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June 18, 2019

RESOURCE COMMITTEE

Pursuant to Standing Order 68, Lisa Dempster, MHA for Cartwright - L'Anse au

Clair, substitutes for Pam Parsons, MHA for Harbour Grace - Port de Grave for

subhead 1.1.01 to 1.2.03.

Pursuant to Standing Order 68, Derek Bennett, MHA for Lewisporte - Twillingate,

substitutes for Pam Parsons, MHA for Harbour Grace - Port de Grave for subhead

2.1.01 to 4.3.02.

Pursuant to Standing Order 68, Paul Dinn, MHA for Topsail - Paradise,

substitutes for Kevin Parsons, MHA for Cape St. Francis for subhead 1.1.01 to

1.2.03.

Pursuant to Standing Order 68, Andrew Parsons, MHA for Burgeo - La Poile,

substitutes for Elvis Loveless, MHA for Fortune Bay - Cape La Hune.

The

Committee met at 6:10 p.m. in the Assembly Chamber.

CHAIR (Reid):

We're going to get started

now.

The

first thing we have to do is we have some minutes from the – introductions

first? Okay.

Okay,

we'll do a round of introductions first. We'll start with the minister.

MR. MITCHELMORE:

Minister Christopher Mitchelmore, Tourism, Culture, Industry and Innovation,

here with my team.

MR. BOWN:

Charles Bown, Deputy Minister.

MS. HAYES:

Robyn Hayes, Departmental Controller.

MS. MURPHY:

Carmela Murphy, Assistant Deputy Minister of Tourism, Culture and Parks.

MS. HEARN:

Judith Hearn, Assistant Deputy Minister of Business.

MS. SKINNER:

Gillian Skinner, Assistant Deputy Minister of Regional Development and

Diversification.

MS. MUNDON:

Tansy Mundon, Director of Communications.

MR. GEORGE:

Bradley George, Executive Assistant to the Minister.

MS. STOODLEY:

Sarah Stoodley, Parliamentary Secretary for Tourism, Culture, Industry and

Innovation.

MS. WILLIAMS:

Renee Williams, Director of Corporate Services, Tourism, Culture, Industry and

Innovation.

MR.

DINN:

Paul Dinn, MHA for Topsail - Paradise. I'll say upfront that I got to beat it

out of here in about 20 minutes, so it's nothing you said, but it gives you a

chance to start the meeting anyway.

MR. COADY:

Malcolm Coady, Researcher, Official Opposition.

MR. PARROTT:

Lloyd Parrott, MHA for Terra Nova, critic for Tourism, Culture, Industry and

Innovation.

MR. LANE:

Paul Lane, MHA for Mount Pearl - Southlands, critic for all departments.

MS. COFFIN:

Alison Coffin, St. John's East - Quidi Vidi.

MR. MORGAN:

Ivan Morgan, Researcher, NDP Caucus.

MS. HILL:

Angelica Hill, Researcher, Government Members' Office.

MR. BRAGG:

Derrick Bragg, MHA, Fogo Island - Cape Feels.

MR. A. PARSONS:

Andrew Parsons, MHA, Burgeo - La Poile.

MS. DEMPSTER:

Lisa Dempster, MHA, Cartwright - L'Anse au Clair.

CHAIR:

I'm Scott Reid, Member for St. George's - Humber. I'm going to chair the meeting

tonight.

We have

some minutes here from the June 13 meeting that we need to have approved.

Can I

have a motion?

MR. BRAGG:

Moved.

CHAIR:

Moved by Derrick Bragg.

All in

favour, ‘aye.'

SOME HON. MEMBERS:

Aye.

CHAIR:

Carried.

motion, minutes adopted as circulated.

CHAIR:

We're going to call the

first heading and then we'll have a few opening comments from the minister.

I'm

going to call the head 1.1.01.

CLERK (Barnes):

Executive and Support Services, 1.1.01 through 1.2.03 inclusive.

MR. MITCHELMORE:

Thank you, Mr. Chair.

It's

good to be back here and be joined with my colleagues from the Department of

Tourism, Culture, Industry and Innovation. I typically don't bring opening

remarks in Estimates, but given that there are several new Members here, I just

wanted to give a broad overview of the department and some of the initiatives

that have taken place to provide some context for the Estimates here this

evening.

The

Department of TCII is the lead for innovation, economic development and

diversification; tourism, culture and provincial parks. It's responsible for

strengthening and diversifying the economy on a provincial and regional basis,

supporting economic growth and employment in the tourism industry, cultivating

contemporary arts and persevering the province's cultural heritage. The

department focuses on the creation of a competitive environment to support

private sector investment and business growth through promoting innovation in

industry and business development, research and development,

internationalization, sector diversification, informed by sector search,

business development and community economic development.

Guided

by The Way Forward , TCII offers

programs and services that ensure entrepreneurship and innovation are able to

flourish, supporting economic prosperity and growth in the province. The

department is also the province's largest operator of tourism, culture and

heritage facilities, including arts and culture centres, provincial historic

sites, provincial parks and visitor information centres. TCII provides insight,

intelligence, innovation support and investment services for business,

non-profit enterprises and community groups. The department markets the province

as a designation of choice, working with a wide range of partners and

stakeholders to identify opportunities, provide support and leverage investments

critical for sector, industry and firm growth.

TCII

encompasses three branches: Tourism, Culture and Parks; Business and Regional

Development; and Diversification, and is supported by two corporate divisions:

Communications and Corporate Services. Leadership is provided by Deputy Minister

Charles Bown and our three assistant deputy ministers: Carmela Murphy, Gillian

Skinner and Judith Hearn.

TCII is

regionally responsive with regional outreach throughout 18 field offices

provided by front-line service delivery staff for all TCII economic development

programs and services. Besides St. John's, we have two other corporate offices,

one located in Marystown, which is responsible for portfolio management and the

other in Corner Brook, which is responsible for the provincial parks.

Departmental staff are also located throughout our provincial information

centres, visitor information centres, provincial historic sites, provincial

parks and arts and culture centres throughout the province. I commend staff for

their collaborative efforts and continued commitment to fostering a culture of

innovation, productivity and creativity in Newfoundland and Labrador.

Newfoundland and Labrador is a destination of choice for people around the

world. Travellers are drawn to our people, our culture and our way of life. TCII

continues to grow and support the provincial tourism industry and it's over

20,000 jobs by enhancing market readiness, designation development and marketing

support in partnership with Hospitality Newfoundland and Labrador, the

Newfoundland and Labrador Tourism Board, regional Destination Management

Organizations and tourism operators.

Newfoundland and Labrador's non-resident visitation has grown at an average rate

of 3 per cent a year since 2009. In 2018 residents made 3.6 million trips in the

province spending nearly $570 million. The combined resident and non-resident

tourism spending in Newfoundland and Labrador reached $1.14 billion last year.

Travel

media; nearly 700 articles were written about

Come From Away in 2018 reaching an

impressive audience of over 110 million. Tour operators are also expanding their

tours and packaging offerings in the province and, just recently, we hosted two

promotional events aligned with the opening of

Come From Away in London.

We keep

hearing from visitors who come here that they love what they experience and they

tell us that our province is a unique and special place. We've also maintained

our support for tourism marketing and our tourism campaign Find Yourself .

It continues to be one of the most successful and recognized in the country

receiving 329 awards. This marketing investment has tremendous value in

attracting visitors to Newfoundland and Labrador.

The

role of the provincial tourism marketing is to inspire, to generate awareness

and to motivate travellers to action. The feedback we receive is incredible and

it's pushing people to book their travel here in our province. The outlook is

positive for this year's tourism season.

In 2018

we hosted a record 111 van tours, including media from all over North America

representing 51 outlets and we welcomed 44 travel trade representing over 180

clients from North America, Europe and Asia. When we launched the Provincial

Tourism Product Development Plan in 2017 we did so to increase the number of

high-quality Newfoundland and Labrador tourism experiences to attract more

visitors, to encourage them to stay longer and to experience more.

Through

the destination development implementation process we hosted 24 opportunities,

experienced development sessions with over 900 tourism operators, potential

entrepreneurs, municipalities and other stakeholders in attendance. One of the

key aspects of the provincial Development Plan is to improve the sense of

arrival in our province and throughout key touch points along the visitor

journey. We have already made investment through comprehensive signage and way

finding for the City of St. John's and the Town of Placentia so their

communities can offer clear and concise directional information. VICs we support

throughout the province. The sites also provide advice and direction on local

festivals and events, attractions and experience; the hidden gems that are

throughout our province. Sites are located in Port aux Basques, Notre Dame,

Clarenville, Whitbourne and Argentia, as well as airports at Deer Lake and St.

John's.

Government provides support to the protection, development, promotion and

celebration of Newfoundland and Labrador's vibrant culture. This includes

legislative protection and management under the

Historic Resources Act , the

Rooms Act , the

Arts Council Act and

Status of the Artist Act ; is a sector

liaison in development for creation and trade; and maintaining and operating our

Provincial Historic Sites. We operate six Arts and Culture Centres, provide

regulatory protection and oversight of the province's archaeological and

palaeontological resources through the Provincial Archaeological Office.

provide support for our non-profit cultural facilities and organizations and

associated activities through funding programs and advisory expertise; funding

support for community cultural activities and events; funding support for

Indigenous cultural heritage; operational funding support to The Rooms, the Art

Procurement Program; support for professional artists and community arts through

ArtsNL; support for the provincial film industry through the Newfoundland and

Labrador Film Development Corporation; protection and oversight of the

province's built heritage; and safeguarding and celebration of the province's

intangible cultural heritage through the Heritage Foundation of Newfoundland and

Labrador.

The new

Cultural Action Plan, launched in April 2019, will guide our investment and

support our culture in the coming years. The department provides $3.656 million

to arts and heritage events and organizations under the Cultural Economic

Development Program. The department certainly recognizes the critical role our

artists play in representing Newfoundland and Labrador on the world stage. That

is why we continue to support what is a vital sector throughout various avenues.

TCII

also provides over $2.9 million to the ArtsNL grant program, thanks to an

additional $1 million investment in

Budget 2019 . From contemporary to traditional landscape to seascape, visual

and performing arts are a true reflection of our province's culture, our

heritage and our people.

A $4

million equity investment in the Newfoundland and Labrador Film Development

Corporation; the provincial film and television industry is a generator of

well-paid skilled jobs, leveraging with it new investment from sources outside

our province. Beyond direct hires, it creates economic spinoffs through spending

on construction supplies, car rentals, gas, hotels, food and a wide variety of

items necessary to make a film or television show. The provincial film and

television industry is a generator of well-paid skilled jobs, leveraging with it

new investment from sources outside the province and creating 640 full-time job

equivalencies and $50 million in production work last year, which was an

historic record.

TCII

also provides $398,000 in support to the Heritage Foundation. They're involved

in helping communities map their tangible and intangible cultural heritage

assets in order to preserve them and realize their potential for community

economic development. Our Provincial Historic Sites are found in St. John's,

Cupids, Heart's Content, Bonavista, Trinity, Boyd's Cove and Point Amour. These

sites offer a wide variety of regular and special programming for all ages and

celebrate the culture and heritage of our province. We had a record-breaking

year last year with over 100,000 visitors.

The

Provincial Parks are the lead department for 32 Provincial Parks throughout

Newfoundland and Labrador: 13 camping parks, 10 park reserves, seven-day-use

parks, the T'Railway Provincial Park and the Main River Waterway Provincial

Park. The Provincial Park network across Newfoundland and Labrador really

highlights the natural beauty of our province and is a great way to discover and

explore what we have to offer.

We have

remained committed to initiatives found in

The Way Forward . Part of this is our

lead role in launching the Technology Sector Work Plan. Through the Cabinet

Committee on Jobs we developed collaboratively, with a steering committee

comprised of industry, government and academia stakeholders, to outline a work

plan with 27 recommendations to drive economic growth and development in the

tech sector. Once the plan is launched, in order to ensure effective

coordination of the work plan activities, TCII formed a working group of the

main industry associations and government departments that meet quarterly,

provide updates, share information and set future directions regarding work plan

activities.

Through

the provincial high-growth firms' initiatives, as part of the Technology Sector

Work plan, we are pursuing initiatives and investments focused on dynamic,

high-growth-potential companies with specific targets supporting for 40

established growth-oriented firms. The aim is to ensure that

high-growth-potential companies with complex needs receive the right service at

the right time, supporting crucial transition periods with financing solutions,

advisory services and export and innovation opportunities. Since the inception,

23 Newfoundland and Labrador companies have signed on for tailor-made business

growth supports, with just over $10 million invested to date to accelerate their

growth.

Empowered Homes is a particularly good example of how our support for

high-growth firms are making a difference. This technology company incorporated

in late 2014 to develop a programmable thermostat for lowering residential

energy consumption, known as Mysa. In 2017, a $499,000 working capital loan was

approved to support the development of Mysa to complete final product testing,

CSA certification and initial manufacturing through an Ontario-based company,

Microart. This working capital loan has been fully repaid.

2018, following a strong sales performance, a second term loan was approved in

the amount of $454,000. This term loan assisted with working capital for product

inventory to see it manufactured by a newly selected China-based company,

Seveco, a productivity enhancement that realized a 30 per cent improvement to

the company's gross profit margin.

TCII

investments in the company have leveraged significant capital investment;

approximately $2 million from private investors, including Pelorus, Killick

Capital and others, along with investments from ACOA, BDC and the NRC. Just last

week, the company closed a $2.3 million equity funding round, largely funded

from Vancouver and Quebec-based investors, which it plans to use to launch new

products and expand sales. I am proud to say that Empowered Homes currently

employs 40 highly qualified people.

Via the

Business Innovation Agenda, TCII provides robust financial and non-financial

supports to business in critical areas that enable firm-level innovation and

remove barriers to growth. We've made investments, grants, term loans and equity

financing in support of R&D, commercialization, productivity improvement,

innovation enhancement, knowledge development and export market development.

initiative in The Way Forward ,

identified TCII implement and collaborate five regional innovation systems pilot

projects, and they're guided by industry-led steering committee and include

various levels of academic institutions and government. We've been able to look

at strategic partnerships.

addition to regional innovation, we've connected to global opportunities where

we've advanced provincially focused trade development, efforts in markets like

and gas resources. This is aligned with the province's

Advance 2030 , The Way Forward on oil

and gas. This has attracted the interest of in-market activity of over 20

Newfoundland and Labrador supply and service sector companies, including Cahill

Instrumentation and Technical Services, NSB Energy, C & W Industrial

Fabrication, Atlantic Maintenance Services, Coastal Safety Management and

Labrador Rewinding.

Last

year, our provincial exports comprised approximately 50 per cent of our GDP. We

know that the value and volume of our province's trade and investment activity.

As it grows, so too does the number of well-paying jobs that are created in our

province, which in turn helps to strengthen our economy and the quality of life.

We lead

Newfoundland and Labrador's participation in the five-year Atlantic Trade and

Investment Growth Agreement, or ATIGA, which began on April 1, 2017 and runs to

2022, a total budget of $20 million. Our contribution is $1 million over the

five-year term, or $200,000 per year. This federal-provincial agreement involves

unprecedented collaboration between our four Atlantic provinces and the

Since

ATIGA's inception, 33 Newfoundland and Labrador companies have participated in

30 international business development projects, focused on opportunities in the

Asian, Caribbean, European and American markets. As a result, our firms

identified short-term sales estimates of $28.1 million and longer-term sales of

$49.1 million.

We're

partnering with industry and investing in opportunities that leverage

private-sector growth, driven to strategic trade development plans to grow

exports in knowledge-based and value-added resource industries, including

aerospace and defence, agrifood, seafood, biosciences, clean tech, ICT,

infrastructure, ocean tech and extractive industries. By pooling off these

resources, we can increase a broader range and enter more diverse markets.

I see

that my time is winding down, and there are certainly a number of other areas in

the department that I've not had the opportunity to touch on including Internet,

cellular service, our investment in start-ups, the various MOUs and industry

investment that we've started, our Social Enterprise Action Plan, our co-op

development, the craft industry, productivity improvements and opportunities

management sessions that we've had, but I feel that I've had the opportunity to

highlight a small sample of activity happening within TCII. I look forward to

answering your questions tonight in the Estimates.

Thank

you.

CHAIR:

Okay, before we proceed to questions, I just want to remind all Members and the

officials, as well, to state their name before they ask or answer a question and

speak clearly into the mic.

Okay,

questions?

MR. PARROTT:

Before we get to the line items, can we get a copy of the minister's briefing

binder and a copy of the transcript you just read out?

MR. MITCHELMORE:

Yes.

MR. PARROTT:

Thank you.

From

1.1.01, can the minister explain how the $1,600 in savings was found in

Transportation and Communications and the revised numbers for '18-'19?

MR. MITCHELMORE:

There was a decrease of $1,600 in transportation in the 2018-19 budget. The

2018-2019 budget, revised, reflects lower travel costs required in the fiscal

year. We decreased the amount in this year's budget by $100 from 2018-19 – the

budget that was proposed for 2020. Just less travelling required determined

through the zero-based budgeting process.

particular, from the Minister's Office, there are a number of

federal-provincial-territorial meetings that are held in this particular

department. There is one for tourism. There's the culture and heritage. There's

economic development and innovation. There's a parks FPT. Also, Francophone

Affairs would have an FPT.

With a

parliamentary secretary and the immense amount of events, it's a very robust

department for travel. Given the geographic location in which I live, on the

Great Northern Peninsula, it's quite a distance, so we are very cognizant of

ministerial travel and communication and we try and find savings where possible.

MR. PARROTT:

From line 1.2.01, Executive Support, what explains the Salaries going over

budget by $53,200 in '18-'19?

MR. MITCHELMORE:

The 2018-19 revised reflects $957,000, which is a net increase of $53,200 from

the budget. It reflects annual leave paid to one departing employee of $40,100.

As well as $13,100 for step variances. The current budget of 2019-20, reflects

adjustments required for the 2019-2020 salary plan variance and steps for

several staff members that would be in Executive Support.

MR. PARROTT:

So the leave would be accrued leave? Is that correct?

MR. MITCHELMORE:

The leave in last year's budget, revised, it was annual leave paid to a

departing employee –

MR. PARROTT:

Okay.

MR. MITCHELMORE:

– $40,100, which would account for the bulk of the expenditure pertaining to

Salaries.

MR. PARROTT:

Can you just go back and explain the $16,600 increase for '19-'20?

MR. MITCHELMORE:

Well, the increase reflects adjustments required to the salary plan, variances

and steps for several staff members.

MR. PARROTT:

Okay.

1.2.02,

in both the '17 -'18 budget and '18-'19, Salaries were marked to decrease but

went over budget last year by $304,400. How did this occur?

MR. MITCHELMORE:

So the net increase of $304,400 from budget 2018-19 and the 2018-19 revised

reflects a salary continuance and retirement cost of $346,800 paid to departing

employees, partially offset by savings realized during the recruitment period

for various positions during the fiscal year.

MR. PARROTT:

So are there any steps being taken this year to ensure that you're not going

over budget again?

MR. MITCHELMORE:

Well, this year there's actually a net decrease of $81,000 between the 2019

budget and the 2018-19 budget, it's the requirements within the salary plan.

We also

transferred $40,000 from TCII to assist with salary shortfall for a trade

position in Intergovernmental Affairs. The Department of TCII was also

responsible for trade policy during a period of time. So this would be an action

that would be taken to ensure that the IGA has the appropriate level of trade

staff.

MR. PARROTT:

Okay.

Can you

explain how the Employee Benefits went over budget by $16,000 in '18-'19?

MR. MITCHELMORE:

In '18-'19 revised, the

increase of $16,000 from the initial amount of budget 2018-19 reflects workers'

compensation buildings this fiscal.

MR. PARROTT:

And next line item, Transportation and Communications, can you explain how it

went over by $7,300?

MR. MITCHELMORE:

The increase of $7,300 reflects higher than anticipated postage cost for the

year.

MR. PARROTT:

Is there anything being done

about that? This year I see a decrease, actually, in your line item.

MR. MITCHELMORE:

So we've actually taken proactive measures within the department to find ways to

mitigate postage and reduce cost. And we've been implementing EFTs, electronic

fund transfers, so we wouldn't have to do particular mail-outs in this

particular situation, and this can help with some of those savings.

We do

anticipate that we will be able to fall in line of maintaining a budget of

$39,700.

MR. PARROTT:

There's $5,500 in savings in

Supplies seen in '18-'19. Is there any reason why it hasn't been carried over

into '19-'20?

MR. MITCHELMORE:

So the decrease of $5,500

basically reflected a lower requirement for that particular year in terms of

Supplies. We have decreased Supplies this year by $500, through zero-based

budgeting, to $15,000. Primarily, as you can see, the Salaries line is lower in

Corporate Services. So we are looking at finding means to reduce Supplies that

we would not need to be purchasing. We feel that $15,000 is an adequate amount

and if we are able to incur less expenditure, then it will become a dropped

balance and we can look at that in future years under zero-based budgeting.

MR. PARROTT:

Okay.

Under

Purchased Services, there's $12,200 in savings located in '18-'19, and actual

increase in 2019-20. Can you explain?

MR. MITCHELMORE:

Under Purchased Services, there's a decrease of $12,200 from the 2018-19 budget

and the 2018-19 budget revised, and that's lower than anticipated spending on

collateral materials and logistics, as well as fewer events, as determined

through zero-based budgeting. This year, we see that number increase by $4,600,

and that's reflecting higher off-site storage costs in the 2018-19 year,

determined through zero-based budgeting.

MR. PARROTT:

Just under the Property, Furnishings and Equipment, the $2,500?

MR. MITCHELMORE:

That reflects the purchase of an iPad for the deputy minister.

MR. PARROTT:

One iPad?

MR. MITCHELMORE:

Yes. It would have been purchased through standing offer and would have a

keyboard and other material associated with it. That wouldn't just be an iPad.

That is purchased to provide technology for the deputy minister to carry out the

work that he would do.

MR. PARROTT:

And provincial revenue, $8,800. Where does that money come from?

MR. MITCHELMORE:

In terms of provincial revenue, that's repayment of prior-year employee impress,

so floats and petty cash. We have a number of entities where they would

potentially have money – like the provincial historic sites that we operate and

other entities would have small sums of money. So this is the repayment that's

captured throughout the fiscal year.

MR. PARROTT:

Okay.

Subhead

1.2.03, Administrative Support, what accounts for Property, Furnishings and

Equipment going over budget by $26,100?

MR. MITCHELMORE:

This is an area that we used for Property, Furnishings and Equipment, which

typically dealt with tangible purchases, like fleet management and of that

nature, so if we needed a departmental vehicle, all of that spending has been

transferred to the Department of Transportation and Works to administer their

fleet management. We did have an allocation in the budget to purchase generators

in the past for the park, but this particular matter is actually a payment for

the cost of land expropriation in Ferryland for the Colony of Avalon.

MR. PARROTT:

Is there any reason why nothing has been budgeted for '19-'20?

MR. MITCHELMORE:

Well, there's no further determination that there –

MR. PARROTT:

That's what's going to

Transportation and Works?

MR. MITCHELMORE:

– would be any other

expropriation or requirement.

This

really is a matter that $33,087 was made payable to Moores and Collins in trust

for the Costello estate land expropriation in Ferryland.

MR. PARROTT:

I assume we move on to line

item 2.1.01 or do we stay at 1. How does that work?

CHAIR:

You don't have to use your

full time.

MR. LANE:

What did we call?

MR. PARROTT:

The last I called was

1.2.03.

MR. LANE:

Okay.

CHAIR:

Further questions?

MS. COFFIN:

Thank you everyone for

coming and thank you for the hard work and dedication and the time you've put

into putting together the Estimates and the briefing booklets and I look forward

to seeing those. I appreciate you taking your evening. I know many of you have

small children as well, so I really appreciate that. I know at least three of

the children. Thank you.

I think

we've done a very thorough discussion of some of the numbers in here. Let's talk

about a more nebulous concept here. What about attrition plans? How's that going

in the department? I notice that the numbers here, at least in this first

section, don't suggest there's much in the way of attrition. Have you met your

attrition targets?

MR. MITCHELMORE:

Nine positions were

eliminated through attrition since 2015-16, and eight positions have been

abolished through the department.

We are

certainly managing our Attrition Management Plan that we have in place. There

was a set target. But there are some challenges within the department given, how

I highlighted, we operate a number of entities throughout. So if you look at the

Visitor Information Centres, if somebody retires at a Visitor Information Centre

that is certainly a job we must fill. It's a front-line service that is

absolutely critical.

The

same way with the Arts and Culture Centres. If somebody is a technician or a

technical service, then those positions would have to be filled. So not always

would somebody who is retiring be a necessary position in which we must fill.

The same way we have provincial parks where we must have park rangers and the

managers and others to make sure that we have the appropriate allocation of

staff.

So we

do have attrition targets, a total attrition target of $2.3 million, basically,

to have met. We are working through our attrition management plan through the

department and finding ways of which we ensure that we can continue the level of

services that we have without having to – we may leave some positions that we

have to, vacant or positions that are funded, so that we can meet some attrition

targets in the salary details.

MS. COFFIN:

So you haven't met the

attrition targets this year?

MR. MITCHELMORE:

We are meeting our dollar

value. In terms of actual positions that were put in place through the 2015

attrition management plan, we have not reduced the actual positions that

would've been allocated, but we are meeting the salary targets that are

required.

MS. COFFIN:

Okay, thank you.

I think

that's the only question I have for this section.

Thank

you very much.

CHAIR:

Further questions?

MR. LANE:

Mr. Chair, with leave of my

colleagues.

AN HON. MEMBER:

Leave.

MR. LANE:

Thank you.

I won't

be asking any questions about any of the line items, per se. My colleagues are

doing a great job at that. I have some general questions though.

Minister, I'm wondering about national parks; in particular, Gros Morne

specifically right now but I guess it would be any national park. When decisions

are made about changes, enhancements and so on to the national parks – they're

in our province, we're promoting them – is the department advised or is there

any consultation, or does the federal government basically go in and do whatever

they feel like doing without consulting?

MR. MITCHELMORE:

The two national parks – we

have national parks within our province and the one you reference, Gros Morne

National Park, is managed by the federal government through Parks Canada. They

would have other sites that they would manage, as well, throughout the province.

The

federal government does consultation, they do invite stakeholders and community

to be part of their strategic planning process and engagement, but the

Department of Tourism, Culture, Industry and our Parks Division would not be

responsible for the activities, management or oversight of Gros Morne National

Park or Terra Nova National Park. Those investments would be made by the federal

government, as well as Torngat Mountains and Mealy Mountains National Park.

MR. LANE:

Sure. I understand that it's

under their jurisdiction; they manage it, they pay for it and all that stuff. I

guess I was just wondering more of consultation. Specifically, the one I'm

getting at is the issue, of course, in Gros Morne and what a lot of people would

say is the absolute destruction of what was an absolutely beautiful gem of a

trail that went in there. That was, of course, all in the media and now it's

turned into a big, old gravel road.

I'm

just wondering. I understand it may be part of a national park and they're

responsible, but just in general, it just triggered in my mind, when they're

making decisions about some of these things, while it may fall under their

jurisdiction, it's actually physically in our province and we depend on those

sites for tourism and everything else. Making decisions like that, I think we

should've been consulted. I'm just wondering: Would we be consulted when they're

making changes or anything significant?

MR. MITCHELMORE:

The parks would open up a

management plan to allow anybody – yourself included could participate and

provide feedback in their process. They do open up consultation in community for

anybody to contribute to their strategic planning. They do consultation with

communities.

I think

in terms of – there is legislation, there is ownership; when they make

investments in the physical infrastructure, like the roads. They've announced

tens of millions of dollars for road improvements in Gros Morne National Park.

There was additional federal dollars announced recently for improvements to

campsites.

We've

seen in Terra Nova National Park there was significant road infrastructure

improvements made for passing lanes, pull-off areas as well, made by the federal

government. I'd have to seek out some direction to get more information to see

what towns were consulted in this process. Was Charlottetown, for example,

consulted? Did adjacent towns, like Eastport and others in and around that area

of Terra Nova Park, when that investment was made – what consultation would

happen? If it's road infrastructure, the Department of Transportation and Works

would heavily be involved in that particular process.

In this

province, we do have a very strong partnership with the hospitality industry of

Newfoundland and Labrador. We work with Destination Canada. We also have our

Tourism Board, we have our Destination Management Organizations from each area

of the province and government. We all sit together, we work collaboratively.

This is a really positive way of which we can deal with issues and we can engage

with the federal government. As concerns are raised to us, we certainly can

raise them with federal counterparts, as well, and encourage more consultation

in community. That's certainly something that I would say.

In my

own district there's a UNESCO World Heritage site that's owned and managed by

Parks Canada in L'Anse aux Meadows national park. The communities in the region

like to be engaged, they want to participate. There are landowners there. There

are all kinds of concerns and it's important. These are very important economic

enablers to the region, as well as cultural assets and historic assets to the

province. Gros Morne National Park is one of the pillars and the key reasons why

people come to Newfoundland and Labrador. It gets easily more than 150,000

visitors.

MR. LANE:

Thank you, Minister.

I do

agree with you. It is an absolute gem in our province, there's no doubt. That's

why so many people were very upset with what was done there, myself included. I

think they totally destroyed what was an absolute, beautiful tourist attraction.

understand what you're saying. They do their strategic plans, I get that.

They're putting in roads, they consult with communities. I get that as well, but

the point I'm trying to make is if they're going to go into a sensitive area

that is very, very important to us as a site – that would be something I would

imagine is probably on our website and in tourist magazines and whatever to

actually go and view that beautiful site.

For

them to go in and totally destroy it and not consult with the province to let

them know what they were planning on doing, I just see a problem with that. I

was just wondering if there was such a process and, if not, I think there should

be.

MR. MITCHELMORE:

The fjord itself and the

viewpoint is certainly something that we promote. It's pristine, the adventure

tourism. It fits with everything that we do as a province to market the unique

landscapes, the area and the region. The particular trail that you're speaking

about would have access to a private boat tour operator, I believe.

I would

encourage you, if you haven't done so already, to either write the department or

Parks Canada to raise your concerns with it. That's certainly something as well

with the Member of Parliament that would represent the Long Range Mountains to

engage and have that dialogue.

MR. LANE:

Thank you, Minister.

MR. MITCHELMORE:

I know there was some

commentary from the Member of Parliament on that particular matter and what

Parks Canada had done and the engagement. I can endeavour to get information for

you to see what level of engagement with the Parks Division. Their headquarters

would be in Corner Brook. I would not have any information on hand about a

general question around something that is a federal responsibility.

MR. LANE:

Sure.

MR. MITCHELMORE:

But I'm more than happy, if you want to meet with me further, to discuss, we

could set up a particular meeting.

MR. LANE:

Well, unfortunately, the damage is done now, so I guess there's not much point

in talking about what's been done. I guess on a go-forward basis, though, we

have many, many beautiful sites and tourist attractions that we promote, I would

hope that in the future, I don't care whose jurisdiction it is, I would think

they would work together and consult before they make any changes that's going

to destroy, like they did up there.

I'm

running out of time, so I will ask one more quick question. I had a meeting with

Bicycle Newfoundland and Labrador, I'm sure other Members may have as well, I

don't know if you have. I'm just wondering, is there any thought around making

any areas of the province more accessible and bicycle-friendly as part of the

tourism experience.

understand that we don't have endless pots of money to create biking trails

across the entire province, but one of the things I had suggested, or thought

about, is maybe something on a pilot project. I'm just thinking the Bonavista

area is a real nice spot, or somewhere like that – it doesn't have to be there –

where we could work with that organization to try to promote more biking and

that type of tourism.

I'm

just wondering if there's anything you – did you discuss it with them at all, or

what your thoughts are?

MR. MITCHELMORE:

Well, we've taken steps, as a government, to improve bicycling safety by

implementing a one-metre law in the

Highway Traffic Act that was well received with Bicycle Newfoundland and

Labrador.

We see

opportunity; we've supported initiatives around the White Hills ski resort to

look at a study for fat biking. We've worked with the Pippy Park Commission

around their trails and development to make them more bike-friendly.

When I

travel around the province, it's really exciting when you do see a number of

people bicycling, and they are, certainly, a tourist or visitor that would come.

It is an opportunity for our province, given our unique nature. I see a number

of them come up the Great Northern Peninsula every year.

I know

that in other jurisdictions bicycling is extremely popular, particularly in

Europe, given that outside of Canada and the US, the UK and Germany are big

markets for tourists. So, there will be some opportunities, certainly, to engage

and work with operators.

We see

on the Bonavista Peninsula where there is actually a business that was started

up where they do bicycle tours, and they have picnics as well. So there are

natural avenues there.

Our

highways are built, especially the Trans-Canada Highway, there are large

shoulders on the roads so it's actually quite safer than some other areas of

Europe where people are bicycling along very narrow roadways. I only have to

look at Ireland and other places.

MR. LANE:

Yeah.

MR. MITCHELMORE:

We just have to be very cognisant of the rules of the road and the new

Highway Traffic Act that the

one-metre law does exist and we need to more over. I believe you were a big –

MR. LANE:

Yes. Absolutely.

MR. MITCHELMORE:

– supporter of the move over legislation for other emergency responders, but for

bicyclists as well.

It is

an economic opportunity and a potential for tourism. I'm certainly willing to

have more conversations with Bicycle Newfoundland and Labrador.

MR. LANE:

Thank you.

CHAIR:

Before I call the head, are there any other questions there?

MR. PARROTT:

Can I ask another question?

CHAIR:

Yeah.

MR. PARROTT:

I'd just like to go back to Gros Morne, just based on what he said there, just

something I picked up.

obviously advertise, we obviously gain tourist money from it, as does the

federal government. You indicated that a federal MP has spoken out against it.

Has

your department spoken out against that trail or is that something that's left

to Members like MHA Lane?

MR. MITCHELMORE:

No, I said that the MP had made commentary about it. I didn't say she spoke

against the development.

MR. PARROTT:

But have we addressed it as a government? We advertised that and the

advertisement is still a much different picture than what it is right now.

MR. MITCHELMORE:

Well, when the investment was made and the trail development had taken place,

the response has been, after the fact, that this investment was done.

MR. PARROTT:

Okay.

MR. MITCHELMORE:

This was done by Parks

Canada. They had let the contracts. They have the responsibility for all of that

landmass whether it's the roads, the infrastructure and the land around that

area. They did consultation. They had public matters of which people could

provide input, but as the MHA for Mount Pearl - Southlands had highlighted,

Parks have highlighted that there was a significant amount of public feedback

around this particular issue, and it's certainly something that they would have

to take into account as they do more work in and around that area when it comes

to trails.

We have

outdoor product development specialists in our department. We focus on building

trail networks throughout Newfoundland and Labrador. Walking and hiking is – by

our exit survey feedback – one of the number one things that our visitors want

to do and experience.

We look

at the East Coast Trail and the 320 kilometres that it has. It's pristine. It's

natural. It's a walking trail. It has immense beauty on the Avalon Peninsula,

and it's certainly something that we promote as well. It not only leads to

tourism investment, but it's an economic enabler. We've seen – and I've heard

stories where people have come and they've seen that. They love this place. They

fall in love with the natural beauty. They see it as a good place to conduct

business and to invest.

I was

in Eastport, in your district, just a week or so ago, for the ArtsNL awards, and

talking to one of the development committees, because we invested in the trails

and the Roads to the Beaches, and as you're adjacent to a natural park, as our

department, we're looking at working with the communities and the groups to

foster economic development. We work with the community to make sure that trails

are either natural and they're in a way that they're accessible as well, that's

certainly something that is important. The same way as we look at building

destination trails throughout our province and the federal Parks Canada site and

what has been done for access as to what they have said that changed the

landscape.

I have

walked into the site myself on numerous occasions, into the fjord and I've taken

the boat tour there. It is absolutely incredible, and it's truly an experience

for anyone. I would still say that it is a place that everyone who comes to

Newfoundland and Labrador and visits Gros Morne National Park should go and see

– should see that fjord, and have that experience.

Not

everybody is going to get that picture of the fjord unless they're willing to do

the hike or do that overnight experience, but everything that we promote in

Newfoundland and Labrador, we deliver and we offer and we hear that feedback

from our visitors, that this is just like your ads, this is just like the

natural landscape, you're not trying to sell something that you are not. So I

think that's really important.

We're

very focused on what's in our responsibility within our department and what we

have control over in terms of being able to pull those levers and create

economic opportunity there.

CHAIR:

Okay, seeing no further questions, I'm going to call the head.

Shall

the headings 1.1.01 to 1.2.03 inclusive carry?

AN HON. MEMBER:

Aye.

CHAIR:

Carried.

motion, subheads 1.1.01 through 1.2.03 carried.

CLERK:

2.1.01 through 2.3.01 inclusive.

CHAIR:

Okay, shall they carry?

MR. PARROTT:

How many cannabis operators

in the province received a licence from Health Canada over the last year?

MR. MITCHELMORE:

The number of companies that have licences from Health Canada, I don't have that

information directly with me right now, but I can certainly provide that. We

have two supply and production agreements right now in this province. We have an

additional company that has a licence and I believe there is another company

that would have a licence as well. I can defer to Judith, if she has some

additional information.

MS. HEARN:

Yes, there are two local firms who have production licences through Health

Canada. We've been also dealing with other firms that are partnering with

producers who have licences from Health Canada, but their main companies are

other places. They're partnering locally.

MR. PARROTT:

Okay.

Government has provided a reduction in tax remittances to cannabis companies.

Have Newfoundlanders and Labradorians been the primary beneficiaries for these

remittances, and what documentation can the minister provide to show this?

MR. MITCHELMORE:

In Newfoundland and Labrador, we were the only jurisdiction in Canada that had

not had a licensed producer. Given that Canada's recreational cannabis was

becoming legal, we had to take action to secure supply. But we made a decision

that not only did we want to secure supply, because we could've looked at the

least-beneficial option for Newfoundland and Labrador and that would be

importation – some other Members suggest it may have been a better option. I

certainly do not believe so. I think it's important that we develop an industry

here that investments be made in our province, that we see jobs that are created

and long-term benefits.

So if

you look at the agreements that we've put in place, one on the West Coast of

this province that's going to lead to significant job creation in St. George's -

Humber, Mr. Chair – in St. George's, in particular, it's quite significant where

the average salary in rural communities would be $54,000 and there's going to be

retail and there's a lot of spin-off that's going to take place by having

construction jobs, there's going to be investment for purchases for materials

and the building, the specialists and the contracting, and then the production

workers and the training. So we're still somewhat in the early days of the

benefits that are accruing because the facilities are being built. They're being

scaled up on the West Coast and in St. John's.

Talking

to the City of St. John's, they had highlighted that there will be significant

benefits for the city, upwards of $1 million in taxation every single year. We

entered into a 20-year agreement. The company is putting tens of millions of

dollars into this capital asset and to get into production. In doing so, there

will be 145 jobs that will be created, the retail jobs as well, so there are

over 460 jobs associated with those two supply and production agreements once

they reach their ability to produce here in this province.

Right

now, we're seeing where we have a network of retail outlets that are being

supplied through the Newfoundland and Labrador Liquor Corporation, and that was

competitively bid through an RFQ where there are a number of suppliers that

would be providing the product and that would be distributed throughout

Newfoundland and Labrador to these retail outlets. Given the fact that we did

not have any producer in this province to supply initially when this became

legal, and given that the consumption reports have shown that sales on a per

capita basis, where Newfoundland and Labrador is, we fared quite well in the

implementation of cannabis retail and supply as this matter progressed across

Canada. Other jurisdictions like New Brunswick and Quebec have either had to see

their stores close for a period of time or reduce their operations.

We've

been able to understand that where this is a new industry, we knew that there

would be supply issues early on and that there would be some challenges, but we

continue to work through those and we're pretty excited about the interest and

the investment that other companies are looking at wanting to partner, as Judith

had just highlighted, that two more local companies have secured production

licences here. We look forward to engaging and having dialogue to provide

performance-based contracts. We've not turned down anybody who's come to us

looking to enter into a supplier-production agreement here, and the important

piece of this is that there has not been any upfront money or grant from

taxpayers.

order for a company to receive a benefit, they actually have to sell product in

Newfoundland and Labrador. So the more they sell, the more they can accrue back

on the benefit. But the more they sell, the more Newfoundland and Labrador also

benefits as well. So the answer is yes. We are the primary beneficiary. The

Newfoundland and Labrador Liquor Corporation would receive maximum benefits

through this stream.

Long

term, there will be other benefits in terms of the additional jobs, city

taxation, the taxation from jobs and the spin-offs that will happen through the

payroll that happens. Those people who are paying taxes, they're going to spend

money into the economy and there will be a ripple effect there.

But we

also provided where there needs to be investment in R & D in these particular

contracts so that we can also stimulate growth in being a leader in research and

development, so that we can look at other opportunities. Because that's

something that our province has been focused on: how we diversify and how we'd

be more innovative in the field of research. And given Memorial University or

the College of the North Atlantic, or private companies, there's a potential for

significant research and development to happen.

It's a

relatively new industry, and we've seen where other jurisdictions have been

focused on research as well, and the educational institutions. So whether it's

focusing on things like soils, and the unique soil that Newfoundland and

Labrador would have, or doing further work, those are the types of things that

we'll see unfold. And the edible market would be coming on stream later this

year. The federal regulations were announced earlier this week, I believe, or

late last week. And that will present other opportunities for which R & D would

happen when it comes to the cannabis industry.

MR. PARROTT:

How many total

Newfoundlanders and Labradorians are currently employed – just the number,

please – in the cannabis industry?

MR. MITCHELMORE:

Well, when it comes to the

day-to-day statistics of who are Newfoundlanders and who would be employed in

private business, there are more than 20 retailers that are out there. We would

anticipate that all the people that are in the retail industry would be

Newfoundlanders or Labradorians, or would be those who would want to be

permanent residents or would be working through, depending on how they would be

hired – if they're on an immigration stream, depending on the employer. I mean,

small business exists in every single community and we don't have specific stats

on every single retail store as to, is somebody a Newfoundlander or a

Labradorian or is somebody looking to become a Newfoundlander and Labradorian,

are they on a particular work visa, et cetera.

MR. PARROTT:

How many current people are employed?

MR. MITCHELMORE:

Well, I don't have the specific statistics as to how many people are currently

employed in retail or in the on-site construction. Once the facility is

complete, there would be 145 jobs at that particular facility and there's over

100 in the St. George's facility, but they are building those in phases. We have

performance targets and we will work with the company throughout their

agreements to make sure that they are meeting their targets.

MR. PARROTT:

Has there been any assistance given to BeeHighVE Incorporated?

MR. MITCHELMORE:

No, but I will say that, as I said earlier, any company and any particular

supply and production agreement that we have in Newfoundland and Labrador, we

have provided that information publicly, we've made that available. We have not

said no to any particular company that's looking for a supply or production

agreement.

welcome investment, we welcome growth here, we welcome local growers and we see

it as a positive step that there are now locally owned companies, like BeeHighVE

and others, that would have a production licence. That would give us the

ability, should these companies wish to enter into a supply and production

agreement with the Province of Newfoundland and Labrador through CannabisNL and

the department. We would be actively involved in those negotiations and if we

are able to conclude a deal with any particular company, we will make that known

publicly as we have previously.

MR. PARROTT:

Are the local growers getting the same tax breaks as Canopy?

CHAIR:

I'm sorry, the Member's time has expired.

MR. MITCHELMORE:

I have no problem to answer the question though.

CHAIR:

Maybe we can continue on and then come back at the end –

MR. MITCHELMORE:

Okay.

CHAIR:

– for another round.

The

Member for St. John's East - Quidi Vidi.

MS. COFFIN:

Thank you very much.

Let's

carry on with that train of thought now. When you were considering the supplier

– and when the allowances were given to Canopy Growth and Biome and whomever

else has received those – was there any consideration to setting up a

co-operative system whereby the people of Newfoundland and Labrador would be the

owners of that corporation, so any money that we spend in that corporation would

then be returned as profits, much like a credit union.

As I

understand it, Canopy Growth and Biome both have their headquarters elsewhere in

Canada, which means that after people are paid and after they get their wages,

that money will circulate. You are right, that multiplier effect does happen

throughout the economy, but if that's associated with lower paying jobs or if

they're part-time jobs or seasonal positions, that really constrains that

multiplier effect. Then, of course, if the profits are being moved outside of

the province, we're not going to see that money circulating as well. I think the

co-operative approach might be a better approach to that, especially given that

the selling of marijuana is pretty much a profitable industry.

MR. MITCHELMORE:

When it comes to setting up a particular business and the new industry that we

have here, as I said previously, government would not dictate a location or

these types of matters; these would be business decisions that would be made.

Certainly we support the co-operative movement, we support credit unions here in

our province and we support social enterprise. It would be a novel approach, as

you mentioned, if there was a group that wanted to create a co-operative to

start a production facility in Newfoundland and Labrador –

MS. COFFIN:

I was thinking more along the lines of we knew this was coming, we knew we had a

supply issue, we knew we wanted local production. Wouldn't it have been a

reasonable initiative of government to consider that co-operative approach and

keeping that money here in the province?

MR. MITCHELMORE:

There are certain measures that can be done in terms of how you would either

establish a co-op or if a company would incorporate here. We have companies that

have either holding companies or they're registered in Newfoundland and

Labrador, so they file taxes here and they would make payments based on their

performance here in Newfoundland and Labrador.

One of

the conversations that was had in the House of Assembly in the fall was around

giving these particular companies EDGE status, which would give them exceptional

tax breaks at the federal level, the provincial level and the municipal level,

potentially; you would see all sorts of payments. The risk then and that burden

of risk goes towards the provincial government, depending on how well a company

performs. For example, if you attracted Google to come here and set up their

headquarters, and if you gave them EDGE status, you could pay an unlimited

amount of money and there would be no benefit to the economy; it would have a

significant downfall.

understand your point of looking at a co-operative model, but we're talking

about a publicly traded company here in one instance and in another instance, as

well, in terms of Biome. These are two companies that saw an opportunity to come

to Newfoundland and Labrador, to make investment here, to put up tens of

millions of dollars to build facilities here. If you look at the type of product

that we're talking about – and we're seeing very large-scale operations in

various jurisdictions where a number of companies or the competitors would just

want to look at importation – there is very little benefit, then, if you're just

importing the product.

MS. COFFIN:

That's why I asked about the

co-operative program.

Do we

know all of the shareholders of the companies to which we offer loans, loan

forgiveness and also tax breaks? Do we know all of the companies involved – or

all of the shareholders involved – in any government spending or a tax

expenditure, which is essentially offering a tax break? Do we know all of the

names of all of the shareholders of those companies?

MR. MITCHELMORE:

In terms of any deal that

government is involved with, if we are providing financial support directly,

then we would be able to provide information of ownership or directors in a

particular company. When it comes to a publicly traded company, though, there

are rules that they would follow as part of the stock exchange and the

regulators that would be involved in that particular matter, because any person

could buy a share and be an owner of a publicly traded company. That changes on

a day-to-day basis if you're looking at particular shareholders –

MS. COFFIN:

Yeah, I am very familiar

with how the stock market works. I'm wondering, though, if we are offering tax

breaks or loan forgiveness or grants to businesses to whom we do not know the

shareholders – or, let's say, for example, the main shareholders, not

necessarily the board of directors, which is a very different beast. I want to

know where the profits are going.

MR. MITCHELMORE:

We would be able to have

access to that information or get it.

MS. COFFIN:

So you do know where all of

the money is going.

MR. MITCHELMORE:

If we are dealing with a

particular company. In the case of what has been discussed in the House of

Assembly around a numbered company that is not doing business with government,

we do not have that information.

MS. COFFIN:

Okay.

Since

we've opened up that box, can you maybe tell me a little bit more about that

numbered company that is not dealing with government? Why is that an issue then

perhaps?

I'm

new, remember.

MR. MITCHELMORE:

Right.

We have

entered into an agreement with Canopy Growth to build a facility here in this

province, and they're going to spend tens of millions of dollars. The City of

St. John's will see an annual benefit in terms of taxation from that. And the

workers that are there, the construction jobs and the investment that's

happening is quite significant.

We have

a contract that's based on performance. So in terms of sales, if the company

sells X here in this province and can provide receipts for eligible cost, they

will get a reduced remittance from the province. But the province will still get

its share of any sales that would've happened in this situation. In terms of any

costs that would be ineligible, if a company is not the landowner and they're

leasing land, then that is not an eligible cost.

We've

stated that and clarified that multiple times in this House of Assembly. We can

only provide a remittance based on our contract and what the obligations to the

contract provide. So when it comes to the company, our role is that this company

is not a related company, so the Canopy Growth Corporation is not receiving a

benefit from this company. And beyond that, they're arm's length of government,

so they are not involved.

MS. COFFIN:

I'm sorry, you're saying that the Canopy Growth is not getting a benefit from

the company, the numbered company from which they are leasing this land. Is that

what you're saying? I'm sorry, the answer was a little wide-ranging.

MR. MITCHELMORE:

I'm saying that they are not a related company. So it is not a Canopy Growth

construction that would be involved. It is not another company that's associated

with them. They are arm's-length in terms of a company of which they would be

doing business.

MS. COFFIN:

Okay.

Let's

go back to the jobs now. You say you anticipate that many of the jobs that are

being generated by the construction of this are being filled by Newfoundlanders

and Labradorians. That's certainly not the case. Have you done any cost-benefit

analysis; or in the loan guarantee or the grants that you've given to these

companies, do you have any requirement that they use local labour?

We are

in a situation where most of our union halls are very full right now, and I know

that there are a lot of people clamouring for work. I'm hearing rumours that

there are drywallers coming in from PEI and Montreal. So if we are using

subcontractors or main contractors that are coming in from the Mainland and they

are bringing in their own workers, then that means those benefits – while they

are getting accommodations and food for a very short period of time while

they're here in the province, the bulk of their salaries will be moved back out

of the province again.

Is that

one of the stipulations of your loan agreements?

MR. MITCHELMORE:

I would say that it's very

serious to say that the majority of people employed at this particular site,

which is a private company that would be contracting, is not hiring

Newfoundlanders and Labradorians, unless you can provide evidence to the

contrary.

MS. COFFIN:

I'm just saying I hear

rumours of that. It's just rumours and speculation at this point. I am asking if

there was a caveat in the agreement, something like a community benefits

agreement that ensures local workers are being used.

MR. MITCHELMORE:

Companies will hire local

workers, where absolutely possible, and that is the case in this situation. As I

said in the House of Assembly – I believe the MHA for Topsail - Paradise had

asked some questions. It is my understanding there was an

article that was

posted around a drywall company from Quebec that had done some work there, but

it's my understanding that, based on Canopy Growth's response, they would have

reached out to local companies. If it could be done here in the province, they

would've certainly utilized that work. So they had to go outside the province to

secure work in this particular field.

MS. COFFIN:

My time is up.

CHAIR:

Any questions from other

Members?

MR. PARROTT:

Yeah, I've got a couple of

questions.

Under

Salaries, Salaries in budget '18-'19 was $319,000 less than '17-'18. After

finding a savings of $236,900 for that year, the revised numbers show that,

again, a savings of $476,700 were found last year. However, budget '19-'20 only

shows a salary reduction of $67,300.

How are

these salary levels determined, when they were previously able to identify such

large savings?

MR. MITCHELMORE:

The department had gone

through a reorganization. In the Accelerated Growth Division there was a

significant decrease in salary of $476,700 as you mentioned, and that reflects

some savings during the recruitment period for six positions during the fiscal

year.

anticipate and we have worked to fill those positions, so the decrease right now

reflects the adjustments required for our current salary plan. As you hire new

employees that would be in this area, there's a smaller amount in the salary

line, but that may reflect the pay scale as to which they enter because these

would be new employees.

MR. PARROTT:

Okay.

MR. MITCHELMORE:

In 2018-2019 we actually had

a number of new hires within the department and that's certainly important,

because a key part of what we are doing in the department, as I mentioned in the

initial remarks, is around working with companies to scale them up, to have a

firm level of growth. We have an ambitious plan to target 40 companies to ensure

that we are providing them with the right level of supports to create further

jobs.

MR. PARROTT:

Grants and Subsidies, can

you provide us with a list of all the grants and subsidies from last year?

MR. MITCHELMORE:

The Grants and Subsidies,

that's $279,000 that would primarily be funding for ATIGA, I believe.

MR. PARROTT:

Sorry, we couldn't hear you.

MR. MITCHELMORE:

That would be money for

ATIGA, the Atlantic Trade and Investment Growth Agreement.

MR. PARROTT:

What explains the line item

for Loans, Advances and Investments being under budget by $1,648,500 in the

revised '18-'19 numbers? Can you explain how many applicants there were and how

was the $8 million located for '19-'20?

MR. MITCHELMORE:

Where are you?

Can you explain which budget line –?

MR. PARROTT:

Sorry, that's under the

Investment Attraction Fund, 2.1.02.

MR. MITCHELMORE:

The Investment Attraction

Fund, Loans, Advances and Investments – in 2018-19 we used an investment of

$6,351,500 and that would have been funds disbursed to the existing investment

attraction funds through varies clients, such as Eastern Composite, Provincial

Aerospace and Quorum. They would have totalled $1.85 million. Then in the

venture capital funds we would have disbursed over $4 million; $2 million to

each particular fund. We would have an allocation for new projects as well,

total $6,351,471.

MR. PARROTT:

Can we get a list of the companies and how much each company received?

MR. MITCHELMORE:

Yes, we can provide that.

MR. PARROTT:

Under line item 2.2.01, Purchased Services in the budget is to receive an

increase of $500,300 in '19-'20. This represents a significant increase of a

budget that in the past years was only five figures. What explains this

significant increase?

MR. MITCHELMORE:

Under Business Analysis?

MR. PARROTT:

Yeah, Purchased Services.

MR. MITCHELMORE:

This is something that was highlighted through the McKinsey report, as well as

the new budget, to highlight a new investment attraction initiative, which would

be $500,000. There's an additional $300 for photocopier-printer cost that was

determined though zero-based budgeting. That would bring our total to $515,500.

Clearly, to achieve new opportunities, given what we've been doing in various

sectors of technology, of agriculture, of aquaculture, the oil and gas and

mining, there are opportunities. If we target and have that expertise for

investment attraction, then we can leverage more opportunities into the economy

of Newfoundland and Labrador and get best value.

We have

exceptional staff at the Department of Tourism, Culture, Industry and

Innovation, but this investment opportunity would provide an opportunity to

maybe hire some specific experts in the field to do some very targeted level of

investment.

We have

seen in areas such as telecommunication, it may require a specific skill set to

attract that individual to unlock some potential.

MR. PARROTT:

How does this align with the attrition plan?

MR. MITCHELMORE:

Well, this targeted investment would be hire through contract.

MR. PARROTT:

Okay.

Under

2.3.01, this line wasn't included in the past budget and it appears to be an

amalgamation of past categories. Can you explain and provide a breakdown of how

they determined the $16,836,000?

MR. MITCHELMORE:

2.3.01, Innovation and Business Investment, we had spent a fair bit of time in

this House of Assembly creating the Innovation and Business Investment

Corporation, creating a new act, finding a means for the full continuum of

support when it comes to business, in terms of idea, pre-commercial, that R&D

and innovative stage, to get somebody to commercial, to get somebody to

international markets.

So the

Grants and Subsidy lines reflect, basically, revenue that was brought in from

RDC being merged into the department. It's an overall investment of grants and

subsidies to various companies there.

MR. PARROTT:

How many applicants did you have last year?

MR. MITCHELMORE:

In terms of applicants, we had 264 projects last year.

MR. PARROTT:

How many applicants?

MR. MITCHELMORE:

I don't have that specific number in terms of applications.

MR. PARROTT:

So 264, I assume, is approved, right?

MR. MITCHELMORE:

We had 264 projects.

MR. PARROTT:

Yeah.

MR. MITCHELMORE:

That we had approved, yes.

MR. PARROTT:

Okay.

The

revenue of $1.5 million, can you explain where that comes from?

MR. MITCHELMORE:

That came from when we had merged the Research & Development Corporation. It's

basically revenue that would've been allocated as the savings through the

'17-'18 budget that would have to be reported in 2018-2019.

MR. PARROTT:

Just one question back to the Canopy Growth. You indicated about monies –

anyhow, how the whole situation works. Are there any monies given to Canopy

Growth for the building of that facility? Are we loaning them money? They're

doing all that on their own? Okay.

MR. MITCHELMORE:

We have provided them with no funding. The agreement is that they have to

produce sales in this province, and then they would get a reduced remittance. No

different than any other cannabis producer that's supplying through the NLC.

They're getting a remittance.

MR. PARROTT:

Yeah.

MR. MITCHELMORE:

But Canopy Growth and Biome would be getting a reduced remittance, based on

their performance targets of making investment in Newfoundland and Labrador.

MR. PARROTT:

Just one other question.

MR. MITCHELMORE:

It's a performance-based contract that would allow us to build an industry,

because up to that date, we had not had anybody making an investment here in

this province.

MR. PARROTT:

Yes.

MR. MITCHELMORE:

Without having some form of incentive to attract large-industry players and

build capacity here, likely we would not see these players make such significant

investments and create (inaudible).

MR. PARROTT:

Okay, just one question on R&D.

Currently, all of our offshore producers pay royalties in under the Atlantic

Accord to the PRNL. Has the department looked at anything like that for cannabis

growers? It would be a great way to force them to invest into our province,

invest into research and give us a path forward with that, with a guaranteed

income.

MR. MITCHELMORE:

Yes, we did build into the contract that there would be $500,000 from Canopy

Growth that would be invested in research and development projects.

MR. PARROTT:

Over how long? Is that over a long period of time or is it …?

MR. MITCHELMORE:

There would be a period of time, that's part of the contract.

MR. PARROTT:

Okay, thank you.

MR. MITCHELMORE:

Five years?

CHAIR:

Okay, the Members time has expired.

Any

further questions?

The

Member for St. John's East - Quidi Vidi.

MS. COFFIN:

Excellent.

As part

of the research and development at Canopy Growth at $500,000, is there any

specifics around if they're doing it in-house or are they going to partner with

local companies or are they going to partner with local educational

institutions?

MR. MITCHELMORE:

Yeah, this would not be in-house research and development, but we are having

meetings with the company where we would highlight projects; they would

highlight their initiatives as to what they would see would be of a benefit to

the industry.

Canopy

Growth, in particular, they have a craft-grower program that they would support

smaller producers as well. So I certainly see this as being a partnership,

either with academic institutions or those who would be involved in research so

that we can have more development.

When we

decided that we would be developing a cannabis industry here in Newfoundland and

Labrador, it was for full supply chain benefits from R&D, from start-up to

export. Canopy Growth and Biome, they're building very large facilities here.

They're going to be producing far more than what Newfoundlanders and

Labradorians can consume. The benefit that they would get from a reduced

remittance would only be on product that is sold in Newfoundland and Labrador.

So their business model would have to be based on export as well.

Our

geographic location is one that is very strategic. We are certainly close to

Europe and being on the water, we have ability to do shipping. Newfoundland and

Labrador certainly has a good investment climate given that we've been able to

attract these large national companies that are publicly traded.

MS. COFFIN:

Okay.

Two

things that come from that, one of which is: Do we own the intellectual property

rights of any R&D that is done by that?

MR. MITCHELMORE:

If it's done with the university, there's obviously an IP office and those who

are doing research and those who are involved would enter into a particular

agreement around IP.

It is

certainly a conversation that we've been having through our Innovation Council

of Newfoundland and Labrador around IP. It was part of the Technology Sector

Work Plan around who owns intellectual property. That's certainly something that

will be part of the ongoing conversation with the company and with whoever they

enter into an arrangement. Right now, the question is somewhat premature.

MS. COFFIN:

The thing with Memorial

University is they have a creator-owned IP process. We want to be very careful

about that because, of course, that means that anyone engaged in that research

then owns that research. You need to be acutely aware of that for sure.

Let's

talk about the export market now. We've seen numerous companies be unable to

manage in Newfoundland and Labrador because we have exorbitant transportation

costs. While we are on the water, so is Halifax and so are a great many other

places. When we are strategically positioned, I have some questions about how

that might manifest as a booming export market. Can you explain to me what their

export development plan is?

MR. MITCHELMORE:

I wouldn't be able to speak

specifically to any company and what they're doing as an export. They are a

privately traded company and they will have their own plans as to what they

would do, whether they're going to charter flights, whether they're going to be

involved in hiring barges, or however they would ship product.

What I

would say is that Newfoundland and Labrador has international airports, we have

facilities of which we can do shipping. We have the Argentia port which does

international shipping. It's the largest in Newfoundland and Labrador; St.

Anthony has the second-largest international containerized port. We do a

significant amount of seafood right now direct into Europe. What we see in St.

John's is freight-forwarding services that would go to Halifax and then get into

Europe. We actually do have direct links into Europe, very lucrative markets

right now.

MS. COFFIN:

I've worked on them. I've

worked on export development initiatives since the early '90s, so I'm very aware

of what our potential is there. What I'm afraid of is that we are going to be

left with a three-sizes-too-big marijuana growing facility that has some

difficulty with their export and then comes to government starting to look for

subsidizing their routes for export in order for them to continue to operate in

the province. I would hate to have them hold our jobs hostage for additional

supports in trying to access the export markets. That's why I say I'm quite

concerned about the export development there.

Let's

see what else we have here. I think we're good on –

MR. MITCHELMORE:

I could make a small

commentary on that. The companies, obviously, do their due diligence. They look

at their investment, they look at opportunity and they look at what they can

sell in the local market, the Canadian market, the North American and the

international marketplace. They obviously see Newfoundland and Labrador as a

good place to do business or else they would not put up tens of millions of

dollars.

The

only way they can recoup their costs is to make the sales locally in

Newfoundland and Labrador, so they're putting a lot of risk. The risk is not

with the province, it is not with government, it is not with the taxpayers. It

is not like many other agreements and arrangements which one enters into. If the

company is unable to recover their cost, they have taken on the risk and they

own that facility and they own that cost.

Really,

in this circumstance, in this situation, government is well positioned and well

protected. The companies obviously have significant cash, they have significant

equity. They have made their decisions based on where they see their long-term

vision. They've entered into a 20-year agreement. When it comes to a 20-year

agreement, just looking at taxation for one company where the city of St. John's

would benefit $1 million in taxation, it will lead to $20 million over that life

of that particular agreement.

That is

very beneficial when you're trying to look at, from a city point of view,

balancing a budget or making investments into their infrastructure and their

particular projects. It would help significantly. Any municipality that was able

to have $1 million added to its bottom line can then go out and leverage

significant other projects.

MS. COFFIN:

I do appreciate that. What I am looking at is potential pitfalls down the road

because we have been held hostage by such things before and I want to ensure

that we are no longer. I'd like to see that long-term planning piece.

You

said earlier that you haven't turned down any supplier applications. So anyone

who makes an application has, so far, been awarded a contract? Is that correct?

MR. MITCHELMORE:

They would have to have a licence from Health Canada.

MS. COFFIN:

Okay.

So if

they get the licence from Health Canada, then that's all is necessary at this

point. That's reassuring. I know a number of people I can pass that along to as

well.

Innovation and business investment seems to be its own entity onto itself, which

I understand. Can you tell me the relationship between that entity and some of

the other things that we're seeing here like the Accelerated Growth fund, the

Investment Attraction Fund, the Business Analysis fund and then we move over

into the our regional economic development, Sector Diversification.

All of

these things seem to be doing very similar things. I can appreciate why they

need to be compartmentalized in some respects, but I'm very curious to know if

the Innovation And Business Investment Corporation, which is getting $16

million, is duplicating any of the efforts over here. We see grants and

subsidies in several of these places are very small sums, but then they're

associated with higher levels of salary.

would be really nice to see if all of these little pots of money, while they can

be allocated out for different purposes, maybe if they were all perhaps

administered in the one spot, like a one-stop shop for small business – and I've

certainly had my share of small businesses come to me saying: How can I get

government to help? I think that might be a reasonable approach to this. Perhaps

you can share with me how there is or is not duplication in this process.

MR. MITCHELMORE:

I want to go back because I didn't have a full opportunity when you had asked

about cannabis production facilities. I would say that a licence from Health

Canada is what is required from a company before we would entertain a

negotiation. We would certainly do our due diligence –

MS. COFFIN:

Good.

MR. MITCHELMORE:

– on any particular

application to make sure that there are benefits to Newfoundland and Labrador

and that it's in the best interests of the province to enter into such an

arrangement. What I have said is that we have turned down no one, at this point,

that has come to us looking to enter into a supply agreement. That would be

local companies or international or national companies that have come to

Newfoundland and Labrador.

What I

will say is that we have – for example, if you take what we've done in this

department, we've gone through a significant restructuring. There were 26

directors in this department in 2016 and now there are 11. We also had the

Research & Development Corporation, which was a separate entity, that we had

realized savings. We had brought the Research & Development Corporation into the

department and realized $3 million in operational savings, but that did come

with some job losses for that entity.

We have

streamlined what we do in the department to make sure that if somebody comes

with an idea, is in the early stage, the research, the development, the

pre-commercial, the commercial, all of that full continuum of wanting to go

international, needing help with the marketing, needing firm-level support, they

can now get in the Department of TCII. We've reduced a barrier by merging the

Research & Development Corporation into the department because before there were

some grey areas. People would come to the Research & Development Corporation and

they would only deal with pre-commercial. Some firms could be in a

pre-commercial state but also in a commercial state and also need other support.

They would be talking to multiple people; it could miss or delay opportunities.

And

we've expanded what we do in InnovateNL and that focused in all sectors of the

economy.

Whereas, primarily, the Research and Development Corporation invested

heavily in mining and the oil and gas sectors, and not looking at other areas

like health innovation or looking at various technology sectors, more focused on

the ocean because we have 53 per cent of the ocean economy in Canada, we are a

big player here.

So what

I would say is we've taken a significant approach to streamline what we do to be

able to help people who are coming to look for dollars and look for supports and

look for various avenues to help their company to leverage other opportunities

in our whole suite of programming. And we can do it through InnovateNL, but we

also have areas where it's more regionally focused where we have Regional

Economic Development officers that would be dealing with, primarily, a lot of

non-profits, non-commercial and small business.

As we

look at all of our business financing and business programming that we have

within the department, we are making sure that our economic development officers

and others that are in the field are equipped with being able to deliver these

particular programs or be able relay those programs to the appropriate people,

the specialists that will be in the department. But they would have one point of

contact; it's a one-window approach to be able to get services within the

Department of Tourism, Culture, Industry and Innovation.

That's

the pathway that we see moving forward so we can make sure that were reducing

red tape and barriers for business and for non-commercial entities. Whether they

are municipalities or the university, or the college or others, we have many

stakeholders and many partners that we work with and we want to make sure that

we continue to work with them through all of the various programs that we have

in the department.

MS. COFFIN:

Okay, my time is up.

CHAIR:

Are we ready to call these headings?

MR. LANE:

Minister, I just got a

question about Canopy as well. Before I do, though, I think that it's important

just to note, because you did say in one of your responses, somewhere along the

way, about Members who would prefer to see cannabis imported into the province.

As one Member who has raised concerns about this – and I think I speak for the

other Members as well because we've chatted about it – the issue is not about

local jobs and production versus importing; the issue has always been about

local jobs by local companies and keeping not just jobs here, not just the taxes

that you talked about, but the actual profits so that it would be

Newfoundlanders and Labradorians that own the cannabis growing facilities as

opposed to some Mainland outfit and the profits going to shareholders up on the

Mainland somewhere. So that's the only issue on which we've ever disagreed as

far as I am concerned on that. I just wanted to state that for the record.

On the

question of the local benefits agreements that came up, I've heard the same

rumors, as my colleague to the right, about workers from Quebec and PEI and so

on that are working on that facility. I heard you say in your response, I think

you said something to the effect of: I'm sure Canopy would go for local workers

and ask for local workers and so on. But that wasn't really the question.

So the

question was, or at least my question is: Was there something inked on that

contract that said, in light of the fact that we're going to give you a

$40-million tax break – albeit it's performance based, I understand that. But in

light of that, when you're building this facility, you are going to use local

workers. Not I hope you would and I encourage you to but, as part of the deal,

you're going to use local workers.

Was

that inked on the contract with Canopy? Is it inked on the contract for the new

one in Bay St. George or wherever it's to on the West Coast and so on? Is that

something that is being thought about and placed in these types of arrangements

to ensure that we have local workers?

We've

heard from Trades NL now. Whether they're unionized or non-unionized, there are

all kinds of tradespersons. We hear the Member for Humber - Bay of Islands every

day standing up presenting petitions about local workers not getting jobs on

projects on the West Coast. So I'm wondering is it in the contract, yes or no.

MR. MITCHELMORE:

So I want to go to your initial point that you made because Newfoundland and

Labrador certainly wants to see local companies grow and prosper. Any local

company has that opportunity to enter into a supply-and-production agreement in

Newfoundland and Labrador. No company, nobody local had a licence or had the

ability and there's no production to be able to supply. So from the point of

legalization, if we had waited for a local company, we would not have had a

supply agreement, we would not have had cannabis production and these benefits

accruing.

MR. LANE:

You could've had the supply, just not the production.

MR. MITCHELMORE:

So in moving forward, to be able to have this investment – because we want

investment to come here. It's no different than the offshore in Newfoundland and

Labrador, being able to attract international companies like Exxon, Suncor or

Husky coming to make investment here in our province. No different than hotel

chains that may be international in nature. They may have local investment.

Sometimes they have their private equity firms. They're not all owned by local

people, but they do employ local people that work at these hotels and there are

benefits that would happen throughout the economy by making investments in

various hotels that would happen in the City of St. John's or Mount Pearl or

others.

So I

think one has to reflect on the level of investment. Because we want to have

both local investment and maximum local investment from people who are starting

business, but we also want to attract investment – whether it's Canadian

investment or foreign direct investment – to grow our economy here in this

province. I think that's certainly something that's important.

The

other point that you make around procurement and public procurement. There are

vast differences in government procuring to build public buildings, public

facilities within the Public Procurement

Act , such as a hospital that government will own or a long-term care

facility. This is something that is being paid for by the private sector; it is

being built by the private sector. They are making the investment, not the

taxpayers and not the Government of Newfoundland and Labrador, when it comes to

cannabis production facilities.

I will

make the point of saying that I was with the Member for Humber - St. George's,

and Mr. Callahan, who is local and owns Back Home Medical Cannabis Corporation,

who is the local president, partnered with Biome – and Biome will be making

investment and scaling up. Mr. Callahan is very passionate about making

investment and bringing people back home.

That is

why he called his company Back Home. He wants to bring Newfoundlanders and

Labradorians away, create $54,000 annual salaries in St. George's – a very rural

community – that's going to pay well over $15 an hour. It's going to pay

significantly. And he's going to focus every aspect to hire local people,

because these are the types of people that are involved.

Companies, when they start up in Newfoundland and Labrador – private-sector

companies – we see it in every community where they look to hire local

contractors, they're good corporate citizens and they give back to the

community. Canopy Growth Corporation, for example, made a donation to the

Community Food Sharing Association. We need to look at the corporate community

here in Newfoundland and Labrador and their responsibilities. And those who are

invested here see opportunities to work with other companies to see the

trickle-down spinoff and economy, because it's more expensive if you have to

look at bringing in crews and bringing in people from outside of Newfoundland

and Labrador.

We do

have labour mobility agreements within Canada, and we do have a number of people

that work across Canada, and a number of companies that bid successfully on

private contracts that bring their crews, their Newfoundlanders and Labradorians

to Nova Scotia, to Alberta, elsewhere. There are people that commute and that

has a significant impact on the economy too.

Those

that have worked in the oil and gas industry, for example, in Fort McMurray or

in other places, they commute and they bring a lot of dollars back to

Newfoundland and Labrador, whether it's on the Northern Peninsula, the Burin

Peninsula, in Clarenville or in Grand Falls-Winsor.

There's

certainly an important conversation to be had. I think every community in every

jurisdiction, we want to see where there are maximum benefits and where we can

help companies grow, and our department is part of that. We will be an enabler

and we will work to find ways in which companies can capitalize on every

opportunity.

This is

why we hold supplier development sessions. This is why we reach out to make sure

that local companies can capitalize and be engaged and properly bid and work

with government procurement or make sure that they have the support that they

can attach to get contracts with companies such as Biome or Back Home or Canopy.

MR. LANE:

I thank the minister for the detailed answer.

Minister, I understand the point you're making, and, listen, I know Mr.

Callahan, very well actually, I have no doubt that he will do what he can to

employ local people and so on; no doubt whatsoever. I realize that there are

Newfoundlanders and companies that work all over the world and so on, I get

that, but there is definitely a move around the country and so on to have local

benefits agreements.

In this

particular case, while you may say it is a private company, which I agree it is

a private company, and are they investing tens of millions? Yes, I believe for

Canopy they're investing $45 million, I believe is the number. But they're going

to get $40 million of that back in tax remittance, which would be money into the

public coffers, which now will not be money into the public coffers because

they're giving it a tax break.

understand why you did it, I understand the performance base, but, at the end of

the day, they're still benefitting with $40 million in taxpayers' money.

I guess

the question was, based on that arrangement, that they will be able to pay off

their capital through those remittances, is there a local benefits agreement on

the construction of the facility? I take it from your answer that, no, there is

not.

Is that

correct?

MR. MITCHELMORE:

There are local contractors that are working and engaged. There are local people

that are hired.

MR. LANE:

That wasn't the question, Minister. I simply asked is it written on – there's

nothing in the agreement saying they have to use local workers. It's a simple

question. Either there is or there isn't or I can ATIPP the contract.

MR. MITCHELMORE:

The contract is publicly available.

MR. LANE:

I would hope we don't need to get to that stage.

MR. MITCHELMORE:

We've proactively disclosed the contract for Canopy Growth. When it comes to

what you're saying of $40 million, the only way $40 million would be beneficial

and in receipt is if the company has full eligible cost –

MR. LANE:

Yeah.

MR. MITCHELMORE:

– that they can show that they have made those expenditures as per the

agreement. They would have to do that. They would also have to make those sales

within the province.

MR. LANE:

Yeah.

MR. MITCHELMORE:

So if they're making those sales in the province, the province is actually

getting more revenue based on its portion of taxation from cannabis. They would

also be producing, so there's a supply chain. There's R & D that's happening.

There's the taxation that's being achieved by 145 workers at the site, beyond

all the workers that would be at their retail outlets. So there's a multiplier

effect. The City of St. John's is benefiting $1 million a year for 20 years that

it wouldn't.

So if

you look at that they would get $40 million over the life if they're eligible

for the full cost, well, the city is going to get $20 million that it would not

have had otherwise, that's a benefit to the taxpayers of the City of St. John's.

MR. LANE:

If a local Newfoundlander built the same facility, they would still get the same

taxes.

MR. MITCHELMORE:

It is quite possible that a local Newfoundlander or Labradorian will look to

make that investment and do the exact same thing. That opportunity exists.

We have

said no to no one that has come forward to us, so that opportunity is there and

we would encourage it. We would encourage local Newfoundland companies, local

hires, absolutely. Unless there's evidence to the contrary that there's not, I

would refrain from saying that people are not hiring local when there are

significant local hires in this particular projects within the private sector.

MR. LANE:

Well, I wouldn't refrain from saying it.

Thank

you.

CHAIR:

We've had several rounds on these headings now and we're approaching the time

when we would normally take a five-minute break. Are people ready for the vote

on these headings?

MR. PARROTT:

I'd just like to make one more comment, if possible?

CHAIR:

Okay.

MR. PARROTT:

So to your point about local contractors. There's no doubt there are local

contractors working there, but, as a point of fact, there is a company from

Quebec with 50 to 60 employees down here. They have had conversations with the

local building trades. It is a unionized company that does not fall under the

local building trades agreement and they are now paying (inaudible), or whatever

the proper terminology is, but they are paying in.

It is a

fact that they are using a company out of Quebec, 50 to 60 people with a higher

wage, paying for hotels and paying for travel when that work could be carried

out by locals. I would encourage you to contact the building trades if you think

that's not a fact, or visit the site.

MR. MITCHELMORE:

Well, I have reached out to Trades NL for a particular meeting so I welcome

having a conversation with Trades NL. They have not approached me with this

particular issue.

There

is, as has been reported, a subcontractor that has been doing speciality work

that could not be procured in the Province of Newfoundland and Labrador

pertaining to drywall.

MR. PARROTT:

Drywall is not a speciality.

Anyhow,

I'm good.

CHAIR:

Okay, are we ready to vote on these headings?

Seeing

no objections, I'm going to call these.

Shall

heading 2.1.01 to 2.3.01 inclusive carry?

SOME HON. MEMBERS:

Aye.

CHAIR:

Carried.

motion, subheads 2.1.01 through 2.3.01 carried.

CHAIR:

Okay, so we'll take a five-minute break now. We'll all be back here 8:06 p.m.

Recess

CHAIR:

We will get started again.

We are

going to call the next heading.

CLERK:

Subheads 3.1.01 through 3.4.01 inclusive.

CHAIR:

Shall these headings carry?

Questions?

MR. PARROTT:

3.1.01, Salaries – in the revised numbers for budget '18-'19 a savings of

$247,600 was identified last year, but budget '19-'20 marks this line item for

decrease of only $137,500. How are these savings located?

MR. MITCHELMORE:

The decrease, primarily, in

2018-2019 reflects saving realized during the recruitment period for various

positions during the fiscal year. This year was adjustments required in the

salary plan for $1,635,300. I believe there was one salaried position that would

have been attrition that would not be filled and that's the petroleum engineer

position.

MR. PARROTT:

Transportation and

Communications, in the revised numbers for budget '18-'19 there are a savings of

$58,000 identified last year. How were these savings located?

MR. MITCHELMORE:

Which line?

MR. PARROTT:

Transportation and

Communications.

MR. MITCHELMORE:

There was a $58,000

reduction in travel to trade show and missions, industry sessions and client

sites; reduction in the number of staff attending any particular trade show and

number of events were actually attended by local staff because of our regional

offices and presence. Because of how we've been enabling our economic

development officers to be that touch point and connected to all of our

programming so we can have better efficiencies within the office, we've been

able to realize those savings.

But we

do anticipate that through this Sector Diversification Division – and this is so

important with all of our plans that we have put in place through Regional

Innovation Systems pilot. So if you look at the agriculture and aquaculture

industries, tourism and fisheries, if you look at aerospace and defence, and

ocean technology as well as industrial benefits in places like Clareville and on

the Burin Peninsula, we want to make sure that we're capitalizing and there may

be a greater requirement this year through those implementations for travel and

various trade shows and doing industry sessions with craft, manufacturing, ocean

and other sectors. And we've determined that there would be an additional $100

through zero-based budgeting.

MR. PARROTT:

Okay.

Increase of $200,000 in Professional Services, can you please explain why that's

going up so significantly?

MR. MITCHELMORE:

Yes. This is a one-time expenditure that we've announced in budget 2019-20. We

had highlighted from the McKinsey report to look at doing an MRO study, so

that's maintenance, repair and overhaul for the aviation industry. That's

something that we will undertake. That's $200,000 of that amount.

MR. PARROTT:

Maintenance, repair and overhaul of assets we own?

MR. MITCHELMORE:

No, the maintenance, repair and overhaul would be an industry speciality for the

aviation industry, so for commercial aircraft. So players that are in the

industry like Provincial Aerospace or EVAS Air or others are currently involved

in maintenance, overall repairs and some do training as well, what they would be

doing is bringing in aircraft, whether it would be from a commercial supplier

like Air Canada or WestJet or international airlines in doing that work here,

adding value and high-paying jobs.

This

was identified in the McKinsey report where there could be an opportunity for

more heavy checks on aircraft and, given the capacity that we have within the

province for aviation and the companies, this is an opportunity that they see

that could create more jobs and grow the economy. So we've allocated $200,000 to

try and capitalize on that.

MR. PARROTT:

So is there any thought given to any of these companies being an AMO? It's been

my background. So in order for them to do any work on these aircraft, any kind

of overhaul based on periodicity, they have to be an AMO specific to that

aircraft and if they currently don't work on that aircraft, they have no ability

to do that.

MR. MITCHELMORE:

There are two things that were in the budget and one comes from the Department

of Advanced Education, Skills and Labour is around the certification and

training that would be happening at the College of the North Atlantic for

various technicians to provide certification. There are also elements of

investment that we've made to the Gander College of the North Atlantic in

partnership with the federal government to enhance equipment.

But we

see opportunity where there could be military aircraft as well that could be

involved in maintenance, repair and overhaul. So this will all be a part of the

study that will go out in this $200,000 to highlight what the opportunity would

be, so the investment is a study that would take place.

MR. PARROTT:

Okay.

Purchased Services, in the revised numbers for budget '18-'19, the money

allocated for Purchased Services last year went over budget by $521,000. What

caused that line item to jump significantly?

MR. MITCHELMORE:

The $521,000 revised reflects four Atlantic Cable Facility repair cost,

approximately $100,000 each, as well as the cost to issue an RFP to divest of

the Atlantic Cable at approximately $130,000.

Just

for context, and I just want to clarify, the Atlantic Cable Facility, Persona

Communications constructed it in 2007 in partnership with Rogers Communications,

MTS Allstream and the Government of Newfoundland and Labrador. The project

constructed fibre facilities between St. John's and Halifax in a ring

configuration involved in terrestrial and submarine routes, and government's

contribution at that time was $15 million. It was proposed to add redundancy in

communication facilities on the Island, and to foster increased competition in

the communications sector. Eastlink currently maintains the fibre portion and

all the signees to the original agreements.

have, as a government, to deal with the maintenance cost to the fibre and we

also have to pay for breaks for various reasons. This can be a significant cost,

so we are exploring and taking proactive action from an initiative in 2007 that

has led to these costs to look at opportunities to ensure efficient and

effective management of this provincial asset and identify where revenue

generation or cost savings can be had.

MR. PARROTT:

Okay.

Under

Grants and Subsidies, there's a reduction of $187,500. How was the reduction

determined, and what impact do you expect that's going to have on the economic

diversification agenda and on the tourism sector?

MR. MITCHELMORE:

Under the Grants and Subsidies, what we have here is a reflection of less

federal funding for the Canadian Safety and Security Program. That would be the

windup or the conclusion of a multi-year agreement with C-CORE. They were

engaged with the federal government to design enhanced space-based ice products

for transportation product, so that was something that was done there.

The

other grants that are provided in this field is that $100,000 to the East Coast

Trail, which I was at the Trail Raiser a couple Saturdays ago, where, through

the private sector and through over 500 individuals, donors to the East Coast

Trail, they raised over $90,000 as well to help with the ongoing maintenance,

which is really great.

Market

readiness at $15,000; $40,000 for the craft development industry; innovation

growth space at $75,000; and there's $150,300 for Canadian Safety and Security.

That also reflects the line item for Revenue of $150,300 because if we get

federal revenue, we have to record it as well.

MR. PARROTT:

Just as another point, can

we get a list of the grants and subsidies from last year?

MR. MITCHELMORE:

Sure. It would basically be

what I had just noted and the additional amount would be for the Canadian Safety

and Security Program, and we will provide that.

MR. PARROTT:

Line item 3.2.01, what

support does the department give to communities who want to build a co-operative

model for economic and business development, particularly in the tourism sector?

I refer, specifically, to something similar to the model being used in Bonavista

right now.

So,

anywhere, Trinity or Bonavista, if you go down there – if I go to Blue Whale for

dinner, they recommend that I go to Amherst Cove and eat at the Bonavista Social

Club. Everybody down there is working collaboratively to –

MR. MITCHELMORE:

Okay. Right.

MR. PARROTT:

So is there any incentive?

MR. MITCHELMORE:

I had just drawn the conclusion of formalized co-operative. We have over 90 in

the province and we have MOU, a co-operative agreement. We have been, as I

mentioned in my opening remarks – and Bonavista has really been a champion. It

has taken them some time as well to realize the benefit of referral and

collaboration, and they have seen tremendous success.

I only

want to cite that during Budget 2016 ,

I went to Bonavista to the Chamber of Commerce and I delivered a speech, and

they had 80 members at that time. Now, if we fast-forward three years later,

they have just under 160 members.

They

have grown the amount of small businesses, the clustering. And we have made

investments because they've been working collaboratively in things like the

Bonavista Biennale where they've been able to add capacity, having 24 locations,

where contemporary art will be placed in multiple communities. Typically

biennales are placed in urban areas.

When I

was travelling in Ibiza, just in January on a personal holiday, I had seen that

they had their 20th anniversary of their biennale. This is the first time – and

it's coming back this year. I encourage you and everyone else to go. They added

over 1,000 new visitors just to see the contemporary art, and then all of those

regions benefited because people went to Keels, Duntara and went to various

communities, not just in Bonavista and Elliston and in Port Rexton, Trinity,

major clusters. We have Provincial Historic Sites, really key assets. There's

the Rising Tide Theatre that's been there for over four years.

If you

look at some of the pioneers like John and Peggy Fisher with Fishers' Loft and

the investment that they've made, but then there's new investment. One of the

exciting areas of sector development where we've seen real growth is in the

craft beer industry, so Port Rexton Brewing, and there are real accolades. We've

made investments where they're now going to open up a manufacturing facility and

do canning on site, creating more jobs.

Bonavista has seen the natural benefit of doing referrals, and all areas and all

regions are seeing benefit from it. Tourism is really a collaborative area of

work, it is not about being competitive with each other in the marketplace. So

over the last time we've done our Exit Survey, there's been 2,000 additional

jobs added and there have been new businesses created in the tourism and

hospitality industry.

provide support through our Tourism Product Development Plan, and not all the

support is financial in nature. Sometimes it is what we can provide to

companies, advice or direction, but we encourage that. Places like Clarenville,

from a hub and spoke model, are benefiting as well because bus tours are coming

to the Clarenville Inn, or you also see investments like the St. Jude Hotel that

has just undergone a major renovation and remodel and rebrand because of

economic activity that's happening around tourism but other economic development

within the region. When businesses work together and collaborate, we have a lot

greater success.

I'd be

more than happy to maybe take the conversation off side, rather than use more

time to explain all this here. We could have a good conversation about what's

going on in Bonavista, how our department has made investments, what's been

working and what hasn't, and in the entire region. So I'd be more than happy to

take the conversation off side and have these chats.

MR. PARROTT:

Perfect.

CHAIR:

Further questions?

The

hon. the Member for St. John's East - Quidi Vidi.

MS. COFFIN:

Thank you.

Let

start with, what has been the effect of provincial, interprovincial and

international trade agreements on local businesses?

MR. MITCHELMORE:

We've had significant

benefits achieved given that 50 per cent of our GDP, as I had mentioned, is

based on export. It's quite significant. We've seen just this year an industrial

shrimp benefit agreement based on the CETA negotiation that will see thousands

of metric tons of industrial shrimp landed at Newfoundland and Labrador for

local fish plants to produce and create additional weeks' work for plant workers

and other benefits that would exist from that.

That

would've been shrimp that would've been produced in other jurisdictions, like in

Iceland or Denmark or other European jurisdictions that may have had a higher

cost of labour. But because of a tariff that existed or a trade barrier, it

would not have been landed here.

So we

are seeing some benefits from CETA. We also have the Canadian Free Trade

Agreement that we've entered into, which we're going through a process of

reducing regulatory barriers and reconciliation, and finding ways of which we

can advance matters. There's a

chapter on energy and electricity as well that

can create significant opportunities for this province.

When it

comes to trade, it's very important to Newfoundland and Labrador, given the

types of commodities that we deal in terms of mining, in terms of oil and gas,

in terms of the fishery and aquaculture, and given our population base. Why we

have a number of high-value jobs in these sectors in the economy and the supply

and service area is because of such trade agreements, and our ability to export

and be competitive.

MS. COFFIN:

I had a conversation with the procurement agency earlier. During that

conversation, we were talking about social and green procurement, as well as a

number of other initiatives – which are fantastic, but unfortunately one of the

constraints of that was when we were talking about encouraging the use of local

suppliers, they were negatively impacted by some of these trade agreements,

because, of course, they said that intra-provincial trade was paramount. And one

of the stipulations of that was tenders or requests for proposals or procurement

– and I'm not sure what the dollar amount was – had to be opened up to

intra-provincial bidders.

So I'm

just wondering if we've seen any negative effects. Because quite often that's

what happens in trade agreements, is we see benefits in some sectors, but some

other sectors will be negatively impacted. Because that's how trade works. When

you have a comparative advantage in a particular area, you benefit in that area,

but when you do not have a comparative advantage, you lose out.

So I'm

just wondering if there are any negative effects that we've seen.

MR. MITCHELMORE:

Do you have any specific example of which you would want to give? In speaking of

social financing or social enterprises, we have a Social Enterprise Action Plan.

We see the value of which social enterprises locally are able to bid

competitively, and they have been winning contracts. One only has to look at the

Newfoundland and Labrador Housing Corporation and the success of companies like

Choices for Youth with their social enterprises, or Stella's Circle and what

they do in terms of their social enterprises. Because you had opened up with

green and social in your commentary, there are avenues of which social

enterprises can have incredible opportunities for local people and local

benefits, and even work with other companies, too, in part of the procurement

process.

We do a

lot in the Department of TCII around supplier development or working with the

federal government and the entities to make sure that, through our Regional

Trade Network, companies are prepared and they can look at where the

opportunities are for them; they can target, whether it's the Canadian

marketplace, whether it's international. Through ATIGA, that I talked about

earlier, you see a lot of pan-Atlantic missions, and we've gone to places like

the UK, the Netherlands, and in very specific target.

Newfoundland and Labrador has a significant advantage to the Atlantic provinces

when it comes to trade because we have done almost $2 billion worth of export in

the UK and the Netherlands alone. We are far ahead of any of the Atlantic

provinces in their export into these markets, but working together we can

capitalize on opportunities, especially when it comes to the Ocean Supercluster

and where the private sector is unlocking $150 million of their money to do

research, to do various development or innovation, to partner with the federal

government to unlock an equal value.

Given

that we have 53 per cent of the ocean economy in Canada, we see where local

companies are going to be able to even partner with more international players

and get a bigger piece of the pie, and that's really important for us.

MS. COFFIN:

Well, I'm glad to see that

some local producers are benefitting from some of these trade agreements.

Going

back to, perhaps, some of the things that I heard on the doorstep along the way

that would go closer to this procurement agreement issue, I certainly have spoke

to small businesses who would normally fill government contracts, who now have

found that they are not getting that, so I suspect that might be a product of

it, but we'll leave that be for now.

Perhaps

another area we may want to look at there would be secondary processing in the

fishing industry, because that's where a lot of the jobs are and that's where a

lot of the value added is. So I'd be really curious to see, perhaps, how we're

faring in terms of the value-added piece and if we are actually at a comparative

disadvantage, and that might be where we are losing out.

For

now, let's move on to diversification. I noticed that we have diversification in

at least three of the different sections here. Some of it's about planning, some

of it's about helping industries diversify, looking for diversification

initiatives. I'm just kind of trying to get my head around why we spent $1

million on a report to find out where we need to diversify.

MR. MITCHELMORE:

The Department of Tourism,

Culture, Industry and Innovation is involved in working with a number of key

stakeholders who are members of the Cabinet Committee on Jobs. W e've

created sector work plans, and we've been leading some of those with the

Technology Sector Work Plan, for example. Others we have worked with, other

departments and key stakeholders, and with it, through the McKinsey report, and

as you can see even within the department, there are a couple of key initiatives

that we've taken from that report to capitalize on the work that we're doing,

that we may not have focused on, such as the MRO opportunity and direct-targeted

investment to look at sector diversification.

I think that's really key in being able to build a certain

expertise, to grow various sectors, whether it would be in aerospace and defence

– because I went to the Dubai Air Show and looking at what Provincial Aerospace

is doing; they've done business in Abu Dhabi and been there for quite some time.

They have relationships and contracts internationally. They can be a lever to

help other companies that are working internationally and want to be in that

space.

As well, they have company contracts with other

international players, whether it would be Thales or CarteNav or others, and

some of that relationship trickles down and brings benefit to Newfoundland and

Labrador in terms of how conferences are held or people setting up offices here

in this province and creating employment, such as what some of these companies

have been doing.

We need to look at and continue to be very nimble, as a

small province, but realize our capabilities. I don't think we've talked enough

about some of the companies that are operating here and what excitement and what

they are actually doing. I highlighted Mysa and Empowered Homes and what they're

doing for energy conservation. You only have to look at what Kraken is doing in

terms of their robotics with AUVs, and how they're getting military contracts

and international dollars and investment being put into them, that's creating

dozens of jobs here in our province that would be high paying. We have a number

of companies that are operating in that space.

Genoa Design, I believe the MHA for Mount Pearl North

mentioned them today in a speech. They have over 100 employees and they're

dealing with steel structure, and very competitive in this space, getting major

contracts and growing; focused on R & D and scaling up. I know the Member for

Mount Pearl - Southlands has talked about this company as well and the owners

have – Leonard Pecore is a pioneer and was awarded by the Marine Institute an

alumni award for major contributions.

We have

this here in our province. I think that we have major companies operating, not

only in urban areas but in rural areas of the province too. The Member for

Exploits, I'm sure, would highlight w