STANDING COMMITTEE ON GENERAL GOVERNMENT
CAPITAL INVESTMENT PLAN ACT, 1993 / LOI DE 1993 SUR LE PLAN D'INVESTISSEMENT
ONTARIO MUNICIPAL WATER ASSOCIATION ONTARIO SECTION, AMERICAN WATER WORKS ASSOCIATION
LABOURERS' PENSION FUND OF CENTRAL AND EASTERN CANADA LABOURERS' INTERNATIONAL UNION, LOCAL 506
CONTENTS
Wednesday 18 August 1993
Capital Investment Plan Act, 1993, Bill 17
Ontario Municipal Water Association; Ontario section, American Water Works Association
Dick Beck, board member, OMWA
Rod Holme, past chair, board of trustees, Ontario section, AWWA
Don Black, executive director, OMWA
Ontario Hospital Association
Richard Ernst, chair, financial advisory committee
Labourers' Pension Fund of Central and Eastern Canada; Labourers' International Union, Local 506
Peter Landry
Carmen Principato, business manager, Local 506, LIU
Onorio D'Agostini, administrator, Labourers' Pension Fund
STANDING COMMITTEE ON GENERAL GOVERNMENT
*Chair / Président: Brown, Michael A. (Algoma-Manitoulin L)
*Vice-Chair / Vice-Président: Daigeler, Hans (Nepean L)
*Arnott, Ted (Wellington PC)
Dadamo, George (Windsor-Sandwich ND)
Fletcher, Derek (Guelph ND)
*Grandmaître, Bernard (Ottawa East/-Est L)
Johnson, David (Don Mills PC)
*Mammoliti, George (Yorkview ND)
Morrow, Mark (Wentworth East/-Est ND)
Sorbara, Gregory S. (York Centre L)
Wessenger, Paul (Simcoe Centre ND)
*White, Drummond (Durham Centre ND)
*In attendance / présents
Substitutions present/ Membres remplaçants présents:
Cousens, W. Donald (Markham PC) for Mr David Johnson
Hope, Randy R. (Chatham-Kent ND) for Mr Dadamo
Mathyssen, Irene (Middlesex ND) for Mr Fletcher
Phillips, Gerry (Scarborough-Agincourt L) for Mr Sorbara
Sutherland, Kimble (Oxford ND) for Mr Wessenger
Wiseman, Jim (Durham West/-Ouest ND) for Mr Morrow
Clerk / Greffier: Carrozza, Franco
Staff / Personnel: Anderson, Anne, research officer, Legislative Research Service
STANDING COMMITTEE ON GENERAL GOVERNMENT
WEDNESDAY 18 AUGUST 1993
The committee met at 1003 in the Humber Room, Macdonald Block.
CAPITAL INVESTMENT PLAN ACT, 1993 / LOI DE 1993 SUR LE PLAN D'INVESTISSEMENT
Consideration of Bill 17, An Act to provide for the Capital Investment Plan of the Government of Ontario and for certain other matters related to financial administration / Loi prévoyant le plan d'investissement du gouvernement de l'Ontario et concernant d'autres questions relatives à l'administration financière.
The Chair (Mr Mike Brown): The standing committee on general government will come to order. The purpose of the committee is to consider public deputations regarding Bill 17, the capital investment plan.
The first presentation this morning is from the Ontario Municipal Water Association and the American Water Works Association. Mr Beck.
Mr Kimble Sutherland (Oxford): Mr Chair, if I may, while they're coming forward, there had been a request for the government to table its amendments. Those amendments have been, I believe, tabled with the clerk this morning.
The Chair: Thank you. I am informed by the clerk that those are presently being Xeroxed and the members will have copies of same shortly.
Mr W. Donald Cousens (Markham): You should say "photocopied." "Xeroxed" has a certain --
The Chair: Someone who was connected with another company at one point in his career would be sensitive to that. Thank you, Mr Cousens.
Mr Cousens: I have never seen you make another mistake in this committee.
The Chair: It is rare, Mr Cousens.
ONTARIO MUNICIPAL WATER ASSOCIATION ONTARIO SECTION, AMERICAN WATER WORKS ASSOCIATION
The Chair: Good morning, gentlemen. Thank you for appearing before us this morning. We have allocated one half-hour for your presentation. The members always appreciate some opportunity to ask questions, so if you'll leave a little bit of time we can do that. You may introduce each of the people at the table for the purposes of our Hansard, and you may begin.
Mr Dick Beck: Thank you, Mr Brown, for the opportunity to appear before the committee today. I am Dick Beck. I'm a past president and currently a director on the board of the Ontario Municipal Water Association. With me are Don Black, executive director of the Ontario Municipal Water Association; Jim McDade, our president; and also Rod Holme, who is past chair of the board of trustees of the Ontario section of the American Water Works Association.
Our presentation today will focus on our support of the creation of the Ontario Clean Water Agency by Bill 17, as well as our thoughts on the directions for this agency.
The Ontario Municipal Water Association, OMWA, is an association of elected and appointed officials representing 200 municipal water authorities in Ontario. We work on issues of mutual interest and concern with the Ontario section of the American Water Works Association, known as AWWA, which represents technical and management waterworks professionals. OMWA acts as a spokesperson for municipal water supply authorities in Ontario and their customers on legislative reviews and regulatory matters related to supply and usage of drinking water. The Ontario section of AWWA has over 1,000 individual and water utility members, representing all the major water supply authorities and many of the small water systems in Ontario. Together, our associations have a wide cross-section of knowledgeable representatives from water supply authorities across the province who can provide direction and leadership on water supply and other water policy issues.
Both our associations support the establishment of the Ontario Clean Water Agency with a mandate to carry out water-related programs and to coordinate the activities and programs of other ministries involved with water supply and distribution. In fact, we have had numerous discussions with the clean water transition team since its inception to express our ideas on the Ontario Clean Water Agency, which we'll call OCWA, and to offer our assistance to government based on our practical experience in the waterworks area.
Talking about the current environment, both OMWA and the Ontario section of AWWA believe the establishment of OCWA is necessary so that adequate attention and resources are devoted to managing and sustaining Ontario's water supplies. In fact, we have several concerns with the current environment as it relates to waterworks policies in Ontario.
(1) We strongly believe there is a need for coordination and cooperation between the province and public water authorities on the issues of water supply, treatment and conservation and the protection of resources.
(2) There is also a need for coordination and cooperation between public water authorities, especially when choosing water sources, to ensure that the source chosen is the best alternative and the least costly option for all water authorities in the area.
(3) The waterworks industry in Ontario is fragmented and in need of direction at the provincial level. Currently, there are several government ministries, such as Environment and Energy, Municipal Affairs, and Natural Resources, which deal with waterworks matters on a case-by-case basis without an overall plan.
(4) In addition, government grants to public water authorities for the development or improvement of municipal water supplies have been inconsistent, and in some cases have been counterproductive by rewarding public water authorities regardless of their performance in long-term planning, the maintenance of their facilities, or their rate charges or accounting practices.
(5) As a result of the inadequate attention previously given to water issues by both provincial and municipal governments, the public do not recognize water policy as a priority unless they personally have been affected by water supply or quality problems. There is a great need to educate the public that water is not free, that it is not an inexhaustible supply, and that there is a need for proper funding and planning of water projects. Uniform accounting and full-cost pricing of water are two ways of addressing these issues.
Talking now about the role of OCWA, the Ontario Municipal Water Association and the Ontario section of the American Water Works Association believe the establishment of OCWA will address some of the concerns that we have identified. We believe that the agency should play the role of the facilitator and catalyst for generating and implementing water policy ideas, as well as public education and water conservation programs.
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We understand that the Ontario Clean Water Agency will not have powers to develop policy, although it may review and comment on water policies developed by other ministries. We believe that while the agency will be essentially an operational body implementing ministerial policies, it must function at arm's length from the government. In addition, OCWA should be client-driven, with funding provided by those who use its services. OCWA should be accountable to its clients as well as to the Minister of Environment and Energy.
Speaking now of the municipal assistance program, formerly the provincial water and sewer capital grants program, we endorse the new approach of the municipal assistance program for public water authorities which will be administered by OCWA. This, however, is only a first step towards reforming the grant program. We believe that one of the first tasks of the agency should be to review and revise the current grant program so that it focuses on loans rather than grants.
While the new municipal assistance program bases eligibility for grant funding on certain provincial priorities, OMWA and the Ontario section of AWWA strongly suggest that funding assistance under the new grant program should be based on the applicant's actual record of plant maintenance, its ability to charge adequate water rates and its efforts to complete long-range planning. A loan program, as opposed to a grant system, may also result in a savings to the provincial government. We've highlighted this concern with OCWA's transition team and it's our understanding that this is an issue to be examined further.
Furthermore, the ratings assigned to each grant application and the monetary awards distributed should be published promptly after decisions have been made. This would build confidence among water authorities that the program is being applied fairly and in line with the criteria.
A word about uniform accounting and full-cost pricing. While OCWA cannot develop policy on its own, OMWA and the Ontario section of AWWA believe that the agency should recommend to the government that a uniform accounting and full-cost pricing system for water be implemented for all public water authorities. This would help ensure that water usage is accurately monitored and that payment for water adequately reflects the amount consumed. Because water usage and cost are often not known accurately, there is inadequate recognition by the consumer that there is not an endless supply of water, that there is a cost associated with using this resource. Uniform accounting and full-cost pricing are critical in achieving water resource management.
On the subject of policy responsibility: OMWA and the Ontario section of AWWA support the establishment of OCWA to act as a facilitator and to work in partnership with local water authorities when advising them on water policy, long-range planning for water supply and coordinating and interconnecting water systems. When necessary, we believe the agency could help settle disputes on water issues, such as locations of groundwater schemes, which may arise between users.
Furthermore, the establishment of OCWA should ensure that there is proper coordination regarding waterworks policy, not only between the province and public water authorities but between public water authorities as well. Coordination between municipalities and public water authorities in the area of waterworks policy, particularly when choosing water sources, will ensure that the best and least costly option is selected.
In recent years, the selection of groundwater schemes by different water authorities in the same locality has resulted in considerable problems. Also, since the waterworks policy within the government is fragmented with various policies scattered in the ministries of Environment and Energy, Natural Resources and Municipal Affairs, OCWA should function as the central coordinating agency for these polices to ensure that provincial water policy is consistent.
While it's true that the agency will assist the government with its financial challenges, setting up an agency which is focused on water and waste water issues demonstrates to the public that these issues are important and ensures that the government will devote adequate attention and resources to them.
Speaking briefly about funding, we strongly agree that the agency should be self-funded and that all activities should be carried out on a cost-recovery basis for public water authorities, municipal governments, the provincial government or private parties. The agency should operate on a no-deficit basis. Funds collected by OCWA for services should not be deposited into the general revenue fund of the provincial government, but should go back into the operating fund of the agency.
Also, we firmly believe that one of the duties of OCWA should be to ensure that all municipalities use waterworks funding for waterworks purposes only, particularly in those municipalities which do not have public utilities commissions. Again, while we realize that the agency will not have the power to make policy in this area, it will have the power to strongly encourage that water funds be used appropriately by all public water authorities. OCWA can work with other ministries to ensure that this is the case.
Briefly, on the structure of OCWA, we would recommend that the Ontario Clean Water Agency establish technical and financial advisory committees for the agency where groups such as OMWA and the Ontario Section of the AWWA, having technical and financial expertise in the area of public water systems, could work with the agency in making sure that benefits are achieved for all.
In conclusion, both the OMWA and the Ontario Section of the AWWA strongly support the creation of the Ontario Clean Water Agency. We believe that the agency will play a valuable role as facilitator and coordinator and catalyst for waterworks policies, as well as coordinator of policies within the government, between public water authorities and the province, and between public water authorities themselves. With water and waste water issues as its area of responsibility, the establishment of the agency will ensure that these issues receive the long overdue attention and resources that they need.
The Ontario Municipal Water Association and the Ontario Section of the American Water Works Association will continue to show our support by working with the clean water agency transition team to help ensure that the Ontario Clean Water Agency is a success.
We've attached to our written brief a summary of recommendations for OCWA. I don't propose to read through those in detail. You can examine them at your leisure. We would now be happy to try and answer any questions that any of your committee members may have.
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The Chair: I'm sure we do have some questions. Mr Phillips.
Mr Gerry Phillips (Scarborough-Agincourt): What do we each have?
The Chair: Slightly more than five minutes.
Mr Phillips: I really appreciate your presentation. What I think we're increasingly finding out is that OCWA means many things to many people and that what originally started out as a creative way for capital, now is increasingly looking like it's kind of, if you will, the Ontario Hydro of water. I think that's where you see this, in fairness, and I think that's the value you see in it, that there will be a provincial independent body set up as what we call a schedule 4 -- it's like the Worker's Compensation Board or Ontario Hydro -- to administer water. The parliamentary assistant says this and I don't think he understands what a schedule 4 agency is, and I'll ask him later on to explain the difference between a schedule 2 and a schedule 4.
In any event, in terms of the future, do you see OCWA setting a uniform water rate across the province or do you see full-cost recovery depending on where you live and the cost of getting you water? On the funding, you've mentioned moving away from the grant proposal to a loan-based proposal. Does the group see eliminating grants which are envisioned to assist municipalities that may have difficulty in fully funding their system from their own users?
Mr Beck: Yes, on the question of uniform rates, we don't see OCWA as ever having anything to do with setting individual water rates in individual municipalities. That's something any municipality would fear, because they have their own requirements. But we do see OCWA as trying to promote a uniform accounting system to ensure that all the costs associated with water or sewage are indeed identified and accounted for on a uniform basis, so that there's a comparable system across the province for all municipalities, regardless of how the water systems are organized.
No, they wouldn't set rates, but we would very much like to see uniform rates structured -- that is, accounting policies -- and dedicated revenues as a basic principle, that the water revenue goes to the water system and the sewage revenue goes to the sewage system, and nowhere else, and there are no other sources of revenue.
On the other, I'll just talk briefly about loan-based. This needs more study. We've tried to discuss this and it needs a lot more discussion and study to see whether there is a better alternative than grants. Our concern with grants is that they have sometimes tended to reward people who have let their systems run down when they should have been spending more money on them. Maybe there's a better solution.
We still recognize that there are small municipalities in particular, and remote municipalities perhaps, that need more assistance. This is recognized under the municipal assistance program currently. We aren't sure whether you'll ever be able to eliminate that, but it's something that deserves more study. I think all the groups represented here would be quite happy to try to contribute to further study of this problem with OCWA, over the next year in particular, to see whether we can come up with a better answer.
Perhaps Mr Holme would like to comment a little bit on this, if he could.
Mr Rod Holme: Coming from the Ontario section of the American Water Works Association, which is looking at the management and the professionals who design and operate the systems, we certainly on occasion see a disincentive coming from the grants system, whereas some other form of funding of the system would encourage good management of that system over time. Our association has developed policies. It has done a lot of research which can provide a lot of assistance as to how that can be achieved. We see an objective there which I think can be of benefit to both the users of water, to the water supply authorities and ultimately to the provincial government.
Mr Phillips: A technical question: The way I read the act, I thought OCWA had the authority, through regulations, to set the rates.
Mr Beck: I'm not sure we quite understand your question. To set the rates of what?
Mr Phillips: Of what they will charge.
Mr Beck: Oh yes, for their own services, absolutely. This is what we mean by full-cost recovery. We fully support that idea that for the services of OCWA and its own investments all its costs should be fully chargeable to its clients. That is quite so, yes. We agree with that.
Mr Bernard Grandmaître (Ottawa East): We were also told yesterday by another group that the cost of this service or water could increase, that there would be an increase between $200 and $800 per household. How do you see this?
Mr Beck: I would think that numbers like that indicate probably extreme ranges. There are some water authorities -- probably the separated public utilities are the best-run in that respect. They have no other source of revenue than their ratepayers and they spend all their money on their own systems. In municipalities where the water departments are operated perhaps as a portion of the municipality, it's never quite clear whether they're being subsidized by some other part of the taxpayers' money or whether their funds are being used to subsidize some other part.
There's a general feeling in the industry, based on a lot of studies that have been done, that many systems are now aging -- 50 or 100 years old, parts of them -- and that while some municipalities have done a very good job of maintaining and upgrading those systems, there are a great many that have not done the job they should have. Those are, I think, the ones that will see the largest increases in the rates which must be charged to do a proper job. I get the impression, and perhaps Mr Holme could comment, that this is even more so on the sewage side of the business than on the water side.
The problem is to do catch-up. If you have a system that's, let's say, 100 years old, or it's going to last 100 years, then you'd have to spend something like 2% a year if you want to replace it in 50 years or something. Those amounts are very large numbers of dollars if you start looking at them, because the replacement costs for those systems are very high today. Mr Holme?
Mr Holme: I think it's important here to look at the question of good management and having reserve funds, having the money in place to make these things happen. There have been a number of studies done in the past which have indicated that the cost of water, in many respects, is generally too low.
Mr Grandmaître: Agreed.
Mr Holme: I know the numbers you saw, which talked about some fairly significant increases. I think the general feeling is that they don't have to be of that magnitude, but if there were full-cost pricing and separate accounting, then you would be able to judge exactly what the cost of the service should be and it would be based on being a self-sufficient industry.
We don't want to see rates increase any more than anybody else does, but we do feel strongly that in order for the systems to function correctly and have public confidence in them, then they have to be adequately maintained and that can be done by a sensible accounting system.
Mr Grandmaître: One short question?
The Chair: Mr Arnott?
Mr Ted Arnott (Wellington): Give him his question.
Mr Grandmaître: In your meetings with the transition team, was full cost discussed?
Mr Beck: Yes.
Mr Grandmaître: We don't have any minutes of those meetings. Can you tell us briefly --
The Chair: That's another question, Mr Grandmaître.
Mr Grandmaître: Well, that's a follow-up, Mr Chair.
The Chair: You're using Mr Arnott's time. Mr Arnott.
Mr Arnott: Thank you, Mr Chairman. When we talk about full-cost pricing, I think in response to an earlier question you said that you wouldn't recommend a uniform price of water across the province, the same price in Sioux Lookout as Toronto. If we're looking at full-cost pricing in individual municipalities, there may be substantial deviations between the price, unless you're prepared to have the customers of the cheaper water subsidize the customers of the most expensive water. That's what you're suggesting?
Mr Beck: Yes.
Mr Arnott: Okay. We heard yesterday what full-cost pricing will cost, and the recommendation or the suggestion was that an increase might be in the order of 8% per year, the average water bill going from something like $130 a year for a household to about $800 a year over quite a significant number of years. That's a politically dicey issue when you're talking about increases of that magnitude.
I wondered at the time yesterday, and I don't know if you can answer this question or not, presumably if price increases of that magnitude were allowed, you would see a decrease in the consumption of water. People would find ways to conserve water in a way they don't now. Have you any suggestions as to what the effect on consumption would be if increases of that magnitude were allowed?
Mr Beck: Certainly, that is why there's a lot more interest in conservation now. The message we want to get out to people is that we've got to look after these systems. If costs have been pushed off into the future, then they're going to catch up eventually. One way of minimizing those costs -- for example, if you think you have to expand a plant, the feeling today is that you should really be looking at conservation measures and education of the public first, before just enlarging capacity. So yes, public education and conservation are very important and they will help to minimize. It's important to talk to our customers on a local basis about this, make sure they understand what the issues are and get their cooperation in minimizing these costs.
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Mr Arnott: We've been told that Ontarians are among the highest per capita users of water in the world. If we start comparing ourselves to other jurisdictions, could we expect, say, a 20% reduction in our consumption per capita or could we expect 30%? What sort of decreasing consumption can we shoot for?
Mr Holme: If you look at numbers around the world and particularly use some areas of Europe as an example, then the numbers are maybe as low as 50% of what the Canadian or particularly the North American consumption is. It is extremely high. There is definitely a relationship between the cost of water and the usage. Certainly at this time there's also a concern with water producers in terms of their own fixed costs. Then reducing consumption doesn't automatically reduce the cost by an equivalent amount. That is an area where there is a significant amount of ongoing research in terms of management. There are a lot of pilot projects out there which are attempting to prove what the exact relationship is.
I think we, as associations, understand the concern about dramatic increases in the cost of anything. Our two associations are not trying to advocate increases in price. We're very sensitive to the impact of that. What we want to see is perhaps an increase in price but also a dramatic improvement in service and quality as a result of that.
Mr Arnott: I think research is very important because it helps the government. If the government can be told, "Look, you may increase price, but the overall householder bill will not increase substantially, because consumption will decline," it makes it a lot easier.
Mr Holme: There have been a number of major not only research projects but conferences held in recent times. There was one earlier this year in Winnipeg on conservation. There's another one later this year on North American bases, at which I think a lot of this information is going to come out. It's current research. It hasn't been an issue in the past. It's a very ongoing, hot topic. Again, I think that's an area where the clean water agency can play a significant role in a coordinating sense across the province.
The Chair: Thank you. Ms Mathyssen and Mr Hope.
Mrs Irene Mathyssen (Middlesex): Thank you for this presentation. Yesterday we heard from Mr Powell and Mr Cochran, and I think you're echoing their concerns and basically reiterating what they were saying about the need to take very firm action.
I wonder if you could clarify a couple of things for me. My sense of OCWA was that it was to basically address the fact that we haven't used water wisely or well in the province. I think it's something like 300 litres per person per day, which is simply not acceptable usage. Balancing our need to conserve with the fact that protecting the environment and human health is going to cost a phenomenal amount of money, more than any government could provide, my sense was that OCWA did provide that bridge inasmuch as the emphasis was on water conservation, good land use, planning; that municipalities were basically going to receive their funding based on more responsible water management. Are we going far enough? Could you give us some advice in terms of how we can bring them along even better?
Secondly, you were talking about full-cost pricing and the need for a reserve fund. Are you suggesting that any profits OCWA might realize should go into a reserve fund for future infrastructure or am I misunderstanding?
Mr Beck: All we're saying is that OCWA should operate as a separate business entity, and if one particular year or quarter or couple of years it generates a surplus, it should stay within the organization. It could be used for improvements in, for example, its plants which it has to operate or whatever, or it could assist in research, or it can simply reduce the rates that it charges its own clients, which is what we do in the municipal water industry. If we have spare cash, it's taken into account in setting the rates for the next year.
Mr Holme: If I could, I think there is also an issue here of recognizing OCWA's role in working with its own clients and running the facilities that it will be operating, which are the existing Ministry of Environment and Energy plants. Of course, we also see that, as we've said, it becomes the facilitator and the catalyst to show the example to the rest of the municipal water authorities in the province of how the management and financing of these organizations can be improved.
So we recognize a difference here. We certainly are supporting the clean water agency because we see it has an excellent role. We recognize and in fact I think it would be safe to say that we don't want it to take on a total responsibility for the entire province. It has to become an example that people will want to follow or want to become part of. I think that's the role we see for it.
Mrs Mathyssen: In its current form, do you think we are achieving that end? I'm looking for advice, I guess.
Mr Beck: We don't think OCWA goes as far as we would like in being able to mandate that utilities follow uniform and full-cost accounting practices, but we realize that wasn't the mandate at the start. Perhaps it could move towards that in the future. We aren't quite sure what will happen there. We'd like it to go further.
The Chair: Mr Hope.
Mr Randy R. Hope (Chatham-Kent): How much time have I got?
The Chair: Just start and I'll let you know.
Mr Hope: I just want to know if I have to put it all in one question or whether I get a supplementary on the end.
I'm interested in the accounting process, and you talk about public education. Let me tell you, from rural Ontario, the first public education is putting a water meter on somebody's house and then issuing a bill. Public education becomes an awareness right away, as soon as you've got to pay that bill versus not having to pay that bill before. That's the first step of public education.
I was looking at the number of municipalities you represent, and I am one who represents rural communities. We have two types of sources of water. The municipality has its own jurisdiction, which controls virtually everything, economic growth and everything outside the city limits, and then we have regional water distribution.
I'm interested in your accounting practices. In regional water distribution systems, when you do capital work, the capital cost is distributed to all those municipalities to put on their books versus the books of the facility. I was interested when you said, "No debt." You're distributing that cost over to the municipalities' books, and then they have problems with their capital projects and whatever they want to do.
Are you saying that in order to get a full analysis, capital costs should be allocated to the facility and the facility only so that way you can prove justification for the expenditures: whether it's working, whether it's paying itself off through capital? You've got to make investments, because usually in your water rates you have capital built into that water rate system.
So there's that area of the accounting, dealing with municipalities and regional distribution. The other question I have is around the strong hold of the municipalities on outlying areas, smaller communities. They dominate and control. They say: "You have to annex land in order for us to give you water," which then allows urban sprawl. I wanted your comments on those two.
Mr Beck: Could I ask Mr Black to talk about the accounting policies just briefly? I see we haven't got much time.
Mr Don Black: What we are saying is that the asset that either the region or the municipality or OCWA has should be set up as an asset and amortized over the life of that asset, and then the cost recovery takes place over the period of that asset rather than putting all these costs in the current year. Basically, all we're saying is that the waterworks utilities in the province of Ontario and OCWA should be operated on a businesslike basis.
The other question was?
Mr Hope: About the strong hold of municipalities, urban sprawl.
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Mr Black: I think we say in the brief that OCWA should be the facilitator, the coordinator, and deal with these issues. I personally see no reason why water cannot go into an outlying area without annexation taking place.
Mr Beck: Yes, we see that there's a political problem here and we don't have to --
Mr Hope: A little problem?
Mr Beck: But that's something that could be further discussed to see whether we can't come up with better solutions. Everyone's jealous of their own territory, we know that, but it sometimes leads to uneconomical solutions to rather large problems. Somehow we've got to try to find a way to deal with that.
Mr Black: The accounting issue should be very simple. It's strictly setting the waterworks accounting system up on a businesslike basis, setting up your assets, taking depreciation, recovering the cost over the estimated useful life of the assets.
Mr Hope: So you're saying, "Don't put the debt on somebody else's books. Put it on your own books."
Mr Grandmaître: That's what we've been telling you for years.
Mrs Mathyssen: Years?
Mr Hope: Oh, come on now.
The Chair: Now, let's not tease the bears. Come on.
Mr Hope: It was eight years that they dealt with the pipeline project --
The Chair: Strangely enough, the time for this presentation has expired.
Thank you, gentlemen. We appreciate your presentation a great deal. We will be conducting the clause-by-clause tomorrow and the bill will be reported to the House this fall. Thank you for coming.
ONTARIO HOSPITAL ASSOCIATION
The Chair: The next presentation will come from the Ontario Hospital Association. Good morning; welcome. We have allocated one half-hour for your presentation. We appreciate, always, some opportunity to discuss as a committee your presentation with you. We would appreciate it if you would introduce yourselves for the purposes of our Hansard recording. You may begin.
Mr Richard Ernst: Thank you, Mr Chairman. We are pleased to have the opportunity to make this presentation to the standing committee on general government regarding Bill 17, the Capital Investment Plan Act, 1993.
My name is Richard Ernst. I'm the assistant executive director of finance and clinical services at Guelph General Hospital, but I'm here today as chair of the Ontario Hospital Association's financial advisory committee. With me is Susanne Bjerno, who is the director of the Ontario Hospital Association's financial management services.
The mission of the Ontario Hospital Association is to play a leadership role in helping to shape Ontario's health care system so that it continues to meet the demands and needs of the people of Ontario. The OHA is the collective voice of Ontario's 222 public hospitals.
With that in mind, our financial advisory committee has studied Bill 17 extensively since it was introduced in the Legislature earlier this year. The potential impact of the bill prompted the committee to recommend this appearance before today's committee to express concerns from the perspective of Ontario's public hospitals.
The scope of the bill is very broad, establishing three new crown corporations and continuing another. There are several parts to the bill and our focus today is mainly on part II, which deals with financing arrangements for municipalities, school boards, post-secondary institutions and, of course, hospitals.
Our presentation relates specifically to concerns about the bill's implications for capital financing for the hospital sector.
As I'm reading my presentation to you, it will be fairly consistent with the brief that has been distributed to you, but there have been some minor changes to that. If they're significant, I'll advise you and perhaps you could change the notes in front of you.
In order to make our concerns clear, I will give you a little background on our situation. Prior to April 1, 1993, it was clear that hospitals received direct grants from the Ministry of Health for capital projects for the construction or renovation of hospitals, including necessary equipment. These capital projects required ministry approval.
Bill 17, in itself, does not remove this authority. The Minister of Health continues to have the authority to make grants and loans to hospitals under the authority of sections 5 and 6, not 6 and 7 as noted on page 2 of your handout, of the Public Hospitals Act, and that is referred to in appendix A of the brief.
There are a number of regulations under the Public Hospitals Act that set out the terms of hospital capital funding. Attached in appendix B for your information are the relevant regulations under the Public Hospitals Act.
The Minister of Health has recently revoked these regulations, creating a single regulation, which is Ontario regulation 459/93, to deal with grants and loans.
Regulation 960 authorized the Minister of Health to pay up to two thirds of the cost of hospital construction or renovation programs which had received ministry approval. In cases where a hospital was located in northern Ontario, as defined in the regulations, the capital grant could be as much as five sixths of the approved shareable cost.
Hospitals are responsible to make up the difference, either one sixth or one third, between the capital grant and the approved shareable cost. The Ministry of Health's commitment to hospital capital projects, as at March 5, 1993, totalled $2 billion of the $3 billion in shareable costs.
The graphs attached to our presentation, which are included as appendix C, further illustrate the significance of hospital capital funding to the province. Over the past 10 years, the average annual capital grant for health facilities has been $186 million, as outlined in appendix D.
Bill 17 could significantly change hospital capital funding. It is unclear from the actual text whether it is intended to create a second, parallel stream for financing in addition to the systems of loans and grants under the Public Hospitals Act or whether the intent is to replace the grant system with one based on loans through the Ontario Financing Authority.
The OHA and our member hospitals are understandably troubled by this uncertainty. In these times of tremendous fiscal restraint, any changes to hospital allocations, whether for operating or capital, are of great significance to our member hospitals. The ability to access capital funding is a critical component of the overall abilities of hospitals in the current fiscal climate even to maintain their existing physical plants to comply with Ontario fire code and occupational health and safety requirements, to say nothing of planning for the future.
There will be continuing need for capital to meet the changing patterns of health care delivery. There has been a major shift towards outpatient and ambulatory treatment from the traditional inpatient modalities. Many hospitals require capital funds to allow for reconstruction of their outpatient units to accommodate the distribution of patient services.
It is imperative that the changes introduced under Bill 17 do not limit the ability of the hospital system to access vital capital dollars. It is also essential that any change from a grants-based process to a loans-based process, or a combination of these approaches, not have an adverse effect on hospital operating transfer payments.
We are clearly moving into uncertain territory with Bill 17 and therefore our primary objective for appearing before you today is to make two critical points in an effort to ensure that hospitals are not exposed to financial vulnerability for repayment of loans for which the government should be completely responsible.
Bill 17 creates a framework whereby a public hospital can borrow funds through the Ontario Financing Authority, but there are broad areas of the bill which must be clarified.
Subsection 33(3) of the bill refers to payments in excess of $1 million for capital purposes by the Minister of Health to a public hospital, but these specific provisions apply only through the end of the 1993-94 fiscal year. We are concerned with what might happen after March 31, 1994. This time frame is not specified within the bill. No one seems to be able to say with certainty, and this must be clarified before the bill receives final reading.
Section 30 of the bill has a degree of ambiguity. It states that the Ontario Financing Authority's objects include "assisting public bodies and the province of Ontario to borrow and invest money, developing and carrying out financing programs." Nowhere is it spelled out how this is to be done. Will the $1-million threshold remain in place after the 1993-94 fiscal year? Once again, we cannot get clarity on this issue to say with certainty, and this must be clarified or specified before the bill receives final reading.
There has been some confusion surrounding Bill 17 since May 17, 1993, when it received first reading. Part of the confusion stems from its retroactive application to April 1, 1993. There is further uncertainty because of the temporary measures contained in the bill, which will only form a full picture once the Ontario Financing Authority is actually in place. These uncertainties must be resolved.
The relationship between parties to the proposed loan agreement -- from our perspective, a hospital, the Ontario Financing Authority, the Ministry of Health and the government of Ontario -- in the cases of capital loans in excess of $1 million is not clear.
The relationship between hospitals and the Ministry of Health under the Public Hospitals Act and its regulations with respect to capital grants is significantly altered. As noted earlier, the multiple regulations have been replaced by one single, simple regulation, Ontario regulation 459/93, which is enclosed as appendix E.
In discussions with the Ministry of Health, the Ontario Hospital Association has previously indicated some areas of concern. As a result, section 6 was added to the regulation. That section states, "It is a term of every loan that the province pay to the hospital the amount of each payment required to repay the loan." However, this clause applies only to loans made to hospitals by the Ministry of Health. Hospitals need the assurance that loans made through Bill 17 and the Ontario Financing Authority contain similar provisions.
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The province must be party to a loan agreement entered into by the hospital and the Ontario Financing Authority. The Ontario Hospital Association requests that the government include in Bill 17 a clause that explicitly guarantees that the province will pay to the hospital the total blended principal and interest required to repay the loan, regardless of the source of the loan.
Our major point is that hospitals must not end up being responsible for those capital financing obligations which would previously have been paid by the Ministry of Health. Government officials have given the Ontario Hospital Association verbal assurances that the creation of the Ontario Financing Authority will not ultimately leave hospitals responsible for repayment of loans through that channel. These loans will be repayable over extended periods, possibly as long as 20 years. It is essential that hospitals be assured that their financial picture will not be adversely affected in the future.
The second major point relates to making sure that hospitals are not expected to repay loans from operating revenues. We would like to draw your attention to subsection 23(1), which permits the Minister of Finance to deduct portions of the indebtedness of a public body from money appropriated by the Legislature for that public body. There must be no expectation of offloading this debt to hospitals in such a manner.
Although this appears to be a voluntary clause, subsection 23(1) imposes an obligation on hospitals to provide security for the loans. We feel that clarification is required to specify that this provision does not apply to loans made to public hospitals. Under no circumstances should the repayment of a hospital loan be paid out of a hospital's operating grant. It would be totally inappropriate to blur the distinction between the capital loan and the operating grants in this manner.
The OHA appreciates the government's financial motivation for these proposed changes. The association also appreciates that this committee hearing is the appropriate forum for raising our concerns and we are pleased to do so.
Our final point is to recommend that in making appointments to the board of the Ontario Financing Authority, the government should ensure that at least one representative to the board have a hospital background, given the significant number of loans that are likely to be made to hospitals.
Thank you for the opportunity to make this presentation. We would be pleased to answer any questions you may have.
Mr Cousens: That's an excellent presentation and it just proves your worth and it proves the system works. In fact, we found that through the presentations by other groups as well, the value to members who need to know the reaction from the field and the people who are on the front lines, and I know other members of the committee would feel much the same way. The quality of the presentation and the thought behind it are just excellent.
I want to go to Mrs Stewart, if I can, because there are a number of questions raised here that have been part and parcel of the debate in the Legislature. They're asking a number of questions about the guarantees to this. Is there anything in the bill that would address the concern being raised through this presentation that protects hospitals from -- or maybe the parliamentary assistant; I'm quite open to whomever -- the concerns they have that they will get the money to pay the interest and principal, that the legislation protects that long-term interest, that it is not going to change? There are three or four points in there. Would you like to respond in general to the issues that have been raised?
Mr Sutherland: If you like, I can do that. With respect to what they're saying, or asking for legislation to guarantee the province will pay the hospital, this isn't just verbal transfers of money. There will be written, signed, legal contracts that will be signed between the hospital and the authority that, obviously, would give the hospital the ability to sue the province in court if the province didn't uphold its end of the legal contract.
Mr Cousens: Why isn't this built right into the legislation at an early stage so that it removes some concerns on the part of the hospitals as to --
Mr Sutherland: I also think you've got to remember the overall process. First of all, legal contracts are pretty binding and that's what's being --
Mr Cousens: The law is more binding.
Mr Sutherland: Yes, okay, but legal contracts entered into between two parties are binding before the courts, so if one party doesn't uphold them, then the other party has action through the courts. The other point of the matter is that it's --
Mr Cousens: I don't even like the thought of public bodies and USH ever having to think that they have to go to court.
Mr Sutherland: That's why we're having legally binding contracts.
Mr Cousens: But I prefer, and I don't know what world I'm living in, that if the law is going to --
Mr Sutherland: Maybe a cynical one.
Mr Cousens: Oh, never mind.
Mr Sutherland: You set yourself up.
Mr Hope: Would you like a response to that?
Mr Jim Wiseman (Durham West): Is that a rhetorical question?
Mr Cousens: No, I don't want the answer. I could hear it coming. If the law made it very clear at the beginning stages that this is the case, then it would remove the sense of doubt and concern that is coming from those who are going to be the partners.
Mr Sutherland: I suppose there would be some ability, if you wanted to, to put it in the law, but the courts have ruled on contractual law for a long time. I think it's pretty clear about contract law and how the courts rule on that type of thing. We'd be entering into legally binding contracts, whether it's hospitals or the other groups, to follow through.
Mr Cousens: I'll just come back to you that this doesn't thrill me, any feedback on --
Mr Ernst: That is our intention as well, to have that guarantee up front in the bill. Part of our concern is as a result of the fact that there has been no contract developed to date. We don't know what a contract looks like, yet there is an element of retroactivity to this bill; it goes back to April 1, 1993. Hospitals that have received grants to date, moneys that have been treated as grants, will now be told retroactively that this was not a grant, that it was a loan, and the terms of that loan will have to be arranged and negotiated with a third party. Our situation will be different today than it has been in the past in that we will be dealing with a third party, whereas in the past hospitals have dealt one on one with the Ministry of Health. So I echo the comments Mr Cousens has raised.
Mr Arnott: Just a local question: We're talking about the Guelph redevelopment plan and you'll be very knowledgeable about that. I assume that the commitment from the previous Minister of Health for significant provincial expenditure towards hospital redevelopment will come under this new Bill 17.
Mr Ernst: Definitely. That redevelopment project has not started to see funds flow, nor has it had an amount finally approved, but an amount of approximately $60 million was set aside for this, so it will exceed the $1-million level.
Mr Arnott: You're here speaking on behalf of the Ontario Hospital Association, but I assume that the concerns you've expressed with respect to the uncertainty created by the new bill would be very strong within the city of Guelph and the hospital community there.
Mr Ernst: Yes, I think it's fair to say that as the Ontario Hospital Association speaks, its views are reflective of the members. As a hospital member, I can substantiate that.
Mr Sutherland: That was one of the points, actually, that I wanted to raise just in response to the presentation that had been made.
I also had just some question regarding your presentation. You said subsection 33(3) refers to payments in excess of $1 million, but you said that it only applies through the end of the 1993-94 fiscal year. I was wondering what you were basing that on. The actual legislation has a start date of April 1, 1993, but in the legislation there's not an end date to indicate that it would be complete in 1993-94.
Mr Ernst: We were maybe making a literal interpretation, but the portion of the sentence I was referring to that relates to a loan starts, "that is charged to an appropriation of the Ministry of Health for the fiscal year commencing on the 1st day of April, 1993." Now, if that should say, "for the fiscal years, commencing on the 1st day of April, 1993," then we have moved into the future. But for the fiscal year commencing April 1, 1993, we're talking about a 12-month period, and that's our concern.
Mr Sutherland: Okay, fair enough in terms of that wording. It certainly wasn't the intent. The only intent there was that hospitals had been informed -- not only hospitals, but other sector institutions -- that grants for this year, once the legislation was through, would be converted into the loans for this fiscal year. That's why it was put as April 1, 1993. That's what the intent of that was. I'm not sure. If we need to clarify that by adding an "s" on, to add "years," then I think there probably would be some willingness to do that, if necessary.
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Mr Ernst: It would be helpful from our perspective certainly.
Mr Hans Daigeler (Nepean): Thank you very much for your presentation. I notice that at the end of your presentation you are saying, "The OHA appreciates the government's financial motivation for these proposed changes." I'm just wondering whether you could enlighten me as to what you see as the financial motivation that's driving the government to bring this in.
Mr Ernst: When this bill was first presented to the financial advisory committee -- just to let you know, that committee is made up of approximately 10 members from various hospitals around the province, chief financial officers and chief executive officers. As we had discussions of this, our appreciation or our thought was that the government was looking to transfer its indebtedness out into universities, hospitals and municipalities and effectively position itself to appear to be as a province less in debt than it actually is. So it may be a financial and a political motivation as well. If someone does a credit rating for the --
Mr Daigeler: You have difficulties with that, don't you?
Mr Ernst: Speaking as an association or speaking as Richard Ernst?
Mr Daigeler: Both.
Mr Ernst: I would say yes on both accounts.
Mr Daigeler: Because you say here that you appreciate the government's financial motivation. I'm a little bit --
Mr Ernst: "Understand" might be the better verb.
Mr Daigeler: Okay. You see where they're coming from but you don't necessarily appreciate it.
Mr Ernst: Or agree with it, yes, that's true, but we understand what they're trying to do, and it's an issue of a significant sum of capital dollars that are being expended that apply to current funds versus deferment of those over a period of years, as also it's a credit issue. The indebtedness is now shown in hospitals which is lost in the province.
Mr Phillips: Just a follow-up on Mr Daigeler's comment. Let's be totally candid. The hospitals, schools, colleges, universities thing is, in my opinion, a fiscal scam. The government spends $600 million a year on capital -- hospitals, schools and colleges -- and every year has to spend that just to refurbish it, and report it. This is designed to get that debt on your books, but the province to assume 100% of the responsibility. They will keep spending $600 million a year and show an expense of $30 million a year.
For about two or three years -- I think the government hopes until after the election -- people will think the books are getting better when in fact debt is going to build up dramatically on your books, but with 100% of the obligation for the province and at the rate, in my opinion, of $570 million a year. For the hospitals it's whatever your share of that is. So that's one disadvantage in doing this.
The second is it seems to me a more complicated process.
What are the benefits to the public in doing this? There have to be some significant offsetting benefits to the public in this approach to have, in my opinion, any merit at all, because I see this as a substantial distortion of the financial picture of the province, personally. Are there any advantages that you see here?
Mr Ernst: The only advantage I could see would be that as a province, we would be spending money we don't have, so we can afford thereby to do some of the capital projects that would otherwise be unaffordable. We're borrowing money, basically, to finance projects we're saying we can't afford to finance out of current revenues. But as you said, if the level of capital expenditures stays the same, it will reach a point where the payments to carry the debt will equal what we're currently paying annually for capital renovations.
Mr Phillips: And then we're back where we started, with another debt.
The Chair: Mr White had an intervention.
Mr Drummond White (Durham Centre): I just have one small question. I was very impressed with your knowledge of the legislation and the financing mechanisms, and I'm wondering if you would have had any contact with your sister association in Quebec or other provinces where this is the basic mechanism for plants.
Mr Ernst: Personally, no, but I would acknowledge that what is being proposed here is consistent with other provinces, so that's a fair observation, that this is not something that's new to Canada.
Mr White: I wasn't aware that there was a major problem between the hospitals in Quebec, for example, or Manitoba, and the provincial governments in regard to the financing.
Mr Ernst: I think that was our point today. If the financing structure, however it's done, is invisible to hospitals --
Mr White: Right.
Mr Ernst: Currently we receive grants, and what is being proposed is that we would have a loan and that we would receive a grant to repay the principle and interest. Ostensibly the whole bill would be invisible to hospitals. Then the relationship between hospitals and the province would, for all intents and purposes, not be changed.
The Chair: No further questions? Thank you very much for coming this morning and bringing your concerns to our attention.
LABOURERS' PENSION FUND OF CENTRAL AND EASTERN CANADA LABOURERS' INTERNATIONAL UNION, LOCAL 506
The Chair: The final presentation of this morning comes from the Labourers' Pension Fund of Central and Eastern Canada and the Labourers' International Union, Local 506.
Mr Cousens: Double duty.
Mr Phillips: Your twin was here yesterday.
Interjection: Looks the same, sounds the same.
The Chair: Order. Gentlemen, you've been allocated a half-hour by the committee for your presentation. I think perhaps you know the ground rules.
Mr Peter Landry: I knew the ground rules. I used to sit on the other side. I appreciate the functioning of the committee.
My name is Peter Landry, as some of you may know already. With me today are Onorio D'Agostini, administrator of the Labourers' Pension Fund of Central and Eastern Canada, and Carmen Principato, a trustee with the fund and business manager of Labourers' Internation Union, Local 506 in Toronto.
What I'm about to say today is indeed similar to what you heard from the pipe trades yesterday. Again, we are not here to analyse the bill in detail, but to give members of all parties a message on behalf of the people we represent. So you'll have to pardon some of the same language I'm going to use. I don't think that's really the point. The point is that these unions are in very difficult situations and want to relay a message to you.
By way of background, the pension fund was established in 1973 and currently has 32,000 members. Local 506 represents approximately 8,000 workers in trades such as cement finishing, waterproofers, pre-cast erectors, welders and other construction technology occupations.
These are among the highly skilled men and women who literally built Ontario's highways, roads, high-rises, schools, hospitals, water and sewage systems and other parts of the public infrastructure that have led to this province having one of the world's best standards of living.
We in Ontario have indeed been fortunate in the past to have had a well-developed public infrastructure which has contributed enormously not only to the economic performance of our province but also to our environmental wellbeing.
The problem is that currently, along with the other workers in the construction sector -- and you heard from some yesterday -- we are facing very high levels of unemployment, levels as high as 60%, which have been with us now for a number of years. Many of these workers have exhausted their unemployment insurance benefits and now are forced to claim welfare. They, along with their families, are certainly not enjoying the standard of living they rightfully deserve.
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Construction workers understand as well as anyone the impact of the recession. This is at a time when our investment in public infrastructure has not kept up with the province's needs or with the levels of investment by many other jurisdictions with which we compete; in other words, at a time when much construction work needs to be done. Our infrastructure is becoming quite old. The bulk of it has been around for 30 to 40 years. Much of it does not meet current safety and environmental standards, is inefficient and wasteful and is quickly deteriorating.
The lack of infrastructure development will clearly affect the economy and the quality of our environment. A specific example concerning members of the Labourers' union is the quality and quantity of roads and highways and of our water and sewage systems. If new investment is not made, it is clear that Ontario will not be able to pursue the economic growth to which we have become accustomed and to enjoy a safe, clean environment.
We note that one of the Ontario government's own publications, Public Investment for Economic Renewal, admits that over a quarter of the province's watermain and sewage pipes are over 50 years old and are therefore near the end of their useful operating life. It goes on to say that many of these watermain and sewage pipes are suffering from a high rate of breakdown. About a third of the province's pipes are between 25 and 50 years old which will lead to increased requirements for rehabilitation in the future. In addition, the publication reminds us that this infrastructure will not meet the rising environmental performance and safety standards of the future.
This same publication claims that over 60% of our highway network has poor or substandard pavement conditions and that about one quarter of our 3,000 bridges require repair and upgrading. This does not even include the much-needed Highway 407 development which we so anxiously await to relieve the traffic congestion across the top of Toronto.
All of this is happening when the government of Ontario's capacity to invest in infrastructure through tax dollars is diminishing as demonstrated by the fact that the infrastructure investment in Ontario is lagging behind the growth in the economy as a whole and thereby having the effect of making Ontario a less attractive place for companies to invest.
We must consider the impact of infrastructure development on the workforce. Unless Ontario moves to get on the leading edge of infrastructure development and retrofitting, workers will not have opportunities to be trained and gain experience in state-of-the-art equipment and technologies. The need for a highly skilled workforce which formed the impetus for initiatives such as the Ontario Training and Adjustment Board will simply not be given a chance to be satisfied.
Without work, people who have invested an enormous amount of energy, time and effort to learn trades will leave the construction industry permanently. Many of them will not find new jobs. Young people considering careers will not look at construction as a viable option for long-term employment.
The solution: The construction industry has been devastated by the recession and there's no indication that there will be a quick reversal of the situation. The recession has forced labour, business and governments to rethink how we operate and challenges old assumptions and ways of doing business. Bill 17 provides an excellent example of this by providing new opportunities to achieve positive results, by forging new partnerships between the public and private sector.
This why the pension fund and Labourers' union view Bill 17 and its four crown corporations with optimism. We believe by creating crown corporations like the Ontario Clean Water Agency, the Ontario Realty Corp, the Ontario Transportation Capital Corp and the Ontario Financing Authority new sources of financial investment and ideas to fix the problems we have described can be found.
We know there is much construction work needed in Ontario. Perhaps we won't see the kind of building boom we saw during the 1980s, but there may be another boom possible in the redevelopment of Ontario's public systems that we described earlier.
We understand the importance of getting this work done soon from the perspective of the economy and the environment and, frankly, directly in terms of work for the people in the construction industry.
We know from our discussions with various industry leaders that even though these crown corporations have not been created, there is already interest in making private investments in public projects like the development of Highway 407 and the retrofitting of buildings and facilities to be managed by the clean water agency. They are serious because they believe the returns can be very positive. We have already seen evidence of public buildings saving on water and energy through the insulation of new systems with fast payback periods for dollars invested. Sometimes full return on investment can be seen in as short a time as three to five years.
Business also knows that investing in new infrastructure leads to new business opportunities, and for us that means jobs. In addition, we believe the kinds of initiatives that could result from Bill 17 represent real opportunities to keep Ontario at the leading edge of technology and in a position to be able to export our knowledge, equipment and techniques. Members of this committee may not be aware that the Ontario construction workers have a worldwide reputation for innovation and quality. We cannot afford to lose that advantage.
The potential benefits of the bill include spinoffs beyond the interests of the workers in the construction sector we represent. The manufacturers who supply the equipment for the projects, the people who transport the products, the people involved in research and development, the engineers, the architects and so on will also gain enormously from the new investment in public infrastructure.
We have briefly outlined how we view the potential of Bill 17 as benefiting our economy, environment and jobs. We believe the government has a positive vested interest as well. By increasing its partnerships throughout the private sector, the government will be able to undertake projects more quickly than it has in the past. It will also realize real tax savings and be in a position to share in diminished investment risks with other more expert partners.
In conclusion, the Ontario construction industry has recently faced some of the toughest times in its history. Our workers are suffering rates of unemployment more usually associated with underdeveloped economies. This situation does not have to continue. We have before us a real chance to put our people back to work in a way that will benefit not only these workers but the quality of life of all Ontarians. We urge members of the committee not to delay passage of Bill 17. The crown corporations it will empower must get on with the job of renewing Ontario's infrastructure and create employment that we depend upon.
Thank you for your attention. We will be happy to answer any questions. I apologize that our message remains the same, but our message does remain the same.
Mr Sutherland: No need to apologize for that.
Mr White: Thank you, Mr D'Agostini, Mr Principato and Mr Landry. I come from a community where labourers are very active; I won't bother going through all their names. I'm struck that with the recession working people and businesses have been able to get together and say, "Look, we need this to happen in our community, we need this building, we need this kind of investment," and really substantively work together, come up with new projects, new dynamics such as you described, Mr Landry, with this bill.
Sometimes you have to repeat that message 4,000 or 5,000 times so people understand it. Businesses financing operations are willing to work together in ways that produce the product, get it on the table, in a sense, much more quickly. I'm wondering what your experience is in that regard in Toronto. Do you see people being eager to move forward to use the kind of mechanisms that will now be available for financing, to get the product on the table?
Mr Landry: In fact we do. We do know, for example, that there are a number of companies that are very interested in the Highway 407 development. They're waiting at the starting gate, anxious to go on that. We also believe that you'll see some partnerships with labour on that and other projects, the partnerships governments always talk about where business and labour, with the third partner being the government, come together on projects like 407 and retrofitting to save energy.
The construction industry has in fact a long history of working with its contractors to a positive end. If you look at, for example, the training facilities that labour's unions have put together with the contractors, they're quite remarkable, despite what people talk about, labour-management tensions. I think the spirit is there and right now, with the added rate of unemployment, the spirit is more than anxious to get going.
Mr White: Thank you very much. Again, I caution you that you needn't be apologetic about having to repeat that same message. Obviously, as you can hear from the people who preceded you and from some of the comments opposite, that message has to come through time and again.
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Mrs Mathyssen: I'm going to be hopefully complementing Mr White's question. Yesterday the Board of Trade of Metropolitan Toronto was here and said that while it supported new financing in terms of projects, it didn't believe that the private sector would be as ready and willing to contribute in a recession as it might have been a few years ago.
That I think flies in the face of some of the evidence that you've been presenting and clearly the need for upgrades, the fact that there's a ready and willing labour force out there and a genuine need. For example, I just received a news release that a hospital in my riding is going to do some energy conservation upgrades that will employ people in the riding and save them $71,000 a year in water utility bills.
You mentioned Highway 407 in terms of there being ready and willing public money. What's your sense of other sectors? Is the Metro board of trade being perhaps a little pessimistic?
Mr Landry: I don't know if they're being pessimistic. All I know is that in the number of people we represent there is a fair level of interest in retrofitting, and I think in fact you're seeing almost a sector in itself coming together around this. There are companies that are specifically in the business of retrofitting public buildings like hospitals, and earning their profits off the energy savings. As soon as there's a profit to be made, people will be there with proposals.
I don't understand the logic. The numbers you gave at the hospital in your riding is a clear example. There are substantial savings to be had here. Most of this infrastructure is ancient and is wasteful. That's why, when I hear some of the arguments about this is going to cost more and more, nothing can cost possibly more than the systems we have in place now that are wasting electricity, wasting water, breaking down constantly, causing snags on the 401 etc. That's what's going to cost us money.
Mrs Mathyssen: So if we set aside this traditional and perhaps ridiculous posturing, we can make great gains in this province.
Mr Landry: I think that people, certainly the people we speak on behalf of in the construction industry, are just anxious to get going with stuff.
Mr Wiseman: I was interested in your presentation. I read the one that was made the other day on infrastructure and the need for restructuring of infrastructure and the rebuilding of it. I think, in terms of where you're focusing, that is a good place to focus because some studies being done on demographics clearly indicate that the kind of housing expansion that took place over the last five years from 1986 to 1990 is not going to happen again.
In fact, the demographics would clearly indicate that there will be an inward migration by the population towards maintenance apartments or condominiums or some kind of structure such as that, and since we can't afford subdivision building anyway, because it just leads to higher taxes for everybody, the reconstruction of sewers and roads and so on is going to be the main focus. For example, in Pickering they have $50 million worth of road reconstruction that needs to be made and they don't have the money to do it.
I think that you and your organization are right to focus on that issue as the main area of jobs in the future because it's clearly not going to be in what has been traditional and we really have to rebuild this structure. I know of some towns in Ontario that are still using wooden pipes for water and sewer. Have you done any work in terms of analysing the demographics and what that could mean in terms of trends and where the thrust should be?
Mr Landry: We haven't done any work on demographics other than that we, like you, watch what's happening out there, and we realize that a lot of the development that drove our economy isn't going to happen any more. Again, as our brief pointed out, there remains a lot of work to be done. The demographics, our interest is just looking at the age of the stuff. I mean, you talk about wooden water pipes. It's hard to believe that a province that thinks of itself as being upfront and progressive would have this situation. So we don't have any studies to show the demographic information that you talked about, but I think it's fairly evident to everybody. Demographics of travelling in Toronto: If you're a truck driver going across the 401, you don't need a demographic study to tell you something's wrong here.
Mr Phillips: I have a quick one. Maybe Mr Daigeler might have one. I wanted to comment on not delaying the bill, just to assure you that personally, you can check Hansard, back in December I called on the Premier in the Legislature to get the bill to us so we could deal with it expeditiously. You can see by the date on the bill it wasn't until May 17, almost six months later, that the bill was finally tabled. I was pushing on behalf of our party to see the legislation so we could deal with it in committee back in January, February or March, and if it had merit, to move on it earlier.
The second comment I make is that we are dealing with the bill this week. We'll deal with clause-by-clause. So there won't be any delay in dealing with the bill, and the government can introduce it when it wants to introduce it for third reading. I will, though, and you've been here, indicate that we see merit in the bill, but we have some real concerns with the bill -- I think you heard the previous presentation by the Hospital Association -- about what they're doing with the finances. We see, as I said earlier, merit in some of the construction. The 407 concept I think has merit; it's a creative way of raising money. The sewer and water one may have some merit. But we have some severe reservations about the hospital one which is encompassed in this bill. So I wanted to tell your group.
My son-in-law, by the way, is a unionized labourer. I'm not sure which local. He may be with your local. So I have some appreciation of the difficulty of finding work, personal understanding, and a lot of empathy with the group.
I guess my question to the group is, in terms of annual expenditures to refurbish the infrastructure of the province, has your group any advice for the Legislature? Right now the province is spending around $4 billion a year. Is that adequate, totally inadequate? Any sense, any advice to us as people who see it first hand?
Mr Landry: It's hard to know whether $4 billion is adequate; it's a big number. But I think, based on our observations of the state of much of our infrastructure, obviously we could do more. We could be taking advantage of new technologies to be more efficient. But we don't expect it to come from the tax dollars in that direct sense. That's why what is exciting about this initiative is that you actually can find investors who are willing to participate in the risk, which may, then, increase the amount of money that is going into public infrastructure, which is fine. That's the kind of thing that we'd like to see happen.
It's pretty hard for us, though, to make a judgement of what "adequate" is in terms of a system this size. I think what you'll see happening is that once these agencies are up in place all sorts of interesting, unpredictable initiatives are going to spin out of it, and that's what we're hoping for.
Mr Daigeler: Again, thank you for your interest in trying to get the economy going again and get construction going. I think we're all agreed on that. You're saying that there's already interest in making investments in public projects like the development of Highway 407. I think we've seen that there has been some evidence reported on in the press. But then you go on to say also in "the retrofitting of buildings and the facilities to be managed by the clean water agency." Can you elaborate a little bit on that as to what those private interests might be? I haven't seen or heard anything.
Mr Landry: I can't elaborate on who the private interests are. I know that we have, as a firm, been approached by people who are interested in exploring this with the agency, people who are setting up the agencies. We're trying to arrange meetings. That is private money, and they're looking into how they can make investments that will benefit their companies and so on. I'm not free to say who that would be, but from our experiences a number of people are already expressing interest in this. The member, Ms Mathyssen, talked about a specific example of why companies may be wanting to invest in infrastructure renewal. We are very confident, based on the people who have approached us, that there's going to be some action here, but I'm not at liberty to say who.
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Mr Daigeler: Why would that not be possible presently?
Mr Landry: Why isn't that possible to say who presently? Because people are exploring what they're going to do with their investment dollars, and until they've made a public commitment that's not for me to announce it for them. All I know is that we have been approached and a number of other people have been talking to governments to find out what's going on with these projects and, in fact, we know already there's construction out there. There are companies in this business who are making a living retrofitting, so --
Mr Daigeler: I must say I still am not clear. Obviously there are people who would like the job of doing the work.
Mr Landry: Yes.
Mr Daigeler: We're talking about investment dollars, people who would like to invest, I guess, in these projects and get a return for it.
Mr Landry: Exactly, because if you invest in retrofitting and the arrangement is that you share in the benefits of the retrofit -- for example, if the water costs go substantially down and you, for investing in retrofitting that building, get a return on it. At some point, it all returns to the crown and the building is then after a point operating more efficiently. But, obviously, if you're going to be investing in this, if you are a company in the business of doing this, you want a return. Those companies are very interested because they know the state of the system.
Mr Daigeler: What you're saying is that they would expect a cut in the energy savings, for example.
Mr Landry: Well, there are companies that do it now. I have a brother-in-law who's in this business in another part of the province and they make their profit off the savings on the water. They invest the upfront and make the profits for a certain period of time that's reasonable. After that point, then the public building, or whatever they're doing, they gain the benefit permanently. But that's what they do.
The Chair: Mr Cousens or Mr Arnott. Mr Arnott.
Mr Arnott: Thank you for your brief; it's a good brief. It repeats some of the things that have been brought forward to the committee over the course of the last couple of days, but it's a very good brief.
I'm just wondering what your membership is comprised of. Are most of your members involved in engineering and municipal construction or institutional construction, residential? What's the breakdown? Is it a mix of all three?
Mr Carmen Principato: Well, I think it's institutional. We have, I would say, 50% of commercial and residential at the present time. I think residential is today's -- not the better, like commercial. Commercial is, as you know, the building -- there is no more office building in the city of Toronto, or I would say in Ontario, and that's where the number will be with other local unions, not only the labourers of 506. Carpenters, electricians, plumbers, they all get fed off this recession today. That's what the number, we believe 50% is what we call commercial.
Mr Arnott: From the bill, I expect that the 407 project as a result of this new mechanism will be expedited, without question, but that's the only specific project the government has indicated will be expedited as a result of the bill, and I'm just wondering if the bill is going to benefit the people in the union to the extent that you hope. But you have every confidence that it will.
Mr Onorio D'Agostini: It would certainly benefit the pension fund because we cover all the sectors. Certainly, this fund will cover Ontario and, of course, the maritime provinces, but all the Labourers' unions in Ontario, they're participating in the Labourers' Pension Fund of Central and Eastern Canada, so it doesn't matter which sector is going to come up with work; we will benefit from it.
Mr Arnott: My next question is to the parliamentary assistant: Is there another specific project that you can make reference to?
Mr Sutherland: Well, if we move to the previous presentation, and the question is: How much public infrastructure investment should we be doing at this time and how much can we sustain under the current mechanisms? We believe that these corporations give us a new financial instrument to allow us to sustain significant capital investment during these difficult economic times and particularly difficult times for government revenue. So besides the Highway 407 project, water and sewer projects may be done quicker and sooner than they would have been done, because the money wouldn't be there otherwise. The USH sector construction projects, again, may be able to be done now, where they may have to wait four or five years until additional funds come in. So there is more than just the Highway 407 project, and more projects will come on stream much sooner as a result of these mechanisms than the traditional ones.
Mr Arnott: That's what you anticipate.
Mr Sutherland: Yes.
Mr Mammoliti: Are you sceptical there, Ted?
The Chair: Order. Go ahead, Mr Principato.
Mr Principato: I think you just touched a good point. The water treatment plant which -- as you know, we've got 60% of our members out of work, not only the labourers and the carpenters who have the same situation as us. Like you said, maybe that's one field we can look at right now and rebuild the sewage plant, rebuild the water treatment plant today. This will assist us.
That's a lot of concrete work, a lot of cement work, all kinds of electricians. Name it; we could be there. That's the important thing for us today. If we can put 400 or 500 members back to work, that helps, because the revenue coming in, the pension fund which is involved in this structure now, money goes into it because of the pension and so forth. This is the important thing that we really ask you people today to consider. This is very important and crucial to us today.
The Chair: No further questions? Thank you, gentlemen, for coming. We appreciate it. You bring a human face to this debate. We appreciate that very much.
For committee members' information --
Mr Hope: Don, did you hear what he just said about you? You're a non-human face over there.
Mr Cousens: It had to come at some point.
Mr Arnott: That was a rhetorical question.
Mr Cousens: That's the answer to it.
The Chair: Order. The committee, of course, will not be sitting this afternoon, in order to give members an opportunity to consider the testimony that has been presented to us and to draft any amendments they may see fit. The committee would appreciate any amendments that any of the members or parties have and would appreciate it, if possible, to have those amendments tomorrow morning so that we may all consider them. Of course, members always have the ability to make amendments as they see something that piques their particular interest.
I'm waiting for one moment. I'm told that the ministry is on its way down with information that members have asked for. As you recall, a number of members have asked for specific information, and the ministry is busily trying to get here with the appropriate documents so that you'll have those to study this afternoon.
Mr Phillips: Just while we're awaiting that, the parliamentary assistant indicated that a schedule 4 agency is very different than workers' compensation. I look at the Ontario government agencies accountability framework for schedule 3 and schedule 4 agencies. Schedule 3 is what WCB is, I gather, and schedule 4 is what we're talking about here. Under "accountability," as closely as I can read it, the accountability is word for word in schedule 3 and schedule 4. I can't see a different word.
They both say: "Legislation sets out mandate, memorandum of understanding documents, expectations and reporting requirements. The Provincial Auditor may review operations, subject to review by the public accounts committee and legislative committees on agencies, boards and commissions. All schedule 4 agencies" -- the other one says "all schedule 3 agencies" -- "must develop a three- to five-year corporate plan. These plans set out strategic direction, performance criteria, major expenditures and commitments, the final requirements to be approved by treasury board, a crown agency to be stated in legislation."
The board composition is identical. I can't find any wording difference between a schedule 3 and a schedule 4 agency, and that's why I continue to say that as far as I can determine, these are similar to, if not the same as, the workers' compensation.
Mr Sutherland: If I could just respond, I'd have to check for sure. I thought you had indicated earlier regarding schedule 2 agencies versus schedule 4, not the schedule 3, in terms of Ontario --
Mr Phillips: That's the WCB, and the WCB, I'm told, is a schedule 3 agency.
Mr Sutherland: I thought it was a 2. I know Ontario Hydro is a schedule 2. In terms of the differences I was trying to talk about earlier, whether they're a 2 or a 3 in terms of the accountability framework sheet you have before you, I understand they are very similar. There is a little different mandate in terms of particular schedule 2s. Hydro and the compensation board can be policymaking organizations setting their own polices. The schedule 4 agencies tend to be more primarily service delivery operations and don't have as strong a policymaking framework. There's accountability there.
The other degree of accountability is, as I've reiterated several times, the minister's ability to issue directives that the schedule 4 agencies -- both with the other piece of legislation, OTAB, schedule 4, and under the legislation here they can issue directives which the corporations must follow. My understanding is that with the others, particularly schedule 2s or 3s, the same obligation is not there in terms of the overall pieces of legislation that the minister can issue directives under. My understanding is that they can follow them or take them under advisement as the agencies see fit.
I think there are some differences. They may not be totally explained in the document you're looking at. In the copy I have in front of me, they do indicate that there are similarities between them, but I think there are some differences.
Mr Phillips: Do you have a different document than I have?
Mr Sutherland: No, I'm just looking at the same document you are. But in terms of when you look at the actual legislation and you look at the accountability frameworks put in here, and also in terms of the other schedule 4 agency, the training and adjustment board, which, I believe, you were involved with in the hearings, along with myself, we had some of these similar discussions about the accountability. We talked about some of the differences in that piece of legislation versus the comparisons to other agencies such as Hydro and workers' compensation in explaining the differences in accountabilities.
Mr Phillips: I just go by what the government publishes here, and they look identical.
The Chair: If there's not further business before the committee, I would note that the ministry has supplied us with responses to the questions that have been asked. I'm sure members will be very interested in those.
Mr Sutherland: Could I just elaborate? There are two questions that aren't involved in this package. There aren't responses there, but they are going to be provided tomorrow morning.
Mr Phillips: Could I ask, on the five-year plans on the -- yes, that's good.
Mr Sutherland: Okay?
The Chair: Thank you. Anything further? If not, we'll see everyone tomorrow morning at 10 o'clock sharp in this room to commence the clause-by-clause.
The committee adjourned at 1144.