1995 Legislative Session: 4th Session, 35th Parliament

HANSARD

The following electronic version is for informational purposes only.

The printed version remains the official version.

Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)

WEDNESDAY, JULY 12, 1995

Afternoon Sitting (Part 2)

Volume 21, Number 28

[ Page 16941 ]

The House resumed at 6:43 p.m.

[G. Brewin in the chair.]

Hon. E. Cull: I call committee on Bill 55.

MISCELLANEOUS STATUTES AMENDMENT ACT (No. 3), 1995

(continued)

The House in committee on Bill 55; G. Brewin in the chair.

section 3 (continued).

L. Fox: I appreciate the opportunity to get in on the debate on this section. At the outset, let me suggest that in the best interests of the municipal taxpayers of British Columbia, I believe that the honourable thing for the minister and this government to do with respect to this

section would be to withdraw this section, complete their negotiations, discussions and consultations with the municipalities, and then bring legislation in next spring. The effect of this legislation is to not take action with respect to the municipal portion of this until next year.

There are a number of principles contained within

section 3 that I would like to see the minister address, not the least of which is.... I think this sends quite a message to other corporations that want to invest in British Columbia and may want to expand in British Columbia. If they have a large enough payroll, all they have to do is tell the Premier and this government that they're not prepared to expand their corporation unless some municipal tax relief is given by this government.

[6:45]

The other major concern I see with this bill is the exemptions that are going to be granted to one private corporation, CP Rail -- the other one being a federally constituted Crown corporation, CNR; but in a short time we could see that also being a private corporation. Yet at the same time we're seeing a new grant in lieu of taxes being offered to those communities along the BCR that previously didn't enjoy that privilege. Granted, this particular initiative will be less than what was expected by those communities along the BCR, but at least it's going to be something that they didn't have before.

When we look at the impacts of this section, we must understand that those railroads compete for business against the trucking corporations, which have been heavily taxed by this government. They are not going to achieve the same kind of consideration that the railroads are going to receive.

There are some other issues that municipalities would have wanted the government to address prior to coming down on them with a heavy hand and forcing a transition and a shift of taxes within those communities from the railroads. In my community of Vanderhoof, for instance, in talking to the mayor today, the shift of taxes from the railroad to the residential taxpayer is going to be $40,000, and that's quite considerable in a community of 4,300 people.

Getting back to the point, this government should have looked at its taxing policies on the railroads over the course of the last four years and what impacts they had, the first one being the corporation capital tax. I submit to the minister that the impact of that taxing policy alone on all three railroads within British Columbia is far greater than the relief that is going to be achieved under this initiative. When we look at the impact of the increase in the fuel tax that is going to have a far greater impact on the competitiveness of these railroads than this particular initiative and the hit that this initiative is asking the municipalities to assume.

Had this government dealt with what was within its mandate.... Indeed, the negative taxation policies which reduced the competitiveness, not only of railroads but also of business in general in British Columbia.... Had they addressed those issues first, and then gone to the municipalities and said, "Look, we need your support in achieving a climate which allows these utilities or these railroads to operate in a competitive environment," I'm quite sure that they would have been a willing partner in this discussion.

It seems to me that the approach here.... I think it's spelled out very well in a letter, dated June 29, to UBCM members from the president of the UBCM, Councillor Joanne Monaghan of Kitimat. I'd just like to read some of it into the record, because it spells out very clearly what the municipal sector feels and, indeed, what their approach to this legislation is:

"We asked the government in strong terms to not introduce such legislation that will interfere or limit railway assessments and/or local taxation powers. Since the provincial government had not consulted with local government about this proposed reduction in local revenues beforehand, we made it plain that introducing such legislation would greatly concern local governments throughout the province and could damage local-provincial relations. The substance of the UBCM's reaction as cited to the provincial government is as follows:

1. A poor approach to problem solving. Local government wasn't asked to be a part of the solution. Local government has been defined as "the problem" to be fixed. A foundation of cooperation was not explored.

2. Unfulfilled expectations. The 1995 provincial budget led us to believe there would be a consultation process to define problems and develop solutions, not just consultation on implementation.

3. Lead-up flawed. The committee set in place prior to the budget was not used properly and its mandate and purpose never clearly established.

4. Intrusion on local autonomy. Any moves especially undefined, to limit local taxing authorities will be seen as a major assault on local autonomy.

5. A short-term policy. The approach taken will require long-term government involvement in micromanaging municipal railway assessment and taxation. It may be an appealing approach in year one, but by year 15 will be a very poor way of assuring the desired results."

There are a further four reasons why the UBCM is concerned about this piece of legislation.

I think it's important when we address issues such as this that we don't react to symptoms and create a solution, that we go through a process of finding out what the problems are. The member for Peace River North mentioned earlier that there are a number of problems beyond the scope of this government in terms of federal initiatives, corporation initiatives and management. Local taxing authorities are a very large portion, admittedly, according to the numbers that the minister gave us earlier, but so are issues such as corporation capital tax, fuel tax and all of those other issues identified here today.

[ Page 16942 ]

I request, once again, that this government and this minister be responsible and show some leadership. Withdraw this

section of the bill, complete the consultation with the municipalities, explore the limiting factors to the competition that these railroads face, and then bring a solution to this House that has the support and is in the best interests of all British Columbians.

R. Chisholm: I rise to say a few words on

section 3. I think everybody has pretty well covered most of what needs to be said, but I'd like to bring a couple of points to the forefront.

I heard the Premier make his statement earlier. Other people were blaming the feds for what they did, and vice versa. As far as I'm concerned, the feds did whatever they did; that's immaterial to what the province does to municipalities. They are, after all, babies of this organization, and we should be consulting. We should ensure that we are consulting. After all, we are responsible for whatever they do, and we give them their powers. The federal government may not have discussed transfer payments with the provincial government, but that's immaterial.

When it comes to the municipalities, we have obligations because we are responsible for them. These powers that we're talking about normally come under the umbrella of the municipalities. I dare say that we should think twice before we start tampering with them and why they were given in the first place.

We hear that there are other ways and other means, and I have to agree with the other speakers wholeheartedly. The corporation capital tax, fuel taxes and whatever other areas we can look at.... With a little bit of imagination, we could make up these things. All we'd have to do is start talking about the $10 million advertising budget and how far that would go towards this $20 million debt.

What I'm afraid might happen here is.... What is the next area that will be tackled in this manner? If this government really and truly believes in consultation, why don't they consult? Why aren't they out there? Why is this going before the UBCM 24 hours in advance? It's similar to the Election Act... the democracy of the people of this province.... Yet they haven't viewed it. It's the same principle. Why didn't the government send it out to the people of the province? Why didn't they send this out, and why didn't they discuss it with the UBCM? If they had, maybe we wouldn't be having these problems trying to get this bill through.

The final thing I'd like to say is: what area is next for this government? What area are they next going to end up destroying or end up with antagonism between government and some portion of society in this province? It's high time that they lived by their words and did consult. And it's high time that when they say they are going to consult, they do it, whether it be on the aboriginal question or with the UBCM, the one that we see now. If we had a lot less of these secrets around this province, maybe we wouldn't be having so many problems with various groups.

With this particular bill, obviously it's going to be very antagonistic. If it does go through, obviously, by the amount of letters that I've seen from mayors of various communities, including my own.... They are very upset about the reduction in their tax base.

Take a look at a community like Chilliwack and start talking about reductions of $442,000 in the rail taxes. This is a community that has already lost CFB Chilliwack, a freezer food organization and bus lines, and it has already had a 24 percent reduction in forestry. I think it's high time this government went out to the communities and started talking. Even before you start talking about this, that community has already lost almost 2,000 jobs and almost $150 million. Yet here we go again; we have another reduction by this government.

This government was totally responsible for a lot of those things I was talking about -- some were federal, but the vast majority were provincial. It's high time this minister and this government talked to and negotiated with the people in question. Then maybe we can come up with some sort of solution that will be beneficial for all.

D. Mitchell: When I look at this amendment to the Assessment Act, I don't know how, as members of this committee, we can have strong opinions about it until we learn just a little bit more from the minister. I don't know if I can support it or not until I learn a little bit more about the specific amendment that's here. The Premier was actually quite persuasive earlier in committee today. I hear members talking about the need for more consultation. Where were they when I moved an amendment suggesting we needed more direct consultation? They weren't here.

[7:00]

Having said that, when we take a look at the actual section, it talks about adjustment factors. Until we know what those adjustment factors are, how can we decide, as opposition members in this assembly, whether or not we can vote in favour of this? Because those adjustment factors, I would imagine, would be fairly crucial to determining how municipalities are going to be affected by this change in the special rules for railway property.

Also, when we take a look at this

section of the bill, we talk about excluding from the definition -- under the Assessment Act -- improvements for "bridges, trestles, viaducts, overpasses and similar things that carry track in place of a railway corporation." Until we know what the effect is of excluding those items from the definition of improvements, I don't know how, without having a fairly good briefing -- which I think we have the opportunity for in this committee -- anyone can decide firmly in their mind whether or not they can support this legislation.

So I would like to ask the minister if she could do just two things to help me decide whether or not I can support this, because the municipalities in the constituency I represent have certainly expressed concerns. Maybe the minister can tell us why we are excluding from the definition of improvements certain bridges, trestles, viaducts, overpasses, etc. What are the adjustment factors going to be for the property of a railway corporation? How are they going to be decided? What is the impact going to be in terms of municipal taxation? If we can get answers to those, then I would like to think that we, as members of this committee, could actually vote on this much more rationally.

Hon. E. Cull: I will just take a moment to put some more information before the members. We heard a lot of passionate speeches before dinner and in the last minute or two about the devastating impact that this is going to have on local governments. I want to point out to members that we're talking about less than half of 1 percent of municipal property taxes

[ Page 16943 ]

here. We're talking about a very small amount of money. But we're also talking about a very significant industry that is under threat. I think members who represent communities that have railways understand that, and they understand that something has to be done.

There has been a railway liaison committee involving municipalities, the rail companies and government. It has been meeting for two years and talking about these issues and going nowhere on it. Consultation has to come to some conclusion. You can't keep consulting while the ship is sinking. Maybe the better metaphor is trains going off the tracks. You have to draw closure to it at some point, and someone has to make a decision.

In this case, we've made the decision based on the fact that there is a very strong and compelling case to be made for tax fairness. I said earlier that the average business tax rate is $13 per $1,000. Rail is being taxed at $45 per $1,000 on a weighted average, and up to $123 per $1,000 in some communities. There is a major issue of tax fairness there and with our competitors.

Some members have asked why we don't deal with the corporation capital tax instead. Let me tell you that if you convert it to dollars per thousand, the corporation capital tax impact on the rail companies is about $6 per $1,000. We're talking about a tax reduction here that would be equal to about $15 per $1,000. So even if you eliminated the corporation capital tax for railways, you would still not have fixed the problem. You would still have a tax inequity issue. You would create more problems in that respect.

It's important to put this into some context. There have been some members who have spoken about the significance of ensuring that we have a viable rail industry in this province. You know, what we're really talking about here, when you boil it all down, is making sure.... We're not talking about a tax break or tax concessions, as the member for Prince George-Omineca suggested; we're talking about a defensible taxation system that has the right values, the right distribution of values and the right tax rates.

We'd say the same and do the same for any industry or class of taxpayers that came forward and said: "This is an anomaly. We are being treated unfairly relative to other users in similar circumstances." We're dealing with a tax fairness issue to begin with, and we are dealing with the need for the province to respond to a very serious threat to an industry that employs 5,000 or 6,000 people in British Columbia.

The member had some specifics that he was talking about -- adjustment factors. The adjustment factors that will be brought in.... It's simply a number. Unfortunately, the member.... No, he's still in the House; he's just not in his seat. The adjustment factors are simply a number that is applied once the conventional techniques have been used to determine the assessment value.

If it generates an amount that is out of keeping -- the conventional costing techniques would be out of keeping; nobody would build a railway today with that kind of costing technique -- then we can come up with an adjustment factor that reduces that to something that everybody agrees is a more reasonable base to start developing taxation policy on. The adjustment factors are simply a number between zero and one-point-something that will be used to ensure that whatever the conventional system generates, we agree that we've got a fair system, and the municipalities will be involved in that.

The regulations don't exempt bridges and other structures; they provide for regulations to make adjustments. That's because in some cases bridges -- because they're the only property in their category -- are taxed at a rate that is almost indefensible. It is captive there, and unlike many businesses, it can't be moved.

G. Wilson: I'm going to come back to this question of adjusting factors and the prescribing of it. To be quite blunt, I think that the end goal is laudable. I think we can support what the government is attempting to accomplish. We understand the serious problem that will take place if product is diverted south and is carried through southern railways into southern port facilities, and we understand the need to do something about it. Within the Alliance Party, our biggest concern is where that difference of dollars is going to be picked up.

How are we going to find those dollars, making sure that those dollars aren't going to simply be passed on to residential taxpayers in the municipalities, who are going to end up carrying the can? That's the big concern.

I think the Premier gave an excellent speech -- and a persuasive one -- and I congratulate him for that; he articulated his position very well. But I don't know that it gave a lot of comfort to people in municipalities by suggesting that not to go this route is going to create a greater hardship as a result of failure within the railway companies, a greater degree of unemployment and failures in the ports. While they don't want that, they also know that right now they're at their limit in terms of what they can afford to pay as individual property owners. So we're really caught in a bit of a catch-22.

These adjustment factors, which the minister says is a number, are critical in order to know how we're going to make this work.

The last point I would say about that is that I really am perplexed. In the first

section of our debate tonight we dealt with this notion of trying to get consultation with each municipality. I think the Premier underscored the need for that when he said that each municipality may be affected differently. He made it very clear that a differential rate is going to necessarily be applied because of the differences that will occur on the local level. That's the reason for the amendment by the member for West Vancouver-Garibaldi, which unfortunately didn't pass.

I find it hypocritical for those to argue now that they want greater consultation and that they condemn the government for not having consultation with the municipalities, as I heard from the Leader of the Opposition. The opposition Transportation critic rightly stood up and spoke in favour of it for all of the right reasons, and then had his vote changed when the Leader of the Opposition came in and voted against consultation with the municipalities, which I think the people in the province need to know.

D. Mitchell: He didn't vote.

G. Wilson: The Transportation critic didn't come into the House to vote.

We need to get beyond this notion now, and get down to the question of these adjustment figures. The people of the province are going to want to know that.... Hollow words are clearly demonstrated by one's vote in this Legislature, and when we look at the voting record, I think the people themselves can judge with respect to what was said and how the

[ Page 16944 ]

vote was cast. I would appreciate it if the minister could talk about these adjustment figures, because they are really critical to those of us in the Alliance in determining whether we can, in the final analysis, support this

section of the bill.

Hon. E. Cull: To try to answer the question as quickly as possible, the whole scheme is based on a couple of steps. First of all, the province is going to absorb a little more than 50 percent of the tax reduction. That will happen immediately. We have made our commitment. We're going to do that, and we are going to adjust that within our budget -- $8 million in a $20 billion budget. It's one of the things that will be managed into the budget as normal.

In fact, I am confident that when we look at this over a period of time, our most pessimistic analysis shows that once we've netted everything else out it's likely to cost us about $3 million a year at the provincial level. If we get the kind of investment that we expect to get, we will end up actually having a net benefit to the province overall in revenues, because we will be able to keep those operations here. We'll have those people employed here, and that's good for our economy all around.

With respect to the municipalities, what we have said to them is that we understand, particularly for some municipalities, where the rail tax portion of their tax base is more significant than in others.... You can look at all the municipalities that have rail in them, and the rail tax varies from a tiny fraction of their tax base to a more significant number. We understand that, and that's what we want to work with them on, to discuss some form of transition over a period of four years, so that this $7 million or $8 million doesn't hit all at once at the municipal level.

The province is willing to work with the municipalities to provide some way of ensuring that there will be a reasonable transition. That's all part of what has to be discussed with the municipalities, and it's currently underway.

The adjustment factors are related to the way that we do the assessment. If we look at the market value of the railways today, no one would actually build a railway if they had to pay that amount to do it. The way the conventional assessment of the system works overvalues rail property generally. It also has some interesting perversities with regard to urban and rural property, which don't make sense, either, when you start to have a close look at them.

What we want to do is go through a system by taking the conventional way of doing the assessment, and then, using a common, practical business analysis, come up with what should be a reasonable assessment for railways -- if you were able to make that informed person's reasonable judgment on what the assessment should be -- and then develop a formula that will reduce what the conventional system gives you to what you probably should be at. That's what the adjustment factor is.

I probably oversimplified it by saying that it is simply a number between zero and one -- a fraction, a point-something. It may be a little bit more complex than that. But to try to understand it, that's essentially what it is. You use the existing system, and you get a number that's up here. It's not reasonable; no one would build at those costs. So what is reasonable? And what is the formula to get you to that reasonable level? That's what's going to be done with the adjustment factors.

G. Wilson: One more quick question before I yield to others.

That adjustment factor, then, is the proportional difference between what may be seen as a real assessment and what may be an assessment decided on the basis of a review, which is going to be undertaken and negotiated -- effectively. It's a negotiated position. What is going to be the role of the individual municipalities in the final determination of that figure? How are the individual municipalities going to be affected in determining that final figure?

[7:15]

Hon. E. Cull: As I said earlier in the debate, the objective is to get to the end of this process and have everybody agree that that's the right way to do things. In an ideal world, municipalities would work with the province and reach agreement on what the factor should be and how best to apply it.

If we are not able to reach total consensus with all the municipalities that are affected, that will only come about at the end of fairly intense consultation, where they get to examine the methodology that's been used, discuss with us the formula, discuss the consequences, discuss mitigation impacts on their own municipality and make sure that we understand exactly how it will affect their individual municipality and that we have examined every opportunity to lessen that to whatever extent is possible.

D. Symons: I must say at the outset, just before I get into the bill, that I'm very flattered to hear that the member for Powell River-Sunshine Coast pays such close attention to what I say in this House and obviously pays very close attention to how I vote.

When I was speaking before on this bill, I mentioned some concerns I had about subsections (1) and (3) and their interrelationship, because we find that

section 27.1(3) says that the Lieutenant-Governor-in-Council may only make a regulation under this

section after the minister has consulted with the UBCM, yet

section 27.1(1) talks about things that are going to be excluded by the Lieutenant-Governor-in-Council. I'm wondering if the exclusion of bridges, trestles, viaducts, etc., will be on the table when you are meeting with UBCM members to discuss ways you can ameliorate the cost impacts this is going to have on the municipalities and their tax base. Are these items, then, because they really don't come into effect until after you have had those discussions, on the table, or are these excluded from discussions that you will be having?

Hon. E. Cull: We were discussing the last question. Maybe the member could just repeat his question for me.

D. Symons: What I was saying is that in

section 27.1(3), you talk about how the consultation must take place first before anything can happen here, so regulation may only happen after consultation with the members of the UBCM. But we go back to

section 27.1(1), and there are some exclusions there. Theoretically, with

section 27.1(3) following, these exclusions don't take place until after you've had the consultation, so you're excluding from the definition of "improvements" -- and obviously improvements are things that are adding to the tax base -- bridges, trestles, viaducts, etc. The question I asked was: are these items in

section 27.1(1)(

a) that are being excluded on the table for the discussions when you come to discussing under

section 27.1(3)?

Hon. E. Cull: The member has to read

section 27.1(3) correctly. It says that you can only make a regulation under

[ Page 16945 ]

the section.... The

section is

section 27.1, which includes

section 27.1(1) that he's referring to. So yes, no regulations can be made under this

section 27.1 until the consultation has been done.

D. Symons: I thank the minister for that answer, and indeed I read that into the question. But I don't think she answered my question, because

section 27.1(1) talks about exclusions. I'm wondering: when you sit down to meet with the UBCM for this consultation that must take place under

section 27.1(3), will these items mentioned as exclusions in

section 27.1(1)(

a) be on the table? Will you negotiate these if somebody says: "Well, in our community, we think that maybe we should leave the bridge in and not have it excluded from the definition"? If you exclude it from the definition, you're removing it, in effect, from the tax base. So basically you're saying that we have a starting point that we're going to discuss, but it seems the starting point has already made some changes.

Hon. E. Cull:

Section 27.1(1) only allows regulations to do exclusions. It doesn't require, mandate or make exclusions.

Section 27.1(3) says that regulations, including those regarding exclusions, can only be made after consultation. So consultation will involve all the aspects in this section, including exclusions.

L. Fox: I have a few questions to ask the minister with respect to the sections here. Before I do, though, I would like to ask the minister.... Earlier she gave us a figure saying that the corporation capital tax impact on the railroad was approximately $6 per $1,000. Not having the total assessment before me, I'm not sure what the aggregate amount of that would be. Can the minister tell me, in terms of that impact, what the total amount of dollars collected under the corporation capital tax are on the three railroads -- or individually if she has that breakdown?

Hon. E. Cull: The total assessed value, I am told, is about $1 billion. The calculation was done simply on the rate of 0.3 percent, or $3 per $1,000, for the corporation capital tax, and then we made some adjustments based on not all of the capital being subject to property tax.

L. Fox: So if I understand that correctly, then, the total collected from the three railroads is about $6 million. Is that what the minister is telling me?

Hon. E. Cull: It's very likely in that order of magnitude. I don't have the precise number with me. I've done it on the basis of calculation, but that's probably within the ballpark.

L. Fox: If I use the Premier's numbers, because they differ from the minister's numbers, the Premier suggested in his discussion earlier tonight that the province's share of the $20 million is going to be approximately $12 million to $14 million, and that the impact on the municipalities would be about $8 million. The minister would agree, then, that the impact on the municipalities could have been lessened substantially had the corporation capital tax and the provincial share of the taxes that were being collected been what was placed on the table by the government.

If we look at the $12 million plus the $6 million in corporation capital tax, then we would have approximately an $18 million reduction to those railroads. Is that not correct?

Hon. E. Cull: It would be nice if all the tax consequences could be borne by the province, and we could get any of the benefits from additional property tax for new investments in the communities. I mean, there's a sharing going on here. The municipalities get some of the revenue, and the province gets some of the revenue through the property tax base, through taxes for school purposes and rural taxes. We're saying that this is a serious issue that affects the province and the municipalities, and we're willing to do our share. We are in fact willing to help the municipalities do their share.

What you're suggesting is that we eat the entire amount, keep the municipalities whole and assist them to benefit from the additional property tax in the community -- and we're saying this is a matter that has to be shared by the two levels of government. We have invited the municipalities to discuss that with us.

L. Fox: Given my earlier question, would the minister not agree that the effect of the corporation capital tax, the levy of $6 million by the province on the railroads, has created this initiative, which is going to end up being downloaded onto residential taxpayers within their respective communities? That's the issue. We have on the one hand an initiative to tax a corporation, which has helped remove the competitiveness of that corporation against those who are down across the border. I remember the debate on that initiative, and this was one of the principles that members in all opposition parties suggested.

They suggested that we are going to drive ourselves out of competition through initiatives such as the corporation capital tax. In actual fact, that has helped decrease the competitiveness of the railroads that are trying to carry on business within British Columbia. It has therefore led to this initiative, in which this government is asking the municipal residential taxpayers -- because that's who is going to have to pick up the reduction that's coming out of this particular clause to the railroads -- to pick up the impact of their corporation capital tax initiative. That is what's happening.

Hon. E. Cull: We're asking the municipal taxpayers and the municipalities to have fair taxes for the businesses in their communities. We have already gone over this. Two-thirds of the taxes paid by the railways are property taxes, not corporation capital taxes, corporate income taxes or any of the other taxes they might pay. They are property taxes. On average, the railways are paying three times the business tax rate. In some communities, it's up to ten times, on average. If there wasn't a tax fairness issue here, we wouldn't be addressing this. We would be dealing with this in a totally different way. There is a tax fairness issue here that must be addressed.

L. Fox: I think the minister will agree, given her background in planning, that railroads are, in many cases, holding properties that they could otherwise dispose of -- in many cases, a limiting factor to a community's expanding its industrial and commercial core. But they are holding these properties and therefore increasing their tax load by doing so.

I suggest to the minister that there are options available to CNR and CPR specifically to remove themselves of some of that burden by making those properties available in many communities along their lines for other individuals to purchase and develop. I don't think it's fair that they should continue to hold these large parcels of land -- not develop them, not be part of an overall community development process -- and at the same time look for tax reductions and, indeed, ask this government to pass that burden and the carrying of all that property on to the residential taxpayer.

[ Page 16946 ]

C. Serwa: Well, this is an interesting debate and discussion, primarily designed to save union jobs with the railways. That is the basis of the whole discussion.

But I'm going to ask a few questions, and perhaps the minister could respond. For my information, I'd like the following question answered: what percentage of a railway's operating costs are involved with property taxes?

Hon. E. Cull: I'm sorry, I can't answer that question.

C. Serwa: That's the start of the problem here. Here the minister and the government are making a decision for tax fairness. They have no knowledge, by being unable to answer that question, of how significant this major adjustment is going to be and how much or how little it will benefit the railways. That's an important question that the minister should have asked, right off the top. Is it significant or is it not significant? Is it as much as the corporate capital tax? Is it a little more? Is it 5 percent of their gross operating costs?

Somebody somewhere has to have that figure, before they jump to the conclusion that we've got to fix it and we've got to fix it in this way. That's a question for which the answer should be known. I expect, before this debate is concluded, that perhaps the minister will commit to get that information to me, because it is important.

The minister has said the railways are paying $12,000 per kilometre in taxes. I presume that's on main lines; I don't know whether it's a statutory rate that applies to branch lines as well as main lines or not. But that's an interesting figure. If that figure is accurate -- that they pay taxes of $12,000 per kilometre -- I would like to know how much of that $12,000 would go to a regional district and how much would go to a municipality in the province, so that I have some basis of knowing or understanding how great an effect this is going to have in municipalities.

Obviously, not a great linear amount of trackage goes through municipalities. That's vital information to know. Are we talking about a great impact on municipalities or a relatively minor impact?

[7:30]

How much of the $12,000 goes directly to the provincial government? That's another question I'd like answered, because unless we know this, we're standing here and debating this issue without any basis for really knowing or understanding the impact.

The concern I have here is that there are some choices to be made. I'm a free-enterpriser and part of a very competitive world. One of the things we did in British Columbia a long time ago was that somebody made a conscious decision that we would pay more to our employees in the woodworking industry than anywhere else. We have done so. That meant mitigating revenue to the province.

If there are other solutions in tax fairness, for example, then we're going to have to have some answers here. Is it going to be significant? What will it do to the communities and to the regional districts? What will it do to the trucking industry? That has to be a valid concern, because there are thousands of people in the province employed in that particular industry as well, and they will be impacted. If we could get the answers to some of those questions, it would certainly facilitate my understanding of the need for this section. I'm simply not going to buy that it is warranted because in some other jurisdiction the taxes are lower or taxes are higher.

The B.C. Assessment Authority is primarily responsible for ensuring that the tax load is equally distributed. If there is something out of line with provincial taxation and arriving at a $12,000-per-kilometre annual tax on the railways, then we obviously have to look at that. Some of the other members have quite accurately pointed out that we're not reducing the costs of goods and services from the province, the regional district or the municipalities.

If the railways are going to have the opportunity of having their taxes reduced, then the burden is going to fall on other taxpayers and probably on residential taxpayers in the province. You can't make something out of nothing, and those are all valid concerns. Perhaps the minister can respond.

Hon. E. Cull: First, on the question of burden, I'll remind the member we're talking about less than half of 1 percent of the property tax revenue. The burden he's talking about is inflated in the way he's speaking of it.

I don't have aggregated amounts for corporation capital tax, but it's equivalent to about $6 per $1,000 versus $20 per $1,000 for property taxes. If you want to get an idea of the order of magnitude, it would obviously depend on the tax situation of the various railways, but the property tax is about three times the impact of the corporation capital tax. The $12,000 per mile of property tax breaks down roughly -- and these are rough figures -- so that about $6,000 or half of it goes to the province, about $4,500 goes to municipalities and about $1,500 goes to "Other," which includes regional districts.

The trucking industry doesn't pay taxes on the roads it has to operate on. In trying to make those comparisons, you have to think a little bit about the differences between the two industries. The rail industry can't pick up and move to a more competitive jurisdiction, but the business that runs on rail versus something else can move. We have to think about the real impact on the community.

It isn't this half of 1 percent of the property tax; as some of the other members in the House have said far more eloquently than I, it is what will happen if the goods and services start to be trucked down through the United States and out through the U.S. ports. We will all be big-time losers. We will lose in the communities that have the rail and the ports in them, and we will lose overall as a province because it will reduce our economy.

C. Serwa: I have just one more question. You have given us a breakdown, and I presume that the situation in the breakdown is not truly representative. You are talking about $6,000 going to the province from all the trackage throughout the province. From all that trackage, $4,000 goes to municipalities? I can't buy that, because only a very small percentage of trackage goes through any organized municipality compared to the large number of miles or kilometres of trackage to other areas of the province. What percentage of the total tax paid by the railway in property tax would actually accrue to municipalities? Never mind the regional districts. What percentage would accrue to municipalities?

Hon. E. Cull: The member may be correct that the trackage of rail in incorporated municipalities is not that great, but the value that is being assessed in the switching yards -- in North Vancouver, for example, or in Golden or Port Coquitlam -- is where the real value and the real tax are. So $4,500 out of the $12,000 per mile is probably pretty close in terms of an estimate.

[ Page 16947 ]

D. Mitchell: I'm not sure if members of the committee are aware of this, or people who are observing this debate, but this is a very significant and historic debate we're having in this committee this evening. Who could imagine a social democratic government in British Columbia in 1995 arguing in favour of making railways in British Columbia more competitive in a deregulated environment, where the need to compete with competitors on both sides of the Canadian-American border is crucial? Who could have ever imagined it, given the populist nature of politics in western Canada and the antipathy, historically, toward railways as large business enterprises?

And who could ever imagine that, in the same debate, the advocates of free enterprise are hammering the railways and wanting to continue an uncompetitive tax burden on the railways? Who could ever have imagined the irony of this important historic debate and how the tables have turned? My, how the tables have turned! You know, there is a question of big corporatism in some respects. But I think there has been.... Tables have been turned. There has been a reversal of historical positions that have taken place throughout Canadian history.

Any students of Canadian history should read this debate in years to come, because it tells you how things have changed. Some members might have different points of view on this, but just sitting and listening to the debate, it's really clear that the tables have turned.

We need to determine.... I'd like to go back just to get a slight refinement on a question. I have two brief questions for the minister. The first question is going back to a point made by the member for Powell River-Sunshine Coast about the adjustment factors. The minister said there was a formula that would be determined. Who determines that formula -- just to get a bit more clarity on this?

And will the formula take into account the regional variations in British Columbia, which the Premier referred to and the minister has confirmed exist in British Columbia, in terms of different communities in different parts of the province having a different tax burden because of railway taxation? Who would determine the formula, and can the minister commit that it will take into account regional variations in terms of assessments in British Columbia?

Hon. E. Cull: I always enjoy the historical interjections of this member. I know that, being a student of political history, he's often able to make observations that may not be apparent to those of us actually engaged in the debate.

But it did occur to me as I was listening to him that there is a significant difference in what's happening here. Parties like the Liberals, the government before us and some of the ones at the federal level have always been in favour of cutting corporate taxes. But they've never actually asked for anything in return. In this case, we're asking for investment in return and are going to be getting benefits to people of the province as a result of this decision.

The government ultimately will make the decision. It is the Lieutenant-Governor-in-Council that has the ability to set the rates. It's similar to the way we do school taxes right now; school taxes are set through a cabinet order. But they will be determined in consultation with the municipalities.

And yes, there will be the ability, as there is with the school taxes, to have that kind of flexibility to recognize regional or local variations, as the Premier indicated.

D. Mitchell: One further question, then. It might be argued that, broadly speaking, there will be two kinds of municipalities in British Columbia affected by this legislation. There will be those that currently receive some property taxation paid to them by railways -- Canadian National or Canadian Pacific. And there will be those other communities along the B.C. Rail line that have never historically received a cent from the B.C. Railway, because B.C. Rail has been exempt. We're going to deal with that in the next

section of this bill. Can the minister tell us whether there will be any difference in how those two different kinds of municipalities are going to be treated under these special rules for railway property?

I ask the question because communities in the constituency that I try to represent are on the B.C. Rail line. They're going to be paid for the first time, according to this bill, property taxation or a grant that, hopefully, somehow approximates the real rate of property taxation. But will they be treated the same way? Will there be equity? Or is there going to be some kind of an anomaly here? It's important for those communities along the B.C. Rail line to know that.

We can deal with that in more detail when we get to the next

section of this bill. But philosophically or in principle, are there going to be two categories? Or are all communities in British Columbia going to be treated in the same way with the adjustment factors, without prejudicing the regional variations the minister has referred to?

Hon. E. Cull: Without prejudicing the debate we're going to have when we get to the next

section of the bill, there is no reason why B.C. Rail and the other rail companies couldn't be assessed on the same basis using a formula and moving to the types of rates we're going to be using. There is a difference, though, in that CN and CP pay taxes

whereas B.C. Rail pays grants in lieu of taxes. What we're trying to do with the B.C. Rail situation brings in a whole other set of problems -- that is, consistency with respect to what Crown corporations do. I'm biting my tongue, because there's a lot more that could be said about that, but that's really the next

section of the act and so I suggest we come back to that at that point.

R. Neufeld: I only have a couple of brief questions about property owned by the railroads. My colleague for Prince George-Omineca touched on them briefly, and some other members also. Knowing the amount of property that B.C. Rail owns in the two communities I represent, Fort St. John and Fort Nelson, I would assume it's substantial. It's used for nothing, but it's a substantial amount of land that's left there for future purposes, I guess, at some future time. I sometimes wonder whether it's a wise move to keep all that land, because there are lots of people who would like to purchase it.

I'm thinking of the case of CN and CP and their large land holdings. CN and CP are looking for the tax break to stay competitive and to keep jobs and investment in British Columbia, and we fully agree with that. But is there a way that they can divest themselves of some of their excess land? Possibly, some of that land may go back to some of the municipalities, because the taxpayers are going to have to pick up $8 million of this tax break.

Hon. E. Cull: We've talked about this a bit, or at least some of the members have raised this issue about properties that various railways own that are not being used for rail purposes at this time. They're not a yard; they're not a rail line; they're properties that could be developed. With respect to CN and CP, it's my understanding that most of those

proper-

[ Page 16948 ]

ties are owned by a subsidiary. They are class 6, and they pay property taxes at the business class rate. So they're not affected by this. B.C. Rail is a different situation, because then we're into the vacant Crown land taxation issue. But again, that's the issue that is part of the next

section to be debated in this bill, and that can be canvassed then.

[7:45]

R. Neufeld: I gather what the minister is saying is that what we're really looking at is the right-of-way for the track, and the yards specifically. All the other excess land these two rail corporations own are paying tax another way. Okay, that answers that question.

The minister said there's a great variation, from $45 per $1,000 to as high as $123 per $1,000. Just so I get a little handle on that, I'm not quite sure how some municipalities got as high as $123 per $1,000. I always thought there was something in the tax system that wouldn't allow this to go that far. Maybe the minister can explain that to me.

The second part of the question is: with the $20 million reduction in taxes for CN and CP, what does it reduce those rates to? If that's the level these companies need to operate at, how do we know that those rates will stay at that level and not escalate in another ten years to the same place they are today?

Hon. E. Cull: The reason that some of the tax rates.... They average $45 per $1,000 for this class and may go up to $123 in the most extreme example. There are no other participants in this class in many municipalities -- in other words, the railway is the only one in the class. When we're looking at, say, the business class, class 6, there are many properties and many different owners and a wide variety of people, all of whom will bring whatever political pressure to bear that they want to bring on their local council should the rate get excessive from their particular business perspective.

The railways have sometimes not been in the same situation. As I said, it's difficult to pick up your railway and move it to the next competing municipality, which you could do, I suppose, if you were operating a business and felt that your taxes were too high. You could relocate, in some cases.

Interjection.

Hon. E. Cull: The member is pointing out that there are other industries that are in the same situation. Fortunately for them, they are not in the same property tax class.

Again, we haven't concluded work with the Union of B.C. Municipalities. The impact would bring it down from $45 per $1,000, but it certainly wouldn't bring it all the way down to the $13 per $1,000, which is the average for the business category. How much lower will it be? I'm not sure. It might be in the order of maybe $15 million.

At this point, there are some loose ends that have to be determined. They have to do with all the factors that we've been talking about tonight: adjustment factors, exemptions, what municipalities will do, transition over a period of time and the like. There is not a target at this point. It's part of what we are going to be discussing with the various affected municipalities, taking into consideration the various regional situations that have to be accounted for in the formulas.

R. Neufeld: It worries me that the government hasn't figured out some of those numbers. We're talking about a $20 million figure. We should be able to say on average that this is going to reduce the $45 to $20 and the $123 to $100, or something of that magnitude. That concerns me.

Secondly, how does the government envision that it's not going to go back up again? I understand what the minister said: the railways are only one part of a class in a lot of cities or towns. How are we assured that in one year or two years or three years it's not going to be $123 again, and we'll be looking at the same issue all over again?

Hon. E. Cull: If we just look at the $15 million, that is about $15 per $1,000. That would take you from $45 to $30, which is why I suggested the figure of $30. But because that figure is not calculated to the last cent, it could be a little more or a little less. That gives you a ballpark figure of about where it might be. There are some issues that have to be discussed with the municipalities that will potentially affect that figure.

The member asked a very good question: how do you know that this won't just creep back up or that there won't be another...? That's what this legislation is all about. There has been an attempt over two years, through the railway liaison committee, to find some other kind of solution to it; it has gone nowhere. This legislation is a way of saying that we are going to deal with this. We will lower our tax rate immediately, and we will spend the next number of months talking to municipalities about how they can do the same, so that we bring the taxes more into line with fair tax policy, our competitors' tax policy and the needs of keeping the rail industry alive.

D. Symons: Just going back a few minutes, the member for Prince George-Omineca asked a question relating the corporate capital tax to the taxes that could be affected on the railways through this legislation. I think the message he was trying to get out, or the idea he was exploring, was that maybe the corporate capital tax could have been an alternative to what you're putting before the House today. Your answer was to the effect that, well, the corporate capital tax is only a small portion.... I think the figure would have been about one-third of the effect of the property tax on the railways.

But you're not talking about removing the property tax on railways; you're talking about adjusting it downward. So the figures you were giving when you were trying to say that, well, there's one-third...the two-thirds is quite different.... The figures are not all that different, considering you're only bringing that level down somewhat. So the corporate capital tax could still be closer to the savings that may occur because of this.

Interjection.

D. Symons: The minister is shaking her head no. I can hear her all the way over here, so maybe she'd explain why not.

Hon. E. Cull: The weighted average for the property tax is $45 per $1,000. The corporation capital tax for railways would be about $6 per $1,000. The reduction, if it did come down to $30, would be a reduction of $15. So if you try to take the corporation capital tax out, you're not quite all the way there.

However, I don't even know why these members are bringing this point up. I understand the policy of their party is

[ Page 16949 ]

to eliminate the entire $300 million of the corporation capital tax -- except for, I assume, that which applies to banks -- and that would create a far larger problem for the province than simply dealing with a $7 million problem.

The Chair: On the speakers' list, I had the.... That's fine. I will recognize the hon. member for Surrey-Cloverdale. I beg your pardon, Surrey-White Rock.

W. Hurd: I have a brief question that could actually be asked on behalf of the hon. member for Surrey-Cloverdale. I will try to keep it down to half an hour.

I want to read into the record a letter of concern from the mayor and council of the city of White Rock and also the city of Surrey with respect to the impact this legislation would have on the Burlington Northern railroad and the Southern Railway, which run through the cities of Surrey and White Rock. I wonder if the minister could just clarify whether those two private rail companies will be captured or affected in any way by this particular

section of the bill.

Hon. E. Cull: I'm not clear. Is the member going to read the letter into the record? I guess I missed the question.

W. Hurd: I have a letter of concern, seeking clarification, from the mayor of White Rock with respect to the Burlington Northern, but I've also had questions addressed to me verbally from the city council of Surrey seeking clarification with respect to the Southern Railway. This particular letter is addressed to the Premier, actually, seeking clarification on the effects of this particular

section in Bill 55 on the Burlington Northern railroad and the Southern Railway, which are two private rail lines. Of course, Burlington Northern owns the right-of-way along the foreshore of White Rock, and its terminus is at the CN station in downtown Vancouver. I was just seeking clarification on behalf of those two community mayors and councils as to what impact this

section would have on those two rail lines and on the revenues that the municipalities would derive from those two rail lines.

Hon. E. Cull: Staff have met with Burlington Northern and Southern Railway, and there does not seem to be any significant impact one way or another on these railways. With respect to Surrey or other large urban municipalities, the impact on their property taxes would be extremely small, given the size of the tax base and the relative size of the railway tax property to the overall tax base. If you have a look at the impacts on various municipalities, the larger the community, even with significant rail property in it, the smaller the impact -- it's in order of magnitude, and the rail property just becomes insignificant in the overall calculations.

W. Hurd: I think the concern being expressed by the mayor of White Rock was that some competitive advantage may be conferred on CN and CP at the expense of Burlington Northern. He was seeking clarification as to whether an unfair trading or competitive advantage was in any way being conferred on CN and CP, who are, I guess, direct competitors with the Burlington Northern railway. He was seeking clarification on that point, and I am seeking clarification in this committee on his behalf.

Hon. E. Cull: All of the commercial railways will be treated the same way, so there would be no advantage to Burlington Northern or Southern.

C. Serwa: I have a few questions on this, but I want to clarify something that my colleague from West Vancouver-Garibaldi said indicating that there was some role reversal here. It's not true; the New Democrats have always been strong on big government, big unions and big business. They work hand in hand, so I'm not concerned about that.

I'm going to ask a couple more questions of the minister in order to understand the magnitude of the challenge facing the railways. Perhaps the minister would tell me: of the total taxes paid by CN and CP railways last year for property taxes.... We're talking about a reduction of perhaps $15 million, but how does that relate to the total taxes paid? Is it significant or insignificant?

Hon. E. Cull: The total property taxes paid are about $44 million.

C. Serwa: When you say total, I presume that is to the province, to the regional districts and to municipalities.

Could the minister advise how many miles of track are involved in CP and CN lines that are presently taxed at this linear rate? In response to an earlier question of mine, the minister said that municipalities get approximately $4,000 or $4,500 of that $12,000 tax per statute kilometre. In answering another question she indicated that most of the properties within the municipalities are owned by subsidiary companies of the railways who pay under class 6. You can't have it both ways.

Hon. E. Cull: I think the member is misunderstanding the way the information has been presented. Looking across the country, for comparative purposes we have calculated property tax based on the track miles for the various railways. I don't have the aggregate number of miles that are in track. That's just a way of being able to say: "How do you compare B.C.'s property taxes to Alberta's?" You have to have some basis for comparison. It can't be based on what CN paid in Alberta and what it paid in B.C., because there might be a different amount of property. So we've used the mile to be able to do that.

[8:00]

The taxes are not paid on a mileage basis; they're paid on the assessed value or the commissioner rate for each part of the operation within the province. Those communities which have more valuable properties like switching yards, etc., would pay a higher tax than a municipality that simply has a track running through it.

C. Serwa: I have one last question, because I'm still not satisfied with the clarification. There are two different areas, and I want to talk specifically about the linear statute taxation of CN or CP main-line tracks going through British Columbia. Never mind what is in a municipality at the moment. What I'm trying to determine is the amount of taxes actually paid per linear mile or kilometre, because the assessment is fixed by statute. It's not a variable assessment. What is that cost per kilometre, for example? The ministry has had to have done its homework on this.

I don't know where the figures have come from. It's very, very difficult to understand how something could go this far with the inability to answer really straightforward questions, and without either challenging information or being able to provide information to this side of the House.

[ Page 16950 ]

[H. Giesbrecht in the chair.]

Hon. E. Cull: The tax that is paid for tracks outside municipalities varies from regional district to regional district based on their tax rate. But if you aggregate it for the province, it's about $1,500 per mile. It will vary. In some regional districts it will be lower, and in other regional districts it will be higher. But essentially, that's the average across the regional districts.

L. Fox: I have a couple of further questions. What has been very clear throughout the discussion is that the government has made a unilateral decision that they're going to reduce a segment of the municipal tax base. They haven't done a lot of homework in terms of what the real problems are. Notwithstanding that, I guess one of the last observations I want to make and have the minister comment on is

section 27.1(1)(a) -- I find that rather interesting. It reads: "...excluding from the definition of 'improvements' bridges, trestles, viaducts, overpasses and similar things that carry track in place of a railway corporation...."

Number one, I have difficulty understanding what "in place of a railway corporation" means. Number two, I find it amazing that these are not considered assets in terms of this legislation. Almost daily we hear from this government that we're acquiring assets when we build a bridge, a road or a school. I have some difficulty with balancing the objective where if it concerns a railroad, it's not a taxable or an assessable asset, yet when it comes to government borrowing money in their tax-and-spend policies, similar structures are considered assets.

Hon. E. Cull: The simple answer to that one is that no other jurisdiction in North America that we're aware of taxes on that basis. That's why the power is there to make regulations to exempt them from those "improvements." We're also, though, experiencing difficulties with some of the

definitions: when is a bridge a bridge, and when is it a culvert-and-fill situation? There have been court cases that have actually tried to resolve that matter. Not clarifying it has some rather strange consequences that are unintended, from the tax policy standpoint, in terms of what actually gets built. You don't want tax policy to start determining whether you build a bridge or whether you do a culvert.

G. Wilson: Certainly from our point of view, this has been a really informative debate, and I must confess that we're moving dangerously close to even supporting this section. I have three questions for the minister.

The first question is with respect to the establishment of the formula. Are the municipalities affected going to be directly involved in the negotiations on how that formula will be created? Will they be involved in the creation of the formula?

Hon. E. Cull: Yes.

G. Wilson: The second question is: has the government consulted with the port of Vancouver and the port of Prince Rupert in terms of the impact of this legislation -- and if so, what is the extent of the consultation that has taken place?

Hon. E. Cull: The Gateway Council -- which takes in the various users, such as the port authority, Vancouver International Airport, the rail companies, etc. -- has been consulted on this and is in support of this, because of the obvious significant impacts of not taking action on the port of Vancouver. I'm not sure about the port of Prince Rupert. I'm not certain of exactly what consultation staff have had there, and perhaps I can get someone to answer that before the debate concludes.

G. Wilson: The last question then.... I actually didn't quite hear what the minister said in the first.... She said the Gateway...?

Hon. E. Cull: There is a council called the Greater Vancouver Gateway Council, which has.... Is the member aware of it?

G. Wilson: Yes.

Hon. E. Cull: Then I won't explain it.

G. Wilson: The last question that I have on this

section is: can the minister tell us whether or not there has been consultation with the affected railways in terms of the capital investments they are prepared to commit to undertake as a result of this legislation, and how that capital investment might benefit, in fact, the affected municipalities? The Premier, in his estimates, made it clear that there was going to be a commitment to make sure that there would be, out of capital investments coming out of this legislation, dollars going into those affected municipalities.

I wonder if there is even something like a list of those investments or some kind of understanding of what they may be, and when we might actually see them, so it's not such a tenuous promise as has been made to date.

Hon. E. Cull: There has been extensive discussion with the railways with respect to investments, and that discussion is continuing. It is not concluded. I can't table a list. Obviously, the railways themselves would want to finalize some of those things with their boards of directors and make the announcements, and not simply have them discussed here in this debate.

G. Wilson: With respect to those investments, does the minister have a kind of ballpark figure of what the value of those investments might be over the next year or three years, say, in British Columbia?

Hon. E. Cull: Yes, there is a ballpark figure. It's at least $100 million.

F. Gingell: I was just waiting until what I hoped would be the end of a rather long discussion on

section 3. I'd like to suggest to the minister, in her role as Minister of Finance, that this particular subject deals with a tax reform that needs to be dealt with in a much wider spectrum than we're dealing with here. I think that members of the opposition, of all political stripes, have been concerned about the rather ad hoc way that we see this being carried out. This is a subject that has been a matter of discussion for some years, and it cannot be looked at in isolation. It needs to be seen as a larger package.

Besides saying that, I'd also like to respond to the issue the Premier brought up earlier in the debate when he spoke about the consequences of the Crow rate. It really shocks me

[ Page 16951 ]

that the Premier has been asleep for 11 years, because getting rid of the Crow rate has been a matter of active discussion between farmers, all the provinces and the federal governments since.... Well, I first got involved in 1985, and I remember it well. Everyone has been aware that the Crow rate was something that had to be dealt with, so for the Premier to bring that up as something that was suddenly thrown at the province clearly leaves the question of what he's been listening to and how he's been following these important issues somewhat up in the air.

[8:15]

Section 3 of Bill 55 approved on the following division:

YEAS -- 40

Pement

Priddy

Cashore

Zirnhelt

Charbonneau

O'Neill

Garden

Kasper

Hammell

B. Jones

Lortie

Miller

Cull

Harcourt

Gabelmann

MacPhail

Ramsey

Barlee

Sihota

Evans

Randall

Beattie

Farnworth

Conroy

Doyle

Janssen

Lord

Simpson

Sawicki

Jackson

Tyabji

Wilson

Mitchell

Krog

Brewin

Copping

Schreck

Lali

Hartley

Boone

NAYS -- 19

Dalton

Warnke

Reid

Campbell

Farrell-Collins

Hurd

Gingell

Stephens

Weisgerber

Hanson

Serwa

Chisholm

Neufeld

Fox

de Jong

van Dongen

K. Jones

Symons

Anderson

section 4.

D. Mitchell:

Section 4 of Bill 55 deals with the British Columbia Railway Act, and this is a significant amendment. In some respects it has been long-awaited, because historically B.C. Rail has never paid any property taxes.

According to this amendment, we are now going to see something called annual grants, not grants in lieu, which is terminology that has been used; the minister herself has used the phrase "grants in lieu of taxes." Under this amendment we see that "with the approval of the Lieutenant-Governor-in-Council" -- with the approval of cabinet -- "the company may make" -- not "shall," and I want to question the minister on the wording in this section; the company, B.C. Rail in this case, "may make" -- "in relation to property of the company or a subsidiary that is within an applicable area, annual grants to (

a) municipalities and other local governments...."

I think it is important to understand the terminology of this amendment. I do note that I have an amendment to this

section on the order paper that I'd like to move. But before I move that amendment, I'd like to make sure that I understand from the Minister of Finance why it is that discretion is being given to cabinet and to this particular Crown corporation that is not binding; the terminology here is the word "may," not "shall." And why are we using the term "annual grants," not "grants in lieu of taxes"? Is this grant going to be tied to property taxation at all? I think that the terminology is important, and before I move my amendment I'd like to get some clarification of that.

Hon. E. Cull: The words "annual grants" are the same as "grants in lieu." I use the word "grants in lieu" because I think that that's what most municipalities use, and they understand it, but other acts that provide for Crown corporations to make payments in lieu of taxes are sometimes referred to as payments and sometimes annual grants. There isn't a standard word that is used in legislation, and this wording will give the effect of what we want to do.

While it says "may," it gives the Crown corporation authority to do so; but if the Lieutenant-Governor-in-Council makes the regulations to allow this to occur, the Crown corporation will pay the grants in lieu as the other Crown corporations do.

That brings me to the third part of the question, which is anticipating your amendment, I guess. I don't know whether we should speak to it before it's there or not. We spoke about this very quickly in the last section. There is another objective being sought here, and that is to try to get the Crown corporations onto a similar footing.

Taxes are paid on behalf of this Legislature building to the city of Victoria, for instance, but there are other Crown agencies such as Ferries or Hydro, or some agencies that are not Crown but are public, like hospitals, colleges or universities, that all have different rules and different amounts that they pay. There isn't any particular logic when you look at it. It has been built up over a period of time and has resulted in a bit of a hodgepodge when it comes to what Crown corporations and other publicly owned properties do with respect to property taxes.

I have had a number of meetings with the Union of B.C. Municipalities on this. In the earlier discussion, I talked about the fact that in some cases I've had different groupings of municipalities coming in and saying, "This is the most important property tax issue," and they're referring to colleges and universities. Then the next group comes in and says, "No, this is the most important one, and we have a study to prove it," and they're referring to B.C. Rail. Then the next one comes in.

What we're attempting to do with the Crown corporations and public properties generally is to try to make something rational out of the system. We have to acknowledge that we cannot afford to do it overnight, and the Union of B.C. Municipalities understands that. They have accepted that what they want to negotiate with us is a process and a timetable that says what's the ideal and what's fair, and that shows that everybody is treated similarly. We would like a timetable to move us toward that in some reasonable time frame.

There is nothing specified in here that ties it to an industrial tax rate or a particular class of tax rate, and that would be unusual in comparison to the others. What we are attempting to do, first and foremost, is to bring the Crowns into some kind of conformity with one another. Your issue may be one for a much later day.

[ Page 16952 ]

D. Mitchell: I understand what the minister is saying on this. This is indeed one important issue, and I agree with the UBCM position on B.C. Rail property taxation. I'm somewhat disappointed that the term "may" is in here, giving that discretion, although I accept the minister's explanation on this. I think that a lot of communities along the B.C. Rail line would have felt happier if this new law had mandated no option not to make grants in lieu of taxes from B.C. Rail mandatory, so that there is no discretion. The word "shall" should be here instead of "may."

Having said that, the minister says that the term "annual grants" in this amendment means grants in lieu, and I accept the minister's explanation of that. There has been some concern about whether grants are grants in lieu of taxes. The minister says they are, and her word in this committee will have to be the guarantee of that.

But when she says that what's being attempted here is to put B.C. Rail on an equal footing with other Crown corporations, that doesn't jibe with the

section of this bill that we just dealt with. According to what the minister said about the previous

section of this bill, we should be trying to put B.C. Rail on an equal footing with other railways in British Columbia -- not other Crown corporations, but other competitive rail operations. That's what we should be seeking to do, and I think I heard the minister say that there was going to be an attempt to put the B.C. Railway Company on an equal footing with other railways, whether it be CN, which is about to be privatized by the federal government, or Canadian Pacific, which has operated in British Columbia ever since there was a British Columbia. That should be the objective.

I think the grants that are referred to in this amendment which are grants in lieu of taxes, the minister says, should be tied to the local industrial tax rate for property, because that would put B.C. Rail effectively on something approximating an equal footing with the other railways. So hon. Chair, for that reason, I would like to move the amendment standing in my name on the order paper.

[SECTION 4, British Columbia Railway Act, proposed new

section 1.5 (3) be amended by adding after the words "annual grants" the following words, "that approximate the local industrial tax rate for the property".]

I think this amendment has the effect of getting us closer to having B.C. Rail operating on an equal footing with other railways and paying a grant in lieu of taxes that is tied to something. It's not tied to what B.C. Hydro or the B.C. Ferry Corporation or other Crown corporations such as ICBC pay, because that doesn't make sense. But paying a grant in lieu of taxes to communities where B.C. Rail operates is close to what CN or CP pays, which is tied to the local industrial tax rate. Only with that kind of guarantee will the communities along the B.C.

Rail line be satisfied -- some 20 municipalities and regional districts, I think. So in that spirit, I hope that the minister will accept the intent of this amendment.

Hon. E. Cull: I understand the intent of the amendment, and in some ways I may even have some sympathy towards it. The class the member has suggested is the wrong class. It would not be the industrial class. It would be the utilities class to put it in with other railways. I will be speaking against the amendment, because at this point we're trying to get them assessed the same as the other railways. That will come about as a result of the legislation we're passing. The whole question of the amount of grants and what the grants in lieu are and how you tie those back to the tax rate is something that is for negotiation with the Union of B.C. Municipalities.

The Chair: Before I recognize the member, the Chair was rather hoping the member wouldn't move the amendment, as the advice offered the Chair has been that the amendment is out of order. It would allow the recipient, the municipality, to determine the amount of the grant, thereby imposing an obligation on the Crown. So on that basis, the Chair would rule that the amendment is out of order.

D. Mitchell: The minister said that the utility tax rate would be involved here to make it consistent with other railways. I accept her opinion on that, and I would urge her to see that that's done.

On the previous

section of the bill, the minister talked about the need to develop a competitive rail system and transportation infrastructure in the province. This crucial

section of the bill deals with B.C. Rail, the third-largest railway in Canada and one of the most important and profitable Crown corporations today in British Columbia.

An Hon. Member: Not this year.

D. Mitchell: As profitable as it has been in recent years -- $40 million net income.

I think it is threatened by the same forces as CN and CP, which the minister referred to in the previous section. We want to ensure that the communities along the B.C. Rail line receive their fair share of property taxation. The grants that are referred to are non-specific. The minister says that they will receive a grant. That's the first time, so that will be an important precedent. Communities along the B.C. Rail line are looking forward to receiving a grant in lieu of taxation. If it's not going to be tied to the utility tax rate for the property, what is it going to be tied to?

[8:30]

The minister says that that's going to be open to negotiations which will take place with the UBCM and, hopefully, with the communities affected, taking into account different local conditions along the B.C. Rail line, which stretches from North Vancouver and the port of Vancouver all the way through the province. But what will the grant be tied to? What will the negotiations be based upon? We heard in the previous

section about adjustment factors that are going to be taken into account in dealing with the other railways. Will there be similar adjustment factors here? Will there be a guarantee that communities along the B.C. Rail line will get at least their fair share of property taxation when compared with any other communities that have the ability to tax other railways in the province?

Hon. E. Cull: The reason that B.C. Rail exists and doesn't pay property taxes is that it has not been a commercial railway per se. It hasn't just been a commercial private sector enterprise. It's had a social policy function in opening up the province and extending rail into areas that would not have had rail if we had been waiting for the private sector to do so. Until a couple of years ago a subsidy was paid by the taxpayers to B.C. Rail. That has now been eliminated, and they're

[ Page 16953 ]

managing to do that on their own. They are still pursuing a social policy mandate as well as a commercial mandate. That's one of the reasons we are not just lumping them all together and putting them onto the commercial footing and saying they go immediately to the CN and CP model.

How the property is valued, which we canvassed extensively in the last

section -- some might say too extensively -- will be the same for B.C. Rail, because we'll need a similar basis for valuing the property. How we determine what is paid, what the grants are and what the payments are will not only relate to what the taxes would be if it was in the utility class -- which is something that obviously the municipalities will want to take a look at as they enter into these discussions. It also has to take into consideration the other part of the issue that I mentioned, which is other Crown corporations trying to get onto an equal footing there.

It will also have to take into consideration the social benefits that are being provided for the province as a whole in having B.C. Rail as a Crown corporation and what we continue to do with that.

So we'll be negotiating with the municipalities what the grants in lieu should be. We'll be taking a step toward conformity with the other rail companies by moving onto a similar assessment determination process. We have told the Union of B.C. Municipalities that this is an issue of tax fairness, and it's an issue of making sure that all jurisdictions are getting what they should get for the services they have to provide, whether it's rail or other public services. But it's a first step in a long process. To do it overnight would simply be impossible under the fiscal realities of 1995.

D. Mitchell: One further question on this point. Presumably the minister and the government of British Columbia would have done some calculations and would have some projections as to what the total liability for grants by this Crown corporation to communities along the line would be. Even though there is a process of negotiation, I'm sure there must be a range.

We know that the task force at UBCM has done some good work in the past and that there have been other estimations as to what the total payment of taxes by this Crown corporation would be if it actually had to pay property taxes based upon assessed value of property along the B.C. Rail line. Can the minister inform the committee if she has an estimate or projection based upon the plan that she has for grants in lieu of taxation by B.C. Rail to all communities affected?

Hon. E. Cull: Currently, B.C. Rail and BCR Properties pay about $1 million in grants in lieu. Vancouver Wharves Ltd., which was acquired by B.C. Rail, pays another $2 million to North Vancouver. We discussed a little bit earlier that some properties that are owned by B.C. Rail do pay taxes. So there's about $3 million being paid right now to a number of different communities. Incrementally, we estimate the increase will be somewhat on the order of $2 million to $3 million.

D. Symons: I have very few words to say on this section. I guess the first few words are: it's about time. As I mentioned earlier in the evening, I was at a meeting of the communities affected by B.C. Rail along the route. I was part of a subcommittee of the UBCM, and I was sorry not to see any government members at that meeting. They were discussing the issues that are here, and I think you should have got around to at least getting into the consultation side considerably earlier than you have. Nevertheless, better late than never, so let's go for it.

Hon. E. Cull: Not to let that one pass, there were the Minister of Employment and Investment, myself, the Minister of Municipal Affairs, and representatives from the Ministry of Transportation and Highways. A number of us had a lengthy meeting with the same group. They asked to meet with us specifically, and we did so.

G. Wilson: It's unusual in committee that we get into the detail of a debate that has become so compelling as to actually change people's opinions. I think it's encouraging when we see that there can be a level of debate and discussion that can actually make elected members make decisions that are perhaps different than their initial inclination when they come into a debate.

I must say that my initial inclination on this

section was to say: "All right, we'll go for it; let's do it." Now I'm hearing from the minister that she's talking about an incremental value of about $3 million. That seems to me to be really low. I would have thought, based on the '93 assessed values, that we would have been looking at a rate of full value paid of about $20 million. If we're only talking about $3 million, that strikes me as being exceedingly low. In fact, it's a token.

Hon. E. Cull: Relative to the other railways, B.C. Rail doesn't have as much property. So while the amount seems small, it's related to the fact that there isn't as much assessed value to tax. The $2 million to $3 million is a doubling of what they're paying right now, and while it wouldn't take them all the way to full utilities class taxation.... As you know, we just extensively debated bringing that rate down, so it's a little hard to know exactly where that would be. It might be a lot closer than you think. The numbers do seem small, but compared to....

We were talking only a few minutes ago about only $40 million for all of the railways in the province, which are more extensive than B.C. Rail in terms of their properties.

D. Symons: Just one last question -- I thought my last one was my last one. We just passed some amendments in

section 3 to do with the Assessment Act. Does B.C. Rail come under the Assessment Act? Therefore does everything that was passed in

section 3 of this particular bill apply to

section 4 as well? Various negotiations are going on regarding the various types of structures that may or may not be taxed by the municipalities. Will that also be in effect for B.C. Rail?

Hon. E. Cull: Anything that's assessed is assessed by the Assessment Authority, and the rules will apply. So to determine the value for paying grants in lieu, it will have to be assessed, and the rules that we just passed in

section 3 would apply.

R. Neufeld: Quickly, the doubling from $3 million.... The incremental increase will be approximately $3 million. Would that mean that the $2 million that's paid by Vancouver Wharves will double to $4 million, and what we'll really see for the rest of the rail line is just another $1 million?

Hon. E. Cull: No, the doubling referred to the fact that B.C. Rail pays about $3 million right now. The incremental

[ Page 16954 ]

would be up to another $3 million, so that would be $6 million; that would be double. Vancouver Wharves is paying full taxation right now.

C. Serwa: In listening to this, I'm reminded of the words of W.A.C. Bennett, when he said: "Equal opportunity for all; special privileges for none." When I'm saying that, I refer to the fact that B.C. Rail is different than all of the other Crown corporations. It's different, because it's in competition with other carriers -- one a national public carrier and one a national private carrier --

whereas the other Crown corporations fundamentally are monopolies. There is a significant difference there.

The minister's argument for special treatment for B.C. Rail was because of the social aspects of B.C. Rail. I'm quite confident that there are great social aspects from CN and CP as well, so I wonder about the validity of that argument.

It does seem to me that while this is at least a tentative step in the right direction, there are some questions that I would like to ask. First of all, the taxpayer has already picked up the debt of B.C. Rail. It wasn't as if this Crown corporation generated revenue and retired its debt; the public, the taxpayers of British Columbia, picked up that debt. The public, the taxpayers of British Columbia, also built the rail extension into northeast coal, and a significant amount of revenue has accrued to B.C. Rail because of that.

In short, it seems that the government would be far more sensitive to the unfair treatment, which we were discussing in the previous section, that impacts other railways. I recognize that there is a great deal of disparity with the various municipalities in British Columbia, and perhaps a high one with respect to taxation is the city of Vancouver. But if B.C. Rail had to pay property taxes to municipalities, perhaps the government would more closely watch this diversity of taxation and take more effective steps.

It seems to me, seeing that it is in competition with the other railways, that it is not even fair to talk about a profit when the base costs are not even factored in. They're working on a subsidized product to start with.

The final thing I'd like the minister to respond to is: what sort of dividend will B.C. Rail pay to the province, in comparison to the $2 million or $3 million that the minister is talking about in lieu of taxes or grants to communities along the way?

Hon. E. Cull: The dividend was eliminated at the same time that we eliminated the subsidy. There's no dividend paid by B.C. Rail.

G. Wilson: Just one quick question; I want to come back to it, having had a chance to think a little about the minister's answer. It strikes me that virtually all the property tax currently paid by B.C. Rail, if I'm not mistaken, is paid largely out of their headquarters, which is in one municipality in North Vancouver. It's paid predominantly to that jurisdiction. Is the minister saying, then, with this

section of the bill implemented, that there's only going to be an equivalent amount collected for all their railway trackage and property, or land holdings in Squamish, Prince George, etc. -- that it's going to be equivalent to what they're now paying for their headquarters in North Vancouver?

[8:45]

Hon. E. Cull: The member is correct. The $1 million that's paid to North Vancouver for their headquarters operation is paid just to the one municipality. The $2 million to $3 million more will be paid to other municipalities that have trackage or other rail property in them. So the benefits, right now, go essentially to one municipality. With this change, more municipalities will receive grants in lieu than currently do.

G. Wilson: There are going to be a number of municipalities, certainly a few councillors I've talked to, that are going to be a little disappointed at what is going to be coming their way, if that's the case. There was an expectation that there would be a considerably higher amount paid. I wonder if the minister might just very quickly provide a justification, then, for not moving them closer to what would be the utility rate, and why they wouldn't.... I recognize that there's a "social policy," or whatever it was the minister said, with B.C. Rail. But it still strikes me that there's an inequity there.

The municipalities had anticipated considerably more than we're hearing from the minister tonight.

Hon. E. Cull: There are two factors, both of which I've talked about before. One is the comparability to other Crowns, putting them on that footing so there's some equity across the Crowns. The other is the matter that has been discussed with the Union of B.C. Municipalities, including municipalities affected not only by rail but by other grants in lieu from Crown operations: the immediate moving to full taxation is just not affordable. The municipalities understand that, too. They're looking for the commitment that we'll get there, that there will be a timetable and that there will be payments made. That's what I've committed to negotiating with them.

D. Mitchell: This amendment is an important first step. Communities along the B.C. Rail line, more than 20 municipalities or regional districts, have been calling for years -- generations, in fact -- to have this Crown corporation pay its full share or a share of property taxes.

Now we have expectations that have been built up. When the hon. minister brought in her budget earlier in this session with the promise that we would finally be moving in this direction, towards a grant in lieu of taxes, there was a confirmation of an expectation that the grant that would be paid by B.C. Rail to the communities would be something approximate to property taxes that would be paid. The estimate of those taxes on B.C. Rail properties, stretching from North Vancouver all the way to the Peace River country, is certainly a lot higher than the incremental $2 million to $3 million the minister is talking about.

While this is a good first step, my fear and my real concern is that a number of communities are going to be very mightily disappointed when they find out that what they're going to be receiving under this plan is a small fraction of the estimates made by UBCM and other groups over the years as to what something approximating a fair level of property taxation is. I think the minister is making a mistake by trying to compare this particular commercial Crown corporation with other Crown corporations; this doesn't bear any relationship to what the full utility tax rate would be. The comparability should be with other rail enterprises in British Columbia.

I think that the debate we had under the previous

section confirms that the minister believes in principle that there should be a level playing field for all railways in the province, including B.C. Rail. My fear is that when I look at

commu-

[ Page 16955 ]

nities in my own constituency -- whether it be West Vancouver, Lions Bay, Squamish, Whistler, the village of Pemberton or the regional district -- there's going to be some real disappointment. We're only talking about a fraction of the payments that those communities, those local governments, have been expecting, which they believed the government was promising in the budget that came down.

I've got to say to the minister that while I'd like to support this amendment in principle, because of the disappointment that she seems to be indicating is going to be delivered with this section, it's going to be impossible for me -- as a member who tries to represent a riding that's partially affected -- to support this kind of legislation. It's going to be a sad and disappointing day if this bill should be passed into law.

Hon. E. Cull: I don't know what figures the member is working from, because he just talked about it being a fraction of what the expectations are. If the expectations are of that size, they are even out of line with the existing system. If we were to tax B.C. Rail under the existing utilities class, it would only generate about $6 million worth of additional tax revenue. So when you're talking about a fraction.... I guess one-half is a fraction, but a fraction to me always sounds like something very small, as opposed to moving half the way to full taxation in one step.

When we dealt with the question of grants in lieu for colleges and universities, the Union of B.C. Municipalities accepted the fact that there was a $2.2 million pot and that it would not take them all the way to full taxation. But they accept that because it is better than where they were the year before. What they wanted was a commitment that the government was moving in a progressive way to addressing these issues.

There are many issues of Crown corporations not paying for the services provided to them in the community because of the hodgepodge of rules that has built up over the past. There are inequities between municipalities, some of which are fortunate enough to have a Crown corporation that pays grants in lieu and gets them additional revenue; others don't. What we're trying to do is address that issue, first and foremost.

As you've said yourself, it's a first step, and I think the municipalities understand that it's a first step. They're willing to sit down and discuss that with us in good faith -- that one step leads to another -- and as we can afford to negotiate with the municipalities, we'll proceed down this path to a fairer system for everyone.

D. Mitchell: Just one further question, then. I just want to seek some clarification, to make sure I understand this.

The minister says that head office, or existing taxation paid by B.C. Rail, is about $3 million in total. I guess one question worth exploring is whether or not that is now going to come down -- whether that existing $3 million is going to be reduced at all or whether it will stay the same.

The second question is whether the current tax liability of B.C. Rail, if it were to pay full property taxation for all the properties it owns, would be in the range of $6 million, as the minister says. That's one estimate that I've heard as well. And if she says that the incremental value that's going to be paid is perhaps as much as $3 million, so we're looking at something perhaps close to 50 percent, does that mean that a community such as Squamish -- which is a community in my constituency that I'll just use as an example because it has significant B.C.

Rail properties and railyards -- which might have received something close to $800,000 or more if full property taxation was paid, might expect to see something like half of that, $400,000 or so, under the grants that are offered in this section? Would that be the order of magnitude that we're talking about?

Hon. E. Cull: I don't want to get into specific numbers for particular communities, even making rough guesses, because I'm certain that municipalities will be looking at this, and if I'm wrong, they'll be disappointed, particularly if I'm wrong in the wrong direction. But the kind of calculation you're doing.... Squamish, Fort Nelson and Prince George, all of which have significant B.C. Rail properties, will benefit significantly from the grants in lieu. It will certainly be more than what they're receiving now. B.C.

Rail is paying the $1 million for its headquarters to North Vancouver, and they're not paying anything to anyone else. This $2 million to $3 million will go to benefit those communities that are receiving nothing right now but do have assessed properties within their jurisdiction.

F. Gingell: I wish to take the minister up and maybe have her explain a little on something she mentioned in passing, which was that dividends from B.C. Rail were eliminated at the time the subsidies ceased. That doesn't quite make sense to me. I wonder whether the articles of association or the memorandum of the corporation had been changed to forbid the payment of dividends to the shareholders. I believe that all the redeemable preferred shares have now been redeemed, and the only shares outstanding belong either to government or to government funds.

If there are any preferred shares left, I'm sure those dividends would not have been eliminated. I wonder if any action had been taken by changing the articles or the memorandum, or if there was some government fiat that stopped the payment of dividends, and I wonder why you made the remark.

Hon. E. Cull: I'm not aware of whether there was any change to their memorandum or articles to do that. I made the remark simply because the member seemed to be under the impression that B.C. Rail was paying a dividend to the government, and I was correcting the record.

D. Mitchell: I have just one further question on this. The minister will remember that during the Ministry of Finance and Corporate Relations estimates this year, we had an interesting and informative exchange over the possible privatization of B.C. Rail. I guess that the only way B.C. Rail would pay its full share of property taxation under the current circumstances would be if it was completely privatized. The minister has indicated that something like 50 percent of full taxation is going to go to communities. That is a good first step, I suppose, and on that basis I think I can support this.

But can I ask the minister: is the attempt to put B.C. Rail on a similar or equal footing to other railways operating in British Columbia possibly a prelude to its potential privatization?

[ Page 16956 ]

Hon. E. Cull: No, there isn't a connection between what we're doing here and any studies that might be done with respect to B.C. Rail. It continues to operate a number of non-commercial or non-economic runs, the run to Fort Nelson being one and the Royal Hudson being a second.

Section 4 approved.

section 5.

D. Mitchell: You're moving awfully fast. When you deal with a bill as complex as Bill 55 and you want to move from one

section to another, it's really like moving a separate bill all in itself. For that reason alone, we need to think a bit about

section 5. Is the hon. Attorney General going to be handling this, or will it be the Minister of Finance? Does the Attorney General need any officials with him now?

Hon. C. Gabelmann: The Attorney General does, but they are on their way and the member should begin.

D. Mitchell:

Section 5 of Bill 55 deals with the British Columbia Transit Act and with the plan for commuter rail service put forward by the hon. Attorney General's colleague, the Minister of Employment and Investment. The problem is that it deals with it after the fact. This is the first time this has come to this assembly, even though the Minister of Employment and Investment has already gone quite a distance toward developing the government's new commuter rail service, which has a big implication for the lower mainland and the Fraser Valley.

If the Minister of Employment and Investment has already done so much in this area and made significant announcements, taken out newspaper ads and preached the praises of the new commuter rail service, then why is this legislation even necessary after the fact? Can the hon. Attorney General -- who may wish to introduce his officials as well, when he gets a chance -- tell us why this is even necessary, given the fact that his colleague has already made so much progress in this regard? Why are we doing this after the fact?

[9:00]

Hon. C. Gabelmann: I don't know whether the member has ridden on this train yet....

Interjections.

Hon. C. Gabelmann: No? Nor have I, nor has anyone else. So it's prior to the fact.

D. Mitchell: Under

section 5 of the act, we're adding a new definition relative to the phrase "public passenger transportation service." I wonder if we could talk about the

definitions that are being added here, because we're talking, first of all, about an "operating agreement," which is one definition. I wonder if this should be amended to include a provision for the tabling of this operating agreement in the Legislature at some point. Wouldn't it be interesting for members of this assembly to actually see the operating agreement for this new commuter rail service? Secondly, why are we substituting a new definition for "public passenger transportation system"? I wonder what a "custom transit service" is, by the minister's definition. If he could enlighten us on that, it would useful.

Hon. C. Gabelmann: It simply allows for the commuter rail concept and operation to be brought in under B.C. Transit, which is not the case now. As to the first question, I don't know that tabling documents ever occurs in

definitions sections.

[G. Brewin in the chair.]

D. Mitchell: I'm not talking about tabling an operating agreement now; I'm just wondering whether at some point it wouldn't be refreshing to have an operating agreement actually tabled in the Legislature for this new service -- which, I suppose, one could argue is tantamount to a Crown corporation. Let me ask a question about

section 6, which adds a new section,

section 10.2, to the act. Why is commuter...?

The Chair: Hon. member, I believe we are on

section 5.

D. Mitchell: Hon. Chair, maybe you could tell us how you wish to proceed. Do you wish to proceed through this

section by section?

The Chair: Yes. Shall

section 5 pass? The hon. member for Richmond Centre.

D. Symons: I want to speak to

section 5, but I would suggest that maybe sections 6 through 11 go together as a unit; it's just a suggestion. On

section 5, in the

definitions of "commuter rail service" and "operating agreement," the words "by the authority" are used. I gather from what's going to follow from

section 5 that what we seem to be doing is taking away the authority for commuter rail that was initially an arm, if you like, of B.C. Transit, and putting the operation of it somewhat under the control of the cabinet, because they're going to make decisions on fares and other things in subsequent sections that we're coming to. But this talks about this system as being operated by the authority, and I don't see a definition of who this authority is. It's obviously not B.C. Transit. Exactly who is the authority that we're talking about here?

Hon. C. Gabelmann: The authority under the act is the B.C. Transit authority or a subsidiary.

D. Symons: I hate to do what I just said a moment ago about not taking the other sections into consideration yet, but it seems that what's coming in

section 6 is that we're taking authority for the operation of this particular operation, commuter rail, away from B.C. Transit, because the Lieutenant-Governor-in-Council is going to have that authority in

section 10.2(3) of

section 6. So I'm not too sure, when you say "the authority" here -- when it's operated by the authority in all the agreements here -- that the authority you've mentioned has much authority left after we get to the next section.

F. Gingell: Shouldn't it be an upper-case A?

Hon. C. Gabelmann: The authority -- in lower case -- is the same as with SkyTrain. It parallels the operation of SkyTrain.

Interjection.

Hon. C. Gabelmann: Wait till we get to the next section, then.

[ Page 16957 ]

Section 5 approved.

section 6.

D. Mitchell:

Section 6 establishes the basis for cost-sharing in relation to the new commuter service. The member for Richmond Centre actually raises a very valid point here. When we look at this section, we have to ask: why is the province taking on what appears to be the complete cost of capitalization and for upgrading rights-of-way and for rolling stock -- unlike SkyTrain, as the hon. Attorney General has indicated it's just going to be the same -- but we haven't seen the province take on the burden or risk of setting fares?

Under the current agreement, my understanding is that the regional transit commission would take a significant share, 68.6 percent, of the operating cost. But changes would be provided for negotiating the other 31.4 percent of the operating cost, which would equate to about $4 million of the total estimated $12 million. That's the point I was trying to make when I suggested that we should have the operating agreement tabled in this Legislature. Wouldn't it be interesting to see what kind of operating agreement had been signed between the province and the transit commission?

All of the revenue from fares is going to the province, it seems, so the transit commission will have to pay this annual $4 million or so out their own resources. They're not broke. They get revenue from gas tax, hydro surcharge and non-residential property tax, I suppose. But other regional transit users will be subsidizing this route. That's the concern I'd like to raise here. Other regional transit users could well be subsidizing this route. I don't think they're going to be asked to get any of the $4 million annually out of the Fraser Valley region.

So maybe the minister could tell us: what is the province going to be taking out of the region in terms of revenue? Do the minister or his officials have any ideas as to what they're going to be taking out of this region in terms of revenue, and whether other regions are going to be effectively subsidizing this transit service?

Hon. C. Gabelmann: Those are questions that should go to the minister responsible during his estimates next year. As far as this

section of the bill is concerned, the provisions here are the same as exist in the existing legislation, with the exception of the fact that the commuter rail will be crossing both municipalities and the regional district. Because of the regional district involvement, different language is required.

D. Symons: I get to subsection 10.2(2) of this, where it says:

"For the purposes of this section, the Lieutenant Governor in Council may prescribe

(

a) classes of expenditures which shall be taken into account in determining the annual cost of the commuter rail service referred to in subsection (1), and

(

b) the portions of the annual cost to be contributed by the authority, the municipality and the regional transit commission under subsection (1) and, for that purpose, may prescribe that the authority, the municipality or the commission shall pay none or all or different portions of the prescribed classes of expenditures."

Now, we have quite a mouthful there. But it seems that we have here something considerably different than the operation of current transit systems in the lower mainland. Indeed, there is basically a formula set that prescribes how much will come from the fare box. That's in consultation with the community. But also the other

part is set, that a certain portion of it will be raised within the community through fuel taxes or taxes on your hydro bill, and the remainder of it is subsidy from the government.

There seems to be absolutely no provision whatsoever in here for some similar thing for the operation of this as a whole. When we look back at subsection (1), it seems that you're going to hive this off into separate municipal portions for dealing with this situation that currently applies, basically, to the whole lower mainland regional transit authority. This seems to be a different set, where each municipality that's affected by commuter rail is going to have its own set of negotiations.

Hon. C. Gabelmann: No. Before I go on to that, I should clarify. I misspoke myself earlier in talking about regional districts.

The difficulty that has to be addressed by this particular

section is the fact that the commuter rail goes outside the Vancouver Regional Transit Commission area. It goes into Mission, as well. Therefore everything in this

section is the same as it is now, with the exception of the adding of the term "municipality." That is added to deal with the fact that the municipal transit system applies in Mission, and we need to be able to negotiate an arrangement with them as part of this integrated service. So I think it's straightforward. It's simply to deal with the fact of Mission.

D. Symons: I take the minister's point there. I think that's a valid point if you're saying that it's simply making the same rules for Mission in relationship to commuter rail as the rest of the service will have in relation to general transit issues.

Later on we're going to use the term "service area" -- I can't find it exactly at the moment, but it talks about areas that are serviced by commuter rail. If bus routes go from Abbotsford to Mission in order to get ridership up so that they can try and meet their projected ridership -- which is considerably overestimated, I think -- they're going to truck people in from various communities south of the Fraser River to rail terminals on the north side, such as from Abbotsford into Mission. Will Abbotsford, then, also be brought into this as a source of revenue compensating for the costs of the commuter rail service?

Hon. C. Gabelmann: The busing of passengers from Abbotsford over the river to catch the SkyTrain would be under the authority of the various municipal systems of B.C. Transit. So arrangements would then be negotiated to deal with that issue if in fact a bus line goes from one municipality to another. That's something that would be organized under the municipal systems part of B.C. Transit.

D. Symons: Just one last point on that. I'm reading the beginning of subsection (1): "Where a commuter rail service is operated in

part in a municipality and in part within a regional transit service area...." I am given to understand that they're going to reconfigure the bus lines in the Fraser Valley in order to feed into the commuter rail terminals. If you do that, then basically those areas serviced by the bus lines

[ Page 16958 ]

that feed into them will become part of this thing called a "regional transit service area." Then the remaining portions of this, which seem to affect financial support for commuter rail through that municipality, will kick in. Is that the case or not for communities that don't have commuter rail specifically, but could quite easily and conceivably have bus services that would take people to commuter rail stations? You're saying that it's a municipal issue, but the wording here says "within a regional transit service area" -- that is, regional transit serves commuter rail. Does that mean it's included?

Hon. C. Gabelmann: This issue doesn't deal with municipal systems. It doesn't deal with anything other than the commuter rail from Mission to Vancouver. That's what we're dealing with. We're not dealing here with interurban transit; we're not dealing with municipal bus systems.

G. Campbell: If I could just get the minister to deal with some of the principles as opposed to the drafting of this legislation for a minute, currently in the lower mainland there is a B.C. Transit board, a Vancouver Regional Transit Commission, and then there are municipalities. So I want to be clear that when we talk about "the authority," we are talking about the B.C. Transit board. In terms of subsection (2), you have pointed out that "the Lieutenant Governor in Council may prescribe..." -- and it goes on, as was mentioned earlier.

The questions I have are: have there been any discussions with the municipalities or with the regional transit commission? Is the government talking about the prescription for revenue-sharing being basically the same basis as currently takes place? Will the government be following the pronouncements that the Premier has made in the past, that any unilateral decisions will be paid for by the party that makes them? Or are they now deciding that they are going to move forward and impose solutions on both the transit commission and the municipalities that are directly affected or directly serviced by the commuter rail service?

Hon. C. Gabelmann: I think the best way of answering those questions is to say that the amendment that we're dealing with has actually been requested by both Mission and the Vancouver Regional Transit Commission, and that's why it is here.

G. Campbell: In terms of the consultations with those groups so far, have the consultations been formed around reaching a similar agreement to the one that currently exists with the transit commission, or are we looking at a totally different formula for funding the commuter rail service?

[9:15]

Hon. C. Gabelmann: I think the Leader of the Opposition knows that there have been extensive consultations with both the region and Mission. The formula that would evolve from those negotiations obviously isn't complete. It will be different, no doubt, from the existing arrangement, but not significantly different.

G. Campbell: Can I go to class 3 for a second? One of the critical components of the Vancouver Regional Transit Commission, at least, has been the integrated nature of both the service and the fare structures. One of the concerns that I have as a result of the suggestions that are contained in this piece of legislation is that we may lose that opportunity for integration. I would like the minister to explain how the government intends to integrate the services for commuter rail with the bus service, the SkyTrain service and the SeaBus service, so that we do not lose that sense of integration that currently takes place.

And maybe while you're doing that, you can point out how it will integrate with the municipal transit services that are going to feed into the commuter rail service, which are outside of the Vancouver Regional Transit Commission.

Hon. C. Gabelmann: It will be fully integrated with the Vancouver Regional Transit Commission fare structure. It has to be for it to work effectively.

As for the second question with respect to neighbouring municipal systems, I can't answer that question right now. That is something that will have to evolve.

G. Campbell: It will be fully integrated. Will the fare for the commuter service...? Say you come from Mission to downtown Vancouver: will there be an additional fare to take the SeaBus across to North Vancouver? Will there be an additional fare to connect into Richmond from downtown Vancouver? How do you intend to carry out that operation?

Hon. C. Gabelmann: The fare that one pays at Mission will get that passenger to anywhere in the greater Vancouver transit system coverage area.

F. Gingell: These sections of the act contemplate an arrangement whereby you allocate costs, and you get a portion of the costs recovered, or they are the requirement of the municipalities outside to contribute. The minister will appreciate that there are significant differences in what the opposition believes will be the subsidization required and the amount that the government thinks will be the case. Only time will tell; we shall find out.

Some arrangement must have been made with the municipalities to get them to agree to share these costs. Was that cost-sharing arrangement negotiated on the basis of your current estimates of what the required subsidization will be? Or have they agreed to come into an open-ended arrangement where they will pay a fixed percentage of the net costs of operating the line?

Hon. C. Gabelmann: I'm going to go through a series of points that have been prepared. Members will understand that I'm carrying this for the minister who is involved in the trade issues. It's an area I'm not particularly familiar with, as I'm sure the Leader of the Opposition, who is extremely familiar with this issue, would understand.

First of all, the funding formula has been developed cooperatively by all of the parties over the last few months. The local share of West Coast Express operating costs that the VRTC and the district of Mission would assume, including the cost of rolling stock and debt service, is 12.5 percent of total costs. The West Coast Express funding formula involves a fixed contribution by the VRTC of 31.4 percent, with the remaining 68.6 percent of operating costs to be assumed by the province. The province agrees to fund 100 percent of the cost of infrastructure and rolling stock. The VRTC share of West Coast Express operating costs is the same as its current

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share of Vancouver bus operations. The VRTC will retain similar authority over West Coast Express as it does over other transit services. Finally, the province would receive all West Coast Express revenues to offset its 68.6 percent share of operating costs.

If the people who are helping me say that anything I have said is not correct, we'll soon hear, and if members have any questions, they can try me on for size.

F. Gingell: One recognizes that whether the government's estimates or the opposition's estimates are correct, the Vancouver Regional Transit Commission is going to have to come up with substantially greater amounts of money than it does under the present cost-sharing arrangement. As I understand it, these are all add-ons. This doesn't change the current cost-sharing arrangement. The Vancouver Regional Transit Commission collects its funds by way of gasoline taxes, hydro taxes and some other t