs, one had speech therapy. All those programs are now non-existent. She is a teacher who truly likes teaching. She has no complaints. She just says it is getting more and more difficult to make a difference in a child's life. That is an issue for us. It means that teaching in a classroom is not in isolation, and on page 8 you see that.
We cannot ignore library programs, whether they are cancelled or closed in schools. I've certainly visited enough schools in the last three years to observe libraries in schools that have been closed. The doors are locked, they are not staffed, they are underresourced. Add to that, if we have user fees or problems around the financing of the libraries in municipalities, we are creating a very serious crisis for children in learning to read.
It goes on about field trips and extracurricular sports activities. These in essence are also part of learning.
Probably one of the most focused myths that we have as an organization, being that we are committed to early childhood education -- and we certainly have done as much as we possibly can in educating people on the importance of making the investment early in junior kindergarten programs. To date, we have 26 boards that have cancelled junior kindergarten; probably more easily translated that we have 30,000 young children not attending junior kindergarten now in Ontario.
The question to the presenter prior to our presentation, which I knew would be somewhat of a contrast, was around the deficit. The teachers in Ontario do not believe that the deficit does not have to be attended to. The fact is, if it's attended to at the cost of children in junior kindergarten, then it will be a very short-term solution. The statistics around the importance and the benefits of junior kindergarten are presented before you.
Other myths and causes for concern we have outlined for you. However, in concluding, I want to reiterate that classrooms truly do not exist in isolation; neither do schools and neither do communities. They're all interdependent. Cuts to welfare impact on health care, on social programs, affect young children and children who attend our schools. They bring that burden into the classroom. They have to be attended to.
I visited a school in Sudbury in November. It was a school that served three government housing complexes. I talked to the principal. It was a junior-kindergarten-to-grade-6 school and it started in September with 214 students. She said she had approximately 187 registered now. Come June, there would be 179 around and half of them would not be the original students who enrolled in that school -- a highly transient population. You can imagine the impact any adjustments to the cost of rent in those government housing projects or complexes would make on the lives on those families and the children attending that school.
Teachers in Ontario entered the profession, as I said before, to make a difference in a child's life. It's that simple, and that's it. If this government wants to achieve one simple thing, other than getting re-elected, then we truly believe that the education of children in this province should be at the forefront of the priority of this government. It is the only real investment you make in the future or, as Mr Harris would say, in "a brighter Ontario." Thank you.
The Vice-Chair: Thank you. Ms Gaskell, anything further from yourself?
Ms Sandra Gaskell: No, not at this moment.
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Ms Bassett: Thanks very much for your presentation. Of course it's always interesting to look at education. I started as a teacher and things have changed enormously. But it's interesting that I didn't hear any comments from you about the fact that this province has a deficit of over $8 billion and, although we've reduced it in the 18 months we've been in government, we still have to face this problem of spending more money than we're bringing in.
Education spending has increased 82% in the last 10 years in this province while student enrolment has increased by only 16%. Education is certainly a growing expense and welfare is a decreasing expense. We have to look at how we can reduce our expenses. This is just a thought because I have so many friends who are older teachers who are dying to get out after all these years, if they could be bought out, and I have so many friends who are younger teachers who are wasting and rotting on the vine, and you mentioned, I think on page 3 of your summary, about them going and being hired in California.
Do you have any suggestions of what the government could do to help buy out or go in conjunction with the teachers' fund? I think the teachers' pension plan is over $100 million. Could we go that route?
Ms Hoshizaki: I think the question could certainly be directed towards me and the government, because that has been presented as a solution. It's not going to solve the deficit that you mentioned, but what we have found in the past is that it again is a short-term solution. We have a balloon of, as you said, people of that age who are dying to get out and leave in that year, but then you don't have the natural retirement the next year or the year after, which then becomes somewhat problematic.
There has certainly been research and a look at if that would bring more people into the profession and have more people encouraged to retire, but it's something that the government and the teachers have to solve together. It's not in isolation for teachers as a solvable problem, nor is it for the government. I think what would be helpful is if you focus that same solution towards the government, which is part of the pension partners.
Mr Jim Brown: Thanks for the presentation. My wife is a teacher so I hear all sides of the story. As a very small businessman, I look at what we pay per student, say in the city of Toronto, $8,000 per student. With 30 kids in a class minimum, a class then would take in $240,000. I know what my wife makes and if I subtract that, of the $240,000 there's probably $180,000, $175,000 per class. I think that's a lot of money in infrastructure and, without touching the size of the classroom, it seems to me common sense that we ought to be able to save a little bit of that $175,000 outside of the classroom.
Ms Hoshizaki: I can't calculate the absolute exact costs of the conditions your wife is working under if in fact she has 30 students, but my guess is that what we're not looking at is the cost in isolation per pupil as well as the teacher's salary. It is part of, I'm sure, a school building, the plant and the operations of the plant and the support systems that provide services for those children within the classroom. In the context of existing within a fairly complex neighbourhood, there are services provided within the neighbourhood that are attached to that. It's not as simple as calculating it as easily as you have calculated it, and to suggest that is common sense is completely mind-boggling.
Mr Jim Brown: You know what? My wife tells me it's simple, and I believe it's simple. Usually when you reduce things to simple problems, you can come up with solutions. She tells me that she wished that there wasn't as much infrastructure and administration because she could get her job done better.
Ms Hoshizaki: I think that's probably fair when you take a look at a classroom teacher who's speaking personally to you and talking in reference to infrastructure and being able to assign service to an individual child. But if you've got 30 students in your classroom, you do not have simple problems. I will guarantee you you have complex problems, and the simple solution to a complex problem has got us in the state we are right now in education with the proposal that we are overfunding education.
Mr Spina: Just a quick one. My wife has been a public high school teacher for 22 years, so you're speaking here to people familiar with the territory who have heard the arguments before.
One of the things that Sweeney recommended was a reduction of the non-classroom spending, from 47% to 42%. You presented as if this government is fully intent on wiping out all non-classroom activity and I would suggest to you it is exactly the opposite. We fully appreciate that a teacher is not a standalone person. He or she needs the supports system, and your points are well made about the library system, guidance counsellors and so on. But Sweeney recommended reducing it from 47% to 42%. A 5% reduction in non-classroom activity is equated to the tune of $1 billion. That's what Sweeney said. You don't have to agree with him.
The thing is that we made a $400-million cut and probably we're on the way to making the additional $600 million. The minister has held back on that. Why? Because we are now in the process of restructuring how education is funded.
The Vice-Chair: Mr Spina, the question please, if you don't mind.
Mr Spina: Anyway, we feel that this exchange will allow us to better put the money into the classroom, and I would hope that you would help us to see that because the myths that you're talking about we don't think are myths.
Ms Hoshizaki: I wouldn't be here presenting if we did have a different picture on what are myths and what are realities. I don't want to comment on someone who professes to have a secondary background around what's in class and what's out of class.
I agree. I think what's really important for us is to record and document for you what's important to teachers who are teaching in the elementary system. Some things that have been put forth in a paper on behalf of what is outside the classroom are integral to educating children in the province, and when you make the decisions as a government, we hope you will consider that, that libraries in schools are significantly important to children's lives. That's all.
Mr Spina: That's fair.
Mr Kwinter: Seeing as how everybody is adding their disclaimers at the beginning, I'll have to do the same. My wife is also a school teacher and has been for many years. I also have to confess that I have taught both at the post-secondary and the university levels, so in my background I've been a school teacher.
We've had representations and there's a lot of controversy about the non-classroom expenditures. We have the minister saying that out of every dollar 80 cents goes to non-classroom expenditures. We've had educational organizations come to see us and say the real number is only 4%.
We had the Ontario Hospital Association come to see us today with exactly the same complaint. The Ministry of Health is saying to them, "Here are all of these expenditures that are non-patient-related." When they start talking about it, they're saying heat and light, as if, if you have a classroom or a hospital, you don't have to heat the place, you don't have to light it. They're saying school buses are non-classroom, libraries, vocational guidance, music programs. All of these things that go to the quality of education -- not the quality of life, the quality of education -- are effectively non-classroom expenditures and, "Surely we can cut a lot of this stuff out."
Having said that, Ms Bassett just happened to use a figure, saying that educational costs have increased dramatically over the last 10 years, but so has education. You can't compare what is happening today in the classroom and what happened even 10 years ago. All you have to do is just take a look at the so-called new economy with the computers. I've got seven grandchildren. I've got grandchildren who are three who run circles around me on a computer, and I like to think I have some capability on a computer. That's their life. They don't know another life. They learn that and that has to be transferred into the classroom.
There's a resultant cost, a substantial cost, and you can't just look back and think: "Let's go back to Leave it to Beaver days. Let's put that kind of money into the situation where mother is at home greeting the children as they come home for lunch and making them their lunch and sending them off to school with their apple." We have totally different situations that require totally different funding. Do you agree with that?
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Ms Hoshizaki: I absolutely agree with you. There's no doubt about it that, first of all, I'm in a room of people who have very strong relationships with people who are in education, so they probably know that as a fact, but there have been significant changes. The kinds of children that are coming to us today come to us with more complex problems, for many reasons, but also because many of the support systems have been pulled out from under them. That is a serious issue. Poor children learning in school is a serious issue for teachers right now in Ontario and somewhere along the line a society has to respond to that complexity. One or two or three poor children in a classroom of 25 in grade 3 has a significant impact on your ability to make a difference in all the children's lives in that classroom.
Mr Kwinter: Another statistic that you brought out that I was aware of: When you rank comparisons of per pupil spending in North America, we in Ontario rank 46th out of 63. One of the things that everybody wants, and this isn't a partisan kind of thing, is to make sure that we are as competitive as we can be and that we have that ability. You saw in the budget yesterday that there is a feeling that unless we invest in our children, unless we get them to the point where they can compete intellectually, in the future we are not going to be able to compete as a country.
I'm also a very, very strong adherent of and believer in preschool education. Again I tell you, I look at my grandchildren and see what they're doing. A couple of my grandchildren are younger than five and already speak three languages. They speak it without thinking about it because they don't know any differently. They just think that's the way it's supposed to be, because their parents are really into that kind of thing.
I think that is an opportunity we are missing, and if there is one place, other than health care -- because we have a responsibility to do that -- where any government has an obligation to make sure they're spending, not wastefully, but spending the money, it's in education. I just want to let you know I'm totally supportive.
I just want to make one comment, so you know in case this particular document is being circulated other than here: You have made a mistake that I'd just like to correct. You say Ontario is the second-largest province in Canada. I'm sure we all know, and you said actually in your presentation, that it is the largest province, but I want you to know that the text says that we're the second-largest.
Ms Hoshizaki: Blame it on the computer.
Mr Pouliot: Thank you for your excellent presentation. I wish to assure you that some of my best friends are teachers.
Ms Hoshizaki: I know that.
Mr Pouliot: Further, you imputed motive, but positive motive, talking about a strong relationship. I will not term my relationship with some of my best friends as strong or weak but it has been consistent, to say the least, and I would term it as interesting.
You must fear, on the eve of the provincial budget -- you're very much au courant. You've read the terms in the papers; it appeared all over in the dailies, about inventing a crisis. I'm not the one saying this. I'm just drawing off memory to relate some of the phraseology that was used that sent shock waves through the teaching community.
You've also read, with some anxiety I'm sure, about the need to reform education. When I read these things as a neophyte, a novice reading the daily newspaper, I sensed that there was a negative tone. If I had been a cynic, if I had been in a profession where cynicism abounds as the order of the day, I would have said: "Maybe they're seeding. Maybe they're planting. Maybe they wish to prepare the general public -- taxpayers -- for what's ahead." Then, shortly, I read about amalgamation. That did not bother me as much. But I read about the tax break, that now the province was to take over the responsibility of education. They were to deal with the teaching profession.
I also happen to know, by reading the financial pages that my friend opposite produced in great quantity, about the teachers' pension plan. I'll need your help. I'm not so sure whether it's $43 billion or $44 billion in the teachers' pension plan, the one that's headed by Mr Claude Lamoureux. I also read, if my memory serves me correctly -- again I need your help -- that it is actuarially funded, that is has no liability in the future even if you were to project a time going more than 30 years. It's fully funding; it's gone by leaps and bounds; it's doing very well. I know the province puts in 50%; they are the employer. Well, they say they are the employer, but the collective bargaining is with the school board.
When one of my good friends in the teaching profession sees all this, and when they talk about the need to compete -- you've cited one example of some place in California where the teaching salary is $33,000. Some people are dying to get out but they never quite die, those people. You still have a factor 90 under the provisions to get out, the average of the most lucrative three years, right?
Interjection.
Mr Pouliot: Five it is, not three. Thank you. It's fully indexed. They pay a supplementary 1%. What about factor 85? I don't see a lobby -- as I'm an avid reader -- under your figures. Canadians are avid readers. There doesn't seem to be a big push to lessen the factor from factor 90 to 89, 88, 87.
My question is simply this: What do you see happening with the government of the day? You heard rumours that they were going to cut anywhere from $650 million to $800 million in the fiscal year and that education was to be the target, the focus, and then the Minister of Finance comes through and doesn't say we're going to cut anything. Do you still feel under the gun? I'm talking about people like yourself, people in the classroom, the front-liners, not the directors of education who make more money than the province, not the reduction of school boards, but where the real expense is and the real responsibility, which is to educate, like Mr Kwinter said, our future, our children. How do teachers feel?
Ms Hoshizaki: How do teachers feel in the province? I just think, in response to the creating of the crisis, which has probably got more airplay than anything else in the province around education, if it was a motivation for improving education, it didn't do that. It made people who are providing the service probably more defensive than helpful. If I have one message for the Minister of Education, it's as simple as that.
If inventing a crisis or creating a crisis is rationale for justification of a tax credit or dealing with the deficit, then that is problematic. There are different ways if you want to improve a system. If you're a leader of a system, which Mr Snobelen is, you have a responsibility to ensure that people participate in wanting to improve a system. Improving a system is not by finding rationale of what's at fault for it and then believing that we're all going to jump in and say, "Yes, we're going to participate in improving the system by taking more out of it."
What we've presented to you today, we believe, are concrete examples of taking more out of the system. We knew it was a billion dollars. This is not new information we've just figured out in the last year. We knew back when $400 million came out that another $600 million or more was going to come out. We calculated very simply because we knew the target for this government unfortunately was to deliver the promised tax credit. We hope that isn't the reason for it, but that is a problem.
However, how do teachers feel? It's the wrong motivating factor. It didn't make teachers feel good, and they didn't feel great on the first day of September this year, when Mr Snobelen spent all of his time telling the press the teachers are overpaid, overworked for the quality of education they're delivering in Ontario. That is a problem.
Mr Pouliot: Like my friends -- and also true stories; they're incapable of departing from the truth and so am I -- my wife taught for 35 years.
Ms Hoshizaki: I know.
Mr Pouliot: Actually, it's her sixth year of retirement.
Ms Hoshizaki: Yes, I know. That's why you knew the benefits so well.
Mr Pouliot: She started at 12. Well, I can't count too well, but the "2" is true. You possess your friends. I guess you court what you are and sometimes you marry what you are, so it's a close environment.
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I have friends who are teachers, and they kept saying in our small community, Manitouwadge -- we're 800 miles north of this big city -- that the school boards are growing by leaps and bounds. I kept telling them the director makes more money than Bob Rae, that there weren't five directors of education in the province who made less money than Bob Rae, and Bob Rae was the Premier then. But they kept saying they go to Sault Ste Marie, they go to Thunder Bay, they come here for two hours and it's consultant this and that, with a bit of exaggeration thrown in, a bit of emphasis for illustration; you understand that.
I knew of your concern. They've made a commitment -- and we'll see -- to protect and to enhance classroom education, and that's what you fear in your presentation, but that's what you're here for. You shouldn't have to re-emphasize that if you were to believe them completely.
The Vice-Chair: Thank you, Mr Pouliot. That concludes the time for this presentation.
Mr Pouliot: Do you believe that they will live up to their commitment in the next budget by respecting your presentation?
The Vice-Chair: Thank you, Ms Hoshizaki and Ms Gaskell, for your presentation today. Have a good evening.
ONTARIO NATURAL GAS ASSOCIATION
The Vice-Chair: The next deputation is the Ontario Natural Gas Association. I have listed Paul Pinnington, president, and Bernie Jones, coordinator. I think Kenneth Smith has joined us as well. Gentlemen, welcome to the standing committee.
Mr Paul Pinnington: Thank you, Mr Chairman and members of the standing committee. My name is Paul Pinnington and I'm the president of the Ontario Natural Gas Association. Accompanying me is Mr Bernard Jones, to my right. He is president of Blue Apple Consulting and a resource person for the association. On my left is Ken Smith, who is a member of the association's finance committee and also director of taxation for the Consumers Gas Co.
We are pleased to be with you again today and thank you for the opportunity to join in these important deliberations. This is our 10th consecutive appearance before the committee, and we do appreciate the opportunity. On behalf of the members of the association, we have prepared a discussion draft entitled Restructuring For a Competitive Economy, which has been distributed to the members of this committee. Mr Jones has prepared a brief overview of this document and he will concentrate in particular on the conclusions and recommendations. He will take us through that document momentarily. I would ask your concurrence, Mr Chairman. I propose that my colleagues and I would respond to questions at the end of his presentation. The discussion draft has been provided to the clerk and the representative of Hansard, I understand, and additional copies have been presented. With your permission, I ask Mr Jones to proceed.
Mr Bernard Jones: Good afternoon, ladies and gentlemen, Mr Chairman. I intend to go through the document rather speedily, but if you turn to pages 3 and 4, you'll see the recommendations listed. If you would take the trouble to mark each recommendation with the numbers 1, 2, 3, 4, and 5 through 7, then as I go through the text I'll refer to the recommendations. I'll be dealing with them in a slightly different order than they appear in that list.
By way of introduction, let me begin by stating that the brief addresses four subject areas: (1) the economy, (2) planning for our fiscal future, (3) taxation, and (4) energy sector restructuring.
"Who does what?" is the fundamental question being addressed in the current hearing on the Ontario government's policy on public sector restructuring. A parallel who-does-what debate is occurring regarding restructuring of the provincial electricity system for competition. Time must be found also to address this very important issue.
Natural gas commodity supply is already fully competitive. A decade of experience with competition in natural gas shows that positive benefits will flow from introducing competition in electricity in Ontario. Responsibility for power supply must shift from the Ontario Hydro public monopoly to competitive generators; responsibility for transmission and distribution delivery services must be vested in regulated monopolies that are at arm's length of generators; and regulatory responsibilities over the municipal electric utilities must shift from Ontario Hydro to an independent regulator. Fortunately, Ontario's restructuring debates are occurring against a backdrop of an improving economy and a structurally sounder fiscal situation and outlook, so the opportunity for positive change may never be better.
Turning briefly to the economy, the prospects for steady and stable growth in the Ontario economy are brighter than in recent memory. We share the Minister of Finance's optimism that employment will grow and the unemployment rate will decline. However, we must be mindful of the fact that Ontario's economic recovery has so far relied almost exclusively on exports and greatly on recovery in the US economy. The unemployment rate is unacceptably high and we must avoid falling into a trap of believing that a 7.5% to 8% unemployment rate is the best that we can hope for. There are some people who take that position. We are not among them.
The Ontario natural gas industry is contributing to this more broadly based economic expansion. The gas utilities alone plan to invest many billions of dollars over the next five years on pipelines, compressors, compressor stations and other capital equipment. The industry, as you may be aware, has about $10 billion of assets invested in the province, employs 8,200 people and paid wages or salaries of over $378 million, and last year paid more than $300 million in taxes.
It's our position that we must begin planning our fiscal future. ONGA commends the Minister of Finance for adopting prudent economic assumptions to underpin the government's fiscal projections. The government intends declining budget deficits and a balanced budget by the year 2000-2001. What happens subsequent to achievement of the budget balance watershed will depend on advance planning.
ONGA members remain convinced that based on the historical record, non-reversal of the fiscal gains must be a primary objective. In the US, debate continues on a proposed constitutional amendment that would require the federal government there to maintain a balanced budget. Most states in the US are required to balance their budgets. In Canada, the federal government is not bound in this way, nor are the provinces, with the exception of Alberta, which has passed budget balance legislation. Other provinces I understand are examining in various levels the possibilities. In our 1994 pre-budget brief, ONGA recommended a debt-reduction strategy and we believe we need to begin to establish criteria for debt reduction that is fair to everybody.
There are several reasons why it would be prudent to make plans now to retire the debt. These include protecting the province's credit rating, insulation against renewed inflation and higher interest rates, attracting business investment and employment, and it would be fairer to future generations.
As a second priority, a fiscal dividend for taxpayers in the form of tax reductions will be needed to help offset the large scheduled increases in contributions to the Canada pension plan. Of course, increased spending will be beneficial where it is directed at necessary projects in important areas such as education, health and the environment.
This brings me to the first of our recommendations, which is item 1 on page 3, if you've marked it: ONGA recommends that no later than 1998 the government engage in a public debate on post-budget balance strategy and priorities and on the question of balanced-budget legislation.
Turning now to taxation, this is an issue which is important in our fiscal future. We support efforts to reduce the tax burden and streamline tax administration, but the current lack of predictability in taxation at the federal and provincial level complicates private sector decision-making and discourages investment in the province, we believe.
Looking at municipal taxation for a moment, although natural gas pipeline networks require virtually no local services, in 1996 the gas utilities paid more than $123 million in municipal taxes. The compressors and pumps which are necessary for transporting gas through the pipes are included in the municipal property tax base, whereas they are actually machinery and equipment which fairness suggests should be exempt from property tax. Therefore we recommend this exemption, and that's item 7. As well, uniform rates to all classes of property are the fairest way to apply property taxes.
Item 3 tells you that ONGA recommends that ONGA members seek government assurance that the realignment of provincial and municipal responsibilities and fiscal resources that is now being debated will not result in discriminatory and unfair taxation for industry, including the gas industry, and the proliferation of arbitrary user fees and charges, causing added tax burden on the industry during economic recessions or other periods. The industry is feeling rather vulnerable because of the uncertainty in this area.
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On another, more minor matter, which is item 7 on your list, we believe that the Municipal Interest and Discount Rates Act should be amended to make it mandatory that all municipalities pay interest on tax overpayments. Currently, only a handful of Ontario municipalities treat taxpayers fairly in that regard.
On provincial taxation, ONGA commends the government for taking positive steps to reduce the personal income tax burden, lower the payroll tax on small business and restore consumer confidence. However, the corporate minimum tax is simply unjust. The Ontario Fair Tax Commission recommended against a corporate minimum tax, and in our January 1992 brief to the Fair Tax Commission, ONGA had earlier recommended a similar conclusion. We continue to believe the tax to be unjust and arbitrary, and it's levied in addition to the long-standing Ontario capital tax, which is payable regardless of corporate income and thus already constitutes a form of minimum tax.
Therefore, item 5 on your list: We recommend that the Minister of Finance review the rationale for and performance of the corporate minimum tax with a view to either its removal or narrowing for more equitable application.
There are also opportunities for improvements in sales taxation. Starting April 1997, the federal government and three Atlantic provinces will blend the GST and provincial sales tax into a single harmonized sales tax applied across a common range of goods and services at a rate of 15%. The harmonized tax will be collected by Revenue Canada initially, but ultimately by a joint federal-Atlantic tax commission. There are many items taxable under the GST but previously exempt from provincial sales taxes to which the 15% tax will apply, including gasoline and diesel fuel, fuel and electricity. ONGA finds it incongruous that essentials such as food and shelter are not taxed whereas residential energy use, which is also an essential, is taxed.
Prior to the introduction of the GST in 1991, ONGA had advocated to the standing committee the harmonizing of federal and provincial sales taxes into a sales tax levied on a uniform base of final goods and services, with essentials such as food, shelter and residential energy excluded. The approach adopted for the Atlantic provinces has positive and negative features. I won't go into those. I'll just simply say that in ONGA's opinion, the federal-Atlantic provinces agreement appears to offer a basis for Ontario and the other non-participating provinces to negotiate a truly national sales tax under one tax administration, one set of rules, and a common set of tax-free necessities, including food, shelter and residential energy.
So item 4 on your list: ONGA recommends that the standing committee advise the Ontario Minister of Finance that if Canadians must pay a federal sales tax, then he must take the initiative with his provincial colleagues in seeking an equitable and practical way of expanding the federal-Atlantic initiative into a single national sales tax. Such a tax would exempt necessities, as I have mentioned. The minister should also encourage consolidation of federal and provincial corporate income and capital tax administrations.
Another area actually where there has been cooperation between the federal and provincial governments has been with the creation of a viable natural gas vehicles industry. This industry is located principally in Ontario. There are some current tax exemptions that are detailed in the document that apply and help this industry.
It is estimated that less than $6 million in government revenues have been forgone to date as a result of these incentives while the economic benefit from NGV runs in excess of $100 million added to GDP. A substantial industry has developed. Ontario has over $33 million invested in fuelling facilities and refuelling appliances. More than 4,000 person-years of skilled employment have been created in a list of towns which I've put in the document, including -- I'll just list a few -- Kingston, Tilbury, Ottawa, Chatham, Kitchener, Mississauga. The Cummins natural gas V10 engine, which is in the Ontario-built Orion buses and used by the TTC and Hamilton Street Railway and sold throughout North America, is one of the technological breakthroughs that government and private sector partnership has helped do.
So item 6, we are recommending that the province continue its incentives for NGV, without which the further technological development of market growth necessary for a self-sustaining industry will not occur. Loss of fiscal incentives would mean the end of the industry as we know it today, and Ontario would lose its worldwide recognition as a centre of expertise for NGV technology. Members of the committee will be aware that natural gas vehicles bring environmental benefits and they substantially reduce harmful vehicle emissions.
The Ontario Energy Board is presently conducting a 10-year review of the natural gas industry, in consultation with industry stakeholders, and that's with a view to enhancing competition at the retail level in the gas markets. Retail competition is already well-established in the gas industry, but further reforms are under review to make it more efficient. Currently, almost two thirds of all natural gas sales by volume are non-utility sales, and it may surprise you to know that many large gas users and hundreds of thousands of residential gas users purchase their gas from someone other than their local gas utility.
In the interests of customer choice, market efficiency and regulatory fairness, it is important that there be as much synergy as possible in the changes occurring in the natural gas industry and those which are looming in the electricity industry in this province. Competition in electricity is inevitable. It's already occurring across North America, and the Ontario electricity system cannot remain a protected island.
The Macdonald report acknowledged a broad consensus among electricity system stakeholders that the status quo in electricity must change. A multi-stakeholder alliance has subsequently formed representing an unusually broad cross-section of interests, including small and large business, the municipal electric utilities, independent power producers, the Ontario natural gas industry and the Board of Trade of Metro Toronto. The depth of this alliance I think is proof that the status quo is unacceptable.
The stakeholder alliance which I've just mentioned proposes to drive the focus of the electricity business from the large electric monopoly downstream to the customer. The focus must be on creating competition in generating and marketing. The electric transmission and distribution systems must join the Ontario natural gas distribution utilities as regulated monopolies, governed by congruent and modern regulation. I'd like to stress that it's our view and the view of the alliance that privatization need not be an issue at this time.
SAC has proposed that the government act quickly to: separate the transmission system; set a time frame consistent criteria for municipal utilities and Ontario Hydro retail to work out the restructuring of local distribution through regional studies; and establish a transition agency with the mandate and authority to effect the changes needed to introduce a competitive electricity market.
So item 2 on your list of recommendations: ONGA members recommend that the standing committee support SAC in urging the government to introduce competition in the electricity system and regulate the electricity transmission and distribution monopolies. Creation of a level playing field in competition between competing energy forms, including natural gas and electricity, is essential for our future economic competitiveness and for customer choice.
In conclusion, ONGA believes that the government is making good progress towards restoring Ontario's fiscal integrity and that the benefits can already be seen in higher business and consumer confidence and the improving economy. In our opinion, it is now time to consider the strategy for the post-budget balance period. Some elements of that strategy have been discussed in this brief. This concludes our presentation. Thank you.
The Chair: Thank you very much. We begin a four-minute round of questions with the official opposition.
Mr Kwinter: Thank you very much. As always, I enjoy your presentation. I have a couple of questions. You make a point about municipal taxation, and you feel that because basically your compressor stations and pipeline networks are really chattels as opposed to fixed assets, I guess you'd call it, or equipment, they shouldn't be taxed in the same way as property. Is that fair?
Mr Jones: That's correct. Ken, would you like to deal with that?
Mr Kenneth Smith: Yes. I think we're just talking about the compressors and the pumps, not the pipeline itself.
Mr Kwinter: How do you handle it on your balance sheet? Do you depreciate them with a straight-line depreciation?
Mr Smith: Yes. We depreciate all of our pipeline system, including the regulators, compressors, pumps, in total, on a straight-line basis, yes.
Mr Kwinter: How do you reconcile that? If on the one hand municipalities are taxing you as if it were the same thing as real estate, where you don't get that kind of depreciation, and on the other hand on your balance sheet you're depreciating it down to the point where eventually you have your equipment on the books for nothing, really, I assume, if it's old enough and you haven't replaced it, how do you reconcile that?
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Mr Smith: I think we're replacing the equipment constantly, but we are comparing it to other industries where the equipment, which again on other industry balance sheets is depreciated over time, is not included in the base for property taxation. We're arguing that our industry is similar and the equipment should not be included in the base for property tax.
Mr Kwinter: I'd also like to spend a little bit of time on the natural gas vehicles. It seems to me that over the years, every time you make a presentation you talk about the opportunities in that particular sector, and I have to admit this isn't something I follow very closely. I haven't noticed, and I may be wrong, an appreciable increase in the utilization of natural gas in the vehicles. Is that the case, or am I just not aware of it?
Mr Jones: In 1990, the number of vehicles that were actually at that time converted was about 9,800, and it went up steadily to 16,500 by 1994. It dropped marginally in 1995, but the rate of increase in conversions, the actual number of net conversions, was higher in 1995 than in 1994.
So if you looked at that very recent experience, there's been a bit of a levelling off, but the rate of expansion is a function of relative prices of competing fuels, so I don't think we'd expect to see a constant uptrend. There has to be a break in the trend occasionally, so what we're saying is we're hopeful that the trend would be upward again.
Mr Pinnington: May I just add to that response as well that I think you have to look at the manner in which these vehicles are being used. I think we've made significant progress in what we call the dedicated vehicles or fleet vehicles, delivery facilities, the Eatons of this world and the trucks they use, the post office, taxi cabs. The Consumers Gas and Union Gas fleets, for example, are primarily all driven with natural gas at this point in time, and there have been quite significant inroads made into the public transportation sector with buses.
Where the growth has been slower and less encouraging is in the broad general vehicle population, and I think that's primarily because we are faced with the problem of chicken and egg. The number of stations, where they're located, the convenience of refilling for the average person is just not there yet. The feeling in the industry is that if we build the infrastructure around the dedicated fleet and get some of the filling infrastructure in place, then this other market will gradually follow.
Mr Pouliot: Gentlemen, thank you for your presentation. Under the Assessment Act, there is a provision or allocation made for the mining sector. For instance, the well underground is not taxable. Profits are, of course. There's a depreciation allowance also to give, and the sector feels that it is not too harshly done with because it's a non-renewable resource.
Yours is a non-renewable resource. You're in the business of transporting, of delivering, what has been mined, natural gas. When it comes to the municipal level outside the boundaries, the mining sector is exempted from being assessed at the municipal level for residential purposes. That money, which hypothetically doesn't exist here, would suffice for the school boards and also general purpose, which is picking up the garbage, running the swimming pool, etc.
What is the difference between a pipe that runs from point A to point B and is being assessed along with other machinery once it reaches the boundaries of municipalities, and a mine site, be it a smelter, which operates within the boundaries of the municipality? Should they be treated the same, as in your pre-budget presentation? Why should you be exempt? Why should it be different?
Mr Smith: We are not asking for exemption on a pipeline; it is the machinery and equipment that is attached thereto. I'm not an expert in property taxation myself, so --
Mr Pouliot: Yes, but on the other hand, wasn't your depreciation allowance amortized over fewer years? Did you not get a break vis-à-vis amortization for that ministry to minimize the impact of the taxes?
Mr Jones: You've raised an interesting question. I'm not sure we have the appropriate answer for you at this time. It is an interesting question. There is an analogy.
Mr Pouliot: Thank you kindly, because I want to bring you back to number 2. Thank you for the guides when you talk, and rightly so in this, about the need to legislate to enforce that you balance the budget, and then you wish to have lobbyists. It's not vulgar; it's the right way to put your best foot forward. People learn by your instructions, by being exposed to what you do, and you do it well.
I see you're torn. You say we should have a balanced budget by the book to which we must adhere. These are good times; things are really good now; things are changing. But there are cycles also which are traditional, are fundamental, and that impact will keep going. Maybe we won't recognize it or term it the same as before, but it will definitely happen. Given all the other changes, if you're bound by legislation that says that you must balance the book and must do so by certain times, how much flexibility are you factoring in in terms of the timetable? It's an important component.
I'll give you an example. The government had a choice to do all that and made several, I would imagine, judicious choices. They had up to $11 billion when they took office, so they ride an economic recovery. Good for them. Timing is important. Then they say, "Now we're going to add one more year, because we don't want to really dislocate the system in balancing the books, and we're also on the hook with a 30% tax decrease." Should the cycle hit, and you're faced with the legislation, one would have to -- when you commend the government, you must have faith in the administration of the day, regardless of stripe. If a negative cycle hits, they would have to make a difficult choice: either enlarge the timetable, as in "This is going to take two more years, but we're on the right track"; or raise taxes -- they can't do that; they're cutting taxes by 30%; or really impact the system negatively, where it would take a much longer time because they would dislocate the system.
When you made those recommendations, I wonder in terms of timetable and in terms of all the fundamentals, how much time you have given them.
Mr Jones: What we've done is recommend that this should be a public debate. You've raised very important questions. It's not an easy matter to deal with. The United States has been examining this for at least 10 years and they still haven't come to a resolution. Alberta has; of course, Alberta's in a relatively good financial position. Nevertheless, out of that debate might come better ways of dealing with fundamental changes that happen at the economic and fiscal level, even if it didn't result specifically in legislation that forbade the running of deficits. We're saying, at least get the debate going; begin the process.
The Chair: Moving to the government side, Mr Martiniuk.
Mr Martiniuk: Thank you, gentlemen; an excellent presentation. I want to deal with harmonization of the GST and PST. We had a presentation earlier from the real estate industry, who said: "No way, Jose. That will kill our industry." When we deal with harmonization, as they've done in the eastern provinces, obviously, you're extending the PST to certain things or services not presently covered by that, and one of those things would be new housing.
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You as an industry depend upon the sale of your product, new demand through residential housing, through industry, yet about the very harmonization you're advocating the building industry comes and tells us that harmonization will decrease the demand for your product because there won't be construction going on, whether it be residential singles or residential multiples, and it could also possibly affect the commercial and industrial building going on in Ontario. What do you have to say to the building industry when you make your presentation?
Mr Jones: Every industry comes at this from a slightly different perspective. We've tried to look at this from the public interest point of view, broadly, and to say that if you have harmonization, the savings in administration and compliance would be quite substantial. We haven't identified a particular tax base. We're not saying that the current tax base or the one chosen by the Atlantic provinces and the federal government is the appropriate one. It might be possible to make certain exemptions which might include sectors such as housing. It's possible.
We don't think enough work has been done. There hasn't been enough goodwill, if you wish, put into the discussion so far, so we'd like to see a little bit more effort made that way. Would you like to add to that, Ken?
Mr Smith: I'd like to stress that it was the administration end, the duplication of the system of tax collection, assessment and audits, that is a cost to both government and to industry, the additional cost on the taxpayer, that drives us towards looking to harmonization.
Mr Rollins: Thanks for a good presentation. One of the other figures we tossed out last year when Mr Martin and Mr Eves had the meeting of minds to put the GST and PST together is that under the conditions they offered it would have cost the taxpayers of Ontario an additional $4 billion. Mr Eves chose not to listen to that.
You people recommend that we adopt some of the principles of the Macdonald report. You tell us we should open up Ontario Hydro. What is your recommendation to free up the market when Ontario Hydro has an excess of power available and also a debt which is the driving factor in whether we can be competitive? How do we deal with those two things under your recommendations?
Mr Jones: Let me preface it by saying that the stakeholders' alliance which includes that group of people I've mentioned previously, which is really quite a significant alliance, have all come to a common position on these principles in full knowledge of the fact that Ontario Hydro has significant debt and that there's always the possibility of stranded assets.
The Association of Major Power Consumers in Ontario has conducted research which indicates that even if the price of electricity were to drop, because it has a surplus of power at the moment, it could fall and still not strand assets. The other point to bear in mind is that the experience of the gas industry shows that even if there were some stranded costs as a result of competition -- because there are no guarantees -- there are mechanisms to deal with that. The important thing is to note that those costs should be put on the ratepayers that use the system, not on taxpayers.
The Chair: Thank you very much. We appreciate the Ontario Natural Gas Association appearing before us and giving us your views for input into the pre-budget consultations.
CITIZENS FOR PUBLIC JUSTICE
The Chair: We now come to the Citizens for Public Justice, Mr Vandezande and Mr Tobias. Welcome to the committee, gentlemen. We'll have 30 minutes together. If you'd like to go over your brief, we'll then fill in our extra time with questions.
Mr Gerald Vandezande: Thank you, Mr Chairman, for this opportunity to appear before the committee. My name is Gerald Vandezande. With me is my friend Rick Tobias, the executive director of the Yonge Street Mission. Mr Tobias will begin our presentation and I will conclude.
Mr Rick Tobias: I want to thank you for the opportunity to be with you today. The Yonge Street Mission is a church-based charity that came into existence 100 years ago specifically to serve the poor of the city of Toronto. I came to join the mission 13 years ago to take over a centre on Yonge Street specifically to work with street youth, and seven years ago became the executive director of that centre.
The mission's main catchment area has always been the downtown core, and in the past number of years it has increasingly been the lower east side of the city of Toronto. We run four centres: We run a program called the Christian Community Centre, which predominantly works with women and children; we run a centre called Evergreen, which predominantly works with street youth; we run a program called Genesis Place in partnership with the province that predominantly provides housing for downtown residents; and we run a program called Amen House on Queen Street, which works with rooming-house and ex-psychiatric patients in the core of the city.
Beyond that, we operate the third-largest food bank in the city of Toronto, a health care centre that last year had about 6,000 visits, employment training programs, drop-in centres and a used clothing store. We also offer professional counselling, feeding programs for children, youth and seniors as well as a whole range of recreational and skill development programs.
The community we serve is one of the most economically deprived in the nation. It has been said that the lower east side of the city of Toronto has one of the highest concentrations of poverty, welfare recipients and unemployment in the nation.
The impact of the welfare and social service cuts on this community has been very harsh. Welfare cuts resulted in approximately $13 million in lost income to our neighbourhood in the past year. In addition to that, millions of other dollars were lost to the neighbourhood as the agencies that we partner with were downsized, ceased to do their own spending in the community, ceased to provide their own services in the community and as the staff who would work in that community stopped doing their own spending. As I've noted in our report, we estimate that our staff, as an agency, probably spends easily in excess of $100,000 a year within the area of several blocks of our agency. As other agencies are downsized, we expect that their spending in the community has also been cut. The end result has been a significant economic downturn. We regularly talk with businesses in the community who talk about the impact of all of those cuts on their businesses and what it has meant for their staff.
The Yonge Street Mission as an agency has not been directly impacted by any of the budget cuts of the past year, predominantly because we don't receive a lot of government money, nor have we ever tended to receive a lot of government money. The impact for us, however, has been indirect. The reality is that we have been significantly overwhelmed by what has happened to us over the past year. In 1994, the demand on our food bank decreased by 6%, and in 1995 by an additional 5%. In 1996, the demand on our food bank has gone up by in excess of 40%. This past summer we ran out of food for the first time in the 13 years that I've been at the mission, and we now regularly cut back the amounts of food we provide to individuals and families. Seniors, children and the severely disabled have all seen a reduction in the amount of food that we actually deliver to them as an agency.
This fall as we approach Christmas, the Daily Bread Food Bank, who we partner with, has informed us that it can no longer continue to provide us with the food that we've received historically from them, at least at the same levels. That means that our staff now spend more time than ever simply recruiting food and trying to find food, as opposed to delivering some of the other soft services, which perhaps have the possibility of resulting in more long-term change. The reality for us is that it's only a matter of time before we face, as an agency, a very severe crisis, and only a question of time before we regularly have days where we simply say, "I'm sorry, we don't have food any more."
The change in demand on food has come from families who used to get by on welfare perhaps until the 27th, 28th of the month, and now all of a sudden run out on the 23rd, 24th of the month. It has also come from families who used to get by on welfare without food subsidy and who now all of a sudden find themselves needing to come to us because they're not getting by any more, and an additional new demand as people who have lost employment in the past year all of a sudden start arriving on our doorsteps.
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If we move from our centre at Gerrard and Parliament over to Evergreen, the mission's centre for street youth, we've experienced approximately a 50% to 60% increase in the number of youth attending our centre over the past 15 months. As we've looked at that, our guess -- and at this point it's simply a guess -- is that is not due to lots of new youth on the street. Rather, instead, it's due to youth coming to our centre who once used to go to other centres. As those centres have been forced to downsize their programs or cut back their programs, youth have come looking for another place. Quite bluntly, it means that they arrive at our centre a little frustrated, a little angry because we were not their prime service agency of choice. All of a sudden we become the only agency available for them.
It has simply left our staff overwhelmed. We have historically been one of those agencies in the city that has held on to staff for a very long time. Burnout has never been a major issue for our staff. However, burnout in the past year has become one of the most frequent discussions staff has had, as the tendency to violence, being overwhelmed by needs, as those processes simply impact our staff. The end result is that we are providing less care for each individual young person, we're experiencing increased violence, increased stress load on our staff and our expectation is, and it has already begun to happen, increased staff turnover. We have now for the first time begun to lose staff simply saying: "We can't do it any more. We're at the end of our rope."
I spoke a lot in the past six months at service clubs and service agencies. I have said to those service clubs and service agencies, "If we were a mutual fund or if we were a business, you would want to invest in us like crazy, because we're experiencing a 40% to 50% growth rate clear across the board." The reality is that we are not that; the reality is that our goal is to be out of existence; the reality is that we're experiencing a growth that we cannot sustain and that will eventually crush us.
Thus, I come to you on behalf of the mission and on behalf of the people we serve simply asking that the government refrain from further budget cuts, both to social services and to welfare. The impact of those further cuts would literally be devastating to those we serve and to our resources. The Yonge Street Mission has a very wide support base, a very loyal support base, but we are convinced that the individuals and companies who support us will not or cannot support the increased demand on our services. Therefore, our expectation in the future is that without change, we will be pushed to a significant expansion first and then to a significant reduction as we find ourselves unable to contain that expansion.
Mr Vandezande: I would like to begin by drawing your attention to the single recommendation that our organization is making, on the bottom of page 1. It's namely the following: We urge the finance committee to pass on the following recommendation to the government:
That the Ontario government introduce the legislation and table the regulations detailing the unforeseen circumstances, the uniform conditions, and the provincial standards that all municipalities must meet in order to ensure the following: (1) that all Ontario municipalities equally qualify for equitable assistance from the province's welfare trust fund; and (2) that all Ontario municipalities provide neighbours in need with equal and fair access to equitable social assistance, public services and community programs.
In order to leave enough room for discussion, I'll skip the bulk of page 2 in the hope that you will look at it later, if you have some time, and continue on the bottom of page 2.
There's growing evidence, and we've heard it from Rick a few moments ago, that more and more people in Ontario are experiencing a serious loss of dignity and a real sense of futility when they cannot find jobs at decent wages and when they must rely on food banks and hostels in order to escape hunger and homelessness. In this context, it would be helpful -- I've attached them as appendix D -- if the minister were required by this committee to answer the questions we raised in our letters of January 3 and 8, 1997, very specific questions that deal with how the government is dealing with the various unemployment, welfare and poverty situations. We have yet to get answers.
I think those answers should be tabled not only with this committee but in the Legislature so that the public knows exactly what progress, if any, is being made with respect to the implementation of the promises the government made during the election campaign and which Mr Harris repeatedly stated on CBC Radio in interviews with Gzowski and others, namely that poverty would be eliminated, jobs would be created and we would live in a province where people would enjoy a genuine life of dignity and community.
The reality is otherwise. Vulnerable neighbours must daily struggle to meet basic human needs of their families, while others, like most of us in this committee room, daily benefit from the government's arbitrary reductions in Ontario's income tax rates. These cuts were imposed at the expense of the poor and the unemployed and are having a severe impact on community services and social programs that are so essential to these vulnerable Ontarians.
A year ago when I appeared before this committee, I strongly urged the government particularly to put a moratorium on income tax cuts and to use the savings to restore the social assistance cuts that had been made so arbitrarily without consulting anyone.
In preparation for this appearance, I read the Hansard containing your committee's proceedings of February 6 when Finance Minister Eves presented his analysis of how well the government is doing in terms of its financial forecasts and deficit projections. Mr Eves stressed that the deficit is being cut more quickly than he had expected and that the "the government's plan to cut taxes and create jobs is indeed working." I don't know for whom, but it's working.
Mr Eves said, "The size of the restructuring fund has been increased from $900 million to $1.8 billion and we have committed over $1.3 billion in restructuring investments to date." My question is, where does the money come from? Does it come from the hundreds of millions of dollars that have been taken away from social assistance and other social programs?
The finance minister announced that the provincial government "will be sharing the costs of social assistance with local government." That means, as I understand the record, that municipal governments' share will increase from 20% to 50%, no less than two and a half times the current load.
We're deeply concerned about this offloading of costs. Quite apart from the question of whether municipalities have sufficient resources to adequately cover these increased financial responsibilities, we strongly object to the principle of funding social assistance and services through property taxes, which are currently very regressive and not based on ability to pay, rather than through the progressive income tax system.
While Mr Eves stated, "A $700-million trust fund for welfare has been established that will provide assistance for communities in the event of unforeseen economic circumstances," the Treasurer has yet to spell out the following, which I think is crucial: (1) which unforeseen circumstances will entitle municipalities to receive assistance from this trust fund, (2) which uniform conditions the provincial government will insist on before municipalities will be provided with equitable assistance, and (3) which provincial standards all municipalities must meet in order to ensure that all Ontario communities provide neighbours in need with equal and fair access to equitable social assistance, public services and community programs.
CPJ is deeply concerned about the rapid disappearance of equitable national standards and effective enforcement mechanisms that would provide legal equality and fiscal equity for all Canadian residents in all provinces and territories.
The federal government's terrible failure to establish and enforce national social policy standards across Canada should not be repeated at the provincial level. The Ontario government must insist, in law, on uniform conditions and substantial standards for social programs that are enforceable across Ontario.
According to our Canadian Charter of Rights and Freedoms, all Canadians are "equal before and under the law" and have "the right to equal protection and equal benefit of the law." In our view, Canadian citizenship entitles all Canadians to equal treatment, without discrimination, across Canada, to legal equality, to national consistency and to economic, fiscal and social equity, no matter in which province or territory we live.
At the same time, the principle of equal citizenship rights should apply, without discrimination, across Ontario, no matter in which municipality we live.
I'll stop here in the hope that we can have some candid discussion about the absolute necessity that there be standards tabled by the minister as to how all Ontario people who are living below the poverty line are going to have equitable, adequate access to government resources, and how municipalities will be required to treat these people without discrimination.
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Mr Martin: Thank you for a very sobering presentation. It behooves all of us who have the responsibility of government to always try to determine the impact of the decisions we make on people, the people who live and work and enjoy, or try to enjoy the livelihood that should be available to all of us in the province.
Today you particularly bring to our attention a group of people we have special responsibility for and you make an excellent point in calling for a standard or the setting of a standard, particularly as we see this government make decisions about who will pay for what services, and the downloading of that on to municipalities and the varying ability of municipalities to provide for a certain level of comfort, whether it's seniors or the poor or children or whatever. How do you propose we establish a standard and how do you propose we enforce that?
Mr Vandezande: I think there needs to be some consultations with the stakeholders and the people who are directly affected. When Mr Martin tabled his budget in 1995, through Bill C-76 he abolished the Canada assistance plan, which committed provincial and federal governments to do whatever they could to remove the causes of poverty.
Within CAP there were certain standards, all of which, except for the residency requirement, have been eliminated. The Canada health and social transfer has only one condition that applies to social programs and that is the residency requirement, but even that is being played with, to use the term loosely. CAP has ended, the CHST contains no real standards on programs within province, and it behooves this government and the Ontario Legislature to see that as a non-partisan issue. To prevent intermunicipal warfare as to what we do with the poor, it is essential there be conditions that are equally applicable to all across the province.
There needs to be discussion with AMO and the other stakeholders, including agencies such as the one Mr Tobias represents and other food banks, as well as municipal social service deliverers so we know from one another what is needed and what standards should be put in place, so that when the political decision-makers have to decide on decisions as to who is entitled to a share of the welfare trust fund, it is done at arm's length, in the light of conditions, criteria and standards that are equally applicable to all, so that it doesn't become a political slush fund that will go to those municipalities where the most people may be supporters of a particular ideology or program, and so that people really know in terms of the public record who is entitled to what under which conditions.
I listened to the presentation by AMO earlier today. Clearly, they ought to be at the table, as well as all the agencies that are directly involved in the delivery of services. The government cannot arbitrarily go ahead with a trust fund. Who are going to be the trustees? Will they be independent citizens who are competent to judge the applications of municipalities for assistance from this fund, and will people like Mr Tobias and others be on that panel of people who decide whether there is a real need that must be met, or are there going to be patronage appointments that will do whatever the government of the day thinks is best to do?
I apply that not only to the Conservative government that is now in power, but to whoever is going to be the next government, which is going to also have to have an arm's-length relationship to the agency that decides what assistance municipalities are entitled to.
Ms Bassett: Thank you very much, gentlemen, for your presentation. As parliamentary assistant to the Minister of Finance, I want to assure you that I will relay what you have said. I look forward to re-reading it because there's so much density in all your ideas and when it's in Hansard I will look at it very closely.
I also want to assure you, although you look at how we're going to get there, that we do share the same goals and our government does have a program that is beginning to pay off in order to raise the general economy so there will be money to pay for social programming. You might disagree, but I want to put that on the record; we're going about it maybe in a different way.
What I wanted to mention was that I was looking at some clippings for another group that was in and I see that food bank numbers were way up in 1989; some reporter wrote that they'd increased way over 100% since 1984. It just made me think, here we are in 1997 when I always, when I used to help out in food banks, thought they would be a Band-Aid.
I know that's just one aspect of all the myriad of things you do, but it brings me to the question: We are looking very carefully at how we can educate and provide job opportunities to maybe help people you are helping to stand on their own feet. Do you have suggestions on the job market? I know it's just one little bit of all the things you talked about and I don't mean to trivialize in any way by crossing off or not dealing with all the other things.
Mr Tobias: I am not, by nature, a political person. I run an agency that works with the poor. I'm not sure how policies get implemented. What I know is that I regularly meet with the senior executive people of national and international companies that are positioned in Toronto. They regularly ask what they might do to benefit the community we serve and I regularly suggest opening some businesses in our neighbourhood. The most frequent answer I receive is, "What else could we do?"
Thirty or 40 years ago our community was rich with businesses. Times have changed and most of those businesses have moved to the fringe of the city while the poor have remained in the core and the community remains a catchment area. There will likely be no significant change in our community until there are jobs in our community. Whether that's the job of government or industry or who, I don't know that that's for me to answer.
But I do know that our community is in desperate need of jobs. We are convinced that the single largest cause of poverty in our community is not the abuse of substances -- alcoholism or things like that. The single largest cause of poverty or of hunger in our community is unemployment. We know that in the mission where we work, we regularly have to break up fights among people who are arguing over who gets to help out and volunteer and work, and one of the consistent issues in our community is that people are saying, "We want to work."
From street youth who want to serve behind the coffee bar at our drop-in or sweep the floor or mop up, to the single moms and others who come down to volunteer at our food bank, we find our people are desperate to say, "Just give us a job and let us do it." The reality is that nobody's providing those jobs. Until those jobs are provided by somebody, and I suspect it's not the job of an old mission, food banks are with us to stay.
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Ms Bassett: They should be provided in the downtown core where you are.
Mr Tobias: They should be provided in the community where we are.
Ms Bassett: That's the kind of thing that is helpful to look at, yes.
Mr Vandezande: I'd like to add to that. First of all, thank you for your commitment to review what we've said. I'll be glad to give you a submission that we made to the parliamentary standing committee with respect to the possibilities of job creation.
One of the keys, I think, is that we reduce overtime or eliminate it, look at the distribution of work, and plug the loopholes in the tax system that give unfair advantage to highly profitable corporations and wealthy individuals. I think this government, in facing the reality that the job creation is not what it thought it was going to be, should establish an independent arm's-length job creation task force that looks at the measures that ought to be taken.
However, when I look at the discussion there was between Mr Phillips and Mr Eves when Mr Eves appeared before this committee, I think it is crucial that the Ontario people get a clear presentation of what is actually happening on that front, and let's have an independent analysis of which jobs are created and where.
That's why we asked the questions we did. Maybe you can use your influence with the Minister of Community and Social Services to make sure that those figures come on the table and that we get an accurate reflection in the minister's statement whether revenue is really increasing. If it is increasing as rapidly as -- let's use some of that money to get the kind of job creation possibilities in the downtown sector. If we want to prevent more health problems, more criminal problems etc, then that's one way of effectively using the money that Mr Eves on -- when was it? -- February 6 said the government was --
Ms Bassett: Thank you. I'll be interested in the submission you've made.
Mr Phillips: I appreciate those remarks and your suggestion is one I've suggested before, but involving some independent stakeholders -- I hate the term "stakeholders" -- because I think we have our head in the sand on jobs.
I put some numbers out and the government refutes them, but the numbers came out in the last couple of days and we've lost 37,000 jobs in Ontario in the last five months. That's their numbers. The rest of Canada has gained 72,000 jobs in the same period. I don't think I've ever seen our youth unemployment as high as it is, according to the government, 18.6% in January 1997.
The government, in one of our hearings, when asked, "What should we expect in terms of job creation with 3% real growth?" said, "Jobs will grow at 2% -- 2% job growth -- about 100,000 jobs." We have what looks like a problem that is not going to be solved on the jobs front and your point is that until we get beyond arguing about whether we've got a problem or not, we'll never solve it. I say we've a problem. It's in the government's best interest, any government frankly --
Mr Vandezande: It's clear from yesterday's federal budget presentation that we are stuck with close to 10% registered unemployment. Then the unregistered unemployed is another 5% or 7%. It's also clear that neither the provinces nor the federal government really know how to get hold of it. I want to stress it's an issue that is, first of all, non-partisan -- both unemployment and poverty. Second, it involves more than government. Industry and communities need to become part of it. It's fascinating to me that certain jurisdictions in Europe are doing a phenomenal job on job creation and at the same time have a high level of social programs and social services, and we may want to look at those.
In addition to that, the figures you've cited, Mr Phillips, and were cited in the federal budget yesterday all point to one reality, that unless we work together for a better Canada, for a better Ontario, on a non-partisan basis and are prepared to face the people on that issue, including the people who are wandering the streets of Toronto, we are going to have more cynicism and more disrespect for political parties.
Last night I was in Scarborough. Thousands of people turned out and some couldn't get in. That is not only because of the megacity; that is because people are deeply frustrated that they are not getting a hearing, that they're not being told the facts, that they're not given any options, that they are not allowed to participate, that they aren't given the opportunity to really access their politicians. I'm speaking right across the board. We need a new way of dealing with these issues. If we don't, we're going to be in deeper trouble than we already are.
I think that involves participation of the trade unions, the chamber of commerce, AMO, the universities, everyone, and let the government have the vision to say, "Let's get the advice of the common people for the common good and let's not worry about whether our revolution makes it or the opposition parties can score points, but let's do something for the wellbeing of the people."
The Chair: We thank you very much for your very passionate presentation. I can assure you it's something we face every day and it's something we're very concerned about. We'll certainly take your remarks into consideration, Mr Vandezande and Mr Tobias.
Mr Vandezande: Would your committee ask the Minister of Community and Social Services to table the answers to our questions, which we've tried to put in as non-partisan a way as possible.
The Chair: We'll put forward that request.
Mr Vandezande: Thank you.
The Chair: Thank you very much. That concludes the business for the day and we stand adjourned until tomorrow at 10 o'clock.
The committee adjourned at 1806.