May 13, 1997

PUBLIC

ACCOUNTS COMMITTEE

The Committee met at 9:30 a.m. in Room 5083.

CHAIR (Mr. T. Lush): Order, please!

We welcome, to this Committee, officials of the

Newfoundland and Labrador Housing Corporation.

First of all, I want to introduce to you the

members of the Committee, probably the best thing to do there. Our Chairman is

away this morning, he is unavoidably absent.

I am the Vice-Chair, Tom Lush, MHA for Terra Nova

district. Perhaps we can let everyone give his name and the district he

represents.

MR. WHELAN: My name is Don Whelan. I am the MHA

for Harbour Main - Whitbourne.

MS THISTLE: I am Anna Thistle, MHA for Grand

Falls - Buchans.

MR. FRENCH: I am Bob French, MHA for Conception

Bay South.

CHAIR: There are three other members of the

Committee - two will not be here this morning and another member will be here a

little later.

We welcome you here this morning to this hearing;

the Public Accounts Committee is the watchdog of the expenditures of the House

of Assembly. It is a very important committee to ensure that the taxpayers'

dollars are being spent wisely, prudently and in accordance with the various

Acts of the Province, the various Acts on legislation.

We are guided by the Auditor General's Report. The

Auditor General examines the books of various Crown agencies throughout the year

and determines what strengths and weaknesses she recognizes, and particularly,

any irregularities with respect to legislation affecting a specific agency, and

we generally follow through on her report and the recommendations that she

makes.

This morning we are examining the books of the

Newfoundland and Labrador Housing Corporation for the year 1995, and we want to

thank the officials of Newfoundland and Labrador Housing Corporation for coming

here this morning and to tell you that our questioning is not to badger people

but simply to get at some of the facts related to some of the things that the

Auditor General highlights in her report.

Each member of the Public Accounts Committee is

entitled to ask questions throughout the hearing; we will try to do it in an

orderly manner, but we do not necessarily have ourselves restricted to any

particular speaking order. We ask people to speak into the mikes and identify

themselves each time for the purposes of identification, and with that, I think

we can go right into the subject matter under consideration.

I do not know if the Auditor General wanted to

start off with any opening remarks; if so, we will give her the first

opportunity.

MS MARSHALL: I do not have any opening remarks

on the report item, but I would like to say that the report item on consultants

resulted from a Legislative audit of the Corporation and Mr. Noseworthy has

included the full report on that Legislative audit as part of your package on

pages 5 to 27.

I would also like to say that when I conduct

Legislative audits of Crown agencies, generally, I always look at the retention

of consultants and how much money is being spent on them and as part of that, I

also look at, on a regular basis, the amount of money that government is

spending on consultants in the government departments because it seems to be a

significant amount of money. So it was not just an area isolated to the Housing

Corporation, I do it for the entire public sector.

CHAIR: We can start any way we like here with

the questioning. Mr. French, would you want to start off?

MR. FRENCH: Thank you, Mr. Chairman.

I am Bob French, the Member for Conception Bay

South.

Just some brief questions. I notice there was one

consulting firm which received 82 per cent of the work, another time 76 per cent

of the work. I wonder what firm that was.

MR. GRANTER: Clyde -

CHAIR: Probably, Mr. Granter, we could have you

introduce your officials. I am sorry about that.

MR. GRANTER: My name is Clyde Granter. I am the

CEO of the Housing Corporation - recently appointed, I might add, so it is quite

likely I will not have had a direct involvement in the issues that you will

raise. We have reviewed the Auditor General's report, and I do have the benefit

of input from those around me. On my far left is Mary Marshall. Mary is the

Vice-President of Human Resources and Information Systems. Peter Honeygold, on

my immediate left, is the Vice-President of Business Development, and Ed Heath,

on my right, is the Vice-President of Finance and Corporate Services.

I suspect that the answer to your question - I have

not done a percentage breakout - but I suspect that you are referring to

Newfoundland Design Associates, which would have received the bulk, in financial

terms, of the work during that year. Newfoundland Design Associates was the

engineering firm working with the Corporation on sort of major residential land

developments in Cowan Heights, I believe, during that period. Perhaps, Peter,

you could add to that.

MR. HONEYGOLD: Cowan Heights and Mount Pearl, I

think, would be the primary areas where those numbers would come from.

MR. FRENCH: What is the practice today of

awarding design work? How would you do it today differently from when the

Auditor General made her report?

MR. GRANTER: If I could just sort of back up a

little bit before coming to the answer, the practice of the Housing Corporation,

as the Auditor General indicated, was in line with I believe the government

approach pre-1985, or perhaps even earlier than that. During that time period,

the government introduced policy guidelines for the selection of consultants.

Those guidelines were not transmitted to the Housing Corporation so they

continue to operate as they had done pre-issuance of the guidelines.

We are currently in the process of adapting or

adopting the government guidelines for our own use, which would mean that in the

event of a capital works, if the estimated value of the contract is expected to

exceed $150,000 then we would go to public tender. If it is between $100,000 and

$150,000 we would be obliged to at least solicit limited proposals. A minimum of

three, I think, is the normal practice. We are in the process of adapting or

adopting those guidelines at the moment.

MR. FRENCH: So that is now coming into -

MR. GRANTER: Yes.

MR. FRENCH: Okay. From page 2 in the Auditor

General's report, the question is asked - I guess, from your last answer, the

Corporation has now formalized a procedure which it will now go through in the

future to select consulting engineers to do various work.

MR. GRANTER: Yes. We have not yet taken those

guidelines to our Board of Directors for formal approval but I expect we will do

that perhaps in the next meeting.

MR. FRENCH: So the old policy today is still in

place?

MR. GRANTER: The old policy is still in place

but I think, starting as of now, if we were to require an engineering

consultant, or any consultant, for that matter, within the financial parameters

that we just referenced, then I think we would go to a public proposal call and,

in fact, we have done that. I think, with the exception of land development

where the argument is that there is a need for continuity. If you do Phase I and

you are about to move on to Phase II, there are financial benefits as well as

quality-related benefits in retaining the same firm to carry on with successive

phases. But I think, even in those circumstances, we will be advising our board

to take the route of a public proposal call.

MR. FRENCH: Do you receive many complaints from

other consulting firms?

MR. GRANTER: In my time, and it has been brief,

five months or so, I have had some comment from firms who have not been, I

guess, as lucky as others in getting work, pointing out to me that they feel

that the corporation should be opening up the business but I cannot say that I

have had a lot of complaints.

MR. FRENCH: Okay, because I have certainly had

some calls from engineering firms in this area who wondered why they could not

be part of the process or why they could not get some of the work that was

actually being allocated by Newfoundland and Labrador Housing. I did not just

hear this once, I heard it on a number, and I mean a number, of occasions. Is

the board still involved in developing land now?

MR. GRANTER: Of course, the major land assembly

and development that is under way is in Southlands. There are, I believe,

ninety-seven lots completed and most are sold at this point so we have to come

to a decision shortly as to whether we will carry on with the next phase. If we

do that we would be talking somewhere in the neighbourhood of 115 lots to sort

of essentially complete Phase I of Southlands. Beyond that, and maybe I should

ask Peter to speak to this, we have sold recently some blocks around in Mount

Pearl and we have lots available in Gander, Clarenville, Stephenville and Corner

Brook.

MR. HONEYGOLD: That is correct. We have also

sold, and would be continuing to sell blocks of land as opposed to developing it

ourselves in Gander, as we have done in Corner Brook. Most recently, I guess, in

Mount Pearl, as the Chairman has reference there, where we have had several

block land sales and have been quite successful and quite well accepted by the

development people.

MR. FRENCH: So are you moving now to get out of

land development or are you not?

MR. GRANTER: It is a question, I guess, that we

have to place before government. There are at least two strongly held views in

the community about the validity of the Housing Corporation continuing its

involvement in residential land banking and development. One is held by

primarily the smaller contractors, and they advocate quite strongly that we stay

in land development. The larger land developers would take an opposing view,

particularly in the St. John's area, and I guess the trick of the government, or

the issue that the government will have to contend with, is how to balance those

different views.

MR. FRENCH: What procedures were followed in

the past for selecting consultants? Was there any particular procedure, or just

if somebody was doing a job you would just keep the same consultant around?

MR. HONEYGOLD: Generally speaking, I guess, in

the majority of instances, the Corporation viewed the type of project that it

was to be involved in, considered the expertise within the consulting community,

and chose a consulting firm it felt best suited those qualifications, was able

to do the job, had the capacity and the capability to do the job effectively.

The work is always paid on the

schedule of fees,

which is part of the Consulting Communities Act, so that is a fairly standard

process, no matter who you would appoint; and I would say, with the exception of

the major land developments, we would have chosen consulting services from the

broad range that would be available in the consulting community particular to

their expertise, whether it be environmental or whether it be some of the

specific trades, either architectural or mechanical, electrical, and so forth,

and I think the listings that were appended here would testify to the

involvement of a great number of firms in doing work for the Corporation.

More recently, as the Chairman just mentioned, we

have gone to a proposal call for a major piece of work in Stephenville, an

environmental assessment work, which was the first phase, where the order is

about $200,000. We have used a proposal process, that is a good selection of -

well, the consortium, actually, of firms that would be doing that work.

MR. FRENCH: I guess it is suffice to say that

the rules are a lot different now from what they used to be.

MR. HONEYGOLD: Yes.

CHAIR: What guidelines, or what criteria, are

used by the Corporation to determine which areas you will go into for

development of land?

MR. GRANTER: I guess it has a certain history.

Most of the residential land holdings that the Corporation now has are in areas

where back in, I guess, the late 1960s, I understand there was some expectation

of significant demand as a result of fish plant development and other

industrial-type activity. So you will find that we have developments, for

example, in Arnold's Cove; we have Stephenville, Gander, Corner Brook, Marystown

and the like. It was essentially, I think - and again I will probably look to

Peter to give you some more firsthand knowledge of it, but - it was essentially

a conclusion by the communities, by the Provincial Government, the Department of

Municipal Affairs, and the Housing Corporation, that there would be sufficient

demand in those communities to warrant land assembly and proper land

development.

CHAIR: With respect to the industrial land

development, would you name some of the areas where we have carried out or were

to develop but have not sold the properties; they have not been taken over by

private developers. What are some of the worst examples?

MR. HONEYGOLD: I do not know if I can think of

worst examples. There are some areas that are much less active than others, and

I guess there are varying reasons for that. The Wabush development has, I guess,

a reason for (inaudible) sales but there have not been any recent sales in that

area. Port-aux-Basques I guess, is another area where there was a development

which I think has not had a great amount of activity in recent time and I guess,

to some extent, that may be synonymous with the economy that the Province has

been experiencing, and there has not been a lot of industrial growth in a number

of these areas. But I guess the view of the government of the time was when

these were developed, that the areas were serviced and available and would offer

an opportunity when and as industrial development, you know, propose to occur or

could be encouraged to occur by other means and other efforts.

CHAIR: With respect to the experience gained

from these industrial developers, could the officials indicate whether they have

developed some new criteria and some new guidelines, particularly for land

development industrially? Could they explain to the Committee whether we have

adopted some new criteria, some new rules, so that does not happen in the

future?

MR. GRANTER: I think the answer is no, we have

not. We have not considered industrial land and the demand for industrial land

at the moment to warrant very much attention. A lot of the lands that have been

developed as Peter mentions, still have a large number of lots available. I

visited Corner Brook just last week and I think there are only two or three

users in that industrial park. In the St. John's area, there is still land

available at Donovans and we have a fairly significant holding of

currently-designated industrial land in the Octagon Pond area. So essentially, I

mean, the history of industrial park development, as I understand it, is linked

very directly to the availability of federal funds, and back in the 1970s and

into the 1980s, so we do not anticipate at the moment any significant industrial

land assembly for the foreseeable future.

CHAIR: It seems as though we were quite

optimistic about the success of industrial park development, when we take as an

example the Corner Brook one where it is indicated that we developed eighty-four

acres, of which only twelve were sold. Somebody obviously miscalculated along

the line here in terms of what the potential was.

MR. GRANTER: Of course, at about the same time

as that industrial park was developed, the City of Mount Pearl opened up an

industrial park just down the road. It was closer to the Trans-Canada and it is

now just - I think they probably have sold their last lot in that industrial

park. So there was competition in Corner Brook, and that was one of the reasons

for the poor showing in terms of land sales.

MR. WHELAN: The Wabush development - what was

the time frame, when was that developed? When was the idea... spawned, I suppose

you might say?

MR. HONEYGOLD: My best memory is in the late

1970s that development was undertaken. There were two developments. There was a

residential development and an industrial development that went hand in hand.

Plus, very much at the same time we did a major development of public housing in

Lab City, 140 units or 141 units of housing in that area at that time.

The timing could not have been worse, I guess,

because right after that there was a big flop in the steel market and the -

MR. WHELAN: Major down-sizing (inaudible).

MR. HONEYGOLD: - business went through a

standard review and down-sizing, and really is only now beginning to come out of

that cycle. It is interesting to note that we have sold I think it is

approximately fifty lots in the Wabush subdivision over the last year or two,

for the first time since really it was put there.

MR. WHELAN: So things are starting to turn

around down there, and now as a result you are seeing some activity with regard

to the sale of lots. What is the status now? It says here that you had 101 lots

to go but only two lots were sold. Could you give us an update on that?

MR. HONEYGOLD: In Wabush you are speaking of?

MR. WHELAN: Yes.

MR. HONEYGOLD: There are fifty lots sold now,

fifty-one, in fact, are sold at this point. The industrial park, I guess they

were recording seventy-eight acres developed and thirty acres sold. I am not

aware of any recent activity over the past year.

MR. WHELAN: With regard to your debt, I

understand it is somewhere in the vicinity of $165.5 million. Does that have a

significant impact on the paying of the debt? What is the status on the debt

now?

MR. HEATH: With regard to the land assemblies,

which I assume is what you are speaking of, the debt associated with the land

assembly is - all land assemblies are financed 100 per cent by bank loans, and

it is a revolving line of credit, totalling $30 million. As we spend money on

land, we draw it out on our bank loan; as we sell the land, we use those funds

to repay the bank loan. Carrying charges are charged to the land development,

and hopefully, the anticipation is to recover those through sales of land.

MR. WHELAN: Only fifty sales in Wabush. Does

that have a significant impact on the amount of debt you have been carrying over

the past number of years?

MR. HEATH: In Wabush we would have, I believe,

written off that land development last year-end down to one dollar, and the debt

would have been reduced, written down to zero. The carrying charges on that

industrial land of $360,000 would have been charged prior to that to the land

development, and thus the increasing book value would have, I guess, caused us

to be in a position where the market value of the land would have been higher

than the book value, thus the reason for the write-off, and thus the reason for

the Auditor General's concerns here. The market value is not there any more.

MR. WHELAN: So what price did you get for the

lots, the fifty lots?

MR. HONEYGOLD: Approximately $5,000 a lot, I

believe.

MR. WHELAN: What did it cost to develop them -

per lot?

MR. HONEYGOLD: I am guessing, but I would say

in the order of between $7,000 and $8,000 of that day. There would have been

some unusual expenses, I believe, if I recall, with that particular development

in Wabush because a treatment facility had to be installed there, and all of the

electrical utility had to be installed as well. Because there was no operating

utility up there at that time, we would assume that debt. Newfoundland Power

(inaudible). That was a good peculiarity, and that added to the expense of doing

that development at the time.

MR. WHELAN: I want to ask a few questions with

regard to the housing, and this is on a much smaller scale than we have been

talking about.

I have had some concerns expressed to me with

regard to people who build houses, borrow - they are financed through the

Newfoundland and Labrador Housing Corporation. The payment on their house is

based on their income of the previous year, from what I understand. For example,

if somebody worked at Bull Arm in 1994 and made perhaps $70,000; the next year

they are probably drawing unemployment insurance and making maybe $15,000. Human

nature being what it is, we do not always look ahead to tomorrow. We are not all

financial experts, and we are not all great managers of our money. I was

wondering if there was some thought put into this idea of people losing their

houses because of the fact that their income has dropped drastically from one

year to another.

I notice that some of the houses have been taken

away from people who may be on unemployment insurance, and within a month or so

maybe somebody else who is on social assistance is occupying the house. I am

wondering about the rationale behind it - quite often the hardship that is

endured by some of these people.

Probably one of the arguments could be that maybe

they might have bought this house but they were not farsighted enough to look

ahead. As I mentioned before, we are all human; and we are not all great

management experts. I am wondering if there is any consideration being given to

looking into that particular problem. This past three or four years, since I

have been in public life, it has been more noticeable to me, and I suppose it is

because of the concerns expressed. Could I have some comment on that?

MR. HEATH: The circumstances of which you

speak, I do not think your facts are quite right.

MR. WHELAN: Well, I stand to be corrected.

MR. HEATH: If a person is earning, say, $70,000

- what was the number you mentioned?

MR. WHELAN: Oh, well, just an arbitrary -

MR. HEATH: Whatever. If the incomes of the

individual drop in any given year, he has the right to come in and have an

income review done by the Corporation and his rent or his mortgage payment would

drop in that particular month. The fact that a person might go on unemployment

insurance would cause his income to drop. He can come in and we will adjust his

rent from that particular month.

MR. WHELAN: I know that there were a number of

people who lost their homes.

MR. HEATH: Excuse me; both mortgage payments

and rent.

MR WHELAN: I know a number of people have lost

their homes. (Inaudible) - why they have not done that. They must have received

notices. They must have said to somebody: Look, I just do not have the income

that I used to have.

MR. HEATH: We charge in accordance with a rent

geared to income scale.

MR. WHELAN: And are they adjusted from one

month to the other?

MR. HEATH: It can be, yes. We set the rents a

year in advance based on the income for the previous year; but, as I said

earlier, each individual has the right, if his income drops for some unknown

reason that was not allowed for in the previous calculation, he can come in and

have his rent adjusted downward month by month.

It is only then, after falling in, I would suggest,

severe arrears, would we take action to repossess. In a lot of cases, those

vacant units you may see are simply people who do not have the wherewithal, I

guess, to maintain the units in the case of (inaudible) units. They may simply

feel they cannot maintain them and may walk away from it, in some cases, walk

away from ownership of the unit. They own the units where we hold the mortgages.

We repossess, I believe, I would guess, fifty units a year, from a portfolio of

maybe - we may have about 1,500 units now in our portfolio.

MR. WHELAN: Is that throughout the Province?

MR. HEATH: Throughout the Province.

MR. WHELAN: Are these houses vacant?

MR. HEATH: No. Right now I (inaudible) -

MR. WHELAN: It is taken and somebody else goes

in there.

MR. HEATH: Right now there are about I believe

thirty-odd units vacant that we have repossessed, and we are attempting to find

people who wish to move in. We will treat them as a rental unit if there are

people in the community who are in need of a rental unit. Again, we will base

their rent on their ability to pay, which is rent-geared to make (inaudible).

Right now that ranges from 25 per cent of their income to 30 per cent of their

income, depending on how high their income is.

MR. WHELAN: I just found it a little difficult.

I could not understand why, when somebody else could not keep up mortgage

payments or whatever, another family or another individual could go in there and

probably have his rent paid for. But you have cleared it up somewhat. There are

still some questions I will probably have to refer to somebody else.

MR. GRANTER: If you have knowledge of a

specific case, then if you identify it we can provide you with the -

MR. WHELAN: Maybe I will call somebody

(inaudible).

MR. GRANTER: Yes.

CHAIR: I should point out that it is quite in

order, if witnesses do not have the answers immediately, to provide them to the

Committee in writing at some future date.

I would just like to ask another question about the

land assemblies re residential development. In many of the areas we are looking

at on our charts, I am referring particularly to the land assembly developments,

residential, in some of our rural areas like Fortune, Fermeuse, Bonavista,

Daniel's Harbour, in these rural areas where private developers would not go -

not likely. I am just wondering what criteria were used by the Corporation in

going into these areas. We must have had some criteria before we went there.

MR. GRANTER: I think, Mr. Chairman, it would

have related to someone's forecast of economic development. Daniel's Harbour,

for example, I suspect that land was assembled (inaudible) back in the early

days of the mining operation, where the expectation was that there would be

demand for residential land. The same in Arnold's Cove - with a good, I suppose,

fish plant there, with Come by Chance coming on stream, it would have caused the

Corporation and the Provincial Government of the day to conclude that it was

wise to assemble some land and make it available for residential development.

CHAIR: By the same token, would you now go to

Argentia?

MR. GRANTER: A decision has not been made.

Certainly, if the Housing Corporation - put it another way, if the government

decides after review that the Housing Corporation should stay in residential

land development, and we know that there is a pent up demand in the Placentia

area right now, that it would likely be an area for the Housing Corporation to

move in.

CHAIR: On both levels, residential and

industrial?

MR. GRANTER: Yes. I do know that the issue is

being considered at the moment, with involvement from Municipal Affairs and

Government Services and Lands and ourselves, to determine whether it is

necessary for the Housing Corporation to be involved in some fashion. The

Housing Corporation does not necessarily have to be involved to the point of

developing lots but it can be involved to the point of assembling the land and

developing the plans, the concept plans, and so on.

CHAIR: The Auditor General also pointed out

that the Corporation appears to be borrowing without the proper authority,

without the authority required by its own legislation. Could the Corporation

comment on that?

MR. HEATH: We are not totally in agreement with

their observation but we have agreed to resolve the matter by going forward to

government with a request to straighten out our authorities such that both

parties are in agreement with the end result. At least some of the concern of

the Auditor General comes from the fact that certain authorities that we had in

earlier years were not related to expenditures for that year. When we add up the

total of all our loan authorities over the year, we find that we have in fact

more authority than we need cumulatively at this point in time. However, if you

look specifically at the reason for the original authority, you could argue that

those previous authorities did expire and should be replaced by new authorities

for new expenditures. We are in agreement that we should get that straightened

out, but one point, I guess, is that we do not spend any money without the

authority of government.

All the monies that we spend on our capital account

and which we borrow for is approved through our capital account budget process.

So it is not like we are spending money and borrowing money without the

knowledge of government. Government approves our capital budget. I guess maybe

since 1991, we would go annually, after our capital budget was approved, some

month or two or three later, to them, and in addition to having our capital

budget approved, we would ask government, by an Order in Council, to approve the

borrowing to carry out this capital budget, but for the last three or four years

we have not done that. Consequently, one could argue that the last three or four

years, while we had approval to carry out the work authorized through our

capital budget process by our legislation, we did not complete all the paper

work to get the authority to borrow to carry out that capital works even though

if you looked at the total authorities that we had accumulated over time, one

could argue that we do have enough to satisfy the banks to authorize everyone.

MS THISTLE: I would like to talk a bit about

approved contractors for carrying out maintenance work of NLHC properties. How

does one go about getting on the approved contractor list?

MR. GRANTER: If they are not already on our

list, I suggest they just give us a call and we would put them on the list. The

practice that we use is, in the event of a contract that is under the financial

limit for a public tender call, we tend to go through that list on kind of a

rotating basis. I suspect it would turn out, if you were to assess it, not to be

sort of a perfect rotation. Because sometimes when you go to a particular

company, it is not available to do the job, so you just move on. But that is the

process, and if someone is concerned that he may not be on the list, then he

should give us a call.

MS THISTLE: Do you have maintenance contractors

located in each area of the Province where you have housing units?

MR. HONEYGOLD: Yes, generally speaking, we do.

In the major centres, in the seven centres where we have our regional offices,

we have maintenance forces there as well, to some degree, depending on the size

of the office and the operation. They would do some of the maintenance activity,

but as well, we would have a listing of contractors that we would, as the

Chairman has indicated, rotate through and solicit pricing to carry out work.

MS THISTLE: How would you pay a contactor for

mileage to carry out work on a unit that was not in the particular area? In

other words, I cannot be specific as to say - I am trying to say, if you do not

have a contractor in a particular part of the Province, would you allow a

contractor from another community to come in and carry out work?

MR. HONEYGOLD: I would suggest that we would

ask for quotations for the work to be done. If a contractor from another area

wished to travel to the area where the work was being done, and was competitive

in his price, most competitive in his price of those we were choosing, then he

would be selected to carry out that work. We would not pay mileage. We would not

pay him a bonus to go to an area. I am fairly sure of that.

MS THISTLE: Okay. Are subsidized housing units

transferable from one building to another? If there is a particular subsidized

unit in a building, can that subsidy be transferred to another apartment

complex?

MR. GRANTER: You are referring to the rent

supplement program -

MS THISTLE: Yes.

MR. GRANTER: - I think, where we would have an

agreement with the landlord to use a certain number of the units for our

clients. I guess I would say that subject to adhering to the agreements that we

would have with the landlord, yes, it is transferrable.

MS THISTLE: Transferrable, okay. I would like

to ask you a question now about your board make-up. You are now using, I assume,

the per diem rate established by government for board members. Is that correct?

MR. GRANTER: Yes.

MS THISTLE: I would like to ask the question:

Are board members still receiving half-a-day rate for preparation time for board

meetings? If they are, why are they?

MR. GRANTER: I am afraid I cannot answer that.

I do not know if -

WITNESSES: (Inaudible).

MR. GRANTER: They may be? I would have to check

that to give you an answer that I would be confident was correct.

MS MARSHALL: Perhaps I could - we have been

discussing it with officials of the Housing Corporation, and we have been

informed that that practice has now ceased. Now, we have not verified it through

audit, but we have been informed by Mr. Power that it would be ceased.

MS THISTLE: I know it is quite unusual. It is

not the norm for most boards, and if it has ceased, probably we can have just

confirmation of that. I will pass for now.

CHAIR: I noticed that the coffee just came.

Maybe we will take a break for coffee, about ten minutes. Is that okay with

everybody? Just ten minutes.

Recess

CHAIR: We will resume, and I just wondered whether

or not Mr. Granter or Anna Thistle would like to make a comment after our coffee

break on anything that took place earlier and want to clarify anything. We will

give you the opportunity to start off. Mr. Granter.

MR. GRANTER: Thank you, Mr. Chairman.

I would just like to speak to the question relating to

payment, the preparation time for directors. I have had confirmed that we do not

pay preparation time now, although it was the practice prior to that practice

being identified as contrary to government policy by the Auditor General. When

the Corporation became aware of the change in government policy, that change was

immediately implemented with our board of directors and approved by our board.

CHAIR: Now, are there any other Committee members

who would like to lead off this second -

WITNESS: Doug, did you have a question you wanted

to ask?

CHAIR: Mr. Oldford.

MR. OLDFORD: Yes, getting back to what the

Vice-Chair mentioned about land assembly and we talked about in major areas,

major development (inaudible) industrial development. In some small towns, like

in a specific case in Burgoynes Cove, which is about thirty-five kilometres from

Clarenville, you have land down there, individual lots I know. I was approached

by somebody who is interested in buying one of these lots and he made a proposal

to Newfoundland and Labrador Housing Corporation in Gander and they came back

and said: No, we cannot sell you the lot because it is before Treasury Board.

MR. HONEYGOLD: I believe the lots you are

referring to - over time we have acquired and banked considerable numbers of

properties throughout the Province for use in building our non-profit, Rural and

Native Housing portfolio. Of course, in 1994, that program terminated with CMHC

and the Corporation has had those lots on inventory. For a period of time they

were made available for sale with sale signs posted on them and so on. But more

recently, last year, we conducted a complete inventory of all our assets and

those, particularly, would be designated as surplus to our future needs. We were

establishing a divestiture policy, so until we went through that process, we put

a freeze on some sales on a number of those properties until that work was done.

That policy was brought forward as part of the program review process and

included in that form and I guess now it is fair to say that we will be going

out again this year, through this season, to begin sale of those properties once

more by means of either a tender or just general advertisement or listing with a

real estate agent who might be operating.

MR. OLDFORD: This piece of land is only a small

lot and the person who was interested in it wanted to expand his lot and do some

hobby gardening and that type of thing. There are lots of private land and lots

of Crown land in that area. The population of Burgoynes Cove has gone down by

about 10 per cent in the last four or five years so there is no great need for -

you know, and this citizen could make use of it.

MR. HONEYGOLD: I would suggest that he, I guess,

renew his interest in that, our commitment to interest in that land, and we will

be able to deal with him. Unfortunately, that is the situation with a lot of

these land holdings. We were buying those properties in the rural areas in order

to satisfy a particular housing need, and at the moment those properties are not

very marketable, and the majority of them will probably remain in inventory for

quite some time.

MR. OLDFORD: You mentioned that you might go with

some real estate agent out there. I think that piece of land, the true value of

it, would probably be about $1,000. I own land in the area and I cannot get

$5,000 for three acres, so it would be worth about $1,000, and if you go through

that process your return on it is going to be minimal.

MR. HONEYGOLD: Well, we would always sell these

assets at their market value of the day, not the book value that we would have

set up for them. So, in many cases such as that, where even the market value is

pretty difficult to ascertain, there is an opportunity for negotiation there as

well. Our interest really is now the disposal of those assets and properties

which are surplus. We will do that, as I said, in accordance with - and we would

have an appraisal done at the point when there was an expression of interest

raised for the particular property.

MR. OLDFORD: Thank you, Mr. Chair.

CHAIR: I would just like to come back once more to

the land assembly development with respect to guidelines used to determine which

area the corporation will venture into for residential development. Based on the

areas that I have been looking at here, Bonavista, Fermeuse, this kind of thing,

I think Mr. Granter intimated that there was certainly some suggestion of

growth; but it seems to me that we would want something very concrete, something

tangible, before we ventured into some area.

If I told you, for example, that Gambo was on the

verge of economic development because of its close proximity to Gander - that

Gander had landed a couple of real big contracts and that Gambo was vying to get

some people locating there because of its location - you would want something

more than that, would you not? Is it in response to lobbies from council,

business people? We go in there other than on some whim, I am sure.

MR. HONEYGOLD: Mr. Chairman, I will have a crack

at that, if I may.

I guess our involvement in land development, and I can

speak historically throughout the Province, is doing, for any number of reasons

and under any variety of criteria. In some instances we have gone in at the

request of government to take over areas of which a municipality might have

begun the development and ran difficulty. I can think of at least three places

where that occurred over time.

In other cases, there were demonstrated, I guess,

opportunities for growth which were being shown for that particular community

and we judged, in conjunction with, I guess, other areas of government such as

industrial development, or the Department of Development or whoever, and the

Municipal Affairs Department as well, in their planning areas. That growth

prospect could be substantiated and we would have, with authority, undertaken

development in those areas. So it is really a mixed bag of circumstances, I

guess, that has gotten us into a number of these communities. Some of them, Mr.

Chairman, as I already mentioned have been as a result of specific industrial

initiatives, obviously, Come By Chance, the Arnold's Cove development was

specifically that and, as you may recall, Come By Chance was looked upon to have

some significant growth and development in the early days of its life. With the

first refinery, possible petro-chemical plant, possible third paper mill.

As I said, in Daniel's Harbour certainly the mine

looked to be a very viable operation. There was no service development there. I

guess the suggestion that we would have some of the management workers and so on

coming in from other areas of the country who would expect and be looking for

some service development on which to build, or the companies in which to provide

for them (inaudible) were other situations. But there is a broad spectrum, I

guess, of activity that we have been involved in for different reasons.

CHAIR: Once we have a land assembly development

offered for sale, what factors are used to determine the cost? Is it the cost

recovery?

MR. HONEYGOLD: I guess that is another point I

should mention from historic developments as well. Initially, we would have

priced the developed land on a cost recovery basis. The exception to that would

be the St. John's - Mount Pearl market where I think, virtually from the

beginning, we would have priced those areas at market value. In many cases, it

is probably the lower end of the market. But in the rural communities where

essentially there was no market for serviced land, in a lot of instances, we

were gone on cost recovery. And that pricing strategy sustained itself for quite

a time until - in many instances we had success stories. We had a lot of

development which was done and sold in major centres - Gander and Corner Brook

and places such as that, but in some of the areas (inaudible). We undertook a

write-down of these developments to market because, in many instances, the value

of the property was exceeding the market value - the cost recovery price was

exceeding the market value.

The current strategy, anywhere we would go, would be

the price at market and if the cost of the development was beyond that market,

the development would not be undertaken unless there was, I guess, some unusual

circumstance where there was an opportunity for some subsidy from outside into

our resources, but I think that would be a rare in today's economy.

CHAIR: So, in all of those areas now, like Wabush,

Fermeuse and Bonavista, the lots there would be at market value in all of those

places? What would a person have to pay, for example, in Fermeuse?

MR. HONEYGOLD: I would be guessing, but I would

think, in the order of $3,000 - $4,000.

MR. WHELAN: What size lot would that be? Would

that be - in some areas you have to have a half-acre lot and in more places -

MR. HONEYGOLD: That would be serviced land that

would be probably fifty-five to sixty foot frontage by 100 foot rearage, in that

vicinity.

CHAIR: I will stop for a while. Are there any

other members who would like to ask a question?

MR. FRENCH: Yes, I guess, to Mr. Granter. I have

already asked so I will not do it here. I asked in the Estimates Committee so I

assume that somebody is eventually gong to - I know Anna touched on the list and

so on, and I asked Anna in the Estimates Committee. Mr. Granter and his people

are going to supply that to me. I do not have any more questions, Mr. Chairman.

MR. GRANTER: Just for the record, that list is

being prepared; I think it is pretty close to ready to be sent out to you.

CHAIR: I would just like one other on consultants.

There is some perception from the Auditor General's Report that the consultants

seem to be very selective, a very small group. I am just wondering whether the

Corporation sees this as a problem. We only have a small group of consultants in

the Province and yet, it seems as though all of them do not have equal

opportunity to access the business offered by the Corporation, that it just

seems to be a small number. Can the Corporation comment on this as to whether

they intend changing this to make sure that all of the consultants throughout

the Province get fair access to the opportunities that are available?

MR. GRANTER: I think the answer is yes, we will be

changing our procedures to address that concern, but I think, because of the

nature of our expenditures, we will perhaps not avoid the appearance of skewing,

if you look at it from a financial perspective.

For example, in this current year, we will be

requiring engineering expertise for the continuation of Southlands and we will

be requiring engineering expertise related to the environmental assessment at

Stephenville. Those are two examples. And whether we do a proposal call or

whether we select, those are going to be fairly large contracts in financial

terms, and that is where we would have the greatest requirement. So, if

everything else that we viewed would be small contracts, I think, particularly

for as long as we are involved in land development, there is always going to be

that appearance of skewing in favour of one or two companies.

Now, hopefully, one or two companies will be different

each year, that you will not be able to look over a five-year period and see

that we use the same engineering firm, even though that is a possibility, I

suppose, because, if a company gets a knowledge base of a particular project,

chances are, they can be more competitive in a public proposal process than

their counterparts who have not been previously involved with that project; and

I do not know how we overcome that.

CHAIR: How do we go about selecting, in the

absence of a proposal call?

MR. GRANTER: Just based on the knowledge within

the Corporation of the experience and the qualities of the various consultant

companies.

MR. HONEYGOLD: Only to add to that, it is their

capability and capacity to do a particular piece of work within time frames that

we would judge appropriate as well.

MS MARSHALL: Could I make a comment, Mr. Chair?

CHAIR: Yes, of course, Auditor General.

MS MARSHALL: The concern that I had was that there

is significant money being spent on consultants. Now, I realize that once a

successful consultant is selected, they might very well tap into a million

dollars, but the concern I had was that anybody who was interested in being

considered and was qualified to do so would actually be in the pool eligible for

consideration. That was the big concern that I had.

The other area that I thought was important was the

role of the board in the area of consultants. Where there was such a significant

amount of money being spent on consultants, I felt that the board at least

should be aware of what the Corporation's policy was with regard to the

selection of consultants, especially those involved in a significant amount of

money.

MR. GRANTER: I take the point, but I would say

that in just sort of searching a little bit of background on this whole issue

over the past few days, there is evidence of the board having been involved, not

necessarily in an approval kind of format but discussions about major projects

and discussions about the ability of various - and we are talking engineering

primarily here - engineering firms being able to respond to the requirements are

evident in some old board Minutes.

MS MARSHALL: Now, we looked back, too. It was not

consistent, though. We saw some things that went to the board but other things

that were not, so we could not really say: Well, it is the policy of the

Corporation that the board would look at these specific things but there was no

need for them to look at others. So it was not consistent; it seemed more like

some things got to the board and some things did not, and we could not really

differentiate why some did and some did not.

MR. GRANTER: I think it was related primarily to

the size of the project, the nature of the project. The involvement of

Newfoundland Design Associates in Cowan Heights, for example, was talked about.

I believe, as well, there was kind of an informal

interaction between the chairman of the day and the minister and others within

the government; but I agree with you that there was no sort of formality to the

process and there appears to have been no consistency to it, and that is what we

need to address with the introduction of our own policy.

CHAIR: Are there questions from any other members?

Mr. Granter, do you have any concluding remarks you

would like to make?

MR. GRANTER: No, with one exception, I guess.

You, Mr. Chairman, displayed a particular interest in

the residential lot developments in some of the smaller communities that have

not demonstrated themselves to be particularly successful, and that is a valid

observation. But I think if you look at the overall involvement of the Housing

Corporation in residential land, you will find that the record is more

impressive than those five or six communities that did not realize on the

economic development that was projected back at the time.

The other thing is that a lot of these land

acquisitions occurred quite a long time ago, twenty or twenty-five years ago. We

are not now, I do not believe, too active in acquiring land. We have a

considerable bank of land, both residential and industrial, particularly in the

area of St. John's, Mount Pearl, and we are not actively banking at the moment.

You could argue that is short-sighted, because if you have to start planning

twenty to twenty-five years in advance to sort of acquire the proper area of

land for development, then we perhaps should be thinking a little bit longer

than the next two or three years at this point, but we are not really concerned

that we have a problem in the St. John's, Mount Pearl area at this time and

that, I think, is where most of the activity would be at the moment, with the

exception of Argentia.

CHAIR: Yes.

I take it that members have no further questions and

we can therefore bring closure to this particular period. I want to thank you

all. In the view of members, we believe we have fulfilled our parliamentary

duty, and we thank you again.

I ask the members of the PAC to stay behind for a few

minutes. There are a couple of things we would like to discuss.

Thank you very much.