Resource Committee

2013-06-05

Newfoundland and Labrador — Committees

PDF Version

May 6,

Pursuant to Standing Order 68, Christopher Mitchelmore, MHA for The Straits

White Bay North, substitutes for Lorraine Michael, MHA for Signal Hill Quidi

Vidi.

The Committee met at 6:30 p.m. in the Assembly Chamber.

CHAIR (Brazil): Okay, we are all ready to start. I want to welcome

everybody back to the continuation of the Resource Committee Estimates hearing

on Innovation, Business and Rural Development.

Before we do that, a bit of housekeeping; I need a motion to adopt the

Resource Committee minutes of May 6, Department of Fisheries and Aquaculture.

Motion made by the Member for Fortune Bay Cape La Hune.

All those in favour, 'aye'.

SOME HON. MEMBERS: Aye.

CHAIR: Opposed?

Motion carried.

On motion, minutes adopted as circulated.

CHAIR: Thank you.

Just going back, we had already adopted up to 2.1.04 inclusive. I noted here,

Mr. Bennett I think we discussed this you had gone through

section 3,

Business Development, Investment Portfolio of Business Development. If you are

still good with that we can move on to 4, and then Mr. Mitchelmore, I will come

back to you on that. Mr. Bennett, you can start at 3 if there is something there

that you want to touch on again.

We are starting with subhead 3.1.01, or you can go right to 4.1.01.

Mr. Bennett.

MR. BENNETT: Okay, thank you.

CHAIR: The same process will follow: we will go twelve to fifteen minutes

back and forth. If somebody has a minute or two that they need to conclude a

particular section, not a problem.

MR. BENNETT: Minister, on page 11.8, under 3.1.02, Investment Portfolio

Management. There is a figure there first of all, what does that mean,

Investment Portfolio Management?

MR. HUTCHINGS: That is basically the management of funds that we have

disbursed, in terms of that process of managing the files.

MR. BENNETT: Is it the managing of loans that have been extended?

MR. HUTCHINGS: Yes.

MR. BENNETT: Are there other investments that are managed?

MR. HUTCHINGS: Well, all investments would be managed.

MR. BENNETT: Does the department receive money and invest in something

else, say, short term, until it is decided to invest into something that would

be longer term or more in accordance with its mandate?

MR. HUTCHINGS: Yes, this would be all the money, like any kind of equity

investment, SME loans, that kind of thing. Anything like that would be managed

through this portfolio.

MR. BENNETT: Okay.

MR. HUTCHINGS: As well, I guess this would be the Fisheries Loan

Guarantee as well?

OFFICIAL: (Inaudible).

MR. HUTCHINGS: Fisheries Loan Guarantee Program as well, and some of the

old portfolios, like the old ENL, Enterprise Newfoundland and Labrador. Any

files that were left over from that would be all part of the portfolio

management.

MR. BENNETT: Would that range anywhere from entertaining loan

applications right up to collections, the whole run?

MR. HUTCHINGS: Well, the Business Analysis component would be to do with

applications and those types of things in terms of the business case and what

was applied for. Then a data analysis would lead to a yea or nay in terms of the

investment. Then that investment would be followed through the portfolio

management.

MR. BENNETT: Your department follows up for collections of payments and

that sort of thing?

MR. HUTCHINGS: Yes.

MR. BENNETT: Okay. Even in enforcement if there is a default.

Under 01, Salaries, last year $505,000 was budgeted and you used $438,000.

Does that mean somebody was not hired or a position not filled?

MR. HUTCHINGS: Do you want to take the time to explain?

MR. MEADE: What this was, Mr. Bennett, it was just a couple of clerical

positions where there were individuals on sick leave or on leave of some type,

therefore we did not pay out as much. Other than that, this would be the normal

staffing level.

MR. BENNETT: Okay.

Line 10, which is Grants and Subsidies, for the last two years there has been

$1,500 and $25,000 budgeted and revised. Where is the $3.6 million going to go?

MR. MEADE: This is where we have taken the grant components from various

other aspects of the Estimates and activities and we have consolidated here.

This would be the non-repayable grant component of our business development

program. This would be paid out through the Business Investment Corporation to

administer those non-repayable.

You may recall we have redesigned our program toolkit to have a business

development program and a regional development program. The business development

program has a non-repayable component, grants based, where we would assist

companies in productivity, technology utilization, travel, and marketing

development support. This is where we consolidated that activity here.

We placed it under Investment Portfolio Management because of the reasons the

minister gave. This is the division that manages the portfolio for the

department, so this is where we place the funds.

MR. BENNETT: Is this amount paid out in loans over more than one year?

MR. MEADE: These would not be loans, these would be grants. They would be

normally paid out within a year, yes.

MR. BENNETT: Okay. So this is the one-year allocation for fiscal

2013-2014?

MR. MEADE: Yes, it is.

MR. BENNETT: Do you know at this point who is going to receive these

funds or is this something you anticipate you will use?

MR. MEADE: This is application driven, so we would not know. We know the

type of companies, but this would be application driven.

MR. BENNETT: What types of companies are contemplated for that money?

MR. HUTCHINGS: Almost any type of company, really. We do not get involved

with the retail sector; SMEs, ocean tech companies, IT companies. What other

sectors was it?

OFFICIAL: It would be really across the board.

MR. HUTCHINGS: Across the board, really. Yes.

MR. BENNETT: Is there a particular size, size by sale or size by number

of employees?

MR. HUTCHINGS: That we would look at?

MR. BENNETT: Yes.

MR. HUTCHINGS: No.

MR. BENNETT: Is it conceivable that one company could get all of that

money?

MR. HUTCHINGS: No.

MR. BENNETT: How many companies would you expect to receive that much,

assuming there is a full uptake, ten or eight or twenty?

MR. HUTCHINGS: Gosh, I do not know.

OFFICIAL: It could be between 300 or 400.

MR. HUTCHINGS: Yes, a couple of hundred. Then you are looking at other

leveraged monies as well in terms of that investment, what it might look like;

so usually 300 or 400.

MR. BENNETT: These would be relatively small grants then, if it is 300 or

400?

MR. HUTCHINGS: Yes.

MR. BENNETT: You only need a few tens of thousands for that much.

MR. HUTCHINGS: Probably the most would be $100,000.

MR. BENNETT: Okay.

On the next page, Strategic Enterprise Development, what is that? What is a

strategic enterprise? Is that something you have identified, a type of business

or a region?

MR. MEADE: The Strategic Enterprise Development activity is one where in

years where we need, we would make investments in the Business Investment

Corporation so they may make loans in investments, but it is also where we

allocate funding for special initiatives that we will be undertaking. This year

it is reflecting essentially the investment in fluorspar, in the St. Lawrence

project.

MR. BENNETT: This $16 million is for one project?

MR. MEADE: It is.

MR. BENNETT: Are there amounts outstanding from other years for other

enterprises, or other companies? Is there a book of business where you put loans

out?

MR. MEADE: There would be, yes.

MR. BENNETT: Do you have a running sheet of that? Who they are, how much

they got, and how much they paid back?

MR. MEADE: Yes, we would have a running list of our portfolio. It seems

to be what you are asking.

MR. BENNETT: Yes. Is that available?

MR. MEADE: I think it would be, yes.

MR. BENNETT: Okay. In that case I would like to have a list of the I

would call it a portfolio, exactly as you call it.

MR. MEADE: Is there a certain period, Mr. Bennett, you are looking for?

Because

MR. BENNETT: Maybe over the last five years and whatever is currently

outstanding, if it came before five years.

MR. MEADE: Okay.

MR. BENNETT: Just like an ordinary investment portfolio.

MR. MEADE: Yes.

MR. BENNETT: That is what I would look at if I was investing for stocks

or something like that.

Before I go further, Mr. Mitchelmore may want to pick it up. I do not want to

get too far down the road from where he is.

CHAIR: Okay. Sure enough, we will go to

section three. Mr. Mitchelmore,

start on that section.

MR. MITCHELMORE: Okay.

CHAIR: Thank you, Mr. Bennett.

MR. MITCHELMORE: Under 3.1.01, Business Analysis, under the revenue last

year there was $300 that was actually collected. I am wondering what that was

for.

MR. MEADE: It was an error in posting.

MR. MITCHELMORE: Okay.

Under the Investment Portfolio Management you had mentioned the Fisheries

Loan Guarantee Program. How much is available in your portfolio under loan

guarantees for fisheries right now?

MR. HUTCHINGS: Yes, I do not think there is a defined amount exactly. We

entertain requests. Last year we indicated we did upgrades in regard to the

Fisheries Loan Guarantee Program in terms of the amount of capital that is

available. As well, based on some case law, the actual licences were allowed to

be used for equity. That was in consultation with the FFAW in terms of the

changes we made.

Since that time I am happy to say we have seen a significant uptake in terms

of the Fisheries Loan Guarantee Program. One of the other components was the

fact that harvesters that had been financed through processors had the option

now of using that to refinance those loans. As I said, we have had a significant

increase in uptake and it has been very positive.

MR. MITCHELMORE: I know the announcement that was made on the changes

were very positive on behalf of your department in conjunction with the

Department of Fisheries and Aquaculture. Is there a set amount of people who you

have? Are we talking about ten clients, fifty clients? Do you have a number of

the people who you

MR. HUTCHINGS: Maybe I will go to Rita Malone, the ADM. She can speak to

it.

MS MALONE: This year we have twenty-six active files either approved or

under consideration.

MR. MITCHELMORE: How does that compare with other years?

MS MALONE: Last year there were five and the year before there were five.

MR. MITCHELMORE: Okay, so you are seeing some uptake in that?

MS MALONE: Yes, very much so.

MR. MITCHELMORE: They were saying that there is upwards of $100 million

potentially available under the Fisheries Loan Guarantee? Is that the case?

MS MALONE: As the minister said earlier there is no fixed amount.

MR. MITCHELMORE: Okay.

MS MALONE: If you are asking what kind of paper would be written as a

result of the guarantee, it could easily reach that amount.

MR. MITCHELMORE: Okay.

MS MALONE: That is the total amount of the investments advanced through

the relative banks, and we have a guarantee which is a contingent liability on

that.

MR. MITCHELMORE: Okay. Understood.

The equity investments that are made under this portfolio: Has there ever

been a return or repayment on equity?

MR. HUTCHINGS: Certainly, on our portfolio, we have been seeing returns.

The Fisheries Loan Guarantee Program is an example. I think over the years there

has been a little over 1 per cent default on it. Then with the other SMEs and

those programs, we would see returns on it is all part of the portfolio

management.

MR. MITCHELMORE: Where would these returns be reflected? We are not

seeing revenue in the Estimates. Revenue would be coming back if there are

payments being made to these SME programs or equity investments in the form of

dividends and things like that. Where do these show up in your (inaudible)?

MR. HUTCHINGS: (Inaudible) the evolving nature of that fund and how it

works.

MS MALONE: We have our portfolio of roughly $50 million and it is in

place with a business investment corporation. We produce annual reports and

annual financial statements and they are also audited.

The returns of the equity and flexible term loans are reinvested back into

what it called a revolving fund. This revolving fund was put in place in 2005

and I am happy to say that it has been preforming at 3 per cent to 5 per cent in

terms of doubtful accounts or write-offs, so it is a very good return. The

portfolio is roughly balanced between 70 per cent of flexible term loans and 30

per cent in equity based positioning.

MR. MITCHELMORE: Okay.

The Auditor General, through his details and recommendations by year that he

released, said that the department should consider requiring audited financial

statements for significant investments and it says that is not completed.

MS MALONE: The individual investments, depending on the merits and the

complexity of them, we oftentimes require externally prepared, fully audited

financials. In some cases though, when the level of risk, the level of

investment, and indeed the cost for the client is really high, that we will ask

to review engagement statements.

So the AG is right in terms of suggesting that we do not ask for all level of

fully audited financial statements, but for example, for a small sawmill, that

would cost them probably $5,000 or $6,000 to do their inventory. If they are

making payments regularly and we have no reason to believe that there is

deterioration in the account, we ask what is in fact reasonable.

MR. MITCHELMORE: Okay.

What about having financial statements within ninety days of year-end? How is

that being tracked?

MS MALONE: Again, we look at the relative client. A large-scaled

processing company's fabrication with high-volume sales, sometimes 120 days,

federally, is expected, and even in the banking industry 120 days. We usually

look for ninety on most of our mainstream clients, but there are occasions where

we do grant 120 days.

MR. MITCHELMORE: Okay.

What are the actual lending priorities and criteria for extending loans to

potential clients in this Investment Portfolio Management? What are the types of

security requirements and the payback schedules that are adopted? Is there set

criteria, or does it depend based on each program that falls within this

umbrella of business investment?

MR. HUTCHINGS: The bottom line here, first of all, is the type of

operation. From an economic point of view, is it going to be productive? Then go

through the normal business analysis in terms of what types of investment we

think would be successful based on the analysis, based on our experience, based

on the industry, and certainly based on what that applicant is bringing to the

table in terms of equity. There may be other investments at some point in time.

Collectively, it is hard to say there are set particular guidelines that are

going to meet every review. It is a collection of a number of items and issues

in terms of what is going to make this look like there is risk in all of this,

obviously. A lot of times we believe in economic development and commercial

banks in many instances will not play. So we believe it is important, especially

from a rural and economic development point of view, but ultimately at the end

of the day we want to reduce the risk as best we can. If it sounds and meets our

overall objective, we will pursue it.

MR. MITCHELMORE: What is the lowest interest rate your department would

give?

MR. HUTCHINGS: Three per cent right now. As part of some of the changes

we have made over the past year, we were 3 per cent plus prime. That is based on

SME fund and things like that. As part of the retooling of our programs and what

we were hearing, now it is 3 per cent.

MR. MITCHELMORE: Will this be in competition with the Business

Development Bank of Canada, the Community Business Development Corporations, the

CBDCs, or credit unions and other institutions if you are able to give a loan at

3 per cent?

MR. HUTCHINGS: I think we are competitive now, is the best way to

describe it. Again, I do not see CBDC, per se I do not see us in competition.

We work collectively in terms of driving economic development, and some times we

will certainly promote each other's programs. We try to do it on the front lines

with our staff to make sure what other programs are there, whether they are

federal or provincial, to drive entrepreneurship and to drive business activity.

MR. MITCHELMORE: Do you take security on these loans?

MR. HUTCHINGS: Yes.

MR. MITCHELMORE: Is security registered on all of these loans and

available?

MR. HUTCHINGS: Yes.

MR. MITCHELMORE: Would that be able to be provided for business

investments that were made in the last year, the actual security that was taken

on lending?

MR. HUTCHINGS: That gets into commercial sensitivity in terms of

investors. I would not say. That is in terms of investments. You are getting

into very commercially sensitive information in terms of finances and those

types of things.

Rita?

MS MALONE: We certainly did register general security agreements, real

estate and ship mortgages alike. I do think that would be an extremely difficult

process to be revealing all of the different aspects of security in each

individual investment. At times, depending upon the level of security and the

appraisal they are in of that security in the event of default, we would be

asking for mitigation through personal guarantees, joint and several guarantees,

as well as inter-company guarantees. There would be a great deal of complexity

to the security depending upon which deal you were talking about.

MR. MITCHELMORE: Have you seized any assets in the last year?

MS MALONE: Yes.

MR. MITCHELMORE: Where would they show up? Would they show up under the

Business Investment Corporation?

MS MALONE: Yes, they would.

MR. MITCHELMORE: How detailed are the Business Investment financial

statements and things that get put forward? Would they list particular company

details and information that assets were seized?

MS MALONE: They are normally accountant prepared through the Canadian

accounting regulations and they would provide allowance for doubtful accounts.

Do they name X, Y or Z company, and how much was received on the event of

default? No, they will have used the aggregate numbers of the allowance for

doubtful accounts and the recovery the same therein. They will have an audited

statement as to the health of the portfolio and the risk therein.

MR. MITCHELMORE: Okay.

What are the other programs beside the Equity Investment and Fisheries Loan?

Would the Green Fund also fall under this?

MR. HUTCHINGS: No, it is with Environment, I believe.

MR. MITCHELMORE: Now, the Department of IBRD had been administering the

Green Fund in the past and had been promoting it through their economic

development offices in partnership with Environment and Conservation, as well.

That fund no longer exists; is that correct?

MR. HUTCHINGS: I do not think it was administered through IBRD, was it?

MS MALONE: No.

MR. HUTCHINGS: No.

MR. MITCHELMORE: I have a question about if IBRD had lent money to one of

the wood pellets from wood waste to Exploits Pelletizing. Was there an

investment made by IBRD to this company in the last year?

MR. HUTCHINGS: Yes, I do not know if we would get into one-on-one

investment, but there is some information we could certainly provide you.

MR. MITCHELMORE: Okay.

The company has posted online receiving government funds and information

there, so just knowing where those funds came from and what role the department

played.

MR. HUTCHINGS: Yes.

Do you want to go ahead there, Rita?

MS MALONE: We did an investment. My numbers may not be exactly right

because we have a number of accounts, but about $130,000 from us. Also,

Environment and Conservation did a small amount under their Green Fund at the

time. That would have been two-and-a-half or three years ago.

From my perspective, that account (inaudible) has agreed and they are

producing pellets, interestingly enough, using waste oil as part of their pellet

component for domestic markets.

MR. MITCHELMORE: Are they selling them?

MS MALONE: Yes.

MR. MITCHELMORE: Okay, good.

I have a question on the Strategic Enterprise Development piece. You are

saying that this funding here was for fluorspar. What was spent last year in the

$300,000?

MR. HUTCHINGS: Yes, that was originally for fluorspar. It was $17 million

in total. This year, I understand, the first part was to build some

infrastructure for wharf infrastructure, so the company hopes that a tender will

be called shortly to get the project started.

MR. MITCHELMORE: If I could have a list of the Grants and Subsidies under

the Business Analysis section, Investment Portfolio Management, and Strategic

Enterprise Development as the portfolio, as Mr. Bennett requested; I do not

think I have further questions in this

section at this time, unless Mr. Bennett

has some further questions he would like to ask.

Can those things be provided?

MR. HUTCHINGS: Yes.

MR. MITCHELMORE: Thank you.

CHAIR: Mr. Bennett, you are good with that section?

MR. BENNETT: I may have one or two more questions, and they may be

applicable at the next section. I just do not want to go further ahead.

This fluorspar money, this will all be paid out this year, or is that

dependent on how they perform? I know they have delay issues, but that might be

whatever.

MR. HUTCHINGS: The intention is this year, but then again, in terms of

how the project proceeds I think it is $100 million project in total, if I

remember correctly. The intent is in this fiscal year, but again, in terms of

how it proceeds.

MR. BENNETT: Okay.

Does IBRD guarantee any commercial loans, instead of using its own money, to

make them easier to acquire, basically to leverage IBRD funds and to put more

money on the books?

MR. HUTCHINGS: I believe the only guarantee we do is the Fisheries Loan

Guarantee Program. That would be where we guarantee that through the commercial

bank.

MR. BENNETT: Okay. I have no more questions on this section.

CHAIR: Okay, I am going to ask for a motion to adopt sections 3.1.01 to

3.1.03.

Motion by

MR. MITCHELMORE: Mr. Chair, I am just wondering if the EDGE program falls

under this

section as well, or is that program no longer available.

MR. HUTCHINGS: Okay, why don't you speak to that?

MR. MEADE: EDGE is actually voted under Business Analysis, Grants and

Subsidies.

MR. MITCHELMORE: Okay. So there is actually no increase in the number of

employees or companies looking at being part of the EDGE Program in this coming

year compared to what it was last year?

MR. MEADE: It would depend. We would do projections. If your question is,

are there new EDGE companies, there are.

MR. MITCHELMORE: Yes.

MR. MEADE: We would do it on a year-to-year basis. We would do our

projections on what needs to be paid out.

MR. MITCHELMORE: Okay, great.

CHAIR: Okay, we have a motion there to adopt subheadings 3.1.01 to

3.1.03.

All those in favour, 'aye'.

SOME HON. MEMBERS: Aye.

CHAIR: Contra-minded?

Motion carried.

On motion, subheads 3.1.01 through 3.1.03 carried.

CHAIR: Okay, Mr. Bennett, go to 4.1.01, or whatever

section beyond that,

that you would like to.

MR. BENNETT: Yes, Minister, under this section, Salaries has dropped by

approximately one-third. What is happening there? It has gone down from $1.25

million roughly to $840,000.

MR. HUTCHINGS: We had two contractual positions that were eliminated. We

have a manager's position and I think that is it, is it?

MR. BENNETT: What were these people doing that you do not need done now?

MR. HUTCHINGS: We had two positions that were related to the Rural

Broadband Initiative. As I said, they were contractual. At a point in the

future, we did not need a particular service. We may look at contracting service

again. Based on our experience and getting through RBI One, and the knowledge

and the people we have now, we certainly feel well equipped to move forward.

MR. BENNETT: The drop is around $400,000 and it is two contractual

positions. Were they making around $200,000 a year each?

MR. HUTCHINGS: No, I do not think that was right. There were two

contractual and one manager, wasn't it?

Why don't you go ahead, Brent?

MR. MEADE: Okay.

The contractual positions associated with RBI would have been approximately

$180,000 to $190,000. Then, again, as the minister indicated, there was also a

manager's position we eliminated in that division.

MR. BENNETT: Is that because you rolled out what you needed done under

RBI?

MR. HUTCHINGS: One of the exercises I did not speak to that they had done

was a mapping exercise in terms of a determination of what the capacity was in

the Province in regard to served and underserved areas. That is a difficult one

because it is proprietary in terms of the service providers. They do not usually

give it up.

We work with Industry Canada and through our own work here in the Province to

try to determine where there was service and where there was not service. There

was a lot of work done on that by these individuals.

MR. BENNETT: I would like to ask a little bit about synergies between

IBRD and other government departments. You have recently acquired Mr. O'Rielly.

I am acquainted with him. He still has to put up with me because he was

Fisheries before and he is IBRD now.

What possibilities do you see for synergies between what people might want in

DFA with fish waste and underutilized species, or maybe marketing or equipment,

that DFA really does not have the mandate to invest in, but IBRD might have?

MR. HUTCHINGS: Yes, we have worked with other departments. Certainly,

there are indeed synergies, as you say. Our Business Analysis component that we

do looks at investments of various types. We would do that analysis related to

Natural Resources, related to the Department of Fisheries and Aquaculture. We

look at what is taking place down on the South Coast with the aqua-fishery

industry. We have been heavily involved with that with DFA.

Under Innovation, Research and Technology, that is a key component. We look

across borders, across departments, and looking at how we can assist. If it is

in innovative, or new technologies or new industries, like I say, whether it is

Natural Resources, Fisheries, or wherever it is.

MR. BENNETT: Okay.

To go on to Natural Resources, as an example, would you fund something by way

of loan or grant? Let's say someone wanted to have a drilling program for

minerals. There is practically no drilling that I know of in the Northern

Peninsula right now for minerals, but for years there was. If somebody came to

you with experience and a little bit of capital, but needed to fund a piece of

drilling equipment, is that something you might look at?

MR. HUTCHINGS: We look at any proposal in terms of what that would be

from an economic development point of view. I do not think today we have

entertained anything like that, have we?

MS MALONE: No, a couple of years ago we were looking at something in Baie

Verte, but the client ended up being able to get it through other sources of

financing. We would certainly look at equipment, subject to a business plan that

showed some viability.

MR. BENNETT: If I can find someone who will come to the Northern

Peninsula and drill, and they have a good business plan and a little bit of

money

MR. HUTCHINGS: Send in the proposal, we will take a look.

MR. BENNETT: I should send them to you. It could happen.

MR. HUTCHINGS: Oh, yes.

MR. BENNETT: Let's hope it does.

Grants and Subsidies of $4.5 million, it was $5.7 million last year. A

million less than was allocated last year was actually put out. What happened

there? That is an even million. I do not like round numbers because they do not

tend to happen except for a specific purpose.

MR. MEADE: Mr. Bennett, this is actually an area where it is a bit

complicated in terms of what was there last year and what is there this year.

Last year's $5.7 million or $5.8 million roughly, would have included a lot

of the innovation programming that has now been moved to the other two

consolidated areas that we have referenced, the Business Development Program and

the Regional Development Program. That would have included things like money we

would have had around tech utilization, travel, or whatnot. It would have also

included $4 million in rural broadband.

This year's money, the $4.5 million is strictly for broadband. It is $1

million that was carried over from last year. We had $2 million last year of

where we only spent half of it because of the way the project cash flowed. We

need the other million this year; also, then, the $3.5 million in new money that

was announced for broadband. That $4.5 million constitutes all money for

broadband now.

MR. BENNETT: This year it is down somewhat but not that much down. What

do you anticipate doing with the $4.5 million this year?

MR. MEADE: It is all broadband money.

MR. BENNETT: Okay.

MR. MEADE: It is difficult that is why I am suggesting to you. It is

difficult to compare to say that it is down because you are comparing apples and

oranges in a way, because what constitutes the $5.7 million is not what

constitutes the $4.5 million.

MR. BENNETT: I understand. It is different projects.

MR. MEADE: Right. There are different elements, and part of that $5.7

million now is actually reflected in other activities in the department.

Specifically, elements of it would be found in 3.1.02 under Grants and

Subsidies, and some of it would be found under Comprehensive Economic

Development, 5.3.01.

MR. BENNETT: Minister, do you find that you have a line up of people who

know all the things that you have funds for? Do you have too many applicants, or

do you find that not enough people know about what you have to offer so you do

not get enough of the best applicants, or both, or neither?

MR. HUTCHINGS: As part of doing our review we committed to in 2011 and

then I coming into the department and reaching out to regional staff and

discussing with staff we have. I think there was an issue in regard to sometimes

visibility of our programs, and through that getting enough applicants coming

forward.

We have done well, but I think there is room for growth. I think with the

redevelopment of some of our programs, the consolidation, and making it easier

for the applicant, I think we will see increased growth in some of our

activities.

MR. BENNETT: Do you go through chambers of commerce?

MR. HUTCHINGS: Pardon me?

MR. BENNETT: Do you go through chambers of commerce just to get the word

out?

MR. HUTCHINGS: Yes. Definitely, yes, we use a lot of those groups on the

ground in terms of what we have available. Like I said, we work with the other

lending agencies or what are the federal ones?

OFFICIAL: ACOA.

MR. HUTCHINGS: Yes, federal, ACOA, business development, all of those. We

reach out to all of those when we can with what we have available.

MR. BENNETT: Is there any particular limit on the amount that your

department would put into one venture?

MR. HUTCHINGS: I do not think so, no.

MR. BENNETT: Mr. Chair, I could pause and let Mr. Mitchelmore go forward.

CHAIR: Okay. We are under 4.1.01.

Mr. Mitchelmore, go ahead.

MR. MITCHELMORE: Thank you, Mr. Chair.

I would like some explanation as to why there is only $4.5 million allocated

for broadband when the budget document states a much higher number, over $6

million. Can that be explained?

MR. HUTCHINGS: Yes, that was basically intended to cash it over two

years. That is the commitment of the funds, but we know from experience in terms

of picking the applicants and flowing it out -

MR. MITCHELMORE: Okay. I understand.

MR. HUTCHINGS: Yes.

MR. MITCHELMORE: It usually takes a year for them to complete the

project.

MR. HUTCHINGS: Yes. By the time you do the call, get your applicants

back, negotiate with them and finalize it.

MR. MITCHELMORE: Understood. The government Broadband Initiative that was

invested a few years back, the Auditor General states that there was not a

cost-benefit analysis on utilizing government-owned fibre. Why wouldn't

government do a cost-benefit analysis to make sure that we are getting greatest

return for our own strands?

MR. HUTCHINGS: I think originally the trans-gulf fibre was $50-odd

million in total in terms of the overall project. Our investment was around $15

million. If you even look at it in terms of the return, let alone just bringing

competition to the Province but as well having the redundancy to the rest of

North America, Telelink or TELE Greenland was established. I think EastLink

invested close to $80 million in terms of overall.

We have seen tremendous investment and everything grow from that. Even some

of our post-secondary institutions have talked about the fact that with

competition and other agencies have seen very competitive rates.

I do not know, Brent, if you want to comment any further in terms of

MR. MEADE: Clearly, the direction we have moved is to focus more on how

we can expand access to underserved and unserved areas. That has been the focus.

The Government Broadband Initiative was about how we could build a government

network. The government realized and we do differ a little bit with the AG on

this; we did do cost-benefit analysis around what it would cost for us to fully

utilize and develop a government broadband network.

We realize that the cost-benefit analysis numbers did not work for us at that

time and we should focus more on expanding our access to underserved and

unserved areas. That is why you would have seen, hon. member, a shift in

strategy in many respects a couple of years ago where we said do you know what,

let's look at us doing that.

Where we are right now, in terms of use of that fibre, that we would have got

access to as part of the Atlantic cable facility proposal, or the trans-gulf

proposal or initiative as it is commonly referred to as, we are now looking at

how we can use that fibre with carriers, with organizations like Nalcor, where

we can continue to expand access for Newfoundlanders and Labradorians.

MR. MITCHELMORE: Do we have enough fibre with our GBI and with what the

private sector and with what the RBI initiative is set to do to meet the needs

of the remaining unserviced or rural and remote communities? Are we going to

actually get coverage to all of our communities?

MR. HUTCHINGS: With fibre?

MR. MITCHELMORE: With fibre or with wireless, however

MR. HUTCHINGS: That is our intent, but not with fibre, certainly not. It

is sort of a hierarchy. It is fibre, it is wireless, and it is satellite. I

guess that has been our approach and we work with the major carriers, innovative

new companies, to try to see how we get there.

Can I say we will be 100 per cent in every region of the Province? No,

certainly not. Is it our intent to get and keep pushing it out and pushing it

out? Yes, I think over the last year or year-and-one-half there have been

tremendous improvements in terms of getting to areas of the Province. I think,

based on the funds we have in the budget, there is much more growth to come in

terms of what we can do.

MR. MITCHELMORE: I believe so too, especially moving with wireless

technology and cellular technology providers.

MR. HUTCHINGS: Yes.

MR. MITCHELMORE: I was provided a technical briefing by your staff and

they provided quite an overview of the industry, and I appreciate that. They

also talked about a map that was done. Is it possible to get the map of

coverage? They had gone and used a number of resources, whether it was through

the university or using Stats Canada sites, for showing where broadband coverage

is. Is that something that can be

MR. HUTCHINGS: Give us a little bit of time. We are almost finished in

terms of completing that map.

MR. MITCHELMORE: Sure.

MR. HUTCHINGS: Very shortly we probably could get something for you.

MR. MITCHELMORE: Great.

I am not sure if I have questions pertaining to the line items, per se, but I

was wondering when you had mentioned about the technology programs like that

Technology Utilization Program, the Innovate and Demonstrate Program, and the

Commercialization Program. Are those no longer in this section? They have moved

and have been collapsed; is that the case?

MR. HUTCHINGS: Yes.

MR. MITCHELMORE: Just because they are collapsed, that does not mean that

they are gone; it is just that there is a general fund now?

MR. HUTCHINGS: Yes, exactly.

MR. MITCHELMORE: If somebody does apply for technology, they would be

eligible.

MR. HUTCHINGS: Yes, all we need to see is the application of what exactly

they are looking for and then we will deal with the rest behind in terms of the

funds.

MR. MITCHELMORE: Do you have a benchmark set, though, where you are

allocating a certain

section of your funds for technology, a certain

section for

small-scale manufacturing, so that not 90 per cent of your funds go out the door

for technology? Do you have an idea as to what

MR. HUTCHINGS: Our Technology Utilization Program, that was about a

$600,000 program in prior years. So yes, we have a benchmark of where we have

been in prior years and we will probably be around that again, I would think.

MR. MITCHELMORE: Okay, that is good.

I do not have any other particular questions, I do not think, in the

Innovation, Research and Technology, if Mr. Bennett wants to pick up and ask

something else there.

MR. BENNETT: I am okay with four actually.

CHAIR: Okay, you can move on to the next subheading.

MR. BENNETT: Minister, five starts with rural development planning. Where

do you see rural economic development going in the next year, three years or

five years?

MR. HUTCHINGS: Our approach has been a regional approach in terms of

economic development. Certainly, we have moved to an opportunity management

perspective where there is opportunity. We have a wholesome group of staff and

expertise on the ground.

Again, it is about identifying that opportunity and determining how we can

make that opportunity grow, whether it is an SME, like Magine Snowboards out in

the Port au Port Peninsula. Three young guys came up with an idea how to make

snowboards and put them into the market. We supported that on a small scale.

They worked out of a garage and are really starting to make some move.

Whether it is bigger, in terms of regional, what we have seen, again, down on

the South Coast with the aquaculture industry, opportunities down in St.

Lawrence with the fluorspar mine, those bigger ones, or it is related to

supplier development for our megaprojects. We are seeing a lot of companies that

we help through supplier development, things like work skills enhancement and

training for technology.

So it is a whole range of things, but in terms of rural Newfoundland and

Labrador there are opportunities for that SME or there is spinoff regionally

where something can be developed in a particular sector. In Labrador, in terms

of what is happening there with the mining industry, there is huge spinoff and

huge opportunities.

We have seen in Newfoundland, across Canada, and really in many

jurisdictions, the migration to the urban centres have been far greater in other

regions; in Newfoundland and Labrador it has been less. Now, it has occurred. As

you notice, most of our programs were not cut in economic development. We

believe in economic development and continue to support it.

MR. BENNETT: If you say they are opportunity driven, does that mean that

some areas with maybe more proactive entrepreneurs might benefit more than other

areas?

MR. HUTCHINGS: Well, it is that entrepreneur who drives that activity.

Certainly, yes, to your question, I would say yes; if you have entrepreneurs,

you have investors who are coming forward and saying we see an opportunity here

and we want to work with you. We also have a Chamber of Commerce, we have

regional councils, and we have development folks on the ground who are driving

opportunity. It could be a regional sector diversification fund on the

non-profit side. We have seen tremendous work done on that in various

industries.

I think we spent $44 million and leveraged probably another $114 million, but

that is providing infrastructure to ground, whether it is for tourism or whether

it is for other SME activities to strive in growth. It is both the commercial

and non-commercial that is driving activity in rural Newfoundland and Labrador.

Yes, to your question, I see continued opportunities. High-speed obviously is

an issue in terms of business activity and entrepreneurship. It is so important,

the communication. That is why we are continually so invested in that and are

committed to it.

MR. BENNETT: Minister, in this

section Regional Development Planning for

Salaries there is $1,012,000. It is pretty much on budget; it is similar this

year. Who is doing what for that money?

MR. HUTCHINGS: Do you want to take us through that, Rita?

MS MALONE: This is our headquarters that organize the programs and

policies and monitors them. They also lead in building the teams for opportunity

management.

The minister is quite correct when we talk about, what do we do in rural

areas? We look at the regional strengths and the regional opportunities within

sectors. We tie investments and appropriate policies to helping make SME build

out occur.

When you look at a place like Labrador West, one of our investments has been

in the industrial park to build out more opportunities for small and medium

enterprise to provide the supply chain for the five big mining industries there.

We also do skills up, WSEP. We like to tout we have a two-prong approach.

This is a small core team who do a lot of engagement. I believe a few weeks

ago you would have seen a couple of the officers at an MNL event that you

attended, Mr. Bennett. I was present, as well as Minister Hutchings.

They co-ordinate; they monitor the WSEP. They co-ordinated the action plans

for business retention and expansion. We are now heavily engaged in about some

480 businesses and clusters. They monitor and organize that, and help make sure

our work plans and our reporting processes are robust and are meeting our

indicators and our targets.

MR. BENNETT: You have indicated that Labrador West is a very robust

economy right now, and maybe a lot of opportunities to access capital. Would you

see IBRD, part of its role, to advance more risk capital in areas that have less

opportunity for capital, areas where chartered banks are less likely to go, or

where credit unions may not exist?

MR. HUTCHINGS: I think the programs may vary depending on the

environments you describe. What is needed in Labrador West in terms of

programming or capital may be different than in some other area of the Province.

I have to mention the Workplace Skills Enhancement Program.

In an area where there is a lot of activity, based on the diversity of what a

company may do in SME, getting into other activities to be in the supply chain,

they may need something like that Workplace Skills Enhancement Program to

upscale their labour. Another area where there are challenges, as you said, the

risks may be greater; but if it is an opportunity we identify has potential, we

may be more inclined to invest there in that area. I think it would vary in

terms of what the opportunity is on the ground.

MR. BENNETT: Do you have a consistent underwriting for loans, or do you

have a more flexible underwriting if it looks like there are different factors

that might need to be considered that would increase the risk?

MR. HUTCHINGS: I would say we are flexible in terms of overall what that

risk is and what the opportunity is.

MR. BENNETT: In line 10, Grants and Subsidies, last year budgeted $2

million, $625,000 was used, and it is zero this year. What is that line for?

MR. HUTCHINGS: I think that may have been the Regional Economic

Development Boards, our contribution with the federal government in terms of

what that was used for. That is correct, I think, is it?

OFFICIAL: Yes, Minister.

MR. BENNETT: Does the Rural Secretariat show up here anywhere?

MR. HUTCHINGS: No, that would be under the Office of Public Engagement,

the Rural Secretariat.

MR. BENNETT: Okay.

Is there any consideration by your department to put back in place, restore,

or recreate anything that would be similar to any of the Rural Economic

Development Boards?

MR. HUTCHINGS: No, we went through a process in terms of discussions with

the federal government when they talked about doing this. We reflected on right

now what is the capacity on the ground with our staff and with other groups on

the ground, whether it is Chamber or Commerce, other voluntary groups, or

municipalities.

As well, the point to remember is that through our Community Capacity

Building, we still have assistance that is available to all volunteers on the

ground, whether it is regional planning or community planning. We still have

that there to assist them, as does ACOA, I do believe, in terms of their

programs.

At the end of the day, when we look at whether we take over a $4 million-plus

that ACOA had backed out of, we were confident that we could move forward and

drive economic development. Over the past year, we have seen no downturn in the

amount of requests or applications that are coming to us. If anything, in some

respects we may have seen an uptake or a greater increase in terms of activity.

I think we need to integrate better. The entrepreneurs you spoke about on the

ground in the business side of things to make sure we are fully connected in

regions, I think is very important. There is a role for municipalities, in some

areas a greater role, in terms of identifying and driving economic development

regionally. It is not about one small community; it is about a number of

communities in a region. If there are opportunities there, how do we

collectively drive there? Certainly, we are there to support.

MR. BENNETT: Do you see a role for any of the development associations

either to deliver services or to act as almost mini MGOs that would perform jobs

on the ground, either by direct investment or overseeing investment?

MR. HUTCHINGS: I am not sure, like a third party?

MR. BENNETT: Maybe even as an entity to borrow funds to get something

going, something if nobody in the private sector is suitable or willing to

proceed that if you had a development association, would they be able to apply

for funds the same as any other individual?

MR. HUTCHINGS: To me, that would be duplication. That already exists. We

have offices and folks on the ground, and that application comes to us now. I am

not sure you can put another line of activity and folks in there to facilitate

that; we already have that.

MR. BENNETT: I did not mean to process it; I meant to run it. I meant to

actually be the proponent

MR. HUTCHINGS: Oh, I am sorry I misunderstood the question.

MR. BENNETT: if there was not a proponent available, someone who could

actually run a community (inaudible)

MR. HUTCHINGS: Oh, like a co-op or something. Yes, certainly from that

perspective.

MR. BENNETT: Maybe a not-for-profit.

MR. HUTCHINGS: With our upgrades to RBI, down on the South Coast there

was some applicants in terms of who were the applicants for the RBI build out,

down in Grey River and a couple of areas. In Labrador, Smart Labrador is another

example of a non-profit group, describing basically what you are talking about,

that they become the advocate for the region or the applicant for the region and

they would oversee it.

We have a great relationship with the Federation of Co-operatives that we

have our MOU with. We have seen the number of co-operatives increase, if I

remember correctly, over the past couple of years. What you described yes, we

would certainly continue to support it.

MR. BENNETT: Under Field -

MR. HUTCHINGS: Just one second Rita.

MS MALONE: Thank you, Minister.

Mr. Bennett, the rural development associations that still exist in the

Province are roughly about fourteen. They are very much engaged in project

initiatives. We have invested, through our Regional Development Funding, support

on project initiatives throughout the areas that they represent.

MR. BENNETT: Many of them, as I understand it, have over the years sort

of evolved into organizations that just deliver, to a large degree, make-work

projects and they get a fee for doing this. With some of them, they may be

better off if they could do something which would be more economically

meaningful, which would also then be a profit centre for them to run their

organization with. It is sort of a move upward for some of them, but they may

need to go there or die.

MR. HUTCHINGS: Some are starting to go that route, I do believe. The

Northeast Avalon just announced the other day in terms of they are carrying on

much like you describe, I believe.

MR. BENNETT: Under Field Services, are these the officers you have in the

field? People who promote the department, take loan applications, and sit with

people?

MR. HUTCHINGS: Yes, that would be. Yes, indeed.

MR. BENNETT: Those are basically your front line people?

MR. HUTCHINGS: Yes, our regional office, all of those folks.

MR. BENNETT: The next category down, Economic Development, what does that

cover, the Grants and Subsidies of $12.5 million?

MR. HUTCHINGS: That is a revolving fund right?

OFFICIAL: That is the Regional Development Fund (inaudible).

MR. HUTCHINGS: Oh, okay. That the Regional/Sectoral Diversification Fund

I spoke about, the non-commercial.

MR. BENNETT: Yes. What does it do?

MR. HUTCHINGS: Those are the supports for non-profit groups, whether it

is in the tourism industry most of the development funds to support regional

economic development that is not commercial in my area, I think of. We have

invested in the Folk Arts Council in the building, in terms of upgrades to

Colony of Avalon in my area, in terms of providing that infrastructure that

grows visitation, or grows it to bring people into the region. That drives that

other business activity in those communities.

MR. BENNETT: Is this capital?

MR. HUTCHINGS: It could be, yes.

MR. BENNETT: Could it be operating?

MR. HUTCHINGS: No, we usually do not get that in operating. No.

MR. BENNETT: The budget is doubled year over year.

MR. HUTCHINGS: Do you want to speak to that?

MR. MEADE: Sure.

MR. BENNETT: That is not a complaint but we are in restraint. In a year

where it doubles

MR. MEADE: Mr. Bennett, this is an example of where you may remember

when we talked about under Innovation, where a number of things were moved from

the $5.7 million. I mentioned a number of things there. This is an example of

where we would have consolidated our non-commercial activity into the Regional

Development Fund.

Programming here, and you will see it as well when we go to Ocean Technology,

where there was funding once under Grants and Subsidies there. That has now been

zeroed out; it has been moved into here. We consolidated our programs into two

areas. In the Estimates now it is reflected here for the non-commercial, and the

commercial is reflected back under Portfolio Management, as we have discussed

earlier.

This would include, as the minister mentioned, the types of activities you

mentioned under the former Regional/Sectoral Diversification Fund. We would also

fund here initiatives with academic institutions. We might do something with

Memorial University around Ocean Tech or Marine Institute. We may do things with

College of the North Atlantic around any number of things, any number of

initiatives in a number of sectors that we would pursue and, as the minister

mentioned, with other community organizations or regional groups. It will all be

here.

CHAIR: Mr. Bennett, can I give you one more minute? Then I want to go to

Mr. Mitchelmore, please.

MR. BENNETT: For sure.

This sounds like when we did the Budget lockup and I asked questions of the

person from Finance. He said well, it is not gone. It is gone from there to

someplace else but you will have to ask the department in Estimates.

MR. MEADE: At the previous sitting of this Estimates Committee I think we

committed to showing you exactly where things moved, what they were last year,

and we committed to showing you how they migrated this year. We can show you in

detail where programs would have existed last year and how they have now

consolidated. We can show you that.

MR. BENNETT: Do you have a flow chart for that?

MR. MEADE: Yes, we can show you. We can submit it.

MR. BENNETT: Can you send it over to us?

MR. MEADE: Yes, we can.

MR. BENNETT: Yes, that will be easier.

CHAIR: Thank you, Mr. Bennett.

Mr. Mitchelmore.

MR. MITCHELMORE: Since we are on the Economic Development piece, under

the revised amount of 2012 it says that the Revenue Provincial was $5 million.

How did we get this $5 million repayment if this is commercial and

non-commercial activity?

MR. HUTCHINGS: That was monies that were originally allocated to Grand

Falls-Windsor for severance. When the work was done in regard to that severance

and it was all calculated, and what the actual amount would be, that $5 million

was excess. This year that was returned, or it is registered here as revised.

MR. MITCHELMORE: All of the people in Grand Falls-Windsor with the

expropriation for the severance, they all received their severance pay and

supports. You had over budgeted, basically, and this is just to clear up the

accounting?

MR. HUTCHINGS: Yes, exactly. That is to close that account out.

MR. MITCHELMORE: Okay.

Under the Regional/Sectoral Diversification Fund, you stated only non-profits

are eligible for, I guess government institutions or public institutions like

academic. That is correct, right?

MR. HUTCHINGS: Yes.

MR. MITCHELMORE: Is there a cap on the amount of money you would give

under the Regional/Sectoral Diversification Fund to any one entity?

MR. HUTCHINGS: You can go ahead and take that.

MS MALONE: We look at leverage and we have been posting roughly 25 per

cent to 30 per cent we would invest, and then we would leverage the balance from

other sources. We are looking at, in general, up to a million dollars with

$500,000 in grant per annum.

MR. MITCHELMORE: Okay. Thank you, Rita.

I just have a question for clarification, I guess. The RDC has a significant

amount of money in the bank for doing things like research and pieces like that.

Why would the academic institutions not be looking at RDC to get their money

versus the Regional Sectoral/Diversification Fund, which could be utilized by a

number of non profits and municipalities and entities across the Province? Is

there a reason for that?

MS MALONE: The RDC are doing applied research. What we do with this fund

is, for an example, if we have an industrial development opportunity, and we do,

and we require investment in the College of the North Atlantic to do academic

build out and a good example is the power line technician in Happy Valley-Goose

Bay in order to be ready for employment. That is separate and distinct from

research and development which is the stick of the R&D Corporation.

MR. MITCHELMORE: Okay, interesting. Thank you for that explanation. It

clears things up quite a lot.

Under the original Regional Economic Development Services you have listed

here, this is where the RED Board funding would have been and it is no longer

listed. There was $625,000 but it also lists this would be where

appropriations would be made for community capacity building. I do not see where

the funds would be here. Did that get moved somewhere else? How much is

allocated for community capacity building?

MS MALONE: Four-hundred and fifty for the community-based groups, and

then we have an additional seven hundred for sectors and that broader piece.

Those investments are, in fact, well intact from earlier years.

MR. MITCHELMORE: Okay. Is NLOWE also as the third party receiving funding

under Regional Development Planning?

MS MALONE: They would be one of those sector organizations, women in

business they represent.

MR. MITCHELMORE: Okay.

In terms of some of the questions, I guess, could we have a list of the new

co-operatives that were funded? I know that the Federation of Co-operatives list

about ninety co-ops on their Web site. I am just wondering if maybe there are

further updates or information there.

The Federation of Co-ops have federal funds, it seems, available to set-up

co-operatives. Are there any types of funds provincially to set up co-operatives

or that your department would assist with?

MS MALONE: We support the Federation of Co-ops through our sector

funding, around $50,000 a year. We also have a $500,000 equity revolving

investment with the Federation of Co-ops and it was put in place in 2005. That

is performing very well.

We look at investments around $30,000 in range on individual co-ops. In

addition, we have a co-op developer's network of specialists within the

department, one in each region supported by a person in headquarters.

MR. MITCHELMORE: Okay. One of the challenges I see with regional economic

development, especially with the cuts to the RED Boards, when it comes to

initiatives that are project driven that IBRD funds sometimes, a number of

groups on the ground depend on other government programs to use it to leverage

one set of funds, stacking funds basically, and maybe JCP. Sometimes one fund

gets approved. IBRD sees the merit of the business, but the JCP funding does not

come forward and therefore the project does not get off the ground.

Is there an ability where your departments are working a little closer

together to see actual commercialization of some of these activities? Some of

the activities would have significant business merit to helping rural

communities. I am asking, what role do you play in trying to help more

partnerships in cross department?

MR. HUTCHINGS: Yes, whatever the opportunity is we will certainly look at

working with that group on the ground. Sometimes we can offer them help to

leverage other funds, whether it is through other agencies or other groups to

try and make it happen.

MR. MITCHELMORE: I guess my thing, Minister, is saying that in more cases

than not your department has been approving funds for rural entities because you

see the business aspect in rural communities, but other departments are not

coming through with their level of funding that is needed, the labour component

or whatnot, to actually see the project move forward. It stagnates a lot. Is

there an ability where your department can either look at lending additional

sums or money, or how it can eliminate the stacking so that projects can

actually get off the ground?

MR. HUTCHINGS: Yes, we can view each project or we can go back to a

particular department and say can you take a look at this? Based on

what we have seen there, this looks really good. Is there some way we can

leverage those other dollars, whether it is a JCP? We have seen cases where we

have gone back and looked at other departments, or we have stepped up ourselves

and maybe contributed a bit more than we usually would, based on the fact that

we thought it was worthwhile.

MR. MITCHELMORE: Is there an ability to work with, maybe, a third party

where there are no RED Boards on many grounds? You talk about the Chambers of

Commerce and you talk about other entities that are there; when we look at the

field officers that are there, most of them are not going to be writing specific

proposals for applications they are going to look at approving funding for. That

is not a service they would provide and it seems like there is some form of

disconnect when it comes to the proposal-writing piece.

Is there an ability to maybe look at partnering with an entity on the ground?

I just look at the Rural Development Associations that you mentioned. Maybe they

are not regionally based, I know I have three in my own district, but the CBDCs;

there are fifteen of them, and they are regionally based. They also do lending

and they also work with you as a partnership.

If, for example, they had a specific staff person who would do a product

development or proposal writing where they joint shared the funds. Where you

paid someone about $50,000 and it was $25,000, you would be spending about

$375,000 to really build up communities all across Newfoundland and Labrador. Is

that something that could be discussed as an option to help Regional Economic

Development? Maybe it would not be with them, but I am saying maybe it would be

through Municipalities Newfoundland and Labrador.

MR. HUTCHINGS: You are talking about creating a core structure that you

would fund to do that?

MR. MITCHELMORE: Yes. What I am saying is you would need a third party to

assist on the ground with helping to facilitate business to your own field

staff. So by having a third party, it would help drive that and the third party

could be very low cost, if you had a partner that would also benefit. I am just

saying I think there is a real loss when it comes to on the ground with the RED

boards in many rural communities.

I know that in my own district they leveraged more than $13 million. Over the

last ten years, the amount of salaries and operations were only about $3.5

million, beyond all of the project-based work they did for other entities.

MR. HUTCHINGS: One of the things we have looked at is that capacity on

the ground. We talked about if there was some deficiency there we would look at

providing a capacity, whether it is, as you said, being able to put those

projects in, and being able to write them and put them in the proper form. If

there are other agencies there on the ground that could help with that, then we

could provide training, we could provide support, and we could provide whatever

we could to upscale groups or individuals who could do that. That is something

we certainly looked at. We have heard from particular areas of the Province in

that regard, but if there are programs that we can do or a service that we can

provide we will certainly do that.

I do not know, Rita, if you have a comment on the third party piece of it.

MS MALONE: Through our Opportunity Management process, it is not only

prioritizing what are valued, sustainable economic activities; it is also

looking at the capacity on the ground.

The minister referenced earlier our Capacity Building program. What we have

done is specific problem solving with respect to, let us say, an infrastructure

initiative; whether we have to get project management brought to bear and fund

that, whether it is technical design experiences, or whether it is building a

marketing strategy.

In one particular initiative now they are looking at doing a foundation-type

fundraising. So we are hiring legal expertise to form the foundation and then

developing a fundraising marketing strategy on a major piece of infrastructure

in this Province. What we try to do is more focus it on end solution as opposed

to a broader core kind of piece where sometimes the return investment that would

have suggested there, like $3 million returning to $13 million, is not there.

Also, I really would not want to leave the impression that we are just a

police, and that we march through the tick boxes on a proposal. Very much, our

work is piloting and trying to marshal, yet at times it means we sit down and we

help carve out initiatives. What we would have to do internally is make sure the

assessment and the carving out, that we have some distinct roles and

responsibilities there. Our proactive work and our work on the ground is helping

churn up proposals as a result of opportunities.

MR. MITCHELMORE: That is a great answer in terms of looking at the

capacity on the ground. I just feel that on some levels not all regions are

equal and that there are some regions that are going to face increased challenge

when it comes to getting service that they had previously when it comes to

regional economic development.

There were a lot of players when it comes to offering this type of service

and trying to network for so long, since 1996, I guess, and prior to that, with

Rural Development Associations, and they still exist. They were looking at

building these partnerships, building these networks, and it seems like that has

kind of disbanded now, in that it is focused on the individual type of thing,

and go direct to your department. I see that somewhat as a challenge in some

regions of the Province.

Why did the department do performance-based management for the RED Boards if

they were going to axe them? Why not keep the top performers?

MR. HUTCHINGS: Again, that is a policy issue. We have made a decision; we

think the capacity is there on the ground with any assistance we can provide as

we move forward. As I said, we are still seeing good uptake on our programming.

We are confident economic development will continue to move forward in

Newfoundland and Labrador.

MR. MITCHELMORE: Okay.

CHAIR: Mr. Mitchelmore, are you almost finished that area? If you are, I

will give you another minute or so. If not, I will move back to Mr. Bennett and

then we can come back to you.

MR. MITCHELMORE: I have a couple of more questions. You can go back to

Mr. Bennett if you like.

CHAIR: Okay.

Mr. Bennett.

MR. BENNETT: Minister, page 11.14, there is nothing left there, so it was

moved somewhere presumably or discontinued. The Canada/Newfoundland and Labrador

Business Service Network: What did that do and what does it do now, or is it

just gone?

Newfoundland and Labrador. I guess it provided walk-in service in regard to

things like start-up business, statistical information, information on how to

start a business, those types of things.

If my memory serves me correctly, I think it was last year I think that was

funded through ACOA, they announced that they would not be continuing to fund

the Canada/Newfoundland and Labrador Business Service Network.

What the federal government did, I think some of those staff were pulled back

into ACOA. We followed suit and I think we had five staff from IBRD, and it was

a rotating Chair a rotating Executive Director I guess is the proper word that

was paid for. We brought those staff back into well, actually the staff were

let go and then, through bumping privileges, they bumped back into IBRD.

On a go-forward basis, in terms of data, there were a lot of online licences

and those sorts of things where people could access that information. We worked

out with Memorial and the School of Business as well as the College of the North

Atlantic that, in the past experience, a lot of this information was being

accessed by students and young people. So, we thought that was a good venue to

have that material so the material would not be lost.

Then, ongoing, we would still pay for the licence of those different access

sites that they would have related to business and economic activity. We provide

that same service through our regional offices, as well through the head office

here in St. John's. Did I miss anything, Rita?

MR. BENNETT: Minister, through IBRD is there a place or service where

somebody could go if a person had a business idea, some money, and they wanted

to get in the business themselves? You mentioned the people with the snowboards

on the West Coast. Is there somewhere they can pick up the skills, do a quick

course that is offered that would let them learn about things like source

deductions, HST, and personal guarantees to improve their chances of success?

MR. HUTCHINGS: Yes, through this it is one thing I did not mention we

have the Canada/Newfoundland and Labrador Business Service Centre. It used to

have lunch and learns, give seminars, and those types of things.

We have taken that over and still will provide that. Like in a region if

there were some young entrepreneurs or anybody wanted to start a business on

particular areas that you are describing, if it is accounting, if it is things

to know when you are getting a business up and operating, we would go out and

offer those seminars. They would be offered around the Province to identify and

contribute to what you are talking about.

MR. BENNETT: The individuals who put these off, are they departmental

staff, or retired business people, or bankers?

MR. HUTCHINGS: They would be different kinds of resource people. From

time to time we may have a local entrepreneur who will be part of that to be

sort of a mentor in terms of experience, knowledge, and here are the things you

need to do. It will be an integration of staff and people on the ground, the

entrepreneurs.

MR. BENNETT: Are they offered regularly, or in different parts of the

Province, or on demand?

MR. HUTCHINGS: A little bit of both.

Rita, do you want to speak to that?

MS MALONE: It is a little bit of both. Last year as an example, with

about 260 tourism enterprises, we gathered together the federal government, AES,

ourselves and we went through four topics: financing your business; e-commerce;

things. We do specific to industry and to business.

We also still have online a very robust linkage between

Canada business and

our Web sites. We also have steps to starting a business which is very, very

good and nimble on how do you register for HST, how do you incorporate and that

type of thing. We call it the steps to getting into business. In addition, our

front-line EDOs as well as headquarters people can walk through, and our Web

sites do have some very good links to the relative agencies in terms of the

regulatory stuff.

MR. BENNETT: If somebody comes to the department looking for a loan or

grant, some sort of funding for a business, do you put them through any sort of

a test do you access their abilities? Because sometimes novices get eaten up

pretty quickly in business and they did not need to if they had a clue what they

were doing. It could be location. It could be they do not know how to organize

the cash flow. Maybe they should have leased instead of buying.

If you are going to put money on someone to do whatever, do you make sure

that they have the business skills that they may not want necessarily to even

talk to you about because they have a great business idea and they are going to

make tons and tons of money? Do you access them from that point of view and

insist that they know what they are doing to some degree before they get going?

MS MALONE: Yes, we try to. We do provide programs to access technical

support. A lot of it is around marketing a really good product or a really good

service, and we do that. A lot of it, of late, is around using the Internet,

using e-commerce, that type of thing, developing their Web sites and that type

of thing.

We have done specialized cost accounting with companies that are into

fabrication or production; dairy farmers, for example, in terms of understanding

their yield and the likes of that. So we try at the start-up but also as the

company grows and experiences challenges to try to identify because we do not

have all of the answers internally by any means, but we do try to use programs

that Mr. Meade mentioned and the minister. We try to use programs to get that

really good problem solving technical support.

MR. BENNETT: Mr. Brazil, I have no more questions on

section five.

CHAIR: Okay. I will go back to Mr. Mitchelmore and then, Mr. Bennett, I

will go come to you.

Mr. Mitchelmore.

MR. MITCHELMORE: Just in terms of the Regional Economic Development

piece, I wanted to ask about the Ambassador Program. Does that one follow there

and is the program still in existence?

MR. MEADE: The Ambassador Program is still active and is actually under

2.1.03, under Marketing and Enterprise Outreach.

MR. MITCHELMORE: Okay. Since we have passed that, would I be able to just

have a list of the ambassadors that are participating, the businesses that have

been profiled and affiliated with that program?

MR. HUTCHINGS: We will take a look at it, yes, and see what we can do.

MR. MITCHELMORE: Okay.

In terms of the Regional Economic Development piece, I am looking forward to

seeing how these new funds are going to roll out, and getting that flow chart of

how the programs line up. I do not have questions on that, but I did want to ask

a couple about the Canada/Newfoundland and Labrador Business Service Network.

Are you still maintaining their Web site and all of the resources that were on

it, or is that being migrated?

MR. HUTCHINGS: Yes, all of those sites, we have taken those on and they

are still available.

MR. MITCHELMORE: What has actually happened to the physical location of

that office they had and the satellite offices? Are they just staying where they

are and not getting funding?

MR. HUTCHINGS: That was the office in Pippy Place, I think it was. It was

lease space between the federal government and the Province, so that space was

just let go at a certain date.

MR. MITCHELMORE: What happened to all of the business development tools,

like the business planning guides, the literature, and everything that was

there? It was a wealth of resources.

MR. HUTCHINGS: The literature went to CNA, MUN business school, and

anything else remaining came back into us where we would distribute it out to

our regional offices. My point is all the material is still used and will be

used.

MR. MITCHELMORE: My only other question would be where we have seen the

federal government cut back on funding to your department, the programs have

been eliminated. If there are further cutbacks to ACOA or from the federal

government itself through a direct department, would we anticipate that other

programs will be cut in your department?

MR. HUTCHINGS: No, we are committed, as I said, to economic development.

I think our budget demonstrates that. We are fully committed.

As I said, when we look at an analysis of Canada/Newfoundland and Labrador

Business Service Network, we look at the regional office we have and at the

staff we have; we look at how many people communicate today and who is using the

service. I am very confident in saying we have lost nothing in terms of pulling

out the Business Service Network.

MR. MITCHELMORE: I just have a question on the Red Tape Reduction

Initiative. Are there funds in this year's budget on that, or is that program

completed?

MR. HUTCHINGS: That is Service Newfoundland and Labrador.

MR. MITCHELMORE: Oh, that is Service Newfoundland and Labrador.

I do not have any further questions when it comes to Regional Economic

Development,

section five.

CHAIR: I am going to ask for a motion to adopt Estimates headings 4.1.01

to 5.4.01.

Motioned by the Member for Bonavista North.

All those in favour, signify by saying 'aye'.

SOME HON. MEMBERS: Aye.

CHAIR: Opposed?

Headings carried.

On motion, subheads 4.1.01 through 5.4.01 carried.

CHAIR: Mr. Bennett, I will go back to you to heading 6.1.01.

MR. BENNETT: Minister, this says Ocean Technology, and it looks like it

is still there except there is no money left. Grants and Subsidies went from

$3.8 million to zero. Did this money get moved somewhere else?

MR. HUTCHINGS: Yes, that would have been re-profiled. Do you want to take

us through that, Brent?

MR. MEADE: This is another example of where we have moved the funding.

About $700,000 of that money has been moved to the business development program

which would be reflected now under 3.1.02, Investment Portfolio Management,

which we discussed earlier under Grants and Subsidies. The remaining $3.6

million is now reflected under Comprehensive Economic Development as under the

regional development program 5.3.01.

MR. BENNETT: Does that mean that the department is not supporting ocean

technology initiatives any more?

MR. MEADE: No, that is simply a case of us consolidating the toolkit.

Ocean technology is still a priority and will remain a priority under those

programs.

MR. BENNETT: The staff look like they are still there.

MR. MEADE: Yes.

MR. BENNETT: Does that mean that they do the front-end work, for want of

a better word, and then you apply through wherever?

MR. HUTCHINGS: Yes. The benefit there is that some of those ocean tech

companies now may get access to programs that they never had access to before

because it is all consolidated.

MR. BENNETT: I have no more questions on six and we only have seven. I

just have one or two general questions and then I will be done.

CHAIR: Okay, well, 7.1.01 has already been carried. Yes, you can spend

your time in the next few minutes on general questions.

MR. BENNETT: We hear a lot of discussion about CETA.

MR. HUTCHINGS: About?

MR. BENNETT: CETA.

MR. HUTCHINGS: Okay. Is there a line item?

MR. BENNETT: No, it is not a line item. Where did you hide CETA?

MR. HUTCHINGS: I am not hiding anything.

MR. BENNETT: How much are you going to put into it and where did you hide

it?

MR. HUTCHINGS: There is nothing to hide; there is no agreement.

MR. BENNETT: There is no budget allocation?

MR. HUTCHINGS: Yes, there is.

MR. MEADE: If your question is: Where would the resources that we are

applying towards the CETA negotiations be reflected? They would be reflected

under Trade and Export Development, 2.1.01.

MR. BENNETT: Let's say at some point we sign CETA, will your department

be the one that actually delivers it?

MR. HUTCHINGS: We are the lead on CETA. The staff who are engaged in the

negotiations or are advising or representing Newfoundland and Labrador's views

to the federal negotiator rest in my department under trade. Any agreement, we

as a government would review it and see if it is in the best interest, as we

have always said, of the Province of Newfoundland and Labrador, but the

MR. BENNETT: Do you see in your department any role for any of the

opportunities that CETA brings?

MR. HUTCHINGS: Oh, definitely, certainly in terms of new markets and for

exports, whether it is fish or technology. Yes, it is a huge market. It is a

market of, what, half a billion people. Yes, we certainly see opportunity.

MR. BENNETT: With respect to some of the opportunities for funds that are

received, do you know if there is any consideration that this may make us more

or less competitive as some of the other CETA partners? They may have a concern.

NAFTA, for example, says you cannot provide certain types of subsidies unless

everybody accesses it. Do you anticipate that some of what is offered here might

not be able to be offered any more because we are part of CETA?

MR. HUTCHINGS: No, I do not think so. There are obligations in any trade

agreement, but we do not look at being any less competitive as a Province. We

have exciting industries and exciting opportunities. We think we will do just

fine.

MR. BENNETT: I have no more questions.

CHAIR: Thank you, Mr. Bennett.

Mr. Mitchelmore, we will go back on

section six and any more general

questions you may have.

MR. MITCHELMORE: I just have a few questions, actually. I have a couple

of general questions and a couple to the line items.

I would like to ask about the professional services on the Ocean Technology

Initiatives as to what was actually done. Who was hired to do what work in last

year's budget for $107,000?

MR. MEADE: We do not have those details here, but we can certainly get

them. The professional services under Ocean Technology Initiatives would be

related to the hiring of particular expertise or firms to help us with market

intelligence or sector development.

MR. MITCHELMORE: So you typically have to go out and outsource that level

of expertise. I know that the minister had talked about growing the Ocean

Technology Sector to $1 billion, and it has certainly extended quite a bit. It

has had a lot of investment in recent years and is growing. Any detail that can

be provided on the professional services would be great. I guess the $190,000 is

for the same level of expertise to be hired on a particular project.

The Grants and Subsidies, you explained where it is going, but can you

provide us with the list of grants and subsidies as to where money went last

year?

MR. HUTCHINGS: Yes.

MR. MITCHELMORE: Okay.

I just have a question on what happened to the economic opportunities in the

Green Economy. There was a report done, the Green Economy and your strategic

plan. It promised to do a road map Web site to identify and navigate existing

green programs and services, and improve energy efficiency and reduce greenhouse

gas emissions. I am just wondering if that is axed.

MR. HUTCHINGS: I will ask Mark to speak to that.

MR. PLOUGHMAN: The work for the road map Web site is just about complete.

We expect to see that rolling out within the next few months.

MR. MITCHELMORE: Great. It is good to see things that were going on in

Business, Innovation and the Green Economy and seeing the presence of IBRD there

in Corner Brook.

Has your department attended a meeting on the Poverty Reduction Strategy? It

seemed like in your last strategic plan there were no initiatives in your

department under the Poverty Reduction Strategy. Has this changed?

MR. MEADE: In fact, what happened with the Poverty Reduction issues that

we did have is they became A-base initiatives within the department. We had the

micro-lending initiative we were doing with the Federation of Co-ops. We had

Capacity Building. Capacity Building actually, Mr. Mitchelmore, started as part

of an initiative through the Poverty Reduction Strategy and, as ADM Rita Malone

mentioned earlier, that has now been expanded upon as part of our core function

as a department.

MR. MITCHELMORE: Okay.

Is there anyone in your department on the Working Group for the Poverty

Reduction Strategy?

MR. MEADE: Yes, there is. We continue to be engaged in the Poverty

Reduction Strategy.

MR. MITCHELMORE: At what level? Who would be the

MR. MEADE: We still have Working Group representation. We still have

representation at the deputy table and any other type of structure that you

would have around it.

MR. MITCHELMORE: Okay, excellent.

I just have one last question just on the Arctic initiatives, things that are

happening in ocean technology around particular port development, and things

like that. Is there anything planned through your department to make further

investments when it comes to port developments for cruise ships, for shipping,

to actually promote that so we can actually move forward on these Arctic

opportunities that are out there? Is there anything planned or further

consultations, Minister, because you did travel across the Province? Is there

follow-up to that?

MR. HUTCHINGS: Yes we are finalizing our direction from that

consultation, but I can tell you in various areas of the Province we are having

discussions in terms of port development. Also, I had discussion with my federal

counterpart in regard to the Atlantic Gateway as we move that forward. I made

representation, too, in regard to Arctic Opportunities, our initiative here, and

how important it is in regard to port development. As a Province, we see that as

key in terms of moving forward. It is certainly on our agenda over the next year

or two in terms of taking advantage of that exists.

From time to time, we may get companies wanting to come to the Province, and

as part of that venture they may need enhancements to port development. There

are various stages of port developments and review going in any particular time.

Your question in terms of Arctic Opportunities, yes, we see port development as

crucial as we move that file forward.

MR. MITCHELMORE: Great.

I really appreciate, Minister, you answering the questions - and your staff -

here tonight. I have asked a number of very tough questions, I would think, and

you have been very forthcoming with answers, a willingness to provide

information, and a lot of good initiatives moving forward. Thank you all for

that.

I do not have any further questions, Mr. Chair.

CHAIR: Thank you, Mr. Mitchelmore.

Mr. Bennett, I will give you the last comment.

MR. BENNETT: We tend to spend a lot of time asking questions about small

business in rural parts of the Province and so on. What about St. John's; what

about small business in St. John's? It is the capital. If a person wanted to get

into business and they were here, what would they do?

MR. HUTCHINGS: Yes, well, it is the same. We have the Avalon Regional

Office. We have our Economic Development Officers as well. We see a lot of

activity in the Northeast Avalon in terms of small business as well. It is a

different environment because there is opportunity, the biggest population, you

have the service sector, and you have significant activity.

MR. BENNETT: There are challenges, though, I would expect, with the cost

of rent, the cost of wages, and whatever else.

MR. HUTCHINGS: True enough, and that is why you see some push out to the

fringes of the urban core, I guess you would say. Yes, it is true, as the

economy grows there are challenges as you described in regard to labour and

rent, especially for companies starting up. We are seeing some smaller SMEs

coming together, maybe, and doing things collectively. There are synergies

between what they can do oftentimes.

MR. BENNETT: Okay.

I am good.

CHAIR: Thank you, Mr. Bennett.

I am going to ask for a motion to accept inclusive all headings 1.1.01 to

7.1.01 of the Department of Innovation, Business and Rural Development.

MR. RUSSELL: So moved.

CHAIR: Motion made by the Member for Lake Melville.

All those in favour, 'aye'.

SOME HON. MEMBERS: Aye.

CHAIR: Opposed?

Motion carried.

On motion, subheads 1.1.01 through 7.1.01 carried.

MR. CROSS: Before we close, there are a lot of handouts it seems like

those fellows have asked for. We were over here saying we would like to get

them, too, especially some of the other things, because if it is only handed out

there, then they are going to have more information than us, and I am not too

happy about that.

MR. HUTCHINGS: Okay.

MR. BENNETT: (Inaudible) government relations, we will roll out some of

this money for a fee.

MR. HUTCHINGS: Yes.

CHAIR: Fair enough, the minister and his staff, when they circulate to

the Opposition Parties, will do the same, too, to all Committee members.

MR. HUTCHINGS: We will do that, yes.

CHAIR: Okay.

I would like to make one little correction. I think when I asked for a motion

to adopt the minutes I said the Department of Fisheries and Oceans. I want to

correct that in Hansard and say Fisheries and Aquaculture. I will have that

noted there.

Without any further business, a motion to adjourn.

MR. BENNETT: So moved.

CHAIR: So moved by the Member for St. Barbe.

MR. HUTCHINGS: Thank you, Mr. Chair.

CHAIR: All those in favour, 'aye'.

SOME HON. MEMBERS: Aye.

CHAIR: All those against, 'nay'.

Carried.

I want to thank the minister, his staff, and the Committee. Thank you for all

of your information.

Our next sitting will be Wednesday at 9:00 a.m., our last one.

On motion, the Committee adjourned.

Document details

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