1987 Legislative Session: 1st Session, 34th Parliament

HANSARD

The following electronic version is for informational purposes only.

The printed version remains the official version.

Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)

THURSDAY, DECEMBER 15, 1987

Morning Sitting

[ Page 3011 ]

CONTENTS

Routine Proceedings

Miscellaneous Statutes Amendment Act (No. 5), 1987 (Bill 68). Committee stage.

(Hon. B.R. Smith) –– 3011

Mr. Jones

Mr. Williams

Hon. Mr. Brummet

Hon. Mr. Couvelier

Hon. Mrs. Johnston

Ms. Smallwood

Mr. Rose

Mr. Loenen

Legislative Assembly Allowances And Pension Amendment Act (Bill 69). Second reading

Hon. Mr. Veitch –– 3017

Mr. Rose –– 3017

Hon. Mr. Veitch –– 3018

Property Purchase Tax Amendment Act, 1987 (Bill 60). Committee stage. (Hon.

Mr. Couvelier) –– 3018

Third reading

Assessment Amendment Act, 1987 (Bill 67). Committee stage. (Hon. Mr. Couvelier)

–– 3018

Mr. Clark

Mr. D'Arcy

Mr. Rose

The House met at 10:09 a.m.

Prayers.

MR. JANSEN: Mr. Speaker, in the House today is a good friend

and supporter from Vancouver, Michael Cytrynbaum. Would you please make

him welcome.

Orders of the Day

HON. MR. STRACHAN: Mr. Speaker, I call committee on Bill 68.

MISCELLANEOUS STATUTES

AMENDMENT ACT (No. 5), 1987

(continued)

The House in committee on Bill 68; Mr. Pelton in the chair.

HON. MR. STRACHAN: Mr. Chairman, the orders of the day point out that the committee adjourned on

section 38, with

section 22 postponed.

section 38.

MR. JONES: Just one further brief comment on this section.

It seems to me that this is an interesting mix of private and public

enterprise, and I think it would be more appropriate for something to

be presented from this side of the House, rather than the government

side. Certainly we've seen of late on the government side a mania with

privatization: wanting to privatize the public assets of this province.

We've seen from government a tremendous increase in funding private

schools in this province. We've seen a reduction in the term required

for the establishment of such schools. And we've seen an increasing

marriage between the Ministry of Education and the independent schools

of this province. However. this is for the government a curious mix of

private and public enterprise. I think it is not an unreasonable one.

The minister assures me that there will not be a cost to the taxpayer

for this particular program; that the initiative came from a school

board in this province, so obviously there was good consultation there.

So in light of that, Mr. Chairman, I have no real difficulty with

section 38 of this bill.

MR. WILLIAMS: It does seem strange, Mr. Chairman, to see the kind of flaky detouring that goes on in this administration in one short year.

MR. RABBITT: Shame!

MR. WILLIAMS: Shame? What else would you call it? You've got

this mad drive to the right over here saying "Sell it off, sell it all

off." Nothing will be left of B.C. Hydro but the wires, that's all. And

then you say: "Ah, but we want our schools to go into business." Come

on! What do you stand for anyway? You stand for whatever flaky idea you

heard this morning. That's what you stand for over there.

Don't shake your head, Madam Minister of Municipal Affairs. You know, you've

got a boss that's ideologically driven except that every now and then he

just lets go of the wheel. It veers from the right, then lets it go to the left

for half an hour, what the heck. "Let's have some fun here; I get bored

with consistent policy." That's what is going on over there.

What sense does it make? How many school districts have we got in British Columbia? Thirty of them?

MR. JONES: Seventy-five.

MR. WILLIAMS: Seventy-five. Seventy-five school districts can

go into business. If I were up in the Nass, I'd be interested in some

little diversion down in Tahiti. It has all kinds of interesting

possibilities, and if I was a school board member, I'd be very

interested in making visits to Hong Kong. Fascinating. Wonderful. But

what's it all about?

[10:15]

AN HON. MEMBER: Privatization.

MR. WILLIAMS: Privatization, yes. Now if I had to think about

the most unlikely businessmen in British Columbia — and I hope the

teachers will forgive me — I might pick the teachers. Oh, and we're

getting some applause over there on the government side. But that's

what you're saying — that you want them to go into business. And where

do you want them to go into business" Why, in the toughest, competitive

little entrepot in the world. Hong Kong. Some might even think you had

a twisted sense of humour in terms of that.

Come on, let's 'fess up. Your boss heard this idea and said: "Well,

that's fantastic. Imagine the schools going into business. Why not?"

And you know, it has the ring of truth, doesn't it? You can just see

it. The back bench can see this is the way business is done in British

Columbia these days. Sure, we're selling everything else off — but why

not? Let's get the teachers into business. Come on! When there's so

much to be done in terms of doing a proper job, setting standards of

excellence, getting kids going on into university and avoiding the

dropout problem and having our problems in the regions where the kids

don't get to universities and colleges — the worst in the country,

pretty well.... We've got serious problems here, right at home, and

we're not dealing with them satisfactorily. Why should you give this

diversion to a few elite school boards that would like to try marketing

their product in the Far East? Come on!

What are they really selling? Are they really selling the world's

greatest expertise in education? I would hope that's so, but I don't

think so. What we're really selling is some kind of free, open province

and some kind of future immigration ticket. Isn't that what we're

really selling, if we're honest with ourselves? Is that what we should

use education for? I don't think so. Some kind of narrow bridge out of

a colony that is going to disappear within a decade. I don't think so.

It's clear that it's just another flaky idea that happened to get

through. Somebody in the lineup at Fantasy Gardens buzzed in somebody's

ear one weekend morning, and it was a fine idea, why not?

MR. RABBITT: Shame, Bobby!

MR. WILLIAMS: Shame! Yeah.

That's how some of this happens. It's very clear. There is no

consistent policy direction in this province any more. It's erratic; it

is an erratic game. That same erratic stuff....

[ Page 3012 ]

You've moved him out of this building this week.

You've managed to get him lots of appointments, so we won't see him all

week, because the erraticism was becoming all too clear last week. I'm

sorry that the Premier is not here today to back up his latest clever

idea that he heard some weekend morning; because that's clearly where

it came from. I can't believe for one minute that this came out of the

people who really want to build a better educational system in British

Columbia.

HON. MR. BRUMMET: I believe we are making progress, but the

remarks of the member from Burnaby.... He apparently, since yesterday,

has read the legislation and now understands it. It would be most

helpful if the member for Vancouver East would also read the

legislation so that he might understand it. I'm sure he would then

support it as well. It's interesting how that member, in not

understanding the legislation, has talked about privatization efforts

in British Columbia through this measure. The legislation clearly says

that this is one step in the Pacific Rim initiatives in education to

try to get a better coordination between the Pacific Rim countries and

ourselves, and this is one step to say it can be done only outside the

province.

MR. JONES: I want to thank the minister for helping educate

me. He did send me some information on the Pacific Rim initiatives

program. I have it here, and as soon as I master Mandarin Chinese I

will fully understand all the implications of this legislation. Perhaps

this is how communication happens in cabinet. Perhaps this was the

communication between the Premier and the Minister of Education, to put

the bug in his ear to come up with this program.

What I clearly indicated to the minister yesterday I'll reiterate

today; maybe it's not clear and maybe it requires a number of

repetitions. I have some difficulty — and the reason I don't have any

trouble with this aspect is because the minister assures me that it's

not a cost to the taxpayer of British Columbia — with a $12 million

program that is not focused on the problems in our own backyard, and I

hope the minister understands that. In my view, the Pacific Rim

initiatives have not changed since yesterday or the day before or the

day before that.

This particular aspect which we're focused in on now — not in

principle in second reading, where I clearly communicated to the

minister my difficulties with this program.... As far as

section 38

goes, because there is no cost to the taxpayer and because it was

initiated by a school board in this province, I don't have any great

difficulty with it. I don't know if it's the direction we should be

going, but because it's not going to be a burden to the citizens of

this province, I'll have no difficulty supporting it.

But on the $12 million I have serious questions that the minister

has not yet answered, and I would hope for an answer at some time.

MR. WILLIAMS: The minister's an old teacher, a former

teacher, and we're all ears and willing to listen more. He has shown

such tolerance the last couple of days. If he has a great educational

job to do, he can maybe start with the Legislature.

Isn't what you're really saying, Mr. Minister, that the private sector

hasn't done the job here and that the public sector should get out there

and move into that world of competition? Isn't that what you're saying?

No, that's not what you're saying. You're letting the school boards

go into business. You want them to get into for-profit education abroad. Is

that correct? You're shaking your head no.

HON. MR. BRUMMET: Have you read it?

MR. WILLIAMS: Have you read the legislation — that's the way

I read it. Maybe you can explain it. You want them to go into business

abroad and you want them to make a buck.

That's clear, and you're starting in Hong Kong. That's clear from

what you've said anyway. Where does it all lead to when you're dealing

in public policy — that's what you want to know. And you can wrap it up

in all that gauze and cotton batting and say, "Oh, it's part of our

Pacific Rim initiatives stuff," but come on! You're sending them out

into that wild world of free enterprise and competition, and where is

it going to lead?

Is it any more than an immigration ticket in the end? You haven't

answered that. Is that the real appeal of a British Columbia

institution in Hong Kong — an immigration ticket? I think so. Well, say

that that's the game you're in, that that's the business you're in,

that that's what you want this province to be. Say so; don't put it in

all that Pacific Rim initiative stuff.

How much money do you want them to make? What do you want them to

use the money for? Where will the profit go? If it's going to be a

for-profit institution, what's the profit going to do? Is it going to

benefit that school board in British Columbia? Will it be dissipated in

school boards flying back and forth to Hong Kong? Where will it go?

Those are reasonable questions. Where would your next target be in

terms of a British Columbia school abroad?

Is it only in the places where you think a big buck can be made, or

might it play some social role in some interesting way somewhere else?

Some of my friends have mentioned Managua. That's a fascinating idea,

but would this minister approve a British Columbia school in Managua,

Nicaragua? Or are there some clear biases here that just see this as a

fast buck game in a colony that's going to disappear within a decade?

HON. MR. BRUMMET: It's tempting to let some of these

ludicrous statements just pass. The member has said that we're getting

teachers to go into business. The teachers will be employed like they

are now — by the school board. He missed that point.

The second one is that the school board isn't going into business.

They're allowed to incorporate a company to run this school. They're

not allowed to loan them any money, and there are all kinds of

protections there. I guess the member for Vancouver East has his own

vision that there's got to be something wrong if the government is

doing it, so he's translating it to suit his purposes. I think you have

to read all sections of this section.

MR. WILLIAMS: Let's settle this. We've had a hundred years of

public schools in British Columbia, and never before has any

administration in this province seen the need for a private school

corporation to be established out of the public school sector. All of a

sudden you birds do.

Interjection.

[ Page 3013 ]

MR. WILLIAMS: Come on! For a hundred years we've had a system that has served us reasonably well, and now

HON. MR. BRUMMET: Read 3(a).

MR. WILLIAMS: "Is located outside the province." I understand

that, Minister. You have been playing the game all morning long as if I

didn't. You haven't been listening clearly if you think that's what the

problem is. I know you're talking about some facility abroad. Is that

the point you're trying to make?

Interjection.

MR. WILLIAMS: Yes, I do understand that, and that's why it

concerns me, Mr. Minister, because we have never before had a British

Columbia school from the public sector abroad. We have a lot of private

sector schools already that cater to these needs, and do so reasonably

successfully.

What is it? You just think there's a buck to be made, so the public

sector should move into it? You shake you head and smile, but how do

you tally that against all of the other ideological garbage we've been

listening to for many months now in terms of privatization? It does not

fit at all. As I've suggested, if it's anything more than an

immigration facility, I'd be surprised, because in the end that's what

a lot of the exercise is with private schools in British Columbia.

That's why they have appeal. It is a preliminary immigration game. You

may bang your head all you like, but that's the reality.

How can you explain, all of a sudden, the need after a hundred years

for us to establish some kind of educational institution abroad?

MR. LOENEN: You're a dinosaur.

MR. WILLIAMS: Let's hear from the member for Richmond (Mr.

Loenen) then, Mr. Chairman. If he thinks it's a dinosaur idea not to

endorse this proposal, then let's hear from him. Let's see why he

stands for this exercise of enterprise in the school sector, in terms

of them making a buck in Hong Kong. Why?

HON. MR. BRUMMET: How long are you supposed to prolong this?

MR. WILLIAMS: You're not giving us any answers, Mr. Minister.

That's what I'm saying. You're supporting the idea that it's just

another flyer from the Premier that you're going along with. Shake your

head all you like. That's what we get: no consistent policy out of this

administration; zingy flyers all of the time. This is one of them.

There are 75 school districts. Have you got all 75 of them asking

for this privilege, or one or two that see a fast buck being made on

the lower mainland?

[10:30]

Interjection.

MR. WILLIAMS: That's the way it looks to me, and it doesn't

seem straightforward at all. It seems gloriously inconsistent, which is

the pattern we get out of the Premier of British Columbia.

HON. MR. BRUMMET: I would just like to explain that I have

tried to answer the questions that have been asked that are relevant.

The accusations and all of the speculation about what other things are

being generated in that member's mind, I can't answer those, because

they aren't questions. You can't answer something that has no basis in

fact or intelligence.

Sections 38 to 45 inclusive approved.

section 46.

HON. MR. COUVELIER: I thought it important to rise and make a

few comments on this particular section. There are currently 23 court

actions in process or pending regarding refunds of tax paid on

explosives and fuels which have been disallowed on the basis that they

do not qualify as direct agents. The potential revenue loss from these

claims alone is $31 million. If no amendments are made, more claims can

be expected as a result of the Canada Cement Lafarge Ltd. court

decision, leading to further erosion of revenue and prolonged

litigation. Therefore there is a retroactive tax ruling implied in this

section, and I wanted to so alert the House.

Sections 46 to 53 inclusive approved.

section 22.

HON. MRS. JOHNSTON: Mr. Chairman, in response to a question

put forward by the member for Surrey-Guildford Whalley (Ms. Smallwood),

I would like to clarify the properties involved in the exemption.

There are two zones on the property now: a public assembly area and

a residential area. The public assembly area is being used for

educational purposes and is the only area covered for property tax

exemption. The property classed as residential area is presently up for

zoning to permit development of 180 townhouses, but it is not included

in the exemption.

MS. SMALLWOOD: Just one further question. Basically, this

amendment includes the name of the Bible Fellowship Housing Society.

Then it goes on to explain that the property that will be exempt is

only property being used for educational purposes. Can the minister

tell us what part of the property held by the housing society falls

under educational purposes?

The other question I asked the minister yesterday was why this

school is getting special privilege. Why is it receiving exemption

comparable to a public school?

HON. MRS. JOHNSTON: I thought I had clarified that point

yesterday. It isn't getting special exemption. It is still liable for

local improvement taxes and fire and drainage charges, which would be

levied against other properties. They are getting the same treatment as

other educational facilities. The legal descriptions spelled out in the

bill would cover the properties qualifying for the exemption. To

qualify for exemption, the property must be used for educational

purposes. I don't know how much clearer I can make it. There is a

school on the property.

MR. WILLIAMS: Could the minister advise us what happens with respect to this land when it's not used for this purpose?

[ Page 3014 ]

HON. MRS. JOHNSTON: It would then be called upon to pay taxes if it was not used for educational purposes.

MR. WILLIAMS: Could you advise us where it says that in the amendment?

HON. MRS. JOHNSTON: Under

section 20(l), "college property

means land and improvements that are owned or leased by the college or

by the Bible Fellowship Housing Society on behalf of the college, but

'college property' does not include land and improvements used or

occupied by the college for any purpose that is not an educational

purpose". Only property used for educational purposes will be exempt

from taxation.

MS. SMALLWOOD: I would like further clarification. This is

the third time I've asked this question. The only difference in this

amendment to the previous bill is the inclusion of property owned by

the Bible Fellowship Housing Society. A housing society is not a

society that is held for educational purposes, unless of course the

purpose of the housing society is to educate people in housing. I am

unclear as to the purpose of including the Bible Fellowship Housing

Society in this amendment, if indeed the government is not exempting

the housing society from paying taxes.

HON. MRS. JOHNSTON: Mr. Chairman, it seems to me somebody's

looking for a bogeyman underneath the bed. Part of the property is

registered in the name of the Pacific Bible College; part of it is

registered in the name of the Bible Fellowship Housing Society. Only

the property used for educational purposes is exempt, under this bill,

from the payment of taxation. I don't know how much clearer you can get.

MR. WILLIAMS: It's just a matter of clarification. Has the housing

section always been in separate title under the housing society, or not?

HON. MRS. JOHNSTON: Mr. Chairman, my understanding is that it

has been; and that's where we slipped up when the initial bill was

brought forward in '84-85. It was not determined at that time that

there were two ownerships for the property used for educational

purposes. We did not realize at the time that part of the property,

because of the separate ownership, did not qualify for the exemption.

So we're really cleaning up what we thought we had accomplished in

'84-85 when the original bill was introduced.

MS. SMALLWOOD: In discussions with the municipal collector, I

was told that the property is one roll; that the original bill in 1985

only named the Pacific Bible College; that it did not name the Bible

Fellowship Housing Society; that the property held by the housing

society has continued to be taxed since 1985; that the housing society

has not paid taxes since 1985; that upon the tax sale being initiated

in September, the housing society paid half, to postpone it; that the

whole title, the property in whole, is not listed under two separate

names as two separate parcels, but is one parcel under two names; and

that the whole property was up for tax sale, not just the portion held

by the housing society but the whole property.

This bill exempts from taxes the properties held by the Pacific Bible College

and the housing society. They are not separate. They can't be treated differently

unless they are separate titles held separately by the two organizations. This

bill exempts a housing society; it wipes off the taxes. In 1985 this government

excused the taxes. Now again we are excusing past taxes, and saying that they

don't have to pay taxes if it's used for educational purposes. What

educational purposes are being conducted by the housing society?

HON. MRS. JOHNSTON: Mr. Chairman, it would seem to me that

the land titles office registration showing the ownership of the

property is not what should be up for debate here. It could be owned by

Joe Blow...

MR. WILLIAMS: Or Bob Williams.

HON. MRS. JOHNSTON: ...or Bob Williams, or whomever.

What we are saying is that when the original legislation was

introduced, there were two registered owners of the property. For

whatever reason we were not made aware of the ownership or

part-ownership of the Bible Fellowship Housing Society. It was our

understanding that all of the property was registered in the name of

the Pacific Bible College. We are not, in this amendment, giving the

Pacific Bible College anything that we didn't think we gave them in

1984 or 1985, whenever the initial bill was brought forward.

So to clarify again: there are two zones on this property. Part of

the property is zoned for public assembly, and you can have more than

one zone on one piece of property. You can have a portion of one parcel

zoned for public assembly, and it appears that this is the case here. A

portion of this property is zoned for residential use. Only the portion

that is zoned and used for public assembly falls under this exemption.

My assistant has talked to Wayne Vollrath, the municipal clerk,

Dennis Atkinson, the municipal treasurer, and Ken Greenwood, the

municipal tax collector, between yesterday and this morning in an

attempt to clarify, and this is the information that was brought back

to me. So there's no confusion in their minds that the exemption

applies only to the property that is being used for public assembly and

educational purposes. But the property in this case happens to have two

owners, even though it is one piece of property, and for whatever

reason we seem to have omitted any reference to the Bible Fellowship

Housing Society.

It seems that the word "housing" is throwing you off and causing you

concern. Hon. member, I would be concerned if I thought that we were

somehow giving non-educational-use property an exemption. But I'm

satisfied, with the information that has been brought back to us from

the municipal hall today, that only the property being used for

educational purposes continues to be eligible for an exemption. I don't

think I can make it any clearer than that.

[10:45]

MR. ROSE: I haven't had much of a chance to read the

transcript of what went on at the private bills committee some two

years ago, but I think there are some pertinent things here.

At that time Reverend Hunt applied for forgiveness of a certain

portion of his property. I asked him and he said: "The $100,000 is a

forgiveness of the swamp and the creek, is that right? Municipal

property taxes." The argument at that time was that he wanted

forgiveness because it wasn't any good for anything. He was given a

forgiveness of $100,000 back taxes

[ Page 3015 ]

going back to 1979, according to this information

that I have here. Again, I admit that I haven't had a chance to go

through it with a fine-tooth comb. When this thing came up I recalled

that, and our chairman here was present at that meeting as well. So

there's a lot of money changing hands around here.

At the time there were some school taxes forgiven as well, and I

want to be very careful about this because I haven't found it in the

transcript. I would hate to ask for this to be stood again, but

nevertheless it seems to me that there were school taxes here. Why are

we concerned about the school board? What is the significance of the

twenty thousand? And then the clerk, Mr. Izard, answered that. He said:

"If I could answer that...because I brought it up. The reason why I

suggested the school board be contacted is that we contacted the Surrey

council, or at least the municipal clerk, who had advised us there was

no problem from their point of view...."

So the Surrey council at that time had no objection to forgiving

about $100,000 worth of taxes, $20,000 of which was school board taxes.

At that time my recollection is that Reverend Hunt was a member of the

school board, which hardly seems to me what we'd call an arm's-length

relationship.

Anyway, what he got back for his swamp and his creek — no mention of

the fact that it was a single title or a double title or two pieces of

property — was $100,000 which was forgiven on that piece of property.

And I guess it's been forgiven ever since. Well, that's what this says.

At the same time we were having tremendous restraint in the school

board budgets, especially in Surrey because they were about $1 million

a year short. The formula delivered $1,000 less per student than they

really needed.

We're forgiving school taxes to this outfit. We just didn't think

that was quite ethical, as a matter of fact. There's a lot more to

this, if we had time to go into it. There's a good deal more to it. Can

I have the minister's assurance that if this portion of swamp and creek

as described in this thing.... Are we going to get the $100,000 back?

If we've got the forgiveness, now that we're going to change it....

We'll perhaps change its zoning into something that might be suitable

for residential development; it was nothing but a swamp and a creek and

worthless and full of alligators the last time we heard about it. I

invite the minister to go over it and see what the debate was and what

we were told. I don't think that the witness — in this case, Mr. Hunt,

and he also, I believe, had legal counsel with him — was quite upfront

with us there. I would have a great deal of.... I won't vote for this,

because I can't vote for it. Can the minister assure the House that the

money that was forgiven will be paid back?

HON. MRS. JOHNSTON: Mr. Chairman, I'm not aware of $100,000

being forgiven. I've been trying to explain that because of the way the

original legislation was drafted, showing only one ownership, they have

never been able to qualify for the exemption that we thought we had

given them at that time — strictly because of the property ownership.

We agreed to it, we went through the Public Accounts Committee, the

legislation came into this House, a unanimous vote approved it. Because

there were two registered owners, because of that technicality, they

have never been able to receive the exemption. I'm just trying to

clarify that with this amendment and clear up the technical oversight

in the preparation of the original legislation. There is nothing new in

this bill that wasn't proposed and supported by the Public Accounts

Committee in the report that you're reading.

MR. ROSE: With respect, I would be very pleased to share this

document with the minister. I just don't have a chance to make a copy

of it right now. Let me read from one other point. This is a testimony

that took place — and I can give you the date and the page number and

all the rest of it. This is from May 29, 1985.

"MR. ROSE: And you owe the school board something like $48,000, or you could be liable for that if this bill doesn't pass.

"REV. HUNT: That's correct.

"MR. ROSE: What we're authorizing is a forgiveness of

an indebtedness of something like $48,000 for schools and $3,000 for

hospitals and $600 for the GVRD, and we're saying to the citizens of

Surrey: 'You make that up some other way for those costs. We want to

give this money to Reverend Hunt and his school.' All right? That's

essentially what we're talking about, isn't it? Am I stating it fairly?

"REV. HUNT: Mr. Chairman, the word usage that I would

be using for that situation would be that these exemptions should have

been properly given at a much earlier date.... "

Reverend Hunt said they should be properly given at a much earlier

date; what the minister giveth, she now taketh away. It's another

minister,

Interjection.

MR. ROSE: Oh, I'm sorry. The minister is getting a briefing.

Could I read that part? Mr. Hunt responds to me: "The word usage

that I would be using for that situation would be that these exemptions

should have been properly given at a much earlier date." If they should

have been properly given at the much earlier date. now you're saying

that you're taking them back. So collect it. I think it's a scam that

up to $100,000 — maybe double that by now – has been forgiven

incorrectly. I think that the committee itself wasn't given all the

information which we needed at the time. I think that what we should do

here, if the House agrees, is to stand this one more time until the

minister has a chance to look at this material; then we can come back

to it. It may be that it's clearing up a wrong, but if the wrong was

perpetrated and the citizens of Surrey, their schools, their schools

and hospitals have been deprived of a certain amount of money over the

years, then I think we are entitled to have it back. I'd like the

minister to think about that.

HON. MRS. JOHNSTON: I see no point in standing it down. I

recall the discussion that took place. I read the report that resulted

from the committee meeting that was held in '85, and somewhere along

the line.... The members opposite either don't understand or don't want

to understand what we are attempting to do here. I think it's very

unfortunate if the anti-private school prejudice comes through in

dealing with this particular legislation. We have many private

institutions in the province that are dealt with in exactly the same

way we are attempting to deal with the Pacific Bible College. But for

reasons unknown to me there appear to be two ownerships. We are trying

to correct that because until we correct it, the Pacific Bible College

does not qualify for

[ Page 3016 ]

the exemption that this Legislature thought it had given them in '85. That's clearly and simply all we're doing here today.

MR. ROSE: I would just like to correct the minister gently

about the anti-private school bias. We are pro public school, and

nobody here will ever deny that. But I would like to find in all these

bills one instance of a college — including Trinity Western and these

other foundations, and including this bill — that we voted against. We

did not. What I'm concerned about is: did we vote without proper

knowledge of what was going on? I submit that we probably did, and it

has nothing to do with whether we're pro or anti a particular form of

education. We have these schools; they exist. As long as they provide

the proper curriculum for young Canadians, it's the parents' choice. We

could argue that one all over again, and I don't intend to do that here.

But that's not the point. The point is that I don't think any group

— whether it's a church, a school, a lodge, a synagogue or a temple —

should be forgiven on grounds that might be specious. It's not clear in

my mind yet, because we have had very little opportunity to refresh our

minds on this. This thing came in on Friday, we began to debate it

yesterday, and we didn't have the background. Even the minister stood

it down because she didn't have the background. One should not impute

motives to hon. members.

MR. LOENEN: I would just like to say that from my

information, this is a pure technicality. If you want to debate the

concept.... We've heard the House Leader of the opposition say that

perhaps we're depriving the other residents and citizens and taxpayers

of Surrey of some needed funds. This concept of exempting private

educational institutions and churches is well-embedded. It happens in

every municipality all the time. If this were a school rather than a

college, it would be dealt with at the local level. I'm sure there are

all kinds of private schools in Surrey that have the benefit of having

their property that is used for educational purposes exempted. There's

nothing mysterious about it. We're not depriving anybody. This

particular

section before us is of a purely technical nature.

MR. ROSE: Let me try to enlighten the hon. member by quoting

again from the transcript. I could quote, but I won't. I could find it

here somewhere, but I won't bore you with that; I'll just repeat what I

said earlier. When I asked Reverend Hunt whether he was asking

forgiveness on the school, he said no. He was interested in getting an

exemption on the swamp and the creek. It wasn't the property used

for.... His argument was quite the contrary. He was getting the benefit

for the school, which is legal. Nobody objected to that. But it was the

swamp and the creek. I said: "Is it the swamp and the creek, where the

alligators are? Is that your allegation?" And he said: "Yes, that is

correct." And you can look in here.

HON. MR. VEITCH: Who's the alligator?

MR. ROSE: Reverend Hunt — and he came without counsel, I'm told.

MR. LOENEN: I don't know what transpired in the hoary past. All

I know is what's in front of us, and we're talking about that chunk

of the property which is used for educational purposes. I think that is a well-established

precedent in our society. It happens all over the place and there's nothing

mysterious about it.

MS. SMALLWOOD: On the request to stand down, I think that

it's a legitimate request, given the fact that we haven't had an

opportunity to look at the debate when the first exemption happened. I

want to point out again to the member from Richmond — who seems to be

functioning as the representative of the housing society or the

minister — that the question here is: why is a housing society looking

for exemption for an educational facility? Why is a housing society

holding property in an educational facility? That seems to be a pretty

basic question that needs to be answered before this House goes about

exempting such an organization from paying taxes.

MR. WILLIAMS: Just for clarification, if the minister could

advise: as I understand it, then, it's a jointly held title but a

single parcel of land, and the ownership was with both the college and

the housing society. So it was not clear, then, where the breakdown was

between these two owners, in effect — who are probably the same people.

[11:00]

HON. MRS. JOHNSTON: Probably.

MR. WILLIAMS: It would seem, then, that the problem could be

that wherever that imaginary line between the housing society and the

college would be, it would be flexible. We don't know, but it could be.

It's something between those two owners, presumably. It's not a matter

in land registry; it's not a matter in Surrey municipal hall. It's

between those parties.

HON. MRS. JOHNSTON: If I understand correctly what the member

has asked, it's how and who will draw the line. I can tell you that

when I was on Surrey municipal council, if there was a large parcel of

land with only a portion of it being used for worship or education, the

municipality determined which portion of that land should qualify for

the exemption and which portion of the property should not. I have to

assume that that is probably still the case.

MR. WILLIAMS: That helps clarify. It would seem that their

problem — just for clarification purposes — is that because of the

joint ownership, the municipality has not since 1985 given the

exemption even for the college part. Is that correct?

HON. MRS. JOHNSTON: That's my understanding.

MR. WILLIAMS: So this, then, clarifies it and gets it limited

to the college, and that's it. But we have that interim period of time

where it's unclear, since the legislation came in previously. Does that

mean that these two institutions are going to pick up that tax bill for

that intervening period?

HON. MRS. JOHNSTON: This takes it back for the taxation year

1985, to coincide with the initial legislation. Anything prior to 1985

that may have been given by way of forgiveness or grant would have been

done by the municipal council, using their other authorities; it

wouldn't be anything to do with the provincial government.

[ Page 3017 ]

Section 22 approved on division.

Title approved.

HON. MR. VEITCH: I move the committee rise and report the bill complete with amendment.

Motion approved.

The House resumed; Mrs. Gran in the chair.

Bill 68, Miscellaneous Statutes Amendment Act (No. 5) 1987, reported

complete with amendment to be considered a the next sitting of the

House after today.

HON. MR. VEITCH: I call second reading of Bill 69, Madam Speaker.

LEGISLATIVE ASSEMBLY ALLOWANCES

AND PENSION AMENDMENT ACT

HON. MR. VEITCH: In moving second reading of Bill 69, I would

say that there really are two aspects to this bill. The bill would

clarify that the Board of Internal Economy, established under the

Legislative Assembly Board of Internal Economy Act that was passed

earlier in this session, has the power to determine the indemnity and

expense allowances of members of the Legislature and certain members on

both sides of the House who occupy designated positions of

responsibility, such as the Leader of the Opposition, the Speaker, the

Deputy Speaker, the Whips, the official opposition House Leader and

some other sundry positions.

[Mr. Speaker in the chair.]

The Board of Internal Economy initiated a salary and expense

adjustment for members and these designated persons in September of

this year. No further increases are contemplated at the present time.

At that time the basic salaries of the Members of the Legislative

Assembly were increased by 3 percent effective November 1, 1986, and a

further 3 percent effective April 1, 1988. In addition, the allowance

for the Leader of the Opposition will increase from $24,762 to $30,000.

The other part of this bill is to increase the salaries of the

Premier, members of the executive council and parliamentary

secretaries. Members might care to note that no increase has been

forthcoming to the Premier, members of the executive council or

parliamentary secretaries since 1982. In fact, in late 1982 the

designated salary was rolled back by 10 percent as a restraint measure,

and remained so to this day. Prior to that, I believe all salaries were

rolled back by 10 percent in 1976.

The increase to the Premier, the members of the executive council and the parliamentary

secretaries is specifically set out in the bill, and I want to assure the House

that these adjusted salaries are by no means out of line with salaries paid

to similar persons in other jurisdictions. In fact, in balance they are quite

modest. This bill will increase the Premier's salary to $45,000 per year.

This will make the Premier's salary comparable to that paid to Premiers

in Newfoundland and Ontario. It will be less than the salary paid to Premiers

of Alberta and Quebec.

Insofar as ministers are concerned, the salary of $39,000 is roughly

comparable to that paid in other jurisdictions such as Quebec and

Alberta. Inasmuch as there has not been a salary increase in almost six

years and the....

MR. WILLIAMS: Where are your friends, Elwood?

HON. MR. VEITCH: I hope I have some on the other side when I need them.

Inasmuch as there has not been a salary increase in almost six years

and there were rollbacks of 10 percent and these increases are

statutory and not likely to be changed again at an early date, it is

readily apparent that these adjustments are warranted at this time. I

move second reading.

MR. ROSE: I don't know why it is, but I always get the job of speaking to these things.

Interjections.

MR. ROSE: Well, I rather hope I am. It is very difficult to speak about these things without sounding self-righteous.

MR. WILLIAMS: But you'll try.

MR. ROSE: I'll do my best, although it is a quality for which my party is well known at times.

Everything that the minister has said about the rollbacks and no

increases applies equally to MLAs, not just to cabinet ministers. So if

you can justify an increase of 3 percent for MLAs, it is very difficult

to justify 8 or 9 percent for cabinet ministers. However, few of us are

without sin in these matters, and when we're dealing with our own

salaries we sometimes have a double standard. I think it's going to be

very difficult for us to support these rather large increases in

cabinet salaries.

The other parts of the bill are fine. No time that I have ever heard

of was the right time to raise salaries for elected members. I have

been involved in these things since about 1970. I’ve been through three

federally and two provincially. I thought we had this matter settled

with the Board of Internal Economy. Before 1982 we thought we had this

whole matter settled for cabinet ministers and MLAs, because we had a

formula, and the formula was tied to the cost of living. A formula of a

similar kind operates in Ottawa, and it clicks in just the same as the

increases to the old age pension — without any debate, without any of

this business about our rewarding one another and rewarding ourselves.

Because everybody knows that politicians never deserve a decent income.

Your Premier is going to get the magnificent sum total of perhaps

something like $80,000. Is there anybody in the NHL who makes less than

that? So we can certainly argue on both counts.

AN HON. MEMBER: The guy running the Zamboni and the organist.

MR. ROSE: The Zamboni driver.

At this time of restraint and high unemployment and all the rest of

it, I don't see how we can support that kind of raise for cabinet,

because people are losing their jobs, people are lined up at various

charities, and we hear it on the air all the time. So it's not the

right time again, and it never is.

[ Page 3018 ]

I think we could handle this very easily if we would set up an

independent commission. If the commission rather than ourselves made

these decisions, if we were tied to some sort of judicial rate, or

something like that, it would be far better than this messy business,

because we chicken out all the time. We chickened out in 1982 and

ruined a perfectly good formula. I wasn't here at the time, but there

was a little bit of grandstanding for a rollback then. Consequently,

we've been stuck ever since until we had the Board of Internal Economy.

I would like to make it very clear to all the press, including the

Province newspaper, that the board had nothing to do with the cabinet

raises. We're not part of that.

While ours was a modest 3 percent, for which we got criticized

roundly, this certainly is excessive. The minister says that it is not

likely to occur shortly again and this is really catch up. I think you

could use that argument on all the salaries. The fact is that it far

outstrips percentage wise the award to the MLAs. As a matter of fact,

it comes on top of it.

While we approve and applaud the Board of Internal Economy and

approve some raise for members of cabinet, we think it's excessive and

wish they hadn't done it. On the basis of

section 4 anyway — I know

we're not dealing with the sections now — it would be very difficult

for me and my party to support that.

HON. MR. VEITCH: Mr. Speaker, the hon. opposition House

Leader is quite correct: there are few without sin. He stated that

there was no correct time for wage adjustments.

When one considers the salaries of executives.... Indeed, he

mentioned a perhaps not so significant player in the NHL and the

salaries that we're given. I don't see the salaries paid to the Premier

or members of the executive council as excessive in any way, shape or

form. When one considers the salaries of some of the people we employ

in government service, they're not excessive but they are certainly far

and above the salaries that members of the executive council get.

While the opposition House Leader mentioned that the Board of

Internal Economy gave adjustments of only 3 percent to members, there

was an adjustment for other members. The Leader of the Opposition was

one of those, and that adjustment was $5, 248 or 17.46 percent. So it's

not without precedent.

I agree that there is no right time, but I still believe that these increases are warranted. I move second reading.

Motion approved on division.

Bill 69, Legislative Assembly Allowances and Pension Amendment Act,

1987, read a second time and referred to a Committee of the Whole House

for consideration at the next sitting of the House after today.

[11:15]

HON. MR. STRACHAN: I call committee on Bill 60.

PROPERTY PURCHASE TAX

AMENDMENT ACT, 1987

The House in committee on Bill 60; Mr. Pelton in the chair.

Sections 1 to 11 inclusive approved.

Title approved.

HON. MR. COUVELIER: Mr. Chairman, I move the committee rise and report the bill complete without amendment.

Motion approved on division.

The House resumed; Mr. Speaker in the chair.

Bill 60, Property Purchase Tax Amendment Act, 1987, reported complete without amendment, read a third time and passed.

HON. MR. STRACHAN: Committee on Bill 67.

ASSESSMENT AMENDMENT ACT, 1987

The House in committee on Bill 67; Mr. Pelton in the chair.

Sections 1 and 2 approved.

section 3.

MR. CLARK: I'd like the minister to allay my concerns,

because I think the committee struck by the previous Minister of

Finance, the industrial assessment task force.... My reading of that

report was that it was a very good one. It recommended a very

sophisticated approach to valuation of industrial property. From this

section 1t's quite clear that the Minister of Finance has rejected that

comprehensive and sophisticated approach, and in fact has replaced it

with what appears to be a very simplistic approach to the valuation of

industrial land: cost less depreciation. It seems to me that while

simplicity has its merits in terms of taxing, it may in fact

significantly undervalue industrial assets in the province.

Recognizing that at the time of significant recession, like 1981-83,

this system introduces stability and may be more adequate than what we

had, in times when the market is higher it seems to me that it has the

potential to dramatically undervalue property. Maybe the minister could

give us some justification for what appears to be a very simplistic

approach to industrial valuation.

HON. MR. COUVELIER: I'm not aware of any approach dealing

with this complicated subject that might be accurately described as

simplistic. It is true that the recommendations of the special task

force struck to consider this question over a year ago — to use the

phrase used by the hon. member — developed a sophisticated approach to

assessments. I suppose that if by sophisticated you mean difficult to

understand, difficult to police and difficult to enforce and interpret,

I would have no difficulty agreeing with the definition.

It seems to me that one of the problems we've got in this whole

issue has been for the government to adequately explain its intent as

it related to cost value and assessed value. The repeated efforts by

predecessor governments to deal with this question have inevitably

resulted in appeals being lodged on very fine esoteric nuances of

phrasing, and as a consequence we've had the courts determining.... By

courts I mean the appeal boards, so I use the generic term, I guess.

We've had other bodies interpreting our intent.

One of the obligations of government is of course to write laws, but it's also an obligation to write laws that clarify its

[ Page 3019 ]

intent. What we've done here is bring forward a

clarification of our intent, and necessarily a simplification of the

method that would be used to determine such things as costs.

I can assure the member that the recommendations submitted by the

task force he referred to were not, to my knowledge, endorsed by

anybody other than possibly the hon. member opposite. The Union of B.C.

Municipalities were on record as opposing its recommendations in

respect to determination of costs. The private sector, to a man, to the

best of my knowledge, were opposed to it. I received mail on the issue

from nearly every organization that represents industry. So if the hon.

member opposite believes that the formula suggested by the task force

was appropriate, then I suggest, were it put to popular vote, he would

be a voice of one. I don't think that there is any doubt by those who

know the issues and have studied them that the recommendations made by

the task force would not work. It was as a consequence of that, and the

absolute inability to find any common ground among the people impacted

and involved in the issue, that those suggestions were not supportable.

You had best understand, for the benefit of some of the interjectors

across the floor here, that we are liaising with not only the municipal

governments — one side of the equation — but also private industry, the

other side of the equation; that is to say, the beneficiaries of the

taxation authority and the payers of the taxes. So it is not as if

we've been involved in a one-sided dialogue here; we've been intimately

involved with both sides.

MR. CLARK: It's not surprising that the industry is

concerned; they would like to pay no tax. But one of the problems I

have is that we have a task force struck by the previous Minister of

Finance, and the people on the task force had all the credentials in

the world to deal with assessment. They gave a great deal of thought

and consideration to the problem and came up with a proposed solution.

In fact, they came up with three different potential solutions, and

suggested one. Then the minister brings in a bill that doesn't take

into consideration any of those recommendations. Maybe the minister

could tell us who came up with this formula. You struck a task force;

you don't like their recommendations. Is this an in-house

recommendation, or is this the industry's recommendation? I mean, did

this come from your ministry? Did it come from the municipalities? Did

it come from the industry? To me it seems suspiciously familiar to some

of the recommendations made by, say, the mining association.

If you're going to reject the analysis put forward by your

government's task force, it seems to me that you have to give more

rationale than to simply say that the industry is not in favour, and

you have to justify why you came up with this new approach.

HON. MR. COUVELIER: I'm always grateful to the hon. members opposite who tell us what we must do. It's informative.

MR. D'ARCY: Can the minister tell us how the government

intends to determine what the depreciation is on any particular

industrial property or the improvements thereon and, in particular, as

that depreciation relates to what the government is going to define as

the replacement cost? In other words, does the depreciation apply to

the replacement costs or the market value or the original cost?

HON. MR. COUVELIER: I wanted to verify that there's no

section dealing with depreciation specifically. I assume, therefore,

that the member is referring to the

section dealing with cost, which is

a mixture of our cost calculations less a depreciation factor,

If we take cost as defined and deduct depreciation based on the

effective life of a plant, taking into account the rate of

technological change in an industry, the result is a value that is

close to market value before adjustments for the impact of changes in

external economic conditions. The subject is very technical in nature,

and if the hon. members would like to receive a technical dissertation

that would glaze the eyes and confound the issue, we'd be delighted to

bring in some technical people to do that. I think what we should be

doing as a matter of practice, however, is looking at the issue in

global terms and trying to get some idea about the approach being taken

here.

We have developed a formula which is a mixture of actual costs,

replacement value and reproduction value. This formula does require the

production of a manual for use by the industry and by the Assessment

Authority. These manuals are now in production and will be in place

within a matter of a month or so.

For a little bit uncertain as to what amount of detail the hon. members would like.

[11:30]

MR. D'ARCY: I m not quite certain whether that was an attempt at bafflegab

because the minister doesn't understand the question or because perhaps

I didn't articulate it properly.

The example I might use is.... You see, my concern here is that we

have a government which, certainly for the first time in my living

memory, wants to move away from fair market value when it comes to

setting assessments. Certainly that was the watchword of the original

Assessment Act when the former member for Vancouver East, as Finance

minister, brought it in in 1973 or whenever it was. That has been the

watchword that the Assessment Authority has operated on, and that was

the basis that the hodgepodge of municipal assessors operated on before

that. Now we have a

section of the bill which says: "We want to go to

replacement value of improvements of industrial property, less

depreciation." Say it quickly and it may not sound too bad.

The example I would like to throw at the minister is: suppose you

have a pulp mill which cost $40 million in the late 1950s — $40 million

in 1960 dollars, let's say — and let's suppose that same mill sold in

1986 for $80 million 1986 dollars. But everyone knows that to replace

that mill from scratch in 1987, for the same quantity and the same

quality of market pulp, might cost ten times the sale price: in other

words, $700 million to $800 million.

Is the mill going to be taxed on the $700 million to $800 million or

is it going to be taxed on the $80 million? And if there is

depreciation that's going to come off that before the assessment is

set, is it depreciation off the $40 million, depreciation off the $80

million, or depreciation off the $800 million that it might cost to

replace that mill today? If the minister can’t come up with a firm

answer, we might see some glazed eyes in the boardrooms of this

province when they get their tax bills.

Just to follow with another example, what about a largely depleted

mine? Let's take the Sullivan operation in Kimberley, which has been in

operation for 80 or 90 years in this province and is largely depleted.

Unless they find some new

[ Page 3020 ]

ore — and they've been looking for it for 80 or 90 years, unless

they find something they've overlooked — that operation is going to be

shutting down in the next few years because there will be no ore at all

— not just a reduced value of ore but no ore at all. Is that operation

to be taxed on its replacement cost when in fact there is no more ore

there? That is a point that has been constantly made by the mining

association, and I would say it's a very good point to be made.

HON. MR. COUVELIER: Now I'm beginning to understand where the

hon. members of the opposition are coming from. We are evidently

dealing with

an act that was inadequately managed during their term of

office way back in the ancient days.

The fact of the matter is that this whole question of market value

is the root of the problem that has resulted in all these appeals,

combined with the downturn in the economy. It's clear that it was

timely for us to deal with that inadequacy if only to clarify what the

government's intent is in relation to the question of cost and how

depreciation should be determined.

If I understand the example given, the member talked about a pulp

mill that originally cost $40 million in 1960 dollars. It was sold in

1986 for $80 million, and the member said that it has a replacement

value of $700 million to $800 million. That's the example given. I

wonder about those spreads; it's a pretty horrendous adjustment.

In any event, aside from that question, the approach that this

amendment would take is to introduce a modified replacement value

method which assumes a 20-year lifespan of the operation. The taxing

rates are set out in the manual that I mentioned earlier and would be

phased out over 20 years.

The question of how we should be assessing new versus old facilities

is, of course, the whole basis on which the manual is constructed.

Because of the intricacies of that dilemma, there have to be formulas

arrived at; these are modified formulas — modified on the basis that

they are not true replacements. They are sensitive to the particular

industry or sectors that they are assessing, and they are managed by

professionals.

The act is not unique or different in the sense that it requires

subjective decisions by the assessors. Hopefully, however, the manual

will clarify some of these

definitions so that the number of appeals

will be reduced and there will be more certainty, not only for the

municipalities but also for the taxpayers.

MR. D'ARCY: What we've heard is a great example of bafflegab

by a minister who is trying to justify, from a socalled,

self-proclaimed free enterprise party, moving away from the concept of

fair market value for the establishment of assessments for property

taxation purposes, something which no centre or centre-left government

in this province ever contemplated. I want to get the minister back on

the straight and narrow. The fact is that the reason there have been so

many appeals, and so many successful appeals, is that the assessment

procedures have been less than adequate.

Mr. Minister, what is wrong with any property owner-residential,

commercial, industrial — having a right to have his day in court?

That's all that's been going on: people with their right to have a day

in court over re-examining their assessment. If assessments have been

too high, then there's something wrong with the bureaucratic

procedures, the yardsticks that have been applied. Let's remember that

presumably the government and the assessment authorities have the right

to have their day in court to increase assessments if they wish.

It's clear, Mr. Chairman, if we go over the history of this

machinery and equipment and industrial taxation over the past few

years, the government swung the pendulum far too quickly in the late

seventies, when the former member for Saanich was the Minister of

Finance. Industrial taxes went up far too quickly relative to other

forms of taxation. The recession hit, and the government then reacted —

the former Social Credit Minister of Finance from Saanich overreacted —

by reducing machinery and industrial tax too much, too quickly, and the

result was that there was an increase in pressure on other forms of

property taxation, as a phased-in thing carried on through to the 1987

taxation year. The result was that commercial and residential taxes

went up drastically. There was hardly a community in this province that

didn't see residential taxes in 1987 increase at a faster rate than the

inflation rate. There was indeed a certain — perceived at least —

reaction of municipal voters last October to those increases in

taxation. And now the government is saying: "We're going to take some

more money off those industrial taxpayers, because we went too far

before."

My concern is: what about the depleted mines? What about the older

sawmills? What about the older pulp mills in this province? We have a

lot of industrial operations in this province that are more than 20

years old. How do they fit into this 20-year declining program that the

minister wants to talk about? Sure, we would like to see these

operations modernized. Sure, we would like to see every operation in

the province, of any sort of industry, to be totally state-of-the-art,

1987, absolutely first-class 1n terms of any technology or industrial

efficiency in the world today. Some of them are attempting to do that.

But are they going to do that if they're looking at a taxation regime

which is going to tax them in advance, even before they get there?

Particularly when we're looking at the mining industry, when we know

very well that a mine depletes. While another mine may start up in some

other part of the province mining some other commodity, you cannot look

at a mining operation as an industrial operation in the same way you

look at a manufacturing plant that produces manufactured goods based on

raw materials in secure supply.

The whole thing, Mr. Chairman, is that the government wants to move

away from fair market valuation, and fair market valuation has been set

in the marketplace. I agree that there's a problem with industrial

properties: major ones don't sell frequently. But what is wrong with

allowing industrial property owners to have their day in court? The

industries themselves concede that most of the major appeals have

already been heard. They have been successful, in whole or in part.

What's wrong with that, Mr. Chairman? It's a democracy. Why shouldn't

people have an opportunity to have their day in court? If the

government doesn't like the court proceedings, they have an opportunity

to change the rules — and I guess that's what they're doing. But I know

of no act in this province, in my experience, which sets property

taxation assessment levels at anything other than fair market value.

Sure, the duly elected municipal authority — just like the duly

elected provincial government — has all kinds of opportunities to set

the tax rates and vary them according to the will of the duly elected

municipal or provincial authority of the day. But we have yet to see

anybody mess around with the

[ Page 3021 ]

assessment levels, based on political decisions. That's what we're

getting here. We are giving the minister of the Crown and his advisers

the opportunity to mess around with assessments based on political

considerations. Mr. Chairman, I'm strongly opposed to that, and I am

absolutely amazed that a government that likes to proclaim itself of

the guardian of the free market system and free enterprise is going to

take something away which has traditionally — in this province, in the

rest of North America and the rest of Canada — been set by the

marketplace only, and take it into the hands of the minister of the day.

HON. MR. COUVELIER: Mr. Chairman, my comments were described

as "bafflegab." I've never seen such a manufactured argument in all my

life. I'm going to tell the hon. member categorically: this government

is opposed to political interference of assessments. We join with you

in opposition to this oppression. It will never occur as long as the

Social Credit government is in power in this province.

This government also agrees with you, hon. member, that local taxes

have to have some stability and that there must be some day in court

for appellants who are aggrieved by actions of the Assessment

Authority. This government stands unalterably opposed to people losing

a day in court. We join with you in sharing the pleasures of life in

British Columbia, which ensures people will have a day in court. Of all

the nonsense — to try to fabricate a case that you and you alone are in

favour of a day in court. What absurdity! The whole act ensures that

that day in court will be fairly heard, and heard by people who are

expert in the profession.

The hon. member has ranged through

section

Section 3 has many

clauses. Obviously he was so excited that he would like some more

detail. I am prepared to provide it, if the House will bear with me.

Dealing with all the sections in

section 3, hon. member, so that your

level of knowledge is raised a little bit, I will give you further

information.

Dealing with

section 26.1 and cost, this important subsection

establishes the cost basis of the new cost-less-depreciation method of

industrial assessment being created by this bill. The new basis

replaces market-value assessments for industrial plants included in the

new major industrial property class created by this bill. The cost

basis is the cost of replacing an existing industrial improvement with

an improvement of the same size that is built to serve the current

function of the improvement and constructed using generally accepted

building materials and techniques.

In choosing a cost basis for the new industrial assessment approach,

the government had three conceptual options: historic cost adjusted to

reflect increases in construction costs since the date of construction,

replacement cost and reproduction cost. Each of these had distinct

advantages and disadvantages.

[11:45]

Historic costs have the advantage of being documented. However, if they are

not increased to reflect current construction costs, the resulting assessments

fail to reflect inflation and thereby undervalue old plants relative to new

plants. This creates serious inequities and discourages innovation and new investment.

If historic costs are increased by the rate of inflation, they will, depending

on the assumptions made, be similar to either replacement or reproduction costs.

Of these two latter alternatives, the use of replacement cost is more subjective

and provides less certain values. This is because it incorporates the impact

of technological change on value by requiring that assumptions be made as to

what type of plant would be built if a particular plant were to be replaced

today. Reproduction cost assumes that the plant will be replaced with an exact

replica and is therefore less subjective — more certain but less realistic.

The approach taken in the legislation is a compromise between

replacement and reproduction cost, designed to be as fair as possible

within the constraints of stability, certainty and predictability. It

requires that a calculation be made of reproducing the existing plant

design that permits both the substitution of modem construction

techniques and specific adjustments where buildings are not used for

the purpose for which they were originally constructed.

In order to ensure consistency of application by assessors, the

definition also provides for the establishment of cost manuals to be

used in the determination of the cost of particular industrial

buildings. The assessment is based on the market value of the land, and

the value of the improvements is determined on the basis of cost as

defined in subsection (1), less depreciation, as determined under

regulations that will be pursuant to this section.

In order to put the approach into perspective. It can be said that

by taking cost as defined and deducting depreciation based on the

effective life of a plant, taking into account the rate of

technological change in an industry, the result is a value that is

close to market value before adjustments for the impact of changes in

external economic conditions. As a result, equity in valuation is

maintained, but the effect of volatile market conditions, especially in

commodity markets, is removed from the values used for assessment

purposes.

Dealing with the question of industrial improvement, this important

subsection defines the properties to be included in a new major

industrial property class. These properties include mines, aluminum and

metal smelters, petroleum and natural gas plants, sawmills, plywood

plants, gypsum board plants, pulp and paper mills, fertilizer plants,

plastic plants, cement plants, insulation manufacturing operations,

glass plants, shipbuilding plants and cargo-loading facilities. The

intent is to include about 400 major properties. These industrial

plants were chosen on the basis of three criteria. First, they had to

represent substantial and unique assessment problems that created a

high probability that the assessments would be disputed. Second, they

needed to be major industrial plants. Third and finally. Inclusion was

generally, but not always, based on the degree to which the plants are

located in small to medium-sized communities.

This new subsection establishes the major industrial property class

to which the new cost-less-depreciation approach will apply. The class

consists of industrial improvements as defined in subsection (1) and

associated land. It is anticipated that regulations under

section 26 of

the Assessment Act will allow municipalities to levy a separate tax

rate on major industrial properties. This new subsection describes how

property in a new industrial property tax is to be assessed. It also

lays the groundwork for a long-term solution for tax base erosion, by

providing that the taxable status of industrial improvements

constructed after September 30, 1989, will be based on a precise,

regulated listing of what is and is not taxable.

In more detail, it orders that the two existing exclusions from the

property tax base do not apply to industrial property. These exclusions

are the landlord and tenant test and the machinery and equipment test.

Both of these tests are vague

[ Page 3022 ]

and subject to dispute. As a result, property has been removed from

the municipal tax base, only to have to be put back in by provincial

legislative amendments.

Section 26.1 (4). This new subsection provides for the phasing in or

adjusting of assessment values or taxes determined under the new

approach. The reason for this

section 1s that the goal of the policy is

to provide stability without increasing taxes on any particular

industrial property by a significant amount. As a result, provision for

some mechanism to phase 1n changes is necessary.

I notice from the comments and the conversations that the hon.

member who had such curiosity under this

section has glazed-over eyes

and has stopped listening. I can only assume, therefore, that the

amount of detail I'm providing isn't really what he had in mind. Maybe

I'll sit down and let the hon. member continue with his questions.

MR. CHAIRMAN: Before we proceed, the Chair understands that

the Minister of Health would like leave to make an introduction. Shall

leave be granted?

Leave granted.

HON. MR. DUECK: It's my pleasure to introduce to the House a

couple of friends, businessmen from my constituency, Mr. Jake Kingma

and Mr. Ray Feenstra. Would the House please make them welcome.

MR. ROSE: I would like to congratulate the Minister of

Finance on his oral reading. I'm less certain about his comprehension,

but we certainly enjoyed that soliloquy that we heard. At least we

didn't stimulate him into any aerobic orations like he made the

previous time.

I would like to ask the minister a direct question, if I may:

whether or not under

section 26.1(1)(

f) and (g).... Please don't read

that whole page 2 on Bill 67. Would, for instance, a new dry kiln in a

mill qualify and be considered for tax relief under this new policy as

outlined in 67? If you look at (

f) and (g), it may be the case.

HON. MR. COUVELIER: The answer is yes.

MR. ROSE: That would give it certain exemptions and certain

relief, is that true? It gives it certain relief under this bill,

contemplated on a cost basis, as explained.

HON. MR. COUVELIER: I'm not sure what the hon. member means.

A dry kiln under this

section would be assessable. Okay? And you're

asking if it would have some relief.

MR. ROSE: No. It would be assessable under this section.

HON. MR. COUVELIER: Yes, it would be.

MR. ROSE: It has a certain relief under this

section as well, has it not?

HON. MR. COUVELIER: In the sense that it would be....

MR. ROSE: The reason I asked the question was to know whether

or not it would be taxable. At the moment they aren't, because they're

not considered structures or buildings. I think that that is

unacceptable. So now you have a situation where they become taxable

because they've been tax-exempt and there's been a huge tax relief on

the basis of their definition as a building or not. They were not

considered a building, and the regional manager for the lower mainland

in the Assessment Authority was complaining bitterly that these huge

structures worth thousands if not millions of dollars were not taxable.

I wanted to get it clarified that they now are.

HON. MR. COUVELIER: They are. They weren't.

MR. D'ARCY: I enjoyed the minister's discourse. He must have

thought that this was question period and he had to fill out the time.

I even enjoyed the 5 or 10 percent of his remarks that actually dealt

with the subject that I raised.

I'll have another go at this. Let's just suppose that there is a

major industrial owner and taxpayer in this province that happens to be

operating a smelting and refining facility largely built in the 1920s.

They produce refined lead, silver and relatively minor amounts of other

elements such as gold, antimony, cadmium, bismuth and so on. Let's

suppose that they are in the process of spending $400 million to

replace this facility, which is 50 to 60 years old, depending on which

part of it you're looking at, with a brand-new, modern, externally and

internally clean operation. Under this

section of the act, are they

going to be taxed on the basis of the old facility, which is dirty and

inefficient and expensive to operate? Or are they going to be taxed on

the facility which they are installing and which may not be in full

operation for the next four to five years?

HON. MR. COUVELIER: There are many aspects to the question as

phrased, and it's difficult to give any generic answer. I take it the

major thrust of the member's question was whether this theoretical

example would experience any significant tax increase as a consequence

of these changes. I sense that's really what you're talking about.

Because if you want any more than that, we'll have to get the

technicians in to talk about the various aspects of how market value

will be determined, which is a function of cost, depreciation,

replacement and a whole lot of other niceties.

But in answer to the general question — whether this theoretical

plant would experience a significant increase in taxation — I can tell

the member that we do not anticipate that. The member would understand,

however, that by virtue of this government's initiative to elevate the

decision-making authority of local governments, to some extent this

decision is in the hands of the local government taxing authorities.

If, however, this government finds such freedoms abused, I can assure

the hon. member that there are adequate remedies at hand for us to deal

with those unexpected events.

MR. D'ARCY: I hope the minister understands that we on this

side of the House have no objection to the streamlining of these

evaluations. But simply an expression of "we don't anticipate a

problem" may be fine in here. I mean, we're all hon. members, and I

accept what the minister has to say. The question is whether Cominco

Ltd. anticipates a problem. I think that's what the real concern is out

there.

[12:00]

Let's remember the way I read the bill — and, indeed, the convoluted way the minister has gone about explaining this

[ Page 3023 ]

section — it would appear to be quite possibly irrelevant whether

the company was in fact modernizing and spending this $400 million

right now. It would seem to me they could be taxed the increased

amount, or the assessment can go up by the increased amount, even if

they weren't doing anything or even planning on doing anything. While

that doesn't apply to them, it could well apply to other industrial

operations in the province which are, as I mentioned in my earlier

remarks, in excess of 20 years of age. There are a number of those.

Altogether, I'm not finding the minister's comments on this

extremely satisfactory. Yes, of course, we know that municipal

authorities do have the option of applying variable mill rates to

industrial operations. They already have that. If they have that now,

why do we need to change this particular section? Is it to give them

more power, or is it to restrict the options of the duly elected local

authorities when it comes to taxing industrial operations?

In view of the fact that large numbers of industrial operations in

the province are obsolescent — I don't believe that's any secret

whether you are looking at the mining industry or the pulp and paper

industry or the forest industry or, indeed, some of our other

manufacturing operations — there is a great need over the next few

years for industry to find the investment dollars to modernize and

hopefully expand a whole variety of operations in this province, if

we're to maintain our ability to compete in world markets, since most

of the products of these particular operations are not sold

domestically but are sold internationally.

I have a concern that these taxation changes and these assessment

changes could restrict the options of industry in this province to

modernize their industrial plant facility across the board, which I

feel is absolutely essential if we are to maintain our manufacturing

and production levels and stay competitive in the world markets in the

late 1980s and 1990s.

The House resumed; Mr. Speaker in the chair.

The committee, having reported progress, was granted leave to sit again.

Hon. Mr. Strachan moved adjournment of the House.

Motion approved.

The House adjourned at 12:03 p.m.

[ Return to Legislative Assembly Home Page ]

Copyright 1987, 2001, 2008: Hansard Services, Victoria, British Columbia, Canada