British Columbia Hansard — Tuesday, May 17, 2016

20160517pm-Hansard-v40n4

British Columbia — Debates (Hansard)

Fifth Session, 40th Parliament OFFICIAL REPORT OF DEBATES OF THE LEGISLATIVE ASSEMBLY (HANSARD) THE HONOURABLE LINDA REID, SPEAKER ISSN 0709-1281 (P rint) ISSN 1499-2175 (Online) Tuesday, May 17, 2016 Afternoon Sitting Volume 40, Number 4

PROVINCE OF BRITISH COLUMBIA (Entered Confederation July 20, 1871) LIEUTENANT-GOVERNOR Her Honour the Honourable Judith Guichon, OBC Fifth Session, 40th Parliament SPEAKER OF THE LEGISLATIVE ASSEMBLY Honourable Linda Reid EXECUTIVE COUNCIL Premier and President of the Executive Council .............................................................................................................. Hon. Christy Clark Deputy Premier and Minister of Natural Gas Development and Minister Responsible for Housing ......................Hon.

Rich Coleman Minister of Aboriginal Relations and Reconciliation ......................................................................................................... Hon. John Rustad Minister of Advanced Education ............................................................................................................................... Hon. Andrew Wilkinson Minister of Agriculture ........................................................................................................................................................ Hon.

Norm Letnick Minister of Children and Family Development .......................................................................................................Hon. Stephanie Cadieux Minister of Community, Sport and Cultural Development and Minister Responsible for TransLink ................ Hon. Peter Fassbender Minister of Education ............................................................................................................................................................Hon.

Mike Bernier Minister of Energy and Mines and Minister Responsible for Core Review .....................................................................Hon. Bill Bennett Minister of Environment ..........................................................................................................................................................Hon. Mary Polak Minister of Finance .................................................................................................................................................. Hon.

Michael de Jong, QC Minister of Forests, Lands and Natural Resource Operations......................................................................................Hon. Steve Thomson Minister of Health ............................................................................................................................................................... Hon. Dr. Terry Lake Minister of International Trade and Minister Responsible for Asia Pacific Strategy and Multiculturalism ...........................................................................................Hon.

T eresa W at Minister of Jobs, Tourism and Skills Training and Minister Responsible for Labour ...................................................Hon. Shirley Bond Minister of Justice ...................................................................................................................................................... Hon. Suzanne Anton, QC Minister of Public Safety and Solicitor General ................................................................................................................. Hon.

Mike Morris Minister of Small Business and Red T ape Reduction and Minister Responsible for the Liquor Distribution Branch ........................................................................................................Hon. Coralee Oakes Minister of Social Development and Social Innovation..............................................................................................Hon. Michelle Stilwell Minister of Technology, Innovation and Citizens' Services ................................................................................................ Hon.

Amrik Virk Minister of Transportation and Infrastructure ......................................................................................................................Hon. Todd Stone Minister of State for Emergency Preparedness ....................................................................................................................Hon.

Naomi Y amamoto LEGISLATIVE ASSEMBLY Leader of the Official Opposition ...................................................................................................................................................John Horgan Deputy Speaker .............................................................................................................................................................................. Richard T. Lee Assistant Deputy Speaker ...............................................................................................................................................................

Raj Chouhan Deputy Chair, Committee of the Whole ............................................................................................................................................ Pat Pimm Clerk of the Legislative Assembly ................................................................................................................................................... Craig James Deputy Clerk and Clerk of Committees .................................................................................................................................

Kate Ryan-Lloyd Clerk Assistant — Committees and Interparliamentary Relations ..........................................................................................Susan Sourial Sessional Law Clerk ............................................................................................................................................. Loredana Catalli-Sonier, QC Sergeant-at-Arms ................................................................................................................................................................................. Gary Lenz

ALPHABETICAL LIST OF MEMBERS Anton, Hon. Suzanne, QC (BC Liberal) ...................... Vancouver-Fraserview Ashton, Dan (BC Liberal).....................................................................Penticton Austin, Robin (NDP) ................................................................................ Skeena Bains, Harry (NDP) ....................................................................Surrey-Newton Barnett, Donna (BC Liberal) ............................................... Cariboo-Chilcotin Bennett, Hon.

Bill (BC Liberal) ...................................................Kootenay East Bernier, Hon. Mike (BC Liberal) ......................................... Peace River South Bing, Dr. Doug (BC Liberal) ................................ Maple Ridge–Pitt Meadows Bond, Hon. Shirley (BC Liberal) ...........................Prince George–Valemount Cadieux, Hon. Stephanie (BC Liberal) ................................Surrey-Cloverdale Chandra Herbert, Spencer (NDP) .................................Vancouver–West End Chouhan, Raj (NDP) ........................................................... Burnaby-Edmonds Clark, Hon.

Christy (BC Liberal) ........................................ Westside-Kelowna Coleman, Hon. Rich (BC Liberal) ...........................Fort Langley–Aldergrove Conroy, Katrine (NDP) .............................................................. Kootenay West Corrigan, Kathy (NDP) ..................................................... Burnaby–Deer Lake Dalton, Marc (BC Liberal) ............................................. Maple Ridge–Mission Darcy, Judy (NDP) ..................................................................New Westminster de Jong, Hon. Michael, QC (BC Liberal) ..............................

Abbotsford West Dix, Adrian (NDP)............................................................Vancouver-Kingsway Donaldson, Doug (NDP) ......................................................................... Stikine Eby, David (NDP) ..........................................................Vancouver–Point Grey Elmore, Mable (NDP) ................................................... Vancouver-Kensington Farnworth, Mike (NDP) ............................................................ Port Coquitlam Fassbender, Hon. Peter (BC Liberal) ...................................

Surrey-Fleetwood Fleming, Rob (NDP) .......................................................... Victoria–Swan Lake Foster, Eric (BC Liberal) .......................................................Vernon-Monashee Fraser, Scott (NDP) ............................................................Alberni–Pacific Rim Gibson, Simon (BC Liberal) ............................................. Abbotsford-Mission Hamilton, Wm. Scott (BC Liberal) .................................................Delta North Hammell, Sue (NDP) ....................................................

Surrey–Green Timbers Heyman, George (NDP) .................................................... Vancouver-Fairview Hogg, Gordon (BC Liberal) ............................................... Surrey–White Rock Holman, Gary (NDP) .......................................Saanich North and the Islands Horgan, John (NDP) .......................................................................

Juan de Fuca Hunt, Marvin (BC Liberal) ....................................................Surrey-Panorama Huntington, Vicki (Ind.) ..................................................................Delta South James, Carole (NDP) .........................................................Victoria–Beacon Hill Karagianis, Maurine (NDP) ........................................Esquimalt–Royal Roads Krog, Leonard Eugene (NDP) ............................................................. Nanaimo Kyllo, Greg (BC Liberal) ........................................................................ Shuswap Lake, Hon. Dr.

Terry (BC Liberal) ....................Kamloops–North Thompson Larson, Linda (BC Liberal) .........................................Boundary-Similkameen Lee, Richard T. (BC Liberal) ......................................................Burnaby North Letnick, Hon. Norm (BC Liberal) ..............................Kelowna–Lake Country Macdonald, Norm (NDP) ....................................Columbia River–Revelstoke McRae, Don (BC Liberal) ............................................................ Comox Valley Mark, Melanie (NDP) ...........................................

Vancouver–Mount Pleasant Martin, John (BC Liberal) ..................................................................Chilliwack Morris, Hon. Mike (BC Liberal) ........................... Prince George–Mackenzie Mungall, Michelle (NDP) ..........................................................Nelson-Creston Oakes, Hon. Coralee (BC Liberal) .............................................Cariboo North Pimm, Pat (BC Liberal) .........................................................Peace River North Plecas, Dr. Darryl (BC Liberal) .............................................Abbotsford South Polak, Hon.

Mary (BC Liberal) ..............................................................Langley Popham, Lana (NDP) ...................................................................Saanich South Ralston, Bruce (NDP) ................................................................ Surrey-Whalley Reid, Hon. Linda (BC Liberal) ..................................................Richmond East Reimer, Linda (BC Liberal) ........................................

Port Moody–Coquitlam Rice, Jennifer (NDP) ........................................................................North Coast Robinson, Selina (NDP) .............................................Coquitlam-Maillardville Routley, Bill (NDP) .................................................................. Cowichan Valley Routley, Doug (NDP) ............................................Nanaimo–North Cowichan Rustad, Hon. John (BC Liberal) ................................................

Nechako Lakes Shin, Jane Jae Kyung (NDP) ...............................................Burnaby-Lougheed Simons, Nicholas (NDP) ................................... Powell River–Sunshine Coast Simpson, Shane (NDP) .....................................................Vancouver-Hastings Stilwell, Hon. Michelle (BC Liberal)............................... Parksville-Qualicum Stilwell, Dr. Moira (BC Liberal) ........................................ Vancouver-Langara Stone, Hon. Todd (BC Liberal) .........................

Kamloops–South Thompson Sturdy, Jordan (BC Liberal) ..................................West Vancouver–Sea to Sky Sullivan, Sam (BC Liberal) ...........................................Vancouver–False Creek Sultan, Ralph (BC Liberal) ..................................... West Vancouver–Capilano Tegart, Jackie (BC Liberal) ............................................................Fraser-Nicola Thomson, Hon. Steve (BC Liberal) .......................................Kelowna-Mission Thornthwaite, Jane (BC Liberal) ..........................

North Vancouver–Seymour Throness, Laurie (BC Liberal).................................................Chilliwack-Hope Trevena, Claire (NDP) .................................................................... North Island Virk, Hon. Amrik (BC Liberal) ............................................. Surrey-Tynehead Wat, Hon. Teresa (BC Liberal) .............................................. Richmond Centre Weaver, Dr. Andrew (Ind.) .......................................... Oak Bay–Gordon Head Wickens, Jodie (NDP) ..........................................Coquitlam–Burke Mountain Wilkinson, Hon.

Andrew (BC Liberal) ........................ Vancouver-Quilchena Y amamoto, Hon. Naomi (BC Liberal) ................ North Vancouver–Lonsdale Y ap, John (BC Liberal) ......................................................Richmond-Steveston LIST OF MEMBERS BY RIDING Abbotsford-Mission ......................................................................Simon Gibson Abbotsford South ..................................................................... Dr. Darryl Plecas Abbotsford West ...................................................... Hon.

Michael de Jong, QC Alberni–Pacific Rim .......................................................................... Scott Fraser Boundary-Similkameen ................................................................ Linda Larson Burnaby–Deer Lake ................................................................... Kathy Corrigan Burnaby-Edmonds ..........................................................................Raj Chouhan Burnaby-Lougheed .............................................................Jane Jae Kyung Shin Burnaby North ..............................................................................

Richard T. Lee Cariboo-Chilcotin ........................................................................Donna Barnett Cariboo North .................................................................... Hon. Coralee Oakes Chilliwack ......................................................................................... John Martin Chilliwack-Hope ....................................................................... Laurie Throness Columbia River–Revelstoke ..................................................

Norm Macdonald Comox Valley.....................................................................................Don McRae Coquitlam–Burke Mountain .......................................................Jodie Wickens Coquitlam-Maillardville........................................................... Selina Robinson Cowichan Valley ................................................................................ Bill Routley Delta North .........................................................................Wm.

Scott Hamilton Delta South...............................................................................Vicki Huntington Esquimalt–Royal Roads .....................................................Maurine Karagianis Fort Langley–Aldergrove ...................................................Hon. Rich Coleman Fraser-Nicola.................................................................................... Jackie Tegart Juan de Fuca .....................................................................................John Horgan Kamloops–North Thompson ............................................ Hon. Dr.

Terry Lake Kamloops–South Thompson ..................................................Hon. Todd Stone Kelowna–Lake Country ..................................................... Hon. Norm Letnick Kelowna-Mission .............................................................. Hon. Steve Thomson Kootenay East .......................................................................... Hon. Bill Bennett Kootenay West ............................................................................ Katrine Conroy Langley.......................................................................................Hon.

Mary Polak Maple Ridge–Mission ..................................................................... Marc Dalton Maple Ridge–Pitt Meadows ........................................................ Dr. Doug Bing Nanaimo ........................................................................... Leonard Eugene Krog Nanaimo–North Cowichan ......................................................... Doug Routley Nechako Lakes ........................................................................ Hon.

John Rustad Nelson-Creston ........................................................................Michelle Mungall New Westminster ............................................................................... Judy Darcy North Coast......................................................................................Jennifer Rice North Island .................................................................................. Claire Trevena North Vancouver–Lonsdale ........................................Hon.

Naomi Y amamoto North Vancouver–Seymour ..................................................Jane Thornthwaite Oak Bay–Gordon Head ...................................................... Dr. Andrew Weaver Parksville-Qualicum .......................................................Hon. Michelle Stilwell Peace River North ................................................................................ Pat Pimm Peace River South ..................................................................Hon. Mike Bernier Penticton............................................................................................

Dan Ashton Port Coquitlam ..........................................................................Mike Farnworth Port Moody–Coquitlam ................................................................Linda Reimer Powell River–Sunshine Coast ................................................. Nicholas Simons Prince George–Mackenzie ....................................................Hon. Mike Morris Prince George–Valemount ...................................................Hon. Shirley Bond Richmond Centre ......................................................................Hon.

Teresa Wat Richmond East ..........................................................................Hon. Linda Reid Richmond-Steveston ..............................................................................John Y ap Saanich North and the Islands .................................................... Gary Holman Saanich South ................................................................................

Lana Popham Shuswap ................................................................................................Greg Kyllo Skeena .............................................................................................. Robin Austin Stikine ....................................................................................... Doug Donaldson Surrey-Cloverdale ....................................................... Hon. Stephanie Cadieux Surrey-Fleetwood ........................................................... Hon.

Peter Fassbender Surrey–Green Timbers ..................................................................Sue Hammell Surrey-Newton ................................................................................. Harry Bains Surrey-Panorama ........................................................................... Marvin Hunt Surrey-Tynehead ......................................................................Hon. Amrik Virk Surrey-Whalley..............................................................................

Bruce Ralston Surrey–White Rock ....................................................................... Gordon Hogg Vancouver-Fairview ..................................................................George Heyman Vancouver–False Creek ...................................................................Sam Sullivan Vancouver-Fraserview ..............................................Hon.

Suzanne Anton, QC Vancouver-Hastings ....................................................................Shane Simpson Vancouver-Kensington .................................................................Mable Elmore Vancouver-Kingsway..........................................................................Adrian Dix Vancouver-Langara .................................................................Dr. Moira Stilwell Vancouver–Mount Pleasant .........................................................

Melanie Mark Vancouver–Point Grey .........................................................................David Eby Vancouver-Quilchena ................................................ Hon. Andrew Wilkinson Vancouver–West End ...............................................

Spencer Chandra Herbert Vernon-Monashee ...............................................................................Eric Foster Victoria–Beacon Hill .......................................................................Carole James Victoria–Swan Lake.........................................................................Rob Fleming West Vancouver–Capilano ............................................................. Ralph Sultan West Vancouver–Sea to Sky ..........................................................Jordan Sturdy Westside-Kelowna ................................................................

Hon. Christy Clark Party Standings: BC Liberal 48; New Democratic 35; Independent 2

CONTENTS Tuesday, May 17, 2016 Afternoon Sitting Page Orders of the Day Committee of Supply ............................................................................................................................................................ 13191 Estimates: Ministry of Finance (continued) Hon. M. de Jong C. James V . Huntington D.

Eby Proceedings in the Douglas Fir Room Committee of Supply ............................................................................................................................................................ 13218 Estimates: Ministry of Social Development and Social Innovation (continued) M. Mungall Hon. Michelle Stilwell S. Fraser M. Mark J. Wickens

TUESDAY , MAY 17, 2016 The House met at 1:32 p.m. [Madame Speaker in the chair.] Orders of the Day Hon. M. de Jong: Committee of Supply, Madame Speaker. In this chamber, Ministry of Finance, and in Committee A, Ministry of Social Development. Committee of Supply ESTIMATES: MINISTRY OF FINANCE (continued) The House in Committee of Supply (Section B); R. Chouhan in the chair. The committee met at 1:34 p.m. On Vote 23: ministry operations, $178,497,000 (con- tinued). [1335] Hon.

M. de Jong: When we broke, the hon. member had just posed a question about payday loans, and we were scrambling about, trying to ascertain the status. I can confirm the essence of the member’s question, built as it was around an undertaking the governing party had given in the last campaign. Some of that work around protection for consumers has been undertaken. The specific adjustment around the borrowing rate, if I can use that term, has not…. The reason we were scrambling a bit is that the initia- tive is being led by Consumer Protection B.C., which is housed within the Ministry of Solicitor General. [R.

Lee in the chair.] I was able to obtain some general information. The specific objective, though, to answer the member’s ques- tion, has not yet been achieved, but I am advised they are continuing to work on a proposal that would see it achieved. C. James: Thanks to the minister. It’s certainly some- thing that, from my perspective…. I mean, there are all kinds of issues that need to be dealt with around an in - dividual’s personal debt. But I think the issue of the pay- day loans and the report certainly put some urgency to it, so I appreciate the minister getting the information.

Just a question — and it’s timely, with the shake-it house outside — around earthquake preparedness and disaster preparedness. I’m sure the minister has been having the same kinds of conversations, or certainly other members have, with the insurance industry around disas- ter preparedness and the request of the Insurance Bureau of Canada to take a look at options that could be there for government to partner with industry to look at pro - viding protections. I think the industry has done a good job of reminding people how important it is to look at earthquake insur - ance and to look at those options.

I think everybody agrees. Certainly, the Insurance Bureau of Canada has pointed out that if there really was a major earthquake, insurance wouldn’t cover it. If we really faced that, we wouldn’t be looking at losses…. In fact, they’ve predicted we could be looking at 73 percent of losses not actually being covered. The industry has put forward a number of ideas that they are certainly hoping government will engage with them on. One, obviously, is some work with the federal government to see if the federal government is coming to the table.

One of the other ones is related to working with private insurance to look at some kind of program that could actually be put together with government, with each of them taking some liability — not putting the money in place but in actuality providing the support that govern- ment would have to provide anyway if insurance wasn’t covering the issue. I just wondered whether the minister has had those conversations at all with the Insurance Bureau and whether there’s any discussion. I recognize that the Minister for Emergency Preparedness is obviously en - gaged.

I know they have also wanted to have discussions with the Finance Ministry around long-term liability for government. [1340] Hon. M. de Jong: I have a distinct recollection of the report that I think the member is referring to. I believe that the insurance sector met with me and other repre - sentatives of government either just before they released the report or at the same time it was released. The member is correct. There are dimensions to it that engage all lev- els of government and certainly the federal government.

As I recall, the report highlighted the risk factors that are at play, particularly with respect to British Columbia — transportation infrastructure, bridges, emergency infrastructure. It is, I think, the subject of discussion within government. I will say that, within the Finance Ministry, the work has tended to focus on the regulatory side of the insurance sector more than the specific recom- mendations around emergency preparedness. I think the member’s point, though, about trying to quantify from the point of view of ultimate Crown ex - posure in the event of a catastrophic event is a valid one.

I think, candidly, we’re somewhat exposed in our present circumstances. There would, undoubtedly, be in the way, 13191

British Columbia Debates13192 Tuesday, May 17, 2016 I guess, that we saw…. As compared to what would occur in the aftermath of a major seismic event, the floods, as catastrophic as they were in Alberta a couple of years ago, might pale by comparison in terms of the financial chal- lenge that presented. With respect to the insurance sector itself, though, our work has tended to focus around specific regulatory ques- tions and the statutory oversight that governs the behav- iour and the work that the insurance companies do with consumers in B.C. C. James: I appreciate the minister’s answer.

I think we would expect that the emergency preparedness area would deal with emergency preparedness and would be looking at the nuts and bolts. I think, really, what the insurance bureau is saying is: “Let’s have the conversa - tion sooner rather than later. ” It really is about sharing risk and how you share risk. Ultimately, government is responsible, in the end, for those disasters and the challenges of people who are either underinsured or not insured, or the disaster is so large that the insurance companies couldn’t manage the kinds of costs that we’re looking at.

I certainly would en- courage the minister to have those conversations. I agree that it’s not specific to the regulatory struc - ture, but it is specific to some kind of partnership that I would expect the provincial government, the federal government and perhaps the insurance industry itself could look at to try and cover some of that risk. As we all know, as I said, it’s timely — today, outside the House — to remind us that it’s not eventually; it’s when. I think it’s good preparation. I’m doing a number of random pieces to make sure they get covered off.

Just a quick question that I’ve been asked to bring forward to the minister — I believe I know the answer, but I want to get it clarified — from a volun - teer fire department that is looking at the transfer of a fire truck from one department to another department. This is the McLeese fire department. They were gifted an ambulance, in fact, from the Horsefly volunteer fire department. It used to be done without PST. Now they have to pay PST. They’re asking: with that change, is the government looking at providing them with an opportunity to not have to pay PST on something?

When the change was made, it made it very clear that it had to be a family mem- ber that you were giving a car to in order to be exempt from the PST. These, obviously, aren’t family members — with two volunteer fire departments. I think the answer is going to be related to becoming a registered charity, but I just want to clarify that with the minister so that we can get back to them as well. [1345] Hon. M. de Jong: I was casting my mind…. I’m pretty sure I recall this specific request. It was McLeese Lake, just north of Williams Lake — home of the Oasis Pub.

I think the dilemma we ran into is that there is no general provision that would allow for an exemption. The reason I remember it is that I — like the member, probably — struggled with the idea of how, in effect, a charitable endeavour or a logical endeavour might be frustrated by the application of general taxation laws. The exemption that applies for the gifting of a vehicle of course applies, as the member just pointed out, to families, so that wasn’t applicable. There is no general exemption that applies with respect to charitable dona - tions.

I have seen some other examples where that has been problematic, sometimes to the tune of many thou- sands of dollars. I recall attending — or hearing about it; I may not have been there — a case of a very valuable sports mem - orabilia donation being donated and fetching a sizeable amount of money. The donor later discovered that he was on the hook for remitting PST, and a similar circum- stance exists here.

I think I’ll take advantage of the question for pointing out to the interested parties, to assure the member and them, that we looked at all of the available mechanisms through which this laudable donation endeavour could be accommodated and weren’t able, within the existing framework, to do so. V . Huntington: Just for the minister and his staff, I’ll be asking, eventually, a question related to Vote 23 — spe - cifically, the appropriation for internal audit and Crown governance, if his staff would like to familiarize them - selves, or himself, with that committee description.

My discussion goes to information that came out of a number of Public Accounts Committee meetings that were dealing with government computing controls, the general computing controls, and the concern within the Auditor General’s office and government as a whole — and the committee, certainly — with the troubled per - formance management we’ve had over a number of years in a lot of these multi-million-dollar software programs that have been developed in various ministries. [1350] Now, please understand that I am not here criticizing anybody in particular.

It’s the general issue of account - ability that I’m speaking to. What we seemed to discover in the committee was that there was an accountability gap within the government with regard to the development of these systems.

In one of the reports, the general computing controls report of 2014, the Auditor General said that: “The B.C. office of the government chief information officer is mandated with governance authority for standards setting, over - sight and approvals for the province’s information and communications technology. ” Then the next line basic- ally said, “B.C. government organizations are responsible for following the spirit and intent” of that.

British Columbia DebatesTuesday, May 17, 2016 13193 So right away, I thought: you can’t follow spirit and in- tent if there is a requirement and a mandate to develop processes and enforce those processes through the sys - tem. I asked the information officer how they developed the spirit and intent. What processes did they use? Did they approve the processes within a ministry as they were developing these huge data management plans and contracts? Did you assist them in developing them? Do you have compliance requirements?

Do you go in and test and say: “Okay, we’re testing this before you proceed down the line?” Apparently the answer was no. The answer was that they set up a general framework, and it is the choice of the min- istries whether or not they wish to follow that framework. As we pursued that a little further, we ended up under- standing that within the last two years, the office of the chief information officer has developed what were called policies and tools. They brought in KPMG and Ernst and Y oung. They’ve developed policies and tools that they hope will engage the ministries.

But what I’m con- cerned about is that there was an obvious accountability gap. They agreed there was an accountability gap. I don’t understand how, when you’re talking multi-million- dollar expenditures — many of them failed along the way — that there is no accountability and people that will go in and check.

I guess my question to the minister is whether the in - ternal audit and Crown governance appropriation within his ministry has the capacity to do an audit to determine whether those new policies and tools are appropriate in order that the government is protecting itself from these multi-million-dollar losses that we’re seeing as a general occurrence — whether he has the capacity to take a look at the tools and policies being developed within the chief information officer’s office and whether those will do the trick to protect government from these risks. Introductions by Members The Chair: Hon.

Members, with the indulgence of the committee, I would like to make an introduction. In the gallery now we have 21 students, led by their teacher, Mrs. Sabina McCloskey, and also 25 adults right now, over there, from Holy Cross Elementary School, one of the best schools in B.C. Would the House join me… Interjection. The Chair: In Burnaby North. …to give them a very warm welcome. [1355] Debate Continued Hon. M. de Jong: If the member will allow me just to complete the exchange that took place with the hon. opposition critic.

I am advised, with respect to gifts of vehicles to a charity, that they are exempt from PST if the donor has paid the PST on the gift originally. I’m not certain, in this case, whether that was applicable or not. I just thought I should fill that in, in terms of that exchange that we had earlier. Now on to the member for Delta South’s question about an admittedly very important part of government activities and government expenditures.

It’s true that we still build buildings — hospitals and schools come to mind, highways — but beyond that, the most costly infra- structure that public moneys are devoted to tend to be the IT systems that are purchased and upgraded. The mem- ber will get no argument from me that, in many cases, the scale of investment is quite staggering — measured, sometimes, in hundreds of millions of dollars. It is intended to connect disparate groups and loca - tions across a large province.

It is intended to ensure that people sitting at desks or dealing with citizens across this province are able to communicate with one another. I sup- pose it’s fair to say that, for most of us, the complexities as- sociated with doing that are quite staggering, to the extent that most of us have some contact with technology either with our laptop or iPad and are able to navigate, probably in most cases, pretty well. Sometimes it must strike us as odd — it certainly strikes me — the measure of complex - ity and cost associated with upgrading systems.

I won’t — because I know the member knows this — go on at length about where I imagine much of that complexity derives from. There are certainly security components to it, privacy components, all of those things that members and the privacy commissioners and others urge upon government. Y et it adds dramatically to the complexity and the cost. The member’s question, I think, confronted by ex - amples where there have been slower than anticipated operationalizations of systems, or complications…. I think some of that often can be assigned to the challenges of change — period.

But then there are examples where the system hasn’t performed. Certain assurances have been given, and the system simply hasn’t performed. I mean, I can think of several. I think the member’s question, though, is: is the in - ternal audit

section equipped to directly involve itself in tracking some of that or assessing some of that? It is. I can advise the member that the

section has not done so to this point in a separate, focused way but has done so as it looked at individual agencies as part of its ongoing audits. Actually, I think the member, as part of Public Accounts, occasionally has an opportunity to review the reports. Sections of the report have dealt with procure - ment of IT services and packages. [1400] What has not occurred is that kind of global cross- government assessment or review or audit of IT pro - curement. Probably the member will detect from my

British Columbia Debates13194 Tuesday, May 17, 2016 response so far that it’s not something that I would be in any way hostile to. Some work has gone on. As I think about the projects that lie ahead and the need, I am told, to update on an ongoing basis and establish in a lot of areas more effect- ive communication between departments and between systems, this is not a challenge that is going to end or go away any time soon. V . Huntington: Just to briefly follow up. I thank the critic. I guess my request of the minister and his ministry is that….

Previous to 2014, or the general computing con - trol report of the Auditor General — which, if the min - ister has not read, he may be very interested in reading — the chief information office, even though they had a much broader mandate and responsibility and authority, tended to concentrate their interest and authority on risk and assessment — security issues, rather than the broader performance management of procurement issue.

Subsequent to these reports, it appears that in the last two years, they brought in big organizations to help them develop tools and policies — a governance framework, they call it — that will assist them with the broader au - thority. What I’m concerned about, given the total lack of accountability through the structure of government…. I asked the comptroller general: “Is your department re- sponsible for ensuring management and performance management processes are adequate when a ministry goes to procure a large IT project?” No, they don’t do that.

If the chief information officer didn’t do it and the comptroller general didn’t do it, who does it? The only place I could see was the description of this committee in that, apparently, the chief information officer has now developed a new framework of tools and policies, he says, that will enable them to reach out into the ministries and follow those new projects.

I am asking the minister whether his office has the au- thority to do an audit of those new policies to ensure that they’re doing and will do what we hope they will, and that is: provide an oversight mechanism, on this expenditure of hundreds of millions of dollars, and an approval mech- anism that the government can rely on in the future — an audit of the new process. Hon. M. de Jong: I think the short answer is yes.

The interest in doing so derives from the fact, of course, that at the end of the day, these projects — some of them involv- ing tens or hundreds of millions of dollars — are capital projects that frequently require Treasury Board approval. In fact, new directions this year require departments and agencies wishing to embark upon those kinds of pro- curements in excess of, I think, $50 million to present to Treasury Board and receive scrutiny.

There is not only an interest but an imperative and a role for Treasury Board. [1405] To that extent, the authority, I believe, exists under the Financial Administration Act to conduct the kind of re - view/audit that the member speaks of. C. James: I just want to move on now to talk a little bit about the commission on tax competitiveness that the minister announced and that was announced, obviously, in the budget as well. Interesting to note that this is the fourth commission in the last four years, if I’ve got my numbers right.

There was the Expert Panel on B.C. ’s Tax Competitiveness in 2012, an industry tax steering com - mittee that was put together in 2012 and the job and in - vestments board’s final report, in 2014, which also looked at taxation. Just to ask a few questions specifically on the terms of reference…. I think it’s interesting. If you take a look at the terms of reference, they talk about allowing the commission to consider a range of options to encourage competitiveness and the added piece that the scope of the work will explicitly exclude consideration of a return to the harmonized sales tax.

I wondered if the minister considered adding the word “fairness, ” when it comes to the tax system, in the terms of reference. Hon. M. de Jong: I’m not sure if I did or didn’t. I should think that the panel…. Maybe I should back up, because there’s no point talk- ing about this in the abstract. I had hoped that by the time we had this conversation, the member would be able point to the inevitable press release appointing the indi- vidual and the individuals. Regrettably, I haven’t finalized that as yet and am hoping to do so in the course of the next few weeks.

But we can still certainly have a conver- sation about the intended purposes and the mandate that that group will be charged with. I would say fairness is an underlying principle that should guide not just this group’s deliberations but gov- ernment’s as well. Its absence from the material should not, I hope, and will not be taken as suggesting that it’s not something that will be taken into account or that I would expect the committee to take into account or that government would take into account when considering the recommendations. The member’s….

I didn’t specific- ally exclude it or specifically include it, and I can’t honest- ly remember if, in reviewing the mandate, the inclusion of that term occurred to me or not. C. James: I think it’s important. If you take a look at competitiveness and you take a look at fairness, they can often be at opposite, polar ends. I think, from the pub - lic’s point of view, there’s been a great deal of discussion during the term of this government around tax fairness, around the issue of fees and services and whether those are taxes or not taxes.

From my perspective and from the public’s perspective, I think that really is the bigger dis- cussion that needs to be had.

British Columbia DebatesTuesday, May 17, 2016 13195 I guess I would also ask the minister, given that the government doesn’t include fees and services — fees in particular…. Whether we’re talking about MSP , wheth - er we’re talking about hydro rates, whether we’re talk - ing about tuition fees, whether we’re talking about ferry fares, whether we’re talking about all of that range of fees and services that the public has been hit with, I recog - nize, as I said, that the government doesn’t include those as part of taxes. I think the public would beg to differ.

I think the public very clearly includes them as part of taxes. I think even the Premier herself, when she was running for leadership, said that she believed that government needed to take a look at the entire burden on taxpayers, which included those fees and services. I wondered: from the minister’s perspective, is there anything to exclude the discussion around fees and ser - vices and affordability and fairness as part of this tax commission? [1410] Hon. M. de Jong: I think there is sufficient room and breadth of scope that the group will be able to address issues.

I think, to the member’s point, for citizens and businesses, the costs that are imposed upon them by government and by society come in many forms. Some are purely tax-related and others fall into other categor - ies. Some are payroll deductions and therefore referred to as payroll taxes. Having said that, I also try as best I can to be forthright with the member and the committee.

In establishing the committee, I must confess, I am seeking to have them ad- dress some large structural issues, as well, around things like the PST and personal income tax, corporate and small business income tax: how these things fit together; how they apply in the context of in British Columbia, vis- à-vis our trading partners, the manufacturing sector; and where we might be in a position to effect change — and how we might be in a position to effect change — that en- hances our competitiveness as a trading province. That is uppermost in my mind.

But the opportunity for the panel to examine other questions as they relate to that, I think, certainly exists. C. James: I think the minister raises exactly the point. If the discussion is going to be…. And I understand the issue around structural changes to the tax system. If the discussion includes personal income tax, certainly, from my perspective, it needs to include, as the minister him- self said, all of that burden on the public. If you’re talk - ing about personal income tax, people don’t simply look at their personal income tax. They look at the payroll tax. They look at MSP .

They look at the other fees and services that they face. This plays in to the people that are appointed, and I appreciate that the minister said those final decisions haven’t been made. So it’s good timing to put forward advice, or it’s certainly a view that a broader tax panel would be helpful in that regard. I think there are some very qualified people who’ve sat on previous tax panels, who have a great deal of experience but are very focused, as the minister has said, on the structural piece of tax competitiveness.

I think, from my perspective, it would be an interesting exercise for the minister to have representatives from, for example, the Fraser Institute and the CCPA on a tax fair- ness commission. Y ou would have an interesting discus- sion and polar opposites of a view around the tax system. Surely, if we’re going to look at a good discussion and a good debate around the tax system and the competi - tiveness of the tax system, it would be helpful to have those kinds of people.

I wondered if the minister had ever thought about a bit broader terms of reference or a bit broader look at the individuals who are sitting on this commission. [1415] Hon. M. de Jong: Well, I think the member’s observa- tion that the conversation will be guided by the nature and the backgrounds and the expertise of the partici - pants is a valid one. I’m not in a position, unfortunately, to disclose some of the names of people that we have been considering. They are, I can assure the member, from a variety of backgrounds and, in a couple of cases, might, I hope, pleasantly surprise the member.

Again, I apolo - gize for the fact that we’re not able to have that conversa- tion in more detail, knowing who those individuals are and who the Chair is. I wonder if I might also, though…. Again, I value this opportunity to provide the member and the committee with as much information as I can, and this may high - light the importance of the point the member has made around the backgrounds of the individuals. This may not be something that the member wel - comes hearing, but I don’t actually see this as a huge road show exercise of travelling from town to town. We have a budget committee that does that.

That is not to say there won’t be an avenue, probably an electronic one, for people to submit their views and ideas. I do see this more as a case of people with views, expertise and background sitting down and having that discussion. I wouldn’t want to leave the impression and then have the member disappointed, thinking that this was going to be a travelling road show across the province, because I’ve never thought about it in those terms. There are other avenues for that. Members of this assembly participate in one of the important ones, and the member herself has as well. C.

James: I understand that from the commission’s perspective. They request people to put in submissions, and I think that’s another area where the commission

British Columbia Debates13196 Tuesday, May 17, 2016 could look at a broader base. It’ll be interesting to see the list when the list comes out. But if the group isn’t as broad as perhaps it might be by including academics or people from the tech sector or the resource industry or folks who have some expertise in that area…. If the panel isn’t as broad, the other way to ensure that that information comes to the panel, of course, is through submissions. The minister points out that the group won’t be travel- ling.

I think that’s completely understandable, but I think it is important to take a look at where the submissions have come from. This is an interesting exercise that we go through at the select standing committee as well. Where did we get submissions from, and more importantly, where did we not get submissions from? Where are the gaps? I think it was interesting. I just took a look at the sub- missions from previous panels — 31 submissions from industry associations, nine companies, three municipal- ities and two individuals. A big gap, really, when it comes to submissions.

I wonder if the minister has taken a look at or had a discussion — and perhaps it’ll happen after the panel is in place — around how to encourage a broader base of sub - missions, how to make sure, if the panel is a little more focused on the technical side of taxation, that the panel has the opportunity to be able to reach out in a broad enough way through information to groups and organ - izations to get those submissions coming in to the panel. Hon.

M. de Jong: It’s probably a shared responsibil- ity, and ultimately, the bulk of that responsibility falls to government to make sure that people are aware that the work has been commissioned, who the members are, how they may be contacted. [1420] There’s probably an ongoing role for the committee itself, but I certainly have tried not to be shy about em - phasizing the rationale behind creating the body — what the objective is in terms of timing and what the object - ive is in terms of the report and recommendations that are introduced.

I think the value of the work will be enhanced by the breadth of the input that is presented and the ability for the members to debate some of those disparate views that, undoubtedly, will be presented to it. Y es, I’m sure a subject of this sort will elicit passionate and varied views from all corners of the province and all quarters of the economic landscape. In many ways, I don’t envy the work of the group to try and distil it down into a set of recommendations, which, inevitably, will be influenced by the biases that people in the group bring to their duties.

That is a dimension to this that exists for the select standing committee and other groups that perform this kind of function. We’ll wait and see. In the fall, hopefully, we’ll end up with something specific that the member and I can dis - cuss and debate the merits of. C. James: I just wanted to check around the timelines. He mentioned the committee is a little behind. Is the re- porting time still the fall of 2016? Hon. M. de Jong: Y es. Still looking for a report in the fall. C. James: Now I want to move to a couple of areas in the minister’s service plan.

Goal 3, objective 3.1, talks about effective oversight of public sector organizations, and goal 1 talks about sound and transparent manage - ment of government services. I want to speak a little bit about this, related to the dir- ect operating debt that we hear the Finance Minister talk a lot about and, certainly, a lot about in this budget. The minister talks about reducing the direct operating debt by 2018-2019. I do think it’s important when the minis- ter talks about that.

I’m sure the minister would do that, as well, to recog- nize that overall government debt has gone up by $4.6 billion in the last two years — expected to go up by $6.6 billion in the next three years. When we talk about direct operating debt, I think it’s important just to acknowledge that — to acknowledge the debt. I want to talk about part of the minister’s calculation that he uses for reducing the direct operating debt. Part of that includes the dividends that come from Crown cor- porations. That’s a clear link. Where the dividend comes in, that’s included in part of that calculation.

When going through estimates with the Energy Minister, it was interesting to note that the Energy Minister said that the dividends from Hydro — that ac - tually come into the general budget from the minister — are actually borrowed money. I just wanted to confirm with the minister that the Minister of Energy’s state - ments…. I wanted to make sure that those were accur - ate statements and that the minister agrees with them. [1425] Hon. M. de Jong: I think the first…. There was a lot packed into the member’s submission, so I’ll probably deal with parts of it, and we can talk a little bit about the parts I miss.

I’ll begin by saying this. I occasionally, or maybe even frequently, hear people and colleagues of the hon. member say: “ Ah, this lofty claim about the budget being balanced — it is only balanced on the strength of the payment of dividends from Crown agencies like B.C. Hydro or ICBC. ” The point I have made and will make again for the purpose of the committee today is: for the purpose of determining whether the budget is balanced or not, the payment of the dividend is inconsequential. The num - bers would be the same, were the funds, those amounts, to remain within the agency.

Now, the member has pointed out, in the case of B.C. Hydro, where amounts are transferred. I should point

British Columbia DebatesTuesday, May 17, 2016 13197 out — and I’m often interested that this doesn’t factor into the conversation at all — there are Crown agen - cies, Crown corporations, from whom the government takes all of their return — 100 percent. The B.C. Lottery Corporation — which we’ll talk about, I think, later in the program here — is such an example where all of it is returned to the government as a dividend. Again, were it to remain with the corporation, the ef - fect would be the same. It would be the same for the pur- pose of determining budget surplus or budget deficit.

The Liquor Distribution Branch is another case where all of the proceeds are returned as a dividend to the taxpayers of British Columbia. Attention tends to focus on B.C. Hydro and ICBC. But the notion of paying that dividend — and in the case of B.C. Hydro, that now steadily reducing dividend — is not dissimilar from what occurs with other corporations. The member is correct in the case of B.C. Hydro. Given the very, very expansive construction program that is under- way, there is an element of direct borrowing involved in seeing those projects through to completion. C. James: The minister is right.

There are some agen- cies where all the revenue is taken; there are some agen- cies where a portion of the revenue is taken. The debate around whether that individual dividend makes a dif - ference to balancing the budget is not the focus of my questions here. The focus, really, is on utilizing borrowing to be able to pay a dividend to government.

I think that’s the piece where the public and others scratch their heads, to say: “How does it make sense to have an agency in debt bor - rowing money to give to government, to take from one hand to give to the other hand?” I guess that’s my question to the minister: how does that make sense to the public? A Crown agency that is in debt that is borrowing money to pay to government on a dividend — how does that make good fiscal sense? [1430] Hon. M. de Jong: Two things come to mind.

One is to emphasize the fact that the degree to which there is bor- rowing on the part of the Crown corporation that we’re discussing has far more to do with the extensive program of construction that is underway. Obviously, Site C is a large part of that. I can offer this to the member.

The degree to which I share the notion that debt equity ratios are important — and the government shares that view and that concern — is reflected in the degree to which the corporation and the government have established a program over the next ten years to phase out the payment of a dividend — well, to phase it out and to return the corporation to a much stronger debt equity circumstance.

To the degree that the member is looking for some measure of comfort that the government recognizes the importance of ensuring a healthy balance sheet — not just for the central operation but for Crown agencies as well — and that the government is prepared to take steps to facilitate that, it is reflected in the steadily diminish - ing amount of the dividend that will be paid through the next decade. C. James: There seems to be a contradiction from the minister’s comments around the dividend and the dif - ference that the dividend makes in the budget. If you’re taking a dividend….

The minister admitted himself that you’re looking at reducing the dividend, that you are con- cerned or that you are cautious about the debt at other Crown agencies. I think, given the requirements of good oversight of those public sector organizations, it seems odd that government would continue to take money that has to be borrowed, that actually adds to Hydro’s debt. Hydro’s debt is British Columbia’s debt. Hydro’s debt is the ratepayer’s debt. Hydro’s debt becomes how much people are paying in their Hydro bills. It’s not something abstract. It’s not something over here.

This relates directly to British Columbians. The other comment that the minister made was that the payment of the dividend is inconsequential when it comes to the budget, that it isn’t related to balancing the budget or not balancing the budget. Well, if it’s incon - sequential and if the minister believes that there’s a chal- lenge with the debt at Crown agencies and that has to be watched, why would the minister continue to take the dividend, then?

If the minister believes that the debt at Hydro is a chal- lenge, if the minister believes that the dividend doesn’t make a difference to the budget, as he said, why would the minister, then, not stop taking the dividend from Hydro and digging a bigger hole for Hydro when it comes to debt? Hon. M. de Jong: What I can say to the member is to emphasize the degree to which the government is seek - ing to both reduce the dividend by, I think, in two years, up to $100 million a year until such time as…. The divi - dend payable will reach zero and stay at zero until B.C. Hydro reaches a debt equity ratio of 60-40.

This may go to the heart of the member’s question. I think the notion that the shareholders…. The member is correct. It’s a Crown corporation. It is owned by the people of British Columbia. Its debt is considered self- supporting. [1435] We do track that very carefully because were that not to be the case there would be serious consequences for things like our triple-A credit rating. So we do track that very carefully. But the notion of having the shareholders benefit, to a limited degree, from the returns and the suc- cess of the Crown agency is, I think, a valid one.

Where I am compelled to agree or acknowledge is that we believe the degree to which the shareholders benefit

British Columbia Debates13198 Tuesday, May 17, 2016 from the transfer of a dividend should be strongly influ- enced by the strength of the balance sheet of the organ - ization itself. We would like to see B.C. Hydro’s balance sheet grow stronger, even during this period of time when it is engaged in the single-largest public infrastruc- ture build in the history of the province. C. James: I think most of the public would agree that the bottom line for Hydro needs to be strengthened. Debt issues need to be addressed.

I guess I would ask the min- ister again: how does borrowing money, which then adds to Hydro’s debt, to pay a dividend to government on one side when the Crown corporation is on this side…? How does that make sense? I guess I come back, again, to the minister’s point that if there’s a problem with the dividends and the govern - ment has recognized that and they’re going to start re - ducing the dividend down…. When Hydro is having to borrow 100 percent of that money to pay the dividend to government, why wouldn’t the government do that now? Why wouldn’t they end that now? Hon. M. de Jong: Two things come to mind.

The first, of course, is something that the member and her col - leagues would have heard from my colleague around the practice that has developed, dating back to, I think, 1990, 1991. I have, again, acknowledged and indicated my be - lief and my agreement with the proposition, and my role in establishing, that the creation and payment of a divi - dend should be reduced and phased out. We are doing that gradually, over a period of time. The second point that I am advised and wish to convey is that there is a difference between borrowing for oper- ations and borrowing for capital. Of course, B.C.

Hydro is engaged in the single-largest public infrastructure build in our history and is borrowing largely for that purpose and some other capital programs. They do generate, how- ever, extensive cash returns as a public utility. I’m not sure it’s entirely accurate to try and paint those dollars into separate categories. [1440] The operation of Hydro generates a return in the same way that other Crown corporations generate returns, and the practice has been to derive for the shareholder the benefits of that.

Having said that, I have acknow - ledged and said to the member again that, in my view and the government’s view, until such time as the debt equity ratio hits 60-40, the objective will be to phase out the payment of dividends from B.C. Hydro to the government. C. James: Just to touch on a couple of points the min- ister made, one about the fact that dividends have been coming to governments since the ’90s…. I think, as the minister himself has said, that for the shareholders, the public, to benefit from a well-run Crown corporation is not something that would be disagreed with.

It’s not something we would disagree with, nor is it something that the public would disagree with. I think there is a distinct advantage to public Crown corporations. There’s a reason that they’re there. It’s so that the public can benefit. I think no one would disagree with that approach.

But I think when you have a minister admitting that the money is borrowed to give as a divi - dend and acknowledging that, it makes the public scratch their heads and say: “How can they pay the government money that they don’t have, that they’re having to bor- row, that is adding to their debt?” I think that’s the real crux of the issue, from the public’s point of view. That just doesn’t make good sense.

As I said, if the minister himself is saying that the money is inconsequential to the balancing of the budget, then I think the public is even more puzzled about why the government would continue to take that money. Wouldn’t you shore up a Crown corporation so that later on, when dividends are coming, when it’s making a profit and it’s not in debt, you’ d be looking at resources actually assisting British Columbians? But that’s not the only piece in the area of Hydro that is a tool that’s being used. I think there’s another tool.

I’m sure it will be of no surprise to the minister — the issue of rate smoothing and the issue of the rate-smoothing regulatory account that’s in place. I think it’s important to just ask a couple of questions about this piece as well. For those who are watching, this account allows B.C. Hydro to show future unapproved and yet received rev - enue in the current reporting period. So for example, money from 2020 — is it being booked as revenue in 2015 and 2016 and 2017? I wonder if the minister could tell us what other jurisdictions this kind of account, this specific kind of account, is being used in. Hon.

M. de Jong: I’m just going to bring in Doug Foster, who, within the ministry, works closely with the corporation. He’s probably best equipped to advise me with respect to some of these questions. So if I might beg the indulgence of the committee for just a moment. C. James: Does the minister want to move on to an - other

section while we do this, or is he close by? Okay. [1445] Hon. M. de Jong: Joining us is Doug Foster from the ministry. The specific question that the member has asked is: are there other jurisdictions that engage in the exercise of rate smoothing? My advice is that, in fact, there are. Certainly, U.S. utilities engage in a similar practice. The rationale is that as the corporation, the agency, is in - volved in significant expenditures, capital upgrades and capital infrastructure improvements, we would not ask the taxpayers today to foot the bill for that entirely. This

British Columbia DebatesTuesday, May 17, 2016 13199 is a mechanism by which the costs associated for that can be spread out over the life and duration of the project. [R. Chouhan in the chair.] But the member’s specific question, I believe, was: does this occur in other jurisdictions? I’m advised that it does. I asked about whether, within the Canadian context of, say, Hydro-Québec….

I was advised that a similar mechanism — it may not be precisely the same — to ac - count over time for the significant expenditure of dollars on large capital improvements is also employed to guard against ratepayers today shouldering the entire burden for improvements that will accrue to the benefit of mul- tiple generations. C. James: The reason I bring this up is similar to the previous discussion around Hydro and around the issue of dividends and utilizing borrowed money to be able to balance the budget.

In the case of the rate-smoothing regulatory account, in fact, what you are really looking at is that B.C. Hydro then shows a profit through the account, which then gives government a chance to be able to count the net income, the Hydro net income, towards balancing the budget.

So from the public’s perspective, the question that gets raised is, “Is the budget being balanced both on borrowed money when it comes to the issue of the dividend, and on unapproved money, not yet received money?” — which again, from the public’s perspective, raises all kinds of red flags about what the actual finances are and what the actual process is for the finances in British Columbia. I guess I would ask the minister about counting rev - enue that has not come in yet — nor been approved yet — and how that is accounted for in our provincial budget. [1450] Hon.

M. de Jong: I want to try and convey this in a semi-coherent manner for the benefit of the committee. We have a Crown agency that, in the case of B.C. Hydro, is making large, large, significant investments that will accrue to the benefit of generations. It is, in this case, not an exaggeration. The investments that lead to those benefits and to the creation of that asset are large, in the billions of dollars. So the corporation, as a means of providing certainty and stability around rates, employs a mechanism that is accepted as being appropriate for sharing or spreading those costs out over time.

It is an established mechan - ism for accounting for those expenditures and for the operations. I’m reminded that the Crown corporation, in this case, doesn’t pay corporate income tax. It doesn’t pay prop - erty tax — some grants-in-lieu, in that instance. It enjoys those benefits that other businesses do not. It borrows, when it does borrow, on the strength of the province’s triple-A credit rating. I suppose that might be a good place for me to offer this observation.

To the extent that the member is do - ing her job, which is to poke and prod about whether or not the manner in which the financial statements for the Crown and Crown agencies are being presented…. I hope the member will take some measure of comfort from the fact that these are the questions that agencies like Standard and Poor’s, like Moody’s, like Fitch, like Dominion…. These rating agencies examine in great de - tail the state not only of the province’s books but of the Crown agencies that the province has created. They pass judgment on those books and the manner in which they are kept. They offer comments.

One by one, we have seen jurisdictions in this country slip down the ladder far - ther and farther away from that highest rating that we in British Columbia enjoy. Whilst I think it is entirely appropriate for the member to pose the questions that she has, perhaps the strongest response I can give is to highlight the fact that others be- sides her, in — if I can say — a less political forum, pose similar questions, offer commentary and do so on a com- parative basis. Thus far, they have continued, happily, to assign to British Columbia the highest grade possible.

In the case of our books, I think it was Standard and Poor’s just last month who said that when it comes to transparency, when it comes to fiscal accountability, British Columbia sets the standard in this country. That’s something we’ve worked hard to achieve and, admittedly, are quite proud of. [1455] C. James: I understand the minister’s points that he raises. But I think it also, from the public’s point of view…. When you find projects that are exempt from the B.C.

Utilities Commission, for example, and don’t have the opportunity for the examination that should happen from the Utilities Commission put in place for that ac - countability and that kind of independent oversight, it raises all kinds of questions from the public’s point of view. In fact, it defeats the minister’s discussion and pur- pose in trying to make sure that there’s transparency and oversight when the government refuses to send the pro- jects to the B.C. Utilities Commission.

While I take the minister’s point, I think that the re - ality and the facts speak for themselves around the lack of transparency and the lack of accountability around projects and around what’s going on at Hydro, which therefore impacts the provincial budget. I think that’s the link that I really want to emphasize today, which is the concern about what appears — not my words; they were the words of a newspaper editorial that said it’s a shell game — a shell game, where money is moved around to appear that things look better than they are when they aren’t.

British Columbia Debates13200 Tuesday, May 17, 2016 To me, that’s not good fiscal management. That’s not being open and transparent. That’s not living up to the minister’s own service plan, which talks about that. But I think this is one where we’re going to agree to disagree on this particular point. I want to move on to talk a little bit about debt col - lection and spend a few minutes on debt collection. We know that changes were made last year around collection of student loans.

We had a discussion with the minister when the bill, Bill 13, was passed around the fact that ICBC was now going to be used to collect student loans. The minister talked about the fact that that was going to be rare and that it wasn’t going to happen very often. I just wondered if the minister could share how many times ICBC has shared information with B.C. revenue services. How many times have they enacted that bill and the ability to utilize the licence provision to be able to collect from students? Hon. M. de Jong: To the member, who correctly re - lates the conversation we had, the answer is none.

The OIC that would authorize that process to begin — I signed it — was just approved a week or two ago. For the member’s information, it speaks to that tool and its appli- cation in the case of student debt and non-traffic-related court fines, so those are the two areas. I think we talked about that when the bill was being discussed. The tool now formally exists, and at some point over the course of the next six months, I think we’ll presum- ably be in a position to have a conversation about how it’s been used. But it hasn’t been used yet. C. James: So a future question, to look at that. I appre- ciate that.

Thanks to the minister. I want to talk a little bit about the contract that’s in place for revenue services and revenue collection and look at the HP Advanced Solutions — the contract it - self. Our understanding is that the contract expired this year. It was first signed in 2004 as a ten-year contract. If I’ve got my numbers right, in 2006, the contract was opened again. Two years were added. It was called a re - fresh at that point and went from a ten-year contract to a 12-year contract. I just want to ask the minister specifics. Is that con - tract expiring this year? Will it be renewed?

Is there a process for that? Is it going to be tendered out through that process? [1500] Hon. M. de Jong: I’m reminded that the contract…. Well, to cut to the chase, last year the contract was re - newed for a five-year period, which takes it to 2020 — so from 2015 to 2020. The other point I’ d want to make is that this is an ex- ample of where I think it’s entirely appropriate…. We are working to establish a system where, at that point in time, the contract would have been posted. The member would have the benefit of being able to go to the website and say, “Uh-huh.

That contract has been renewed for X amount of dollars, and it is for such and such a term, ” and can actually look at the contract itself and look at the terms that are applicable. The short answer is that it was renewed in, I think, April of last year for a five-year term. C. James: Just a few questions around the cost of the contract. It’s a little bit confusing for the public who are watching because there are portions of this contract that are paid out. The contract has a service provider’s share, a ministry’s share and what’s called net benefits that come to government.

When the contract was first put in place, the minister at the time said the contract was going to be about $58 million a year. That was going to roughly be the cost of that contract. If we take a look at Public Accounts, where the data comes out, we can see that that’s really ballooned over the last number of years. From the start of the con- tract at $58 million, we’re now looking at $90 million, $100 million; 2014-2015 lists it as $159.2 million. I wonder if the minister could tell what justifies that increased cost. How has that increased cost occurred? [1505] Hon.

M. de Jong: I’ve got some numbers for the mem- ber that I’m happy to share. Total payments to HPAS under the contract, actual payments, as at March 31, 2016, are $770 million. The extension, I’m advised, would see additional payments of $267 million to the end of March 31, 2020. Those amounts account for base fees, performance, change orders and revenue management system com - pletion payments. The bottom line is that given the con- struct of the contract, as more money was collected on behalf of the province, the contractor, HPAS, secured a higher return for themselves.

So those are the amounts, and that is the anticipated amount going forward, $267 million, to the year 2020. C. James: Just to speak for a moment about the per - formance issue that the minister mentioned. I’m sure it’s the same for MLAs on either side of the Legislature. Probably one of the biggest complaints we get in our con- stituency offices are the wait times for MSP — trying to get through; trying to be able to even reach somebody; being on hold for 45 minutes, an hour; not being able to get through.

It got so bad that MLAs were given a spe - cial line to be able to get through to assist people, to be able to reach them. It doesn’t seem to me that those are great performance measures, just based on the volume of individuals who come in and complain in our offices. I know there used to be a monthly report that would come out that was re-

British Columbia DebatesTuesday, May 17, 2016 13201 quired, that would talk about service level reports to the government. We haven’t seen any of those, or we haven’t seen that those reports are continuing on. I wonder if the minister could talk about if there are monthly progress reports and monthly service reports that still come to the ministry. How is the ministry dealing with those kinds of complaints? Hon. M. de Jong: The member’s specific question, I be- lieve, was: are there monthly reports that track perform- ance — things like call wait times?

I’m advised that there are such reports, and we continue to receive them on a monthly basis. They are received on a monthly basis, and a report card is generated on a quarterly basis. [1510] C. James: I just wondered, then…. The Ministry of Finance used to include that in their annual report when they talked about revenue services. It appears, from the research we’ve done, that 2008 was the last time that that measure was included. I wondered why that’s not includ- ed anymore, from the Ministry of Finance’s perspective. Hon.

M. de Jong: Well, I’m not actually going to try and speculate as to why the change occurred, but I will say to the member that if the suggestion is that it might be these reports may be legitimate candidates for pro - active release by government, I’m inclined to agree. C. James: I’ d say to the minister that I think it is an im- portant indicator. I think it’s a critical indicator to include wait times, particularly with the complaints that come forward. There was previously a graph that talked about the wait times. From my perspective, I certainly would encourage that to be included in the report.

The last piece that I want to touch on for this

section is the issue of MSP debt written off. I think the minister will have read the Canadian Taxpayers Federation report that talked about the value of MSP written-off debt. That was something that certainly was out there. Interjection. C. James: This is the report from the Canadian Taxpayers Federation that came out, that talked about the value of MSP written-off debt and how much it has increased over the last while. I wonder if the minister would like to make some comments on that. [1515] Hon. M. de Jong: I’ve been trying to get as complete a set of numbers as I could for the member.

We calculate the amount owing and payable on MSP premiums for the current fiscal year in the range of $2.6 billion. The member will know that there are two numbers of note. There is the allowance based on historical data that is made for non-collection. That is $149 million — we did the rough and quick calculation — which is just under 5 percent of the amount due and payable. The other smaller number, though significant as well, relates to the amounts that are actually written off as ul- timately uncollectible. That, for the current fiscal year, is believed to be just under $40 million. Both are large numbers.

They are a relatively small percentage of the overall amount due and payable but still not insignifi - cant, which I think has generated some of the conversa - tion we’ve been hearing. The conversation around MSP has tended to focus on the amount that British Columbians are asked to pay and contribute to the health care system. Then there’s a second conversation that I think the taxpayers federation touched on around the mechanism for collection. This is where you get to have the conversation about (1) should there be a separate levy, but (

b) if there is a sep - arate levy, is there a better mechanism for collecting that separate levy? Is it at payroll? Is it as part of the income tax system? These are, I think, relevant and legitimate questions when confronted by the order of magnitude of non-collected amounts. Then there is the separate conversation about the actual amounts that are levied, but we’re talking about the collec- tion at the moment, so I’ll restrict my comments to that. C. James: The minister walked into the other issue, of course, which is the cost of collection.

Never mind the amounts written off, which, as the minister said, is a large amount in itself, but the actual cost of this contract and the cost of the collection, I think, certainly points — I’ll save that discussion, because we don’t have time to get into it today in estimates — to the discussion need - ed around MSP itself and the cost of administering, the cost of collection. That alone, never mind the unfairness of the tax, the regressive nature of the tax, the need to make changes.

I acknowledge that the minister made some changes in this last budget that will take place next fall and January, but I think it certainly points to the unfairness of the tax and the need to look at a better approach to utilizing it. Now, I know we’re getting ready to move on to our next section, so I just want to ask a couple of quick ques- tions to finish up. I know we’ve had this discussion, as well, during legislation, but I think it’s important to make sure that the minister also gets it on the record. It’s related to the prosperity fund and the funding of the prosperity fund in this year’s budget.

I think the first obvious question for the minister is why now. We have had the discussion in previous years. The minister has been very clear in previous years, and the Premier was clear this would be a fund that would be utilized for LNG revenue, when revenue came in. We obviously have no LNG revenue in the province right now — that is, new revenue coming from a new part

British Columbia Debates13202 Tuesday, May 17, 2016 of the industry. Therefore, to take $100 million and put it into a fund at this point raises questions from the pub- lic’s perspective. I just want to ask the minister why now. [1520] Hon. M. de Jong: We had a little bit of this conversa- tion, I think, with some of the budget legislation. The member presented her questions and, dare I say, her skepticism at the time. I don’t think my answers will vary a great deal from what I said at that time.

Firstly, it is to acknowledge that the conversation around the creation of this kind of mechanism certainly arose in the context of the possibilities around creating a new industry and a new form of industrial activity, that being LNG. I’m not going to suggest otherwise. It is also patently clear that we continue to await the first final in- vestment decision that would see the construction phase of the liquefaction facilities begin. It is not correct to say that there has not been LNG- related activity.

The investment in the upstream that has taken place — billions and billions of dollars’ worth — is, in part, very much directly related to a burgeoning LNG industry, but we don’t have a final investment de - cision just yet. So why now? Firstly, the government did make a com- mitment to create this mechanism by which a legacy fund could be created — took that obligation seriously and wanted to fulfil it. Secondly, here we are enjoying rela - tively strong and stable growth.

We are, by every meas - ure that is presented, leading the country in that regard — which is not to say that the benefits of that are accruing to every single family. They are not. It is not to say that the benefits of that nation-leading growth are accruing to the advantage of every single region of the province, because they are not yet. Nonetheless, it is true that we are leading the nation in economic growth. It is true that we are leading the nation in job creation. It is true that we are leading the nation in the lowest unemployment.

It’s the first time, I think, since 1976 that we’ve been able to boast of that — the first time since 1961, I am advised, that British Columbia will lead the country in back-to-back years in economic growth. On balance, British Columbia as a jurisdiction is per - forming well economically. Our challenge, of course, is to ensure that the benefits of that accrue to people and families in all regions.

In addition to that, on the strength of that growth and coupled with the fiscal management and discipline that we have shown, we regularly post budgetary surpluses in a way that no other jurisdiction in the country has been able to over the last three or four years. In that context, what I said to the member a few months ago and will repeat for the committee is the idea of taking what by budgetary standards is a relatively small amount of money — not necessarily so for real people, and I include myself, oddly, in that category….

To take a relatively small amount of money out of our chequing account and put it into a savings account to begin the process of establishing that fund is, I think, entirely legit- imate, entirely appropriate. I will acknowledge, in anticipation of what may follow, that there are always areas that are in need of more money and more spending.

So the query or the question or the criticism or the admonishment that says, “But why didn’t you spend it here?” or “Why didn’t you spend it there?” — yes, there is always a very compelling case to be made for why those moneys weren’t spent somewhere else. [1525] The thing I would say in reply to that, however, is that as optimistic as we are and as positive as we are, there may come a day when British Columbia does not enjoy the advantages of leading the country in growth or where we may be confronted by some severe economic chal - lenges that visit upon the whole country or the whole region.

In that case, it will be of benefit to those that are confronted and governing at that time and to society as a whole…. It will be of benefit, in these relatively positive econom- ic times for B.C., which we have achieved in the midst of some very fragile economic circumstances internation - ally, if we have tucked away a few dollars that the gov - ernment of the day can tap into to help stabilize whatever challenges are being faced at that time.

If we are correct and if the work that has been under - taken comes to fruition and pays off and there is a final investment decision, then the incremental additional revenues that will flow from that will have a home, will have a place. But in the meantime, we’ll have demon - strated that we are not simply resolved to spend all of the revenues that come into government and that we do see merit in saving for more difficult days ahead — albeit with what is, initially, a very modest amount.

I’m sure to the member that I sound like a broken re- cord — probably an unconvincing one at that, for her — but that remains the rationale. I believe it’s a legitimate rationale for the steps we have taken with respect to the establishment of this fund. C. James: It’s not the broken record; it’s, again, the contradictions. The minister mentioned LNG revenue. There’s a difference between activity and new revenue coming in. Certainly, the impression given was that this fund would be put together for new LNG revenue, not activity to do with the LNG industry.

I also want to just touch on the point that the min - ister made that there may come a time when British Columbians don’t enjoy the advantage of a strong econ- omy. I think the minister has described it before as “dif- ficult days” may come. I think that it’s important to note that those difficult days are there for lots of British Columbians. Part of the challenge and part of the diffi - culty with a fund like this is that there are lots of British

British Columbia DebatesTuesday, May 17, 2016 13203 Columbians who, in fact, don’t enjoy the advantages of the strong economy right now. The minister mentioned areas we’re leading. Well, we’re also leading in child poverty. We’re leading in personal debt. We’re leading in two cities which have been de - scribed across the country as the worst cities for hous - ing affordability. Personal debt. I think those are the areas. When the public takes a look at $100 million and says, “I’m not benefiting, ” or a senior citizen isn’t bene- fiting because they aren’t able to get the kind of care that they need….

I think the contradiction is the issue where I would profoundly disagree with the minister on priorities. Just my last question, and then I’ll turn it over to my colleague. It’s related to how the fund is allocated. The majority of the fund goes to debt. The minister was clear about that: “Debt reduction is a priority. ” That again makes people wonder why it went into a separate fund. If the government is going to pay down the debt, they can do that any way they want. But 25 percent of the fund can be used for core government priorities, and it doesn’t appear to have any ties around it.

It doesn’t appear to have any structure around it. I just wanted to ask the minister my last question, around accountability. What transparency and what accountability will be there for how the decision is made for that 25 percent of funds? Will those resources be allocated to ministries? Will they go through the estimates process in ministries? Will the ministers, then, be accountable for making those decisions? Will the Premier be accountable for making the decision on that 25 percent? What are the account - ability mechanisms in that area? [1530] Hon. M. de Jong: I think I understand the member’s question.

That is: where there is a decision made to with- draw…. By the way, I answer the question not wanting to leave the impression that any such decision has been made for the fiscal year we’re in or the fiscal year ahead. There is — and I think this is clear from the legislation itself and the discussion we had around it — the obliga - tion for a Treasury Board process — beyond that, though, a reporting out, not just at public accounts but at quar - terly financial updates and service plans for ministries for whom proceeds are assigned.

I think the member would agree that that will, in all likelihood, trigger an opportunity for…. Well, it would trigger an opportunity for the process that we are en - gaged in now — the estimates process for a more detailed scrutiny of what those decisions are and the purpose be- hind the allocation. I am satisfied that, in the event a decision is made by a future government to affect a withdrawal, there is an obligation to disclose that in a very open and transpar - ent way and an opportunity for the chamber and this committee to both scrutinize and criticize the decisions that are made. D.

Eby: My first questions are in relation to credit union guarantees for deposits in British Columbia. It was in 2014 that FICOM commissioned a report about B.C. ’s credit union exposure to risk and mortgage markets. It found that 67 percent of B.C. credit unions’ total loans are personal real estate–backed assets, and home mortgages represent half of consumer debt in B.C. The report said that: “Default risk is a particular concern given the continuously climbing housing price in the greater Vancouver area. ” That was 2014.

The housing mar- ket’s appreciated in some areas by 100 percent since then. [1535] It was late last year that a Nobel prize–winning econo- mist, Robert Shiller, was on the Business News Network to caution Canadians in Vancouver and Toronto about the risk of the collapse in the housing market. It was echoed by the Royal Bank of Canada’s economist, who cautioned that Metro Vancouver’s housing market is “potentially detached from reality” as well as “dangerous. ” The Minister of Finance knows that B.C. guarantees our credit union deposits against default.

Credit unions are also more likely to engage in higher-risk lending than traditional banks, including real estate. The question is quite straightforward in that context: what measures has the minister put in place to limit B.C. exposure to cred - it union collapse resulting from mortgage defaults, and what is our potential exposure to credit union defaults? Hon. M. de Jong: I’ve got some data for the member that I’ve been provided with. If I don’t capture all of what he is pursuing with his question, I’m sure he’ll alert me to it. I am advised that 93 percent of the total loans are backed by real estate.

That accounts for about $53 billion. Credit unions hold deposits of about $58 billion for al - most two million members. The question that the member asked was: what is the exposure? I’ll answer it this way, because I don’t want to leave the impression that the regulator is sitting here worried about an imminent collapse. The legal exposure is something that the member referred to.

The govern - ment, in 2008, offered an unlimited deposit guarantee to credit unions, so it would be incorrect for me to ignore that fact, and it’s one of the reasons that the province and the regulator are very active and diligent about ensuring that the requirements are being met. Now, I’m just reminded by the regulator that they do, as a matter of course, stress test on the basis of different scenarios.

The regulator advises me that, in the most re- cent example of that, they contemplated a scenario in which residential property values diminished 40 percent and commercial properties diminished 50 percent — a dramatic shift in value. The regulator advises that the system of safeguards that is in place and capital require- ments for the credit union movement within the prov - ince are robust enough and sufficient to accommodate that manner of sudden shift.

British Columbia Debates13204 Tuesday, May 17, 2016 I don’t know if that even begins to touch on the ques- tion that the member has asked. He’ll tell me, I’m sure. [1540] D. Eby: It does go some way. The question was: are there any new policies that have been put in place to man- age risk since the dramatic run-up in property values in Metro Vancouver, which most commentators acknow - ledge increases risk.

I want to read you a headline from today’s Canadian Business magazine, talking about the Vancouver house- price surge, advocating for an independent agency to regulate runaway speculative investment. “The Vancouver house-price surge is exactly the sort of thing the independent agency should handle. It is a national issue. Everyone knows who will be called on to clean up the mess if it bursts. The banks would feel it and likely would curb lending. CMHC would feel it because it has insured most of the mortgages Vancouverites have used to buy their inflated assets. ” Of course, it’s not just CMHC.

It’s the government of British Columbia, through our guarantee to credit unions. The question is: were there any new policies or are there any new requirements that have been placed on credit unions in this dramatic run-up in property values to ensure that our tax dollars are protected from having to bail out, for example, a small credit union or a medium credit union that doesn’t have the protection in place? We know the range of credit unions in B.C., from the very small to the very large, like Vancity.

Are there any new measures that have been put in place, new capital requirements or anything like that to deal with this run-up in property values? Hon. M. de Jong: I can alert the hon. member and the committee to three specific areas and then another con- versation that I had with his colleague earlier in these proceedings that I think is relevant to the discussion that we are having. Within the last 24 months — three areas where policy has been altered, amended, enhanced to address the area of risk.

One is as it relates to residential mortgage underwriting; the second, the question of internal cap - ital targets for credit unions; and the third, governance standards or governance issues, particularly standards of competency for boards as it relates to risk assessment. Those are three areas where the regulator, in concert with credit unions, is working to effect changes to ad - dress questions of risk. There’s another area though, and the member men - tioned it and may not have had an opportunity to hear the exchange I had with his colleague earlier as part of the FIA review.

That is the fundamental discussion we are having with credit unions about the deposit guar - antee itself. There are a variety of views that have been expressed. I won’t take more time than necessary except to say that I alerted the member’s colleague to the fact that that process, which is very active, I am hoping to see brought to a conclusion this fall.

The credit unions themselves have offered recommendations to the government as part of the financial statutes review, including a recom - mendation as it relates to the deposit guarantee that was put in place in 2008. [1545] It is very much an issue on the front burner and some- thing that I expect he and I will be discussing in the months ahead. D. Eby: I don’t want to put words in the minister’s mouth. I just want to be clear. The minister has listed three areas that definitely are areas that would be of con- cern if you were worried about risk: mortgage under - writing, capital requirements and governance.

But my question was: are there any new policies in place at credit unions to manage the risk related to the run-up in hous- ing prices? So I understand the minister to say: “No, there is work underway, but there are no new policies in place. ” Is that correct? Hon. M. de Jong: I’m sorry. I didn’t mean to be opaque about this. The areas I’ve referred the member to are guidelines in the sense that they represent the regulators’ expression of expectations of the credit unions. They have been developed over the last 24 months. I don’t know if that qualifies as new for the member, but they are new to that extent.

They represent recent expressions by the regulator of expectations that credit unions must now govern themselves by. In the case of my reference to the deposit guarantee discussion, it is entirely fair and accurate for the mem - ber to say that nothing has changed, but I did want to alert the member to the fact that the conversation is tak- ing place and is something that credit unions are very engaged with. D. Eby: Those requirements that the minister talks about in the last 24 months that have been modified or somehow communicated by the regulator — are those published anywhere?

Are they available to the public, or would the minister provide them to me? Hon. M. de Jong: I’m advised that they are on the website. D. Eby: I will have a look, and I will check in tomorrow with the minister if I’m unable to find them. The minister has set out the regulations. Just for back- ground for the minister, I’ve been told before that stuff is on the website that’s not on the website. So I always double-check. I would appreciate it if the minister would commit, if it’s not on the website, to provide copies.

British Columbia DebatesTuesday, May 17, 2016 13205 The minister has told me that he’s got better regula - tions in place. He’s managing risk at the credit unions with the regulations. Are the regulations actually being policed and enforced? Are they being tested? Is the cred- it union’s activity being tested against the regulations by the regulator?

The reason I ask this is that there was an Auditor General report that said that there was a staff shortage at FICOM that’s dated back two years — this Auditor General report was released in 2014 — and that FICOM had completed only seven of 17 on-site reviews of credit unions. Four more were rolled over, and 16 planned on- site reviews have been reduced to three. It would take over 14 years for FICOM to review all of B.C. ’s credit unions. FICOM lacked staff expertise and competencies because they were unable to hire. They were increasingly reliant on contract resources.

They des- perately needed experienced and knowledgable staff to oversee the work performed by their own staff and any contractors. The minister knows this isn’t just in relation to credit union risk around mortgages. This is around policing the real estate sector. This is around policing mortgage brok- ers. The question to the minister is quite straightforward. Where does the situation for staffing sit now, given that, at the time of the audit in 2014, FICOM had 25 staff va - cancies, representing 35 percent of positions in its finan- cial institutions division? [1550] Hon.

M. de Jong: I can answer quickly and then take the follow-up questions. The member’s colleague and I had a brief exchange about this. I, at that point, indi - cated to her and the committee that FICOM was one of two areas where we have experienced challenges in terms of vacancies. The ministry averages about 5 percent. In the case of FICOM, it fluctuates between 25 and 35 percent. Y es, it is an area of concern. Y es, we have found that people with the unique skill set that is required to do this work are very much in demand, and there have been challenges in terms of retaining those employees.

So between 25 and 35 percent vacancy. D. Eby: The minister knows…. Ms. Rogers came to testify at the Public Accounts Committee. When she testified — Ms.

Rogers is the head of FICOM — she said: “The Auditor General noted that the staffing constraints were not budget-related but rather stemmed from other constraints outside FICOM’s direct control, and that’s why the recommen- dation” — the recommendation to fix this situation — “was directed to the Ministry of Finance and not to FICOM or the commission. “Government supported the recommendation” — that was in 2014 — “and as I mentioned earlier, the Ministry of Finance subsequently requested that the Public Service Agency work directly with me and my management team to address the issues and develop a plan.

Some work has been done in the area over the summer. ” Now the minister tells me that we are in the same situ- ation. The Auditor General is clear that this is a Ministry of Finance responsibility, that the budget is there be - cause the minister knows the money comes from the industries that are regulated. The industries are sending money over to the Ministry of Finance to hire the very inspectors and investigators and auditors that they want to ensure their industries are protected, and the minis - ter stands up here and says that he has still failed to fill those vacancies.

This is a creature of the Ministry of Finance. It is en - tirely in his responsibility. Why has this happened? Hon. M. de Jong: Well, there’s no question it’s been a challenge. I’m also prepared to acknowledge that, to the extent that some of the pressure relates to the private sector being in a position to offer more attractive salary packages, the responsibility for that ultimately rests with the government and, in this case, I suppose, ultimately rests with the Minister of Finance.

There’s also no question that through this period of time, when we have been asking the women and men who work in the public service to accept very, very mod- est wage increase packages, I have felt a certain obligation, a real obligation, to insist that we apply a similar stan - dard and a similar approach in other areas and with other agencies. To that extent, I accept responsibility.

I can tell the member that the Public Service Agency, in respect of the specific circumstances, did establish a team, hiring compensation experts, to work specifically with FICOM to identify a means by which the pressure could be alleviated. That has led to some modest salary adjustments over the course of the past couple of years. We have approved three new executive positions.

But there’s no question that these are specialized areas. [1555] We have been and I have been very much alive to the fact that we are asking hundreds of thousands of other people in the public service to make do with very modest increases and have asked the same. I think that is prob - ably attributed to some of the pressure and some of the recruiting practices that we have seen.

I do feel that obligation to, on the one hand, ensure that the agency has the people it needs to perform its function but, on the other hand, ensure that the remuneration that is offered, or increases to that remuneration, is not wildly out of sync with what we are asking hundreds of thou - sands of others to accept, who work in the public sector. D. Eby: I think the minister saw the effect of under - staffing and the impact on public confidence in the real estate sector where, suddenly, everyone was quite startled by the fact that there were serious issues that needed to be dealt with. I don’t understand.

Maybe the minister can clarify this for me. I understand that industry sends money to

British Columbia Debates13206 Tuesday, May 17, 2016 the Ministry of Finance to pay for this regulation. They are funding their own regulation. If that’s the case, then I’m trying to figure out why it would be that the minister would be suggesting that somehow this was connected to the broader public service. They want the regulation to be done. They’re paying for the regulation.

It’s the minister’s job to say: “Here’s how much it costs to do the regulation that has to be done to protect your industry, to protect its public reputation. ” I think the minister is giving a very convincing argu - ment for why this needs to be an independent agency and not within the Ministry of Finance. It seems that the minister is actually blocking the hiring of the regulators that the industry is paying for. The question is: how much money did these indus - tries send to the Ministry of Finance for regulation?

How much was actually spent on regulation, and was any money returned into general revenues of the prov - incial government? [1600] [R. Lee in the chair.] Hon. M. de Jong: I’ve got the numbers for fiscal year 2015, where I can advise that there were recoveries — I’m talking about credit unions and the trust sector — of $6.3 million, expenditures of that amount of $4.9 mil - lion, leaving an amount of $1.4 million. To the extent that any of that amount was not expended, any unexpended amounts were returned to the consolidated revenue fund. D.

Eby: The minister knows that the superintendent is responsible for a number of different areas: mortgage brokers, realtors, the insurance industry. What were the recoveries from those sectors and the expenditures? Hon. M. de Jong: For insurance, recoveries of $2.9 million and expenditures of $2.7 million. For real estate and mortgage brokers, $3.1 million and expenditures of $2.2 million. D. Eby: Were there recoveries from any other indus - tries that helped offset costs for the superintendent, and what were the expenditures relative to those industries? Hon.

M. de Jong: Pensions of $2.2 million and ex - penditures of just under $1.4 million. D. Eby: By my total, the government underspent recov- eries from industry by almost $3 million. Can the minister explain how it could be that industry is sending money to government to regulate it, and the government under- spends by $3 million — returns that money into general revenue, doesn’t spend it on the regulators that the in - dustry is compelled to pay? I’m sure that some of them are more enthusiastic than others about being regulated.

They underspend it by $3 million at a time when they still haven’t dealt with the report of the Auditor General that says that this is leading to risky situations where cred- it unions, in particular, in that report…. I think we can all look at real estate and say, “Boy, there were some serious problems there” — underspent by $900,000. Who knows what’s waiting in pensions, underspent by $800,000. Why would we be underspending so dramatically when industry is sending this money for the express pur- pose of hiring regulators? [1605] Hon. M. de Jong: A couple of things come to mind.

The member referenced the report of 2014. I can, of course, point out to the member, as of April of this year, the progress that has been made on those 11 recommendations. Six related to policy and practice improvements. They have been implemented and are completed or substan - tially complete. Three of those 11 recommendations re - lated to developing a deposit insurance payout plan, and those are in progress. It is, I’m told, a relatively complex project and will take some more time. Then two recom- mendations relate to addressing the staffing challenges that FICOM has experienced.

Members already heard me indicate that there have most certainly been challenges involved in recruiting staff to that agency. I can advise the member and the committee that that is primarily responsible for the issues that the organization has experienced on the staffing side. Believe me, by far the preference on the part of myself and government would be for the organization to be fully staffed with the professionals who possess the tools ne - cessary to fill those positions and do the work.

I’m reminded, as well, that the fee structure that gov- erns how much a credit union must remit to FICOM is governed and influenced by the size of the organization. Credit unions have experienced steady growth over the last number of years, and that has influenced — in a posi- tive way, from the point of view of FICOM, and, I sup - pose, in a negative way, from the perspective of the credit union — the amount that they are remitting. Amounts paid to FICOM have gone up. The ability to recruit the talent necessary to fully staff to the degree that we would like — those challenges have increased as well.

But the objective, I can assure the member, is to see those positions fully staffed with qualified personnel and to make use of the other resources that are clearly available to do that. D. Eby: We’re — what are we? — seven years since the collapse in 2008 in the United States, where we learned, I hope, a very valuable lesson about the importance of regulation and enforcement of regulation in the real es - tate market. Now we’re seeing our own dramatic run-up in real estate values in British Columbia. [1610]

British Columbia DebatesTuesday, May 17, 2016 13207 At the same time, chronic, years-long — that audit re - ported in March 2014, done in 2013 — understaffing of the regulator under this minister’s watch. And I don’t want to mention it, but the chair of the Premier’s fundrais- ing committee benefiting significantly from the run-up in real estate values — Mr. Rennie: significant donations to the minister’s party from the real estate industry. I put these things together, and I have to ask the min- ister: why would he not move regulation out of his min- istry?

Why would he not end any kind of question about his inaction in staffing the regulator? Why would he not move this FICOM watchdog, like all the other watchdogs, out of the Ministry of Finance and let them set the rates? Let them set the rates of what needs to be paid in order to ensure good regulation. I think that we’ve learned from the Real Estate Council of B.C. that you can have great rules on paper, but if they’re not enforced, things get crazy.

I think we need a regulator that has enough people on the ground to go and do the undercover investigations, to go and do the audits, to go and do the reviews, and you cannot do that. The Auditor General was unambiguous. Y ou cannot do that. It’s been a couple years, so…. The Auditor General said that “the lack of staff is stalling the effectiveness” of FICOM’s work. Although they’re establishing appropri- ate risk ratings, “the lack of staff is stalling the effective - ness of this work. ” That’s two years ago, and the problem hasn’t been solved.

To the minister: why hasn’t he moved this agency out from under the umbrella of the Ministry of Finance where they can do the work independently without any concern that they won’t be able to hire the people they need because the minister has decided it’s somehow con- nected to broader public service issues, even though it’s funded by the industry itself? Hon. M. de Jong: Thanks to the member for his ques- tions and submission.

Again, I don’t think he was here earlier when we had the conversation about the review that is underway with the industry that is statutorily ob- liged to take place and that is designed to consider fun - damental structural changes that may be appropriate, and may be even more appropriate in the context of a particu- lar set of market circumstances. I think there are at least two issues at play, and I think the member is attempting to link them in a certain way.

I have readily acknowledged that FICOM, the regulating body, has encountered and experienced challenges re - cruiting and retaining some of the skilled personnel with the unique skill set necessary to perform the work of the regulator. I have readily acknowledged that. The question about the placement of the organization within government is an interesting and maybe relevant conversation to have. But to suggest, as I think maybe the member is, that it somehow is linked to what is taking place in the market is something I profoundly disagree with.

I can assure the member that I’ve been doing this long enough that I have no sense of proprietary turf pro- tection around any particular agency. The objective is to ensure that we have a regulator and a regulating body in place that can do the job. It has for many, many years found a home within the…. Since the 1980s or beyond that — 1989, I think. I don’t know if it was Minister Curtis that…. Anyway, the 1980s. [1615] The notion of finding a different home or a different structure offends me in no way whatsoever.

I am more skeptical, however, and ultimately reject the member’s suggestion, if this is one that he’s making, that somehow I am inclined — or the government is inclined — to be territorial as a result of trying to protect the interests of others. Our interest here is to ensure that we have a regu- lator in place that is equipped and able to perform the functions that are assigned to it statutorily in the public interest — full stop. D.

Eby: All wonderful ideas, if the minister hadn’t been chronically understaffing FICOM for years now and clawing back millions of dollars from industry revenues paid to FICOM for the purposes of regulation into gen - eral revenue. I agree with the minister: an effective, well- staffed, independent regulator — critically important; not what we have in British Columbia. The regulator is not independent, not well staffed. Don’t take my word for it; take the Auditor General’s word for it. In the meantime, the minister is clawing back the money paid for regulation into general revenue.

Clearly, we’re not yet at the level that he aspires. I wish him luck. I hope that he acts, in light of his lack of territoriality, and passes that surplus that he’s taking — so-called surplus; the regulatory revenues — over to an independent body that will actually hire the auditors that are needed. It’s not without consequence. It’s not like we haven’t seen the impact of understaffing. The real estate indus - try has taken all kinds of hits. An unlicensed real estate practice — I can advise the minister if he doesn’t know — is absolutely out of control in Metro Vancouver.

It’s absolutely out of control in the CRD. People are, with impunity, dropping leaflets at the doors — thousands of leaflets: “I’m not a realtor. I want to buy your house. ” Now, we’ve seen the Alberta regulator literally chase an unlicensed realtor into British Columbia. He says that they pursued him ruthlessly. He says that they made his life miserable. They fined him $100,000. They’re threaten- ing to put him in jail for two years. That’s what happens in Alberta when you’re an unlicensed real estate agent.

Y et in B.C., assignments are openly sold by non-realtors on Craigslist, and people are dropping professionally print- ed leaflets at the doors of people across Metro Vancouver and the CRD. My question to the minister is: how many FICOM staff were allocated last year to the issue of unlicensed

British Columbia Debates13208 Tuesday, May 17, 2016 real estate practice? How many staff were allocated this year to unlicensed real estate practice? Has there been any change at all in light of changing market circumstances and realities on the ground? [1620] Hon. M. de Jong: Look, there’s just one thing. I appre- ciate that the member has views and, as part of the ex - change, wants to express them. I thought earlier, though, he, in referencing the Auditor’s report…. I may have heard it incorrectly, or he may have been thinking of one thing and talking about another thing.

But the suggestion that the regulator, the superintendent, does not operate in an independent manner…. I feel obliged to respond on the record and say that based on my experience and my conversations with others, it would be unfair and inaccurate to suggest that the regulator — I am speaking in the third person — who is here in these proceedings and in this chamber, has per- formed her duties independent and free from influence. I think that’s important to say. As I said, I may have been mistaken in what I heard the member allude to.

But I don’t at any point think the Auditor General has ever impugned the superintend - ent, the head of FICOM, for acting in a way that isn’t in- dependent and discharging her duties responsibly in that respect. The member has thoughts and ideas about how the structure could be altered — fair enough. We’ve had a conversation about that. I did want to get that on the record and, in so doing, have talked myself out of the answer I wanted to give to the member’s question, which he may have to remind me of now. D. Eby: I know

Document details

Collection	British Columbia — Debates (Hansard)
Citation	20160517pm-Hansard-v40n4
Type	hansard
Volume / chapter	20160517pm Hansard v40n4
Language	en
Format	pdf
Source	PROVINCIAL
Identifier	c77c69d1ad3401f17429b2157a3c2ffc489d47d1

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