Special report,
Provincial Auditor: Section 3.03, project to automate
the land registration system (Polaris)
Hon Norman W. Sterling,
Minister of Consumer and Business Services
Ms Sandra Lang, Deputy Minister of Consumer and Business
Services
Mr David Roote, assistant deputy minister, registration
division,
Ministry of Consumer and Business Services,
Ms Jennifer Smout, assistant city solicitor, city of London
Ms Sue Corke, assistant deputy minister, policy and consumer
protection services
Ministry of Consumer and Business Services
STANDING COMMITTEE ON
PUBLIC ACCOUNTS
Chair /
Président
Mr John Gerretsen (Kingston and the Islands / Kingston et les
îles L)
Vice-Chair / Vice-Président
Mr John C. Cleary (Stormont-Dundas-Charlottenburgh L)
Mr John C. Cleary (Stormont-Dundas-Charlottenburgh L)
Mr John Gerretsen (Kingston and the Islands / Kingston et les
îles L)
Mr John Hastings (Etobicoke North / -Nord PC)
Ms Shelley Martel (Nickel Belt ND)
Mr Bart Maves (Niagara Falls PC)
Mrs Julia Munro (York North / -Nord PC)
Ms Marilyn Mushinski (Scarborough Centre / -Centre PC)
Mr Richard Patten (Ottawa Centre / -Centre L)
Substitutions / Membres remplaçants
Mr Bert Johnson (Perth-Middlesex PC)
Mr George Smitherman (Toronto Centre-Rosedale /
Toronto-Centre-Rosedale L)
Mr Joseph Spina (Brampton Centre / -Centre PC)
Also taking part / Autres participants et
participantes
Mr Erik Peters, Provincial Auditor
Mr Andrew Cheung, director, justice and regulatory audit
portfolio,
Office of the Provincial Auditor
Clerk / Greffière
Ms Tonia Grannum
Staff / Personnel
Mr Ray McLellan, research officer,
Research and Information Services
The committee met at
1033 in room 151.
SPECIAL REPORT, PROVINCIAL AUDITOR MINISTRY OF
CONSUMER AND COMMERCIAL RELATIONS
Consideration of section 3.03,
project to automate the land registration system (Polaris).
The Chair (Mr John
Gerretsen): I'd like to call this committee meeting to
order. Welcome, everybody. Today we're dealing with section 3.03
of the 2000 special report of the Provincial Auditor, the project
to automate the land registration system, Polaris. We'll start
off with a statement by the minister. Welcome, Minister. That's
twice in two days that you're here.
Hon Norman W.
Sterling (Minister of Consumer and Business Services, Minister of
Correctional Services): I hope they don't give me
another ministry.
Mr Chairman, thank you very
much for the opportunity to say a few words. I have some prepared
remarks, but before I go into those I should say that perhaps a
sketch background of the registry system as I saw it prior to the
automation or the digitalization of the land registry system
would be helpful.
Back in the old days, when I
practised law, before becoming a member of the provincial
Parliament, there were basically three types of land registry
systems in the province. In fact, they still remain but are much
more compact at the present time due to the whole Polaris
project.
The first and the oldest type
of system that we had in Ontario was the land registry system,
which essentially was a system inherited in its form, its rules
and its law from Britain. That system was developed over an
800-year period, so when we started to set up our land registry
offices we adopted a lot of the rules, the rights of easements,
the rights of licences, the rights of fee simple, the rights of
fee in tail, all those kinds of names that were common in the
land registry system from Britain.
The land registry system was
basically a system of registration which allowed a great deal of
flexibility with what you could do with land. That was sort of
the beauty of the system, that you could use land and grant
rights and partial rights, leasehold rights, easement rights, in
a whole number of ways that therefore allowed a great deal of
flexibility for the landowner to share his or her property rights
with others.
In probably the 1960s or
1950s, we started to develop some land systems which gave greater
surety of title to a person who was buying the land, because the
government at that point in time started to see that the old
system of land registry often required a lawyer or a title
searcher to go back and check the history of the title for a very
long period, where records were not that good, where there
weren't a lot of land surveys surrounding what was described in
the instruments. There was a decision to create essentially two
other types of systems, called the certification of title system
and the land title system.
The certification of title
system was a system whereby if a person was uncertain of the
title because of the registry documents that went back 40 or 50
years, there was a process by which you could go and essentially,
at a time frozen, get a certification of the title as of 1960, as
of 1972 or as of whatever time the application was made, that the
title was good and the crown was saying the title was good at
that time, subject perhaps to a certain number of conditions.
Then the land title system
was developed. The land title system was a system of titles
whereby not only would you freeze the guarantee of the title at a
specific time, but you would continually guarantee that title
into the future. The land title system I think is one which we
should aspire to for every title, every piece of land in the
province of Ontario, because what it does is limit or lower the
cost to the consumer in terms of acquiring that property. If fact
there is a guarantee that is kept up to date, so to speak, from
year to year. Then when the next purchaser comes along for that
property or the next mortgage goes on that property, you don't
have to go back and there is certainty of what your rights are in
that particular property.
What happened in around 1986
or 1987 was that the government of the day decided that it would
try to take another step in the long history that I've outlined,
and that would be to give even greater certainty of title and
greater accessibility in terms of records. To try to move where
we were going in the future, they started a project totally
within government called Polaris. This was contained in the
Ministry of Consumer and Commercial Relations, through which the
land registry offices have always reported.
That project started, I believe, in and around
Kitchener; it was in southwestern Ontario, as I understood it, at
the time. They started to digitalize and tried to develop a
system of putting paper onto a computer. As I understand it, they
started to run into problems about two or three years later,
deciding that the government itself couldn't put this project
together. It was becoming evident that it was quite awesome. I
think the number of properties at that point that were under the
three registry systems that I outlined was something like 3.6
million or 3.7 million across all of Ontario. It was becoming
more and more evident to the government of the day that they
couldn't do it.
1040
In 1988-89, the government
put out an RFP, or an RFQ-I'm not exactly sure how they went
about it-to try to join in partnership with the private sector to
carry this project of digitalizing all of the land registry
records across Ontario and put that in a public-private
partnership. I think actually the first partnership fell apart,
but in 1991 a successful partnership did develop with a company
called Teranet, which is still the company with which we are
engaged in undertaking this project.
That company is owned 60% by
the private sector and 40% by the government of Ontario. We still
have 40% of the common shares. I believe we also have some
preferred shares securing the investment we had already made as a
government in the project. In other words, as I mentioned before,
we started as a government alone trying to do this project and I
think the government of the day spent around $30 million of
government money in terms of the staff of the civil service that
it had put in. The deal struck at the time was that we would put
in $29 million, the private sector would put in $29 million and
we would get credit for the $30 million which we had already sunk
in, in the form of some kind of preferred shares, which I guess
eventually will come out at the end of the project.
I have to tell you, though,
that as we went through this process, having had the opportunity
to do some work in this area, primarily in the 1970s when I
practised law, I was somewhat skeptical that this project could
be done, just because of the mammoth size of it. It was just
huge. Having had the pleasure of going particularly into rural
eastern Ontario and seeing the complexity of some of the titles,
the uncertainty of some of those titles and the task that was
there to try to clear up an individual title, I was somewhat
skeptical that we would get to a final conclusion. But of course
it wasn't within my realm of possibility to deal with that matter
at that time, save and except as an opposition member of the
Legislature, and the deal was struck with Teranet and it was
set.
As you can imagine, when I
outline the three kinds of titles that there are, the three kinds
of registration systems that there are in Ontario-the land
titles, the certification of titles and the registry office-the
first two are much easier to deal with when you're trying to put
them on a digital record and trying to confirm that this title is
good, because in the first case-and the most important part of
both certification of title and land titles is that you need a
survey. If you have a survey on the ground which says in the
description of the land that you are buying or selling or
mortgaging, a particular parcel of land which is described in a
survey which is in fact there on a piece of paper, then there is
much less problem with conflicts surrounding that particular
title. You have a picture of it, a land surveyor has gone out and
put bars in the corners and therefore you know exactly what's
happened. A lot of the problems with the registry system relate
to sloppy descriptions, you know, "the east half of lot 7,
concession 8," and in some cases the farmer who was adjacent to
it put his fence over on the particular property and there were
rights associated with possession and all those kinds of
things.
At any rate, what happened
over, as I understand it, the first four or five or six years of
the project was that the digitalization-blame it on the
computer-was primarily focused on those properties which were in
land titles and in certification of titles. The real problem that
Teranet ran into was when they started to get into the registry
office titles. In eastern Ontario that is probably more
prevalent, particularly outside the urbanized areas. It becomes
more and more expensive to clean up these titles because you
don't have the surveys, you have sloppy conveyancing that took
place and those kinds of things. As we're getting closer to the
end of the project in terms of putting all of these-now I think
there are 4.2 million or 4.3 million titles, because the
number of titles has gone from 3.6 million to 4.3 million-Teranet
is facing more and more difficult problems in putting each new
property on to the system because it's hazier as to exactly what
the rights are and it's more difficult to clean up the old
titles.
Presently we are in a
situation where we have approximately 72% of all properties on
the system. We still have some areas, I believe, in the north,
like Sudbury, Thunder Bay and some of the northern communities,
which basically have a land titles system, so that putting those
particular projects on to the system will be still relatively
easy. But to get the last 15% to 20% is going to be a difficult
process. I think the bottom line is that we're going to have to
sit down with Teranet and calculate out how this will eventually
be done in a most efficient and economic way.
The bottom line of the whole
thing, in my view, is that it was a mammoth project to start. It
has required over the period of time for the government and the
company Teranet to continue to negotiate, to continue to deal
with changing technology, the changing nature of the project as
you've gone from the easier properties to put on the system to
the more difficult projects to put on the system. But as a result
of what we have done, I believe that in the end we will provide,
number one, a process which will be more economical to run and
more economical for us to deliver in the future.
It does take less time for
the people involved in the transactions to do their business and
therefore should lead to consumer savings with regard to that. It
will lead to greater
certainty of title and therefore I believe that services like
title insurance, often used in the United States, are virtually
unnecessary for the average person in our province. You have the
province standing behind the title, so why do you need somebody
else ensuring that particular title? In fact, what has happened,
if you compare costs of conveyancing in the province today, they
are very similar to the costs for the services of a solicitor and
for the services of a title searcher back in the 1970s. Those
costs have not increased and that's partially due to the fact
that we have continually improved our registration system.
I don't think you can look at
this particular item and investment in this particular area as a
public-only investment. I think you have to look at it from the
point of view of the citizen and what is he or she getting in the
end. I believe in the end they are getting better certainty of
title and they are probably getting a much better cost in terms
of the delivery of that service.
1050
We have in part of Ontario
provided for electronic transfers at this present time, and
hopefully that will spread to other parts of Ontario. That is a
system where the client comes in, normally, to a lawyer's office
and says, "I'm buying or selling a piece of property," and the
lawyer can, without going to the registry office, search the
title in his office. He can actually transact the business in his
office via keyboard, through the use of identification numbers
and can of course transact, in a lot of cases, the financial part
of it as well. So it is moving from a very, very antiquated, old
system into, really, the next generation, and we are leading many
jurisdictions in the world in terms of what we are doing.
The company Teranet itself
also has alternate businesses that it's been involved in,
although the land registry system in Ontario and the
digitalization of that system has been its principal business.
They have done some business in the UK in terms of other kinds of
software. They have software packages that they are selling, and
it is our hope, as this project comes to an end, that that part
of the company will be enhanced.
The Chair:
Minister, we normally allow 20 minutes for opening
statements.
Hon Mr
Sterling: Have I gone on more than five?
The Chair:
You've gone about 21½ minutes. But I'll let you finish up,
and then there may be some questions.
Hon Mr
Sterling: I know that you've all enjoyed it, though,
very much.
The Chair:
You've certainly given us a beautiful legal history of our
landholding system in Ontario.
Hon Mr
Sterling: I guess the net part of the whole thing is
that to date this has cost the consumer-our net investment is
about $115 million. We have saved about $75 million in government
staff because government staff in registry offices have dropped
from about 1,200 to under 500 as a result of how the business is
done, and we are in fact ending up with a better system in the
end.
We have not received
dividends as shareholders of this company at this time in terms
of cash. I believe we have received dividends in terms of those
other things that I mentioned, in terms of lower-cost
transactions for the average Ontarian. But we will continue to
act diligently in representing Ontario's interests as a member of
Teranet and also as the ultimate controller of the land registry
system.
Teranet owns the system. The
province will forever, as long as we are the government of
course, own the data. Therefore we, in the end, control that. We
control the registration fees, which are part of the investment
strategy that is involved in this.
Thank you very much. I had a
prepared speech which I didn't actually read, but hope that the
people who wrote it are not too-
The Chair:
I'm sure you can file it with us and we will read it for bedtime
reading.
Hon Mr
Sterling: I'm sure you will. Would anyone care to ask me
a question about the beginning?
The Chair:
As I mentioned before, last week when you appeared before our
committee, it is rather unusual for a minister to appear before
this committee, but we always welcome the opportunity. What I'm
suggesting is that perhaps we'll allow 10 or 15 minutes for each
caucus to ask questions, if I hear no objections, because there
may have been a number of issues based on that. So I'll start
with the Liberal caucus.
Mr George Smitherman
(Toronto Centre-Rosedale): I'd like to ask maybe just a
couple of framing questions to try and determine better the
extent to which-
Ms Marilyn Mushinski
(Scarborough Centre): Do you want to frame the
minister?
Mr
Smitherman: Glad to see you're awake.
The way the relationship
works talked about public-private sector partners, as we hear
that language a lot. You mentioned the 60-40 split. I'm anxious
to know the extent to which on a day-to-day basis the government
of Ontario seeks to play its role in determining the way the
business is run.
Hon Mr
Sterling: We don't. We have equal representation on the
board of directors, even though we are "minority shareholders."
The relationship is purposely set so that the company has
control, so the CEO or the president has control of the
day-to-day business. Our relationship is involved in really
dealing with the agreement that we have with Teranet the company
and through the board of directors in terms of general guidance
to the company in terms of some of the major decisions which
would, of course, include their financing arrangements.
Mr
Smitherman: Would you agree that that sets up a
situation whereby some taxpayer dollars-or in this case, you used
words like "investments," talking about the system itself-are
offered a higher level of scrutiny and accountability through the
Provincial Auditor, as one example, than investments-a word that
you used-into these public-private sector partnerships?
I'll use as an example that
this morning I awoke to your smiling face on television talking
about absentee rates in the public sector. As a partner in a
public-private sector partnership, does the province of Ontario
have a greater
responsibility to the taxpayers to play a role in making sure
that companies are operated with every available energy put
toward the protection and enhancement of the taxpayers'
investment?
Hon Mr
Sterling: I think the scrutiny has to be a little bit
different in terms of what we do because we are not making the
individual daily decisions and therefore we have to hold a board
of directors in the company responsible as a whole in terms of
the profit and loss, the living up to the contract which we have
made them, whereas when we are responsible for the actual
delivery of the service, then we have to be more intrusive in
terms of our scrutiny.
Mr
Smitherman: Would you see it as an unhealthy precedent
to begin, through these public-private sector partnerships-which
presumably are going to become more rather than less common-to
give greater access to the Provincial Auditor, as an example,
through the agreements that are signed? Obviously, Teranet was
looking for business from the province of Ontario. I'm not saying
you were there when the original deals were done, but I'm asking
for your view. You've been a minister now for your second
go-round. The Teranet file is not a new one to you. Probably you
got back there for your first afternoon of briefings and were
reminded that this stuff was still going on and you wrung your
hands-
Hon Mr
Sterling: No, I expected it, actually.
Mr
Smitherman: Do you think this is something that we ought
to be trying to enhance, to provide a higher level of
accountability for the taxpayer in those investments in
private-public sector partnerships, as an example, to give the
Provincial Auditor enhanced access to those things to protect the
taxpayers?
Hon Mr
Sterling: I think what you have to do is seek the
protection within the framework that you set up. The whole idea
of a private-public partnership is to say that the private-public
partnership is going to operate in a freer and a more competitive
nature than you can as a public sector. The public sector is
often inhibited in terms of how it operates because it's not
operating with a bottom line, it's not normally operating in
competition with other sectors, and therefore I think you have to
take that into account in terms of what you're doing. Therefore,
I don't think that the intrusive nature that we allow for our
auditor to go into our ministries should be the same in
public-private sector relationships. I believe it should be done
through the contractual nature and the overall view of it from
the point of view of what we, the taxpayers, are paying for it
and what the government stands to win or lose out of it.
Mr
Smitherman: Wouldn't you say that it's a dangerous
precedent to establish a situation where the public domain is
narrowed through public assets being transferred, in a sense, to
the private domain, where there is a-I would say diminished; I
think you would at least say different-level of accountability.
Isn't the danger that you as a minister, with some responsibility
presumably, if I'm to read my press clippings, to try and find
ways to save costs within the ministry that you're responsible
for, are taking a very different view toward that piece of
business that used to be a core ministry business but is now in a
public-private sector partnership and operating in a different
way? Isn't there a danger that the taxpayer is better represented
in the sense that you're working harder to look at the
line-by-line activities in your ministry than those things which
have been pushed into another domain and protected, I would say,
from a better look-see from some of the tools that citizens have
found important, like the Provincial Auditor?
1100
Hon Mr
Sterling: I think it's a trade-off. I think what you do
when you're deciding whether you're going to go and have a
particular service provided by the private sector rather than the
public sector is that you're going to gain more efficiencies
because they are better able to control their expenditures,
better able to make decisions on a day-to-day basis in terms of
the running of a business rather than as a public sector, because
of the pushes and the pulls that they have in the private sector,
and therefore you say we can afford not to have day-to-day
scrutiny in this particular matter and we can then describe that
in a contract with the company, and if they step outside of that
particular contract, then we can go back in or we can take
remedial measures. That's, I think, how the original contract was
set up back in 1988, 1989 or 1991, or whenever it was, with
Teranet. I think there's a balance there in terms of what you
do.
Mr
Smitherman: In your time as a minister with
responsibility for the Teranet file, if you will, have you ever
been in a position to ask the senior staff there or the board or
your government appointees on the board to take costs on, to
sponsor events or activities? Have you ever as a minister used
any influence to ask Teranet, the private company, to sponsor
activities that were of particular interest or concern to
you?
Hon Mr
Sterling: I'm not sure I understand the question. I have
met with the chair of Teranet, I've met with some of the members
of the board, whom we appoint as the government of Ontario, to
talk to them about their concerns with regard the company. This
is going back to when I was the minister before, 1995 to 1996. I
have not had the opportunity in the last two weeks to meet with
anybody from the board. I don't know how many times I met with
members of the board to talk about the direction that Teranet was
taking, whether we should renegotiate, not negotiate, what the
debt load was, all those kinds of things. Yes, I did as a
minister do that.
Mr
Smitherman: I'll just restate my question. What about
instances where you might have asked them to look favourably upon
something that had come across your desk or domain and that you
weren't in a position to deal with? This is a private company.
Obviously they've got the capacity to do some things the
government can't do. Have you ever as a minister been in a
position to ask them to support activities that you might have
favoured but weren't in a position to do as a minister?
Hon Mr Sterling: I can't imagine
how that would happen; they're in a very defined area of
business. So no, I've never done that.
Mr
Smitherman: No sponsorships, no support for hiring of
employees, that sort of thing?
Hon Mr
Sterling: No.
Mr
Smitherman: No advocacy on that part?
I guess I have a different
tack of question. One of the things I worry about-obviously all
of us are struck every day by the rate of technological evolution
that's going on. I think about 1991. It doesn't seem like that
long ago-well, maybe it does to some-except when you place it in
the context of technology; obviously there's been a pretty
dramatic rate of that. Is there any danger that because we
continue to miss deadlines-I think you made a pretty good defence
of the challenge, especially with the last 28% that still need to
be digitized, but is there a danger that because we miss
deadlines and the total time that it's taken will be much greater
than was originally predicted, the end product that the
taxpayers, the citizens of Ontario, will have will be at risk of
being not redundant but out of date technologically?
Hon Mr
Sterling: There is always that danger in terms of what
you do, but hopefully the data and the technology now permits you
to transfer or use all the work you had before to move it on to
the future.
We may decide, too, that we
shouldn't try to do this last stage, this last 18%, within a
specific time frame of three to four years. We may decide that
it's more efficient and better for us as taxpayers and as a
government to do that over 30 years in order to get that last 18%
done. It may be much better to try to do that as the properties
actually transact into the future and make a deal, or try to
contract that on an individual case with all the lawyers across
Ontario to get that finally done. So we're entering into a very
different stage of time in terms of where we're going to go in
the future, but there is that danger.
Probably the ministry will be
able to answer you more specifically on it, but as I understand
it, Teranet is building the system so that it could be
transferred on to a succeeding system if that became the way in
the future.
Mr
Smitherman: I want to make sure I heard that right. Were
you suggesting that it might take 30 years to complete those
final tough ones and that that might be, from your standpoint, an
appropriate circumstance?
Hon Mr
Sterling: I think that should be part of the discussion,
as to whether we should do that or not.
Mr
Smitherman: How do we engage in that discussion?
Hon Mr
Sterling: I will engage in that discussion with Teranet
to find out what is in the best interests of the taxpayers in
terms of finishing off this last 18%.
Mr
Smitherman: I might say that for my two cents' worth-and
I will phrase this in the form of a question-I would ask you to
ask them this. My concern would be that you have a situation
whereby you decide to slow down the rate rather than finish that
final piece, and obviously people in some parts-you've mentioned
lawyers as one example. I was waiting for a response from my
honourable friend the Chair to talk about his knowledge of this
situation. But it would seem to me there would be some regional
inequity in a circumstance that saw those more difficult ones put
off with that project not being completed. I think that's a
danger, on a regional basis.
I would be even more
concerned that further enhancements to keep up with technology
that you mentioned are there as a platform to build upon, that it
would be very difficult to justify those enhancements to the
piece that has already been done in the absence of having
completed the overall project. How would you respond to that?
Hon Mr
Sterling: I think you have to look at where these
properties, the 18%, are. They're probably properties which are
often within families, that may be traded or sold or conveyed or
mortgaged once every 30, 40, 50 years. Therefore, in terms of
equity, you're talking about properties generally of maybe lower
value where it just doesn't pay to have it all surveyed; the
survey costs three times as much as the value of the property.
You run into problems like that. Therefore, it's not a question
of equity in terms of one system versus the other, or the cost of
doing business from one to the other, but the fact that a lot of
these properties that we're taking about are the properties that
are relatively inactive in Ontario.
What is the best way to deal
with them? Is it better to spend $100 million-I'm picking that
totally out of the air-when you could have this done over a
longer period of time for, in present-day dollars, $10 million,
and you're not really hurting anybody in terms of how they
transact business because the business is transacted so rarely in
those areas? I think that has to be taken into account.
I would imagine that the
technology will always accept a new piece of property because the
number of pieces of property is going to grow every day anyway.
Every time you put up a new condominium, if you have 100
apartments in it, there are 100 new properties that go on to the
system, so it's always going to have to be open-ended.
Mr
Smitherman: That's 5,000 new properties in my riding
alone in the last year or two.
Hon Mr
Sterling: Thanks to the growth we have in Ontario.
1110
Ms Shelley Martel
(Nickel Belt): Thank you, Minister, for appearing before
the committee today. I'd like to begin where the auditor left off
in his audit, in terms of the future fallout, because the auditor
made it clear that at the time the audit was complete the
ministry could not give the auditor a good indication of where it
was heading. Specifically, "The Ministry also advised us that it
was in the process of assessing its options for automating the
land registration system." So, by your comments here today,
should the committee assume that the ministry has completed its
assessment of options and you are clearly determining that you will continue
with Teranet?
Hon Mr
Sterling: I can't answer that. I do know that we hired a
consultant to evaluate the situation before the auditor began his
report. I don't believe we have that evaluation back yet.
Ms Martel:
This is the second evaluation after the outside consultant who
reported in 1999?
Hon Mr
Sterling: I'm going to have to defer to my deputy on
that. This is a point of history that I wasn't involved in.
Ms Sandra
Lang: The review that the minister referred to is very
much an ongoing initiative between ourselves and SuperBuild,
which is a part of the government's examination of its ownership
interest in the company. We have yet to complete that evaluation.
We have explored a number of options, we have a number of options
that we're looking at, but we haven't completed the analysis yet
of those options to determine whether there is a specific course
of action that we then want to sit down and negotiate with the
company.
Ms Martel:
Let me back up because your options, as I just heard you, all
include Teranet. When I read the auditor's report, it seemed to
me that there were options outside of continuing with Teranet. Is
the review specifically on how to continue the relationship with
Teranet but to improve it so that they continue to be the company
providing this service?
Ms Lang: I
certainly think that is a very real option. It's not necessarily
the only option. I think we want to ensure that the investment
we've made to date with the company is continued if in fact that
is a viable option and one that's fiscally prudent.
Ms Martel:
Can you describe to the committee what other options you're
looking at that might be outside of Teranet? Is the ministry
seriously considering resuming ownership of this project?
Ms Lang: I
think it's fair to say we've looked at that, but as I indicated
earlier, we haven't completed the analysis of that. There also is
potentially the option of looking at a different company, should
we want to pursue a different course of action with another
company. But all of those are, at this point in time, just
options that are needing to be done. As good public servants, you
know it's our job to look at all the options available to us and
provide the best advice we can using principles of good customer
service and fiscal prudence.
Ms Martel: I
appreciate that, Deputy. I guess what worries me is the
uncertainty, because as I listened to the minister, I certainly
got the impression we were continuing on with Teranet. I
apologize if I was mistaken in that. What worries me is that the
auditor completed his report in, what, April 2000? We are now in
February 2001 and you still can't give us a clear picture of whom
you're going to continue with and how this project is going to
unfold, almost a year later. Doesn't that worry you?
Ms Lang: I
think it's fair to indicate that we have been, in the course of
that year, doing a significant amount of work exploring options.
But we've also engaged, as I indicated earlier, with SuperBuild
in a process to do the appropriate kind of due diligence. We've
engaged financial firms, technology firms and legal firms to do
the best analysis they can and give us the best advice on what
our going-forward strategy ought to be.
Ms Martel:
Can you tell us, Deputy or Minister, whoever wants to respond,
does the ministry have concerns about Teranet's financial
stability? I'd refer back to the bond issue in September 1999,
which clearly involved Teranet using its proceeds (a) to pay
loans and (b) to finance the future costs for this system. Now,
those future costs were not identified by the auditor, so if you
know what they are and can share them with the committee, that
would be helpful. But are you in any way concerned about their
financial viability as a company and whether or not it's going it
make good business sense to continue with them as a partner?
Hon Mr
Sterling: Of course we are. We always will be concerned
about debt. We, the taxpayers, own 40% of this company and that's
why we have people on the board of directors: to be concerned
about that. I would point out that that bond issue is issued by
the company. It's not a liability of the taxpayer as such, save
and except that it's a liability of the company of which we have
part ownership. It's quite important to understand the
distinction. Therefore, it limits our liability in some ways in
terms of the government of Ontario.
Ms Martel:
Except it would become a liability to you if one of the options
the ministry chose to continue this process was to terminate its
relationship with Teranet, because Teranet put up as security its
licence with the province, the agreements, all the computer
software and the equipment. So the issue of where you're heading
is particularly important, because if where you're heading
includes terminating your contract with Teranet, there are some
serious obligations that the province would have to assume.
Hon Mr
Sterling: I don't want to hold that out as our number
one choice by any stretch of the imagination. I think we've had a
long relationship with Teranet over the last 10 or 11 years, and
the likelihood is that that will carry on and we'll continue to
work with them to try to make this system work and to get the
project done to the best degree we possibly can. My guess would
be that it would be more difficult to untangle than to try to
make this thing work, and we are working as partners with them to
try to make it work.
Ms Martel:
Do you know what their future costs are with respect to
implementing the automation? This goes back to their issuing the
bonds to have enough money to cover that. Do you know what their
costs are?
Ms Lang: I
think the costs are going to be determined partially by how we
decide to proceed in going forward. If we continue on the same
path that we're going at the moment, I think the estimate from
the company was somewhere in the order of $700 million. But we
have not made any of
those determinations in terms of accepting that as our
going-forward strategy.
Ms Martel:
Is SuperBuild looking at this $700-million estimate? Can you give
the committee a clearer picture of why that appears to be so high
now? What does it involve?
Ms Lang:
SuperBuild is looking at that number. They're looking at a
variety of components of the company and its estimation of the
costs. I think the costs are probably related, as the minister
alluded earlier, to the nature of the records that have yet to be
automated and the amount of time associated with trying to
convert and automate those records in a very timely way.
Ms Martel:
Just out of curiosity, has SuperBuild also looked at-perhaps
they're not the ones-has the ministry sought some legal advice
with respect to what its obligations might be if the relationship
with Teranet was severed? I'm not suggesting that's where you're
going, but certainly as a result of the bondholder issue, did the
ministry seek legal advice at that time to clearly understand
what its obligations might be?
Ms Lang:
Yes, we did. It's our belief that we do not have any liability
that relates to the bond. We were quite clear in getting legal
and financial advice, and we consulted the financing authority
for the province as well.
Ms Martel:
So despite what has happened and despite what was put on the
table as an asset, there are no repercussions for the
province?
Ms Lang:
We still have ownership of the data, and we also have in one of
our agreements the expectation that we will continue to see the
operation of the land registry system should there be a break in
the relationship with Teranet.
Ms Martel:
The ministry does that, and that's clearly in the agreement?
Ms Lang:
Definitely in the agreement.
Ms Martel:
In terms of the decreasing revenues that are coming back to the
province, is SuperBuild examining why that is happening? For
example, we know that in 1994-95 the revenues were about $38
million, and that declined to about $13 million in 1999-2000. Is
the ministry examining why those revenues continue to decline
when it appears there would be more transactions going on than
ever before?
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Ms Lang: I
think I would interpret your question to refer to the royalties.
Is that the number you are referring to, the royalties coming
back to the province?
Ms Martel:
I would assume so, but I don't think the word "royalties" was
used.
Ms Lang: I
think the numbers you referred to are clearly the numbers
associated with the royalties.
Ms Martel:
And the decline is associated with what? The committee would have
to assume that an increasing number of transactions would be
occurring, so our royalties should be increasing, not
declining.
Ms Lang:
That's right. I'm going to ask David Roote. He's the ADM
responsible for this division, so he can respond to that
question.
Hon Mr
Sterling: Mr Chairman, while I've offered myself,
perhaps members of your committee would rather ask questions of
my officials.
The Chair:
In all fairness, we allowed the official opposition 15 minutes to
question you, and we'll allow Ms Martel and your own government
members the same time. Whether they use it to question you or the
ministry is entirely up to them.
Hon Mr
Sterling: I was trying to get out of here, that's
all.
Ms Martel:
Any of these that you'd like to answer would be fine with me,
Minister.
Mr David
Roote: If I could, then, the original model that was
established assumed that as properties got automated, the
statutory fees related to the registrations on those properties
would be transferred to the company as an ongoing funding
mechanism to pay for the project. What the Provincial Auditor
looked at, and our assumption, was that as those revenues began
to increase to the company, we were also experiencing savings. As
the minister mentioned, we have saved about $75 million in staff
costs and we also no longer have the operation of the system,
since it's operated through the company. So on a net basis, the
province is better off and, as the minister mentioned, our net
cost is about $114 million. So it was always assumed that as the
properties became automated, the fee revenues would be
transferred to the company to pay for the ongoing cost of the
project.
Ms Martel:
But the revenues are dropping.
Mr Roote:
The retained revenues for the province, because as more
properties get automated, those revenues go to the company. We
retain the revenues associated with the properties that are not
automated.
Ms Martel:
But isn't the split 50-50?
Mr Roote:
That's on the basis of the profits from the company, not the
diversion of revenues from registrations.
Hon Mr
Sterling: I think it varies in terms of searches. If
it's automated, Teranet gets 95% and the province gets 5%. On
registrations, I think it's 75% in royalties to Teranet and 25%
to the province. You have to remember too that as what we get
back is dropping, so are our costs. Yes, we're getting less in
terms of the revenue pot, but we're being pulled upon less and
less each day as more and more of these properties go on to the
automated system. It will be a net wash in the end and hopefully
net positive for us.
Ms Martel:
That was going to be my next question. So far we've seen a
decline over the period 1994-95 through to 2000. I don't know if
you have any estimates of your revenues for 2000-01 or if it's
too soon to give the committee an idea about it. Are we going to
end up in a situation where there actually isn't a net benefit,
that we're seeing a loss in the outgoing years as this project is
completed?
Mr Roote:
No. We will continue to retain the revenue from registrations
against properties that are not automated. Since the automation
project has carried on longer than was originally anticipated,
the retained revenue for the province is also more prolonged. Also, as a
result of the properties being automated and fees being
transferred to the company, our royalty payments rise, because,
as the minister mentioned, 25% of the registration fees come back
to the province as royalties. So our royalty payments are rising
as the properties get automated.
Ms Martel:
Do you have a schedule you could provide to the committee that
would show both of those streams? I must confess that not all of
this is very clear to me.
Mr Roote:
I'm sure we could provide that. As the deputy has mentioned as
well, it will be affected on the basis of the go-forward model we
develop, once we finalize what the public policy approach is
going to be in the future.
Ms Martel:
Could you give us-and maybe the deputy or the ministry could
answer-some of the things you're looking at with respect to
trying to improve the accountability you have with Teranet? I
gather there has been no contract signed with respect to the
latest deadline, which in our documents appears to be 2010. I
don't know if the ministry thinks that will be the actual
deadline or whether that is something SuperBuild is also looking
at. Can you give us some idea of what you're looking at in terms
of how to improve the relationship so that there is better
accountability and we more clearly understand the costs that are
coming at us and the schedule as it appears to be going away from
us?
Mr Roote:
If I might, Deputy, the deputy talks and meets regularly with the
chair of the board. Prior to board meetings, the deputy and I
also speak with our provincial appointees on the board. I also
sit as a non-voting member on the board. That was one of the
recommendations made out of the consultant's report so that we
have a greater direct presence at the board meetings from a
provincial standpoint. We do have good oversight as to what's
happening with the company, and we will be talking about the
various models and what the completion date will be or how we
determine when the completion of the project will be. That's part
of the options we're reviewing now.
Ms Martel:
Are you in a position to share with the committee any of those at
this time?
Mr Roote:
I think the deputy has mentioned a couple and the minister
mentioned a couple with regard to looking at conveying or doing
transactions of the properties that are conveyed into the future.
There are a variety of different things, but we're still in the
early stages of doing the analysis, and now with SuperBuild
involved as well they are looking at the financial and ownership
interests. So those things all have to be put together; they have
to be done as a package deal.
Ms Martel:
Do you have any idea when the review will be complete?
Mr Roote:
SuperBuild is hoping to have some results of their analysis
available in the spring, and we hope to be able to have our
information with regard to the public policy options completed
around the same time.
Ms Martel:
In the meantime, you have not extended formally by way of
contract the completion date, so the completion date that is
still in effect would be the one that was signed in January 1998
for 2004.
Mr Roote:
That's correct.
The Chair:
We'll have to leave it at that for now, Ms Martel. Mrs Munro.
Mrs Julia Munro
(York North): I wanted to go back to the little history
lesson that the minister provided us with in relation to the fact
that when you talked about the historical role the province has
provided in this area, it is clearly providing the kind of
service primarily to the legal profession in terms of being able
to execute the research that's necessary for those lands to
change hands. I just wondered whether, through you or the deputy,
we have any notion in terms of the way in which this current
process is working and whether we can look at the kinds of things
that are happening today as a result of those changes that have
been introduced through Teranet.
Hon Mr
Sterling: I have to say that of course whenever you go
into these kinds of things you have resistance in terms of people
who are involved in it, but those people who are involved in it
love the system. We have a lawyer who would speak to it, if
that's the desire of the committee, in terms of transacting
property and those kinds of things.
I must say that when I
looked at it, as I said before, having been involved under the
old system, I was somewhat skeptical about some of the things and
particularly concerned about the security of transactions and
those kings of things. I became convinced after I listened to the
debate that in fact the new system, the electronic system, is in
a lot of ways more secure than the paper system, because there
was forgery; there were methods of fraud under the old system.
The system will work and it will work well, and the legal
community will speak very highly of it. I think you should also
know that it will lead to lower transaction costs for the
consumer because the system is more efficient in terms of
everybody's time and it is more certain in terms of the titles
that are being transferred.
1130
I suspect we'll have a
debate here in the Legislature maybe five, 10 or 15 years from
now-I'm not sure when that debate will take place-that maybe
we'll have conveyancers in this province instead of lawyers doing
this kind of business. It would of course require them to be well
trained. This has happened in England in terms of the
conveyancing profession. Mind you, those conveyancers are trained
just about as long as the lawyers are in terms of what they're
doing, but I suspect that will happen. But right now, as I
mentioned before, the cost per transaction is about the same now
as it was in the 1970s in terms of the solicitor's fees. Other
costs have gone up-the costs of surveying, the costs of real
estate fees, because property is worth more and it's a percentage
of, and those kinds of things-but if you look at the cost per
transaction, it's stayed the same, and that's because of some of
the automation that has gone on.
Mrs Munro: I just have one other
question then that sort of relates to that, looking at this in
terms of what role this automated land registration system is
going to play in the bigger world of e-commerce. There were
questions raised a few moments ago about how flexible this system
that is being designed today is going to be for the future.
Obviously it would seem to me that this is also part of what
should be in the mandate, if you like, of the organization.
Hon Mr
Sterling: That's a good point. The whole idea of setting
up Teranet was not just to run the land registry system and
automate it. The whole idea of setting up Teranet as a
public-private company was that they would in fact become
innovative, they would use this as a jumping-off point in terms
of other services. They have, as I understand it, already been
involved in some other kinds of services. I had examples of them.
Maybe you can give me a hand on exactly what other kinds of
businesses they've been involved in.
Mr Roote:
They are developing an electronic portal for the legal community
called BAR-eX. That's their brand name. It allows the legal
community to do a lot of different things. Even getting into the
ordering of legal supplies, they can have linkages now. As the
minister said, they want to get more innovative, they want to
expand in the market for lawyers so that they have not only the
real estate business but they get into the other business that
lawyers are engaged in, in order to expand their markets in those
areas. They have done quite well in that regard.
Ms Lang: I
would also refer to the fact that they are engaged in work with
the Ministry of the Attorney General as well. They've automated
the writ system. The writ system is one of their products. As the
minister alluded to, they have also been engaged in some
initiative with the government in the UK in looking at the extent
to which their products might be useful to some of the
initiatives the UK is currently considering as they relate to
their land registry system.
I do know that they've also
had some discussions with the provinces west of here.
Saskatchewan, for example, has been talking with them about the
product they have and whether there's some value there in terms
of Saskatchewan taking a look at our process.
Ms
Mushinski: I'd like to follow up on Mrs Munro's line of
questions, because it seems to me, when I look at some of the
handouts you provided to us this morning, that there's
significant experience on behalf of Teranet if you look, for
example, at the awards they've received etc. Can you advise us if
a cost-benefit analysis was conducted prior to entering into this
contract in 1991?
Ms Lang:
Yes. There were actually quite a few cost-benefit analyses
conducted. My understanding, based on the information that I've
been given to date, is that in the late 1980s there were some
cost-benefit analyses that were looked at as the government of
the day was contemplating the automation and seeking out a
private sector arrangement. There were also when the contract was
signed.
Ms
Mushinski: Could you say that again? That was in
1988?
Ms Lang:
It was 1987 or 1988, the latter part of the 1980s.
Ms
Mushinski: During the Peterson government.
Ms Lang: I
know the ministry also conducted some examination of what it
would cost for the government if we were to carry out the
automation process utilizing continued investment in public
servants and the technology of Polaris. At that time, I think the
estimates were well in the order of somewhere over $600 million,
with a timeline of about 15 years to complete the automation.
It's also fair to say that at that time we weren't contemplating
electronic registration. It was simply automation of the records
and conversion to title.
In the early 1990s, when
the contract was about to be signed, due diligence was taken at
that time. I understand that consultants were brought in to take
a look at the arrangement and the contracts, and the assessment
was completed before the contract was signed in the early 1990s.
So there has been a series of examinations, both from a
cost-benefit perspective and also to ensure the contracts were
tight and in the public interest.
Ms
Mushinski: I'm trying to get a handle on this change
from 3.4 million properties to 4.3 million, which I believe,
Minister, you said represents about 17% that haven't been
registered yet, or converted, I guess?
Hon Mr
Sterling: Let me clarify that. As we were saying, each
time a condominium is registered-let's say it would have 100
units in it-that increases the number of parcels there are in
Ontario. Because we've had such significant growth in that kind
of development over the last five or six years, it raises the
total number of parcels of land-calling your space in the air a
parcel-from, I think, 3.5 million to 4.3 million or whatever. So
the number-
Ms
Mushinski: So that's growth?
Hon Mr
Sterling: Yes, that's growth. But of the 4.3 million in
total, we still don't have 28% automated at this point in time.
It's easy to automate the new ones that are coming on, but it's
more difficult-
Ms
Mushinski: I take it that the new ones-I'm looking at
growth of close to 4,000 units coming on stream in my own area in
the next little while, very close to the growth in Mr
Smitherman's riding, thanks to our government, of course, but he
never said that. I take it the growth is automatically registered
under the new system.
Hon Mr
Sterling: It depends where it's occurring, but generally
speaking, yes. If it occurred in Sudbury, it wouldn't, because it
hasn't happened in Sudbury at the present time.
Ms
Mushinski: So does that 28%, which is what I'm trying to
get a handle on, have to do with the complexity of the
transaction, does it have to do with the location? Why has that
28% not yet been undertaken?
Hon Mr
Sterling: The answer is partially both of those-the way
you put the question. Part is the location. They have gone, in
terms of automation, to one geographic area. I think they started in Kitchener
and then went to London.
Interjection: Woodstock.
Hon Mr
Sterling: Woodstock. They've sort of moved from registry
area to registry area. If you were looking at it, there are
probably 8% to 10% that are still somewhat easily done. Those
would be in suburban areas like Thunder Bay and Sudbury, where
they are under a land title system. Automating those records will
be fairly easy. Once we get to 80% or 82% or 83%, the other 18%
will be difficult to do because they are in the land registry.
They are out in the rural communities, and the titles aren't
quite as good in those areas.
Ms
Mushinski: My last question has to do with other
jurisdictions. Are there other jurisdictions within Canada that
have automated their land registry process?
Mr Roote:
Yes, there are. BC OnLine is one of them. But to compare Ontario
with the other jurisdictions in Canada, Ontario certainly has the
most properties and, as the minister has said, in some of the
other jurisdictions, particularly in the west, all the properties
were in land titles to begin with, so the conversion process
wasn't necessary.
In the eastern provinces,
New Brunswick and Nova Scotia are also going to convert their
properties. They're in registry and will be converted following
the Ontario lead, because they do see the benefits we are
incurring in Ontario and are pursuing automation like us. We are
certainly front-runners with regard to the ability to have
electronic land registration. We're the only jurisdiction in
Canada that has that, and it's a decided advantage for the
consumer and for the legal community to be able to register
electronically.
1140
Hon Mr
Sterling: Chair, maybe we didn't explain that there are
sort of two pieces to it. One piece is the land titles records
that are automated. They are there. When you go to search the
title, you can punch it up and can find it, or you can find it on
your screen in your office. The other part is transacting the
business, conveying the piece of land from A to B.
As we've pointed out, the
project has changed. It was originally just an automated record
that you could punch up and then search your title. Now it has
become not only that but the ability to transact business on your
computer.
The Chair:
Just for clarification, you talked about the growth taking place
in condominiums, but the same thing would apply to any new
subdivision that is registered or any severance that takes place
that creates more units.
Hon Mr
Sterling: Absolutely. Yes, that's right.
Ms
Mushinski: I understood that. Just one quick question:
have you had an opportunity to view the Provincial Auditor's
recommendations with respect to the ministry independently
reviewing Teranet's procedures? These were all alluded to in the
auditor's report on page 71, which are now sort of contained
within recommendations that Teranet should reassess its
estimation procedures for project costs and timetables, that you
should independently review Teranet's procedures and cost
estimates, and that Teranet's accountability processes be
improved to ensure that relevant operational and financial
matters be brought to the attention of key ministry officials on
a timely basis.
I wondered if-
The Chair:
Just to be clear on that, those recommendations were not
contained in his report; they were a handout this morning.
Ms
Mushinski: I realize that, but they were certainly
alluded to in the auditor's report.
The Chair:
They were alluded to, yes.
Mr Erik
Peters: They are on page 71.
Ms
Mushinski: I wonder if you had any comment.
Hon Mr
Sterling: It's an ongoing process. We have to continue
to be diligent in demanding of Teranet and the company what its
estimates are, what its projected costs are, and are the dates
realistic in terms of the job to be done? The ministry, as I
understood it, prior to the report of the auditor last year, had
already started and engaged in evaluating where we were and where
we're going. We have to do that. I think it's absolutely
essential with a project of this size that we continue to do that
and continue to meet with our members on the board to ensure that
our interests-the taxpayers' interests-are being properly
represented.
Mr Bart Maves
(Niagara Falls): Thank you, Minister, for appearing
today. You've got a good grasp of this system and this process.
You were probably a minister of the crown way back-half the time
of the history you talked about in land registry.
Part of the history of this
process itself-I may be wrong, but correct me if I am-is that all
the cost-benefit analyses and the decision to go with a
private-public sector partnership started in the 1980s with the
Peterson government, and then in the early 1990s the NDP
government agreed that was the right way to do this project. In
1991, did they have a full and open tender process in order to
find Teranet as a company to go into this business with?
Mr Roote:
At the time the election took place, there was another due
diligence review. The deputy mentioned that there have been
several of these done over time. So prior to the deal being
agreed to or being completed, there was another due diligence
review that was undertaken by the government of the day at that
time, and the deal was then signed in 1991.
Mr Maves:
Was there a tender process to pick Teranet?
Mr Roote:
No, the process by which Teranet was formed started prior to that
time. There were expressions of interest primarily from the
surveying community. There was then a consortium arrangement
developed which led to the formation of Teranet. So that was not
reviewed. What was done was the due diligence review as the
founding assumptions around this, and the government then signed
the deal in 1991.
Mr Maves:
When they signed the deal in 1991, the business arrangement that
the minister talked about, with their revenue, the diversion of
certain revenues, the royalty, the dividend streams and all that, that
was set up in 1991 also?
Mr Roote:
That's correct.
Mr Maves:
Has that been adjusted at all since?
Mr Roote:
No, we're still operating with the same basic agreement that was
struck in 1991.
Mr Maves:
In part of the auditor's report he talks, and we talked this
morning, about this $44-million debt that the company has right
now. Where has that debt accumulated from? What has caused that
to accumulate?
Mr Roote:
That's their overall financial statements if you looked at the
company, their accumulated debt with regard to the carrying costs
from the bond debenture and all other lines of business that they
have investments in. So if you looked at the bottom-line position
on a cumulative basis, there's a $44-million debt.
Mr Maves:
By looking at that, is it possible to determine what parts of
that pertain to our dealings with them and what might pertain to
other dealings the company might have?
Mr Roote:
I don't have those figures available, but we certainly will be
looking at, from the standpoint of what makes good sense from the
taxpayer's value, the Polaris project and its financial dynamics
going into the future. I don't have a breakdown of those
numbers.
Mr Maves:
Both the deputy and the minister have said, and I quote the
deputy, "Originally, we were not contemplating electronic
registration when the process started." In 1991, there was this
$275-million estimate to complete the process. Both timelines and
costs have changed. How much of that change in the cost and
timelines of the project was the result of the change of the
scope of the project?
Mr Roote:
First of all, the $275-million figure was not an all-in figure.
When we look the documents that were signed when the deal was
entered into in 1991, the total costs estimated at that time were
just over $400 million. In today's dollars, that's about $500
million. The major cost considerations that have occurred since
the deal was originally signed were the debt financing through
the bond and renegotiation of the agreement with the company's
subcontractor, which added some additional cost to the projected
completion of the project. Those were the two major cost
considerations.
Mr Maves:
Can you explain why the company left its original
subcontractor?
Mr Roote:
At that point, the cost to retain the subcontractor was greater
than the returns they were getting on the transfers of revenues
from the province. So they were paying more than they were
getting in return for the business they were conducting. So
they've reduced their cost by terminating the contract with the
supplier. Now they do it all in-house.
The Chair:
Just one question for clarification, using the Chair's
prerogative, just to get some clarification with respect to a
statement that you made, Minister: you said that the ultimate aim
is for the system to be less costly to the consumer. I wonder how
that relates to the tremendous increase in the land transfer tax
over the last 10 years. Also, you made a statement to the effect
that in the long run it will not, in the new system, be necessary
for people to get title insurance, and yet title insurance is
something that's really only come into vogue in Ontario over the
last 10 years. Would you just like to clarify those?
Hon Mr
Sterling: Yes. Number one, land transfer tax has nothing
to do with the registry system. It's a method of taxation that we
pay, and those rates are determined the same way your rates of
income tax would be struck, and all that money just goes to the
Ministry of Finance. I believe there have been decreases since
1995 in land transfer tax, after substantial increases in land
transfer tax prior to 1995, and I'd be pleased to provide those
to you.
The other question was-
The Chair:
Title insurance.
Hon Mr
Sterling: Yes, title insurance. Title insurance is
available very widely in some states in the United States, and
there has been some talk of title insurance companies coming and
doing business in Ontario. But when you have a land title
property, when you look on the screen when it's automated, what
you see is probably one or two or three documents: you would see
the subdivision agreement, if you lived in a subdivision; you
would see a mortgage on the property, which would be put there
either by the builder or the predecessor you had; and you would
see a deed on that particular title.
When the property is
transferred to you, you essentially get a deed or a transfer-it
used to be deeds; they're now transfers-that says, "You are the
owner of this property, subject to this mortgage and subject to
the subdivision agreement." That's your title. That's what a
title insurance company would do for you in the state of
Illinois: they would provide you with title insurance, for which
you would pay, as I understand it, somewhere around $200 or $300.
They have a private insurance company over here which does that.
We don't have that need here in Ontario, nor do we have the need
for the lawyer to go back 40 years and search the title, because
all he has to do is look at the most recent instruments and say,
"The title is good. The province stands behind it," which is
actually, in some ways, a heck of a lot better than an insurance
company, because the province is forever going to be here.
The Chair:
I'm sure we'll have further discussion on that.
Thank you very much,
Minister. It's five to 12. We can either adjourn now and come
back at 1:30 or-was the ministry going to make a presentation as
well or did the minister give the ministry's presentation?
Ms Lang:
The minister did a fine job.
Hon Mr
Sterling: She'll tell you something after lunch.
The Chair:
Then I would suggest that we recess at this time and come back at
1:30.
The committee recessed
from 1153 to 1334.
The Vice-Chair (Mr
John C. Cleary): I call the afternoon session of public
accounts to order. It's my understanding that we're going to
carry on with the rotation this afternoon from where we left off,
but the auditor has a statement he wants to make on some
questions that were answered this morning.
Mr Peters:
Thanks, Chair. Ms Martel raised a question about royalties and
the net income going down. Over lunchtime we secured some numbers
on this and I wonder, Mr Roote, if you would be in a position to
verify the numbers we had for the revenue. As we said, for March
31, 1995, the net revenue to the ministry was $38 million; for
March 31, 2000, it was $13 million. The royalty component of that
in that period-maybe I should give you all the components,
remembering that where fees are charged for records that are not
transferred to Polaris, the ministry can retain 100%.
In 1995, $71 million was
earned in revenues not on Polaris, and $2 million was earned in
terms of royalties from Teranet by the ministry. We have to
deduct from this the branch expenditures of $35 million, which
gives you then $38 million for 1995.
The comparable numbers for
March 31, 2000, were that $29 million was earned from records not
on Polaris-in other words, that's 100% the ministry's-royalties
were now $12 million, so they have increased as we assumed they
would over this period of time, for a total of $41 million, less
branch expenditures of $28 million, giving a net revenue of $13
million.
You may want to comment,
but that's the best we could provide in terms of bringing the
background to bear.
Mr Roote:
If I might, just to repeat what I mentioned this morning, the
intention of the project, the way it was intended to be funded,
was that the fees would be transferred to Teranet at the time the
property was automated and registrations were made against that
property. It was assumed that as more properties got automated,
there would be a larger revenue transfer to the company that
continued to fund the project. So the fact that the retained fees
of the ministry have declined is not inconsistent; it's quite
consistent with the way the funding model worked for the
project.
Mr Peters:
I agree with that. That really means that the decline is there
because, as more records are transferred to Polaris, the
proportion of 100% revenue, in other words, pertaining to
non-records, would decline and the royalties would go up.
Mr Roote:
That's correct.
Mr Peters:
That's the working relationship.
The
Vice-Chair: Is everyone happy with that at the present
time? If so, we'll move on to rotation now. It's the official
opposition's turn.
Mr John Gerretsen
(Kingston and the Islands): Just so I'm clear, all the
fees at the registry offices, other than land transfer tax, are
set by your ministry. Is that correct?
Ms Lang:
All the statutory fees are set by us. Yes.
Mr
Gerretsen: Those fees have increased substantially,
let's say, in the last 10 years. A registration fee 10 years ago
was about $20 and now it's $60 per document.
Mr Roote:
I think the fees, when they were changed in 1993, at that time
were $27.50 and they went to $50.
Mr
Gerretsen: Right, in 1993, and they've just recently
gone to $60, I believe, as of-
Mr Roote:
December 5.
Mr
Gerretsen: -December 5 of this past year. The search
fees have gone up as well, from $5 to $8 just recently.
Mr Roote:
That's correct.
Mr
Gerretsen: Those are fees that have been totally
initiated by your ministry.
Mr Roote:
That's correct.
Mr
Gerretsen: So when the minister said this morning that
in effect the system is getting cheaper from a consumer's
viewpoint, that's not quite correct. In actual fact, the fees
have gone up quite drastically just within the last two to three
months.
Ms Lang:
That's accurate. The fees have gone up, but I think what the
minister was alluding to was that the cost to the consumer should
go down, particularly with automated properties, because we don't
have to spend a fair amount of time and energy doing all the
searches that were associated with the manual system. The
consumer should be benefiting by not having to pay the legal
community quite as much as they did and by not having to have as
many folks trekking down to the registry office and charging to
the consumer the costs associated with doing those kinds of
transactions.
Mr
Gerretsen: He also said, though-and I think I'm quoting
him correctly-that in fact the legal fees that customarily have
been charged for the lawyers' involvement in transactions are at
about the mid-1970s level, that that really hasn't gone up all
that dramatically. So I'm not quite sure how what you just said
jibes with what he said this morning.
Ms Lang:
I'd be quite happy to bring one of our witnesses up, Mr
Gerretsen, if you think that would be useful. We do have a lawyer
with us today who practises out there, and she might be quite
happy to respond to your query.
1340
Mr
Gerretsen: Maybe we can wait for that until a little
later on.
Ms Lang:
OK.
Mr Maves:
While we're on the subject-
Mr
Gerretsen: OK, let's hear from the lawyer.
Ms Lang:
Maybe Jennifer Smout could come up. Jennifer is counsel for the
city of London.
Mr
Gerretsen: The question I have of you, Ms Smout, is, are
the legal fees that lawyers are charging in real estate
transactions-I'm talking about their fee component. The minister
said this morning that they have remained relatively stable since
the 1970s. A lot of the other costs relating to real estate
transactions have gone up-I think he was talking about real
estate commissions and things like that-but the legal fees that
are charged on a standard transaction have remained relatively
stable over the last 25 years. I believe that's what he said, and
if he didn't say that, I'd like somebody to correct me. Do you
agree with that statement?
Ms Jennifer Smout: I was here this
morning, and I did hear the minister's statement. To the best of
my recollection, the statement was that the fees have, for the
most part, stayed the same since-I believe he said-the 1970s.
What the minister did say, though-and I did hear quite clearly-is
that the other costs associated with real estate transactions
have in fact increased. That's what we in my profession would
call the out-of-pocket or disbursement costs. It's well known
across the province that fee searches-charges by conveyancers and
title searchers-and also registry fees are all tacked on to a
bill in addition to the lawyer's fees. It's fair to say the
lawyer's fee has probably stayed the same, but the cost for the
conveyancer or a title searcher to do the search has not, and
you've seen those go up.
One of the beauties of an
automated land registry system is that there is an enormous
public benefit we haven't really spoken about this morning. It's
imperative for everyone to understand that an automated land
registry system reduces the number of documents that have to be
reviewed in order for someone to offer an opinion on the title,
so that a purchaser can buy, a vendor can sell or a bank can put
a mortgage on the property. In some instances in the registry
system, you might have to look at hundreds of documents in order
to give that opinion. In an automated system you don't. The fewer
the number of documents your conveyancer is required to pull and
copy and review, and that the solicitor is required to review,
the less time that's involved and the less time that's
charged.
Mr
Gerretsen: That's the whole purpose of going into the
new system. But let me ask you this-and it relates to title
insurance. I should tell you that I'm a lawyer as well and have
practised in this area over the last 30 years or so. Until 10 or
15 years ago, title insurance was an unknown commodity in most
parts of Ontario. He made the statement this morning that as we
go into this system, basically you don't need title insurance.
Ironically, it's just within the last five or 10 years that title
insurance has become more and more in vogue, costing the consumer
more money than used to be the case when they simply relied on
the opinion of a lawyer in most real estate purchases. Do you
have any comments on that?
Ms Smout:
My experience with title insurance, I will admit to the
committee, is somewhat limited, but I am well aware of it. I've
studied it since it's been implemented. In fact, in our
jurisdiction in Middlesex we had the first fully automated land
registry office in the province, so we're really on the cutting
edge. We were also the first to have electronic registration.
When the title insurance issue came to our community, many of us
thought, "We won't use it" or "We won't need it." But there are
instances where title insurance is a very useful product.
I know many people in the
non-automated or the old registry system see a huge benefit to
title insurance, because it can actually help bring the cost of a
transaction down. But the big benefit of title insurance is that
in many instances a purchaser does not require a survey of the
property. Title insurance can cover situations where a survey
isn't available. The cost of the survey will vary from one
jurisdiction to another. They might be a few hundred up to $1,000
or more, depending on how complex the property is. So there are
benefits to title insurance, and mostly in that particular
situation.
Mr
Gerretsen: Thank you, because that leads me to my next
question, which deals with surveys, and this is addressed to the
deputy. It's correct to say, is it not, that what's happening in
going into this new system-do you set the rules and regulations
with respect to the registration requirements, or are those set
by another ministry? Do you set those rules and regulations?
Ms Lang: I
believe we set those rules and regulations.
Mr
Gerretsen: It's a well-known fact that if the
description is somewhat different from a previous description, or
in a land severance situation or certainly in the cases of
subdivisions and condominiums, you need a survey nowadays. It's
almost impossible to make those kinds of transactions without a
reference plan or a survey. You've set most of or all those
regulations, have you not?
Mr Roote:
I'll have to get a word from my counsel here.
Mr
Gerretsen: You're not under oath.
Mr Roote:
No, but I'd like to provide an accurate response.
Mr
Gerretsen: OK.
Mr Roote:
It does depend on the situation. If the property is in title, I
think there is already a map. A survey would be more important in
a registry property than it would be-
Mr
Gerretsen: I guess what I'm getting at is that from the
viewpoint of the average lawyer who works in this area and of the
consumer who is involved in property transactions, going into
this new system it almost looks as if we're making the consumers
who are buying and selling land pay for the resurveying of
Ontario. From a practical viewpoint, the survey requirements you
set out in your rules and regulations are much more stringent now
than they were five, 10, 20 or 25 years ago. They're becoming
more and more pronounced etc. Would it be correct to say that
consumers are paying to resurvey the properties of Ontario so
that we can go into this new landholding system?
Ms Lang: I
think Jennifer is prepared to answer that question.
Ms Smout:
I'm not prepared to speak in great detail about the ministry's
regulations, but the automation of the land registration records
does not require a survey to be done. In fact, when the records
are automated and put into the new electronic system, I think it
makes the whole system more accessible to the public and actually
makes the cost easier for the public to bear than a system that
does not.
For instance, I brought a
search of title with me today. This was a registry division
property. It has 41 documents that had to be pulled, reviewed and
copied. The purchase
price of the property itself was only about $90,000, and the
search alone was over $300-just the search. If this property had
been automated and in the automated system, you could have very
easily determined the owner based on the ministry's certification
right on the top of the sheet you pull off the electronic system.
It's very easy to do. You don't have to be a lawyer to do it. The
public can do that. As well, you probably would have had to look
at about eight documents, from my reading of the search,.
Mr
Gerretsen: Right.
Ms Smout:
But the survey requirements, in terms of what you're talking
about, for registered plans of subdivisions and registered plans
of condominiums-the bulk of transactions that would still be done
on the system would not require a survey or reference plan.
Mr
Gerretsen: You put your finger right it on it when you
said that the ministry in effect certifies that title once it's
in the system. The question I have of you, Deputy, is, is that
what you're paying Teranet for, to in effect certify those titles
once they go into the system? Obviously in order for somebody to
certify it to you, they would have to pull those 41 documents so
that you know the conditions, exceptions and parameters of that
certification to you.
Ms Lang:
I'm going to ask Mr Roote to respond to that.
Mr Roote:
It is true that quality control reviews are done, both by Teranet
and by the ministry. One of the things we are looking at in the
future is that one of the models could contemplate relying upon
the certified statements of the lawyer at the time the property
is conveyed. There are some practices now that we want to review
to see whether they should be continued in the future. But right
now we do a quality assurance to verify the accuracy of the
information before it's put into the automated system.
1350
Mr
Gerretsen: That leads me to the next set of questions.
The auditor makes a statement on page 69 in his review of this
contract-and by the way, thank you very much for the summaries of
the individual agreements you provided us. Would you be prepared
to table the actual agreements, such as the master agreement, the
shareholders' agreement, the implementation and operation
agreement and licence agreement, with the committee?
Mr Roote:
If you so desire.
Mr
Gerretsen: I'd request that be done, Mr Chair. He makes
the statement, "We did not rely on the work of the ministry's
internal audit services because they had not conducted any recent
work that was relevant to our review." Do you not have an
internal auditing process in place whereby your agreement with
Teranet, which has escalated from a cost of $235 million to over
$1 billion over the last eight, nine years-an internal audit
review system, so that you know what you're being charged for and
all the auditing that's required to make sure that happens?
Ms Lang:
We have an internal audit branch inside the ministry. But before
I comment on it, I want to correct the record. We have not spent
$1 billion. We do not intend to spend $1 billion. I think it's
important to understand that the government costs to date have
been somewhere in the order of $235 million. It's really
important that the committee understand that the number that was
alluded to of $1 billion is a highly speculative number and one
we do not agree with.
Mr
Gerretsen: But it's a number the auditor says it's going
to cost if you run this program to the conclusion.
Ms Lang: I
think it's one the auditor replayed as a result of a review we
had conducted by a consulting firm that gave a worst-case
scenario. If all of the processes that were in place at the
moment were to continue on the same path and in the same time
frame, it may cost up to $1 billion, but we were well ahead of
that happening. We initiated the review way back, a year and a
bit ago, because we wanted to ensure the going-forward strategy
was in fact going to be one where we could fiscally defend the
expenditure of money to complete the initiative. There has been
no commitment or agreement to proceed with any initiative that
would cost $1 billion.
Mr
Gerretsen: I'm just trying to get a better handle on
that. You've got this contract with Teranet that was tendered
for, I take it, back in 1991, according to your own handout. I
get the impression that we're so far into the system now that you
can't really withdraw from it without the system, the way we
envision it whereby every property is in this system, being
completed. Have we gone so far into it that we've reached a point
of no return and have to go along with Teranet whether we like it
or not, or else we will have wasted the $235 million or we won't
get the whole province into that system? Have we reached that
point?
Ms Lang:
If you look at the contracts, you'll discover the province does
have some options should we decide to terminate our relationship
with Teranet. But as I said earlier this morning, we've had a
very good relationship with that company and we're quite pleased
with the success they've achieved to date. It's been a very
innovative initiative and I think something that was started way
back in the mid-1980s, with a genuine foresight for trying to do
something to benefit consumers. I'm not sure at this point in
time that we would be able to justify to the public pulling out
of the relationship with that company unless there were some
serious problems we have yet to uncover.
Mr
Gerretsen: Yet a few years ago, in 1999, Teranet
provided the ministry with an estimate of over $700 million to
complete the project. That's Teranet's number, which is totally
different from the $235 million they quoted you six, seven years
ago. A billion may be speculative, but $700 million is Teranet's
number. That's not speculative. They were saying that's what it's
going to cost, as far as they were concerned, in April of last
year. I realize you're not willing to pull the plug. On the other
hand, the costs have gone at least triple or almost triple,
according to their own numbers. We're stuck with them whether we like it or not. What
I would like to know is, what assurances are there in the
contracts or within the ministry that these escalating costs,
whatever the number is, whether it's $700 million or $1 billion,
aren't going to go sky-high again? What kinds of mechanisms have
you put in place to not allow that to happen?
Ms Lang:
I'm going to ask David to take that question.
Mr Roote:
Perhaps just to put things in context again, the $275 million was
a figure identified by Teranet that the auditor picked up in his
report. The $275 million was not an all-in number. As I mentioned
this morning, the all-in number, with all of the additional
features, was closer to $400 million, which would put it, in the
context of today's dollars, at about half a billion dollars. Even
based on the government's original estimates if it had done the
project itself, the cost would have been about $600 million,
which in today's estimate and today's present value of dollars
would be over $700 million. I'm trying to keep things in a
context to say that this project has not overrun with regard to
its cost. These costs that we've incurred to date are in keeping
with what was originally contemplated at the beginning of the
project.
It is true we are looking
at the go-forward position. We are very interested in maintaining
best value for taxpayers and finding innovative solutions to
continue the project and complete it. We have worked up some
models with the company. The company's estimates were based on
figures as they knew them at the time. The costs in Toronto are
somewhat lower than they had originally contemplated, so the
numbers have changed, but the context for the numbers is not $275
million. It wasn't that at the beginning. The $1-billion figure
is a scenario we're not pursuing and the other costs are more
along the line of what we've actually experienced to date.
Mr
Gerretsen: But do you agree it is $700 million as of
April 1999?
Mr Roote:
That's Teranet's estimate. That would be based on continuing to
do things the way we are doing them now. We want to look at other
ways in which those costs could be reduced and still provide best
value for the taxpayer and still get the benefits out of the
original project that we've undertaken with them.
The
Vice-Chair: Excuse me. Would the auditor's staff want to
make a comment?
Mr Andrew
Cheung: The comment I have is, we're not sure of the
source of the $400 million or the $625 million that you refer to.
The number we get, the $275 million, is obtained directly from
the Management Board submission in 1991. As far as we know, we
don't see another number beyond the $275 million in that
submission, and it's anticipated over an eight-year period, the
$275 million.
Mr Roote:
I'm sorry, Andrew; I didn't catch that.
Mr Cheung:
The $275 million is the only number we have seen so far in the
Management Board submission of 1991.
Mr Roote:
We've gone back and looked at the original closing documents that
were part of the deal. The figures in there were about $404
million, of which the $275 million was a piece. We've also looked
at original documents that estimated that had the government
undertaken this project itself, that would have been in the order
of about $620 million.
Mr Cheung:
But what is the number approved by Management Board?
Mr Roote:
Those were numbers taken from the Management Board
submission.
Mr Cheung:
But the only number we see, as I said, in the submission is $275
million.
Mr Roote:
Which submission?
Mr Cheung:
The Management Board submission.
Mr Roote:
The Management Board submission, in original documents that we
have, has information that uses those other numbers as well.
Mr Peters:
Mr Roote, I find it a little bit difficult to understand this
line of argument at the moment because our report was sent to
your ministry for factual clearance. Therefore, the $275 million
was factually cleared by your ministry. I find it a little bit
difficult to comprehend why in an open hearing now this number is
challenged when you had plenty of opportunity to challenge it
when we wrote our report.
Mr Roote:
The number was factually correct according to the numbers that
were provided by Teranet. What we've done is gone back and looked
at all the original documents that were developed at the time the
deal was being prepared, and that's where these numbers come
from.
Mr Peters:
Sorry. Why did you not pay us the courtesy, as an office, to
advise of these numbers when we cleared the report with you?
Mr Roote:
We didn't have access to those numbers at that time. We've gone
back and found the original documents that were part of this
arrangement, and that's where those numbers are found.
Mr Peters:
OK.
Mr
Gerretsen: I find it rather curious that, according to
the president of Teranet Land Information Services-this is a
direct quote from him-"It has been known for many years that this
would be much more expensive than we thought, only because the
work has been much harder." Do you agree with that
assessment?
1400
Mr Roote:
The reasons for the change in the project from its original
inception-you have to remember that in 1991, when the deal was
signed, there was an assumption about the amount of money that
would be transferred to the company as a result of the real
estate market at that time. As you also recall, in the early
1990s there was a very significant economic downturn which
changed that assumption. The registration volumes declined from
about 1.9 million to about 1.1 million. That reduced the funding
available to Teranet to continue on the project, so they borrowed
money. They had a credit line. Money was borrowed through a
credit facility and now they have the bond debenture. That has
increased the costs as a result of the changing economic times and the
changing times of the project and how fast it was being
completed.
Mr
Gerretsen: Just a couple of other questions. How much
time do I have?
The
Vice-Chair: You've got eight minutes.
Mr
Gerretsen: I understand that only 17 of the 55 registry
offices we have in Ontario are presently on-line. Can you give us
any projected timeline when the remainder will be on-line or how
many will go on-line, let's say, within the next two years, five
years?
Mr Roote:
When you say "on-line," do you mean with electronic
registration?
Mr
Gerretsen: Yes.
Mr Roote:
We have a couple more coming out this year. The schedule calls us
to be in a couple of other jurisdictions this fall. We are
continuing to automate in Toronto. That's where most of the work
is being done right now, in Toronto and Simcoe county. So there
is ongoing work being done in those areas. There are a number of
smaller offices which don't have automation at this point. We
have about 70% of the properties automated in Ontario now and
about 64% of the properties converted to titles from
registry.
Mr
Gerretsen: Just following up on something the minister
said this morning, these are basically in parts of the province
where, let's say, we have had subdivisions since the Second World
War, and condominiums. The real problems are with the unsurveyed
properties in many of the rural areas, particularly in eastern
Ontario, in which a land holding system goes back, I suppose,
almost a couple of hundred years. Do you agree with that?
Mr Roote:
That's correct.
Mr
Gerretsen: Would you agree it may take as long as 30
years to get every property in the province on-line?
Mr Roote:
It depends on what approach we use to complete the conversion.
Right now, the way the project works is that they go into an area
and they do it according to the blocks of properties in that
area. What the minister was mentioning this morning with regard
to that time frame would be on the basis that if you automated
and converted the property to titles at the time it was being
conveyed on a transaction basis, and because of the turnover rate
of the properties being different in different parts of the
province, that's what that time related to.
Mr
Gerretsen: When we're saying that the properties are
on-line, are we talking about the fact that they have PINs,
property identification numbers, or are we talking about
something other than that?
Mr Roote:
All the properties that are in land titles would have property
identification numbers.
Mr
Gerretsen: Right, and there are many in the registry
system as well now.
Mr Roote:
That are automated; that's correct.
Mr
Gerretsen: When we're talking about the fact that-what
is it?-32% are not as yet automated, would that mean that 32% of
the properties in Ontario do not have a PIN number?
Mr Roote:
If they're in registry, they wouldn't have a PIN number.
Mr
Gerretsen: And if they're in land titles, they would
because of the land titles process.
Mr Roote:
It identifies a specific parcel.
Mr
Gerretsen: I wonder if you could just explain to me what
processes you have in place currently, then, or what you will put
in place to ensure that whatever the cost overrun, it will not
escalate to the same extent it has over the last six or seven
years. What internal processes have you put in place to in effect
make Teranet more accountable?
Ms Lang:
I'm going to ask Sue Corke, who is our ADM for policy, to take
that question.
Ms Sue
Corke: We have two relationships with Teranet in the
ministry-one is the shareholder relationship and one is the
client relationship-with regard to automation and conversion. In
the past, we have actually managed those two relationships in the
same way, if you like. Just in the last six months we've
undergone a reorganization in the ministry. We've set in place a
new sector liaison branch, and the purpose of that branch will be
to put in place some embedded and systematic approaches toward
governance, performance management and accountability. The
financial accountability will become part of that.
We're just currently
staffing up for that at the moment. I think we're probably in a
really good position to do that because, over the last 10 years
in the ministry, we've had a lot of experience with working in a
sort of performance management and governance fashion with other
organizations. I am on four other boards of directors. I have had
a lot of experience now with governance in this sort of
arrangement. I feel fairly certain we can put in place a series
of structures and a series of regular liaison meetings-meetings
with the board of directors of Teranet, the provincial board
members, regular annual strategic planning sessions with the
provincial members, those kinds of things-so that we can get a
much better grip. We'll have a full-time financial analyst on the
staff of the new branch, and I think we will be able to manage
that in a very good, systematic way.
Mr
Gerretsen: Those are all the questions.
The
Vice-Chair: No more questions? OK. We'll move on to the
NDP's half-hour.
Ms Martel:
I wanted to return to the worst-case scenario of the $1-billion
estimate which came from the consultant. Deputy, you said you
disagreed with that estimate because it really emphasized the
worst-case scenario. I was wondering if you could outline to the
committee what that worst-case scenario was.
Ms Lang:
David may have to help me here, but my understanding of that
scenario would be that we would continue to process the
conversion of the properties, particularly the ones in registry
that are quite problematic, in the time frame, and it would
require significantly more staffing to come in and be able to do
that in a way that could achieve the milestone of 2003 and 2004.
Because we've had the experience to date and have discovered the
difficulty of doing the work in the registry part of the
government system, we recognize that may not be a cost-effective way of doing
business. I think the estimate was based on, if you were to take
all of the remaining properties with all of the complications and
all of the problems associated with the automation and conversion
and do it at lightning speed over the next two or three years, it
could potentially cost up to $1 billion.
Ms Martel:
Because you have to hire so many more staff in order to do that.
Teranet has about 800 staff of its own directly employed by
Teranet. How many staff does the ministry have to support this
project?
Mr Roote:
We have a very small unit right now and that's, in Ms Corke's
remarks, to add some additional strength to the ministry from a
government and oversight capacity. We only have a few staff. In
my office I have a couple of staff who are involved in doing the
strategic liaison review with the company and maintaining
relations with the company, but we're now looking to strengthen
that capacity inside the ministry.
Ms Martel:
So the people involved directly in the conversion are Teranet
staff; they are not ministry staff?
Mr Roote:
That's correct.
Ms Martel:
Were they ministry staff at the time the conversion took place
and were transferred to Teranet?
Mr Roote:
Yes. A number of them were. A number of them did go to the
company.
Ms Lang: A
significant portion of them, a high percentage.
Ms Martel:
The second question has to do with Teranet's estimate of $700
million as a project cost. I'm assuming that's total cost, not an
additional cost over and above the $300 million they've estimated
they've already spent.
Mr Roote:
That's correct.
Ms Martel:
You said in reply to earlier questions that that was probably a
fair assessment in terms of costs.
Mr Roote:
I would think in today's environment probably not, because when
those cost estimates were made they weren't very far into Toronto
as a jurisdiction to do. To date, they've done a fair amount in
Toronto, and the estimates to complete Toronto are substantially
lower than they had originally thought when they started out. I
would suggest that those costs probably would be modified
somewhat.
Ms Martel:
Do you have any idea what the modification would be, since these
were costs that came out in September 1999, I believe?
Mr Roote:
I don't have them with me, but certainly we could review
that.
Ms Martel:
Just so I'm clear, what was Teranet basing those costs on? Can
you give us all of the components?
Mr Roote:
Looking at what they call the "cost per PIN" or "minutes per PIN"
in order to do that. Where their estimation varied was from one
jurisdiction to another; the minutes per PIN could vary quite
substantially. They had what they were looking at with the
remaining properties in the province times the average minute per
PIN or range of minutes per PIN, and they then would add in their
carrying costs for their debt financing through the bonds, and
any other capital depreciation would be part of the project
itself.
1410
Ms Martel:
Does the ministry feel confident that all the remaining
properties have been identified? That was one of the arguments
that Mr Kaplanis made, that 25% of the properties were unknown at
the time the project started.
Mr Roote:
The way in which properties are known is, in the registry system
we don't identify individual parcels, and when it comes into land
titles, we do. But in the registry system we have pieces of land.
We also work with the Ontario Property Assessment Corp, which
determines the number of assessable units for property tax
purposes to get a good approximation of the number of properties,
but we don't have a precise number. Of course, the properties are
growing each year too because of subdivisions and condos.
Ms Martel:
So right now you're working with about 4.7 million?
Mr Roote:
About 4.3 million to 4.5 million is what we estimate.
Ms Martel:
At the same time that Teranet gave the estimate of the
$700-million project cost, they also projected a completion date
of 2010. I'm going to assume that was based on no new staff being
hired and continuing the work with their current staff. Was there
anything else that they factored in to arrive at that completion
date?
Mr Roote:
Looking at continued streamlining, where we could have the
streamlining the ministry has with the company over the years for
the procedures to do the implementation, by and large it was go
forward based on where we are today.
Ms Martel:
I'm not sure I understand what you mean by "continued
streamlining," Mr Roote.
Mr Roote:
We looked at ways in which we could modify the procedures to try
and make them more streamlined than they are today, and we've had
various initiatives with the company to look at ways we could do
that. But our bottom line from the ministry standpoint is to
ensure that we have quality of records, we have integrity of the
system and we have public confidence in the system. We've worked
with them, but those are the principles that we continue to
operate with. But we're always looking at more efficient ways of
do it, if they're possible.
Ms Martel:
The 2010 completion date was Teranet's. Does the ministry agree
with that, disagree with that? You disagree with the $1-billion
cost and you've explained that. What's your position on that
completion date and why?
Mr Roote:
The completion date will be a product of what we decide to do on
a go-forward basis. Those are the models we're looking at now. So
the 2010 figure is not something the ministry agrees with. We are
looking for the most cost-effective way and best value for
taxpayers to complete the project.
Ms Martel: How does the
cancellation of the subcontractor affect that completion date? As
I understood you in response to an earlier question, the work is
being done in-house now. But as a result of that occurring, there
was quite a dramatic drop in the number of properties that could
be registered per month. Can you tell the committee how many
properties are now being registered per month, and is it
Teranet's position to just continue to do the work in-house, and
what does that do to the completion date?
Mr Roote:
As we understand it now, they are going forward on their staff
complement. I think they're automating-I'll just have to
check-about 15,000 properties a month.
Ms Martel:
And they were doing about 23,000 before, with the
subcontractor?
Mr Roote:
That sounds about right.
Ms Martel:
Because this happened after they gave you an estimate of their
completion date, which was 2010, have they changed their
completion date now based on doing this work in-house and knowing
that they are not registering as many properties per month as
they used to be?
Mr Roote:
No. The 2010 figure is based on their current workforce.
Ms Martel:
Did they revise it a second time? As I understood the timeline,
they originally told you in September 1999 that it would take up
to 2010, and then the subcontractor was lost in December
1999.
Mr Roote:
But I think the decision had been reached at the company level
that they would be continuing on without the subcontractor. So
those numbers assume their absence.
Ms Martel:
They had already projected that in because they knew they were
going to get rid of them?
Mr Roote:
Yes.
Ms Martel:
All right. The consultant also said in his report that the cost
to convert the remaining-he used the figure 1.8
million-properties using the existing workflows would exceed the
revenues. Do you know what the cost is that will exceed the
revenues, what the consultant projected that to be?
Mr Roote:
The consultant didn't project figures. The consultant took
figures provided by the company and put them in the report. If
you look at the costs incurred to date by the company of roughly
$300 million, then the balance would be associated with the
remaining properties; the balance of their projection would be
associated with the properties still to be done. Why that was
considered to be uneconomic was that the turnover rate in those
rural areas is not as frequent as it is in the urban areas. As a
result, because they would only get fees when the property is
conveyed, the amount of revenue would be much lower than in an
urban environment, where they turn over more rapidly.
Ms Martel:
The cost was never identified by the auditor in terms of whatever
the consultant had said. Is that a public figure?
Mr Roote:
The auditor's cost estimates were based on information provided
by the company.
Ms Martel:
I'm sorry if I'm not making myself clear. Of the bullet points
that were highlighted by the auditor, in terms of what the
consultant said, the one I'm interested in talked about, "The
cost to convert the remaining 1.8 million ... exceeds the
anticipated revenues from conversion." But the auditor didn't
outline a cost there, as I see it. So is that a public
figure?
Mr Roote:
I would say that if you took the costs to date that the company
has incurred to do the properties it has done-
Ms Martel:
Which is $300 million.
Mr Roote:
-and then subtracted that from the various cost estimates, that
would be the cost to do the remaining properties.
Ms Martel:
So it could be $1 billion minus $300 million or it could be $700
million minus $300 million? Is that what you're saying?
Mr Roote:
The most recent one would be $700 million.
Ms Martel:
So about a $400-million shortfall?
Mr Roote:
A $400-million cost based on that analysis.
Ms Martel:
In that respect, Teranet issued about $280 million worth of
bonds, and this was for two things: one, to pay down debt, and
another, I assume, to put aside money for future costs. Do you
have a breakdown of how much was set aside to pay debts and how
much of that $280 million was for future costs?
Mr Roote:
Because Teranet is a private company, I really can't provide you
with the figures on that breakdown basis.
Ms Martel:
Let me tell you what I'm concerned about and maybe you can give
me some confidence that this is all right. Depending on what that
breakdown was, Teranet may or may not have recovered enough of
that $400 million for their future costs. Perhaps they are going
to obtain that money in a different way to make up that
difference. So what I am wondering about is, where is that $400
million going to come from if their costs work out to be about
$700 million? Is it an ongoing stream that is part of the
contract? Is it a portion of that plus a portion of what they got
from the bonds?
Mr Roote:
Yes. The bond money would provide money, in addition to the
monies transferred from the ministry, for registrations against
automated properties. So there would continue to be revenue
provided to the company through the registration process for
fees.
Ms Martel:
Can you tell us what that revenue stream is on an annual basis? I
understand that it fluctuates, depending on properties, but is
there an average?
Mr Roote:
I'll give it to you in a second.
Ms Lang:
While David is getting that number for you, Ms Martel, I'd like
to clarify that the $400-million cost assumes that we would
continue doing what we're doing the way we're doing it. I think
that's subject to our thinking about whether there are other
options. I don't want to leave the committee with the impression
that we've committed
ourselves to spend another $400 million, because we haven't done
that yet.
Ms Martel:
I appreciate that, Deputy. A little bit further in the questions
I want to ask you some more questions about the review, because
it wasn't clear to me where all of that is heading.
Mr Roote:
We're still checking.
Mr Peters:
Just in between, you can probably provide Ms Martel with that
number because what the $280 million was raised for must come
from the offering document that Teranet put out in the open
market. That's an open document and that should contain the
information as to how much money they needed to pay off existing
debt and how much money that provided for the future of the
project.
1420
Mr Roote:
The bond was a private placement.
Mr Peters:
Why does it have a Standard and Poor's rating? They must have
gotten at this information somehow.
Mr Roote:
The Standard and Poor's rating doesn't disclose all of the
material-
Mr Peters:
I realize it doesn't, but with the bond now being rated and being
publicly traded, does that mean the offering document is
confidential?
Mr Roote:
Because it was a private placement with institutional investors,
it wasn't offered for public acceptance or public involvement the
way it would have been for other types of instruments.
Mr Peters:
OK.
Mr Roote:
For the year 1999-2000 the revenue transfer would have been $47
million, and we would have then recovered royalties against
that.
Ms Martel:
What were the royalties recovered against that?
Mr Roote:
I think they were in the order of about $12 million.
Ms Martel:
So would you say that you feel confident that between the revenue
that comes in on an ongoing basis as the project proceeds, plus
whatever money was set aside through the bond offering, Teranet
would not have a problem coming up with another $400 million if
at the end of the day that was the rest of the money that was
necessary to complete this project?
Mr Roote:
I think that's a reasonable statement. I think the early
indications we have from the financial advisors retained by
SuperBuild suggest that their financial position is solid in that
area.
Ms Martel:
Can I ask then about the review? Deputy, you mentioned it earlier
and it actually caught us by surprise because we had nothing in
our briefing documents to indicate that there was a second review
going on. So I wonder if you can give us a bit of information
about it, ie, when it began, what was the nature of the reference
to SuperBuild and also terms of reference, if you can outline
them to us, if they exist.
Ms Lang:
Let me start back to early 1999, when we retained Andersen to do
the first review and that was concluded. As a result of that
review, we started an exercise with SuperBuild in the spring of
last year to begin to take a look at what are the legal financial
risks and issues associated with the current contractual
relationships with the company. Over the course of the summer and
into the autumn, the terms of reference were narrowed down and
there was an offering that went out on an RFP to retain the
consultants. Those consultants have been brought on board this
autumn, some prior to Christmas, some just post the holiday
season. They are in the company now doing the necessary financial
technical and legal review.
At the same time, ministry
staff were working very much with the company on looking at
operational options that might be worth looking to the future for
in terms of different ways of completing the conversion and are
there some models that are worthy of pursuit that aren't going to
cost the kinds of dollars that the company's estimates are
currently reflecting?
So we've had the benefit of
some thinking with the company. We've had the opportunity to
investigate ways in which things are being done in other
provinces. The minister alluded this morning, I think, to the
notion that there are other jurisdictions that are looking at
transaction-based approaches to complete their conversion and
their automation. We've explored those and we are using those
kinds of options with the SuperBuild advisors to help us
determine what might be the most practical, convenient and
prudent way to proceed, ensuring that we maintain the integrity
of the land registration system, but we also do it in a way
that's fiscally responsible.
My hope would be that the
conclusion to those kinds of reviews and analyses will happen
this spring and then we will be making some determinations and
moving forward with the government's support in a plan of
action.
Ms Martel:
So the outside consultants are looking both at Teranet's
structure now-legal, financial etc-and how valid some of the
options would be in terms of being workable, being economical and
getting the project done on time, high quality-both sets of
things.
Ms Lang:
In a way that makes the most sense, yes. I think it's the most
practical solution to getting the project completed in a way
that's going to be responsible.
Ms Martel:
You said earlier, when you were questioned about the $1 billion
and did you agree with it, that the ministry-I thought you
said-had implemented some changes to avoid exactly that scenario.
Can you describe what you meant by that?
Ms Lang:
No, I indicated the ministry hasn't accepted that scenario and
hasn't accepted that costing. That's based on the earlier
assumptions that I referred to, that the company would have to
staff up significantly to complete the detail work of
particularly the registry properties.
Ms Martel:
So the changes that have been made, in looking at the $1 billion
and the completion date of when to work with SuperBuild to get
the outside expertise to look at Teranet and to work with
Teranet-and also Ms Corke talked about the sector liaison branch we
well, which I assume is to have some increased monitoring.
Ms Corke:
It's basically to systematize, if you like, the relationship that
we have with Teranet. We had an excellent working relationship
over the years, but I think what we'd like to do now is put a
little more into it. We have some experience, as I said before.
The sector liaison branch will have some other responsibilities
besides creating that oversight relationship with Teranet, so
it's not entirely devoted to that. But it will give us some
opportunity to know more on a regular basis about these kinds of
things and to participate at the appropriate moments in the right
decisions.
Ms Martel:
Are the terms of reference for that committee public?
Ms Corke:
What I was talking about was the sector liaison branch. It's a
staff activity. We do have to do some, I wouldn't say terms of
reference, but perhaps a business plan. That's very new. We've
only been underway about-actually I've been six days on that
particular job, although we restructured a little earlier.
So yes, we do have to do
that in a formal way. We also have to, of course, talk to Teranet
about how we can have some regular weekly relationships with them
or regular monthly liaison meetings with them and the kind of
financial discussions that we should be having when the
SuperBuild report is done.
Ms Martel:
What was the nature of the relationship previously? There was a
board of directors. Mr Roote, I gather that's a new position for
you because there was not a non-voting government member attached
to the board before.
Mr Roote:
That's correct. The suggestion was that we have our four
provincial appointees at the board, but to give greater presence
to the ministry and to the provincial interest directly it was
suggested that we have an ex officio or non-voting member at the
board, and I've served in that capacity now for the last six
months or so.
Ms Martel:
Does the board meet once every month?
Mr Roote:
No. It does meet once a month now as they get ready for their
budget year, but the board generally meets about six or seven
times a year.
Ms Martel:
Deputy, is it possible for the committee to have the terms of
reference that were used for the selection of the consultants
working with SuperBuild? Is that a public document?
Mr Roote:
It was a public tender to acquire both the legal and financial
advisors that SuperBuild acquired, so yes, it's a public
document.
Ms Martel:
That would be great. Thank you.
Mrs Munro:
I wanted to first of all thank Ms Smout for coming and talking
about your perspective because I raised it earlier today. I think
that given that we're looking at the change to providing a
service, to be able to hear something of your experiences gives
us a sense of exactly what the changes are and how they should
affect the service that we want at the end of the day.
I just wondered if in your
experience, because of the fact that you were in a jurisdiction
where this was a pilot, you brought with you some documentation
to give us some example, and I wondered if you could give us
further example or demonstration of the kind of experience you've
had in being able to compare between an automated and a
non-automated system and the kind of thing that means for both
you in a professional sense but also for the people who want to
see these transactions take place, that is, the citizens of the
province.
1430
Ms Smout:
The one thing I would like to add before I start is that I began
my career in 1986 in London, and at that time the registry office
had not been converted; it was entirely registry. So I have grown
up through two different systems, from the paper registration to
the conversion to now electronic registration, and I'm still
here, so that's good. I never thought at this stage in my career
I'd start to feel old, but I guess that just goes with the
turf.
I have also worked very
closely on this system because our office tested the products for
the ministry as they came out, and that was everything from
electronic searching on your desktop right up to electronic
registration. So I've seen this program in many different shapes
and forms as it is today.
There are four benefits to
this system that I think are almost immeasurable. The first is
that it reduces the complexity. I talked before about the volumes
of work that may need to be done in registry. When you reduce
complexity, you reduce error. When you reduce error, everyone
wins-the lawyers win, the public wins, the municipality
wins-because if you can get that information fast and accurately,
that's a good thing for everyone. It makes the system more
accessible because, with the automated system, non-lawyers can
actually look at the material and often determine what they need
to know. In the registry system that may not always be the case.
We have a number of people in our corporation who are non-lawyers
who are able to get title information on their own without having
to come through the legal department. That is an advantage.
The other benefit is that
the costs do go down because as the volume of material you need
to do to look at a search is reduced, that brings the cost down.
If you have to look at and pull and copy and review 40 documents
as opposed to six, seven or eight, of course the costs will be
different. Or, if you are retaining an agent to do that for you,
then the costs would be different. You don't have to do as many
different types of searches in the automated system as well, and
that reduces the costs significantly in some cases; on the
executions, for instance.
The other thing is that the
system is accurate and it also has the certification, and you can
put in your PIN, address and name of the owner and get this
information right back. That, of course, goes back to reducing
the error.
The last thing is that it's
really accessible, and that's been greatly enhanced with the
electronic system, because you can have it on your desktop if you
want or use the system at the registry office. It isn't as
cumbersome as the
paper system, so you can go in there as a member of the public,
put the information you need into the computer as a layperson and
get that information back in a format that you can understand,
which is a nice benefit for everyone. It also provides more
options for the way you use this information. In the registry
system you need a lot and a plan in order to get your
information. In this automated system you can search by the name
of the owner, by the municipal address, in some instances, you
can search by lot and plan, of course, if you want, or with that
PIN number that we talked about, or you can even look at a map,
point to your property and pull the information up. That makes
the system more versatile and provides more uses for the public
at large than the current paper system does.
When you go back from this
system, when you're dealing with a paper system-and recently I
had to do that: move from this system and go back to the registry
system. We were working on the transfer of the pipeline from Lake
Huron down to London. When you have to go back to that system-you
have to start sifting through these volumes of documents, looking
through these big abstract pages that are all written out by hand
in some instances, depending on how far back you're going-it's
very cumbersome. When you can't be doing that work right off your
desktop, you really notice the difference. In an environment
where we're doing everything at home, from on-line banking to
shopping and whatever else we use your computer for, this type of
system has immeasurable benefits for how we're going to interact
in the business world today, and it's very good for the public in
that respect.
Mrs Munro:
One other question that I think is better directed to the deputy,
since we're coming to winding down in terms of this particular
opportunity: it seems to me appropriate to really zero in on, as
we look at this problem as a committee, the kinds of dynamics
that have changed from the original inception, say, in 1991, to
what we're able to provide today. I just wondered if you could
choose a couple of key things that you see, because I think
that's why we find ourselves in the situation that we're looking
at today, where the landscape, if you like, has changed and yet
we're looking at numbers that started out in 1991 but now we're
looking at quite a different landscape. I just wondered if you
could provide us with a couple of key ideas that you think
demonstrate how that landscape has changed.
Ms Lang:
First of all, we've learned a lot. I think the important part of
the experience for us, and certainly for us to pass on to others
who succeed us, is that there have been a lot of lessons learned.
We've learned a lot about working with the private sector and
have seen the way technology can change the nature of business
and how business gets done, particularly as it relates to
providing service to the public.
As the minister alluded to
much earlier today, historically the system was set up in a very
legalistic, paper-based world. When I visit the land registry
offices I'm always amazed at the amount of paper and the
incredible history that exists in those offices, and that you do
in fact have to employ lawyers in order to help you complete your
transactions. We've learned over the course of this initiative
and other initiatives that technology can make an incredible
difference in how business gets done, how we support the public,
how we can provide services to the public and how we can
streamline the way the role the government plays in trying to be
guardians of registration of land or property, or whatever our
particular responsibilities are, can give us a whole lot more
confidence, a whole lot more assurance and a whole lot more
comfort that the work we're carrying on is going to be done
accurately, with appropriate kinds of checks and balances in
place.
The other thing we've
learned is that there is probably no end to the future potential
of this system, as we've seen the value of technology, the
mapping expertise. I don't really think we know yet the degree to
which the kinds of data and the ability to manipulate the data
and use geographic information systems and other kinds of
technology are going to benefit the public, how that might
benefit the company and how it will benefit the government. I
don't think we have any real appreciation yet. I think the world
is wide open to us in that respect, which then speaks to the
potential benefit for this kind of system to be marketed in other
jurisdictions. One of the original objectives for setting up this
relationship with the private company was to try to find ways in
which we could develop value-added businesses, that in addition
to doing the kind of conversion and title we could also then
explore, in collaboration with the company as a shareholder,
other ways in which their expertise and their technology could be
marketed, and the return on the investment would then begin to
come back to the shareholders.
I think I've articulated
more than two, but I think there is a real story here that is
worth sharing with others. We've had some need to take stock
every once in a while along the road, but I think it's worth
travelling down that road some more, because I do think it's
going to take us to a place where we can feel very confident that
the kinds of services that are being provided to our public,
consumers, are in fact the kinds of services they deserve.
1440
Mr Maves:
Earlier the minister had mentioned the number $75 million, some
savings that had been generated through the ministry. Over what
time period were those savings generated?
Ms Lang:
That's been over the life of the initiative, as I understand it,
from the time it was signed in 1991 till current in terms of
staff reductions.
Mr Maves:
If it did take until 2010, would it be safe to say we'd save
another $75 million over that period?
Ms Lang:
It would probably depend on how we move forward, but part of our
thinking is that there may be additional savings. With electronic
registration it obviously, as Jennifer alluded to earlier, cuts
down on time and cuts down on manual checking and that sort of
thing. So there may be further reductions we'll see over the next
several years.
Mr Maves: Then, once the system
is fully in place, some of those savings become perpetual, I
guess.
Ms Lang: I
suspect we then would be into a mode of continuous improvement
and using whatever technology may be out there that's changing
our world daily.
Ms
Mushinski: Just one question, and it stems back to what
Mr Gerretsen was asking earlier. It's something that really has
concerned me. It seems that any time we move toward new
technologies and new communication systems, we're always given
the promise of savings for the customer, and I guess we make all
these government decisions, clearly, to save money for the
customer. The minister made a statement this morning that in
terms of this particular service, the cost has at least remained
stable since the early 1970s, and this particular system actually
saves the customer money. My question really is, has it saved in
other ways? It seems to me that when I was on a municipal
council, a lot of administrative costs were spent on applying for
a building permit, for example, and part of applying for the
building permit of course was to ensure that the land was
properly owned etc. Does this particular system save money in
terms of other functions like building permit applications, and
has any study been done on how those savings are passed on to the
consumer?
Ms Lang:
Sue, perhaps you could comment on that, and then we'll turn it
over to Jennifer, because I think she would like to make some
comments as well.
Ms Corke:
Mine is probably less of a direct comment on that, but just to
say, getting to part of your point, that Teranet actually is part
of a consortium that won a recent contract to do some work on a
construction permit initiative, just to talk to that particular
issue. I'm not able to answer the question about whether there
are savings there; it's too soon for me to say in that particular
thing. But I thought it was interesting that you mentioned that
as they are actually involved in that kind of work.
Ms Smout:
I have a short answer and a long answer, so I'll give you the
in-between. How about that?
Ms
Mushinski: It was a fairly long question.
Ms Smout:
I have looked at some of our statistics and I think you have to
appreciate that the volume of work I do in my practice depends on
what is actually being done that year by my council, as my
client. This year we're anticipating a much higher volume because
we are purchasing lands and expropriating properties for a large
road project, so that will be a higher project. After annexation,
and I know as a result of restructuring, in many municipalities
they have to do a recataloguing and renaming of their streets to
avoid two streets with the same name and those types of things.
On our annexation, there were I think over 150 names that we had
to change. All that had to be registered. The volumes fluctuate
from year to year, so you have to be very careful in how you look
at those figures.
Last year, on what I call
one-party documents, documents that were initiated at my end by
my council, us alone, that didn't involve another party, I did
over 124 of those and I did all but three of them personally.
That was from March 7, which was the mandatory date in Middlesex,
up until about the middle of last week, so that's not quite a
full year. Of those, I have two options to do those in the paper
system. One option is to give that to a conveyancer to register
those, in which case I would have to physically have someone walk
it down to the registry office, or courier it and pay a courier
charge; I would have to have someone physically walk down there
or have it re-couriered back to me in the paper document system;
and I would pay them a fee to register that. That might be
anywhere from $20 to $40, depending on what services they would
be doing for me. Then the registration fee is on top of that.
These documents I can now
do in my office, on my desktop, within minutes. It's very simple
for me to do them. They're very quick. I was anticipating a large
increase in my workload, but I haven't seen that as of yet with
this volume that I experienced last year. So if you look at 124
at anywhere from $20 to $40 a pop, that's significant.
There's also what I would
call a softer cost, which people don't have good figures on, and
we're in the process of exploring what those savings are. If you
are physically taking someone out of their office, putting them
in a vehicle, sending them to the registry office, paying their
mileage, for instance-because in some areas the registry office
isn't down the street or next door. We're lucky in London; it's
maybe a 15-minute walk or so. But in other areas it's further, so
you have to send them down there, pay for their parking if they
have to park there, if that's applicable, plus the time that
they're there and out of the office. But you can do some of those
functions right off your desktop within seconds. So many of the
people, for instance, in our building division have enjoyed
having that service on their desktop, because they're able to get
that information more quickly and they believe there is a
savings. We're undertaking looking at that and we'd be happy to
share that.
I should probably punctuate
as well that the system is fairly new in London, even though it
has been running for a year. When you have new technology, new
systems and new regulations, it takes everybody a little while to
make sure they're entirely comfortable with it. I'm changing a
lot of my internal office procedures now to streamline things
because I'm more comfortable with the system. Again, I think
you're going to see that evolve as well.
Mr
Gerretsen: I just have one series of questions, and that
basically deals with this: I take it the properties that have
been transferred are the easiest to transfer, that are either in
land titles or in subdivisions that have been built after the
Second World War. These are also the properties over which
usually there's the least dispute and probably where title
insurance is not required. If you stop the process now or go into
a different system now, wouldn't you in effect leave aside that
percentage of properties that probably need this new system more
than the properties that are already in land titles and in
subdivisions? Do you understand what I'm saying? They've
obviously started by
transferring the easiest properties, but also the properties,
with all due respect for Ms Smout, where you didn't have to pull
more than four or five documents to find a clear route of title.
The kinds of examples that she gave, where you have to pull 40 or
60 documents, are probably the properties that are not now
included in the system. They're the 1.8 million properties that
are outside the system. Why weren't instructions given to take
the most difficult properties first? Because the properties that
are already in land titles or in subdivisions since the Second
World War probably needed the new system the least.
Ms Lang:
The answer to that question is that was the original business
model. The original business model was designed on the basis of
moving as quickly as you could on the easiest properties so the
revenue would be generated, so the company would have sufficient
cash to continue proceeding with the conversion of other
properties. So it was very much part of the original business
model to do it that way. The experience, unfortunately, during
the early 1990s was that we had a slowdown in the economy, as
you're aware, and that created some difficulties in terms of the
anticipated cash that was to go to the company, because I don't
think we put that in the estimate. We didn't anticipate the same
kind of economic slowdown as we experienced. But quite honestly
it was the original business model to do it that way, and the
company has adhered to the original business model.
1450
Mr
Gerretsen: It seems to me that precisely the kind of
titles that Ms Smout was referring to are probably the kind of
titles that will remain in the old system for up to 30 years, if
we take what the minister said here this morning, because those
are the ones that are going to take a long time to convert and
many searches and checks have to be done. So it almost seems to
me that we're setting up a new system at quite an expense to the
taxpayer in one way or another, or the consumer in one way or
another, for properties that need the new system the least. I'm
just wondering whether the taxpayer is well served by that.
Ms Lang: I
hope so. I hope, in terms of our going-forward action plan, that
will be very much part of the criteria for whatever approach we
decide to take. If we moved into an approach where the minister
made reference to the transaction-based model, then presumably
you would want to ensure that as those transactions were
occurring and we were converting, you were building in that kind
of assurance and that kind of certainty for the consumer so that
you wouldn't have this sort of situation that I think you were
referring to occur as we move forward in trying to complete the
initiative.
Ms Smout:
Mr Chair, I think it's also fair to say that my understanding of
the ministry's process is that you're converting on a
county-by-county basis and working through the system. I think
that what you get from one county to another will vary, and
you'll have just as many-as we would refer to in our
profession-dog's breakfast titles in London as you will in
Chatham, as you will in Sarnia, as you will in Windsor. So I
don't think it's fair to say that what's being done are the easy
ones. There are many that are just as bad.
Sometimes rural properties
don't have as many documents as urban, or vice versa. So it's
very difficult to make that general assumption on that basis.
Even with subdivisions that may have been done after the Second
World War, many of those were not in the land title system, they
were in registry and required searching behind the subdivision
plan, which again is often rather complex.
To be fair, when you're
looking at each particular county you'll get some areas in that
county or city that look good but just as many that look very
bad.
Mr Peters:
I just wanted to quickly, for the follow-up and just to help our
researcher write the report a little bit better, follow up on the
line of questioning that pertained to the year 2010 as a
potential completion date. If I understand the answer correctly,
the indication is that that is also a date you do not accept at
this point? Would that be correct?
Ms Lang:
That's correct.
Mr Peters:
In relation to the numbers we were just given, if the 1.8 million
records to be converted is the correct number, and if the current
rate of conversion that you indicated is running at about 15,000
a month, that would put it at 120 months, which would put it into
2010-2011. Is it then the anticipation that in some of the
scenarios you are developing there will be a more rapid rate of
conversion, or is the 1.8 million in question? How do we deal
with this?
Mr Roote:
Based on the current count, Mr Peters, if we've done 3.1 million
properties we have about 1.2 million left to go. It depends on
what approach we might use. Mr Gerretsen's right: in a number of
parts of the province, particularly in the east, all the
properties are in registry, but also in the north there are a
number of properties that currently in titles. They're not
automated yet, but they're in land titles. There are different
ways you could automate those than from the current process we're
using with the company, but we'll be looking at a variety of
those different things in order to make the best value decision
for the taxpayer, but also to complete the project with its
original objectives as much as we can too.
Mr Peters:
In our report we talked about 2.5 million records at that time,
and we dealt with a definition that was used in the
implementation under the agreement, which was not only automated
but also in the land registry system. I think in the business
plan you used the three-million-record number, which I presume
refers to the number of records automated but leaves 500,000
still to be put into the registry.
Mr Roote:
The number of properties automated? Yes, that's correct.
Mr Peters:
So when we talk about the number of 15,000 records a month, is
that the number of records being automated or the number of
records being automated and transferred to the land registry? I'm
just wondering.
Mr Roote: The number of
properties being automated.
Mr Peters:
I see, so it's just the automation. And the outstanding then to
the year 2010-so we would have to divide the 15,000 into 1.2
million, as one potential scenario.
Mr Roote:
We would certainly be glad to work with you, because there are a
number of variables in the way we'd have to calculate what the
end point would be, based on how many properties are being
automated. Some of those are being converted. It would vary
according to where we are in the province.
Mr Peters:
I just gave you one calculation that came from the information
here, but just to help the committee write the report, do you
have any idea at this stage, other than 2010, how much earlier
you could see this project being completed? In 2007, 2009?
Ms Lang:
We're not in a position at the moment, Erik, to make that
conclusive a statement.
Mr Peters:
OK. Thank you.
The
Vice-Chair: First of all, I'd like to thank the ministry
staff, the witnesses, the committee staff and the auditor for
making their views known. Hopefully some of the questions were
answered. I guess there'll be more as things progress. Anyway, I
guess we're ready to adjourn the meeting. Thank you.
