Manitoba Committee Hansard — 17 February 1975 (LO Committee, Sitting 7, 30th Legislature, 2nd Session)

30-2-lo7

Manitoba — Debates (Hansard)

Legislative Assembly of Manitoba HEARINGS OF THE SPECIAL COMMITTEE ON LAND OWNERSHIP Chairman Mr. Harry Shafransky, M.L.A. Constituency of Radisson Winnipeg - Monday, February 17, 1975. ---------------------------------------------------------- Printed by R. S. Evans- Queen's Printer for Province of Manitoba

THE LEGISLATIVE ASSEMB LY OF MANITOBA SEVENTH MEETING OF SPECIAL COMMITT EE ON LAND OWNERSHIP WINNI PEG , MANITOBA, FEBRUARY 17, 1975 Chairman: Mr. Shafransky . MR. CHAIRMAN: We have a quorum . We shall proceed . Mr. Don Gibb , Manitoba Inst itute of Agrolo gist s. 373 MR. GIBE : Mr. Chairman, Co mmittee members, ladies and gent lemen , good morning, A policy affecting rural and urban land in the Province affec ts all Manitobans and many non -Manitoba residents in Canada .

The Manitoba In stitute of Agrologists wishes to commend the Govern ment of Manitoba on its decisi on to establish the Special Co mmittee of the Legislature to inquire into matters relating to property rights in lands within the province. The Manitoba In stitute of Agrologists also welcomes the opportunity to appear before the Co mmittee to discu ss the views of agrologists in Manitoba relating to land policy . The Institute is a provincial organization of professional people in agriculture and the related scien ces.

It comprises agrologists in various occupations including agri -business, some farm operators, Manitoba and Canada Departments of Agriculture employees and Univer sity of Manitoba personnel . In the main, the In stitute speaks for this group . Agrolo gists are involved in the whole system of agricultural developme nt . Members of the Manitoba Institute are in a prime position to appraise farmer's nee ds, contribute towards policy formulation , conduct rese arch to meet these needs and become actively involved in the imple mentation of programs.

The Manitoba Institute of Agrologists has a Co mmittee on Land Use . The committee has made a careful study of issues relating to this subject and was pleased to have an opportunity to comment on the Working Paper entitled "In Search of a Land Policy for M a nit ob a" prepared by the Manitoba Department of Agriculture. The is sue of foreign ownership of Manitoba farmland raised in the report mentioned above is commented upon in our Brief as an important aspect of the broader subject of land use . Cur rent production practices result in an under utilization of our land resourc es .

Co n strained primarily by the unce rtainty of market s, farm operators have under-utilized the land base caused unnecessary rural social problems and depopulation and pos sible permanent deter ioration of the land base . Appropriate land utilization requires long-term programs relative to crop and livestock production , marketing and a general stabilization of agriculture to provide the incent ive . Related government programs must not, howeve r, detract from economical land use patterns within agriculture .

Agrologists are concerned about and can contribute toward appropriate zoning plans for land utilization in agriculture and non -agricultural uses . Land use or zoning laws des igned specifically to deal with non -agricultural uses , such as recreation , can have a major impact upon farmers .

On May 30th, 1974 , the Honourable Samuel Us kiw, Minister of Agriculture, has stated his Department would be "providing for the committee and public discu ssi on some time later this year before the committee is conven ed , or when the committee is conven ed , a White Paper on the subject matter (property rights) which will serve as a basis for discus sion and on which people may make representation s and perhaps proposals to vary from the paper it self ." Subsequent to this , copies of the Manitoba Department of Agriculture document entitled "In Search of a Land Policy for Manitoba" were circulat ed .

This Working Paper is perhaps a starting point for discussi on but falls far short of what is normally contained in a White Paper. The Manitoba Inst itute of Agrologists takes iss ue with many of the observation s made in the Department of Agriculture study . This has been included as an Appendix to our brief. In order to be as positive and cons tructive as poss ible the Institute is proposing changes which, if implement ed , would help reduce the future threat of foreign ownership of Manitoba farmland .

To facilitate credible rese arch on the subject of foreign land owner ship, the Manitoba In stitute of Agrologists recommends nec ess ary legis lative amendments b-e adopted during the coming sess ions of the Legislative Asse mbly to provide for more comprehensive information on who owns land in Manitoba .

374 February 17, 1975 (MR . GIBE cont'd) ..... The Manitoba Institute of Agrolog ists recommends the Special Co mmittee on Land Us e recommend the establis hment of a Land Us e Co uncil . Membership on the Co uncil should - include representation from the broad spectrum of people concerned with land use and owner ship .

The Co uncil should be given a period of 1-2 years to: 1. ass emble all pertinent background information on the subject of land use and the extent of foreign owner ship in Manitoba . 2. present this information to the people of Manitoba through extensive public meetings . 3. hold public hearings on the relating iss ues. The In stitute recommends the Council consider the establi shment of effective land use plans and zoning by-laws to correct any future excess es of uncontrolled land development .

Future land speculation could be significantly reduced if the future use of all Manitoba land was planned by such a Co uncil . It would seem the sooner land in the Province is zoned resid ential, industrial , recreational and/or permanent agricultural, the lower will be the Jllblic 's compensation bill to reimburse owners for loss of devel opment rights. Zoning would eliminate much "urban speculation" wherein foresighted individual s pur chase land adjacent to cities and growing rural towns in the hope that , some day, the land will be cut up and "develope d" .

Appropriate zoning would put to an end uncontrolled residential and indu strial deve lopment on prime farm land . Zoning and/or the creation of agricultural land reserves would eliminate speculation in farmland in anticipation of even tual urbanization . Future increases in the value of farmland would then have to result from the capitalization of increases in the value of production pro duced from the land . The Institute recommends the Provincial Go vernm ent take immediate steps to remove existing impediments to private owner ship of Manitoba farm land by citizens residing in the provinc e.

And I list some of the poss ible measures for consider ation by the Provincial Gover nment . (

a) Exempt asse ts in the form of farm land from provisions of the Provincial Gift Tax Act . (

b) Make representation to the Federal Govern ment to request the "tax free rollover" provision be provided to farmland owned by family farm corporations . (The majority of con trolling shares in these private corporations to be owned by persons principally occupied in farming .) This provision is currently provided only to sole proprietors engaged in farming . (

c) Make repres entation to the Federal Gove rnment to introd uce a sy stem of public mortgage insurance to facilitate the extension of long-term mortgage financing to agriculture by private lender s. This is a service currently provided by the Federal Governm ent to urban home buyers. Alternatively the Provincial Gover nment might wish to take the initiative and develop such a program itself . The Provinc e of Alberta is currently studying such a plan . (

d) The Provincial Governm ent re-enter the field providing direct long-term mortgage financing to farmers through the Manitoba Agricultural Cr edit Co rporation . The Manitoba In stitute of Agrolog ists, in reviewing the working paper "In Search of a Land Policy for Manitoba", notes the following as sumptions or hypothesis directly or in directly stated in the document . (

a) Efficiency of production decreases with increase in farm size: In other word s as forms get larger their efficiency decreases . Tables I and ll, Appendix I indicate the average Manitoba farm is still well below the optimum size . Further, smaller farm operations are less efficient than larger size opera tions . Table I indicates the average Manitoba farm in 1971 consisted of 366 improved acres. Table II indicates efficiency, as measured by average value of product sold per acre is greatest where farm size exceeds 1, 600 acres .

In any event the basis of efficiency is related to the management capability of the indivi dual operator. Realistically, there are only, as far as I can see, three basic ways (or some combination thereof ) by which a farmer can maintain or increase his over -all net returns . First, he can expand his ov er-all production through either increasing his acreage and/or his livestock production . Second, he can increase his production from a given size unit by more intensive farming methods such as fertilizer use , feeding properly balanced livestock rations, - - • - -

February 17, 19 75 375 (MR . GIBB co nt'd) ..... etc . Finally , he can attempt to become more efficient in terms of his actual cost of produ ction . Most farmers have probably used some combination of all three methods at some time or other . But in the final analy sis, the farmer must eventually look to expansion either through acreage and/or livestock production, since inc reased effi ciency of operation and expanded output per unit of production has very definite and obvious limitations . A move towards reduction in average farm size through whatever means would reduce the volume of farm production and related levels of efficiency . Another co ntention made in the report: (

b) Young and/or beginning farmers can no longer hope to attain ownership of farmland. Chart A, Appendix I indicates the proportion of beginning farm ers entering agriculture has not changed apprecia bly over the 10-year period 1961-19 71. In 19 71, about 38 perc ent of our farmers were under age 45 , a situation larg ely unchanged from the 42 .6 perc ent indicated during the previous census period . Increasing farm capitalization does not appear to be placing undue pressure on farm ownership . Adoption of the Institute's recommendations under

Section 9 a) -

d) would do much to pro vide a favorable environment which would allow beginn ing farmers to own land. The Institute challenges all levels of government to encourage farm busine sses to adopt alternative org anizational structures to the sole proprietorship, e. g. partnerships, co operatives and cor porations . These forms of business organization have been used by most non -farm businesses for centuri es . Government policies should not discri minate against family owned farm corporati ons .

The Institute encourages government and/or the private sector to design programs to bring new capital into the agricultural industry . The third assumption or hypothesis in the Report for conclusi on : The Landlord-Tenant relation ship represents a growing and undesirable situation in Manitoba . Tables m and IliA, Appendix I, indicate the relationship in 19 71 between owned and rented land in Manitoba is co mpatible with historical patterns .There is no evidence to support the author's view of a growing deterioration in " ....... the mix of ownership and renting of farmland" .

It is the co ntention of the Manitoba Institute of Agrologists the existence of privately own ed rented land represents a very important mechanism whereby land may be transferred from one generation to another . The majority of this land represents a transitional stage between generations, with the son often renting land from his father or members of his family who have chosen to live in cities and tow ns .

The minority of rented land that is rented from non-family members wou ld , in the Institute's view, be better left in private hands vis-a-vis public ownership as farmers are in a better position to co pe with other individuals or groups than the state. Farmers can be justifiably concerned when they see their own money , in the form of tax dollars, being used to deprive them of the privilege of owning land . The Provincial Gove rnment through the Manitoba Agricultural Cr edit Corp oration is encourag ing new people to enter farming, with the justification being primarily the attainment of social objective s.

It is not surprising that creditable farm businessme n find the subsidized 5 perc ent rental payment for MACC tenant farmers highly repugnant . It is the tax money paid by themselves and other Manitoba taxpayers which co nstitutes a source of funding for the government 1 s land -lease program . It is unfair, illogical and wrong for government funds to be utilized to establish a farm business directly co mpetitive to an existing succes sful farmer, when the new firm is given a competitive advantage through a government subsidy .

The direct consequence of this su bsidy is to enable the subsidized farmer to gain a competitive advantage in cost . The farms being co mpeted against are taxpayers whose profits are being used to create a competitor . Very often the conse quence of this type of policy is to make all firms in an industry economically unviabl e. In the Institute 1 s view , agricultural policy should be to strengthen the industry to better equip it to compete in the world market. A poli cy , encompassing a subsidy to one segment of agriculture at the expense of the other tends to we aken the over-all strength of the industry and

376 February 17, 1975 (MR. GliB con t'd) ..... is not a policy in the lon g-run interest of the people of Manitoba . (

d) Risin g land values are due to land purchased by non-residents . The Institute respectfully suggests rising land values between 1972 and 1974 were due primarily to the remarkable rec overy in the profitabili ty of agriculture over this period and were only margi11ally due to foreign purchases of Manitoba farm land . This conclusion is supported by Tables IV and V, Appendix I. Farm cash rec eipts and net farm inc ome in Manitoba increased by 68 perc ent and 90 percent respecti vely over this period .

Farm cas h receipts as at December 31, 1974 were $818 million compared to total farm cas h receipts of $351 million recorded as at December 31, 1969, an increase of 133 percen t . To single out foreign owner ship in farm land as a major co ntributor to rising land values is, to say the least , a very simplistic approach . Individuals residing outside of Ca nada are reported to own 172, 726 acres of Manitoba's 19, 000 , 000 acres of farmland or . 82 perc ent .

While poin ting this out, the report chose not to consider the impact of the purchase of 38, 000 acres of farmland by the Man itoba Agricu ltural Credit Cor poration subsequent to last September , bringing its total holdings to more than 63 , 000 acres . And I think 66 , 000 is a little more accu rate in that regard . Government ownership of farmland means government con trol of who may or may not farm, the scale on which he may do so , the character istic s and qualifications of farmers who are allowed to farm.

MACC tightly defines the kind of individual who is allowed to lease land under its Land-Lease program and , in the process , spec ifically discrimin ates agai nst farmers who have managed to as semble succes sful farm operatio ns .

And just as an example, MACC insists that these farmers to qualify they must be full -time, whose net farm income over the last three years has not averaged more than $16, 000 a year , and whose assets do not exceed $60 , 000 .0 0 I think there's some very definite characteristics of individuals that emerge from this type of criteria; it would indicate that perhaps traditionally they've been vastly under employed . The Institute believes rising farm land pric es to be the result of dramatically rising commodity prices during the period May 1973 to October 1974 .

The rapid increase in prices being due to a phenomenon of temporary disequilibrium between the value of commodities and the price of land, i.e. land priced at $60 to $80 an acre as it was in the east-centrl region of Manitoba in the spring of 1972 , proved to be quite attractive when wheat suddenly rose from $1. 75 a bushel to the five to six dollar range . (

e) Risin g land values are bad in an econ omic sense . The reference to "good" and "bad" in the report are relative terms and have no relevance in an economic sense . Current land value s reflect the present economics of crop produ ction. Land prices were quick to reflect the increase in commodity pric es, an eco nomic phenomenon to be expected from Agricu lture, which I think in this province can be defined as a dynamic industry and one that is closel y attuned to the marketplace. In conclusio n, the Manitoba Institute of Agrologists wishes to go on the record as strongly in favour of private land tenure.

This land system has been fundamental to the succes sful development of Can ada's agricultural industry . A government policy of public ownership of farmland designed to prevent a declin e in farm numbers, means also control of farm size . If this is carried to its natural conclusion it will mean the prevention, by deliberate government action, of the normal and essential proc ess of farm enlargement and rationalizatio n. Thanks very much . MR. CHAIRMAN : Thank you, Mr . Gibb . Are there any questions ? Mr . U skiw . MR . US KIW: Yes . Mr .

Gibb , your presentation here is on behalf of the Institute of Agrol ogis ts . What is the basi s of the brief ? Is it an executive documen t or is it based on the opinion of a co nferenc e wherein the Manitoba Agrologists have had partic ipatio n. How do you arrive at your positi on? MR . GIBE: As I indicated in the paper, we have a committee on land use and we've had this co mmittee for a number of yea rs . MR . USKIW: Co uld you tell me who they are , sir ? MR . GIBE: The Chairman of the co mmittee is George Bo nnefoy . MR . USKIW: Who else is on your co mmittee ? MR. GIBE: We'll send you a list, Mr .

U skiw , if you like . - -

February 17, 19 75 377 MR . USKIW: Okay , that's fine . MR. GIBE: I speak as president of the Manitoba Ins titute of Agrologists and the brief was put together by a policy committee of the Institute comprisi ng of myself, Ed Ba skier and Dr. Bill Craddock. MR . US KIW: You would then be prepared to supply us with the names of the co mmittee that deci ded on this presentation . MR . GIBB: Yes , abso lutely . MR . USKIW: Okay .

You indicate , sir, that your pos ition is , your final statement is that you would prefer the private land tenure system, and that of course is in keeping with the policy of the government so I don't see any problem there. The only co nflic t I see in your submission is that you argue that there shouldn't be a disc riminatory policy on the part of MACC in favour of what you referred to as the "under -employed farmer".

Wouldn't it be an advantage to bring the under-employed farmer who had a small holding into full employment through the provision of a larger holding through the land-lease program , if that is his only way of getting there ? MR . GIBE: Right. I think personally that, you know, we have to separate the economic from the soci al issues involved here, and I would think that personally I would probably agree as long as we didn't have to take away from the commercial farmers to subsidize the non commercial segment. MR . USKIW: Did your land-use co mmittee approve your document ? MR . GIBE: Not specifically .

The document was discussed at the provincial council meeting, a full meeting of the council held last Monday , I believe, Mr. U skiw . MR . USK IW: So you sugge st, then, that there's nothing wrong with a policy where land lease serves as a mechanism to make someone full-employed then that was under-employed prior to the acquisition of a larger land holding. MR . GIBE: I think the major consi deration is at whose expense is this made .

It seems to me that, you know , the signific ant points relative to the Land Lease Program are the nature of the Land Lease Program itself, the subsidized nature of the lease being a case in point and the eligibil ity cr iteria . I think personally, you know , a land lease program might not be that bad as long as it didn't disc riminate against the commerc ial farmers, which ... MR . USKIW: Here again I have a problem . You know, in our view the reason the restrictions are on there is because we don't want everyone to get into the Land Lease Program .

You 're the second person representing an organized group that has come to me asking that those restrictions be lifted so that the larger farmers can get into the program , and if that were the case I can see almost every farmer wanting to get into the program -which is not what we want. Our pos ition here is simply to facilitate a percentage of our farm community who can't get mortgage financing.

We don't want to get into a wholesale land lease system in the Prov inc e of Manitoba, we would much prefer that as much private ownership as is pos sible be retained but that those that are unable to get mortgage financing have another way of getting control of land . MR. GIBE: Right.

I think that, you know , the real question is, and administratively it's perhaps impossible, but if such a subsidized program co uld be set up that would not dis cr iminate against the more commerci al farmers , I think it would be fine; in other words , if you could find a mechanism whereby the subsidy in the commercial farmers' taxes that they're paying, if this could somehow be diverted away from the commerci al farmers and paid truly by the non -farming, tax-paying public of Man itoba. MR . USKIW: To follow through with your philosop hy then, Mr.

Gibb , would I be accu rate in assuming that you would prefer that all levels of gover nment got completely out of sub sidizing agriculture in any way , shape or form ? MR . GIBE: Strictly -and again , there's the economic s and the social cr iteria -that certainly stric tly from an economic standpoint, yes . MR 0 USKIW: You'd like to see government complet ely out. MR . GIBE: Right .

In terms of the social obligation of gove rnment, which is part of the need for the presence of government, there may be reasonable ju stification for this happening, but I think it should be clearly indicated as to the basis upon which the partic ipation of govern ment is required . I think strictly from an economic sense the answer to your ques tion would be yes . MR. USKIW: Well then why is it, sir, that you would want to insist, however, that there

378 February 17, 1975 (MR. USKIW cont 'd) . . . . . be some form of government insurance or guarantees to the private lending institutions so that they might be involved in the business of financing agricul ture? That is a subsidy in itself. You know, it's a public guarantee. MR. GIBB: Right. I think that what the Institute is looking for is a form of equity in our society and I believe that it is difficult for me to justify the Federal Government in this country providing mortgage insurance for urban home dwellers and not extending the same benefit to rural people.

MRo USKIW: With respect to the building of a rural home; in that context, you mean? MR. GIBB: That would be a help, yes. MR. USKIW: Because when you go beyond that, you 're into the commercial area. MR. GIBB: Right. MR. USKIW: Well then obviously I would have to assume that you would also oppose the DREE Program that helps to establish industry and so on, in the same light, on the same principle. MR. GIBB: Yes. MR. USKIW: Thank you very much. MR.CHAIRMAN: Thank you, Me Gibb. Mr. Lane, President, Manitoba Real Estate Association, and Mr. Haig will be assisting Mr. Lane. MR. GRAEME HAIG: Mr. Chairman, Mr.

Lane is unfortunately incapacitated as a result of an attack of the flu and therefore, with your consent and the members of your committee, I would speak on his behalf as well as giving both portions of the presentation of the Manitoba Real Estate Association. MR. CHAIRMAN: Proceed, Mr. Haig. MR. HAIG: Thank you, Mr. Chairman. The first portion, Mr. Chairman, of the paper which I am proposing to present to you is a general presentation and raises certain specific questions which it believes that the committee should concern itself with.

The Manitoba Real Estate Association, in co-operation with the Winnipeg and Brand on Real Estate Boards, appreciates this opportunity of making known their combined views on the wo rking paper entitled "In Search of a Land Policy for Manitoba". These three associations represent some 1, 700 practicing Real Estate Brokers and Salesmen from all parts of the Province, who are vitally interested in any land policy proposed for Manitobans.

Among the objects of the Manitoba Real Estate Association, and subscribed to by the local Boards are the following: to assist generally in the development of Manitoba along lines best calculated to promote the well-being and prosperity of its inhabitants; to advocate and promote the enactment of just, desirable and uniform legislation affect ing real estate throughout the Province; to encourage and protect the rights of private ownership of real property; and on many occasions since the beginning of this century (when the Winnipeg Real Estate Board was incor porated) meaningful briefs and representations have been made to various levels of govern ment on matters affecting real estate.

Without intending to be critical of the Committee's actions in any way, we wish to ex press our concern about the manner in which this extremely important subject has been pre sented to the public. As indicated in the Department of Agriculture's working paper sub mitted to the Committee, Mr. Uskiw's Motion was introduced to the Legislature on May 30th, 1974, and the working paper prepared by the Manitoba Department of Agriculture was made public in early January of 1975 (a period of some seven months). Incidentally, we recognize that the working paper is a submission by the Department of Agriculture.

We hope the Committee will not use this as its total resources. Public response to the resolution has been solicited by your Committee, but less than one month has been allowed for preparation and submission of comments by interested individuals and organizations. We were very pleased to note Mr. U skiw's comments as reported in the Winnipeg Tribune of Thursday, February 6th, to the effect that legislation relating to this subject is not immediately forthcoming.

In order for the public and industry to be fully aware of the "merits" of the government's intentions with respect to "a Land Policy for Manitoba", we strongly suggest that the matter receive the widest possible expression of opinion, over whatever period of time is necessary to ensure total awareness. The matter is much too serious and far-reaching to be determined through a brief and cursory consideration. - • I - - - - - 11 - -

February 17, 1975 379 (MR. HAIG cant 'd) . . o o • It appears to us that,

whereas the resolution as presented to the House in May of 1974 requested an "inquiry into matters relating to property rights in lands within the province", the working paper as prepared by the Department of Agriculture and submitted to the Committee for its consideration deals almost exclusively with farm lands, to the virt ual ex clusion of urban land and non-arable property 0 We strongly believe that any land policy adopted for Manitoba should encompass all lands within the province 0 Without substantially more time than has been granted to us to study the possible impli cations of the resolution, we do not intend at this time to make a critical assessment of the issue, but we would like to pose some additional questions to the Committee which we do feel should be considered before any land policy is established.

In the Introduction to the working paper the following quotations from the resolution pre sented to the House are, in our view, of particular significance: "AND

WHEREAS it is the constitutional responsibility of the Government of Manitoba to regulate property rights within the Province." "AND

WHEREAS the Government of Manitoba wishes to hear the views of citizens with respect to the regulation of property rights in lands within the Province 0" "AND IT BE FURTHER RESOLVED that the Special Committee be authorized: to en quire into matters relating to property rights in lands within the Province 0" Rights of ownership, or the Bundle of Rights, are the very essence of whatever value is attributable to land 0 Any action which restricts the rights of ownership, restricts the value of land.

Land without use - that is to say without rights - is land without value 0 Perhaps the most unfortunate aspect of the wording of the Resolution is that part which states "to hear the views of citizens with respect to the regulation of property rights. " The danger is that the layman may well not recognize the significance of the term "property rights" and may simply interpret them as meaning "sale rights".

Since the public generally is not too well and accurately informed on the subject it may not be too sympathetic to the foreign ownership of Manitoba land; they may well support the resolution without clearly understanding the total implications of their support. The whole question of land ownership requires a full understanding of the government's concerns and objectives in raising the entire question of property rights.

While the major reaction and response to the resolution has come from the agricultural community, and the public may therefore interpret the intent of the motion as being solely concerned with agricultural land, the motion itself makes no such distinction. In the pre amble to the motion it states: "AND

WHEREAS Manitoba citizens have expressed concern over reports of speculation in land, land transactions involving non-residents, and absentee ownership of land o" Land speculation is primarily an urban problem, and rarely a significant factor in agricultural areas.

"Land transactions involving non-residents" can be applied to virtually every corpora tion doing business in Manitoba which is not in fact a Manitoba Corporation 0 The term "non resident" requires better definition 0 "Absentee ownership of land" applies to virtually every owner of an investment pro perty in Manitoba and to many active farmers 0 The resolution clearly encompasses all land and real property in Manitoba, both urban and rural. Before any land policy is formulated we must ask then, the following questions: 1. What is the specific intent of the resolution?

Is it to seek ways and means of con trolling ownership? Domestic and foreign 0 If so, why is the resolution not more specific in its wording to this effect? (The words "foreign ownership" do not appear anywhere in the resolution, but are dealt with extensively in the Department's working paper 0 ) 2. If the concern is for ownership by "non-residents" or "absentee" owners, what definition does the Committee ascribe to these terms? 3.

Is the Committee solely concerned with the ownership of agricultural land, or, as is clear from the wording of the resolution, is it concerned with all land and real property in Manitoba, both urban and rural? 4. If the intention of the resolution is to develop a policy to control or restrict the right of an individual to sell his property to whomever he wishes, has the government considered the probably depreciating effect of this policy on property values?

380 February 17, 1975 (MR. HAIG cont'd) .••.. 5. What is the government's intention with respect to public ownership of lands? If the government intends to purchase all agricultural land in the Province as it becomes available, on what basis do they propose to establish the purchase price? (If all sales are to the govern ment, where then is the market data? 6. If the government intends in effect to have "first refusal" on all available land, will this not discourage prospective private purchasers, reduce free market demand, and thereby reduce property values? 7.

What effect will the proposed policy have on the availability of debt financing? If the effect will be to reduce or eliminate the acceptability of land as security for a loan, what effect will this have on the availability of working capital to the owner, or of investment capital to a prospective purchaser? And what will these matters, what effect will they have on property values?

These are only a very few of the many questions which require answers, if the citizens and legislators of Manitoba are to be in a position to intelligently judge the merits of any pro posed policy or legislation intended to "regulate property rights within the Province." For a majority of our citizens, both urban and rural, the ownership of real estate is their largest single asset. Any policy which alters, or regulates, or restricts their rights of ownership, automatically restricts or depreciates the value of their assets. Manitobans may well be prepared to accept further regulation of their property rights.

In making this decision, however, it is absolutely essential that they be totally aware of all aspects of such a policy, and full aware of the probable effects of this policy on their property values. While the real estate industry is firmly committed to the merits of a free market system, it is equally committed to the merits of intelligent and progressive land use planning, where such planning and regulation enhances the security of real property values to the ad vantage of all present and future Manitobans.

In order for the public and the industry to be fully aware of the "merits" of the govern ment's intentions with respect to the regulation of property rights in Manitoba, we strongly suggest that the matter receive the widest possible expression of opinion, over whatever period of time is necessary to ensure total awareness. The matter is much too serious and far reaching to be determined through a very brief and cursory consideration. Again, we appreciate having an opportunity to appear before you today and make you aware of some of our concerns over the proposed land use policy for Manitoba.

The Association is not only willing, but is anxious to have further opportunity to express in far greater detail its thoughts in this important matter. We would appreciate knowing, Mr. Chairman and Gentlemen, if it will be possible to hold further public hearings, and if so the time and place of such hearings. Conversely if legislation is to be drafted imminently and if so, when it may be tabled for consideration in the House? The answers to these questions will enable us to prepare adequately and submit more meaningful briefs to the Committee and to the Legislature.

All of which, Gentlemen, is respectfully submitted on behalf of the Manitoba Real Estate Association, the Winnipeg Real Estate Board and the Brandon Real Estate Board. In addition, Mr.

Chairman, and gentlemen, there was prepared for your consideration a commentary on land policy in Man itoba which I would like to add to the submission prepared by that Committee and which has the approval of this Committee, and it states as follows: The Provinces of Canada are under the British North America Act, given the following mandate: "In each Province, the Legislature may exclusively make laws in relation to matters coming within the classes of subjects next hereinafter enumerated ;" that is to say, -13, - Property and Civil Rights in the Province.

Regard must be had to the terms of reference of the Special Legislative Committee appointed at the last Session of the Legislature, "to inquire into matters relating to property rights in land within the Province. " As a preliminary, it may be desirable to enunciate a few of the basic rights relating to property in Manitoba which are in existence at the present time. And this list is by no means, Mr. Chairman, exhaustive. They are as follows: 1. Anyone may own land; 2. An owner may lease, encumber, sell, cultivate, mine, develop or improve land or may neglect, damage or destroy it; - - - -

February 17, 1975 (MR. HAIG cont'd) 381 3. An owner may, within reasonable limitations, subdivide land, assemble land, place restrictions on its use, grant easements over the land, and may by testementary disposition or gift, give land freely to any person or persons of his or her choice. These few are not intended to be exhaustive of course but are but illustrative. We must also examine, in this context, the limitations on land use in Manitoba, by an owner, that is to say, the direct or indirect controls. Again without attempting to be exhaust ing, these controls include: (

a) Municipal taxation; (

b) Municipal zoning and similar land use control; (

c) Town or Municipal Planning; (

d) The Real Property Act; (

e) The Law of Property Act; (

f) Rivers and Streams Authority; (

g) Clean Environment Authority; (

h) The Expropriations Act (and other Acts which have Land Acquisition Powers which are referred to by that Act); (

i) The Mines Act; (

j) The Sand and Gravel Act; (

k) The Noxious Weeds Act; (

l) The Municipal Act; There are I believe altogether, Mr. Chairman, some 46 existing Statutes and I am ad vised that the Legislature proposes to consider at its next Session a Planning Act which may be of very considerable value to the people of Manitoba after it has received your deliberations and may answer many of the problems that can be raised by land use committee. There are other Provincial Statutes with broad application affecting the owners' rights.

In addition, Cities, Towns, Villages and Municipalities by By-Law may enact restrictions and controls on the owners of land, and without exception have done so. Certain Federal Statutes such as The Railway Act, and like statutes have an indirect application. Other limitations on the rights of owners of property in land, many of which are indirect but which are controlled or influenced by Government include control of ingress and egress, control of the provision of services, control of the installation of improvements, control over the construction of highways, bridges, drainage systems etc.

As can be seen, the number of methods by which broad rights arising from the ownership of land are in fact limited is already substantial . For most Canadians, ownership of land, whether urban or rural, represents the most substantial investment in capital property made by them during their lifetimes. In every in stance, land originally has been acquired from the Crown, and compensation in money, work, or service, paid to the Crown for the right of ownership.

In addition, the Crown, as a condi tion of the private ownership of land, has reserved to itself, the right to impose taxes running with the land, whose payment is a condition precedent to continuing ownership. As can be seen, the existing restrictions are many, and varied. In the terms of reference for the Special Legislative Committee, a number of concerns are specifically expressed, and these include, speculations in land, land transactions involving non-resident and absentee ownership.

Other concerns not stated in the reference terms, which have public currency, include, communal farms, corporate ownership, govern ment acquisition and land banking, financing of ownership and the rights of disposition in the owner's lifetime and after his death. Individuals in modern times have directly and through their governments, accepted sub stantial limitations or loss of personal freedoms in pursuit of the common welfare of their respective communities, provinces, states or nations.

Many of the present restrictions and limitations of the rights attributable to the ownership of property rights in land have been enacted to the same purported end, the common welfare. As such, and where they have been effective to that end, property owners have generally come to accept these restrictions and limitations on their absolute right of ownership as being worthwhile.

Before any substantial extension of these limitations already in existence upon the pri vate ownership of property and land are introduced, it is most desirable that their need or necessity be demonstrated beyond any reasonable doubt; their effect be limited to deal with the problems which are appreciated or apprehended, and that the long term consequences of such

382 February 17, 1975 (MR. HAIG cont'd) .. ... additional restrictions be carefully examined, and proj ected. Governments should ensure that before additional laws are passed, they have exhausted the capacity of existing legislation to meet existing or emerging problems arising from private ownership of property in lands.

Long, detailed and acute observation of land ownership, both urban and rural, has given to the Manitoba Real Estate Association, and to the Real Estate Boards in the Cities of the - Province of Manitoba, insight, understanding, and perspectives on real as opposed to per ceived problems arising from land ownership and use 0 Considerations respecting the ownership and use of rural land must take into account, not only the available supply and the extent to which it is brought under cultivation, but also the various types of farming presently carried on in the Province, soil types and their suitability for certain use, climate, farm technology.

Broad generalizations respecting farm use including comments respecting intensive, as opposed to extensive farm land use are meaningless except after these factors have been very carefully considered 0 It is the opinion of the Manitoba Real Estate Association that the majority of farm lands in the Province presently under cultivation are being used by the owners of those lands in the most productive manner possible, wherever the decisions and choice of farmers are made free of artificial restrictions.

The discipline of the world market, for Agricultural Products, including the domestic market tends to ensure the highest possible productivity and the preservation of fertility. These are the products of good stewardship of land. The farmer who is the owner of land cultivated by him has a continuing vested interest in the maintenance of his lands in condition for long term productivity and therefore owners, as opposed to renters, tend to bring higher degrees of both skill and concern to the utilization of land.

Foreign ownership of land in Manitoba, outside of urban areas divides itself into two categories, recreational lands and agricultural lands. There has been, so far as the Manitoba Real Estate Association and the Boards are aware, little public concern or outcry respecting the acquisition of recreational lands within the Province by persons not resident of Canada.

The privilege of ownership by foreigners has apparently not been abused, and the substantial resources in Manitoba, of recreational lands, combined with the substantial distances from foreign owners likely to wish the use of such recreational lands, would seem to protect the Province against any abuse arising from a preponderance of foreign ownership in this regard.

To the extent that the Department of Agriculture' position paper to the committee can be relied upon for its accuracy, the actual amount of ownership of Manitoba farmlands by non Canadians or by large diversified corporations not primarily engaged in farming is at the present time small. Manitobans, through their Government, are undoubtedly and properly concerned that the extent of such foreign ownership should not become excessive, nor should it be in such form as to disrupt the effective organization of Municipal services, particularly including schools.

If it should be determined that foreign ownership of agricultural lands is contra-productive for Manitoba and its citizens, either absolutely or beyond a certain per- centage of ownership of the usable whole of agricultural lands, then by legislation the total amount of land which may be owned by foreign owners or by non-farm corporations, should be determined, as should the extent of contiguous parcels under single ownership of such an owner. The decisions relating to such restrictions, Mr.

Chairman, should be arrived at only after very careful review and study, and on the basis of hard evidence as to abuse and to adverse results from such ownership. To distinguish between various types of ownership by Canadian persons or corporations may be in our view a dangerous step.

Any act of a Province which tends to divide or classify the citizens of Canada or one of its Provinces into groups having opposing interests is, in the view of the Real Estate Industry, contrary to the best interests of Canada Modern farming, whether intensive or extensive, is generally carried on on a larger scale than was the case, even a few decades ago. Modern transportation and the decline of mixed farming has made it less compelling that the farmer actually live upon or immediately adjacent to the lands cultivated by him or her.

To create or endeavour to create distinctions between farmers who live on or immediately adjacent to the land cultivated by them, and farmers who actively cultivate land and reside some distance away, would seem an unworthy and unnecessarily difficult task. In like fashion to distinguish favourably or unfavourably between the farming carried on - - -

February 17, 1975 383 (MR" HAIG cont'd) ...•. by a farmer as a proprietor or partner, and farming carried on by a farm family or group of families under a small agricultural corporation is equally unfair, and ess entially devisive. Inactive ownership of farmland , that is to say owner ship by persons not actively engaged in its cultivation cannot neces sarily be cla ssif ied as harmful . Farmlands are cus tomarily rented on one of two bas es , either crop sharing or at a fixed rental price per acre .

The first gives to both owner and the producer, some protection again st, and some benefit from deterio rating or improving agricultural conditions and market; the second alternative provides to farm owners, an opportunity to expand the amount of land under their cultivation in times of growing market, and corre spondingly a reduction in their fixed capital and operating costs during a shrinking economy . The rentals of such land are a subject of negotiation between the owner and the farmer, and no farmer is compelled to enter into a rental transaction , dis advantageous to his own inte rest .

It is the view of the Manitoba Real Estate As sociation and the Urban Real Estate Board that with respect to agricultural and recreational land s, the existing systems of control are more than sufficient to meet every subsi siting public need with the poss ible exception only of non-resident, non-C anadian owner ship. The legislature should seriously ascertain the nature and scope of the problem , and legislate against it to the extent absolute ly necessar y, and no further .

Before leaving the question of agricultural and recreational lands and returning to urban land use, certain problems common to property rights in land throughout the Province deserve comment amongst others, they are as follow s: 1. The impact of Provincial and Federal tax policies upon land ownership by individual s, small proprietorships and small corporation s; 2. The impact of Fe deral and Provincial tax and other legislation upon success ion to property following the death of an owner . I would comment on those som ewhat further, Mr .

Chairman, but it's my under standing that you 're to receive a brief which will deal with those matters in detail and I would not pursue them further at this moment . 3. Great limitations on financial resources available to ass ist land ownership by private citizens will result , if restrictions are imposed on such ownership which limit or prevent in any way protection of the lender, as will inappropriate restr ictions on the right of an owner to dispose of land by gift or test emantary disposition to the heirs and benef iciaries of his or her choice .

Land cost, whether for urban or rural use is not a function of Governme nt decision so long as any of the significant rights of free citizens in a democ racy are preserved . Price is and will remain the function of market , of utility , of borrowing cost and of demand, notwith standing the nature of ownersh ip.

Manitoba Agricultural Credit Co rporation leases and agree ments for sale relate the les sees' ultimate interest cost in the event of purchase to the Government's borrowing cost in world financial markets, and so it would seem that whether the financial inst itution providing financing on the purchase of land is a Governm ent or a conven tional financial agen cy, financial conditions beyond the control of Governments will determine the ultimate cost, not only in terms of principal, but in terms of the interest costs to the purchaser .

Urban land use is subject to each and every one of the controls outlined at the commence ment of this memo randum , but generally urban controls tend to be more complex and more detailed than those subsisting in rural areas. Foreign owner ship of land in an urban commun ity has never excited adverse public intere st , and indeed some of the most important and use ful land asse mbly and developments for urban use have been undertaken by foreign owners and developers during Manitoba's history.

Why in the public mind or the Government mind , any distinction should be drawn between foreign owner ship of urban lands and foreign ownership of rural lands is difficult to under stand on any terms except that from a purely agricultural point of view , land is a productive resource intrinsic ly . The conc erns express ed in Canadian and foreign urban centres about uncontrolled and unstru ctured urban development are not in fact generally valid in Manitoba .

Cities have through the orderly dis tribution of urban service s, and by control of planning and zoning, effectively directed growth in desirable areas and restr icted it in undesirable areas. The process of such control and the method by which it is achieved has been the subject of some criticism , primarily arising when Municipal Governments have arbitrarily subst antially changed the available utility of land by planning changes or re zoning . Losses in value from such planning and zoning changes are not compensable to the

384 February 17, 1975 (MR . HAIG cont'd) .•... owner and it would seem inappropriate that any enhancement resulting from similar causes should be taken into cvnsider ation or attributed to Municipal or City Government actions . Urban dwelle rs, because of the nature of urban communities , whether village , town or city , have come to recogn ize and accept the neces sity for the majority of the controls im posed upon land use within urban communitie s.

Urban and rural property owners , equally have accepted the neces sity for some control over land use in the tran sitional zones between ci ties and towns and the surrounding rural communities, particularly in the case where the cities are larger in size, and require agricultural services from land under inten sive cultiva tion . City and town governments with their limited tax base have been unaware of or have been compelled to ignore the importance in urban communities of certain special land us es, primarily of a recreational natur e.

The maintenance of substantial park areas , golf courses and facilities for entertainment and recreation , add , not merely to the diversity of urban living, but affect life styl e, and in the case of parks , golf courses etc. , they affect the en vironm ental qualities of urban communit ies . Such reso urces in urban communities require careful planning and protection against tax respon sibilities which threaten their continuing use and developme nt .

The res torative capacity for air purity resulting from substantial green areas such as occur in golf courses and parks is apparently not well appreciated by urban authorities . Urban communit ies would appear to have certain optimum sizes beyond which their existence creates more problem than they solve . Land use control s, direct and indirect , desig ned to limit the growth of cities are generally ineffectiv e, and create artificial shortages and increased prices for citizens .

Attractive alternative living communities, whose develop ment and growth Governme nt can in fact sponsor and ass ist are more likely to relieve popula tion pressu re. Much popular outcry, particularly in urban areas is re lated to land speculation . It is the view of The Manitoba Real Estate Ass ociation and the urban Real Estate Board s, that much of such criticism is made in good faith , but without knowledge or insight into the prob lems, difficult ies and expenses involved in land ownership and development for residential or industrial use .

The profits or apparent profits realized by perso ns, firms and corporations who incur very substantial risks in land asse mbly and developm ent are always well publicized , the losses go unnoti ced , except for those who must bear them .

Land asse mbly where success ful has invariably involved an acceptance of substantial risk , long delays while the require ments of Gov ernmental agencies are met, extensi ve, co stly and risky planning, substantial outlay of capital , substantial payment of interest cost for capital, and substantial cost and risk in providing neces sary utilities and services before the land is available for sale. The provision of services and utilities by Municipal Gove rnment seldom has kept pace with land demand, and much of the risk and cost of so doing has therefore been borne by private developer s.

When all of such risks and costs are added toget her , the land speculator or asse mbler is faced with the ultimate risk, the willing ness or otherwise of the public to purchase the land s which have been acquired and develop ed . The acceptance of such risk and the incurring of such costs in the face of so many uncertainties creates a risk which demands and receives high compensation in the event of succe ss . It goes by analog y of cou rse , Mr. Chairman , that it imposes very heavy penalties in the event of failure .

Some criticism is aimed at those who simply acquire and hold land in anticipation of an increment in value. In no city in Canada and pos sibly in North America can the nature and extent of the risk involved in such investment be more readily de monstrated than in the City of Winnipeg . The immense financial losses of land speculators in this City in the first half of the 20th Ce ntury are or ought to be so well known and are so well documented that they require only comm ent here, and not detailed explanation .

Every cost and every expense and every risk which the private land asse mbler and developer must incur is a cost and risk which Governments must also incur should they enter land banking on a large or small scale . The significant difference between private and public developm ent lies in the fact that where by Government action land prices are kept at an ab normally low level , then the purchase of such lands is being subsidized by the community or the province at large, rather than bearing the cost of meeting his own needs.

Observ ations by experienced and knowledgeable realto rs in Manitoba during the various large and small land banking undertaking and Governme nt Land Development Programs, has shown that the ultimate - - -

February 17, 1975 385 (MR . HAIG cont'd) ..... land cost in such projects is as great if not greater than the ultimate land cost of such lands purchased directly from private owners . Governments in selling demonstrate a consp icuous awareness of market value , but Governments in buying land have not demonstrated any special or unique techniques and skill s which lower the cost of land acquisition . In

summary , it is the suggestion of The Manitoba Real Estate Ass ociation and its as sociated Real Estate Bo ard , that the tools and technique s for effective land control use within the province are almost without exception , already in existenc e, and that the need for additional or novel legislation , if any , is in all probability restricted to the question of non resident, non -Canadian ownership .

Any greater restriction on ownership of land in the Province of Manitoba would , in the view of the asso ciation and boards, create for the citizens of Manitoba , greater problems, greater loss of freedom , and greater cost without offsetting benefits individu ally or collectively . It is recommended that the Government of Manitoba consider the experience of neighboring state governments in the United State s, and of other Canadian provinces in the restr iction of property rights in land , before any action of a legis lative nature is taken in this Provinc e.

Special concern and consideration must be given to the situation now in existence or anticipated to come into existence in the Province of Manitoba. It is the strongly held belief of the Real Estate Industry in this Province that those few prob lems which are beyond control by existing legislation are by their nature unique and special to Manito ba, and require unique and special solutions adapted to meet our peculiar nee ds, and not imposed indiscriminately . The Manitoba Real Est ate As sociation and the Real Estate Boards of Winnipeg and Brandon , Manitoba, have, Mr .

Chairman , within their memberships substantial knowledge and experience relating to the ownership and use of land in Manitoba . That fund of knowledge is available to the people of Manitoba, and to their Legislature at any time and willingly . The concerns of the Real Estate Industry of Manitoba, are not merely those of short term en lightened self interest , but also for the future life environment of Manitobans now young or as yet unborn . All of which, Mr. Chairman , is respectfully submitted . MRo CHAIRMAN: Thank you, Mr. Haig. Mr. Dillen . MR .

DILLEN: I would like to move that Les Os land be added to the committee to re place the Honourable Sid Green . MR. CHAIRMAN: It has been moved that the name of Mr. Os land be placed in substitu tion for that of Mr . Green . MR . JORGENSON: Mr. Chairman, I have no objection to that. Are we to assume now that Mr. Green will not be returning to this committee ? MR . CHAIRMAN: That is my understand ing , that Mr . Green will be away . MR . JO RGENSON: Because it seems to me that our restr ictions on our rules indicate that you just can't change people on the short-term basis . If Mr .

Os land goes on this committ ee, he stays on it till the end then ? MR. CHAIRMAN: That is correct . Is it agreed ? (Agreed) Let's proceed . Mr . Us kiw. MR . USKIW: Yes o Mr. Haig, you made the observation that the reso lution dealt with a much broader area and that the paper so far produced is mainly zeroing in on the rural question , and that is true . I just wanted to inform you, and I thought it was well known , that we see the land policy in Manitoba deve loping in stag es .

We don't think we should attempt to try to deal with all of the questio ns, urban and rural and recreational , at one time and there fore this simply is a phase of our consideratio ns . The other point is that your suggestion is valid that any legislation forthcoming out of these hearings should not be rushed and we agree with that , it is not our irt ention , at least from our point of view , the government's point of view, to try to rush into any leg islation .

I should like to indicate to you that the basis of these hearings really emanate from the fact that people not neces sarily on the governme nt 's side raised this matter in the Legislature and that it is because governme nt had no policy in this area that it was decided to hold the hearings . So it should be viewed in that context . MR . HAIG: We tried to do that, Mr.

Chairman , and also we have for example, and I'm instructed so by the Manitoba As sociation , that they considered the Department of Agriculture's paper a departmental paper, not a paper of government policy and that it should not be con strued as government policy , no policy having at this time been est ablished which was in fact government policy .

386 February 17, 1975 MR . USKIW: I then want to take you to Page 6 of your appended submis sion , you talk about the marketplace determining the value of property and I'm talking now on the urban context , it is not true in your opinion that a lot of the val ue that attach to urban properties are a direct resul t of public decision -making, for example, the zoning of the area, the street structur e, all sorts of considerations really add up to the value of a parcel of land in Winnip eg . MR . HAIG : Mr . U skiw , Mr.

Chairman , if I may speak to him directly , you 're quite correct; it 's a two-way street however . Zoning can des troy land value every bit as quickly as it enhances it , and I need give you no better example that is well known across Canada than the establishme nt of the green belt in the City of Toronto which immediately total ly des troyed the val ues of a great many parcels of land without any compen sation whatsoever , and it's the worst kind of cons equence of inappropriate government action which is a de struction of value without compensation or hope of compen sation .

In like circumstanc es and if that is to be government policy by any government , any enhancement of the value of land should not be considered as a cons equence of government action and should not be deemed an unearned increment to value . MR . USKIW: But if government does not compensate for the cause in the reduction of values by zoning or reg ulation , then should government also compensate -o r should the pri vate sector rather gain the new values because of government decisi on or City of Winnipeg decision , for example ? MR .

HAIG : Well in the City of Winnipeg if you suffer a loss , you suffer it privately . MR. USKIW: Right . MR . HAIG: If you suffer a gain , you should enjoy it privately . MR. USKIW: I see , that 's your point . MR . HAIG : It's a two-way street . MR . USKIW: Al l right . Now let me then ask you the broader question . Manitoba is larg ely under populated, I think that's a reasonable statement; we have an overabundance of land as compared to the numbers of people that live in Manitoba .

Does it seem reaso nable that land prices for urban needs should be a very substantial cost or input on the part of the urban dweller or even the business property owner . I mean since we have so much land why is it so expensive other than the development cos t, why should it be ? - - - - - - - MR . HAIG: Well urban land and rural land are inseparable in this context , Mr . Chairman .- The land by itself with nothing done to it by human input has a very low intrinsic value .

It 's only after certain steps are taken , generall y by people, individually or collectively that land begins to acquire value relating to its productivity or use. Wben you get into an urban community you have a number of very special problems which tend to deal with value ; there are factors that are remote such as transportatio il and there are immediate factors such as the cost of servicing land , unique and special costs created in part by our climate, in part by our location on the confluence of two rivers, in part by the availability of capital for the provision of services .

As you are, I' m sure , very well aware, many of the municipalities which are now part of the City of Winnipeg found them selves in the years followi ng, well let 's say 1939 , in a condition where they were incapable of maintaining the existing services and utilities within the municipalities without regard to the need for adding to them . Conseq uentl y there's been an important and significant role of private ownership and private develop ment and I think the city has been the beneficiary of it, the city as a whole and the people in it .

In the final analysis the thing that has most affected land prices in the city in the last while is the limited availability of it, and that 's not merely a function of private ownership but of the length of time in which it must be held before it can be converted to its ultimate use . MR . USKIW: So then you 're suggesting that the res triction ne cessa rily is a public one and that the res trictions themselves militate in favour of higher land costs to the homeowner of Winnipeg. And therefore I put the question to you, if that is the case then should there not be a mechanism that would have the reverse effect.

I mean the public deci sion -making process in essence is deciding the val ue of land in favour of the land owner or speculator . Should there not be some other means to prevent that kind of accrual of value ; should there not be some reulatory system to make sure that, for example, every city lot or a home should not have a greater val ue than so much since all of the va lues are really bases public decisions in the first place. MR . HA IG: I think it's always a question of balancing public decisions and the impact of public decisions against the cost of providing those decisio ns.

February 17, 1975 387 MR . USKIW: Let me pursue this. If there were no regulations that restricted the use of land , then land value s in the urban cont ext would go down . The fact that they go up results mainly from zoning regulations ' rest riction on the amount of land available at any given time for housing or whatever . That is really the basis of the valu e, the restrictive nature of land . MR . HAIG: No , I would say , Mr . U skiw, that's one of the basis of value but to allocate all value to that very narrow use . . . MR. USKIW: Oh, I appreciate that. MR.

HAIG: . . . would be a mistake , but I think it is quite true that where land is created or res tricted to certain special uses within an urban community it's created that way by the community at large and on the presumption that that' s for the community 's benefit .

Unfo rtunately that the processes that make it pos sible to allocate land in that fashion, the cost of those processes is ultimately in large measure borne by the purchaser of the land and if there's an inequity in that, you know , then we have to decide whether that inequity is one which is overbalanced by the ultimate public good of exercising reaso nable control over land develop ment . But you 're either going to have that cost paid out of one pocket or anot her , Mr . Chairman, and you have to decide where it's going to be borne . MR . USKIW: Which just brings me to the next point , sir, if you don't mind .

Since we allow land valu es to find their own level , we find that many people can't afford housing accommodation in the City of Winnipeg because of their level of income, certainly doesn't provide sufficient resources for home ownership or even sufficient resources to pay reasonable rental value for the use of an apartment or whatev er . But we find that the public is really ending up paying these values through low rental housing programs.

Now somehow , someone has been able to make a significant profit on the original value of the land which the public purse ends up having to pay for through the introduction of low rental housing programs and things of that nature . Isn't it really milking the public purse in the long run ? Is n't that what we're doing ? MR . HAIG: No , I wouldn 't be able to agree with that particular constr uction on the process that you des cribe, Mr .

Us kiw, because in the final analysi s, what you're talking about is using the public revenues which are placed in government hands for whatever purposes you in your wisdom as the government of the province think fit , for meeting a social need that arises not as a function of land costs but as a function of the society in which we live , in which there are going to be some people who unfortunately either through endowm ent of bi rth or through some accident of life are incapable either through those personal things or through economic circumstance at any time within the province, incapable of providing the kind of accommodation that they would like to have and they need , and it' s a political and social deci sion made by government that they will be given better housing on better quality land than they can afford to provide for themselv es .

I 'm not suggesting that it's a bad decision, but I am suggesting that it' s not a function of land value . MR . USKIW: Well let me take you to your own paper .

On Page 8, and I want to quote now: "The significant difference between private and public deve lopment lies in the fact that where government action land prices are kept at an abnormally low level then the purchaser of such land is being subsidized by the community or province-at-large rather than bearing the cost of meeting his own nee ds ." I agTee with that obs ervation -b ut is it also not true that the province-at-large is subsidizing the low rental units ?

So it's really irrelevant as to whether you place the subsidy dolla rs on the land side or the control on the land side or the control or subsidy dollars on the housing side . What's the differen ce ? MR . HAIG: Except that you 're dealing, Mr . U skiw, with a very very broad problem, a very broad problem , and trying to allocate the cost of it to a very narrow base . MR. USKIW: It 's one of the costs . MR .

HAIG: To attribute the costs or allocate most of the costs of a program like that to the value of privately held land in the province would be, I think , to distort the figures of the cost of providing the services you 're talking about . MR . USKIW: Let me now illustrat e.

I am led to believe by MHRC that land that is selling at $6, 000 an acre is transferred to the general public through home owner ship at about $14, 000 an acre, that there is an $8, 000 gain in certain sections of Winnipeg between the purchase of land and the resale of that same land ; and if that is the profit position of the land developer or a large portion of that you know then is it realistic that in a province where we have so many millions of acres of land that land should be at a premium and that thousands of

388 February 17, 1975 (MR 0 USKIW cont'd) ...•. Manitoba families cannot afford home ownership because of that substantial profit that is made through the ownership and the transfer of land . MR . HAIG : Well there are two points on that, Mr. Us kiw. Firstly you haven't indicated the span of time over which this increase in value occurs and you must keep in mind that (

a) there is the cost of capital of the original acquisition and there are very expensive realty taxes in this community that have to be paid by the owner whether the land is in use or no t. He can -very readily end up selling it at $14, 000 an acre and losing money . So the difference between the acquisition cost and the selling cost based on that information provided by Housing and - Renewal Cor poration doe sn't give me anything that I can assist you with . MR .

USKIW: Well let me then put the question that I really am trying to get at , and that is should there be a regulatory system that denies profits beyond a certain level so that more people in this province could afford the right to land and home ownership in the urban system . I mean if there is a problem should it be by regulation or should it be by . . . MR . HAIG: Wby go at it indirectly .

If you were to utilize the financial resources that you have in the control over some lands that you have , to make available serviced lands within the periphery of the urban community you would solve that problem without the neces sity of any such restr iction . MR . USKIW: So you are saying then that the MHRC program in esse nce is a good thrust, a good competitor , and you would agree with the status quo that that suffic es in dealing with that problem ? MR . HAIG: MHRC is dealing with a specific problem and they are buying land for specific purposes and they 're using it in a specific way.

They pick their location s, they go into the market -t here's only one difference between MHRC and any other purchaser and that is that they have far more exten sive resources with which to negotiat e. MR. USKIW: I believe that what you 're telling me is that that sort of balances off our situation to a relative ly sati sfactory position, or am I not reading you correctly ? MR. HAIG : Well I'm saying this - it's your respon sibility to make the decision how you cope with an over -all social problem and you have made one and it's workin g. MR o USKIW: I see . MR .

HAIG : I'm not suggesting it's the only answer at all, I' m simply saying that we're the beneficiaries in the community of this answ er . MR . USKIW: Thank you . MR . CHAIRM\N: Are there any other questions ? Mr . Jorge nson . MR . JORG ENSON: Mr. Haig, you in your remarks make some comment about land use.

There have been several sugge stions made to this Co mmittee by various people that what is important at the moment is a land-use commiss ion or council or whatever you want to call it to determine what lands will be set aside esse ntially for agricultural purposes and what areas will then be used for develop ment . Would you be in favour of that sort of council or commission MR . HAIG : I think that a commission which would include that amongst its terms of reference would be a desi rable thing . I really feel , and I'm speaking, Mr.

Chairman, not for myself but I'm speaking as the spokesman for the As sociation whom I represent here, that it is a worthwhile ent erprise for the Legislature of the Province of Manitoba to make an in-depth study of land use including the desir ability of reser ving certain lands for agricultural purpos es . Obviou sly the sure economics of urban communities makes it highly de sirable that a certain amount of intensiv ely cultivated agricultural land around their perimeters always be kept available, otherwise the urban communit y itself comes under very considerable stre ss .

I think for example, that the legis lation which was taken in British Columbia for the protection of the lower Fraser valley was absolutel y critical to be done , otherwise the urban community became dependent entirely on imported food s. I think that those decisions have to be made after very careful investigation and an examination of what the true facts are here. This is not the Fraser Valley . MR . JORG ENSON: No .

But if the criteria , and you have indicated in your brief that there must be a need establis hed before any of these measures be taken , I don't think there's any questi on , this is a personal opinion , I don't think there's any question of the need now for not only this count ry, not only Manitoba but I think this entire country and the world to look at its available land resources to ensure that we do not destroy all available productive land and build cities on it o That will imply of necessity because of the nature of the land that surrounds the City of

February 17, 1975 389 (MR. JORGENSON cont'd) ..... Winnipeg, a limitation on the size of this city . Do you see any serious problems resulting from the imposition of those restrictions in the expansion of this city ? MR . HAIG : No . MR . JORGENSON: Let me put it another way then . In principle are you in favour or would you be opposed to the imposition of those res trictions curbing the size of this city ? MR . HAIG: Well I think our brief makes it quite clear , Mr .

Jorgenson that it is desir able to limit urban growth to a certain manageable proportion , but it's equally clear in the brief, I think, that it 's the view of the As sociation that rest rictions arbitrarily imposed and made in the light of circumstances at any particular time seldom work. That the alternative and a much more sensible and attractive one is for the Gove rnment to select alternative loca tions for urban deve lopm ent and to provide inducem ent of a high quality to persuade people that that is a good place to live and a good place to carry on busine ss .

In other words, satel lite communities if neces sary or the emergence of other large communities within the pro vin ce . MR. JORGENSON: Yes . You've already answered the second question that I was going to as k in this connection but I' ll as k it in any cas e, you may want to elaborate on it . That if Government owns a considerable portion of the land in this province and Crown land , much of it not too far from the City of Winn ipeg, and much of it very close to our bes t recreational areas, do you see any serious problem in developing cities on land which the Government now owns and where Mr .

Us kiw's problem about speculation could pos sibly become a factor in developing those cities in those areas ? MR . HAIG: Well I think that if the Crown land were to be set aside and dedicated for the development of a new urban community de signed to funnel off some of the growth from a city like Winnipeg it would be a funct ion of the amenities in that community not particularly a function of who owned the land for which it was put togeth er .

The whole question of Crown lands is I think one that des erves very careful investig ation ; the use to which they 're presently put, the proposed future uses , the leasing policy and the sales policy . We haven't gone into them in our brief because they are part of what we feel is the sub ject of a much larger and broader inquiry which should be undertaken by you .

If you set out to create a satellite community which you in the final analysis do , if you go to the Crown lands area on the presumption that those Crown lands will not be good agricultural land and that they can be safely converted to urban use that 's a decision you make in the light of today 's circum stan ces . Twenty years from now the fast , and a very very fast development of agricultural technolog y may make that valuable land very suitable for cropping .

Our own experience in our own lifetime in the 100 years that agriculture in the Province of Manitoba has immensely changed the character and quality of agriculture here mo stly because of the development of new cereal grains and new types and that's an on-going process . So to pick any piece of land , other than to go right into the Lurentian Shield, and say it's got no agricultural use would be a dangerous decision to make . MR , JORG ENSON: All right .

The limitation of the size of this city by the imposition of some rest rictions relative to land-use would of neces sity imply the deve lopment of satellite communiti es . MR . HAIG: Right . MR. JORGENSON: So would you not think that in considering the limitation of the size of this city you have also got to look at all the areas that could be developed as satellite communiti es . MR . HAIG: I think you do . MR . JORG ENSON: And you've got to come up with a complete package rather than a piecemeal one . MR .

HAIG: Yes, you have to plan it in its entirety and I think there is great benef it to be gained by the experience that they 're undertaking in other count ries where they 're trying to do this. One of the consequen ces that immediately emerges from the limitation of the size of a community like this however is a growing intensi ty in the population , because if you can't expand geographically you're going to expand in every direction available to you and in the intensi ty of population . Whether sociolog ically that 's a wise and desirable thing to do is a very difficult question to determine .

You end up ultimately with a situation where people are going to decide if they 're going to live in this kind of a community because they want what's

390 February 17, 1975 (MR . HAIG cont 'd) . • . . . here and the only thing that will persuade them to go somewhere else is if they can find the things that they' re se eking here in another place and within the pro vinc e. MR . JORG ENSON: Now you mentioned that when land value change as a result of Gover nment zoning or municipal zoning that there should be no compens ation for the change in land va lues in case it should decrease . And I'm inclined to agree with that philosophy with perhaps one exception .

In the areas adjac ent to the City of Winnipeg at the present time, they're called at the moment I think the additional zone, there is a great deal of farmland and the people living on those lands have no intention of selling that land or don't ever want to sell that land for urban deve lopment , they prefer to farm it, but they're being penalized at the present time because of the very pos sibility of urban development and they've been paying heavy taxes for the privilege of farming in those areas .

Do you think that these people if a zone has been es tablished that permanently declares that particular area agricultural land , that they should not be compensated for the additional taxes that they 've been paying through a period of years for the use of that land , for the right to farm it ? MR . HAIG: Well that 's a function of what kind of land-use that they have .

In many cases those have been divided into five acre parcels which are used basically as residential units, but there are as you suggest a great many small farm units and they may have some capacity to bear a larger cos t of taxation because they 're usually intensively cultivated . But I don't think that personally , and I think the As sociation that I represent would share this view , I don't think that a tax burden disproportioned to the use to which the land is being put should be imposed on anybody who' s farming in an area where the land use has been dictated by a decision of the Municipal Government .

Probably the problem arises as a conse quence of the very narrow tax base that the municipal governments have and the solution may lie in that rather than in an unreasonable burden in relation to land use that small farm units have within the additional zone . MR .

JORG ENSON: I'm not neces sarily speaking of small farm units , I'm speaking of normal sized farming operations within the area that comes under the zoning restrictions of the City of Winnipeg, and I think they're commonly referred to as the Additiona l Zone area , so you 're not engaged in any specific type of agriculture other than what is carried on in the municipality in which they' re located . But they do pay an additional tax because of the threat of being absorbed by the City of Winnipeg and because they come under their zoning restric tions . MR.

HAIG : Well I think that that creates an unfair burden for the farmer who is carry ing on a normal farming operation . MR . JORGENSON: You think then that there is an argument that can be made for some kind of compen sation there ? MR . HAIG : I would think so . MR . JORG ENSON: Thank you . MR . HAIG: That's a function not merely of zoning, that' s a function of making a deci sion to preserve a green belt area or a buffer zone and when the decision is made for the collective benefit of the community as a whole they should bear the cos t of it and not individual owners . MR . JORGENSON : Thank you, Mr. Haig. MR.

CHAIRMAN: Mr . Walding. MR. WALDING: Mr . Haig are you the same Graeme Haig who is the President of the Manitoba Chambers of Co mmerce . MR. HAIG: I am indeed, Mr. Walding . MR . WALDING: I take it then that you are appearing this morning for the Rea.l Estate As sociation in your capacity as their lawyer . MR. HAIG: I'm appearing as their lawy er, yes . MR . WA LDING: I see . So the views that you 're giving are their views and not your own ? I wanted to ask you a few questions about a report in the newspaper . . . MR. HAIG : By all means. MR .

WALDING : . . . which suggests that the Manitoba Chambers of Commerce will be prese nting us with a brief . It would be more appropriate at that time . Can you tell me if the Chambers of Commerce will be pre senting us with a brief ? MR . HAIG: Those are the instructions from the Directors of the Chamber and they're doing their bes t to prepare it . As you are aware, the meeting was held only a week ago and I I • I - - I -

February 17, 1975 391 (MR . HAIG cont 'd) ..... to do justice to the respon sibility will take some time . I'm hoping that they will before this Committee finally reports have an opportunity of making a submiss ion to you . MR , WALDING: Will you be a member of that deleg ation ? MR . HAIG : I would anticipate it , God willing . I hope to survive that long, Mr . Walding, to do that , that 's my job . MR . WALDING: Thank you. I have just one other question too .

You mention on Page 5 that the As sociation does not see any need for leg islat ion against absentee ownership but with the, and I qu ote: "The pos sible exception only of non-resident, non-C anadian owners ." MR. HAIG : And that is a single qualification . Non -resident and non-Ca nadian . MR . WALDING : If that should be necess ary to do , does the Asso ciation see that a non resident, non-C anadian owner would be worse than say a non-re sident Canadian owner ? MR . HAIG: I don't think neces sarily that the As sociation would see that .

However , I think that what the view of the As sociation is, that if you are going to start restricting owner ship of land the first and mos t obvious place is if you can demonstrate some harm as a result of non-Ca nadian , non-re sident ownership, start there. If your subsequent experience demon strates that greater legis lative control becomes imperative then you have taken the first step, but you react as the demand or the need is arising. MR , WALDING : Does the Assoc iation see that the national ity is the criteria in here or is it the reside ncy ? MR .

HAIG : Well nationality is a very delicate and dangerous situation to get into be cause residen ts- in the final analysis what we were very careful to do was to demon strate that nationality coupled with residence had to be the criteria . If nationality and residence were coupled together and had been for very long none of us would be here . I don't think nationality is nearly as significant if you are starting to apply criteria and the fact that you live in Canada and work here and make a contribution towards the country and the province in which you live . MR . WALDING : I' m inclined to agree with you .

How would the As sociation then see resident, non -Canadian ownership ? MR. HAIG : A man who is a resident here who is non-Ca nadian , I think the non Canadian aspect of that is insignificant . If he is a resident here he's here by his own choice , he has elected to become a part of our life and the work here, he should have every right of ownership that there is. MR , WALDING: Thank you . MR . CHAIRMAN: Mr . Henderson . MR . HENDERSON: Mr. Haig, I' m asking you this question because of your knowledge of law and regulations of the coun try .

Do not non-re sidents if they have money coming out of this country, is there not a withholding tax on the money they make now ? MR . HAIG: On income yes at the present time, depending upon the ultimate des tination of the money the holdback range is from 15 to 25 percent and it 's based on income . The out flow of capital, if it is non -Canadian capital leaving the country that ha s been here it 's not subject to any tax withholdin g. But all of the income is.

The range of holdback is 15 to 25 percent and that is held back until the individual or the business or the co rporation or the partnership files a Canadian tax return which they have the right to do . They equally have the right not to do . If they fail to file a tax return then the 15 percent to the United State s, or the 25 percent as the case may be, is the tax they pay . MR , WALDING: So then if a person was a resident of the United States and was a non resident landowner up here there 's a 15 percent withholding tax on him already in addition to taxes that he pays ? MR , HAIG : That's right .

Any income, and it 's against the gross income from the farm I might point out , not from the net income and as a result it isn't the cons equence of whether or not there's a profit been realized from the ownership of the land . MR , WALDING: In other words , he pays a 15 percent tax regardl ess of that in that case ? So he's already got an additional penalty for being a non-reside nt owner . MR, HAIG : Us ually , yes . MR . WALDING: Thank you . MR . CHAIRMAN: Thank you, Mr. Haig . There are no more question s? MR, HAIG : Thank you Mr. Chairman , gentlemen . MR . CHAIRMAN: Mr .

Anhang, Agricultural Department , Bank of MontreaL

392 February 17, 1975 MR . A. ANHANG: Mr . Chairman, members of the committee, I represent the Agricultural Department of the Bank of Montreal and I have a written submissi on which is, believe , being handed out . Mr. Chairman . Let me say at the outset, gentlem en , that the impetus for this sub missi on comes from an observation which was made in the Working Paper . It 's found at Page 56, top of the Page , No . 3, and I quo te, Mr. Chairman : "High land prices make the transfer of a farm from one generation to. the next extremely difficult .

Either the parent must forego a good proportion of the full market value of the farm or the son must as sume an impossible debt load ." Now , Mr. Chairman, my brief is directed primarily at the problem that's set out in that quotat ion . The Bank of Montreal in particular is concerned about a nu mber of aspects of our present provincial taxation, the provincial taxation being the Gift Tax Act and the Successi on Duty Act, and the thrust of the paper will be that these two Acts in combination militate against - militate against - the transfer of family farms today in Manitoba from one generation to the next . Mr.

Chairman , at Page 66 of the same Working Paper, there' s a table, Table 23, it's titled Total Acreage of Farmland by Size of Farm , it's comparison in Man itoba - it 's a DES statistic and it 's 1961 and 1971 . I would direct your attention, Mr. Chairman and gentlemen, to the "size of the farm s" column on the left side . We have 70-acre farms and then 70- to 239 - acre farms and so on, all the way up the spectrum to 2, 880 and ov er . On the right side of the table, the 1971 column, the number of farms .

When one looks at that, one sees that the number of farms beyond the 400 acres, 400 acres up to 2, 880 and ov er, represents 20 , 000 of the 35, 000 farms which were being sampled . In other words, a very large percentage of the farms presently in Manitoba, at least in 1971, were 400 acres and over . Now , Mr . Chairman, the price of farmland I am sure is known to many of you, particu larly the members from the rural const ituencies, and I don't think one would be far wrong in taking an estimate of $3 00.0 0 an acre as being perhaps a current value in southern Manitoba for good farmland .

If one then takes the cost of land alone - we 're just talking about the cost of land alone without the farm buildings, without the implement s, without the invento ries, without the working capital and without the stock for that type of farm - the bulk of the farms in this province would be worth more , the land alone would be worth more than $120, 000 if one doesn't take into account of course the debt load . I appreciate that there's a debt load in many cases . Back in 1971 in the submissi on by the Minister of Finan ce, Mr.

Cherniack, in his re lease of December 30t h, he stated at that time that based on the figures available to him then, which I suggest to you, Mr. Chairman, would have been figures that were likely 1966 and 1967, that a very small percentage of farms in Manitoba would ever be subject to tax on a successi on duty basis . I' m suggesting to you , Mr.

Chairman, that as the result of the con solidation of farms since then and , more importantly , as the result of exploding land value s, that a significant number of farms today in this province, perhaps as high as 25 or 30 percent, would be subject to tax on a succes sion duty basis even after one deducts the debt load . In other words, the aggregate net value would be in excess of $1 50, 000 in the case of a transfer down to a son , or $2 00, 000 perhaps in the case of a spouse with the children being includ ed . Mr. Chairman, now to the written brief . I don't propose to follow it precisely .

It has - and I apologize for it in advance - it has by its very nature some technical matters dealing with the comparison of gift tax in the Province of Manitoba and Successi on Duty Act in this province with the corresp onding acts, or non-acts where there is none, in the other provinces of Canada , and we also make pas sing refer ence to the juxtaposition of the Income Tax Act of Canada as it relates to the Success ion Duty and Gift Tax Acts. The question, Mr . Chairman, which we wish to pose is, why would a farmer wish to sell his land if he has children on the farm who wish to continue on ?

On approaching retirement such a farmer really has very few alternati ve s. First, as suming that he wishes to retire off the farm , his major problem is obtaining cash or an equivalent annuity from a purchaser willing and able to give him top dollar for his land . He re the likely purchasers are either members of his own family or adjoining landowners in the area who wish to conso:idate their own holdings . For the first situation, namely the family farm that he wishes to transfer to other mem bers of his family, what is the provincial tax legislation ? i.e. Do the present provincial tax 11 • -

February 17, 1975 393 (MR . A. ANHANG cont 'd) ..... laws relating to gift tax, act as an incentive or do they act as a hindrance to such a transfer ? It is submitted that the present gift tax law in Manitoba is discriminatory in that regard , in fact is one of the few provinces of Canada where there is no special gift tax consideration or exemption for the transfer of that farm . Mr. Chairman, whether or not this is an overs ight is not the subject of this paper or this submiss ion . The point is that the present gift tax law in Manitoba militates against such an orderly transf er . To elaborate: under

Section 70 of the Income Tax Act of Canada brought in - and this was an amendment brought in by Bill C- 170 in 1973 - the Federal Gover nm ent provided for a tax-free rollover of a farm property on a taxpayer 's death , of land used by the taxpayer in the business of farming immediately prior to his death and being transferred to his spouse or to any of his children .

The land and the depreciable property for buildings must be transferred or distributed to the taxpayer's children who are resident in Canada imm ediately before the taxpayer's death, and must be indefeasibly ves ted in that child within six months after his death . If left to the spouse, to the widow, she could in turn, pursuant to the same

Section , roll it over to the children on her death , tax free (subje ct to the restrictions already men tioned relating to the requirement that the son remain on the farm .) If the conditions precedent to the rollover are met , and the deceased is deemed to dis pose of the land and the buildings at their undepreciated capital cost (for the buildings) or at their adjusted cost base for the land . Similarly, the child is deemed to have acquired the land and the buildings at these figures . There is, theref ore , Mr. Chairman, no federal capital gain or recapture realized by the deceased .

Of course , when the child disposes of the ass ets he will have his father 's tax cost and he will have to pay his own tax accordingly on disposition, depending on the valuation at the date of such dispo sition . Under the same Bill C- 170 passed in 1973,

Section 70(9) of the Federal Income Tax Act provides that inter vivos transfers of family farms, the words "transfers during the lifetime", could also be effected on terms almost identical to those for rollovers on death . In other words, it would go on to the next generation without attracting any capital gains or recapture .

Section 73 (3) begins by providing that the transfer - and this is where you have an inter vivos transfer - takes place at the price "otherwise determin ed" , that is presumably the price set out in the agreeme nt of purcha se and sale . The price for the land , howeve r, cannot be greater than the greater of (

A) its fair market value , and (

B) its adjusted cost base, which esse ntially is its cost . The price for the land may not be less than the lesser of either one or the other . Thus, the price for land must be somewhere between the adjusted cost base and the fair market value . Similarly, the price for the depreciables, for the buildings , must be between the undepreciated capital cost to the transferor and the fair market value . The parent is deemed to have sold at this price and the child is deemed to have bought at this price . Now, Mr.

Chairman, the problem - and again I apologize; it 's very technical, but I propose to give an example which will I hope clarify the difficulty . A serious problem aris es , Mr. Chairman , when the provincial gift tax statutes are applied along with

Section 73 of the Federal Act . When setting their price, the parent and child will want to set their price at a figure which will avoid any taxable gift . If they do choo se fair market value ,

Section 73 (3) states that this is the parent 's proceeds of dispo sition for income tax purposes with the result that he realizes and is taxed on his accrued gains. Consider, for example, farm land on the edge of an urban area whose value on V -day was $75 , 000 but whose value at the date the farmer wishes to transfer it to his son is $200 ,0 00 .00 . If the father transfers the land to his son at his cost , the cost base of $75, 000, he has made a taxable gift of $125, 00 0.0 0. If, however, the father transfers the land to his son at $2 00, 000 , he has realized a capital gain of $125 , 000 .00.

In other words, it 's a dilemma which can't be solved where there is a Gift Tax Act . In those provinces that impose no gift tax there is no problem . The transfer will take place at whatever figure will give the father and the son the best income tax advant age .

Similarly , in gift taxing provinces there will be no problem if the difference between the father 's tax cost and the fair market value is less than the exemption for farm gifts provided in The Gift Tax Act, in other word s, a special consideration for the tran sf er of a family farm, a special consideration that would be found in The Gift Tax Act and is indeed found in most of the Gift Tax Acts of this country . These exemptions that are referred to vary widely from

394 February 17 , 1975 (MR . A. ANHANG cont'd) ...•• provinc e to provinc e, going from $75 ,0 00 in Quebec to $50 , 000 in Ontario to nil in Manitoba. Nil . Unless the province has a generous exemption , I can see no way that a farm can be transferred from a father to a son without a tax cost , either capital gains tax or a gift tax . Now just going to the other provinces on a comparison basis for a moment, Mr. Chairman . I hope you'll bear with me; the treatment is quite short . The gift tax treatment of farm transfers varies almost from province to provinc e.

On the one hand, Alberta , Prince Edward Island , New Brunswick, Nova Scotia and Newfoundland (five provinces) levy no gift taxes at all . On the other hand , Manitoba levies gift taxes and gives no special treatment to farmers. Saskatchewan permits a "once-in-a-lifetime" exemption of the lesse r of the value of the gift and $10, 000 where the gift is an interest in real property to a child of the donor to be used by the child in farming operations . British Co lumbia permits a similar "once-in-a-lifetime" exemption of $1 0, 00 0. 00 .

Quebec permits a person whose principal occupation is farming to deduct from the tax able value of his gifts in a year, once in his lifetime, up to $75 , 000 in respect of a gift to hi s children of land or other farm property (including implements and livestock) intended to be used by his children for farm purp oses . In Ontario, The Gift Tax Act , 19 72, was amended November 30 , 1973 by adding to the lis t of exempt gifts, absolute gifts of farming assets. Their Succession Duty Act has also been amended to allow a complete exemption over a 25-year period where the farming operation is continued .

Under The Succ ession Duty Act of Manitoba , farmers, unlike every other Province in Canada with the exception of Saskatchewan -and I'll speak about Saskatchewan again in a moment because their exemptions on the basic level have now been increase d and they're greater than ours -with the exception of Saskatchewan , then,our Succession Duty Act gives no special treatment to farmers. If the aggregate net value of a farmer's as sets on death exceed the basic exemption, the property is taxable whether or not the property happened to be a family farm.

What conclusion therefore is to be drawn from the present situation in Manitoba as it relates to The Gift Tax Act and The Succ ession Duty Act ? Mr. Chairman , I am sorry to say - - that our province has the worst treatment for farmers of any province of Canada when it comes - to looking at the exemptions. It is submitted that farmers in anticipation of their estate being forced to sell the farm in order to pay succession duty , often elect to sell to the highest bidder during their lifetime.

The present Gift Tax Act only allows the transfer of $2 , 000 per year to any child to a maximum of $10, 000 , plus $5 , 000 to the spouse . For a farm of any value one can readily see that it would take more than a li fetime to divest oneself of any sizeable farm and still avoid paying the taxes . For the farmer to transfer the family farm and pay the gift tax is counter productive since it presents him with the same problem, namely that of an immediate cash payment of tax . It is submitted, Mr.

Chairman, that one of the prime reasons now causing farmers to sell their farms to non-residents or the Provincial Government is their desire to avoid the estate being forced to sell the farm under distress condition s. Finally , the present law would appear to be inconsis tent with the present stated policy of the Government to keep resident farmers on the land .

If the Government in fact wishes to discourage the sale of Manitoba farm land to non-residents, or even to itself, it should take the positive steps required to encourage the orderly transfer of the family farm from one generation to the next, avoiding the incidence of tax . Presently , Mr. Chairman, this is not the cas e. All of which is respectfully submitted . MR . CHAIRMAN: Thank you , Mr. Anhang. Mr . U skiw . MR. USKIW: Yes . You made your very strong point on the question of taxation penalties in the transfer of land .

Would I take it from you that you believe that there should be a dis criminatory attitude on the part of the Government of Canada as between someone transferring assets , who is a farmer, and someone who happens to own a garage or a store and who wants to transfer those ass ets ? MR . ANHANG: Mr . Chairman, through you, that indeed is the present stated policy of the Minister of Financ e.

February 17 , 1975 395 MR . USKIW: No, I'm saying are you saying that you would prefer that there 'd be a di s criminatory policy ? MR . ANHANG: It's in fact the present law of this coun try . Farmers are allowed into the federal Income Tax Act to transfer the farms, tax free, from one generation to the next . MR . USKIW: No , I 'm talking about Manitoba law . MR . ANHANG: Oh, Manitoba law . I'm sorry . MR .

USKIW: I'm saying to you, you imply that there should be a disc riminatory policy that where there are gifts given from a farmer to their desce ndants that there be no tax appli ed, or some provision favourable to them . Would you apply that same principle to the owner of a busin ess, a store, a garage or a theatre or whatever else ? I mean, why can 't I give my busi ness away to my immediate family without Gift Tax provisions ? What's the difference between the two, is what I 'm trying to get from you . MR . ANHANG: First of all, Mr .

Chairman, the parameters of this particular commit tee, I believe is to discuss the problems relating to the sale of farm land to non-residents and , in preparing for this co mmittee the paper which has been put forward by the government department, they have suggested that farmers should be given this special treatment . In other wor ds, the present problem at hand is, how do we keep the farmers from being required to sell the land perhaps to non-residents ? If you, Mr.

Chairman , wished to have observations on whether or not there should be larger exemptions, or special exemptions for family busi nes ses, perhaps we could go into that, but I didn't understand this particular committee to have those parameters . MR . USKIW: No , but my point is, sir, that if you believe in a discri minatory tax policy , aren't you really promoting the idea that we 've got to get our toe in the door so that we open up the door ever wider from here on in ? Isn 't that really what you are saying ?

Because how can soci ety justify a disc riminatory tax policy wherein the situation is identical - that is the giving of gifts to one 's family or descendants ? How can one distinguish between two people living in Winnipeg, one giving the gift, the other one rec eiving it, as against two people living in Morden or on the outskirts of Morden ? How can we treat the citizens of Manitoba in that way , or two groupings in differen· ways ? MR . ANHANG: Again, Mr . Chairm<J.n, I didn't unde;·3tand this to be the suhjeC't of th3s e deliber:Jtions but nevertheless I'd be pleased to answ•"'r. I CJ think, Mr .

Chl irm:m, tlut when it comes to family farms they are the equivalent of family busin esses in urban areas . MR . USKIW: That's right, and that's my point . MR. ANHANG: And if you had a committee that was sitting on the question of how do you transfer the family business from one generation to the next, I believe our position would be the same ... MR . USKIW: No , but my point is, sir ..• MR . ANHANG: ... special provisions for that. MR . USKIW: My point is that, in your opinion , should there be a disc rimination as be tween one class of people and the other class of people ?

That's what I want to get from you . Do you believe in a discri minatory policy on taxation ? MR . ANHANG: Ideally, Mr. Minister, there shoul dn't be any discri mination but , as we understand it , in particular situations where you 're attempting to fulfill a social need by keep ing people on the farm, perhaps you have to give tax conc essions . Similarly in family busi nesses , in order to avoid them having to be bought out by larger concerns you may have to give larger exemptions to those situation s. MR . USKIW: That's fine . MR . CHAIRMAN: Mr. Dillen . MR .

DILLEN: You make some reference in your submission on the transfer of land from a father to a son , and that the reason for this - I don't know just exactly what page it is -but the father wants to use the cas h that he accumulates for the purpo se of an annuity or some investment which will act as a pension fund for him in his old age .

What would happen if in the case of my father, now, wanting to do that, wanting to accumulate this amount of money, and me approaching your bank for those funds to transfer to my father and I don't have any accumulated assets to place with your bank as securi ty , what is the position of your bank with regard to me as an individual ? MR . ANHANG: Well first of all, of cou rse, Mr . Dill en , the land itself is the security . The difficulty with the succ ession duty is that if the farm were to be given or sold to you

396 February 17 , 1975 (MR. ANHANG cont 'd) ....• pur suant to a death, after death, the amount of money you would require wouldn't just be the value of the land , it would be the value of the land plus the tax . That's the difficulty . It would take you longer to buy the farm. It would take you longer I to buy the farm because of the tax element. MR . DILLEN: I see . Has it been the policy of the bank to provide loans for persons who wish to purchase land without any equity ? MR . ANHANG: Well again, Mr .

Dillen , the very fact that you are purchasing the land would provide you with the securi ty that you can give to the bank . You would likely lodge title, you see . You would have an equity of some type when you first started, of co urse, but if you 're buying it with the bank 's money , then the bank would get to hold the title . Just a simply question of whether the bank felt that you could make a go of that farm and pay back the loan . MR . DILLEN: What is the difference between the bank holding the title and the Province of Manitoba holding the title ? - MR .

ANHANG: Well of course there is provision --(Interjection) --Well, Mr. Chairman , under what circum stanc es , if I may through you , would the Province of Manitoba be holding the title ? As secu rity for the taxes, or for what reason ? Is it the Government of Manitoba that you 're thinking of that would be buying this land and selling it to you or . . . MR . DILLEN : Well, I' m trying to establish whether or not by holding the title that you have some --in effect are really holding the land until such time as the amount of mortgage I is paid off. MR .

ANHANG: Well the holding of the title is a recognized form of secu rity in law; it's called an equitable mortgage , just as effective as amortgage . MR 0 DILLEN: And what is the difference then between you holding the mortgage and the province holding the mortgage ? MR . ANHANG: Are you buying from the provinc e, or is the province lending you money I to buy ? MR . DILLEN: The province is purchasing and then reselling . MR . ANHANG: Oh, I see. Okay . Well, let's take an example if we may .

Let 's say the land is worth $300 ,000, which isn 't unreasonable considering the small number of ac reage you now need to get $300 , 000 .00 . The tax on $300 , 000 would likely be in the range of $20 , 000 approximately . In other words , to get that title to that land clear , it will cost you $320 ,0 00 , not $300 , 000 . Now , if the province wishes to lend you $320 ,0 00 against security of 300 ,0 00, then I'm suggesting that the province is being very careful .

But the basic underlying diffi- culty is that you've increased the cost of purchasing by the additional amount of taxes that the 11 province has levied on that land . MR . DILLEN : I don't quite follow you . Could you elaborate ? MR . ANHANG: Okay , let 's just continue that same example. The land should only cost you $300 , 000 . Right ? That's the fair market value, taking that as an example, and you 're getting it through an estate. Corre ct ? And there's succes sion duty levied on that last $1 00 ,0 00 and it's approximately $20, 000 - it's 22, 000, in that range .

To get that land into your name, eventually, you'll have to pay $322 , 000 for it . Okay ? Now , you 're suggesting that the Provinc e of Manitoba should finance the cost of the land . Is that correct ? I mean, is that what you 're sugge sting ? MR . DILLEN: We 're using a hypothetical situation . I am a young farmer . Right ? I have the knowledge and the expertise with which to farm land . But the farm land has never been productive enough with which to support both myself and my father .

Now, my father wishes to remove himself from the land but he needs the money, okay, with which to retire on and live comfortably off the land , or away from the land . How can you suggest that the bank could be of assistance in helping me acquire that land ? MR . ANHANG: Well in that case --you've changed the facts slightly and I understand what you 're saying now --in that case , of co urse, it would depend on whether your father would be willing to take a mortgage back from you and you would then, from the income each year , pay off the mortgage and eventually own the land .

He could do it that way and you wouldn't need the bank financing. MR . DILLEN : But that doesn 't provide my father with a lump sum . MR . ANHANG: If you wanted a lump sum you would have to get a bank or some other outside lending agency to give you long term financing, and then you , instead of paying your

February 17 , 1975 397 (MR . ANHANG cont'd) ..... father the monthly amount , you would pay the monthly amount to the person who lent you the money . Now the difficulty with what yo u're talking about there is an inter vivos sa le. The difficulty there is that your father, in selling that farmland to you at fair market value, would have to get additional funds to pay the tax and there would be less money available to him to provide that annuity . MR . DILLEN: All right. I am now in posses sion of the land through a mortgage from your bank, and you hold the mortgage .

If I came back to you again and said, "I have the land and now I need to purchase the machinery" , what would the posi tion of the bank be in that case ? MR . ANHANG: Again , there are different types of loa ns. One loan that you referred to a moment ago was a long term financing against the title. There's a different type of loan that you can get for equipment and one takes back either a condi tional sales contract or a chattel mortgage .

In addition , you could give secu rity on the growing crops and any other items of value that you might have , like accounts rec eivable; and money is often lent against those particular assets in this province by banks . And many many farmers, by the way, deal on that basis . MR . DILL EN : With banks ? MR . ANHANG: Oh, yes , sure. MR . DILLEN : To what extent are bank loans for agricultural purposes guaranteed by the Federal Government ? MR . ANHANG: I 'm told by Mr .

Gibb , who 's the representative in the provinc e of the Agriculture Department of the Bank of Montreal , there is no special guarantees by the govern ment for this type of a loan . MR . DILLEN: Thank you . MR . CHAIRMAN: Mr. Joh annson . MR. JOHANNSON: Mr. Anhang, it just so happens that my father owns a farm and I am the eldest son in the family, but I 'm not a farmer by occ upation and I didn't do a single thing to increase the value of that farm to help my father work it .

Now , are you suggesting that I deserve to get that land when my father passes away without the Province of Manitoba getting any inheritance tax or succe ssion duty on it ? MR . ANHANG: Mr. Chairman, in reply to that, in every province that does have a special exemption, in fact even the federal legisla tion that has that exemption, they have strict rules on transfer and they do not allow it to be transferred where it can be demonstrated that it will not be used for farming purposes . MR .

JOHANNSON: Well, supposing that I were to then lease the land to a local farmer, it would then be used for agricultural purp os es. MR . ANHANG: No, the transfer is being made to you and you personally wouldn 't be using it for the farming that it's intended to be used for. MR . JOHANNSON : Okay . Supposing that I lived out in the town and that I intended to farm but that I had done nothing personally to help my father work that land , nothing to help him.

Now are you saying that just because I want to farm, that I might have some capaci ty to farm, that I deserve to get that land even though I did nothing to help my father work it, I did nothing to contri bute to that land ? --(Interjection) -- MR . ANHANG: Well what you 're presenting me with , if I may say , Mr. Johannson, is a theoretical situation where a son in order to take advantage of an exemption set out in a tax law would go out and change his occu pation , and Mr .

Mor genson said , "I would doubt that one could suddenly change the occ upation and make a succ ess of it", but if he did I can see no ob jection to it. MR. JOHANNSON : You don't ? MR . ANHANG: If he couldn 't, then of course -I'm assuming we 're talking a bona fide transfer to a bona fide person who intends to do some bona fide farming . MR . JOHANNSON: You know , I, in this area, I don't happen to agree that one should simply transfer assets to someone who had done nothing to deserve them. I happen to be more of a free enterpriser in this area than the oppos ition members seem to be. MR .

ANHANG: I mean surely , Mr. Chairman, this would depend on the desires of the perso n who owns the property , if he wishes to transfer it . I would suggest to you , Mr . Chairman, that the Honourable Member from Wellington ... MR . JOHANNSON: No , St . Matthews . MR . ANHANG: St . Matthews, woul dn't forego the gift if it was made to him.

398 February 17, 1975 MR . JOHANNSON : I might not forego it but that wouldn't mean that I in any way deserved it or that the people of the province should not get tax revenue from it . MR . ANHANG: Well I think, with respect, you're talking about a situation which is unusually rare . The regulations under which these exemptions are allowed are quite severe . They provide that it's only for bona fide farmers who intend to stay on the land and where you have lease concoctions and this type of thing I believe that your administrative people in the tax department across the way would very quickly spot that . MR .

JOHANNSON: Let me bring up another question that's related to this. I happen to represent a city con stituency, I come from a rural area originally , I now live in the city , I represent a city riding . People in my con stituency in most cases do not farm, they are sub ject to the succ ession duty , if they happen to have properties - or their estates are subject, the person inheriting is subject to the succes sion duty if they happen to die . Do you feel that your suggestion that farmers should be exempt from this is fair to my con stituents who are subject to it ?

And would you be willing to tell my con stituents that? Come out and explain to them that you think that they should be subject to this succes sion duty but that farmers should not ? MR . ANHANG: Mr . Chairman , two obse rvations . First of all, the question of the owners hip of Manitoba land by non-residents in the rural areas is the subject of this committee as I under stand it . If it was al so including the question of the ownership of urban land by non residents I would be delighted to go into that particular aspect with you . But , in reply ... MR . JOHANNSON: Please . MR .

ANHANG: .•. if the same tax statement were given to family busine sses I think that the peopl e, even in your urban const ituency , would be in favour of that . But rather than deal with exemptions, Mr. Chairman , let me tell you that this province has the lowest exemptions, it's even lower than Saskatchewan . When the first two acts came into effect , Saskatchewan and Manitoba, back on January 1st, 1972 , the basic exemptions of $1 50 ,0 00 and $200, 000 were the same .

Since then, Saskatchewan has seen fit to inc rease the exemptions by $75 ,000 acros s-the -board , in addition to having these special exemptions under gift tax act and succes sion duty act for farmers. All I am suggesting to you , Mr. Chairman , is that in the last two or three year s, because of the explosion of values in general , not only in the rural areas , that perhaps the government should consider increasing the exemptions across-the-board, from that $200 ,0 00 perhaps up to $300 ,0 00 .00. The ex

Document details

Collection	Manitoba — Debates (Hansard)
Citation	30-2-lo7
Type	hansard
Volume / chapter	30th 2nd hansardpdf lo7.pdf
Language	en
Format	pdf
Source	PROVINCIAL
Identifier	37f73fac55f294b5b20f4ba583f2afa1dda8f4fe

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