Manitoba Hansard — 23 June 1994 (Sitting 53B, 35th Legislature, 5th Session)

35-5-53b

Manitoba — Debates (Hansard)

Fifth Session· Thirty-Fifth Legislature of the Legislative Assembly of Manitoba DEBATES and PROCEEDINGS (Hansard) Published under the authority of The Honourable Denis C. Rocan Speaker Vol. XLill No. 53B • 9 a.m., Thursday, June 23, 1994 ISSN OS42-S492

NAME ASJITON, Steve BARRETT, Becky CARST AIRS, Sharon CERll..LI, Marianne CHOMIAK. Dave CUMMJNGS, Glen, Hon. DACQUAY, Louise DERKACH, Leonard, Hon. DEWAR, Gregory DOER, Gary DOWNEY, James, Hon. DRIEDGER, Albert, Hon. DUCHARME, Gerry, Hon. EDWARDS, Paul ENNS, Harry, Hon. ERNST, T1m, Hon. EVANS,Clif EVANS, Leonard S. FILMON, Gary, Hon. FJNDLAY, Glen, Hon.

FRIESEN, Jean MANITOBA LEGISLATIVE ASSEMBLY 1birty-Fifth Legislature Members, Constituencies and Political Afftliation CONS1ITUENCY Thompson Wellington River Heights Radisson Kildonan Ste.Rose Seine River Roblin-Rossell Selkirk Concordia Arthur-Virden Steinbach Riel St. James Lakeside Charleswood Interlake Brandon East Tuxedo Springfield Wolseley GAUDRY, Neil GD.l.. ESHAMMER, Harold, Hon. GRAY,Avis St. Boniface Minnedosa Crescentwood Gimli HBL WER, Edward R. lflCKES, George KOWALSKI, Gary LAMOUREUX, Kevin LATHLIN, Oscar LAURENDEAU, Man:el MACKINTOSH, Gord MALOWAY,T1m MANNESS, Clayton, Hon.

MARTINDALE, Doug McALPINE, Gerry McCORMICK, Nonna MceltAUB,James,Hon. MciNTOSH, Linda, Hon. MITCHELSON, Bonnie, Hon. ORCHARD, Donald, Hon. PALLISTER, Brian PENNER, Jack PLOHMAN, John PRAZNIK, Darren, Hon. REID, Daryl REIMER, Jack RENDER, Shirley ROBINSON, Eric ROCAN, Denis, Hon. ROSE, Bob SANTOS, Conrad SCHELLENBERG, Harry STEFANSON, Eric, Hon. STORIE, Jerry SVEINSON, Ben VODREY, Rosemary, Hon. WOWCHUK, Rosann Point Douglas The Maples Inkster The Pas St. Norbert St.

Johns Elmwood Morris Burrow s Sturgeon Creek Osborne Brandon West Assiniboia River East Pembina Portage la Prairie Emerson Dauphin Lac du Boonet Transcona Niakwa St. Vital Rupertsland Gladstone Turtle Mountain Broadway Rossmere Kirldield Parle FlinFlon La Verendrye Fort Garry Swan River PARTY. NDP NDP Liberal NDP NDP PC PC PC NDP NDP PC PC PC Liberal PC PC NDP NDP PC PC NDP Liberal PC Liberal PC NDP Liberal Liberal NDP PC NDP NDP PC NDP PC Liberal PC PC PC PC PC PC NDP PC NDP PC PC NDP PC PC NDP NDP PC NDP PC PC NDP

3945 LEGISLATIVE ASSEMBLY OF MANITOBA Thursday, June 23, 1994 The House met at 9 a.m. ORDERS OF mE DAY (continued) COMMITTEE OF SUPPLY (Concu�tSections) mGHW AYS AND TRANSPORTATION Mr. Deputy Ch airperson (Marcel Laurendeau): The Committee of Supp ly meeting in Room 25 5 will resume consideration of the Estimates of the Departmen t of Highways and Transportation. When the com mittee last sat, it had been considering item 5.(a), on page 95 of the Estimates book. Mr.

Daryl Reid (Transcona): When we last sat on the Estimates, I had asked the minister to provide us with some information relating to Caribou Ventures or Caribou consultants, who, I believe, were working in conjunction with several government departm ents relating to the Arctic Bridge agreement. I am wondering if the minister has had a chance to find any information relating to that and any Order-in-Council that may have been place to pay for the services of Caribou. Hon. Glen Findlay (Minister of Highways and Transportation): Mr.

Deputy Chai.Iperson, I have information here for both critics on a number of topics, including an analysis of Caribou Ventures. An Honourable Member: We need a third copy. Thank: you. Mr. Findlay: You got it, you had it. She did not say you need to retain it. An Honourable Member: I need to retain it. Mr. Findlay: You did not say that. An Honourable Member: I need to have it tabled. Mr. Findlay: Just do not take it away in case I need it. An Honourable Member: Okay. Mr.

Reid: In an effort to give me a chance to read this information on Caribou, I will just switch for couple of moments to more general terms relating to the Arctic Bridge agree ment. Maybe the minister ca n give us som e update on what successes the government has had with respect to the Arctic Bridge agree ment and whether or not we have seen any progres s in traffic by way of the agreement with Russia. Mr. Findlay: Mr. Deputy Chairperson, for the member's information, the departments that are involved are EDB; Industry, Trade and Tourism; Northern Aff airs and Highways.

The consultant was hired to submit a report on what economic opportu nities existed for two-way trade, and that report is due fairly soon. Mr. Reid: Well, this agreem ent has been going on since 1991. I believe the original one was struck, and the Premier and the Minister of Agriculture at that time, who is now the Minister of Highways, went to Russia to sign the agreem ent or were involved in the original signing of the agreement in '92, so-[ interjection] Okay, the Minister of Agriculture was involved in some way in the discussions surrounding it at that time.

Two years have passed since, and I have not see n an y an nouncemen ts come out of any progress. I am just wondering, since I had asked at the time, what type of monies were expended with respect to Caribou Ventures. I do not see any information here relating to the amount of monies relating to the hiring of Caribou Ventures and whether or not there was any Order-in-Council that would have been signed. That is my question. Where is the information? Mr. Findlay: Caribou Ventures was hired as a consultant for, I believe, the amount would be

3946 LEGISLATIVE ASSEMBLY OF MANITOBA June 23, 1994 around $100,000, not fully expended at this time, and they were hired through Treasury Board, so there is no Order-in-Council. Mr. Re id: I thank the minister for that information. I would like to switch for a moment to talk about air bilateral agreements. It is my understanding that there is some discus sion recently that I have heard, that the governments of Canada and the provinces may be looking at moving back to the table to talk about bilateral agreements with the United States. Can the minister tell me, have those discussions commenced?

If so, what stage are we at, and are we at the table participating to protect Manitoba' s interests? Mr. Findlay: Mr. Deputy Chaiiperson, on April 28, the Transport Minister Doug Young travelled to the United States and met with Transportation secretary Mr. Pena. That would be, as I said, April 28. There was not much agree ment that came out of there other than to continue discussions at the officials' level. We are meeting, as the member knows, in the beginning of July in Calgary as a council of ministers. We have asked it to be on the agenda.

We have taken the lead from the provincial point of view that it be on the agenda for further discussion. There is a strong desire by the private sector to have better access into the U.S, as our trade patterns continue to improve and the volumes of trade with the U.S. continue to improve. I think the figure is a 40 percent increase with Mexico last year, 20 percent increase of Manitoba trade to the United States last year-20 percent increase. We are obviously doing business. To effectively compete, our people need to be able to move to the loca tions effici ently and effectively.

From a Canadian point of view, we would like more direct flights into major centres in the United States, as opposed to circuitous routes. From a Canadian point of view, we want access to the U.S. I think it is important we give access to Americans that are coming up here looking to buy goods and services. They can efficiently get into our major centres to do business. We are hoping that the discussions can continue in a productive fashion, particularly for Manitoba and western Canada. Mr. Reid: We have not moved out of the problem areas for the airlines to this point in time.

There was, at this time last yea r, some significant discussion taking place with respect to Canadian airlines and Air Canada and Gemini, of course, who also had jobs in this province. [intetjection] They may have helped the situation somewhat from the previous federal government, but I am sure that they were not the sole reason why the problem was solved. Can the minister give me some idea of what is taking place with respect to the problem that had been encountered with the two airlines?

We know that Gemini has moved into the information highway network, I believe is where they are going to be shifting their emp hasis now. Have we retained all of the jobs for Gemini in this province, or are we going to see a loss of jobs there? What is taking place within the Air Canada network? Has the minister met with the company CEOs to find out what the long-term plans are for the Winnipeg maintenance bases for both the airlines and their staffing levels in this province 1 •

(0910) Mr. Findlay: Mr. Deputy Ch airperson, our information is that there are no job losses in Winnipe g. Actually, the episode we were in about a year ago looked very, very bleak in terms of Canadian, Air Canada and in terms of Gemini. Then, through the sequence of processes, at this stage, obviously, both Canadian and Air Canada are refocusing their efforts with their new partners -American Ai rlines with Canadi an, and Continental with Air Canada-to improve their operating profits.

I think the last figures I saw would indicate that they are looking at much better operating end results for this year than last year. The member comments on Gemini getting into the information highway business. Absolutely, a growth area, substantial growth area. All the jobs that were in Winnipeg will be retained in that process.

June 23, 1994 LEGISLATIVE ASSEMBLY OF MANITOBA 3947 A year ago it looked very bleak for all three involved, and today-1 will have to admit that neither airline is out of the woods yet in tenns of economic pre ssure s and competition, but they have got a much, much better future now than they had as recently as six months ago. It looks good for Winnipeg in all aspects there. I think it will also look much better for Winnipeg if we can get more direct flight access into major American centres. It will just improve the job potential here. Mr.

Reid: What efforts are being made to secure other routes other than the ones that we have? It is my under standing we just recent ly got the Winnipe g-Chicago route back via Air Canada, not that long ago. What other efforts are being made to secure other routes to other destinations in the United States or in the Northern Hemisphere? Mr. Findlay: Just to further answ er the previous question. The staff have certainly been meeting with CEOs of all three, Air Canada, Canadian and Gemini, over the past period of time, as everybody is going through the refo cusing, restructuring process.

The air bilateral process is the major way of trying to improve access to markets in the U.S. I think it is fair to say that, personally, I would think that the local airp ort authority would be a good move, to have more initiative from the local level, to be proactive in advancing opportunities of Winnipeg Air por t. The process that is now ongoing is that the fed eral government is looking at additional accountability elements in the local airport authority agree ment. We have no problem wit h tha t, but I think it is the improved accountability principles that have been talked about that sound good.

The federal minister, my understanding is, has it in front of the cabine t at the federal level. It is probably fair to say there are at least 15 other airports across the country looking at a similar principle. My unders tanding is that Winnipeg is next on the list, and it was the next one to have been negotiated and still is. I think that would be positive to allow local interest to promote the airport in a very aggressive fashion.

I know I have always said that the airport is, in a transportation sense, the key focal point for the future, and everything else works in conjunction with it; in harmony with the airport, ground transportation, rail or road, for cargo and then for people. Good integration between all modes is the way of the future, and then we can have local responsibility. I rather think it will improve the capability of this airport. It is a 24-hour airport. It must be maintained that way, and further developments in and around the airport are critical to allowing it to expand to me et opportunities. Mr.

Reid: Before I get into the airport authority line of questioning, I want to ask first, does the department keep employment statistics, or are they advised of what the employment statistics are by transportation sector within the province, and whether through the airlines within the province, airport staff, rail employment, employment in trucking? I am talking dire ct employment here now and not the spin-off related employment. Mr. Findlay: Mr. De puty Chairperson, the University of Manitoba Transport Institute does the analysis and develops the numbers. I have number s here; I have '83, '89 and '92.

Unfortunately, '92 is the last figures we have for total employment in the air industry: 3,000 in '83; 3,500 in '89; 3,100 in '92. It is hard to say whether in '94 that is up or down. We update every two years, so we will get a '94 update. So the most recent is 3,100 jobs, air related. Those are direct air transport services. Mr. Reid: Does the minister also have figures relating to rail and to trucking as well? Mr. Findlay: On ex actly the same sheet, I will give them for the same three years: '83, '89 and '92. I will just repeat the air ones: 3,000; 3,500; and 3,100.

Truck for the same years: 6,000; 6,900; 5,900. CN Rail: 7,400; 6,100; 4,900. CP Rail: 4,400; 2,800; 2,500. VIA, the first figure we have for VIA, is for '89, which is 600 jobs; in '92, 420. Public transit: 1,700; 1,800; 2, 100. There is a category of Other. I will give you the category of Other; probably it is fair to say it is taxi and jobs of that nature: 4,700; 4,600; 5,600. For grand totals of 27,700; 26,300; 24,500.

3948 LEGISLATIVE ASSEMBLY OF MANITOBA June 23, 1994 •

(0920) Mr. Reid: I thank the minister for the information. If he has a sheet there, maybe he can ask the Oerk, if she is agree able, to provide us with a copy of the information. Getting back to the air and the air carriers and air employment, are we currently involved in any discussions with other provincial jurisdictions or the federal government dealing with the national air carrier policy? Are there any studies ongoing with that, and are we involved in any way in those discussions? Mr. Findlay: Mr.

Deputy Chaitperson, there are discussions at the officials' level involving all provinces on the national air policy for the future. Mr. Reid: Can the minister provide us with any kind of background information relating to any of the discussion items that would be forming a part of that air carrier policy, the national air carrier policy discussion? Mr. Findlay: We do not have all the items in front of us. We will supply it to the member very quickly. Mr. Reid: All right. I thank the minister for that. Also, I want to switch for a minute to the Winnipeg International Airp ort.

There have been some discussions of late regarding the airport authority. I know the previous federal government had started to move in that direction, and it looks like the current federal government is continuing with that course of action.

There have been some concerns raised with affected groups in that-and I had the opportunity recently to attend the first annual Winnipeg Aitport Authority general meeting-there does not apJJe ar to be any representation from the province curre ntly sitting on that board even though-well, my understanding, the province is entitled to one seat there-from that last meeting anyway, that seat is curre ntly vacant, and I believe the federal government's position is vacant on that board as well at the last information that I had.

Also, at the same time, there does not appear to be any representation from consumer groups considering that there are ov er 2 millio n passengers that use the airport a year; and, at the same time that the minister has already given us figures relating to the number of airline employees in this province, we do not have any of the people associated with the airline activities represented on that airport authority.

So it seems to me that we need to have some expertise not only from the consumer groups, but from labour as well, from the employees that work it, to have some vested interest as well in what happens with the airport. I am just wondering if we have ever made representation to the federal government, saying that we would like to have that type of representation there to represent those interest groups, and at the same time, can the minister indicate to me-first if we have not filled the position to which we are entitled as a province -why we have not? Mr. Findlay: Mr.

Deputy Chairperson, there was a task force set up to explore the desirability, feasibility of a local airport authority. We were involved in the task force, and funding was in place from Western Economic Divers ification, the province and the city to fund the process. It is what we have evolved to as an airport authority with current officer, Sandy Hopkins, as chairperson; Otto Lang as vice-chairperson; Ernie Halligan as treasurer; Robert Gobor as secretary; and Fred Fulcher as executive director.

The fu ture in terms of the enhanc ed accountability principles will have an additional composition on the board, one representative each from the business community, organized labour and a consumer group. Neither the federal nor the provincial go ver nment wi ll have di rect representation. We will have the right to nominate one person from the province and two from the federal government, but those nominees are not to be elected officials or government employees.

So they will be from the public at large, nominated one by us and two by the federal government, in addition to the business community, organized labour and a consum er group. The new composition of the board is proposed under the new accountability principles, which we support. There is no problem with them, but, at this point, not approved by the federal government Certainly

June 23, 1994 LEGISLATIVE ASSEMBLY OF MANITOBA 3949 we are expecting it to be, but to this point it has not happened. Mr. Reid: It is my understanding that these changes went through federal cabinet some two or three weeks ago from information that I had received from the authority itself or was supposed to have gone through cabinet at that time. I am wondering why the minister indicates that the changes have not been made, what the holdup is. At the same time, if we are entitled to have someone represent us on that board, I mean, I take a look at the composition of the board and, outside of Mr.

Prentice from the University of Manitoba, everybody else is either directly connected with pure business activities in the commercial sense or past members of federal go vernment. I am wondering why we do not have the other groups that have been excluded from the process by way of consumer groups and labour and why we do not appoint our person now to allow them to be a participant in the original discussions setting up the Winnipeg All port Authority before it is turned over, I believe, in August of this year. We should have somebody there representing our interest to make sure that our needs are met as well. Mr.

Findlay: Mr. Deputy Chairperson, I do not know what the federal government is doing at this precise moment, but we all understand that it went to cabinet, as the member said, two or three weeks ago. The best information we have is that it has been withdrawn, for whatever reasons known only to them, to do what they want to do with it. I have no reason to believe that they will not proceed with it. So, at this stage we do not have-until it is approved, it goes through cabinet, and the structure is set up saying that this will be the new composition of the board.

We do not really have any authority to appoint somebody. Now, on the advisory committee, we have Mr. Rollie Savoie. So it is an ongoing process. I think that the existing board is somewhat frustrated They want to get on with life. They have no problem with the ad ditiona l composition, but they need the clearance and the authority to move forward, and that has not come yet. As I said earlier, clearly Winnipeg is the next airport to set up an official airport authority, and whatever guidelines are used here will obviously be the recipe for at least 15 other airports across the country.

I think the member is aware that there are already four airport authorities in existence: one at Montreal, one in Edmonton, one in Ca lgary, and the other at Vancouver, operating reasonably successfully. Mr. Reid: So ifl understand the minister correctly it is the federal government that is the bottleneck in this p roces s, and they have not come back with any information relating to final decisions on the structure of the board for the authority. The minister indicates that Mr. Savoie is representing our interest currently during the discussions taking place? •

(0930) Mr. Findlay: Right. Mr. Reid: Then are we only sitting there as an observer, or are we actively participating in any of the discussions surrounding the transfer and the setup of the authority? Mr. Findlay: As I sai d ear li er, Mr. Depu ty Chairperson, Mr. Savoie is on the advisory committee, not on the board itself. He attends every advisory committee meeting that is held, but the board still meets separately, deals with items separately, but calls upon the advisory board in a very regular fashion. Truthfull y, I think the member has recapped it properly.

We need a decision of a go-ahead from the federal government as to what is the p roces s. If we do not like the process they bring forward, we have a chance to comment then, but I think we just need to have them make a decision and get on with things. (Mr. Ben Sveinson, Acting Deputy Chaii person, in the Chair) I have no reason to think that whatever they will come down with will not be acceptable by us at this point in time, unless they make some violent change in the perceived direction we see at this time. Mr.

Reid: If the minister is going to the ministers meeting on July 7, I believe it is, I take it that the federal minister would be involved in those

3950 LEGISLATIVE ASSEMBLY OF MANITOBA June 23, 1994 discussions as we ll. Would it be possible for the minis ter to raise Manito ba's conce rns?

I should ask, is the minister agree able, first, in having these groups represented and Manitoba play an active role in the setting up of the aitport authority to make sure that more than just pure business int erests are involved in the debate, in the discussion and the ac tivities surrounding the aitport aut hority, and whe ther or not it would be advisable for the minister at his meeting with the fed eral minister and other Transport ministers of provi nces to discuss at that time, to indicate that we would like to take our seat as soon as possible on that board? Mr. Findlay: Mr.

Acting Deputy Cllaitperson, as far as we know, the fe deral minister will be there at the beginning of July in Calgary . It is not 100 percent confinned at this stage , but I certainly cannot imagine why he would not be there . I have full in tentio ns of discussing with him to find out what the holdup is and where he is at, as part of Team We st, which is the grouping, as I told the member earl ier, of the we stern provinces and the two territories to work together on issues of common importance in transporta tion.

This is clearly one item that we want to have discusse d very thoroughly because I fe el Wmnipeg right now is at a competi tive disadvantage with Calga ry and Edmonton in terms of trying to get out there and hustle air routes and air traffic for both people and car go. As far as I know, any disCussions I have had with exist ing business people on the airport authority, they have no problem with the addition of these other people , no problem at all. And I have no problem with business people being involved either.

The member seems to have a little bit of a hangup, but I think for true accountabili ty, in the fin al analysi s, we need the balance . No problem there , and I am posit ive that nobody who is currently on there has any trouble with it. We just need to get on with it. I also like the idea that the pro vincial and fe deral repr es ent at ives will no t be elec ted people . Particularly, I like that, because you get so many vested inter ests brought to the table there , and probably it is better that they are not gove rnment employees. It is somebody we app oint who represents our interests.

So I think the process that is pro posed is good, but we just need to get on with it so we can start compe ting to ma ke mor e things happen in Winn ipeg . You have traf fic vo lume and passengers here in Winnipeg tha t are way below Calgary , and we are cities of comparable size. Mr. Reid: The minister indicated that he thought I had some problem with the fa ct that there were only business people cwrently sitting on the board. I have already indicated in my earlier comments that we had someone from the University of Mani toba by way of Mr.

Prentice sitting there , so it is not just purely business people who are there now with commercial in terests. What I am asking for here is some balance to be struck, that we have repr esen ta tives from ot her groups and a representative appointed by government as well on that board so that we make sure that we are in on the ground floor or as close to it as possible as the discussions progre ss. That is why I raised the issue . There was some pro blem in the past with the acc ount abi lity as well . I know they have to have , I beli eve, annual general meetings to inform the public.

Is this ne w aitport authority going to be responsible for having a public tender of any contracts that they may be awarding for any of the ac tivities which they may undertake? Mr. Findlay: Mr. Acting De puty Chaitperson, in the accountability princip les, there certainly is an item on tendering public ly. There is some debate going on, on what the upper limit would be for nont endered and then everything over that has to be tende red. We certainly would fa vour that limit being as low as possible. There is a proposal now, and it is being discussed.

It is not finn at all, so it is probably better I do not mention any figure, but the interes t right now is to keep that limit as low as possible. I cannot comment on what the fe deral cabine t is thinking, but it is an item that is under debate as to what the limit should be.

June 23, 1994 LEGISLATIVE ASSEMBLY OF MANITOBA 3951 But the basic principles, there will be public tendering. There will be a lower limit under which there is, I would say, the discretion not to go to public tender, but our preference always is in public contracts. In the vast majority of cases, no matter what limits are set, public tendering should be the first priority. Mr.

Reid: There was some concern originally at the beginning of this year, end of last year, that these contracts could be let first without public tendering, and in fact there could be some millions of dollars that could be expended without going through that process. What would the minister see in his estimation or the department's estimation would be a reasonable limit set for the lower level of public tendering? Mr. Findlay: I think in terms of what I have already said, the desire is that there will always be public tendering, and when you talk million contracts, absolutely 100 percent.

Whether our limit should be $40,000 or $50,000, the basic princi ples, first priorities should be pub lic tendering. Where they will end up as to what figure they will put in their final decisions, I would assume it would be somewhere in that vicinity of $40,000 or $50,000 that would be the lower limit for public tender ing, but we would always advocate that public tendering should be done in absolutely every case unless there are extenuating circumstances. •

(0940) Mr. Reid: Well, $40,000 or $50,000, I not sure, it seems like there would be a lot of smaller items that would fall outside of the bounds of the tendering process by having a limit at that level. That could be a bit of a concern in the future should conditions change, and we see contracts let even in portions of under $40,000. We know contracts can be broken up in to smaller components to have that take place, so I am not sure that we would be in agreement with a level of $40,000.

Has any discussion taken place, since we have obviously sat in at some of the discussions, to determine how there is going to be an apportioning of the costs associated with the airport's operation? Is it going to be based on the number of aircraft flights, arriving and departing the airport, based on commercial and passenger? Is that how it is going to be apportioned for costs? Is the terminal going to be separate? Is the cargo

section going to be separate from the activities of the airport? Can the minister give me some indication of how we are going to apportion those costs? Mr. Findlay: Mr. Acting Deputy Chairperson, currently the Winnipeg Airport, in terms of its revenues and its expenses, operates at a loss. What is being negotiated would be classed as a negative lease.

In other words, there would be an ongoing subsidy of some amount to make the airport viable, moving eventually over the course of the time to a total user-pay principle where the revenues are obtained when moving either people or cargo does pay for all the operating costs. The time frame of what that negative lease will be is probably subject to events of the future, and the idea that, as revenues increase from either cargo or from the movement of people, the amount of the subsidy will decline. I think it is widely accepted that you cannot instantly balance the books in terms of the operation of the airport.

The intention is to proceed towards it. (Mr. Deputy Chairperson in the Clair) There is no question that if the local airport authority in terms of the fees it charges for cargo or for passengers is out of line with other jurisdictions, they are going to lose business.

So there is a marketplace, self-limiting ceiling on what there will be, but the intention is-and I do not think there is any question the new Minister of Transport believes that the operation of transport systems has to move to a more market-oriented, user-pay kind of principle, with the lease being prepared or, I mean, negotiated, having a subsidy in the early years. Without that, it would be very difficult for Winnipeg to instantly move to a fully balanced book in terms of annual operations. Mr. Reid: The minister indicates an ongoing funding support.

I do not want to call it the term that the minister uses because that has been taken on a negative connotation these days with respect to other transportation and I am inclined-

3952 LEGISLATIVE ASSEMBLY OF MANITOBA June 23, 1994 Mr. Findlay: The diff erence between the income and expe nses. How is that? Mr. Reid: Yes, okay, that is it I like that term better. Mr. Deputy Chairperson: ... only from those fe deral Liberals. Mr. Reid: Yes, we will not get into that debate , Mr. Deputy Chaitperson. Can the minister indicate what type of fundi ng support, which is, as the minister indicates, due to fade or reduce over a period of time, what type of time period are we looking at, and what type of funding initial amounts are being considered? Mr. Findlay: Mr.

Deputy Chairperson, there is no perceived time period that is fixed, at least not at this point, in terms of when we move away from the income support system that would be needed to make the aitport viable.

The annual loss right now is certainly $1 million or above , and that loss will not move to zero until the re venues from the movement of freight or people is able to pay for it, and our expectation is it may be at least 10 years before there is a balanced book in terms of income and expenses with the airport But there is not a two-year or five-year or seven- year time frame when it says it must balance the books . The principle on the lease says, as the volumes are able to pay the expens es, the degree of income support will be decre ased, but only will be zero when the volumes warrant it to be zero.

It could be, as I say, 10 years or more, under curre nt proj ections. Mr. Reid: The fe deral govein ment, by way of Transport Canada, I believe, picks up a portion of those costs, or do they pick up all of the costs that are associated with the airport? If the airport switches to an authority, will the City of Winnipeg and the province then be responsible for any of those anticipated costs? Mr. Fin dlay: In the process of striking this agreem ent with the local airport authority, the federal gover nment rem ains 100 percent respon sible .

There is no offload of subsidy to the province or to the city or to anybody else. They have paid 100 percent of the income shortfall to this point and will continue to pay 100 percent in the future. Mr. Reid: We have recently heard about the Vancouver Airport Authority having to charge , I think it is an $8- An Honourable Member: Ten dollars. Mr. Reid: A $10 -dollar ga te fee for their passengers that are moving back and fo rth, and it is my understanding that that money is going to be used to upgrade the facilities including the runways at Vancouver International Airport.

When I talked about the app ortioning of the costs here earlier, I had the Vancouver situation in mind. I am wo ndering, looking at the Vancouver experience , has the commercial air traffic out of that operation had to pick up any of the costs as obviously the travelling public would have to pay through their $10 gate fee? Mr. Findlay: Mr. Deputy Chairperson , the local airport improvement levy that is in place in Vancouver, our knowledge is that it is only charged on the passenger list.

There is no similar levy on the cargo that moves in and out of Vancouver, and it is a levy designed to collect fu nds for additional runway or runway improve ments. But the member is looking for the answer as to whether cargo is paying too, and at this stage we are not aware that they are. Mr. Reid: Mr.

Deputy Chairpers on, that is a concern that I have, beca use there is potential for that situation to occur here at the Winnipeg International Airport as well, and if you have a hypothetical situation where you have 50 percent of the aircr aft commercial and 50 percent passenger and the passengers are picking up 100 percent of the costs, then you do not have a fair apportioning of the cost associated with the operation of the aitport.

So it would seem to me to be reasonable that we have some policy or program in place that would say that we should have a fair balance struck between who is going to be responsible for picking up the costs of maintaining and operating and any improvements for that operation. I hope the minister will take that position, and maybe he can indicate to me if he would be in agree ment with that, and, if so, would he be willing to take that

June 23, 1994 LEGISLATIVE ASSEMBLY OF MANITOBA 3953 position to his meeting with the transport minis ters? •

(0950) Mr. Findlay: Mr. Deputy Chairperson, I certainly reflect the thinking of the member. I have always been an advocate that, if you are running a facility, there are always going to be upgrades that must be done. You know you never know what they will be. If you are running in a relay, you do not know whether it is the roof or whether it is the ice or whether it is the change rooms. In this case, you do not know whether it is going to be the runway or it is going to be the tenninal facilities for passengers or whether it is the cargo facilities.

You should always set up a capital replacement reserve, and everybody should contribute. All the users in some agreed apporti onment fashion should pay. Cargo certainly does pay landing fees and this sort of thing, and certainly pass engers pay fees in their tickets. If you are going to put any special levy that is towards improv ements, everybody should be participating and putting money into that pot.

You might have certain passengers or certain companies that are moving cargo for two years and not for the next 10, and whenever you are involved in using the facility, you should be participating in setting up that reserve so that the people in charge can have the resources to make the ap propriate decisions whenever a capital improvement is needed. The decision as to how you do it, in my understanding of the proc ess, would be a local decision. If Winnipeg or Edmonton or Calgary or anybody else decided they wanted to set up s uch a rese rve, they would decide who would pay and how much.

It would be a local decision. That is good. It allows you then to decide how much you can charge and still remain competitive with keeping your customer and cargo activity high, and still prepare for the future. So it is a balanced business decision, controlled and conditioned by the marketplace. I believe everybody should contribute to that because everybody benefits in the long tenn in tenns of any capital improvements that are done . Mr.

Reid: Well, I am not sure if it is a unique situ ation here in Manitoba where we have the Public Utilities Bo ard that bas the powers to review other fees set by Crown corporations , whether it be MTS, Manitoba Hydro , Centra Gas. I am just wondering if there would be a role to play for the Public Utilities Board here in setting any fees that may be required by way of people or either passe nger or commercial interest that would use the airport, because the minister has not indicated to me whether or not he would be willing to take this matter to his federal minister's meeting in July. Mr. Findlay: Mr.

Deputy Chairperson, there is no legal responsibility or right for the province to regul ate those fees. If there is any legal responsibility , it is national. You know you mentioned PUB. He knows in the telephone area we used to do the regulation pro vincially ; it is now done nationally because decisions are made there. If you have provincial decisions made in isolation of other pro vinces, you have an unlevel playing field for all the play ers, and this is another example of where national decisions should-there should be unifonnity across the country in what those decisions are.

So it is a federal responsibility in the regulatory sense . Mr. Reid: I understand that the airports are federally regulated, but since you are moving to an airport authority which is going to become locally operated, and even though the federal government is going to be responsible for the supporting costs over a period of time, once those fade out, then there is going to be, from my understanding, no respo nsibility of the federal government to that operation outside of the safety aspect and some other regula tory matters dealing with tower controls, flight services.

It would seem to me to be reasonable to have the Public Utilities Board as a public body that could oversee any fees that may be charged. If we are not going to talk with the federal minister about this, I mean, we are in the negotiation stage right now; it is my understanding that the final contract has not been signed for the airport authority. This would seem to me to be the

3954 LEGISLATIVE ASSEMBLY OF MANITOBA June 23, 1994 appropr iate time, while we are in those discussions, to move in a direction of making some recommendations on what we would like to see by way of protection for the public. Mr. Findlay: Mr. Deputy Chairperson, my answer is not much different than the previous answ er, that we have no rights or responsibilities in terms of setting fees. It is simply a national jurisdiction.

I could lay out a scenario for the member that if you had provincial regulation but, nationally, the federal government carries the entire liabilit y, and if the fees charged never allow the operation here to be financially viable and they constantly pick up the shortfall of the operation-they carry all the liability, and yet we are allowed to have regulatory control to keep the cost down-they would never accept that.

I think it is fair to say that probably the auditors, the federal auditors that are looking at the situation, would say, the federal government has to have a fair bit of say in what decisions ultimately come from the local authorities because the federal government wants the authorities to move to more market viability, more user-pay principle, and yet if they allow them to make decisions to keep fees down and never allow you to get there, they are defeating their own initiatives. So I think it is fair to say, if there is regulation or ultimate decisions, there is a federal responsibility.

We always want them to have 100 percent responsibility at the end of the day in terms of economic shortfall. So they will never give us authority or rights to step in and provincially regulate, and probably we would never want to do that and then say, well, we will accept some liability for the regulatory decisions. We just cannot afford to get into that financial dilemma. •

(1000) The proces s of broad representation on the board allows a lot of public input in the process of making those ultimate decisions on what the fees will be, but I think it is fair to assume that at the end of the day on certain kinds of major decisions the federal government through their Treasury Board will still want an opportunity for ultimate capacity to say no. Mr.

Reid: I will not carry on any further on that point, except I will just conclude on that part with the comments that since the minister has already indicated that the federal government's share of funding for the operation of the airport to cover the losses are due to be eroded over a 10-or-so-year period, and after that, since we are looking at signing a 60-year lease for that operation, we have another 50 years after that where there are a lot of things that can happen in that 50-year span, the federal government would obviously have no financial vested interest in the operations there for any of those l osses .

If that is the case, that is why I asked the questions relating to some process that would oversee or regulate in some way the fees that could be charged and apportioned to those that utilize the airport services and facilities. I will leave that with the minister, and I hope that he will look at raising that with his federal colleague when he meets with him in July to make him aware that we have some concerns on that. Mr. Findlay: I just want the member, Mr.

Deputy Chairperson, to understan d very fully that even though there may be a desire to move to balancing the boo ks by fees charged in 10 years or whatever-! just use that as a ballpark figure-the agreement that would be signed, if it is whatever number of years, if it is 60 or whatever it turns out to be, the federal government will always have a respons ibility for any shortf all. You know, we might balance the books at year 10 and at year 15, and we are in terrible deficit. They would always be there to balance the books. They would always be there to supplement the income shortfall.

So they are always there as a backstop responsibility financially, and I think that is good for our protection . You never can predict the future. Once you get to a balanced book, it does not mean you always stay there. Things can negatively happen. They have to remain, and we would always want them to remain, and there is nothing on the table right now that would indicate they would not remain there as the ultimate responsible entity from an economic point of view.

June 23, 1994 LEGISLATIVE ASSEMBLY OF MANITOBA 3955 Mr. Reid: That is an interesting concept then, Mr. Deputy Chair. The operations would be turned over to private interest for a 60-y ear lease arrangement, and then they will have no true responsibility for any of the operating losses or any of the capital investment in those operations. It seems to me that they have the best of both worlds, whoever is going to be utilizing the facilities, whether it is the pass engers or the commercial aspect.

Neither one of them will have to cover any of those los ses if the federal gove rnment is ultimately responsible for those losses. Mr. Findlay: Well, let me give it to the member in a different angle. I mean, just think about it, if you are asked to be a mem ber on this bo ard representing organized labour and they say, by the way, once you sign in you are responsible for losses, you would never sign in as a board member. So the board has to be protected in that respect. It cannot be held responsible financially for any shortf all that might happen. You can have the wis dom of Solomon and still not make this fly.

The broad representation of the board can only be effective, can only have the personal freedom to come forward if you know that you will do your be st job, and of course if you do not do a good eno ugh job you might get replaced by the people that nominated you or the people that appointed you, but you can never think that the people on the board are responsible to pick up the losses down the road. I mean, why would we ever start the process? We would never come forward.

I think there has be en an episode in Ontario where directors of companie s--a person accepts an appointment as a director, and the thing goes down, and then he can be personally sued. I mean, that is an untenable position to get yourself into as a citizen. We want citizen input, so you have to give them protection, so at the end of the day, even though some decisions may not woik out right, there is a backstop in terms of their financial liab ility. Mr. Reid: The minister is right. It is exactly what we want. We want citizen input, which to a large degree, we do not have. Mr.

Findlay: But they cannot accept liability. Mr. Reid: I am just worried that the taxpayer is still going to be on the hook after this moves into private hands and that the government is not going to have any direct say in any of the day-to-day operations, but I will not belabour that. My last two questions here relate to the salaries of individuals who are going to be sitting in on the airport authority, any of the paid st aff. Is that going to be public infoimation?

Also, the agreement that Transport Canada is going to sign with the airport authority people, is that going to be confidential or is that going to be released to the public? Mr. Findlay: Mr. Deputy Chairperson, in teims of the new accountability principle s-- in teims of the projected ones, not the approved ones, but I do not imagine whatever is approv ed would be much different than this- annual public meetings must be held within 135 days of year-end. It specifies a 30-day public notice and minimum content of public meeting reports, including remunera tion of directors and officers.

So that would be public infoimation at the annual meeting. Mr. Re id : And the agreement, the final agreement- Mr. Findlay: The final agre ement between the airport authority and the go vernment? [interjection] The situation that exists at this point is that there are agreements with four airports and there are intended to be agreements with many other aitports. I guess the federal government's position is that each agree ment is a commercial agreement, and it is fair to say, they are not going to be standard.

Naturally, they are trying to strike the best deal they can with the people they are dealing with at each jurisdiction. So they feel it is a confidential agree ment between each and at this stage not likely wanting them to be public. In terms of commercial content-in broad detail, I cannot imagine why it would not be, but there is always some co nfi dential business infoimation. The federal government is there to negotiate what it can, and every situation is slightly diff erent. If you made every one public, and I am almost defending them now, you can see

3956 LEGISLATIVE ASSEMBLY OF MANITOBA June 23, 1994 everybody would say, well I want every advantage they got and then I want these other ones. This is an evolving area. Nothing is final in terms of the federal decision as to how to proceed. I probably would favour personally that there be some degree of commonality released, but that those elements that are confidential, agree ments and arran gements from a business point of view with the local board, be held in some degree of confidence for competitive reasons. Mr. Deputy Chairperson: The honourable member for Transcona, who has the answ er.

Now, we need the question. Mr. Reid: Mr. De puty Ch airperson, I was interested in bearing about whether the contracts were going to be released to the public, because after all it was the public or the taxpayers at large who paid for that operation in the first place, and it would seem that if we are going to be turning over a valuable public asset, the public should be aware of the contents of the agreement, and they could determine for themselves whether or not it was going to be in their best interests.

So I hope that will come out somewhere in the future, and if there is any chance for the minister to raise that, I hope he will take that opportuni ty. We had an agreement that was signed-! looked at the news release that the government had on April 28-t he midcontinent tr ade and transportation corridor for expanding trade, and I believe it was down to-with Kansas. Can the minister give me some idea of what the intent of that is? Is it for trucking purposes? Is it going to includ e air operation s and rail, and is the government intent on moving even further south with agree ments moving towards Mexico? *

(1010) Mr. Findlay: Mr. Deputy Chairperson, the Kansas-Manitoba agreement was signed maybe three years ago or four years ago. It was the be ginning of a process of bringing together what has turned out to be 11 states with Manitoba whose intention is to promote transportation movement of goods between Manitoba, midwestern U.S.A., and hope fully extending all the way to Mexico.

Certainly, there is a high level of interest in this by the trucking industry, and as we increase our trade and movement of goods north-south, it would appear the most efficient corridor between here and Mexico is straight south of Manitoba. It is fiat teiiain, basically good roads there now. But the initiative of the midcontinent corridor in terms of involving the U.S. states is to have them lobby the federal highway administration or secretary to ex pen d federal U.S. funds to upgr ade the infrastru cture of this major, major corridor. We see Highway 75,129.

You look at the map, it can go straight south to Mexico. Certainly, we would hope that truck traffic through western Canada would come across Alberta, Saskatchewan to Manitoba, and they have options to go straight south either via Highway 83 and hook up with 194 or come all the way across Manitoba and go south on 75. Here is a general map. You can see the brown line is straight south of Winnipeg, and the putple or blue line is straight south on Highway 83. So the direction of getting straight into San Antonio, Texas here is very, very direct, and there are really no mountains to go up and down.

I am told it is 200 miles shorter than coming from Calgary. To come south of Calgary, you see all the doglegs there, and you are going up and down hills and that increases the consumption of fuel. So we are certainly advocating, promoting that U. S. states get together and lobby hard to have infrastructure expenditure on either one or both of those midcontinent corridors going straight south. aearly' the Alberta people are promoting with the states south of them, in competition with us, some diff erent thinking.

We had a meeting here last June where a number of the states were here talking about exactly this principle. As a department and as a minister in this government, we are certainly promoting as much as we can that this happen. The chamber of commerce-! will just backtrack for a minute. My previous relationship with dealing with the United States is that the states themselves do not have a lot of clout with Washington, not anywhere near the clout the provinces have with Ottawa and Canada, and that maybe the people who have more clout

June 23, 1994 LEGISLATIVE ASSEMBLY OF MANITOBA 3957 are chambers of com merce or people of that natur e. So we have talked to the Winnipeg Chamber and suggested maybe they work with chambeiS down there to see if they can expand the lobby and have more clout than maybe the states themselve s could have . A meet ing was held here on Monday . The Wmnipeg Chamber invited up the chambeiS from Fargo, Sioux Falls, and Grand Forks, further promoting the initiative. We must work to stimulate desire by the fede ral administra tion in the United States to spend money on this corridor.

I think it would certainly ben efit commodity movements by truck. It is a priority, and we have certainly seen more and more-l think we are running at about 11 ,000 trucks through the border a month, and it is going up. We want to promote efficien t, eff ective movement of trucks across our border, and the fo ur-laning of 75 is a key part of that whole puzzle. It will be done by the end of this year.

I just add that Grand Forks was represented by mayoiS and charnbeiS , Fargo or Sioux Fal ls, looks like abou t 15 people were present So I am glad they showed good int erest, and I was certainly really pleased at the reaction of the Winni peg Chamber to spearhead this. It is to everybody 's intere st to be working together on this. Mr. Reid: It leaves me with the impression that this may be an initiative that is tied in with the aitport authority where we are looking to expand their role in an interm odal network.

H that is the case, then I think it could be a good move to strike those reciprocal agreements or alliances with other jurisdictions. · I want to switch for a minu te, because time is running short, to dome stic needs within the province. There were some concerns , and there was a report that came out earlier this year relating to the intraprovi ncia l carrieiS, the rural carri eiS in the province. There was a bookle t that-a study done by Prairie Research Associates looking at regulatory options for rural trucking in Manitoba. What has been happening in that regard with respe ct to the rural carr iers?

I know that the minist er's department has had some meetings with some of the rural carriers who have expre ssed concerns that their businesses were going to be falling by the wayside because of the deregulating of the marketplace and that some of the larger carri eiS were going to come in and take over their busine ss. Have any arrangements been struck? Have any solutions been found to the rural carr ieiS' pr oblems to allow them to continue in ope ration? Are we looking at moving towards a co-operative? Is that one of the solutions we are looking at, or are there other options avail able? •

(1020) Mr. Findlay: Mr. Deputy Chairpe rson, the member is fully aw are that there has been intetprovincial deregulation for some time, and I would say Canadian truckers , particula rly the Manitoba truckers have responded we ll to that, ad justed well, and have held an awful lot more business than one might fiiSt have thought in the process of ad justment. I will give credit to the trucking indu stry. They have been very responsive to adapting to change . Behind the obstacles of change they have seen opportuni ty.

They sought it, and we have six of the 10 national Canadian trucking com panies headquartered here, so that is pretty good. In terms of intraprov incial, at this stage there are only three provinc es that have had any intra provin cial regul ations-Mani toba, Saskatc hewan and B.C. My unders tanding in talking with the Saskat cHewan minister is they are moving to total dere gulation there pre tty quickly. The member mentions Prairie Research Associates analysis which was released in December '93 and done through the course of '93, I gues s-- you kno w, had some comments the re. It was the basis upon which Mr.

Norquay held a meeting where all industry representatives were present to discuss, you know, where do we go from here . From that mee ting, the Manitoba Trucking Associat ion took it upon themselves to come forward with a consensus from the industry. They have come fo rward with a pro posal whe re, by January 1, '96 there would be elimination of geographic restric tions on operating au thorities,

3958 LEGISLATIVE ASSEMBLY OF MANITOBA June 23, 1994 then by January 1, '98, full deregulation comistent with where other provinces are today. That proposal Mr. Norquay has taken back to all the play ers to make them aware of what the consemus was that was put in front of us, and asked for comment in from anybody by-the deadline is tomorrow. That has been in their hands now for three to four weeks. So the Motor Tramport Board will look at the responses that come back from the consensus that the trucking association has brought forward.

When they brought it forward they said, you know, we have had to beat our heads and we are not all happy, but we are coming in here saying we support this and we are prepared to adjust to it The time frames of January 1, '96 and January 1, '98 are seen to be compromises that the vast majority can accept, but we will see what the comment is that is coming back from letting everybody know what the proposal is. Mr. Reid: There was one other aspect relating to deregulation.

I know there was a letter that was addressed to the minister from Litz & Som talking about the time frame for implementation of the deregulation aspects, and they were asking for an extemion that would be comparable to what the Manitoba Trucking Association has suggested, a date of 1998 for deregulation. Has this company and the industry that they represent been put on the same timetable, as they had requested, as what the trucking industry has suggested? Mr. Findlay: Well, Mr.

Deputy Chairperson, with regard to Litz Crane , the issue there is really highway construction materials; now we are down really to bridge beams. The same applies there , as I mentioned earlier. I mean, an example is people in Ontario cann ot come in here and bid, but Litz can go into Ontario and bid. Not necessarily what you would call a level playing field. The Motor Transp ort Board has indicated to them that they want to have deregulation January 1, '96 for highway construction materials, and there are five companies in Manitoba in that business.

I think it is reasonable in today 's environment that it be der egulated and that the board has made that decision. Mr. Reid: I thank the minister for that. I am going to provide for the minister some inform ation relating to Gershman Transport International . This is not the only company that is doing this apparen tly. It appears that they may be contravening some of the Labour Canada laws relating to contracts. I have asked the previous Minister ofTramport questions relating to contract standards for owner -operators. The problem does not seem to have gone away.

I mean, we are still getting this infonnation coming to us complaining that owner-operators are being asked to sign contracts that make them responsible for everything under the sun. I have got one individual that has called me ye sterday saying that he is terminating his employment with the company . The company is holding back some $700 or $800 in salarie s, the monies that are due and owing to the individual from the company for services perform ed. The company will not release it until there is a waiver of legal aspects on the part of the individu al with respect to the company .

Well, we have all kinds of horror stories that are coming to our attention relating to this. I am asking again: Why is it that we have not moved in the area of load-broker regulation and owner-operator standard contract legislation to provide some protections for the people that are working in these areas? At the same time, I am sure the responsible companies out there would, hopefully, have no problem with this because they would be treating their employees in a fair manner already.

It would only be the ones that would not be treating their employees in a fair manner that would be taken to task as a result of any legislation that we might bring forward. Are we going to see some of that legislation to protect the owner-operators from unscrupulous acts? Mr. Findlay: Mr. Deputy Chairperson, the owner-operator question is probably not an easy

June 23, 1994 LEGISLATIVE ASSEMBLY OF MANITOBA 3959 on e to resolve to abso lutely every bod y 's satisfaction. If we introduce legislation in Manitoba, and it was not introduced in other provinces, the industry would just move aroun d Ma nitoba. These operators that now have the ability to work for a big company, the big companies just would not hire them here. They would hire in Saskatchewan, Alberta and Ontario. There is not a willin gness across the country to move to regulation in this regard. There are some standards that have been set up, and we are asking the voluntary compli ance by the companies.

The member is right. The good companies will do it, but the owner-operator always has the right not to do business or not to strike a contract with a company that has a bad record. I think I mentioned it to the member before. We have a tremendous increase in the activity in trucking, and right now it is an owner-operat or's field day in terms of there is more de mand for their services- An Honourable Member: Right. There are not enough people because they are pulling out of the market. •

(1030) Mr. Findlay: Well, the market will adjust. There is no magic in regulation. We can regulate till the cows come home here, and the industry will just work around us. Until there is a willin gness and uniformity across the country, we would become an island that would be negatively hurt by doing something here that would precipitate people not to hire here, not to hire owner-operators here.

So at this stage we are asking for voluntary compliance to a set of stan dards that would be good for the industry, and everybody has to take some responsibility as to whom they do business with to be sure you do not do business with somebody who is not responsible and does not have a respectable track record in that regard. Mr. Deputy Chairperson: The hour being 10:30, and as previously agreed to in the House, this committee will now recess. When we reconvene, we will be in the Department of Finance. The committee recessed at 10:30 a.m. After Recess The committee resumed at 10:38 a.m. FINANCE Mr.

Deputy Ch air person (Marcel Laurendeau): Will the Committee of Supply please come to order. This

section of the Committee of Supply will be considering the Estimates of the Department of Fmance. Does the honourable Minister of Fmance have an opening statement? Hon. Eric Stefanson (Minister of Finance): I do have a very brief opening statement. Mr. Deputy Chaiiperson and members of the committee, it is my pleasure to present for your consideration and approval the Ex pen diture Estimates of the Department of Finance for the 1994-95 fiscal year. The department proposes to spend $744,663,000 in 1994-95. This represents an increase of 2.7 percent over the '93-94 adjusted vo te.

This increase is mainly due to a 4.2 percent increase, in our estimate, of public debt costs as compared to the adjusted vote for 1993-94. As members know, public debt is far and away the largest component of the depart ment 's spending. It is also the component over which we have the least control, exc ept to the extent that we can reduce our borrowing by balancing the provincial budget. This has not been possible over the last few years when the national economy perf ormed poorly and transfer payments from the federal government were restricted.

However, we are committed to balance the budget in 1996-97, and l am confident that we are on track and will achieve that goal. Among the other main appropriations, the only area of spending increase relates to the Taxation Division, where spending will rise by $461,200 or 4.5 percent. This is due to the additional resources we are putting into the battle against tobacco smuggling. This spending increase was necessitated by the decision of the federal government and several eastern provinces, including Ontario, to reduce their respective tobacco taxes, thereby raising the likelihood that

3960 LEGISLATIVE ASSEMBLY OF MANITOBA June 23, 1994 smugg led cigarettes would be sold in this province. • (1 040) Our government is committed to maintaining the tobacco tax at current levels, because tax reductions would encourage more smoking, especially among young people, lead to increased health care costs and reduce cwrent revenue. We therefore believe that the increased resources are fully justifiable.

I am pleased that the other western jurisdictions are co-operating with us in the battle against tobacco smuggling and will be making financial contributions to offset some of the costs we are incurring as the front-line province. Among the rematntng eight main appropriations, one is being held constant, namely, Appropriation No. 10. Expenditures Related to Capital. The other seven are all declining, led by a 5 percent declin e in Appropri ation 1. Administration and Finance.

These operating reductions are being achieved without hampering the essential work of the department and are consistent with this government's detennination to bring the costs of government in line with what Manitoba taxpayers can afford. I would also like to draw members' attention to the fact that a centralized Internal Audit Services branch has been added to the Comptrolle r's Division this yea r. This represents an amalgamation of the Internal Audit Resources previously lo cated in 11 depar tments. Centralization of this specialized service will now allow us to make it available to all of government.

It is also intended that the new branch will give greater emphasis to value-for-money reviews and focus attention on those activities that will reinf orce and improve ma nageme nt accountability. Those are my opening comments, Mr. Deputy Chairperson and members. Mr. Deputy Chairperson: We thank the Minister of Finance for those comments. Does the official opposition critic, the honourable member for Brandon East, have an opening statement? Mr. Leonard Evans (Br andon Eas t) : Mr. Deputy Chaitperson, very briefly, because we are limited for time-I thank the minister for his opening remarks.

Obviously, we do not have time to get into a lot of questions of administration detail regarding staffing and functions of different branches and any changes in those functions, but there are some policy issues that I would hope that we can touch on at least during the short period of time that we have available. In sum, the minister had made reference to the tobacco tax issue, and we certainly support the government's position in this area. There are other questions, of course, the GST, VAT issue.

We have some other questions about the Canada-Manitoba infrastructure, where we stand on that, the monitoring of the Manitoba Data Services or ISM or whatever it is called now and the question, I guess, of advertising guidelin es. Those are some of the questions that we are concerned about and would like to have an opportunity to discuss during this brief period of time. So with those few remarks, we can proceed, Mr. Deputy Chaitperson. Mr. Deputy Chairperson: We thank the member for Brandon East for those opening remarks. Does the critic for the second opposition party, the honourable member for St.

James, have an opening statement? Mr. Paul Edwards (Leader of the Second Opposition): Mr. Deputy Chairperson, I loo k forward to going through these Detailed Estimates today. Hopefully, we can get through it fairly expediti ously, so I am not going to make an opening comment. However, I recognize that time is short in the Estimates process generally and there will be a number of areas which we will want to question. Thank you. Mr. Deputy Chairperson: We thank the honourable member for St. James.

At this time, under Manitoba practice, debate of the Minister's Salary is traditionally the last item considered for the Estimates of a department. Accordingly, we shall defer consideration of this

June 23, 1994 LEGISLATIVE ASSEMBLY OF MANITOBA 3961 item and proceed with the consideration of the next line . At this time, we invite the minister's staff to join us at the table, and we ask that the minister introduce his staff present, please. We will be dealing with page 64 of the Estimates book. Mr. Leonard Evans: While we are waiting for the staff to come, I wonder if we could be prepared to have some flexibility rather than going line by line, which I know has to happen eventu ally, to discuss some of the basic issues because of the shortness of time-and I rais e some of them. Mr.

Deputy Chairperson: At this time I would ask if there is the will of the committee that we deal with it one appropriation at a time, so we can deal with 7.2 and then 7.3 and pass appropriations one block at a time? Would that be the will of the committee? We could discuss the entire appropriation. Wou ld that be the will of the committee ? Agree d? [agreed] The honourable minister to introduce his staff , please. Mr. Stefanson: Mr. Deputy Chaiipe rson, seated next to me, who needs no introduction, I am sure, is the Deputy Minister of Finance, Mr. Charlie Curtis. Mr. Don Rice and Mr.

Eric Rosenhek are joining me as well from the dep artment, assistant deputy ministers. Mr. Leonard Evans: Mr. Deputy Chaiipe rson, I wonder if the one big issue that is confronting the minister today, and the people of Canada as a matter of fact, is the whole issue of the GST and what is go ing to happen to it. As we both know-as we all know in this room, there is some suggestion that we move to some kind of a VAT, value-added tax. Then, of course, there is the proposal that this be harmonized then with the provinces' sales taxes .

As I understand it, the Province of Ontario, there has been a report that they have done a study showing that this would have a negative impact on their economy because the transfer, I gather, from a GST system to a VAT system will , accotding to this study, transfer the burden more from business to the shoulders of consumers. I know there are some business people who always argue that in the end the customer pays, but there is a question of incidence of tax. I believe these economists have come to that conclusion, that it would therefore put a greater burden on consumers and as such would tend to stifle sales.

Of course, that backs up into production, and then if you cut back on production or reduce production somehow, it affects jobs and you get job loss. Of course, there is the whole question then of how you hannonize it with the provincial sales tax. I think the minister has stated that he is not too happy with the VAT appro ach and the hannonization, so I wonder if he could take this opportunity to tell us just where does Manitoba stand now on this issue, because he is now about, I believe, to go very soon to Vancouver to a federal-provincial Finance ministers confere nce. Mr.

Deputy Chairperson: Just to clarify for the record, we will be dealing with Resolution 7 .I with the exception of the Minister's Salary at this time. Mr. Stefanson: Mr. Deputy Chairpers on, I anticipate that this is an issue on which we will have an opportunity for a great deal of debate over the next weeks and months. It has been the basis of some questions in Question Period so far. We just recently have received some detailed information from the federal government. The member is correct.

We are meeting next Tuesday and Wedn esday with all provincial Finance ministers and the federal Finance minister to discuss this issue. As I have indicated, as we are preparing information, I will certainly be more than prepared to share as much of that as we possibly can with all members of the Legislature to maximize the basis of information and knowledge on this issue. The points that he raises about the short-term impact on the economy, we are in the process of attempting to quantify that for Manitoba.

As I responded to an ea rlier question, so far the information I have been provided with is that the principles and the expected outcome of that are

3962 LEGISLATIVE ASSEMBLY OF MANITOBA June 23, 19 94 something that we are ackn owledging as being correct. In the short tenn, there is the possibility of a negative impact as it impacts consumers and consumer confide nce, consumer spending and that the offset, the benefits to business through the result of the input credits flowing through, and the export opportunities and so on are expected to be slower to be deriv ed. So in the short tenn there is an expectation that could have a negative impact on the econo my, on jobs.

The pro jections in principle are that over the long tenn there are benefits, is the theory behind it. Now we are working on quantifying that from the Manitoba per spective . Ontario has done some work through the Fair Tax Commission, so that is a concern, certainly a short-teDD concern. We are also conc erned with the cost to consumers. Some numbers are being bandied about in teDDs of what the costs of baDDonization could be to consumers.

Again, what we are seeing from our preliminary review is that if there was an extension into areas like food and prescription drugs, if we take that at added cost to consumers and then also factor in what we anticipate could be a savings to consumers, based on this 5.3 percent rate that is being suggested, there would still be a net increase to consumers on average for a family of four of between $300 and $400 per year. Now, higher numbers have been suggested. My expectation is that those higher numbers do not necessarily factor in what would be a projected offset through a lower rate in other areas.

At this point in time, this is all sort of theoretical because even the fed eral finance minister has not adopted a position on this committee report. He has indicated be wants an opportunity to talk to the provincial Finance ministers, and to the best of my knowled ge, as of yesterda y, be had not taken a fonnal position. In teDDs of our preliminary position, as we all know around this table, I think we all opposed hannonization when the GST was first introduced.

We continue to oppose haDDonization based on this proposal that we see so far because of the concerns of it moving into areas that we opposed when the GST was introduced. Right now the PST is not applied to books, to certain aspects of children's clothing, to the service industry , to purchases of new homes, and a series of areas, and those are some of the reasons , I think, that we all opposed hannonization when initially introdu ced. So we continue to have that conc ern.

Probably the other overriding concern with harmonization, if we take it on the basis of hannonizing with the GST as it currently exis ts, there is this myth that through haDDonizing you could have a significant reduction in a combined rate. As we both know , it is 7 percent GST and a 7 percent PST in Mani toba.

To haDDonize based on the existing GST, that would not lead to a reduced overall rate because, I think, as we all know how the GST works, you get in put tax cred its, you get credits for inputs, the businesses do, so that there would be a cost to us on that side that in fact, potentially , under the current items being charged, would have to be recovered without quantifying it yet. On the existing items, there would probably have to be an increase in the PST to stay revenue neutral. Now, the proposal is, if you move into these other items, you can conceivably reduce the GST down to 5.3.

The preliminary review is that that does not necessarily translate into any kind of an increase in the PST. So those that have been promoting a sing le, unified tax on the basis of something like a 10 percent combined rate, if the objectives of the two governments is to stay revenue neutral, the preliminary review is that that is not possible unless one level of government is prepared to forgo sources of reven ue. That is the only way you can get down to those kinds of rates, and if that were to happen, then whatever level of government chose to do that, they would have to replace it somewhere else. •

(1050) We obviously think that the PST, as it currently functions in Manitoba, by and large functions very well. We do not get a lot of conc erns, a lot of complaints about it. It is the second lowest PST in all of Canada, after only Alberta, so we see no reason at this point in time to be supporting the

June 23, 1994 LEGISLATIVE ASSEMBLY OF MANITOBA 3963 recomm endati on of the House of Commons committee . Having said that, in principle, I think we all acknowledge that having two taxes is not efficient, that it is costly to business, which is then costly to consumers and so on, and that ultimately we should all be striving to find a way to get to some kind of a single tax, to some kind of a single tax collection agency, single audit process, all of those things that cost us money.

So in terms of an objective, we would agree with that objective, but in terms of the approach put forward so far, we do not think that accomp lishes it in the best interests of consumers, in the best interests of Manitobans. 1berefore, we oppose what we are seeing so far. I think I will have obvi ou sly a lot more information as our staff prepares the information and as I go forward to those meetings next week to hear from Mr. Martin in terms of if he has any other suggestions, any other proposals, of what his view is of the document.

I have had some p rel iminary fee dback from western Canada, and I think basically, without speaking for all of the provinc es, there seems to be certainly a recog nition in western Canada that there is not much support for what is being put forward so far. Mr. Leonard Evans: I thank the minister for that information. Just one tiny clarification. He said an added bwden on consumers of $300 to $400 per year. Is that per family, I presume, or per person? Mr. Stefanson: That is done on the basis of a family of four. Mr.

Leonard Evans: I appreciate the fact that what we have been discussing is a report of a parl iamentary committee, and the government or the minister per se has not necessarily adopted that commit tee 's vie ws. I guess this is what our minister here is interested in seeing or hearing, along with the other provi ncial ministers, when they go to Vancouver. There has been all kinds of speculation in the business media that p rovinces want to trade off. You know, maybe , if you want us to harmonize, what is in it for us, and what trade-offs?

There is even a suggestion of a trade-off with regard to income tax to al low provinces to have more free dom to collect their own income taxes. So I guess the question I am putting to the minister -and it may be a little awkward for him to answer because I guess he does not know what Mr. Martin is necessarily going to be putting on the table. But I am pl ea sed that he is opposed to harmonization.

I was just wondering, is Manitoba, is this minister prepared to sort of discuss options for trade-offs because of the fact that Manitoba would stand to lose actu ally, through pure harmonizations, as it stands now, for the technical reasons that the minister e xplained, that there would have to be some quid pro quo offered somehow? One suggestion was income tax flexibility. I am not necessarily advocating this; I am simply asking that question. Mr. Stefanson: Again, I think the member for Brandon East is portrayin g exactly what will happen next week.

I am anticipating all of these kinds of things will be discussed. It will be interesting to hear Mr. Martin's view on all of those issues. We have at least two fundamental obj ectives. One is, as I had indicated, our tax system here in Manitoba overall is worlring very well. We have an objec tive certainly of staying revenue neutral. We are not, obviously, through any changes, looking for enhanced revenue, but we would expect that we would be able to retain the level of revenue that we currently have. That is an objective.

Then, in terms of any other changes that might be pr oposed, our objective is basically one of fairness in terms of how we think any changes wou ld impact on a combinati on of consumers, individual Manitobans and businesses. Those kinds of things are being bandied about, that there might be a suggestion that we start redistrib uting areas of taxation, that conceivably the federal government takes over this whole area of sales taxes and so on and potentially then does something for provinces in another area. We are prepared to look at those kinds of things, with those obj ectives being the fundamental

3964 LEGISLATIVE ASSEMBLY OF MANITOBA June 23, 1994 undetpinning of what decision or conclusion we would come to in any of those are as. Mr. Leonard Evans: I recall, about three years ago, there were reports in the business media again of a fe deral discussion paper that was supposed to have been prepared, designed to allow provinces to levy taxes on income rather than just take a proportion of the fe deral tax payable. I do not know whether that ever came about. I know the government has changed, but I think there was a paper prepared, and there was some discussion. I do not recall that Manitoba took a stand.

I believe I was asking questions of the minister's pred ecessor on that. I, for one , would be unhappy with Manitoba, frankly, getting into the direct income tax collection process. I do not know whether we stand to gain from that, although obviously it depends on actually how the mechanics are struck, how they are set up. I will just ask the minister. Is that a serious option that he would be prepared to consider, and that is, to trade off for more freedom for Manitoba to collect income taxes? Mr. Stefanson: Mr.

Deputy Chairperson, I have been to two Finance ministers ' meetings since I ended up in this portfolio, and an issue that has been on the table at the national level is the issue of provincial governments requesting and supporting tax on income on our personal tax returns. As we all know right now, our provincial tax is a percentage of the fe deral tax, and provincial governments have been requesting and supporting a change that we end up with a tax on income, just like the fe deral tax is, again, for several reasons.

One , it is more transparent to the taxpayer, that they can then readily look at their tax return, and, hopefully, determine who they are paying their taxes to. We are also looking for some additional opportunity for input into tax policy.

But we have also, as part of that proposal, suggested that we would support and could support a single tax collection agen cy, that, again, there is no reason that there cannot be a single tax collection agency done on a co-ordinated basis with the federal government, an independent agency, even, from government or under the jurisdiction of the federal government with co-operation from the provinces. • (1 100) We do not see that there should be a need for provinces to set up their individual collection agencies or proce sses.

I think those kinds of discussions were taken to the point where there did not seem to be much co-operation and there was a will to break away, like the Quebec system. I think most Canadians would support the co-operation that they file one tax return and have a system of ei ther an independent or a co- ordinated co-operating agency . Mr. Leonard Evans: I would hope that our minister could go to Vancouver and suggest some real options because Canadians do not like the GST. They do not want anything that resembles the GST imposed by the fe deral government , whether it be called a VAT tax, or whatever it is.

They do not want it, and they really voted for the Liberal Party in large measure to get rid of the damn thing. They really thought they were going to get rid of it. Now we all know that gov ernments need revenue , and I would suggest that there are other forms of revenue that we could seek as governments to replace the GST. I have some suggestions to make about that, but I will defer for the moment. I wonder if I could just give the floor to Mr. Edwards, and I will get back to this as soon as I get back. Mr. Edwards: The interest rates in this country have recently taken a rise.

There has been much talk amongst various governments about the effect that will have, and most notably the fe deral government recently. Does the Minister of Finance have an update on what the eff ect of the recent increase will be on the projections of costs of servicing the public debt and what impact that will have on his budget predictions of April? Mr. Stefanson: Mr. Deputy Chaitperson, I guess, obviously we are concerned. There is a financial impact with the combination of interest rates going

June 23, 1994 LEGISLATIVE ASSE:MBL Y OF MANITOBA 3965 up and any time our dollar goes down as well, because we know we carry some U.S. debt. Again, we are in a somewhat fortunate position for two main re asons. One, we have some flexibility in terms of when we are going to the marke t, because we actually, if anything, have been somewhat ahead of the game in terms of our borrowing requiremen ts, so we are not under any pressure to have to get in at a particular time when we see this tremendous volatility in the interest rates, like some of the other provinces. 1bey have had no choice.

They have had to go into the market. We have not had to. In fact, our curre nt borrowing situation is in pretty good shape. So that is very helpful to us. Also , a fairly sign ificant amount of our borrowings is in short term, which, of course, is at the lower interest rate, so we have the opportunity to pick a window when we think it is appropriate to lock it in. Traditionally, like many economis ts, there are all kinds of projections as to what is going to happen over the next several months, a whole range of predictions, where our dollar will be at the end of next March.

Several are still projecting reasonable strengthening, up to a dollar, between 75 cents and 76 cents. Some are projecting being down at 72 cents or 73 cents. It is still all over the map in terms of what the projections are . Based on what has happened to date, the financial impact as of today, from my view, is certainly not something that we cannot deal with. It would be in the $6-million to $8-million range within a five-point-some-billion-dollar budget and total debt servicing of $533 million.

If that is the worst-case scenario, we can certainly find ways to deal with those expenditures during the course of this fiscal year. Obviously, both of those issues do cost us, and I think we, like everybody , would like to see lower interest rates and a stronger dollar. Mr. Edwards: What was the average interest rate for the fiscal year '94-95 and the average dollar value that was used in the projections for the budget? Mr. Stefanson: Mr. Deputy Chaitperson, I believe the average rate for '94-95 is about 8 percent, and the expected dollar projection at fiscal year-end March 31 of '95 would be 76 cen ts.

I should just point out, while we are on this, that we, of course, have issues coming due, and some of those are from the fairly high interest rate period of the early '80s. We have one coming due shortly at, I believe it is, 12 percent Obviously we will be refinancing that probably somewhere in the 7 percent vicinity. We had one that came due in March that was at 14.75 percent, I think it was, that again we were able to refinance at 6.2 5 percent-the one that had been at 14.75. Again, those kinds of things are certainly an offset and are helping signif ic antly in terms of our debt servicing. Mr.

Edwards: When issues are refinanced or new issues are purchased to finance the debt, what are the guide lines, what is the protocol for determining in what currency to place that debt and for what term? Obviously there is a wide range of options available. We have money in deutschemarlcs and yen and American dollars and Canadian dollars. Is there some document, is there a protocol for doing that? How does it actually work.? Is it dependent on the size of the issue or what its purpose is? Is there some guidance the minister can give us on that? Mr. Stefanson: Mr.

Deputy Chairperson, no, there is no document or guidelines that I can provide the member with. A series of issues that are looked at whenever we are having to borrow money-obviously what matk.ets are in the matk.et for pape r, where we can likely sell our paper, again, obviously what the interest rates would be in those markets, where we can borrow at the lowest rate. I should say that our overall objective is to do the maximum amount of borrowing in Canadian dollars. When we formed government back in 1988, approximately one-quarter of our debt was in non-North American, non-Canadian, non-U.S.

Today, none of it is. All of that has been swapped either into Canadian or U.S. So all of our debt today is either in Canadian dollars or U.S. dollars. On an overall basis, if you bring in our Crown corporations, MTS, Hydro, the ratio is about 55 percent Canadian, 45 percent U.S., but even on

3966 LEGISLATIVE ASSE:MBL Y OF MANITOBA June 23, 1994 that 45 percent U.S., we hedge some of it because Manitoba Hydro has some U.S. revenue from export sales. I think about a third of that is hedged through direct revenue sources in U.S. dollars. That is a policy that we want to stay in, ideally the Canadian market but if not, the U.S. dollars. Just to conclude on that point, that does not mean that you will not see us borrowing in Japan or some other marltets where we will do a currency swap back into either U.S. or Canadian currency.

We did a samurai issue last fall but we swapped that one back into U.S. dollars. So all of our exposure is either in U.S. or Canadian dollars. Mr. Edwards: Just to clarify, the preference is primarily for Canadian dollars. That is the first choice. Not Canadian or U.S. equally, but the preference is Canadian dollars. Mr. Stefanson: That is correct. The preference is Canadian dollars. Mr. Edwards: With respect to the Builder Bonds-- and we have had comments in the House about that and it has obviously been a very successful program-what is going to happen with that?

What is the plan of the governme nt, to expand or enhance that, or does the government sense that we have maximized the potential for that with respect to the local marke t? What is the government's curre nt plan for increased use of that particular plan? Mr. Stefanson: Mr. Deputy Chairperson, we certainly would intend to carry on on the basis of doing it on an annual bas is. It has served us very well, as the member indicated, to date. This year we are somewhat over the $300-million marlt. Last year we were about $340 million and so on.

It has been an excellent source of capital, Canadian doll ars here in Manito ba , interest going to Manitobans. •

(1110) It is like anything else. There is only so much capacity. We certainly would continue to watch that to see if there is more capacity, but so far we feel an annual issue serve d Manitoba Hydro very well. It is serving us very well, and we would expect to continue with either Build er Bonds in the future or depending on Hydro's need s, conceivably a HydroBond in the future but, at a minimum, an annual issue somewhat along the lines of what we have been doing. Mr.

Edwards: Can the minister just indicate, and perhaps this was outlined at the time and it escapes my memory, what was the commission paid this last year on Builder Bonds? Mr. Stefanson: Staff will check to be sure that we give the exact amount If we can carry on, we will come back to it. Mr. Edwards: Continuing on the idea of bonds and the retention of dollars within our economy here in Manitoba, does the minister have, does the department have infonnation or an assessment of the level of inves tment year ly, annually, by Manitobans, individual Manitobans, in various stock or bond vehicles in any given year?

I guess what I am getting at, if I can just share with the minister, I had spo ken to those who are in the industry selling RRSPs , some of the majors represented here in Winnipeg. I had received a guesstimate from them of about $640 million in new direct investment by Manitoba citizens in RRSPs or other pension vehicles. I am just wondering if that is tested or if that type of information is assessed by the Department of Fmance. Mr. Stefanson: We do not do anything in tenns of quantifying that intemally.

We utilize whatever in dustry re ports are available, in forma tion provided by the financial community in Manitoba in tenns of what is happening with Manitobans investing their money here in our province. Mr.

Edwards: What is the current information, then, that the Department of Finance has from those sources on the level of investment in, say, the last year, if that information is availa ble, by Man itoba ns specific ally through RRSP investments, and, I guess, secondarily, through other pension investment vehicles, and, of course, you get the global picture, including just other nonnal stock and bond purchases? Mr. Stefanson: The department will source it and, hopefully, provide it either while we are still here or as soon as possible.

June 23, 1994 LEGISLATIVE ASSEMBLY OF MANITOBA 3967 Mr. Edwards: I appreciate that. The other question which, again, is not easy to nail down, but, I think, is an important one to at least get some grip on, is: What level of our investment dollars from Manitobans is retained? I do not know how that is measured, if at all. Again, the people I speak to in the industry make speculations about it, about the percentage of investment dollars that either are initially placed here or make their way back here to the local economy. Is that type of information assessed or available in the department? (Mr.

Ben Sveinson, Acting Deputy Chaiiperson, in the Otair) Mr. Stefanson: We will undertake to provide as much information as we can around that issue as well. Mr. Edwards: The idea of an expanded stock exchange for this region has been canvassed for many years by some in government, but others in the investment community. Of course , there is an exchange here; there is an exchange in Alberta. Has the Department of Fmance done studies into the establishment of an exchange on a regional basis in the prairie region or in the western provinces?

Has any of that happened, or have there been discussions with the curre nt group that does exist, which I have met with, of local business people in Winnipeg who are promoting the idea? Mr. Stefanson: Mr. Acting Deputy Chaiiperson, this was an issue that I have had the department do some review of, and the y have bad some discussions with individuals here in Manitoba. Of course, the exchange in Manitoba is, in effect, owned by the members.

My understanding and what I am being told from those discussions is that the members themselves did not necessarily see a significant value to one consolidated prairie exchange and also suggested that, particularly out of Alberta and B.C., there was even some potential resistance to that idea. But what they do say as being beneficial is that, with computerization and linking between the Winnipeg exchange and other exchanges, that can significantly enhance their ability to service Manitoba.

So any co-operation between them could certainly be an improvement in terms of opportunities in Manitoba, but so far I am told from what we have looked at and from what individual members have suggested that there is not necessarily the significant benefit or the will, in many cases, to go to one consolidated exchange. Mr.

Edwards: With re spect to the move nationally to co-ordinate Securities' rules and make Securities' regulation a national, to bring it together across the country, which, I think, is primarily being promoted by the banks as they have now moved seriously into this area, has the Minister of Finance or the department had discussions with fellow representatives on this? What is the position of the department and the government at this point on that suggestion? Mr. Stefanson: Mr.

Acting Deputy Chaitperson, technically, the majority of that issue is being dealt with by Consumer and Corporate Affairs because of the Securities Commission, but we are involved and particularly it is one of the issues being looked at under this whole iss ue of overlap and duplication through Mr. Masse, the federal minister responsible . Again, our initial review of it is that there is no real benefit to Manitoba. The benefits are through the co-operation, through the information system nationally and so on, in terms of the sharing of information and, again, computerization.

But, in terms of the reaction from Manitoba businesses and our own initial review, we do not see that there is a benefit.

In fact, there is potentially even some downside in terms of access to opportunities out of Manitoba by not having some presence here in our province, and that would be the concern. • (1 120) I think if you went to a national, you would have every province, of course, saying they would like to see that occur in their province, which would significantly benefit that province directly, but then provinces that would potentially lose resour ces or pres ence, obviously, would be potentially diminishing the opportunities in their province.

3968 LEGISLATIVE ASSEMBLY OF MANITOB A June 23, 1994 So, in tenns of the review we have done to date, we do not see that as the one national security commission as making a great deal of sense, but we do support greater co-operation, greater sharing of infonnation, the systems being in place. I am led to believe that there have been si gnificant improvements in that whole area already in the last year or two in terms of a discussion I had with the chair of the Securities Commission not long ago. Mr.

Edwards: With respect to the potential downside to Manitoba for moving in that direction, it is my understanding that one of the concerns of those who are involved here, most notably, I think, the Investors Group and some of the others who have spent a lot of time and effon developing a fairly broad base of representation across the country-that this would erode much of what they have built.

One of the concerns raised was the licensing of brokers and the continued need to retain that right on a provincial basis so that you can maintain the direct link, local link, between a responsible authority, licensing agents and the ultimate customer. I think I see a lot of merit to that concern. However, the other side of this is a bit like the GST argument the minister was talking about In principle, there appears also to be logic to a standardized set of prospecbls rules rather than a patchwork. Is there any way of distinguishing those two?

Are there local concerns about moving towards a national filing set of regulations? Mr. Stefanson: I think what the member has outlined is correct that there is a will and support for moving to a national standardization but still retaining the presence and the control within the provinces, and that what we are being told is that would be more than satisfactory to the business community and address the most significant problems in terms of issues across Canada and the whole issue of overlap and duplication.

I should just point out as well, when we met as western Fmance ministers in Gimli just a month or two ago, it appears-- again I cannot speak for each province indivi dually, but there seems to be consensus that the national securities commission is not some thing that is mu ster ing muc h support-more along the lines of what we have just discussed. Mr. Edwards: I think that has probably been the case in the past, but seemingly the banking community is fairly influential it would seem, history has shown us.

I guess it is an ongoing issue that I think I am sure the minister is-but it needs close monitoring simply in terms of the local impact. Manitoba would not be alone in that, obviously. The other, we talked a little bit earlier about the Winnipeg Exchange which is member owned and the move towards an exchange on a regional basis. One of the problems with the exchange situation as it currently exists is that-and I saw this reponed recently-there are currently 12 which you can define as Manitoba companies listed on the Toronto Stock Exchange.

Obviously, I am sure you could go into a lot of debate about that, but the truth is that our business community lo oking for venture capital is not usually of a size-<>r looking for capital-that is suitably served by that exchange which tends to be an exchange that has a fairly high buy-in, if you will , simply because of the cost of going through the procedure in a much larger exchange.

What can be done to enhance the availability of venture capital for our business sector which is looking for generally much smaller amounts of money, and in this, I would ask in the context of putting the investor in direct touch with the business or entrepreneur? We have the Grow Bond Program which is good, we have the Vision Capital Fund, we have Western Diversification. All of these funds, they all have appointed boards which judge these projects; they all have, in many respects, mandates. The Crocus fund as well.

It seems to me that the ideal situation that we want to have occur is a direct link between individual investors in Manitoba, not necessarily those looking to invest hundreds of thousands or millions of dollars, because they of course can always find their way, but those who are looking to place smaller amounts of money on an individual basis and may be moved and motivated to leave

June 23, 1994 LEGISLATIVE ASSEMBLY OF MANITOBA 3969 the money locally, given the proper vehicle to do that. That to me bas been proven by the success of the Crocus Fund, by the success of the Grow Bonds and by the success of even the Builder Bonds program. There is a high level of motivation to leave the money here. What can be done within the exchange framework, if anything, to enhance that in this province? Mr. Stefanson: Mr.

Acting De puty Chaiiperson, again, I guess I share the point or the concern being raised We are pleased with many of the strides we made, as the member has outlined, whether it is Crocus or Vision or Grow Bonds, which create opportunities for capital for business opportu nities. As the member knows I think from a previous question in the House not long ago, there is a capital market task force which is scheduled to report fairly soon. Their mandate was fairly broad but this was all part and parcel of it.

I believe the honourable member re ad from their mandate or a press release at the time not long ago during Question Period, so I anticipate that a great deal of this will in fact be addressed in that task force. When we receive that report then we will all have the opportunity to decide what we think makes sense to move forward with. I think there is, I do not know if I would use the word "void," but there is potentially a need in some of these areas to create more access to capital. I am optimistic that the task force will provide some direction, some information and some recommendations in some of these areas.

Mr. Edwards: When might we expect that report and, I guess, while the minister is at it perhaps he can comment on when we might expect the other report on the regulation of small business and problems. There are those two committees which are going. What is the timetable for receiving those reports? (Mr. Bob Rose, Acting Dep uty Chairperson, in the Chair) Mr. Stefanson: I know members always like to get a very defi nitive date and usually do not.

Other than saying that they are both expected very soon, my understanding is that both are progressing well and are very close to being able to come forward with their reports. We are not talking many months. I think we are talking weeks in terms of both of those reports. Mr. Edwards: Just one other area and then I know the member for Brandon East has questions as well.

It is my understand ing- ! saw it reported recently and I was not really aware of this prior to that-that the Province of Manitoba is receiving compensation payments from other provinces for the tobacco tax assessed losses from the Manitoba perspective. Can the minister tell us how much is being received, from which provinces, and what is the basis of calculation of those amounts? Mr. Stefanson: It is really the three western provinces sharing in the enforcement side of the issue, not the revenue side, but the enforcement side.

It is on the basis of a quarterly review and it is on the basis of increm ental cost to us over and above additional costs we are incurring as a result of enhanced enf orcem ent. The agree ment is to review it quarterly and each province would contribute $60,000, so $1 80,000 from the three provinces per quarter.

We have received concurrence with the first quarter, which was the end of May, and we will continue to do whatever enforcement we deem necessary and then as the next quarter unfolds determine how much that cost was to us and go back to the provin ces with a maximum contribution of $60,000 per province. • (1 130) Mr. Edwards: Just to clarify, that $1 80,000 represents a pool of money put in by the three provinces each quarter which is then allocated based on increased expenditure. Is Manitoba, the province making that increased expend iture or are others as well or how is it allocated? Mr. Stefanson: Mr.

Acting De puty Chaiiperson, it is on the basis of our costs because again I think I am stating the obvious that we were viewed as the gateway to the west in terms of this issue. So individual provinces might be incurring some

3970 LEGISLATIVE ASSEMBLY OF MANITOBA June 23, 1994 changes in tenns of their own enforcement, which they will be incurring from their own resources, but this was on the basis that to deal with the Ontario-Manitoba border, we were going to have to allocate additional resources, and the provinces agreed that they would contribute what amounts to roughly three:-e�uarters of the cost towards that pa rti cula r enforcement, that incremental enforcement I am not sure ifl - An Honourable Member: B.C. is in it too? Mr. Stefanson: B. C. is in it, too, yes. B. C., Alberta and Sa skatchewa n ea ch contribute $60,000.

So roughly the costs are estimated at $240,000 a quarter to be reviewed and monitored on an ongoing basis based on need and then to discuss with them their contribution. Mr. Leonard Evans: I wanted to get back to the GST question just for a moment, but perhaps before I do so, I will cany on where Mr. Edwards left off, and that is, recently, what has been the impact on tax revenue from tobacco sales for the Province of Manitoba? Has there been any slippage in this respect because of the illegal imports, or whatever the expression is, of tobacco, cigarettes from other provinces? (Mr.

Deputy Chairperson in the Clair) Mr. Stefanson: Mr. Deputy Chairperson, when we looked at this at the outset of the year, StatsCan was suggesting that they anticipated tobacco sales to go down by about 3.5 percent, I bel ieve, just because of less people smoking. To date, our revenues for the four months now that this has been in pl ace, February, March, April and May are down about 5.5 percent. So if you say that the expectation is it would be about 3.5 percent anyway as a result of slippage-! mean this is fairl y subjective-but potentially a couple of percentage points as a result of the problems at the border.

So by and large , we are quite pleased with that because, again, as the members know, I think, if we were to adopt the Ontario or Quebec approach, we would have had to reduce our tobacco tax revenues by about two-thirds, some $70 million to $80 million. So while we do not like to see any erosion of the income that could be put to good use in Manitoba, compared to the alternatives, we still feel very strongly that we are on the right course, and with the co-operation that we just discussed with the western provinces, that is extremely helpful as well. Mr.

Leonard Evans: As I said earlier, we support the minister and the government in this particular initiative. It may be difficult for the minister to tell us, but cigarettes do get tl'amported in illegally , I suppose, by land, but they can also come by air, and they can come through the post office. Do we have any idea of how much is being imported by postal service at the present time? Mr. Stefanson: Mr. Deputy Chairperson, that continues to be a problem area, as I think the member knows.

We have had at least one fairly significant seizure in that area, but we have been working with Health and Welfare Canada in terms of the advertising issue because it is illegal to advert ise , so that has helped dea l with the distribution through the postal system. Actually, the federal legislation that is before the House, the Ways and Means motion, when passed, which I understand is to be passed any day now, will significantly help because it will make it illegal for any retailer to distribute product by the postal system into another province.

So in terms of any commercial operations that should , for all intents and purposes, with the enforcement side, co-operation with the federal government, should eliminate that. That has been one of the more difficult areas to deal with because of the lack of legislative authority and just the nature of the distribution of the product. Mr. Leonard Evans: I guess there are questions of the rights of the individuals to send material and messages through the mail and all that, so there is that big issue of human rights or whatever that always seems to creep up.

But I am glad you men tioned about the advertising because I have had complaints by people who are in the business of selling tobacco products that people have been advertising really illegally that they have cigarettes for sale . You

June 23, 1994 LEGISLATIVE ASSEMBLY OF MANITOBA 3971 know, phone this number. They say they cannot advertise cigarettes for sale in their retail tobacco shop, yet others seem to be able to do that. The minister is telling me that that has been eliminated or stoppe d, virtually, by the Department of Health and Welfare . Mr. Stefanson: Mr. Deputy Chaitperson, as soon as we become aware of any ad in any newspaper, we inform the fed enu government and the RCMP, and under the legislation that currently exists that ad has been pulled lite rally immediately .

So that has been helping deal with the situation, and as I say, with the additional legislation that will help some more, although you did raise the interesting point.

What the fe deral legislation will do is it will preclude any retailer from distributing product into Manitoba through the postal system, but it would not preclude an individual neces sarily from mailing themselves some cigarettes, except for the fact that if they were then fo und in possession of more than one carton, they would be in contravention of The Tobacco Tax Act, so there are still issues around that whole postal system, but the fundamental part of Ways and Means will significantly help in terms of people who are trying to profit from distributing.

There are various amendments when we get to our Statute Law Amendmen ts, there are some amendments in there that would help in terms of going to a marked product in Manitoba. We are going to a marked tear strip like Ontario, Quebec, B.C. currently have. Alberta, Saskatchewan and ourselves , we are all going to a separate marked tear strip, hopefully as early as this fall or certainly early next year. Mr. Leonard Evans: Well, there is a lot to this issue , and there are many things that can be done . There is a lot of frustration.

I know, for instance, a lot of people travel by plane and visit Toronto for business reasons and so on. I guess there is nothing preventing them from bringing back a couple of suitcases full of their favorite brands, but who knows? * (1 140) Mr. Stefanson: Just on that, I will be very brief. I think Manitobans have been very good on this issue, by and large . I mean, I think they recognized the issue, recognized the legal requirements .

Certainly, from what we are seeing of our revenues overa ll, the vast majority are continuing to make their purchases in Manitoba in probably whatever was their traditional way of purchasing cigarettes . Mr. Leonard Evans: Mr. Deputy Chaiiperson, that is good to hear. Just getting back on the GST issue. I wanted to draw the minister's attention to this

article by Neil Br ooks entitled, A Liberal no-alternative tax alternative , subtitled, Preparing to axe the Tax. He comes up with some interesting sugge stions -maybe your staff have seen it, I do not know -as to alterna tives, because he uses an estimate of $18 .6 billion of collections from the GST. I do not know exactly what year it is but, you know, give or take the last year or so. Of that 18.6 he would account for 5.6 through spending offsets.

For example, you have to give GST rebates to what he calls the MUSH sector, that is the hospitals , municipalities and so on, I guess, refundable GST sales tax credi ts, GST payed by government, reduction in index transfer payments and the costs of administering the GST which is $.5 billion itself . You add up all those , and there is $5.6 billion of the 18.6 from that source . Then he suggests $3 billion could be accounted for by excise tax off sets with regard to alcohol, tobacco, gasoline and automobile s.

You know, you eliminate the GST, but he would come forward with an excise tax to virtually keep the same amount of tax, for instance, from alcohol or cigarettes or whatever. Then he finds another $5 billion from new spending cuts, and these are areas such as business meals and entertainment, employer fringe benefits, ordinary capital gains, dividend tax credits, tax write-off for capital equipment, et cetera, and he elaborates on it. Well, you can have a discussion whether these are good or bad, but this is what he is proposing, that there are specific areas that you could find $5 billion.

Then he suggests there should be some new taxes brought fo rward, an energy tax, and he

3972 LEGISLATIVE ASSEMBLY OF MANITOBA June 23, 1994 argues that this is good for environmental reasons, and a wealth tax where you would find $2.5 billion. Either that or he suggests another 2 percentage points increase on income tax rates which would give you $5 billion as opposed to $2.5 billion from an energy tax and $2.5 billion from wealth tax. That adds up to $1 8.6 billion. He suggests there are a lot of benefits from this alternative . Small business would be spared billions of dollars they now waste in complying with the GST.

Canadian retailers would only have to collect about the same amount of sales tax as their American compe titors. I guess he has done a bit of a study there. The provinces would be free to occ upy the sales tax field without fe deral government interf erence. Low- and middle income Canadians will see their tax liability substantially reduced.

Environmentalists would be given an important instrument for reducing carbon and energy usage, and there would be a positive macroeconomic effect, you know, the fact that you are lifting a sales tax off of consumers so that presum ably they would spend more and stimulate the econo my. Then his last point is, it should appeal to those who want to reduce the size of government since it would get rid of a number of inefficient fe deral spending programs . So I thought the

article was rather intriguing. He is professor at the Osgoode Hall Law School in Toronto. At any rate, I would just hope that Man itoba could go to the conference or whenever it discusses this with the fe deral authorities and put forward what I think is a rather attractive alternative . I am not saying that is the alternative , but it is, you know, very imaginative and I think Canadians would by and large welcome it. Mr. Stef anson : Just on that, Mr.

Deputy Chairperso n-an d I think you indicated you were going to ma ke co pies for memb ers of the committee-we are certainly more than prepared to forward that kind of information. I guess, putting this issue in perspective, as I said, we curre ntly have a tax regime in Manitoba that we are not getting an awful lot of complaints on, and when it comes to our PST it is not as though we are generating or getting a lot of complaints. People understand how it is applie d. It is generally accepted. It is the second lowest rate in Canada.

So I guess what I am leading to is the point that we have a GST, a fe deral tax, we have the new government that made a commitment to do something with it, replace it, were the words that were used. As much as we are prepared to provide information with them and offer up suggestions, it is an issue that is fundamentally theirs. It is currently their taxation revenue. It is their issue of making any changes that they deem to have to make to it to stay revenue neutral and all of those kinds of things.

We are prepared to try and be co-operative, but we are also not going to be drawn into doing something that we think is not in the best interests of Manitoba. That is why I come back to-at this point in time, we have not seen any good and valid reason to support harmonization.

In fac t, without getting too detailed in terms of the discussion paper, you mentioned the MUSH category, the municipalities, the universities, the schools and the hospitals, and my understanding of the document when it talks about getting down to this 5. 3 percent , it is on the basis of basically eliminating the rebate program that exists there. So there are ma ny issues, ripple eff ects of some of these decisions, that end up either costing consumers or co sting us as a provincial gover nment, conceivably, or other levels of government.

As I say , we are prepared to share information and so on, but it is a problem that the fe deral gov ernment re ally is the primary level of government that has to resolve its commitment that they made, and we will try to be helpful in what ever way we can. Mr. Leonard Evans: Mr. Brooks was not being critical of the provincial sales tax regime. In fac t, he even says it gives the provinces more flexibility, more room actually, in this field if the fe deral government got out of the GST or any sales tax alternative to it. He states that the provinces would be free to occupy the sales tax field without fe deral

June 23, 1994 LEGISLATIVE ASSEMBLY OF MANITOBA 3973 government interference. I think that is of some advantage to the provinces. At any rate, there are some other points-- we have not got very much time-1 just want to quickly go over them. I am concerned about the monitoring of the rates that the government pays for computer services that used to be offered by a Crown corporation called Manitoba Data Servi ces, which was sold a fe w years ago, I think, to ISM. There have been various name changes, but I think the minister knows of what I am talking about. It was given a monopoly. When it was taken from the public sector and put in the private sector, that new private firm was

Document details

Collection	Manitoba — Debates (Hansard)
Citation	35-5-53b
Type	hansard
Volume / chapter	35th 5th hansardpdf 53b.pdf
Language	en
Format	pdf
Source	PROVINCIAL
Identifier	a868c528d4c3603d736571afe0b0155f46e57fd0

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