Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)

TUESDAY, JUNE 17, 1997

Afternoon

Volume 6, Number 1

[ Page 4523 ]

The House met at 2:06 p.m.

Hon. C. McGregor: It's my pleasure to introduce today an international visitor who's with us from Basel, Switzerland: Mr. Chris Perret. He's the uncle of my administrative assistant, Rachel Bourne.

J. Weisgerber: In the gallery behind me is my good friend David Marley. David worked closely with Bill Bennett's government here in British Columbia and with Bob Stanfield's government in Ottawa. He was most recently campaign chairman for Reform B.C. Would you please give him a warm welcome.

P. Reitsma: In the gallery behind me today, we have visiting 26 grade 8 students and seven adults and teachers from Oceanside Middle School in my constituency. They're touring the Legislature, of course. Would the House please make them welcome.

G. Campbell: I would like to introduce members from the Saskatchewan Liberal caucus in the Legislature, who are visiting with us in British Columbia today: June Draude, the MLA for Kelvington-Wadena, is the caucus chair; Bob Bjornerud, MLA for Saltcoats and deputy Whip; Harvey McLane, MLA for Arm River and caucus Whip; and Rod Gantefoer, MLA for Melfort-Tisdale and House Leader. I'd ask our House to make representatives of their House welcome.

Hon. J. Pullinger: I have the delightful opportunity today to introduce two young men to the House. One is M. Romain Viennois, who is here from Paris, France. He's a student of political science who was here on an exchange earlier and has come back to British Columbia to be here during the federal election and to visit this province. The other is Mr. Dan McHardie, who is a student of Canadian studies and journalism at Carleton University in Ottawa. He's from my riding; he's studying in Ottawa and is back here today. I had a wonderful lunch with both of them, and I would ask the House to make them very welcome indeed.

R. Thorpe: It's with pleasure today that I introduce two constituents from Penticton visiting the precincts, Marianne and Brent Monks. Would the House please make them feel welcome.

Hon. C. Evans: Joining us in the gallery today, and joining us earlier on a farm with 4-H young people, are Sheila Tung, the president of 4-H; Colleen Lepik, executive director; and Ron Sera, from my ministry. They joined the Premier, the Minister of Finance and myself this morning with gumboots on, in honour of 4-H kids. They're here, and these are wonderful people. Please give them a hand.

Introduction of Bills

BUILDING OFFICIALS' ASSOCIATION ACT

Hon. M. Farnworth presented a message from His Honour the Lieutenant-Governor: a bill intituled Building Officials' Association Act.

Hon. M. Farnworth: I am pleased to present the Building Officials' Association Act. This bill will give new recognition to a group of professionals who are as important to the building industry and to public safety as are architects or engineers.

Bill 39 will provide statutory recognition to the Building Officials' Association of British Columbia, which represents 90 percent of local government building officials in the province. The association will now be authorized to govern its members, set qualifications for membership, conduct training and education, and set standards of conduct. These professionals, once approved, will have the protected right to use the titles "registered building official" and "registered building inspector."

The Building Officials' Association Act recognizes the work done every day by a group of highly skilled professionals and will contribute, in a substantial way, to public confidence in the building industry.

Bill 39 introduced, read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.

TRAFFIC SAFETY STATUTES

AMENDMENT ACT, 1997

Hon. A. Petter presented a message from His Honour the Lieutenant-Governor: a bill intituled Traffic Safety Statutes Amendment Act, 1997.

Hon. A. Petter: Last Thursday, joined by a wide range of stakeholders, I had the pleasure of announcing that B.C. will be undertaking the most aggressive road safety program ever, aimed at making B.C. roads safer, reducing auto theft and fraud, and keeping auto insurance rates affordable.

Today I am pleased to present the legislation to implement this road safety program. This program will help to reduce accidents, save lives and keep insurance premiums affordable. We are committed to making bad drivers public enemy number one and saving lives priority number one in this province.

The concerns this package . . . .

Interjections.

The Speaker: Members, this is first reading.

Hon. A. Petter: Hon. Speaker, I would hope the members opposite would be interested in a serious initiative to undertake a challenge to bad driving, because the problems of bad driving should be well known to every member of this House. British Columbia has the highest accident rate in the country -- 25 percent higher than the national average. Every year almost 500 British Columbians die in motor vehicle accidents and almost 50,000 are injured. We're taking action to reduce this carnage, and that's why we're making road safety a priority.

This legislation is targeted at those whose driving behaviour must be changed for their own safety and for the safety of others through the implementation of a crackdown on impaired driving, mandatory retraining for bad drivers and tougher driving tests. We also plan to ensure that new drivers have proper skills to be safe drivers with a proposed graduated licensing system. So that fines and penalty points

[ Page 4524 ]

mirror more closely the severity of speeding offences, the faster one drives, the more one pays will also be a principle within this legislation.

The legislation also envisages the creation of a new road safety commissioner to monitor the success and progress of road safety programs and to provide advice to government on an ongoing basis.

The legislation also takes aim at auto crime and fraud, which are . . . .

Interjections.

The Speaker: Order, members. Minister, can I ask you to wrap it up very quickly and move the motion. Your time has indeed expired.

Hon. A. Petter: The time has only expired because of the heckling across the way, hon. Speaker.

The legislation sees major improvements in the insurance system, and I would hope it is an initiative that will enjoy the support of all members of this House in terms of its focus on saving lives and keeping auto insurance premiums reasonable.

[2:15]

Bill 41 introduced, read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.

MOTOR VEHICLE

AMENDMENT ACT (No. 2), 1997

Hon. L. Boone presented a message from His Honour the Lieutenant-Governor: a bill intituled Motor Vehicle Amendment Act (No. 2), 1997.

Hon. L. Boone: On November 18, 1996, phase 1 of the Motor Vehicle-ICBC merger was successfully completed with the transfer to ICBC of several important functions. We remain committed to the merger and introduce for first reading a bill that will complete phase 2 of the merger. Bill 40 assigns to ICBC direct authority for programs now with the MVB, including vehicle standards and inspections, commercial transport regulations, weigh scales, vehicle weights and dimensions, staff support for motor carrier licensing and regulation, and enforcement of commercial transport vehicle standards.

Our objective has been to place two organizations with similar commitments to road safety and customer service under a single administrative umbrella. We remain confident that this merger will be a positive and enduring benefit to British Columbia drivers.

Bill 40 introduced, read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.

Oral Questions

FOREST SECTOR JOBS

G. Campbell: A year ago the Premier promised to create 21,000 new, direct forest industry jobs in the province of British Columbia. Today we know there are 5,500 fewer forest sector jobs than there were when the Premier made his promise. Now we hear that the Premier has planned a million-dollar publicity campaign to try to hide the NDP's forest industry failure.

My question is to the Minister of Forests. Is the minister going to stand up for the communities he represents and demand that the Premier meet his target and his promise of 21,000 additional and new direct forest industry jobs? Or is he simply going to sit back and let the publicity spin doctors take over once again?

Hon. D. Zirnhelt: I don't know where the opposition get their statistics. But some days they quote unemployment statistics and other days they use other statistics. The commitment to the communities of British Columbia to create 21,000 more jobs stands, hon. Speaker.

G. Campbell: So that the Minister of Forests knows, we got our statistics from both Stats Canada and the directors and the board of Forest Renewal B.C. The fact is that in the last year we have lost 5,500 jobs in the forest sector. The promise that was made to families and forest communities was 21,000 new, direct forest industry jobs. We now hear from the Vancouver Sun that the spin doctors have been at work, and they have reduced the promise by half.

My question to the Minister of Forests is: does he understand that these 5,500 jobs that have been lost are actually families that have lost their jobs? Does he understand that people in forest-dependent communities expect this government and this Minister of Forests to keep their word and not reduce the number of jobs that was promised but deliver the number of new jobs that was promised? [Applause.]

Hon. D. Zirnhelt: It sounds to me like the opposition wants to get in on a good story.

That opposition over there, the Environment critic in that opposition, will not stand up for British Columbians and join the campaign against Greenpeace -- which is the real threat to jobs in this province.

Interjections.

The Speaker: For a quieter question-and-answer, the Leader of the Opposition.

G. Campbell: I'll try to be very quiet, hon. Speaker. The problem is that the families that have lost their jobs in forest communities don't feel like we should be quiet. In fact, what they want is for us to stand up for them, and we will do that. A promise was made for 21,000 new, direct jobs in the forest industry. People understand that that has an impact on their families. Those communities have said consistently . . . . And we have stood by their side, consistently pointing out that your job-killing taxes and your job-killing regulations have driven jobs from this province. We want to make sure we bring jobs back to the province.

The question to the Minister of Forests is: will he join us and demand that the Premier live up to his commitment of 21,000 new, direct forest industry jobs and that he replace the 5,500 jobs that he's driven from the province in the last year?

Hon. G. Clark: I'm delighted that the opposition is finally asking questions about jobs in the forest industry. I look forward to the Leader of the Opposition turning around, talking to his Environment critic and saying that if people

[ Page 4525 ]

want to boycott British Columbia, he will stand with the government of British Columbia against those people who threaten jobs in forestry communities. I look forward to Thursday, when we announce the most ambitious package of job creation in the history of Canada. I want to see the Liberals then come onside with the government to create jobs in forestry communities and stand up, for once, for resource communities in this province.

G. Campbell: My question is to the Premier. I've been in Port Alice, and I've seen what his government's policies have done to the families in Port Alice. I was in Golden, and I saw what your government's policies did to the families in Golden. I was in Terrace, and I saw what your government's policies have done to the people of Terrace. The job-killing tax policies of this government have driven 5,500 jobs from the province of British Columbia. The regulatory overload has been identified by this side of the House for the last three years, and this government has ignored it.

So my question is to the Premier: will he live up, for a change, to his promise to make sure that there are 21,000 new, direct forest industry jobs, as well as the 5,000 jobs that you've driven from the province in the last year? And will you join us in making sure that those jobs are there for people in British Columbia?

Hon. G. Clark: In all the time I've been here, the Liberals have not had one single idea to create jobs in the forestry industry, except to cut taxes for big companies. That's what they want. They want to give corporations a tax break every time they stand up. That's their position.

What we've said repeatedly, and what you'll see on Thursday, is: yes, we're prepared to work with business. Yes, we're even prepared to look at all the costs of doing business, including government costs, but only if they make a commitment to resource communities to create jobs, thousands of jobs in British Columbia. That's using government on behalf of people, not using government on behalf of big corporations in the forest sector.

I want to see where they stand on Greenpeace. I want to see where they stand on working with industry to create jobs, instead of siding with them every time, attacking the government even when we're working to create jobs in forestry communities. I look forward to hearing them on Thursday and Friday and next week, coming onside for a change.

Interjections.

The Speaker: Perhaps members on both sides could lower the temperature somewhat, so we can hear both questions and answers.

G. Campbell: The Premier, unfortunately, has never bothered to listen to this side of the House. When we pointed out to the government that their Forest Practices Code was going to create huge additional costs and drive jobs from the province, the government ignored us. When we pointed out to the NDP that Forest Renewal B.C. should include in its provisions community decision-making, the government ignored us and decided to create a bureaucracy instead.

So my question to the Premier once again is: will he live up to his promise of only a year ago and create 21,000 new, direct forest industry jobs, and will he replace the 5,500 jobs that his job-killing taxes and his job-killing regulations have removed from the province in the last year alone?

Hon. G. Clark: Stay tuned is all I say, hon. members. Stay tuned for Thursday.

I've met with mayors of resource communities up and down British Columbia, and they're onside with the government to create jobs. I've met with forestry communities, with unions, with people up and down British Columbia. They're on side to fight the boycott and the misinformation campaign of Greenpeace. It's about time the Liberal Party came onside with the people for a change, instead of big corporations.

LEGAL SERVICES FUNDING

FOR POWELL RIVER

G. Wilson: My question is for our high-flying Premier. On Thursday an important initiative is going to be announced on job creation, and it's one that I think most of us can support. Today, Powell River Legal Services find that they have been cut, virtually eliminating legal services to the poor. We find that the Premier has chartered an aircraft for Thursday to go on an expensive, glitzy media tour, none of which will materially change the job creation program.

My question to the Premier is: will the Premier walk the 300 yards, or 300 feet, into this Legislative Assembly, make his announcement in this Legislative Assembly and take the money saved from this expensive, glitzy media tour and put it to legal services in Powell River so that the poor can have adequate legal services?

Hon. G. Clark: I make no apology whatsoever for getting out of the Legislature and talking to the people that matter, that build this province up and down B.C., hon. members.

We've spent too much time debating with naysayers from the other side of the House and not enough time building this province, getting out of Victoria and talking to people in Prince George and Quesnel and Williams Lake. That's where we're going, and that's where we should be, to announce jobs in the forests -- working with the mayors, working with the unions, working with the companies in resource communities that provide the riches so that we can come in here and manage a government that's decent and compassionate, hon. members. That's what government is all about.

It's not coming in here talking to bureaucrats in Victoria or these naysayers over there; it's about going out and talking to real people.

G. Wilson: This is the chamber in which new initiatives should be announced. This is the chamber which all of us are elected to represent the people of British Columbia in -- not on some highly glitzy media tour that the Premier has decided to undertake.

A question to the Attorney General: if the Premier doesn't care about the fact that legal services to the poor are about to be cut off and is prepared instead to spend money on a glitzy media tour which will not materially change the job creation strategy, will the Attorney General today undertake to go to the Premier and ask that those moneys be put so that the people of Powell River who are poor can have access to legal services?

[ Page 4526 ]

[2:30]

Hon. U. Dosanjh: Even today, with the $81.5 million budget of the Legal Services Society of British Columbia, we have in British Columbia the highest per capita funds for legal services of any province in this country.

The Legal Services Society board is an independent board; it functions on its own. We give it the budget; we tell it not to accumulate deficits. It's important that we live within the fiscal constraints. I recognize that there may be problems. I sent a directive to the board to make sure, with any reductions that they make, that they not cut the field offices or community law offices across this province -- and particularly poverty law. I'm watching that very carefully and am looking at it.

SOCIAL ASSISTANCE DEDUCTION

FOR THALIDOMIDE VICTIM

F. Gingell: Colleen Martel has been deserted by her husband, has four children under the age of 15 and lives on social assistance. Ms. Martel is also a victim of thalidomide. Ms. Martel has recently been informed by her Human Resources caseworker that her thalidomide compensation, paid from a drug company settlement, will now be deducted from her welfare cheque. This effectively cuts her income in half, and she is understandably distraught.

My question is for the Minister of Human Resources. Will the minister explain to Ms. Martel and her four children why he has decided to cut her income in half?

Hon. D. Streifel: I thank the member for bringing the situation forward. I would offer to bring forward information for the member. I'll take the question on notice, and if you'd like to bring this forward, hon. member, we would be pleased to have a look at it.

The Speaker: The bell terminates question period.

Hon. L. Boone: I rise today to make a profuse and abject apology to the member for Peace River South. Last Thursday I accused him wrongly -- as you know, hon. Speaker -- of not checking his in-basket. He said to me, "Did you check your out-basket?" and in fact I didn't. I found that the notice that I said he hadn't found hadn't gone out to him, so I would like this House to accept my profuse apologies to the member for ever, ever questioning him.

Tabling Documents

The Speaker: Before going to orders of the day, and for something completely different, I have the pleasure to table the annual report of the British Columbia Legislative Library for 1996.

Orders of the Day

Hon. J. MacPhail: I'd like to advise the members that we will be sitting tomorrow.

In Committee A, I call Committee of Supply. For the information of members, we'll be debating the estimates of the Ministry of Human Resources. In this chamber, I call Committee of Supply. For the information of members, we'll be debating the estimates of the Ministry of Finance.

The House in Committee of Supply B; G. Brewin in the chair.

ESTIMATES: MINISTRY OF FINANCE AND

CORPORATE RELATIONS AND

MINISTRY RESPONSIBLE FOR

INTERGOVERNMENTAL RELATIONS

(continued)

On vote 31: minister's office, $348,000 (continued).

R. Thorpe: I have a question with respect to the Raiwind B.C. Hydro project and the IPC share offering. It was my understanding that the B.C. Securities Commission was undertaking an investigation into this offering. Could the minister please advise me of the status of that investigation?

Hon. A. Petter: Yes, I understand that's correct; the investigation is ongoing. I can say in advance that for that reason it would obviously be inappropriate for me to comment on it, other than to confirm that there has been an investigation, which is ongoing.

R. Thorpe: Could the minister advise me of how long that investigation has been underway?

Hon. A. Petter: It was in the period immediately following some of the disclosures that gave rise to public concerns, so I'd say it's been since sometime in the February-March window of last year.

R. Thorpe: It's fair to say, then, that at this point in time the investigation has been going on for over a year. I'm just wondering if the minister could answer this: how much money has been spent on this investigation to date?

Hon. A. Petter: I'm not able to provide the member with a specific number at this time. I can try to do so, but it would be easier, presumably, to do so once the investigation concludes. I'm informed that it's not a huge amount. It's certainly less than $100,000.

R. Thorpe: Could the minister say how many inside staff or outside contracted staff are currently working on this investigation?

Hon. A. Petter: It would be one or two inside staff.

R. Thorpe: In looking at the number of different investigations that the Securities Commission may have ongoing at a time, would it be fair to conclude, based on the length of time and the apparently limited financial and human resources, that this particular investigation does not appear to be on the fast track?

Hon. A. Petter: No, I don't think that would be fair to conclude at all. If the member had been listening earlier on in the debate, he'd know that financial resources are not a major consideration right now, because the commission is in a significant surplus position.

As I understand it, the commission's work has been taking place in relation to the investigation undertaken by Mr. Smith, so the investigation's timing has been affected by some of that work. As a result, it has taken the time it has, but it

[ Page 4527 ]

certainly has not been delayed in any way other than by the circumstances necessitated by the requirements of an orderly and effective investigation.

R. Thorpe: We know that the financial resources of this government are never a top priority and have never been a real concern. I'm pleased that the minister was able to confirm that for me today.

With respect to this particular case, it appears that there have been some other cases that the Securities Commission has undertaken in the past, where the supply of financial and human resources seems to be endless. Would it be fair for British Columbians to expect from this Securities Commission some similar degree of commitment to resolution and to applying some of the financial resources -- which they have in excess, according to the minister -- and more human resources? British Columbians deserve to have this investigation completed and the results made public. Could we get that commitment from the minister?

Hon. A. Petter: I'm not sure what the member is insinuating, hon. Chair, but I want to say right here and now that I have complete and absolute confidence in the Securities Commission and the way it operates -- independent of government interference. If the member is suggesting otherwise, I would ask him to reconsider his thoughts. I believe in the commission and in its capacity to carry out investigations in an orderly and effective way. The commission has done that in this case. I am assured that it is proceeding as rapidly as it can, given the requirements of the investigation.

I would ask the member to consider more carefully the insinuation in his comments before he makes them in respect of this commission or of independent bodies.

R. Thorpe: I did not insinuate anything. I cannot help it if the minister has mistaken any comments that I made. If I offended him, I apologize for that.

Interjection.

R. Thorpe: I unreservedly apologize.

British Columbians want results; they don't want more gobbledegook. Hon. Chair, no one is talking about the independence of this organization; all we're talking about is applying the resources that they apparently have to bring resolution to cases that are outstanding.

Hon. A. Petter: I don't want to prolong this, because frankly, I think it's embarrassing for the member and for the House.

Suffice it to say, the commission has adequate resources. I think that has been established. Despite the member's attempt to make a cheap shot out of that, that is demonstrably the case. The commission is the master of those resources and will employ those resources to carry out its investigations in a way that I am confident is consistent with the policy mandate it has been given. The government does not interfere in respect of that duty, nor would it be appropriate for us to do so.

I'm not quite sure how the member is directing this comment -- whether he's directing it to me or to the commission. But in either case, I would hope that he would simply abandon this line of inquiry, because as I say, I have absolute confidence, and I would hope all members of this House do, in the ability and commitment of this commission to carry out its functions in a way that is beyond reproach.

[2:45]

G. Farrell-Collins: I think the minister is being slightly oversensitive to the line of questioning. Nothing I heard from the member, my colleague, led me to believe that he was questioning the independence or the integrity of the commission. He may well have been questioning the integrity and the accountability of the government, which is something that is not beyond the realm of the duty of an opposition MLA. Indeed, on this issue in specific, I think it's almost required, given the way this issue has been handled not only long before it ever became public but also -- I think more importantly and more relevant to this line of questioning -- after it became public.

The Premier appointed a gentleman to replace the fired chair of B.C. Hydro and then asked that person to also, at the same time that he was the chair of B.C. Hydro and reported to the minister, conduct an investigation into the very minister who then became Premier. So for the minister to be a little sensitive on this issue . . . . I guess I understand the reason for it. I think one should also understand the reasons for the opposition to be diligent in its lines of questioning.

Hon. Chair, I want to ask a number of questions with regard to this investigation. I think it is one of several. There is at least one RCMP investigation ongoing. There was a half-hearted whitewash done by B.C. Hydro into this investigation, which we'll examine at greater length in the estimates for B.C. Hydro. There is also this investigation, the Securities Commission investigation, which I think is one that could prove to be fairly interesting as time goes by. We've yet to find out whether or not the Law Society is doing a fourth investigation into this issue, but I suspect that somewhere down the line that may happen. Of course, that will be up to the Law Society to determine.

I want to ask the minister a couple of general questions. First of all, this type of investigation . . . . I know it's a relatively complex issue as to how it was managed. Some of the documents in the offering . . . . I understand there was a search warrant executed a little over a week ago on one of the gentlemen, Richard Coglon, where the RCMP felt that there was additional information.

I'm wondering how closely the Securities Commission is working with the RCMP. This is perhaps just a policy question the minister can answer for me: how closely do they work on these issues? Is it together on the same investigation? Does each conduct their investigation separately, in tandem, or would they do them one after the other once the RCMP have determined their information?

Hon. A. Petter: Let me just say at the outset that I certainly do not begrudge the opposition the opportunity to ask probing questions concerning the diligence of government. But when probing questions become insinuation, that's when I draw the line on behalf of an independent commission that does not have the capacity in this House to answer for itself. I see it as my role to make sure that the independence of that commission is protected -- even from insinuations from opposition members.

Having said that, the search warrant, which I understand the member is referring to, is in respect of a completely separate matter, not this investigation. The investigation being undertaken by the commission is independent of any RCMP investigation. That is not to say that in the course of investigation there might not have been contact between the RCMP and commission members. There may well have been; I do

[ Page 4528 ]

not know that. The investigation of the commission is independent and separate from any RCMP investigation that may be undertaken into the same matter.

G. Farrell-Collins: I thank the minister for his answer. I do want to come back to his opening comments, though. It's not beyond the ability of this House for the minister to defer to a deputy minister to answer questions. Certainly there is a possibility that if a minister chooses, he can always bring a motion before this House to allow anyone to testify on his behalf.

I think perhaps he should be a little more reticent to jump to the defence and, by his own comments, raise an issue which was not raised by the member opposite. I think the inferences are taking place from the minister, not from the member. If that's the way the minister feels, then that's something he will have to deal with himself.

I'm intrigued to note that these two investigations are separate, because I believe that certainly there will be information that the RCMP glean from their investigation that may in fact be vital to any sort of investigation to be done by the Securities Commission. And I would expect vice versa -- that the opposite could happen, also.

The issue here is how the two investigations can take place separately without an exchange of information and hope to each arrive on their own at a complete and total conclusion and understanding. I'm more than pleased to be enlightened by the minister or his staff as to how that might work.

I know the search warrant that was executed a little over a week ago . . . . If one reads the search warrant -- the allegations that are in it and the statements of the RCMP -- I think it would be exactly the type of information that the Securities Commission would want and, quite frankly, need in order to conduct its investigation and reach a conclusion of fact.

Hon. A. Petter: A number of points are raised by the member's comments. I won't prolong the initial exchange except to say that I don't share the member's view, obviously.

First of all, the search warrant -- if it's the one that we over here understand it to be -- refers to a different matter, but the information certainly will be coming to the commission and will be available to the commission. Frankly, I'm not comfortable speaking on the specifics of an investigation that is ongoing. There may well be exchanges of information; it would not be unusual for there to be exchanges of information amongst investigators.

But that does not detract from the point that I was making earlier; namely, the investigations are different investigations operating under different mandates and therefore information may be exchanged. That does not undermine the separateness or independence of the two investigatory processes.

G. Farrell-Collins: I was hoping that's how it would work, and I'm glad that the minister was able to clarify that after a couple of questions. I do believe it's integral to both . . . . Quite frankly, it probably will end up with four investigations, and the information will be shared between the various parties to whatever extent the law allows that to happen. I'm glad to hear that that in fact is the case with regard to the two investigations that we were specifically talking about here.

In looking at the parallels between the two systems and the way these investigations are conducted . . . . When the RCMP are doing an investigation and it reaches a point where they need to recommend charges, or if it goes beyond a certain point, there's a provision under the law, I believe, for the Assistant Deputy Attorney General to appoint a special prosecutor. The minister obviously knows more about this than I do, and he can correct me if I'm wrong.

I'm wondering if there is a parallel process with regard to the Securities Commission, in the event that someone involved in the political process becomes the subject of an expanded investigation that parallels one that may be going on with the RCMP with regard to criminal activity.

Hon. A. Petter: There is no analogous process, and it would be surprising, frankly, if there were, given that the commission does operate as an independent commission, a quasi-judicial-type body, a tribunal.

But let me make a distinction that may help clarify things for the member. During the course of an investigation by the Securities Commission, should matters of a criminal nature get raised, those would obviously be referred through the securities fraud office to the RCMP and would then become the subject of the process that the member has outlined -- with the Attorney General ministry and the prosecutorial practices that pertain to that then applying.

The securities regulatory component takes place under the purview of the Securities Commission, and the Securities Commission certainly has the discretion concerning who would be appointed. I assume, in any case, that they would make sure that those who are involved as counsel or in any investigation would be people who would not be seen as having any conflict, or appearance of conflict of interest, just as a matter of course. But there's no sort of similar process, except insofar as the securities process can lead into the criminal process and then it triggers the prosecutorial discretions and practices that the member is alluding to.

G. Farrell-Collins: The minister raises an interesting process whereby, if the Securities Commission come across something in the process of their investigation that they believe may or may not be a violation of the criminal law, they can pass that on to the RCMP for investigation. I raise the next question because of the comment that the minister made a few minutes ago -- that the search warrant that was executed a little over a week ago was a different matter, and not something the Securities Commission was involved with. My understanding and my . . . .

Interjection.

G. Farrell-Collins: Okay, that's fine -- the minister says: "from the substantive matter."

Let me ask the first of two questions; I'll ask the first one and sit down. Is there a parallel process whereby, if in their investigations the RCMP come across information that may not in fact be criminal but is, in their opinion, a potential violation of the securities regulations . . . . Would they advise the Securities Commission of that?

Hon. A. Petter: Just to clarify the first point that was implicit in the member's comment, the search warrant, if it's the one we think it is, does refer to a securities matter but not to the Raiwind project. In that sense it's different substantively from the issues that are being investigated by the Securities Commission pursuant to the line of questioning that the members have been conducting.

[ Page 4529 ]

Secondly, yes. If, during the course of an RCMP investigation, it were to come to the attention of RCMP officers that conduct might have violated in some ways the provisions of the Securities Act so as to engage the powers of the Securities Commission, then it would not be unusual practice or out of keeping for the RCMP to refer those matters over to the Securities Commission, for it to then proceed to exercise its jurisdiction.

G. Farrell-Collins: Maybe for clarification here, because I do want to ask a few more questions . . . . While I'm not going to get into the specifics of this case, I do think it's important that we are at least talking about the same thing when we discuss the policy and the process by which this will take place.

The warrant I am referring to is one that was issued with regard to a finder's fee on Dusty Mac and Richard Coglon. I wonder if we're dealing with that warrant. Or is there another one that I'm unaware of at this point?

Hon. A. Petter: That is the one that I'm informed we thought the member was referring to, and apparently it is not specifically related to the IPC matter.

[3:00]

G. Farrell-Collins: So could the minister tell me, then, whether or not there is a separate investigation ongoing into the matter raised by the search warrant a week and a half ago?

Hon. A. Petter: Yes, there is a separate investigation with respect to that matter.

G. Farrell-Collins: I am trying to think of how I can ask this question, because I want it to be both inclusive and exclusive at the same time. Can the minister tell me how many investigations are ongoing by the Securities Commission -- that's the exclusive part -- that may be associated in any way, however distant, with the IPC Raiwind project? That's the inclusive part of the question.

Hon. A. Petter: I must say I'm very reluctant at the best of times to discuss investigations that are underway. I have commented on two because, in the case of one, it's been public knowledge; in the case of the other, there's been a search warrant, so it's evident there is an investigation. But I am certainly not prepared to discuss the other investigatory activities that may or may not be undertaken or that are being pursued at this time by the commission. I don't think it would be appropriate for me to do so.

G. Farrell-Collins: I may want to come back to that in a minute, but for now I'd like to just think about it for a second.

The other question I have with regard to these investigations, or possible investigations, is perhaps one more of just jurisdiction. I understand that the Securities Commission's job is within the boundaries of British Columbia. I wonder to what extent -- and perhaps the minister or his staff can enlighten me -- the commission has the ability to investigate actions taken by people residing here, when the action is taking place outside of British Columbia.

Hon. A. Petter: In the absence of some connection with British Columbia in terms of the transaction, the commission does not have the power to investigate on its own the matters in question. However, as I understand it, the commission does have the power to assist a regulator outside the jurisdiction of the province where there's an investigation going on and someone is located within the province who could assist in the resolution of that investigation in another jurisdiction. The commission does have the power to undertake an investigation, on behalf of the other regulatory jurisdiction, to assist the other jurisdiction in resolving the matter.

G. Farrell-Collins: A general question, then, to the minister: can he tell me if the British Columbia Securities Commission has been asked . . . ? How many times since, say, January or February 1996 -- just to pick a date -- has the Securities Commission been requested by other jurisdictions to participate in investigations that are taking place in their jurisdiction?

Hon. A. Petter: During fiscal '96-97 the compliance and enforcement division received 140 written requests for assistance from other jurisdictions. So this is not an uncommon practice.

G. Farrell-Collins: Can you tell me if any of those requests came from Pakistan?

Hon. A. Petter: A two-part answer. First of all, I don't know the answer; we don't have the information to hand, in any event. But let me just say, again, that given that specific information of this kind could relate to the conduct of current investigations that may still be ongoing in other jurisdictions, I wouldn't be inclined to offer up an answer even if I had one at this stage. If the member wants that kind of information, we could certainly try to provide it to him and therefore make sure that in the process of doing so, we're not compromising any investigations being undertaken by other jurisdictions.

G. Farrell-Collins: I would be pleased to receive that information and more than willing to give my assurances that I would be willing to comply with any requirements of the other jurisdiction, or this jurisdiction, in ensuring that no investigation is harmed. Believe me, I want to get to the bottom of this as fast as, or probably even faster than, the government. I'd be glad to make that undertaking.

I do want to ask a couple of just very quick, general questions, and then I think I'm about finished on this. The investigation that's ongoing in regard to the Raiwind project, as the minister said, probably started in the February-to-March period of 1996. So it's about a year and four months into that investigation. Can the minister tell me, in general terms, the range of the lengths of some of these investigations?

I know that's probably a difficult question to answer, but in one of this complexity and this type, is it something that we can anticipate will take five years or ten months or two years? I don't think it should compromise the investigation itself to get some sort of estimate of when the minister or the commission feels that that investigation may be completed.

Hon. A. Petter: I'm informed that this length -- that is to say, the period that's taken place to date -- is not an unusual period of time for an investigation of this kind. Investigations can take up to, or more than, two years. I'm also informed that it's not expected that this investigation will take many more months before it is complete.

G. Farrell-Collins: Can the minister tell us if the commission usually find other jurisdictions cooperative in helping them in their investigations? Or is it sometimes very difficult?

[ Page 4530 ]

I expect that you can put places like the Cayman Islands, where they are probably far less than cooperative, in one category. But are other jurisdictions, other nations, that actually have or supposedly have some sort of regulations or laws? Are they generally fairly forthcoming with information in order to assist us when we request their help on issues like this?

Hon. A. Petter: I guess there are two dimensions to this. First, it is true that some jurisdictions are extremely cooperative and some are less so. Then there are some jurisdictions that may be extremely cooperative but for which the constraints and rules around which they operate limit the amount of information they're prepared to share -- notwithstanding their cooperation within those limits. So it's the case that some jurisdictions are less helpful in investigations, either due to a lack of cooperation or due to the restrictions that they place upon the disclosure of information to inquiries from outside their jurisdiction.

G. Farrell-Collins: I guess that means there are those places that are really polite when they answer the phone but won't tell you anything, and then there are those that may not be quite so polite but give you more information. Can the minister tell me where he would fit Pakistan in those categories, in our interactions with them over the years?

Hon. A. Petter: I'm happy to say that I'm not able to determine that. I say I'm happy to say it because I don't want to provoke an international incident by starting to grade companies on this scale. But the fact is that I don't have a clear understanding of where Pakistan, as a jurisdiction, would fit on the scale.

G. Farrell-Collins: Somehow I doubt that the Pakistani foreign ministry is reading the Blues with bated breath, wondering what offensive things you may or may not be saying about them -- but I get the point.

At the time when the Hydro estimates were up last year, we had a fairly detailed and fairly specific debate with the Minister of Employment and Investment and minister responsible for B.C. Hydro with regard to this issue. We also had a very detailed and specific discussion about the prospectus that had been offered in Pakistan in order to raise the shares for the Pakistani portion of the investors in the Raiwind project, and there were some concerns raised at that time.

I'm not familiar with securities legislation or regulation in Pakistan -- whether there is any, what it is, what form it takes. But one of the issues that came up upon looking at the prospectus was that . . . . I believe it was a director. There was someone who was a director or a firm that was a director, and the auditor . . . . I'm trying to think what all . . . . This name popped up in four different places in the prospectus. I think there was also the accountant for the offering.

I do need to ask a specific question, and I don't believe it will be compromising the investigation to do so; but I'll take the minister's lead if he feels it is, because he obviously has more information than I do. I'm wondering specifically whether or not the Securities Commission, in its investigation here in British Columbia, is going to look at the entire scope of this project in order to get an understanding of how it worked.

I don't see how one can do an investigation and findings of fact here in British Columbia until you have a good sense of how the entire project was structured -- the players involved, how it was set up. So I will ask a specific question of the minister as to whether or not, in this investigation -- and I don't think I'm doing anything other than what I'm going to do in the Hydro estimates, so I'll ask the question -- the Securities Commission has in its mandate the ability to go to Pakistan and look into the players, the people involved, who may well in fact be involved here.

There are certain specific individuals that obviously we have some concerns about.

Hon. A. Petter: I think the member, towards the end of the question, turned it into a general question regarding the mandate of the commission. That's helpful, because I think it does enable me to answer at a more general level.

In terms of what this investigation will in fact look at, I really will not comment. I'll leave that for the . . . . That will become apparent with the investigation. In general terms, as I understand it, the mandate of the commission, as I said earlier, forces it to look at activities that occur within this jurisdiction. To gain an understanding of those activities, it may be desirable, or indeed necessary in certain circumstances, to get a fuller appreciation of how the British Columbia transaction fits within a broader range of transactions, for there to be an understanding of those fuller transactions.

In that case, certainly, the commission has the power and ability to take whatever steps it deems necessary in order to gain that fuller understanding of those transactions, subject, of course, to the investigatory powers that it has at its disposal and the resources of its budget -- which we've determined was not a major problem.

I say that in a fairly abstract way because, frankly, I have not inquired, and I do not know what the scope has been in this specific investigation -- nor would it be appropriate for me to do so. But in general terms, I think that describes the way in which the commission could and might conduct its business in circumstances of the kind the member has described.

J. Wilson: I ask leave of the House to make an introduction.

Leave granted.

J. Wilson: Seated in the gallery today are 45 grade 7 students from Bouchie Lake Elementary School in my riding of Cariboo North. They are accompanied by their teacher, Mr. Winthrope, and several parents. Would the House please join me in making them welcome and wishing them a good visit to the city of Victoria.

G. Farrell-Collins: I quite apologize to my colleague. He handed me a note ten minutes ago, and I've been ignoring it all along. I'm sorry about that.

F. Gingell: That's just the way you treat the rest of us.

G. Farrell-Collins: I haven't seen any notes from the Finance critic, but I'll await them.

My question, though, to the minister. The reason I raise this is an important reason. Mr. Smith, in his investigation, was unable to penetrate the veil that extends somewhere over the Pacific between here and Pakistan. He was unable to interview some very key players under oath; he was unable, even during his time in Pakistan, it seems, to get a clear understanding of the structure of the deal, the way it was set up, the players involved -- something I found remarkable, quite frankly, given that we have had an individual on the board of SEPCOL throughout its entirety. It seems to me that it

[ Page 4531 ]

has been remarkably and, if I may say so, surprisingly difficult for that information to come forward. As I said, we'll discuss that at a later date with a different minister.

[T. Stevenson in the chair.]

The reason I am asking this is because if Mr. Smith is unable, through his abilities and his powers -- however limited or expanded they may be -- to determine issues of fact with regard to this case, then I want to know what opportunities there are for other investigations that may be ongoing to do the same. That's the reason for the line of questioning with regard to our ability to deal successfully with the people in Pakistan. That was the reason for me to ask the question of the minister: what ability do we have to get information.

Quite frankly, how cooperative has the Pakistani government been with regard to this investigation? Have we even asked them? Because certainly Mr. Smith . . . . It appeared in his parallel investigation, if you will, that he reached a point where there was information beyond which he could not get. He could not secure information from Pakistan. He could not subpoena individuals there, obviously, and there was no way for him to get the entire picture. At least that's what his report says.

[3:15]

I'd like to know what the ability is of the Securities Commission to get that type of information from this specific country -- not in general, not in sort of a general treaty . . . . How is this commission going to have any more success in its investigation than did Brian Smith? I think by answering that question, the minister isn't somehow setting off signals around the globe that there's an investigation going on into this. I think people know. I think the people involved in Pakistan would know. Mr. Smith did his investigation. Certainly Mr.

Mahmood is aware of an investigation, one in which he has failed to cooperate. So certainly those people would know there is an investigation going on. Without having to redisclose that information to them, which is all the minister would be doing, can he tell us whether or not we've made inquiries in Pakistan, whether or not we have any ability to secure information there and what treaties are in place, other than just phoning and hoping that they'll be nice and polite and give us information?

Hon. A. Petter: First, let me say that the investigations undertaken by the securities commissioner are focused on Securities Act violations in the province and are therefore perhaps more tightly constrained. They are nonetheless important but are more tightly constrained than the more broad-ranging inquiry Mr. Smith has been engaged in. I've tried hard to tread the line of providing helpful information without -- I'll use a constitutional term -- trenching into areas of the specific investigation.

All I will say is what I've said before, and that is that should the commission deem it desirable in the course of its investigation to make inquiries about matters outside the province, it can do so. Obviously its ability to do so is conditioned upon the cooperation of other jurisdictions. The extent to which that has been attempted in this case, and the extent to which that cooperation has been provided -- the means that have been used in this case -- I don't know, partly because I don't think it would be appropriate for me to know. For that reason, during the course of the investigation, I don't think it would be appropriate for members of the House to know.

The fact of the matter is that this investigation is somewhat different in the sense that it would be focused on Securities Act violations in the province. I don't think the member's inquiries are inappropriate, but I think they'd be more appropriately raised when this investigation is concluded and we all have an opportunity to evaluate what has or has not been unearthed in the course of that investigation, and what impediments have or have not presented themselves in the course of the investigation.

G. Farrell-Collins: The minister can rest assured that we'll do that when the time comes. I'm sure you can count on me.

I did ask a very specific question at the end of that last round of questions, and perhaps the minister didn't quite hear it. It was: are there any treaties, agreements or memorandums of understanding that set out guidelines back and forth between British Columbia and Pakistan or Canada and Pakistan with regard to what sort of obligations we have to them and what obligations they have to us?

Hon. A. Petter: I'm sorry. I didn't answer that part of the question. The answer is that there is no specific agreement that we're aware of with respect to Pakistan, and the commission therefore would use its offices in the way it would with any other country that it doesn't have a specific agreement for exchange of information with.

F. Gingell: That's the end of the five-minute continuation that we intended in order to complete the Securities Commission. I understand that our jointly agreed agenda next brings in the office of the chief investment officer.

The report that we have available to us to help us through this estimates debate is the annual report of the investments branch for April 1, 1995, to March 31, 1996. This is, of course, the last report that will be issued under the auspices of its present organization as we now move into a new area in the management of the investments that the province is responsible for.

If I may, I would like to first offer my congratulations to the minister on this new organization. I am supportive of it. I think it's the right way to go. It more clearly defines the roles and responsibilities and allows for more appropriate measurement. This report refers to an additional 94 new accounts during the year 1995-96. Is that 94 new pension funds, 94 new customers or a mix of both?

Hon. A. Petter: One of the pleasures of estimates debate is that it gives me a chance to introduce to the House some of the very capable staff I have to assist me and to assist government throughout the year. I feel blessed in this ministry with both the depth and breadth of staff. That applies generally to those who participated to date and who will continue to participate in this estimates process and support me in other ways. So let me start by introducing Doug Pearce, the chief investment officer, who has joined me in this part of the estimates debate.

The amounts referred to are relatively small amounts in the '94 accounts, I'm told -- mostly sinking funds, some WCB pensions and some other small accounts. But they are generally small sinking fund accounts.

F. Gingell: When you mention WCB funds . . . .

Interjection.

[ Page 4532 ]

F. Gingell: Oh, WCB pension funds. I have to remind myself that the Workers Compensation Board is one of the organizations that this investment officer doesn't have administration of. Is that correct?

Hon. A. Petter: No. In fact, as I understand it, most of the fixed income is done by WCB. The WCB equity funds are invested through the chief investment office -- not all, but most.

F. Gingell: Just to recap that, the Workers Compensation Board fund -- which, from memory, is in the region of $3 billion -- is partially administered, invested and managed by this office, and there is a certain portion that is managed outside this office.

Hon. A. Petter: Yes. I'm informed that the total is closer to $5 billion, of which about $2 billion is invested through the office of the chief investment officer and about $3 billion is invested directly by WCB.

F. Gingell: So the funds that are invested outside the office of the chief investment officer are in equities. I wonder if the minister has any knowledge of the rate of return they earned on their investment portfolio in '95-96 in relation to the rates of return that were earned through the office of the chief investment officer. If you have numbers for '97, that would be helpful, too.

Hon. A. Petter: In fact, it's the other way around. It's the equities that are invested through provincial treasury. I said earlier that it was most, not all, but I wish to correct myself. I'm informed that all of the equities are invested through provincial treasury. It's the fixed income that's invested by WCB. I don't have detailed information on the comparative rates of return. I'd be happy to arrange for that information to be provided to the member, but in general the rates of return -- as I understand it -- are very close as between the two investment portfolios.

F. Gingell: No, I don't need those numbers. It would just have been an immediate measure of the effectiveness and success of the investment office.

The assets under administration at the end of '96 were almost $39 billion. Again, we have this problem that here we are in June . . . . I would imagine that it's relatively straightforward for this particular office to be able to get the annual report out. You can almost do it on April 2, in this modern day and age. I wonder what the status of the report is. If it is ready and we just haven't got it, perhaps it would be useful for us to receive it.

Hon. A. Petter: I understand that while the office obviously tries to get the report out as quickly as possible, they like to get the performance numbers and the March 31 numbers, and that can take six to eight weeks. So we may be as much as, but hopefully no more than, a month away from the report being completed.

[3:30]

F. Gingell: Eight weeks -- April, May? We should be there now.

We were at $39 billion. How much is the value of funds under administration one year later?

Hon. A. Petter: About $4 billion more than that; so it would be $43 billion.

F. Gingell: I have a suspicion that the rates of return for 1996-97 may be in the estimates in those annualized returns, therefore the year-end is September 30, 1996. Were the returns for the year ended March 31, 1997, similar to those shown on page 157?

Hon. A. Petter: I'm informed that we're continuing to exceed our benchmarks. The equity markets have been particularly strong, so the overall rate of return is a little higher than was the case last year.

F. Gingell: I am trying to follow through on the issue of what the costs are. From the information that is available, the indication is that the cost to run the office is roughly $4 million a year, which is reported in various stuff as 8.7 basis points. I don't know whether I've got my decimals in the wrong place, but I make that 0.87 basis points. So I'm wondering if there is a whole series of costs related to fees paid to investment advisers, in the region of $32 million or so, that are charged directly to the funds.

Hon. A. Petter: Yes, I think the member is correct. It is the additional amount, and the reason that 8.7 is correct is that management fees are taken out of the pool and therefore allocated according to the user-pay kind of principle. The rate of return is net of those management fees, but they nevertheless show up in the report as a true reflection of the cost.

F. Gingell: When we talk about management fees, these are truly management fees -- i.e., they are managed trusts in which the decisions are made by the managers and advice is given to the office of the chief investment officer only about what has been done, what has happened. They're not seeking the authority. Does that follow from a set of circumstances whereby the chief investment officer purely and simply makes the decision about how much money to allocate to each particular fund manager?

Hon. A. Petter: As I understand the question, the answer is yes. These are fees paid in respect of the management activities that the fund manager undertakes. The decisions concerning investment are undertaken by those fund managers, and investment allocation decisions are then made, based upon an assessment of the fund manager's performance in past years and the like.

F. Gingell: The equity stocks in total at the end of 1996 were split, roughly 50 percent to indexed stocks and 50 percent to active investments, with slightly different breakdowns between Canadian, U.S. and other internationals. First of all, does that approximate breakdown of 50 percent indexed and 50 percent active still apply at this point?

Hon. A. Petter: The apportionment will be a little higher towards indexed than not. And it's a little different in respect of the different geographic areas in which investment takes place. So within Canada it's 75 percent indexed, 25 percent in other. I understand that 80 percent of investments are within Canada. The U.S. would be 60 percent indexed, and non-North American, 40 percent indexed. So it varies. But overall, it would mean that the component that is indexed would be somewhat in excess of 50 percent -- I'm guessing, but probably somewhat in excess of 60 percent.

F. Gingell: Can I take it from this that for those that are in indexed funds, you don't pay any management fee? You may

[ Page 4533 ]

pay a fee to the organization that does the investing for you, but the investment decisions themselves are done, in effect, automatically by the makeup of the index.

Hon. A. Petter: No, the management activity associated with the indexed investments is done in-house, and therefore there are no fees associated with it. The costs are borne within the budget of the chief investment officer.

F. Gingell: I might as well get to the question that I know you are waiting for. Does the way you operate the indexed funds allow you the flexibility to make the decisions to leave out from the index a particular stock -- obviously, such as the Bre-X?

Hon. A. Petter: It's obviously the prescience of the afternoon that I think I see where the member is going with his blunt questioning. But the answer is no. The advantage of using an index to guide investments is so that the kind of selection and discretion that might otherwise be required -- that would entail associated management and fees -- is not required. So, as I understand it, there is not within the indexed investments the discretion to remove selectively a particular stock or stocks.

F. Gingell: My line of questioning on this wasn't really focused to come through to the Bre-X issue. As soon as Bre-X happened, I phoned the office of the chief investment officer, who happened to be in Toronto. I was hoping he wasn't going there by helicopter, and I showed due concern for his health.

But I understand that the total loss suffered by all funds was in the region of $78 million. Perhaps you could confirm that.

Hon. A. Petter: Approximately $78 million -- correct.

F. Gingell: That was in a period of time when the stock market went up substantially, and you more than recovered.

Hon. A. Petter: The member and I obviously received the same briefing. That's certainly my recollection -- that the profit realized from increases in stock market values in that same period more than offset the $75 million lost, by some considerable amount.

F. Gingell: We've been going through a long bull market. I'm not a security expert in any way, shape or form. But, you know, what goes around comes around. We have been in a long-term bull market. Is there any point that the chief investment officer has felt it appropriate to move from the equity market into the bond market or the money markets?

Hon. A. Petter: Well, the investment portfolio is well diversified right now, with about 40 percent targeted at debt and 60 percent in equity. At this present time there isn't the intention to shift back, away from equity. But certainly when bulls turn to bears, I'm sure the investment officer and his staff would act strategically. We have an investment policy that is opportunistic in the best sense of the word. As opportunities exist more on the bond side than on the equity side, I'm sure that shifting in that direction would and could take place. But at this time the division seems to be one that is doing well for the province.

F. Gingell: In no way would I want to be seen as offering advice. One of the advantages, of course, of being in opposition is that you can ask a question like that. If the bears do come in and chase out the bulls, I'm a genius. If they don't, no one remembers, anyway. So you get the wind in both directions.

In the report for '95-96, there was an expression of need for the office to improve the management of the real estate and mortgage programs. Perhaps the minister could advise the committee what the problems were and what action has been taken to correct it.

[3:45]

Hon. A. Petter: Yes, I understand that the actions that have been taken have been some adding of resources -- additional personnel -- in respect of the real estate side of investments, plus the introduction of a new, better tracking system to keep track of real estate investments and to enable those investments to be monitored and reviewed in a more systematic way.

F. Gingell: Do the province's investments in the real estate market take the form of owning title of properties? Or is it of corporations that are in the real estate development business? Well, no, I presume not, because that would be shown as equities. Is it in the form of trusts? Or have you gone into partnership with B.C. Buildings Corporation?

Hon. A. Petter: For the most part, hon. Chair, the province would be on title; it would have direct ownership of property and would be on title -- and no, there is no partnership with BCBC of which I'm aware.

F. Gingell: So these are properties that you own without partners; they're not tenants in common. Does the office, then, actively manage them?

Hon. A. Petter: There are portfolio managers who would do the actual hands-on management of the properties. In respect of joint ownership, the great preponderance of properties are held solely by the province, and that is reflected on the title. There may be some cases in which there is joint ownership of certain substantial properties with another pension plan or the like, but that's the exception rather than the rule.

F. Gingell: Are all the properties clear title, or are any of them subject to mortgage? Just following along from that, are any of the mortgages within the mortgage funds that you may be holding for other clients of the office?

Hon. A. Petter: It's complicated. To simplify it, yes, first of all, there are some mortgages that are held on some of the real estate. In terms of clear title, there is a maximum 25 percent debt that can be secured against title. I understand, though, that it's generally significantly less than that. I hope the member isn't going to ask me if any title is held in fee tail as opposed to fee simple, because that goes back way too . . . . No, never mind. It's okay; it's an anachronism.

F. Gingell: So in each building, there is at least 75 percent equity. That seems to be the other way around; I would have thought it would have been at least 25 percent equity.

Hon. A. Petter: No, that's correct; it's at least 75 percent equity.

[ Page 4534 ]

F. Gingell: During the year ended March 31, 1996, the province acquired in its investment fund roughly $340 million worth of buildings. How much more was acquired in the year 1996-97? What is the investment in real estate at this point?

Hon. A. Petter: We're looking for the answer. This may provide the same answer through another means. If it doesn't, then I will try to get the answer. The total real estate holdings, right now, are $1.4 billion.

F. Gingell: That gives me the answer that I need. That's a lot of real estate. Can the minister identify any significant buildings that the province happens to own? It's much more interesting to think about the actual bricks and mortar than the financial numbers -- as much of a shock as you might find that to be.

Hon. A. Petter: About 34 percent of the holdings are in B.C.; the remainder are in Canada. There are no holdings outside of Canada. We could go on giving all sorts of descriptions. But, interestingly, if the member visits Toronto, drop by 145 King Street. I understand that it's owned by the province of British Columbia through these investments.

F. Gingell: So I take it, Mr. Minister, that you're giving us an assurance that there are no condominiums in Palm Springs amongst this portfolio.

If you've got $300 million or $400 million in British Columbia, are there any major buildings in Victoria, Vancouver, Kamloops or Vernon in your portfolio?

Hon. A. Petter: The holding includes industrial property, multifamily residential and office space. An example of an office property that is owned within these portfolios would be Park Place in Vancouver, which I think is at Burrard and Hastings, if I'm not mistaken.

F. Gingell: Is there any relationship between the colour of that building and the political party that happens to be in office? Maybe we'll get it repainted at some point in the future.

There are two more subjects that I'd like to touch on. One is that the report refers to the need for the office to improve some of its back-office functions. They were spending some money, as I understand it, on additional computer power and upgrading, that kind of thing. Does the chief investment officer now feel comfortable with the ability of the office to look after all the responsibilities in its mandate?

Hon. A. Petter: Yes, there have been improvements in terms of some of the systems that are utilized as part of these so-called back-office functions. "Back office" sounds a little peculiar to me, but it's a political lens that I'm looking at this with. These are very legitimate back-office functions, and they include mortgage systems -- we talked about real estate before -- and systems that facilitate better communications between brokers and the ministry staff.

F. Gingell: One of the issues, of course, in an office of this type is to ensure that the internal controls are in good shape and that there's a sufficient division of duties and responsibilities, so that when you close the door at 5 o'clock you are sure all the assets inside aren't going home with the employees. Does the office continually have evaluation of their internal control operations performed by some outside consultants or by the office of the auditor general? What internal review disciplines and ongoing practices does the chief investment officer have to assure himself that everything is as it should be?

[4:00]

Hon. A. Petter: Obviously the issue of internal controls is an extremely important one, as the member indicates. As I understand it, there have been three reviews looking at specific issues undertaken by the office of the comptroller general in the last year. The auditor general is focused on this area on an ongoing basis because of its importance.

Also, the question of delegation and separation of functions is one that is, again, extremely important, and such delegation and separation is provided for in a way that allows those who work in this office to get home and sleep at night; although I must say, in my experience, that in their pursuit of investments worldwide and the like, there are nights when they don't get home and sleep -- but not for a lack of adequate delegation and separation of functions.

F. Gingell: I appreciate that that is unquestionably the case. I see that there is a reference in the report to the use of derivatives. This is a subject that the minister and I have discussed in earlier estimates in relation to the debt of the province, where we take derivatives to deal with floating interest rates, foreign currencies and such issues. In what form is the investment branch using these kinds of arrangements?

Hon. A. Petter: It's always interesting how much one learns in these debates.

The office does have the capacity to use derivatives, but to this point they have not done so. They are contemplating the possible use of derivatives such as swaps or options on a very limited basis, where it would afford greater flexibility and where it would reduce the risk and provide greater diversity within the holdings. To this point, derivatives are not part of the current portfolios.

F. Gingell: Moving on to the classification of investments, which this report refers to as private placements, I presume that these are the B.C. Focus funds. Is that correct?

Hon. A. Petter: Yes, private placements are utilized, but on a very limited basis. Less than 2 percent of total investments are in the form of private placements. Some of that would be B.C. Focus funds, and some of that would be a very small component of the pension funds -- less than 2 percent of pension funds would also be invested through private placements.

F. Gingell: I actually got the wrong end of it. I wasn't talking about who they invested for; I was talking about what they're invested in. By Focus funds I was really referring to the commitment that the province made to assist certain types of startup businesses -- British Columbia companies, particularly in the high-tech area, that have reached a certain point of development and need financial support, and which aren't ready to go public but are past the startup stage.

At the moment, it's substantially less than half of 1 percent in this analysis. Perhaps I could reword the question to ask the minister what portion of these funds is invested in what we would call startup exercises that are in relation to economic development for the province. What portion of the

[ Page 4535 ]

funds is invested in private placements that seemed to the investment managers in the office to have the potential to give above-average rates of return?

[G. Brewin in the chair.]

Hon. A. Petter: With respect to the B.C. Focus funds, I indicated before that about $53 million is in private placements -- the majority in venture capital with a particular focus on tech and biotech investments in B.C. Now, that is obviously targeted and is part of government policy.

In addition, as I understand it, within the pension fund portfolio, part of diversifying those investments results in a small percentage of those funds also being invested in venture capital-type arrangements with respect to these kinds of emerging companies, as well, just simply as part of the overall investment portfolio. But the B.C. Focus is, as the title suggests, focused on trying to provide venture capital for these kinds of emerging ventures, particularly in the tech and biotech fields.

F. Gingell: I'm sure that cabinet ministers continually hear from and have pressure put on them by constituents and entrepreneurs in the province that they really need some help and that there are no investment funds available. That's, of course -- because of a lack of investment fund for some of these things -- why the Focus fund was originally created. But in the end, someone has to make a decision on whether or not an investment is made.

Do you have a separation with the Focus funds, so that the decision to invest may be made outside the office of the chief investment officer? So really, it's not an investment exercise that is a decision of the investment officer, but it is clearly managed by them, because they're the professionals, and the province needs someone to manage them -- separate from private placements, which staff within the office may think are good opportunities for investment and which will still meet some of the criteria that the minister spoke of.

Hon. A. Petter: Yes, I understand that external fund managers are used with respect to both the B.C. Focus fund and the private pension fund component. Just to make sure we're using the same nomenclature here, I'm using the term "venture capital" in the sense of being a subcategory of private placements. Private placements would include venture capital, but would presumably include other forms of investment.

F. Gingell: In the documents that we obtained through freedom of information -- relative to briefings given to the Minister of Finance up to something like the end of March -- were some briefing notes that discussed the province's investment in Epic Data International, flowing through to Ebco Aerospace. As in so much of this information you send us, there's a heading, a date, someone's name at the bottom and a big blank space in the middle.

Without wanting to have information become public that perhaps is confidential -- though I often think that that exercise is overblown -- I take it that the province has a $2 million or $3 million investment in Ebco Aerospace through Epic Data International. Obviously the investment has circumstances surrounding it that made a briefing of the minister appropriate. Would the minister like to expand upon that?

Hon. A. Petter: As near as I can determine, the issue regarding Ebco concerns an investment undertaken by Discovery Enterprises. The responsibility for Discovery Enterprises became the responsibility of this office, but the problems precede the involvement of this office. So we're engaged in a cleanup operation in relation to matters that were undertaken by Discovery Enterprises prior to it becoming the responsibility of this office.

F. Gingell: Have all the operations of Discovery Enterprises been folded into this office?

Hon. A. Petter: Well, there's still a Discovery Enterprises board that runs the day-to-day management, but ultimate responsibility for Discovery Enterprises does now reside with the chief investment officer.

F. Gingell: What was the gross investment in the private placement category at March 31, 1997?

Hon. A. Petter: Roughly $400 million.

[4:15]

F. Gingell: Have any of the private placements that the office has supported graduated to being Canadian equities?

Hon. A. Petter: We're aware of four that have graduated and one in particular that did so very recently, in which the province happily, through that graduation, realized about six times its original investment. Now, I don't want to claim that that's necessarily typical of all the investments, but it bodes well. Clearly there have been some successes in respect to this part of the investment portfolio.

F. Gingell: I thought the minister was going to name the company that did go public at six times the province's acquisition price.

Hon. A. Petter: Well, I'll give two names of companies that have graduated, to our knowledge. The one that I just referred to is known as ALI, apparently; the other, Stressgen.

F. Gingell: Are both these companies in the biochemical area? They sound like it.

Hon. A. Petter: I understand that ALI is a technology-based company -- software development. Stressgen is biomedical in its focus.

F. Gingell: I appreciate that it's much more difficult to measure rates of return in relation to private placements. They take longer to mature, and in the meantime, so often there's normally no real, independent market valuation available. But could the minister give the committee a feel for whether, in the total package, going into the private placement business has been successful? Recognizing all the ups and all the downs, do you have a feeling of confidence that you're going to make a rate of return that is in excess of the rates of return being earned in the somewhat buoyant Canadian equities market?

Hon. A. Petter: Well, as the member indicates, it is still early days for this kind of investment to be fully evaluated.

[ Page 4536 ]

But I take it that there is a degree of satisfaction with the performance to date and some confidence that we will be able to realize a rate of return commensurate with what is a mainly higher-risk form of investment, but one that obviously has major benefits in terms of jobs and economic benefits for British Columbia.

F. Gingell: The office of the chief investment officer has identified a series of program benchmarks, as they've been called. It's important for these benchmarks to be consistent but also for us to add to the benchmarks as advice is given on more measures that are appropriate, or on measures that are more appropriate than some of the ones that we are using. So has the office of the chief investment officer sought the advice of outside experts or outside people in developing these particular benchmarks, all of which are related, that are shown here to both long-term and short-term rates of return?

I think it would be important for us to try and identify some benchmarks that will measure the efficiency and effectiveness of the office -- the business management side. I wonder whether any thought has been given to that and, back to the first question, whether any outside advice has been sought on the most appropriate benchmarks.

Hon. A. Petter: I understand that the benchmarks being employed here are not unique to the ministry; they are standard benchmarks. In this case, the benchmarks are derived or provided by Frank Russell Canada, which is a "benchmark maker." Just as there are agencies that establish credit ratings, I guess there are agencies that establish benchmarks for investment. I didn't know that, but now I do. And Frank Russell Canada, I take it, is the one whose benchmarks are being employed here because of its expertise and recognized qualifications.

In respect to broadening the benchmarks to look at other issues, yes, there's work in that regard in terms of looking at the cost base and relative cost of managing the portfolio, etc.

F. Gingell: From my distant past, when I used to be involved as a trustee of a pension fund that was in the hands of money managers, I seem to remember that the rates of return were calculated by an independent body. Is that this same Russell company? And if it is, is it their calculations that are used in this reporting system?

Hon. A. Petter: It turns out that the whole industry uses a standardized approach to measure performance in attaining benchmarks. In this case, the software being employed is software that was, I take it, developed by Frank Russell Canada, and it provides the basis for the measurement that then becomes subject to audit by the auditor general.

F. Gingell: I would just like to thank the minister for this discussion. I always follow the results of the investment office with interest, and I'm pleased to see that they've been doing well. I wish them well in the future -- for all of us.

Hon. A. Petter: Well, I very much appreciate those remarks. This is a part of government and a part of the ministry that doesn't always receive as much attention as it should, but it has been a tremendous success story, I think. Some of the institutional changes and capacity-building that we've had a chance to debate and to shine a bit of light on have helped me -- and others, hopefully -- to better understand the operation. I very much appreciate the member's comments, and I know staff appreciate them doubly.

F. Gingell: I move that the committee recess for five minutes.

The committee recessed from 4:28 p.m. to 4:39 p.m.

[G. Brewin in the chair.]

F. Gingell: We spent some time yesterday dealing with Treasury Board, discussing the responsibilities of the assistant deputy minister for special projects. It would seem to me that that partially deals with a capital expenditure review and a program review -- a whole series -- in relation to dealing with costs rather than with the delivery of programs.

The other sort of new function that has been set up under Treasury Board under Steve Hollett is to look at what assets the government may realize. When the budget was tabled, we all noted that an amount of $170 million was shown as anticipated receipts from asset dispositions, and I'm sure the minister will remember the lack of response from various Crown corporations and other people who were asked about this. Have we got to the point where the $170 million has now been identified?

Hon. A. Petter: This is an area in which I'll give some general response, but because the dispositions have not taken place, I don't want to compromise the ability of government to realize a full and adequate return when properties are disposed of. The three major areas that have been looked at are the assets associated with the windup of B.C. Systems Corporation -- there's a building and equipment which has a substantial value, perhaps in excess of $50 million.

There are other information technology areas in which there may be interest in the private sector in assuming some of the responsibility for providing access to databases and the like. There is also the area of vehicle management, which is being looked at.

I might say that in all these instances, we're obviously looking at establishing competitive processes in which we can ensure that there are real values to be had. If there are savings to be had in an operational sense -- and in some cases, there may well be -- those are real savings as well. We're looking at the request-for-proposal type of arrangements with competitive bids and the like.

F. Gingell: I didn't catch the first one. Was it B.C. Systems?

Hon. A. Petter: Yes. The member will be aware, of course, that B.C. Systems is in the process of being wound up. There are still assets, such as the building in Victoria that B.C. Systems is located in, that have not been disposed of. The disposal of some of those assets that formed part of B.C. Systems can provide some significant contribution toward the $170 million. The other two categories I mentioned are two other areas that are being looked at actively -- and ministries as well. Treasury Board staff are obviously open to other possibilities as well, but those are the three major areas of focus.

[4:45]

F. Gingell: I take it that this building that B.C. Systems Corporation was in is owned by that corporation. Nod if the answer is yes. Yes, okay.

As this is a Crown corporation, the building appears in the accounts of B.C. Systems Corporation. If you realize . . . . On winding up the assets of B.C. Systems Corporation, it will

[ Page 4537 ]

be a financing transaction to the extent that it is recovering the book value that's in the consolidated revenue fund for these assets and only income to the consolidated revenue fund for the gain. Would you agree with that?

Hon. A. Petter: As I understand it -- and I think this is not what the member suggested, because B.C. Systems Corporation was a corporation that was not within the consolidated revenue fund -- the book value of its assets would not be carried within the consolidated revenue fund. The disposal of those assets would therefore return a profit to B.C. Systems that could then be translated into a dividend through to the consolidated revenue fund. That's my understanding.

F. Gingell: Was the conclusion arrived at by the triumvirate over there unanimous?

Hon. A. Petter: Yes.

F. Gingell: I'm bewitched, bothered and bewildered. When money was invested by the province into B.C. Systems Corporation . . . . As when it is invested into any other organization, if it is not put in by way of a subsidy or payment for services but is the acquisition of shares -- shareholders' equity -- that's a financing transaction. The disposition of that, the conversion of that into cash, will not give rise to revenue. It will give rise to cash, but it will not give rise to revenue. Now, if this equity in the building is the result of reinvested profits that B.C.

Systems has made -- profits being a rather loose word, in this particular instance -- then I would agree with you. I would have thought that the increase in the value would have been the result of investment of money, rather than the reinvestment of profits.

Hon. A. Petter: The money that will be remitted to the consolidated revenue fund is in the form of retained earnings -- that is, the incremental value of the building that results from the investments that resulted from the retained earnings of the corporation. It is therefore a legitimate realization of real value that can be credited to the consolidated revenue fund through a dividend.

F. Gingell: As I said, if it is retained earnings, then that's fine. It'll be one of those transactions that will reflect as income in the consolidated revenue fund but not in the

summary financial statements, because the incremental values have been recorded in the

summary financial statements -- although there may well be a profit on the building in addition to its book value. Could the minister give me some idea of the possible size of that incremental value?

Hon. A. Petter: I want to be cautious here, because we want to realize the full value, of course, and I don't particularly want to set a market value. I don't want to set a ceiling value. The other way to answer this would be to give the member some sense of what the book value is, because that would at least give him a sense of what the sale will be charged against, if I could put it that way. I don't have that to hand, but I can provide that to the member if it doesn't compromise our bargaining position. I'm not sure if it would, but I don't happen to have that information to hand at the present time.

F. Gingell: The purpose of my discussion is for the committee to finish up with a feeling for where the $170 million is going to come from and whether that is a reasonable estimate. I think it was treated with a bit of skepticism at the time of the budget, because reporters had phoned various organizations like B.C. Rail, and they said: "What are you talking about?" I just want to get some feel for it. The information technology, I presume, is also part of B.C. Systems. Is it one of the retained assets, or is it information technology that sits outside B.C. Systems?

Hon. A. Petter: It exists outside B.C. Systems. There are opportunities, here, for asset recovery and operational savings by virtue of some of the opportunities that may exist for the private sector to operate some of these services more cost-effectively, on the one hand, or to put some of the services that have been put in place by government to a better use and thereby increase the effective value of those assets in terms of the profits they can generate.

I'll give you an example. Simply providing, say, on-line services to information bases on a 24-hour basis rather than on an eight-hour basis can greatly enhance the profits and the service and hence the value. If a private sector operator were prepared to take that on and do that, the consequence could be an expansion of service for the public. But the value of the equipment, etc., would of course reflect that increased utilization and profit, which would then be reflected in the return to provincial treasury.

F. Gingell: I really am getting confused now. Are we talking about selling something -- disposing of some process and information -- which the citizens of the province will subsequently be paying for, be buying back? Why does this have a value, unless the person who buys it can use it for commercial purposes?

Hon. A. Petter: One little added element that I want to make sure I share so that there's no misunderstanding . . . . As I understand it, in respect to some of the equipment that's involved here, the equipment is still in fact owned by B.C. Systems but has been leased or rented to government. These operations exist outside of B.C. Systems, but some of the equipment may still be owned by B.C. Systems.

The situation is this. Government does have commercial operations with respect to information and profits from that. What we're going to test here -- and there is a substantial belief that we will succeed -- is that there are opportunities for these commercial operations to be far more profitable in the hands of a non-governmental operator who's prepared to maximize the opportunities to provide service, on a cost recovery basis, than has been the case for government. It is that increased opportunity, of course, that then generates the value that can, through a competitive process, be returned to government.

Through that process one can then expand service for these commercial operations by having them operated outside of government and, at the same time, provide to government some benefit for the disposition of these services to a non-government operator.

F. Gingell: I must admit, my reaction is that if I were to see this in an IPO, I would file it in the round basket. I just don't have any feel for this. Well, you won't be able to sell my name to Maclean's magazine's subscription department, because they already have it about 18 times.

I have a problem being able to see in my mind how you can do all this in this year -- realize some substantial proceeds from this sale which must not in turn be recovered back from the taxpayers over a period of years. That would not be an acceptable way. But you'll be able to accomplish all this and realize proceeds in the year '97-98.

[ Page 4538 ]

I don't think that this perhaps is the place for us to explore this issue. It's somewhat complicated, and I need to be educated about it. If we may, I'll leave it at that -- unless the minister he has something to add.

Hon. A. Petter: Just a little something. There are, throughout government, extensive assets that one might have looked at for an asset disposition policy. These didn't come forward accidentally. In the case of the Systems concerns, they came forward because there is, in our view, a strong interest and opportunity that exists here, and we anticipate, as a result of that interest, that there are some real gains that can be had. I appreciate the member's concern about not converting future income streams into net present values and all that.

These areas were identified, as a result of the program review that was undertaken last year, as areas of high potential and areas in which people -- who certainly have more knowledge of these particular areas than I do and presumably the member opposite does -- indicate that they believe there is high potential. They've expressed high interest, and we therefore believe there's high potential for a return in a way that is responsible.

All I can say further to that is that the RFIs and RFPs are in the works, and we'll have to see. The proof of the pudding will be in the response, and that's the way it should be.

[5:00]

F. Gingell: I look forward to next year's budget speech -- that is, if this government is still the government and this minister is still the minister. Maybe he'll get lucky and get moved out of this portfolio.

In your budget speech -- if you have been successful -- I will look forward to your mentioning the specific sum that has been raised from the sale of information technology by the government. If the item is missing or if you don't mention it, I will make the assumptions that opposition members always make in those circumstances.

We move along to vehicle management. As the minister knows, there is an amount within the budget whereby the B.C. Purchasing Commission, I presume, acquires all the vehicles. It's called the special account. The government acquires all the vehicles in bulk, they assign them to the ministers, and they bill the ministers for annual lease costs based on their costs. They borrow money more cheaply than anyone else in the market. I was under the impression that they were somewhat satisfied with the process. I also understood that the government was looking at the possibility of going into privatizing this function.

There may be some reason that would indicate that some outside financial body could do this at lower costs with no lack of service.

When you mention vehicles, am I to assume, then, that the way the privatization process would be done -- if it were to be done -- would be to sell the currently existing fleet over to the organization, so they've got all one package at one time, and they carry on from that point?

Hon. A. Petter: Yes, the proposals that are being looked at would entail the sale of the vehicle fleet and responsibility for the vehicle fleet to a non-governmental organization. The open question is whether the maintenance for the fleet would be done as part of that sale and part of that proposal or whether it might be retained as a service provided within government. Those are some of the issues that are being looked at as we move forward towards a competitive process here.

I just want to say one small thing about the member's comments about looking forward -- as I do -- to how this all transpires. I'm curious to see how it does work, and obviously I feel there is tremendous potential here.

But we went out of our way in the budget not to make any secret of this and to include it as a separate line item and to make sure that the proposal to dispose of assets was transparent. That principle of transparency and, flowing from it, the principle of accountability are ones that I frankly think should give the member some modicum of confidence that I'm prepared to be answerable for what I hope will be the success of this assets disposition strategy. It should give the member an opportunity to point out where he feels it hasn't been successful.

F. Gingell: I think that government finances and your budget should always be transparent. I don't think that it should be the exception to the rule. The minister's remarks kind of indicate that it's the exception to the rule: "Praise me for this one occasion that I have been transparent and told all."

Moving along from there, I would like to remind the minister of the issue that I brought forward on information technology. The minister repeated my concern and understood what it was: that you wouldn't sell something that was, in effect, a current value of a future income stream -- that income stream to someone else becoming a cost to government.

I'd like to suggest to you that the circumstance with the current vehicle fleet is that the fleet is paid for. The costs have been written off by government. If you turned around and were to sell it now in the package, yes, you would show some revenue, but all that is, is a cost that you will absorb from this point on. That's all that will happen. It is no different . . . .

I'd better be careful how I say that, because it's in one of these rotten special accounts that get everybody confused, and may well have been treated as a financing transaction . . . . Oh dear, the way you keep your books is really a little difficult. No, it's not a financing transaction. Therefore I make the assumption that the amount has been written off. Yes, it has been written off: "The purchase of these vehicles has been charged as an expense to this point."

So what you're doing, if you were . . . . I can appreciate the issue of privatizing future acquisitions if there is a business management basis for it. But in turning around and selling the presently existing fleet, all you're doing is taking the current value of a future cost stream, putting that into income and absorbing those costs over the years that the purchaser will recover that acquisition cost.

Hon. A. Petter: I'm sort of amused to some extent that when government takes action to try to maximize value, the member is quick to point out how it in fact doesn't achieve that, for all sorts of different reasons. In fact, I think the truth lies somewhere in between. That is, the member is absolutely right that there are certain cautions here for accounting purposes and for good public accounting treatment; that clearly we want to make sure that we are not ascribing as a value the net present value of a future income stream or the realization of a book value that's already carried on the accounts.

I think those are the two areas. The member is pointing his finger at me and saying, "Don't count those," and I agree.

But having said that, the book value of the vehicles is conservatively assessed, depreciation is perhaps not conservatively assessed, and there are, in our view, opportunities to realize a real value in terms of the difference that exists

[ Page 4539 ]

between the book value and the value that might be gained through the sale of this fleet to a non-governmental entity. I think the member would agree that if there is such a differential, that's a real value that can be counted, and should be.

Moreover -- and I think the member suggested this -- if we can set up an operation that is less costly in the future, well, one wouldn't carry that benefit into this year's budget. It would have benefits in future years in terms of the costs associated with the renewal of the fleet and, potentially, its operation. So I just hope that the member isn't becoming so negatively disposed or fixating on the limitations, which are real, to the point that he's denying that there are real values to be had here.

We've looked very carefully across government and identified this as one area in which we think -- and we'll test it through a competitive process with an appropriate accounting treatment -- there are some real values that can be realized.

F. Gingell: I'm sorry, but I'm not convinced in any way, shape or form. These assets have been written off. Now, if you intend to sell them to some third parties . . . .

Interjection.

F. Gingell: Yes, they have been written off. I'm sorry, but they have been written off.

Hon. A. Petter: If the member checks Public Accounts , volume 2, page B14, I think he'll find the treatment in public accounts is somewhat different. The treatment in public accounts is that vehicles net of amortization are carried at a value of $34 million. He may be confusing the two accounting treatments between public accounts and the estimates process. They have not been written off for the purpose of public accounts, and therefore there is value here and . . . . The member is more acquainted on a day-to-day basis with public accounts than I am, but I think that a reference to Public Accounts will confirm that.

F. Gingell: So what you're saying is that yes, we've written them off as far as the consolidated revenue fund is concerned, always have, and they've been charged up as an expense in here; but that through the capitalization exercise for the purpose of the consolidation and the creation of the public accounts, you have brought them back -- which I support. I support it for business reasons. I support it for one reason only, actually. I support it because I think that it improves program costing. It more accurately reflects the costs of delivering programs by this government.

Now, the method that you have been using through the working capital special account has already accomplished that. I mean, you already . . . . I appreciate that vehicles have been written off, but it was a means by which you allocated a monthly cost or an annual cost of owning the automobiles to each ministry, and that was able to be charged into the programs. I'm disappointed in the minister using this capitalization program for the purpose of questionable -- in my mind -- revenue recognition.

Hon. A. Petter: It's quite the opposite. It's completely the opposite from what the member is saying. But for this change in accounting practice, we would not have to reduce the value by $34 million. Because of capitalization and the associated accounting changes, there is a $34 million value net of amortization that it's measured against. So it takes away a false incentive of trying to realize an asset that has been written off but really has a value.

So, far from pillorying me for taking advantage, the member should be crediting me for making sure that this new accounting treatment is utilized and that the real benefit to government is adjusted to take account of the continuing value of this vehicle fleet. I mean, I'm prepared to be pilloried for almost anything, but not for this.

F. Gingell: Yes, I accept that, but you've got to recognize that you've already bought these vehicles once and written them off. You've already bought these vehicles once and written them off in the consolidated revenue fund, and recently, through this last chance, capitalized them back for the purpose of producing the public accounts, and now you are going to sell them again for a quick-term gain and long-term pain. You're going to pay for them over again. The final result of the exercise at the end of the day is that you've pulled income into 1996-97 and increased your expenses in subsequent years. That's the end result. Agreed? Check with the accountant on your right.

Hon. A. Petter: No, I've checked with accountants to the left of me, accountants to right of me . . . .

What's fascinating about this debate is the incredible defence and faith the member has in public enterprise as the most efficient, effective way in all cases. I'm heartened. So we're sort of in a strange position in this debate.

But let me assure the member that we will not only have to, through this competitive process, show a gain in terms of the value that we realize through the sale of the vehicle fleet -- should that occur; should that be shown to be justified -- adjusted for the current book value, which has not been written off under the accounting treatment in public accounts.

We will also certainly have to show in future that the provision of vehicles, which presumably would no longer be owned by government, would be owned by some non-governmental entity and provided to government . . . that that cost is in fact cost-effective for government in the future, as well. This is not a transference of future benefit to long-term detriment; in fact, there are benefits to be had both in future years and in the sale.

I appreciate the member's concern. I honestly do, because I don't think we want to achieve false economies; we want to make sure they are real economies. But his skepticism is not in keeping with his philosophical position within this House.

[5:15]

F. Gingell: It all depends, just like with the agenda, on who is driving it. If it's government employees who are driving the cars afterwards, if they haven't changed, if the government is paying the lease rental, I'm sure you'll think this thing through and realize that there isn't any magic pot at the end of the rainbow. The question is: on the money that you've gained, are you borrowing it, in effect? That is what a lease arrangement is: it's just a borrowing exercise. Have you borrowed it at a rate that's lower than the government can . . . ?

I don't think the sale and leaseback, which is what it is -- that's exactly what it is -- gives rise to revenue. I think it's a financing transaction. But let's move on. We've had an interesting discussion, and I've got the last word in.

[ Page 4540 ]

It doesn't sound like the minister has come up with $170 million yet. Maybe he has. There were suggestions made at the time of budget day that there was an anticipated realization of some assets that sit within B.C. Rail. Has that moved along at all, or was that suggestion without foundation?

Hon. A. Petter: No. Within the budget there was provision for some additional dividends to be provided by Crown corporations from realization or sale of properties, excess properties or excess assets they may own, but the amount that was booked through asset disposition to the consolidated revenue fund -- other than the windup of B.C. Systems Corporation, which is a rather unusual situation -- pertained to assets that exist within government.

F. Gingell: I was just going to suggest that B.C. Systems Corporation was not going to be any different.

One of the obvious places that one thinks about is in the disposal of land. I was wondering what thought the Ministry of Finance or Treasury Board had given to issues of raising revenues through the disposition of Crown lands.

Hon. A. Petter: Again, the sale of Crown lands is not factored into the $170 million, but there is provision in the budget for the sale of Crown lands with respect to the Crown lands special account. Government is working to maximize the potential within responsible limits and to try to set a target that is achievable, but is certainly more ambitious in terms of the sale of Crown land than was the case in last year's budget, for example.

F. Gingell: So that optimism, or the intention to focus more on it, is the reason that revenue source was increased from some $31 million to a hoped-for $56 million.

I'm not sure exactly how this works, but I would imagine that when the Roberts Bank backup lands were acquired, for instance, that would have been charged to the Crown lands special account, and is perhaps some land that the government should be encouraged to realize. I presume Crown Lands talks about who is the owner rather than the method by which it was acquired -- i.e., acquired by conquest rather than by purchase.

Hon. A. Petter: The intention here is to take a more entrepreneurial approach to the sale of Crown lands and to provide a benefit by providing more Crown lands for use within the province.

The particular lands that I know the member is very interested in -- with his lay hat on, as well as his critic hat, I'm sure -- obviously are contentious. I'm aware of a little bit of the history in terms of some of the feelings of the original owners and their desire to regain ownership over those lands. I don't anticipate that those lands are necessarily going to be part of this strategy, partly because of some of the controversy and difficulty surrounding them. It's probably a matter the member could take up with the minister responsible for Crown lands during her estimates debate.

F. Gingell: It's a particular subject I take up with all ministers -- Agriculture, Environment, Lands and Parks, Finance -- whoever I can . . . .

Interjection.

F. Gingell: Yes, Aboriginal Affairs, too -- whoever I can find to listen.

Hon. J. Cashore: I gave you the same answer.

F. Gingell: Well, you did. But I was pleased that the minister recognized the need to deal with the matter swiftly before it was taken out of her hands.

I noticed in the cost breakdown for vote 32 for Treasury Board that some $830,000 is allocated to the asset disposition and revenue enhancement unit, but only 2 FTEs. I know there must be a lot of additional non-payroll costs involved in that, and I wonder what they are.

Hon. A. Petter: That's a reflection of the need to do due diligence around these particular proposals, and therefore to engage contractors to evaluate the real potentials so that we can set prudent targets, ones we believe can be achievable within the time frame of this year's budget. There is a fair bit of work that has been and will be undertaken in respect of these matters.

F. Gingell: So I take it that these additional costs, which I presume are in the region of $700,000 or almost that amount, are more in the area of contracting for outside advice. We are now two and a half months into the year. Have any contracts or RFIs been issued with respect to this area?

Hon. A. Petter: The answer is that there have been both contracts and RFIs issued -- RFIs particularly in reference to the information side of this initiative. I'd be happy to provide the member with that information in greater detail and in writing if he requires it.

F. Gingell: We got into a prolonged discussion about trying to differentiate between ourselves in relation to these three categories that you gave us: the difference between asset dispositions and dividends or revenues. The $170 million is the amount that's been included in the budget for the excess overcapitalized values. Does the minister have any feel for the additional funds that will be realized for the asset disposition which will be treated as a financing transaction?

Hon. A. Petter: The advice I'm getting is that it's difficult to estimate. To the extent that it can be estimated, we don't have the breakdown at hand. So again, we'd certainly undertake to provide the member with what information we can about that, if he can allow us a bit of time to assemble that. Obviously, as the dispositions take place, we'll be able to provide an accurate accounting and apportionment.

F. Gingell: As the start of this discussion on asset dispositions identified, there were remaining assets at B.C. Systems Corp of buildings and equipment and information technology, which I haven't been able to completely grasp and understand, and vehicle management or the vehicle fleet, the accounting treatment of which we can discuss subsequently. Is there any other item, or is that the majority of the package that's expected to raise revenue in the amount of $170 million?

Hon. A. Petter: There are other bits and pieces -- I guess I'd call them that -- around government in which ministries may have some potential to realize a return from asset dispositions. But those three areas are the ones that are the focus of this initiative.

F. Gingell: To finish this subject, I would make a plea for the capitalization-of-assets issue. One of the things that government will benefit from is far better knowledge about what equipment, what assets it does have. I know that the

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troller general's office and the ministries are having quite an exercise in trying to garner some of that information now. But it's an important project. It's going to cost some money, but I'm sure it will enhance both the government's accounting practices and the internal control of all these things, because equipment walks on occasion.

With that, I'd like to now raise the subject, within Treasury Board, of intergovernmental relations and constitutional issues. Maybe I'll turn the floor over to my friend from Richmond-Steveston.

G. Plant: I'm delighted to have the opportunity to rise to join in this estimates debate. I take as the point of departure here, I suppose, the fact that the minister is the Minister Responsible for Intergovernmental Relations and has within his ministry budget provision for something called the intergovernmental relations secretariat. I want to ask some questions about those two, I suppose, overlapping activities.

I want to take as my starting point an extract from the most recent financial report for the Ministry of Finance and Corporate Relations, the '95-96 annual report. I want to ask a few fairly mundane questions around dollars and activities. The subject of federal-provincial relations is dealt with at page 12. The budget figure there is $605,000, with a total of seven employees. Now, I know that this would probably have been the fiscal year within which responsibility for intergovernmental relations moved, from the government's perspective -- although, as I understand it, it followed the minister. But I may be wrong on that.

[5:30]

I guess what I need is a little bit of help from the minister in explaining two figures that appear to me to be incongruent. One is the figure of $605,000 for federal-provincial relations in the Ministry of Finance and Corporate Relations annual report. The other is the figure of $1.5 million for ministry operations in the same time period -- the '96-97 estimates of the Ministry Responsible for Intergovernmental Relations. Two different numbers, and they may deal with two different things. I just don't know why it works out that way.

Hon. A. Petter: If I understand the member's question, there are two different things. One is the federal-provincial relations branch of the Ministry of Finance, which has had an ongoing role that certainly has preceded my service as minister. It does excellent work, particularly in tracking federal-provincial fiscal issues. It helped, for example, in the preparation of the report that was done for the Western Premiers Conference by the western finance ministers. It tracks the province's position with respect to federal budget decisions, transfer payments and the like. It provides support to government on fiscal issues related to federal-provincial relations, from a Finance perspective.

The other is the intergovernmental relations secretariat, contained in a separate vote -- vote 32. It has a larger budget; I think the estimate for the coming year is $1.3 million. Its function is to provide support services to the executive council and for government generally, in respect of a broader range of policy and intergovernmental relations matters.

I'll say that if the member wants to debate in any detail those numbers or the activities of the intergovernmental relations secretariat to the point that he would want me to have staff present, I haven't provided for that this evening. But I can certainly try to provide that for later in this estimates process. If he wishes, on the other hand, to debate the federal-provincial relations component, then certainly that's a function that falls within the area we're now dealing with.

If he wants to talk about policy terms on the federal-provincial front, I am happy to engage in that, as well, and take my chances without staff. If the member is interested in getting into some of the internal financial workings of the intergovernmental relations secretariat, I just want to forewarn him that if he provides notice to me, I will try to get staff here later on this evening, but that was not part of the

schedule that I had anticipated for this time.

G. Plant: I thank the minister for that clarification. I will defer the questioning specifically directed at the secretariat to another occasion. Perhaps I could just ask one or two -- well, maybe more than that; we'll see.

Hon. A. Petter: Because of the member's interest and the response time of my staff, I am informed that the ADM responsible for the intergovernmental relations secretariat is going to be available within the next ten minutes or so. So if the member wants to ask some questions in that regard, it may be possible to deal with this matter at this time -- before we break or certainly after we break.

G. Plant: Well, that's tremendously good service. I'll have to make sure I have some good questions.

Let me then tie up the issue of the responsibility for federal-provincial relations within the Ministry of Finance. The 1995-96 annual report for the Ministry of Finance set aside a budget for just over $600,000, with