We are on Resolution 13.5. Rural Economic Development (a) Executive Administration (1) Salaries and Employee Benefits.
Hon. Leonard Derkach (Minister of Rural Development): Mr. Chairman, I would like to introduce two staff who have joined us at the table: Mr. Dick Menon, who is the general manager of the Manitoba Water Services Board, and Mr. Larry Martin, who is the assistant deputy minister for the Economic Development side of the department.
Mr. Clif Evans (Interlake): Pass.
Mr. Chairperson: The item is accordingly passed.
13.5.(a)(2) Other Expenditures $30,700--pass; (b) Infrastructure Services (1) Salaries and Employee Benefits $1,443,100.
Mr. Clif Evans: Mr. Chairman, if the minister could enhance us on this what I believe is a very important part of our rural development and our infrastructure. It includes, of course, water, the Manitoba Water Services Board and deals with providing good drinking water, water that is necessary throughout. Can the minister indicate--it says under Expected Results, of the 26 water treatment plants for municipalities which--are all of these 26 water treatment plants in operation, and what work is in the future for water treatment plants in Manitoba?
Mr. Derkach: Yes, Mr. Chair.
Mr. Clif Evans: No, I asked, of the 26, are these all ongoing facilities or are they also part of some new facilities coming into play, of the 26 that he has listed here?
Mr. Derkach: Yes, they are all operating.
Mr. Clif Evans: Can the minister indicate what plans there are for water treatment plants in the department in the very near future that are being developed?
Mr. Derkach: Mr. Chairman, throughout this year and every year, we enter into new projects. We upgrade existing facilities. We have a capital program that we administer on an annual basis in terms of providing clean, potable water for communities and for residents of Manitoba, and those communities are both rural and urban. We have an allocation every year for capital works within the province, so if there are specific ones the member would like to speak about or talk about or ask questions about, I would be happy to enter into that kind of question and answer.
* (1440)
Ms. Becky Barrett (Wellington): Mr. Chair, I have one or two questions to ask the minister relating generally to the water services in the province of Manitoba but more particularly dealing with the whole issue of water services and rural development as it relates to the City of Winnipeg and the rural municipality of Headingley and the Cartier water. So I hope that this is the appropriate place to ask those questions, and I know there may have been other areas, but I would like to ask some questions on the status of the process, et cetera.
First, can the minister tell me what the costs, now that the City of Winnipeg has--I am not sure if they chose to or through a technicality, the City of Winnipeg is not at this point going to sell water to the rural municipality of Headingley. Can the minister tell me what the cost now will be for the St. Eustache project?
Mr. Derkach: Mr. Chairman, to be fair to the member, I take her back from, I guess, the beginning of this entire project and just to explain the process that we have undertaken to get to where we are today. This is not a new project in terms of the discussions. It has gone on seriously for two years, but much longer than that before, and even when Headingley was part of the urban centre. As a matter of fact, it was at that time that there was a local improvement district that was approved under TransPlan Winnipeg I believe, which was to be the serviced area for water and sewer.
When Headingley seceded of course, as a municipality, then independent of the City of Winnipeg they continued to pursue their desire for potable water and for sewage services. When they approached the department and the Water Services Board, we were given several options that we could look at in terms of providing water to the community of Headingley.
At the same time, I would have to say that the Cartier water development co-op was formed, and once again, that is a project that had been worked on for a long time, and they as well, were looking for sources of where they would get their water from. So there were sources of water identified; one was the Assiniboine River, another was the Portage la Prairie Water Treatment Plant and another was the City of Winnipeg water source.
Discussions went on between--at the municipal level for some time, and there were no agreements that were being reached by municipalities, so at that time we were approached as the department to assist in the process of sourcing the water and making sure that we would start to proceed with construction of infrastructure that would provide those services to those areas. As with all projects in Water Services, there is a priority list, and as communities come forward, they are placed on this list, and as their municipality is able to raise the necessary funds through debenture, or whichever method, then their projects come forward.
The Cartier water development project and the Headingley project were coming together for this year, and that was known about a year or two ago. We started to look seriously at where we could get water for Headingley from and what would be the least expensive route to go. It was at that time we approached the city, or not we, but the municipalities approached the City of Winnipeg and the City of Portage to see whether or not we could get water from those two sources.
The City of Portage, after some time and some debate internally, and after some meetings that went back and forth--and our role at that time was one where we facilitated the discussions between the two groups and tried to lay out what the options and the benefits would be under them joining the water co-op and extending water--Portage did decide to agree to deliver a finite amount of water to the Cartier water development project.
At the same time, we approached the City of Winnipeg, and once again I have to say that there were discussions going on between Headingley and Winnipeg in the interim. It was not something that we initiated for the first time from the department. Winnipeg was not certain whether they could or could not provide water. They did not know whether it would be to their advantage to provide water and so they were attempting to get some kind of agreement from the community of Headingley that the water service delivery to them would not end up in an explosion of development outside of their boundaries, specifically residential development, but Headingley was not going to sign any document that said they could not allow their community to grow. I do not think any municipality in Manitoba would do that at this point in time that I know of.
So the discussions continued. Again, our department and the Water Services Board came together with the two municipalities. What was happening at the meetings was that all kinds of issues were--we were diverting our attention from the issue at hand. We were talking about all kinds of things, so finally we did get down to the issue at hand and that was whether or not Winnipeg would agree. It was a straightforward question: would Winnipeg agree to extend its water services to the municipality of Headingley or not and also their sewage services, because one way or the other Headingley was in a position where they could afford to pay their share of water? They were the largest urban community in rural Manitoba without water service and sewage service, and they were facing an environmental problem with their sewage, especially at this time of the year.
In the end, there were some, I think, public meetings held in the city of Winnipeg. I know of at least one. I do not know if there were more than that. Just one. I think that the meeting was--or the initiative was being undertaken by one City Councillor, but there were others at the meeting as well. The city, after going through that and after a debate internally, decided not to participate and not to extend water services to the municipality of Headingley, and that was fine. I mean that is a decision that is within the realm of that municipality to make, and their decision has to be respected.
Mr. Peter Dyck, Acting Chairperson, in the Chair
So, therefore, the next step was to proceed with water service to the Cartier water development region and to Headingley under a different program. Now in conjunction with the partners, there was a costing done for water service delivered from the city and from Headingley to meet the needs of the entire region, and that cost I believe was in the neighbourhood--and there was an approximate cost of around $10 million. There was also a costing done of building a freestanding water treatment plant at St. Eustache that would draw water from the Assiniboine, and I think that cost was around $12 million.
After further analysis and after realizing that the City of Winnipeg and Portage could not deliver all of the water to the whole Cartier water development co-op, we would still need to build a water treatment plant. It became obvious that the water treatment plant would still have to be built. However, because Portage was now contributing some water to it, we could afford to build the plant in such a way that it would be designed in modules where we would build just the modules that were required to service whatever area we needed.
Now, the cost of this was targeted at about $12 million, and we entered into a contract with the consulting company to search out consortiums or partners who would be interested in developing this project on a public-private partnership. After that process was completed, we have further, because we have only one way to go, been able to pare down the costs of the water development project to $10.8 million.
* (1450)
So, Mr. Chair, I have to say that the project now is coming in at $10.8 million and that is for the water development part, and it is for the Cartier regional water system. In that is included Headingley, but we are talking about Headingley being the local improvement district that was identified even back when Headingley was still part of the city. This does not include extending water to undeveloped lands that are not currently being developed. It does, however, include one area because a water main is going to go through to service other homes, 47 lots I believe it is, in the community of Headingley, plus the infill lots that are available inside the community.
The cost of the distribution lines is another project, because the Cartier water development project, which is the $10.8 million does not include the distribution lines within the local improvement district of Headingley. That project is $7.2 million. So there is a process where every resident who is going to be receiving water is going to be contributing to the cost of the project. In addition to that, the municipality is going to be levying a mill rate to ensure that there is an ability for them to be able to pay out their debenture or their loan.
In terms of the sewage system, again, different options were looked at. One option, of course, was the sewage treatment plant in the southeast corner of the city. However, after the city said no, they were not going to participate, we had to look at other options. The municipality of Headingley had identified a property on the northwest side of the city and the Environment department had started to do their analysis on that location. So we said there have to be other options that we should look at, and so other options are being pursued with regard to sewage treatment for the community of Headingley. I might say that the $7.2 million includes not just the water for Headingley, but it is the water and sewer for the community of Headingley.
So that is basically where we are at presently. The project is to move ahead this year, but until we finalize where and what the method of disposal of sewage is going to be we cannot proceed with the sewage part of it.
Ms. Barrett: I do not have a lot of time, so I am going to try and be as tight with my questions, so I get some information. The minister said that Headingley could afford to pay their share of the water. I am wondering: if the minister can quantify their share, what is their share globally and how is that figure determined?
Mr. Derkach: Mr. Chairman, there is a formula which applies to all communities across rural Manitoba with regard to this type of infrastructure, and there are two components to that. One is for the water development side, which would in this case be the Cartier water development co-op, which is the St. Eustache water treatment plant and the main lines that run from there. The other would be the participation in the distribution system right in the community of Headingley.
Our portion inside the community is $2.4 million and the municipality's portion is $4.8 million. On the water development side--I am sorry. The municipality is going to finance their portion of the cost through a mill rate of 9.65 mills plus a $425 annual frontage levy which is going to be used to calculate taxes after the services are in place. Okay. Now for the water development side, on that larger project which is the $10.8 million, that project is done through our regular water development program which is on a 50-50 basis. The way that the revenue is going to accrue to that is through water rates that are going to be established. So there will be a water rate for the usage, whatever it might be.
Ms. Barrett: So for the Cartier part of the project, the modules, the $10.8-million part of that, Headingley and the province split that cost 50-50, but the Headingley part of that--
Mr. Chairperson in the Chair
Mr. Derkach: Mr. Chairman, the municipalities all belong to the Cartier water development co-op. The cost of the water development project, the water treatment plant and the main water distribution lines, the large lines, that cost is $10.8 million. That is shared on a 50-50 basis between the province and the water development co-op.
Ms. Barrett: I am assuming that the co-op figures out within their 50 percent how they determine the cost distribution.
Mr. Derkach: It is based on usage, Mr. Chairman, and it is done through water rates. They develop a water rate, and then they charge it in accordance to the amount that is used.
Ms. Barrett: And the distribution project, the water and sewer that is $7.2 million, Headingley will be responsible for 2.2 of that and the province 4.--
Mr. Derkach: I am sorry, Mr. Chairman, the municipality, Headingley, will be responsible for $4.8 million, and the province will be responsible for 2.4.
Ms. Barrett: Going back to your first answer to the question where you said that was a formula, these numbers are just, particularly the distribution, the 7.2 split--is just plugging into the formula that is the same throughout the province.
Mr. Derkach: Mr. Chairman, within the community, the distribution within the community to each of the homes, the formula for that is a 70 percent municipal portion, 30 percent provincial portion. The other part is 50-50.
Ms. Barrett: I think I understand this now. My arrows, you should see my arrows.
Mr. Derkach: I should also indicate that this is not any different than is used across the province. So it is the same formula, the same application that is used anywhere else in the province.
* (1500)
Ms. Barrett: Mr. Chair, the minister then said that this whole project--the water treatment plant part of it and the distribution and the water and sewage--is not designed to service any land that is not now under development with the exception of 47 lots that I think are probably right in the direct line or something.
Mr. Derkach: Mr. Chairman, there is a local improvement district that has been identified within the development plan. That is the area that is going to be serviced. Within that area, there are infill lots that are right in the community of Headingley. I do not know how many there are of those. Then there is a small development, and I think it is the Harris property, if I am not mistaken, that has 47 lots. There is a present development going on. It is not a new development. Well, it is new, but it is ongoing, along Breezy Bend, but that is already started, so that is part of the plan as well. So there is some housing--I do not know if you call it infill, or development--that will be ongoing in that area, but that is not new because that has already been started. I do not know how many there are in that area, but it is not a big development.
Ms. Barrett: And the public-private partnership, the PPP, has that gone through the Water Services Board, or is it all finished and everything is in place, or did you say you were in ongoing discussions with other parts of the partnership? I am assuming that would be the private parts, because the public would be the province and the municipalities, so the private would be still under discussion.
Mr. Derkach: Mr. Chairman, we have not finalized all of the final points or the details of the project. As I indicated, I think the largest outstanding one right now is on the sewage side, but as soon as all of these are completed, we will be in a position to make an announcement regarding the project. But it goes through the normal process through the consultant. The costs are analysed, then there is a tender call for proposals, then there is a process in which the work, the quality of work and the cost are analysed and then the tenders are awarded.
I guess I should also indicate, Mr. Chairman, that the water rates are going to be used to pay for the system over a 20-year period under this private-public partnership arrangement. At the end of the 20 years, the system will be turned over to the water development Co-op.
Ms. Barrett: I am wondering if the tender call or the request for proposals, if I could have access to those, or kind of, what are the parameters of the private part of the public-private partnership?
Mr. Derkach: Mr. Chairman, I can get the proposal, call proposal to the member. I do not have it with me right now, but certainly we can get that for her.
Ms. Barrett: Thank you. My understanding is there have been two proposals on this. I would imagine that there would have been maybe one for the plant.
Mr. Derkach: Mr. Chairman, yes, there are two calls. One is for qualification, and one is based on cost. So, yes, she is correct.
Ms. Barrett: To whom do these calls go out, or tenders, or whatever the appropriate word is?
Mr. Derkach: Mr. Chair, these are all public tenders, and anyone who feels their company is qualified to meet the test of qualification can apply.
Ms. Barrett: I am wondering if the minister is aware of the York region in Ontario, which just recently completed a very extensive survey and study of the cost-benefit analysis, I guess in a phrase, between public infrastructure as we traditionally have had in Manitoba versus the PPP process which is just now starting, Charleswood Bridge and now the Cartier project, and I am sure there will be others under Bill 12.
If the minister would like, I can--I am assuming it is too late for this proposal, but it is a very good, very extensive study, and I am more than happy to loan it to the minister if he would like to take a look at it. Basically they say that for the sake of rate regulation, reliability of service, public accountability and cost control, they could find no justification for going into a PPP process for water supply in the York region.
So I will make that study available to the minister because there, as he well knows, have been some major concerns about not only the particular process of water to Headingley but the larger issue of public-private partnerships. Everyone wants the most effective, efficient use of government dollars, whether that is municipal, provincial or federal for that matter. I think it is incumbent upon us all to take a look and have access to information that is available from other parts of the country and see if there is something that could be done that is not quite as extensive as this.
Mr. Derkach: Mr. Chairman, I welcome the opportunity to look at the report that the member speaks of. I do not have a copy of it, so I would certainly be more than happy to receive it and to have staff of the department review it. We are not going into a private-public partnership on every project across the province. As the member knows, we have several projects in the works right now--one at Dauphin, as an example. Each project is, I guess, analyzed on its own merits, and this particular project could be considered a pilot. We will certainly be doing everything we can to look at the costs and compare them to the traditional way of supplying service.
When we did work before, we went into the triple P. We had our consultants do an analysis of the traditional way of doing this particular project and then looking at it under the triple P. It looks like, at this stage, we will be saving the project about $1.2 million by doing it this way. However, this is not the end of the pilot, so we are going to have to fairly stringently scrutinize what happens with the project from this point.
We do not want to reinvent the wheel, and if there is information that is available that could help us in other projects, I would be more than happy to look at that. I think what we want to do in the end is to ensure that however we supply the service it is done in a very cost-effective way, because it is the taxpayer and the consumer who pay the costs of these projects, and we have to be mindful of that.
If there are systems, and I am not just saying approaches--but if there are not only approaches but systems out there in the world that are more effective, more efficient and we do not have to reinvent them, then we are more than happy to look at them to see whether or not they fit our circumstances. I can tell the member we are looking at different sewage treatment processes. We have looked at a couple now, and we will be attempting to do one that is probably less costly as a pilot again, to see whether or not it works in our climate, to see whether it is effective and if it works, and if it is a less expensive way of doing the job, I think we want to approach it in that way.
I have to tell the member that, in all of these projects, we always have a partner, at least one partner which is the municipality, but when we were doing the infrastructure component of the federal-provincial program, the federal partner was involved as well. So some of our projects have the PFRA involved directly as well; it is not just the province and the municipality doing it.
* (1510)
Ms. Barrett: You stated earlier that Breezy Bend development that is already underway on 47 lots within the LID of Headingley will be part of this new system and will be hooked up, if I can use that technical phrase. I know there are a whole lot of lots in Headingley, or not lots, they are not lots but land that has been bought up by developers and currently is not--[interjection] Yes, I know the minister knows our concern. We raised that clearly in the House and in other venues that at some point there will be pressure to extend services such as water to areas such as that, rezoning and then access to water. Let us just for the sake of argument say that there was some rezoning done and 100 lots became rezoned for the large-lot residential, I do not know what the exact term is, but what would the process then be for the Municipality of Headingley to access water for those lots?
Mr. Derkach: Mr. Chairman, I think the land that the member is referring to is on the north side of No. 1, and at the present time the LID where the water services are going to be extended to include, if the member is familiar with the Husky station in Headingley, it would include water extension to the Husky station on the north side of the highway and then it would move across to the south side and service the community of Headingley itself.
If in the future there was a will to rezone any land within that municipality, the municipality would have to go through a public process to rezone the land because there is a process that every municipality has to go through in order to rezone land. If they were successful in doing that, they would then have to approach the province to assist them with water to that area. In doing that they would also have to have the ability to be able to raise their own share of money for extending services to that area. So it is not as simple as just running another line out to the area. It is going to mean some consultation with the public, with the province and so forth.
Having said that, I want to also indicate to the member that, with regard to the Capital Region, there has been some fairly extensive discussion over the course of the last six years that I have been in this department with regard to the Capital Region, and I think we have made some excellent progress in a number of areas. I have to say that when I came to the scene there was no agreement on anything, and let me assure the member that not only was there not agreement on anything, it was difficult to get members to a meeting to talk about a specific or specific issues. But members did start coming to meetings because there were issues that were starting to arise that affected the entire Capital Region.
I refer the member to the solid waste management discussion that went on for some time. We were not getting anywhere on that discussion. Finally it was our recommendation that we had better do an inventory of what there is in the Capital Region regarding solid waste disposal sites. Why would we be entering into development of more disposal sites if we did not have an inventory. So that was probably the first signal of agreement on a specific project where the Capital Region said, yes, that is a good idea, let us do an inventory.
From that they have now been able to get enough data to understand where we have suitable sites for waste disposal grounds, how many we have in the Capital Region, and what we should be doing in terms of consolidating and effectively managing the waste disposal sites. So there is good discussion going on in that regard.
When the sustainable development concept was introduced to the Capital Region, it took a long time to get any meaningful discussion and to get an understanding of what the Capital Region Strategy was all about. But let me say that over the course of the last five years we have been able to accomplish an agreement on a Capital Region Strategy. That was accomplished more than a year ago.
A document was published in March of 1996, I believe, which outlined the Capital Region Strategy as it was approved by the membership of the Capital Region. Now, our role in that was of facilitator. We were leading the discussions of course, but we were not imposing the provincial will on anyone. There was a framework document that had been developed, and the discussions were based on that document and on the issues that were important to the Capital Region.
At that time the Capital Region said to itself, how are we going to implement this? So they decided to select a task force that would guide them in how to implement the strategy. The task force met late winter and at that meeting my department prepared a document on an implementation with the participation of Urban Affairs as well. A document was prepared to present to the task force, because one of the elements of the task force was that the provincial government assumed a leadership role in terms of guiding the task force through the process.
So when the document was adopted at the task force level, it was then taken back to the Capital Region. The Capital Region endorsed the approach, and we are now in the process of implementing a strategy whereby we can start implementing the elements that are identified in the Capital Region Strategy.
So when we talk about development in the Capital Region, this will all start to make some sense now in relation to the Capital Region Strategy and the implementation process. When the member asks the question about the undeveloped lands, those lands will also be part of the discussion and part of the implementation plan as we move to implementation of the Capital Region Strategy.
Ms. Barrett: Yes, that was going to be my next brief area of questioning. If I had more time I would enter into discussion with the minister about his summary of the Capital Region Strategy and some of the value, you know, the statements. I do not think the process has been nearly as efficacious as the minister would have us believe. There have been a lot of problems with it, and I know the task force has been put in place.
Is that document that was prepared by your department, has that been made public? If not, is it--[interjection] Well, I will ask for it. You can tell me no, but I will ask for it.
Mr. Derkach: Mr. Chairman, that was an internal document which outlined a process to the task force which the task force then amended, adopted, and took to the Capital Region. It was an internal document.
But the member makes a statement about the effectiveness of the approach that was taken. The Capital Region is not a new region. We had the additional zone prior to that, and I know the member has been around for some time and understands the difficulties and problems that have existed for 20-30 years in this area.
* (1520)
The approach that I have taken with both--and I would say my colleague the Minister of Urban Affairs (Mr. Reimer) has taken with the city and with the municipalities surrounding the city is that we have indicated to them what we want to do. Our goal in the end is to try and ensure that the entire region becomes a stronger region, and that as a Capital Region of this province, we are seen to be a strong, viable, healthy, energetic, economically prosperous area. That is a motherhood statement, but I think that indeed that is also the wish and the goal of the reeves and the mayors who represent the various municipalities in this Capital Region. It is just a matter of how we get there.
I can tell the member that both the Minister of Urban Affairs and I have attended many, many meetings over the course of the last five or six years, and finally I think we are getting to the point where there is a good understanding of why there is a need to co-operate and to try and accomplish agreement on a lot of issues. The Winnport issue is just another example of that. Right now, we have the R.M. of Rosser and the City of Winnipeg who own land within that area, and there has to be some understanding and some give-and-take as to how we both win out of a situation like that, and there is a way. So our role in that is to try and accomplish some understanding and some meaningful discussion in trying to get a solution that will benefit the Capital Region as a whole and benefit this province.
Ms. Barrett: I had some discussion with the Minister of Urban Affairs about the task force and the implementation process in Urban Affairs Estimates, so I am aware of most of what is happening I think.
One other area that is I think under the control--well, maybe not the control, but is dealt with by the Ministry of Rural Development is something called the Urban Centres Peripheral Development group. Is the minister aware this is a group of municipalities that include Portage, Dauphin, Brandon, Virden, Steinbach, Selkirk, Thompson, Flin Flon, Dauphin, Winnipeg and The Pas, a group that has met several times in the last year and a half, two years? They were to have presented a submission to the government. I believe they did in November of '96 or they had one prepared, where there are a bunch of issues raised by each of these municipalities, some of which were related only to their own particular issue, but one of the themes that came out of this group was that the province has shown a lack of continuity in regard to the enforcement of provincial legislation, lack of control and inconsistent application of provincial land use policies around urban centres, and the need to develop a model that would result in an equitable, financial solution to the relationship between those who benefit from local government services and those taxpayers who pay for them, which is another way of saying: what is the real cost of providing services to people, no matter where they live, and who should be responsible for paying those real costs?
That is a big issue. We used to think all of these issues were issues that related to the city and its relationship with its surrounding municipalities. Now we are finding that other urban centres like Steinbach, Dauphin, even Portage, are having the same kinds of challenges with their outlying communities or regions. Not at the same level, but many of the same things--enough so that they felt they had to get together and talk about it, and make a presentation to government.
I am wondering if the minister can update me on what is happening, either officially or unofficially, to deal with these issues that have been raised by 10 or 11 municipalities throughout the province.
Mr. Derkach: I am aware of the group. The group did meet with the Premier (Mr. Filmon) and ministers in November, as the member indicates. But our dealings have been with UMM and with MAUM. These are the two major organizations that represent all municipalities across the province. Now there are other groups. There is a rural municipalities group, where some municipalities get together and talk about issues. Then there is this periphery group. We have instructed them fairly clearly about the fact that if they have issues, why do they not deal with them through their organizations like MAUM and UMM, where those issues can come as resolutions before the floor of their assembly, and then be brought to government as resolutions endorsed by the entire body.
Having said that though, we did listen to their concerns. I take issue with the fact that they say that there is inconsistency in how the policies are applied, because there is not inconsistency. If you look at how policies are applied across the province, as a matter of fact there is a complete consistency in the way that staff administer the policies. I think there was a letter that was sent from the Premier (Mr. Filmon) to these organizations indicating to them that if they could come forward with a plan that was endorsed by both their parent organizations, being the UMM and MAUM, and if they developed a plan that was endorsed by these groups, certainly we would move ahead.
I should also say that there is a study currently being done by the Rural Development--or maybe it has been done already--by the Rural Development Institute out of Brandon by Dr. Rounds on this issue as well on this periphery development issue. There is work that is being done at the present time, and it was undertaken by an independent institute at Brandon.
Once this panel, the task force, this process that the task force has agreed to in the Capital Region, the committee has agreed to, is implemented, then the report that comes back, I guess, would also have some implication to those types of communities.
I might say though, that if you look at Portage as an example, we have come a long way in Portage. I recall very well, and vividly, that there was not a lot of harmony between the City of Portage and the R.M. a few years ago. Today, there is an agreement between the R.M. and the city on how they are going to revenue share on development that occurs in and around the city. The city has agreed to sell water to the Cartier regional water co-op.
There are other examples across the province as well. I could cite The Pas, where there was a desire for the LGD at that time of council, R.M. now, to build its own lagoon. Yet there was a lagoon that was actually in the municipality that the town of The Pas was using. We worked with both jurisdictions and in the end what happened was there was an agreement between the two jurisdictions that they would not build another lagoon. Rather they would use and expand the existing one.
The process seems to be working, and I think that is what we are endeavouring to do in all of our communities around the province. There is a need for communities to start looking at their region rather than simply looking at their municipality and what can be extracted in terms of taxes and services for a small municipality. You have to look at this in a broader way. Municipalities have to come together to look at how they can strengthen their entire region, no different than what we are trying to do with the Capital Region of the province. It is the same on a smaller scale in communities across the province.
* (1530)
Ms. Barrett: Just to check that I have what I think are the two major parts of your response correct, I will just recap. One, you are saying that the issues that are raised by the Urban Centres Peripheral group, the process that the Premier has said to them, and I do not know what the process would be for me to ask for a copy of that letter. I guess I could ask MAUM or UMM for a copy of that letter, which I will do. Okay. Those issues or that group, the process has been suggested by the Premier that resolutions go to UMM and MAUM dealing with issues that are raised, and then the government would respond to them. I am sure that is what you said.
Mr. Derkach: On this particular issue, Mr. Chairman, there was an indication that if there could be agreement between this peripheral group, UMM and MAUM on a process that they wanted to embark on that they should agree to it and send that in to me as minister, I guess, and then we would certainly not just sit on it but take action on it. But there had to be some agreement from the two parent bodies that in fact this was going to take place. It does not mean that they have to go to their next annual meeting with a resolution. If they could agree beforehand on a process and send that in to us, we would not wait until their next annual meeting to hear from them.
Ms. Barrett: I appreciate the clarification, but the process is the Urban Centres Peripheral group or members thereof go with concerns or issues or process requirements to MAUM and UMM. MAUM and UMM agree that this is a concern or an issue or this is a suggested process to deal with it in the form of, if not a resolution at their annual meeting, in the form of something saying, we agree, and then that would go through to you rather than the Urban Centres Peripheral group itself or components of it, go straight to you. You are asking them to go through MAUM and UMM.
The second thing is you are talking about the Capital Region task force report. When this panel and all of this process is completed, that could be used sort of as kind of a template for other groups to deal with their own urban sprawl or urban peripheral concerns, is that what you are saying generally?
Mr. Derkach: Mr. Chairman, if the panel comes back to government with recommendations that lay out a process on how you can resolve issues of settlement and development in a region surrounding an urban centre, and if that is applicable to Steinbach or to Portage, Dauphin or The Pas, wherever it might be, then, yes, I would say that that is what we would propose and that is the solution we would propose if it fits, because instead of trying to reinvent the wheel for every community, we should be using a common approach if in fact it is one that is acceptable and seems practical.
Mr. Clif Evans: Just a few short questions in this line relating to my constituency, can the minister indicate if final negotiations for funding have been satisfied for everybody with the Ashern water system? Have all the negotiations between the Water Services Board and Siglunes and Ashern been completed?
Mr. Derkach: Mr. Chairman, yes, the project is under construction.
Mr. Clif Evans: Can the minister indicate how much resources were finally settled on between the province and the community?
Mr. Derkach: The total cost of the project is $1.49 million. The Manitoba Water Services Board will be contributing $560,000 to the project. The local community is at $100,000. The rest of the money, whatever that is, will be--and I do not have the breakdown by participant, but the rest of the money will come from Manitoba Environment, PFRA, Canada-Manitoba Infrastructure and the oil companies.
Mr. Clif Evans: The Fisher Branch water system is also a very important project that occurred for the community. What was the involvement of Water Services with the Fisher Branch community?
Mr. Derkach: I do not have the details for that project here, because that project was completed last year. I would have to get that information for the member.
Mr. Clif Evans: It is my understanding that in Water Services there still are meetings with the Water Services Board and the community leaders about the project. Is that a fact or is Water Services Board totally finished with being involved with the Fisher Branch system?
Mr. Derkach: There are some minor things that have to be completed, Mr. Chairman, but by and large the project is done.
Mr. Clif Evans: I understand that there will be a meeting very shortly, I guess, to resolve whatever concerns there are, and I would certainly appreciate being informed. I know I will be informed by the community and kept up to date from the department. If the minister wants, I will write to him and request it, or if he wants I will raise it here in House.
Well, I am sure that the minister and the department will be--well, the department and the staff will be receiving proper thank-you letters from the areas once everything is completed and done. I must say that I am pleased to see that Ashern and Arborg and Fisher Branch have received the funding and the projects have gone through. It was very important to the communities. I certainly hope that the Water Services Board will be co-operative and the minister will be co-operative if any of my other communities approach them for the future of their community development and their water system. So I appreciate that and the involvement.
* (1540)
I know that the staff has been diligent in some of the communities to make sure that things have worked out, worked out to the satisfaction of everyone. So I would like to ask the minister a final question on that. Have the criteria changed for application at all in the Water Services from past years?
Mr. Derkach: No, the guidelines and the criteria have not changed.
Mr. Clif Evans: Before I pass this line, I do not want the minister to feel slighted whatsoever that he thinks that I might not appreciate what he is doing in my communities. If he is sensitive to that, I will make sure that the local community gives the minister an extra pat on the back for his support.
Mr. Chairperson: Shall the item pass? The item is accordingly passed.
13.5.(b)(2) Other Expenditures $423,500.
Mr. Clif Evans: Just one quick question on transportation. I notice that the transportation costs for that have gone up by $45,000. Are there any particular reasons for that expenditure to go up that amount?
Mr. Derkach: Because of the increased activity in the Water Services Board and because of the fact that they now have responsibility for all the conservation districts in the province, this has increased the amount of travel that is done by the Water Services Board staff to all regions of the province. That is really what has caused the increase on the transportation side.
Mr. Clif Evans: In a footnote at the bottom of that page it says: increase of two staff positions. That relates to the Conservation District Program, these two positions. This minister, I believe, indicated that these two positions deal strictly and specifically with conservation districts, and in working with them and only with them, an enhancement of their programs?
Mr. Derkach: Yes, Mr. Chairman, to the member, these two staff positions are specifically designated for the conservation district. As the member knows, we have a lot of activity taking place in the conservation districts. We have had four new conservation districts over the last four years. We have also had additions to conservation districts. We were looking at more additions to conservation districts and the establishment of at least another one or two over the next short while, so there is a requirement for an additional staff component to this area.
Mr. Chairperson: Shall the item pass? The item is accordingly passed.
13.5.(c) Community Economic Development Services (1) Salaries and Employee Benefits $2,800,600--pass; (2) Other Expenditures $695,000--pass; (3) Grants $545,000.
Mr. Clif Evans: This is a part of Rural Development that I am an advocate of and a supporter of and that is regional development corporations and the work that they do. I notice that expenditures, resources for this department, have stayed the same for the past few years. Can the minister indicate whether the regional development corporations themselves, and of course the executives who are local reeves, mayors and councillors who form the executive as part of the regional development corporations, is there a need--well, I am sure there is a need, there is a need for everything for more money--but have the development corporations and the executives of these corporations approached the government, the minister, the deputy minister to be looking at expanding their roles within the communities? They do wonderful work, I know, throughout the different regions.
I believe that there are seven rural development corporations, if I am correct on seven, throughout the province, and of course, being a part of one, was a tremendous--oh, of course, IDC, the Interlake Development Corporation which is, I know, one of the finest development corporations in the province. They are right now working in co-operation with the municipalities around the area on the gasification. I know that they have support from other areas for this. Can the minister indicate whether, in fact--and I think I made comment at a function involving the Interlake Development Corporation and I referred to all development corporations on the work that they were doing. I did indicate that through the efforts of the different communities, different regional boards that were involved some years ago when it was undertaken by them to make sure that their mandates for what they were doing in their communities was not overlapping with the Community Futures people.
I do strongly believe that the RDCs could in fact be of tremendous more help for the communities and in their areas with, I hope, better resources. It was mentioned in my comments; it was agreed. Of course, it is easy to be on this side and say we need more for this and more for that. I understand the situations, but for something like this, it is on record in front of my reeves, mayors, and the RDC staff, the executive that were at this meeting. It was stated that they are in place now, they are doing a much better job than previous years. The opportunities are there to do even more and that resources themselves would be part of expanding the support of the regional boards and, of course, for the communities that are involved with them. I would ask the minister whether there is ongoing conversation or discussion at all to enhance the role of our regional development corporations.
Mr. Derkach: Mr. Chairman, with regard to the amount of funding to the regional development corporations, that has not increased, but we had asked our regional development corporations to submit business plans on a three- to five-year basis to the department. These have started coming in. Most are in. The department staff will be meeting with the RDCs to review their business plans in order to be able to strengthen the partnership and the accountability of the RDCs to the department and to the people that they are supposed to serve.
* (1550)
But I would also like to add, Mr. Chairman, that in addition to the RDCs the member knows that some years ago we started the community round table process which was an offshoot of the round table on the economy and sustainable development. We started the community round tables throughout the province. We have 88 community round tables now in the province, and they are certainly serving to bring the community together, to look at its strengths, to determine the direction that community should go, in terms of developing its economic programs, and also the community as a whole. They, in turn, are working with RDCs, or RDCs are working with them. So there is a lot of grassroots volunteer time that is now being dedicated to strengthening the community. I think that is the key to the success and the boom that is going on in rural Manitoba today.
I was just reading a clipping out of the Free Press which suggests that there is an economic boom out there in Manitoba, but we do not really know what triggered the change. I think the member would agree with me, that there is, first of all, a significant change in attitude on the part of rural Manitobans, and what should happen with their community, and that if anything positive will happen, it is up to them to drive it.
Our role in that is to provide such tools as support to RDCs, support to the community round tables, and some programs that have been developed with the goal in mind of strengthening the community and the community's involvement. I think, by and large, that communities have matured somewhat today, and are in fact seizing opportunities that are coming their way. I think we are finding that communities are not only building from within, but many are becoming very attractive places for companies and manufacturing to locate. I would have to point again to the southern part of our province, and specifically the Winkler area, where there has been an extensive amount of development taking place. It is done because of the approach that has been taken by the community, and the positive attitude that has been adopted by the community.
Mr. Clif Evans: I agree with the minister with what he is saying, a lot of it is our grassroots people. Those were my comments at the meeting. We have to have support of the grassroots people, in making sure that we can work with the community, and how to develop future economic benefits to any particular community, as such. I believe and I support some of the initiative that has been undertaken. Being involved in some of it myself, and having people close to me who were also involved with the process, is supportive. I believe though, and my comment was I believe that the Rural Development corporations, in conjunction with the community futures and the round tables, can do a much more--for lack of proper wording--greater job, a better job to be able to enhance all the opportunities and enhance all the ideas that the grassroots people are implementing or trying to implement within their own communities.
The regional boards, I am a very strong believer in that, they are the hub for these community places that we have. They have a role, they have been playing a role that has become I think greater in the past five years. I believe very strongly that for everyone to be able to work together on whatever project it may be and whatever community it may be that resources, not only people resources, but financial resources, to enhance that program and to enhance those regional development corporations into a successful operation that is going to benefit everyone.
Mr. Derkach: About four years ago I tried to initiate the bringing together of Community Futures groups with RDCs in the hope that we could, together, work on economic development without trying to sometimes duplicate what the other group was doing. Unfortunately, that did not work out, and we have not been able to attract the Community Futures groups to undertake a unified approach to development in a region. I have spoken to federal ministers about that and federal M.P.s about that as well. It is still my hope that somewhere down the road we will be able to do that.
But having said that, the round tables have really been the key in establishing the priorities that are sometimes undertaken in a region, because those mission statements, those vision statements, those objectives that are outlined at the community round tables do go to the RDCs and the Community Futures groups. They use that as a basis for their business plans on a three- to five-year period of time. In addition to that, the membership overlaps. There are people who sit on a regional development corporation, who sit on the Community Futures who also sit on the round table. So there is some co-ordination going on.
I will not say that it is as effective as it could be, but that is certainly our goal as we continue down the path to make communities understand the value of working together, looking more broadly at the global issues and looking at a regional approach to developing a region within the province. So we are working towards that, but we are not there yet. I certainly encourage the member, when he is talking to these organizations to also be giving the message that together we can accomplish a great deal, far more than we can separately.
Mr. Clif Evans: Mr. Chairman, I thank the minister for those comments and will support his comments, the comments that he has just made. I do talk to my Community Futures people. I have two in my area: one on one side and one on the other. I meet with them fairly regularly to discuss rural development, the federal input, local input and, of course, provincial input. I get the sense that perhaps the local Community Futures groups--without putting words in their mouths--do want to be more co-operative in working with the local rural development corporation--[interjection] Yes, wherever the powers to be and who are perhaps holding him back to be more of an integral part of our local district, our local regional board district. I would support the minister on that and say, let us try and get them going together.
On a final note though, I still would like to see the minister relook the rural development or development corporations as far as resources go and, perhaps, make them a stronger entity in rural Manitoba.
Mr. Chairperson: Shall the item pass? The item is accordingly passed.
Item 13.5.(d) Food Development Centre $912,400. Shall the item pass?
Mr. Clif Evans: Just one comment on this line, and I must say that I am going to put on record that I apologize. I believe that my colleague and I were supposed to have gone and visited, we were supposed to go to Portage to visit this.
I would just like to ask the minister, the $912,000 is funded through Rural Development, but it also says--obviously, there is other funding made available to the centre. Can the minister indicate from what department or departments? And is $912,000 the full amount?
Mr. Derkach: Mr. Chairman, joining us at the table--I am sorry, I did not introduce Peter Mah, who was here and left, and I think the member knows Peter Mah. Joining us now is Mr. Gerry Offet, who is general manager of the Food Development Centre. As the member knows the Food Development Centre is an agency, a special operating agency. Our contribution to the special operating agency is $912,400. There are other sources of revenue that the Food Development Centre has. Some of that comes from the services that are provided on a fee-for-service basis. Some of that money comes from the National Research Council, who they do some work with, and also there is some consulting and some training that goes on by the Food Development Centre where they receive some revenue. So their total operating as a special operating agency is $1,690,900. Of that, our province contributes $912, 400--912,000--1.690.9.
* (1600)
Mr. Chairperson: Shall the item pass? The item is accordingly passed.
Resolution 13.5: RESOLVED that there be granted to Her Majesty a sum not exceeding
$6, 967,100 for Rural Development for the fiscal year ending the 31st day of March, 1999--pass.
13.6: Rural Economic Programs (a) Grow Bonds Program (1) Salaries and Employee Benefits $436,500.
Mr. Clif Evans: Mr. Chairman, a few questions on the Grow Bonds program. I know that there is an annual report on the Grow Bonds department and on the programs, so can the minister just advise in this past fiscal year how many new applications have come to the department under the Grow Bonds, and what might they be?
Mr. Jack Penner, Acting Chairperson, in the Chair
Mr. Derkach: Joining us at the table is Mr. John Melymick, who is the director of the Rural Economic Development Initiatives, REDI programs, and also involved in the Grow Bonds area.
To the member's question: there are ongoing inquiries about the Grow Bonds Program, but we have had over the past year four formal applications for Grow Bonds. I would have to say that the staff within the Grow Bonds area are getting constant inquiries, not of a formal nature, but certainly there are discussions taking place between a variety of companies in rural Manitoba, and they vary throughout the province.
Mr. Clif Evans: Can the minister just enlighten me on--and I admit I did not look at the book before I did come up--the growth since '91? I believe there have been 21-some-odd Grow Bond issues; of those 21 that have been in place since '91, are all 21 still running under the Grow Bond system, and how many have, hopefully not failed, but if "fail" is the word for it, how many have?
Mr. Derkach: Mr. Chairman, 21 Grow Bonds were issued since the beginning of the program; two of the bonds have failed, where the companies are not operating at the present time.
Mr. Clif Evans: First of all, the two that you say are not operating whatsoever now, two have totally failed, and are there others that have failed under the Grow Bond system but are still operating as a business? I believe Gilbert International is one of them. Are there others?
Mr. Derkach: Yes, Mr. Chairman, six Grow Bonds have been paid out over the life of the program, but two are not operating at all. The others are operating under a different configuration or different management.
Mr. Clif Evans: Does the department get involved when in the transaction of the four--and I know that the minister had indicated previously, and we discussed the Grow Bond issue quite a bit last Estimates last year and the year before--let us say for these four that are still operating, how much does the Grow Bond department or the Department of Rural Development get involved to have these companies continue in whatever fashion or financial situation that has made arrangements?
Mr. Derkach: Over the past two years, the department has become--well, I should not say just the past two years, but certainly in the past two years there has been a very active role by the department in helping these companies to either restructure or to find a way in which to survive. As the member knows, these are very important jobs in these communities, and our responsibility is not just simply to issue a Grow Bond; it is to work with the companies to make sure that they are successful for the long term so that the jobs in those communities can be sustained where at all possible. I am happy to say that the staff within the department, under the direction of Mr. Melymick, have done a fabulous job in terms of working with these companies and restructuring them, finding equity partners, finding a way in which we can continue to have these companies survive.
Mr. Clif Evans: The minister in his comments indicated that with problems being there and making sure that applications are of the sustainable type and eligible, have there been any changes within the regulations and the financing agreement within the Grow Bond issues themselves, the Grow Bond application, the mandate of the Grow Bond? Have there been any changes in the past couple of years within the act?
Mr. Derkach: Mr. Chairman, the guidelines have not changed for the program. What has changed is some of the internal procedures with regard to monitoring, with regard to, I guess, working with these companies. Also we have put together a committee whose responsibility it is to ensure that all of I guess the policies are reviewed, that the audits are done, that all of those things that are essential for good fiscal practice are implemented with these companies. At the same time, I think it is important to understand that this is a venture capital program and that under any venture capital program there is a degree to which one can expect that some companies will fail for one reason or another.
But I would have to say that so far I am quite pleased with the way that we have been able to work with companies who have been struggling to ensure their survival and to ensure that those jobs are actually preserved for those communities.
* (1610)
Mr. Tim Sale (Crescentwood): I think in the minister's last answer he was indicating that the recommendations of the Provincial Auditor in the Grow Bond reports, several now have been done, that those recommendations and procedure are now being carried out and fully implemented. Just to be clear about that, are we now in a situation where all Grow Bond holders are receiving the appropriate notices at the appropriate time, the audited statements, et cetera, so that they are in effect being treated like bondholders of a corporation under The Securities Act, which did not happen in some of the early days of the Grow Bonds Program.
Mr. Derkach: The answer to the question is yes, we have implemented the recommendations of the Auditor, and, yes, in the initial stages of the program there were areas that had shortfalls that needed to be addressed. But we acknowledged that, I think, from the very beginning that this was a new program, one that would go through growing pains and one that needed to be tightened up. In terms of the internal procedures, we did ask the Auditor to do the audit. I think that was essential for the survival of the program and indeed for the public acceptance of the program and for good fiscal management of the program.
So the recommendations of the Auditor were accepted and have been endorsed. We have communicated with all of the companies to ensure that indeed the bondholders do receive the proper notification and the proper statements that they are entitled to under the act.
Mr. Sale: I understand the minister wanting to put the best possible face on the compliance question, but I think it is important to note that at least the most critical of the reports was not done at the department's behest but was done after a great deal of work on the part of the opposition. That, of course, is the Woodstone report. If it had not been for the amount of work done by some of the employees, some of the bondholders and members of the opposition, the Auditor would not have undertaken that report with the kind of thoroughness that he did.
I can tell the minister that I supplied the Auditor with a number of inches of files, locations of product, and other information that the Auditor did not have from other sources, because a number of people were working to try and deal with that. I certainly was not going to raise that, but the notion that all of these changes came because the department was concerned about strengthening the program is putting the best possible face on a situation where there were significant failures, significant noncompliance, and significant resistance on the department's and the minister's side to the compliance issues when they were raised in the House.
I am glad they are finally being done, but I am not prepared just to allow the minister to suggest that there was no involvement of anybody else except the good work of the department in bringing this program up to snuff. I think credit is probably due on all sides, including some of the investors who raised significant questions about compliance. I can think of Mr. Reynolds, for example, in Vancouver, who was quite a thorn in the flesh of the department for some time, trying to get his status in regard to the bonds for the Care Corporation clarified and ultimately redeemed.
I want to also raise with the minister a very serious concern coming out of the Care Corporation failure. The minister will recall a number of exchanges that we had in the House in which the minister was maintaining that it was entirely proper for the company to offer to some bondholders the payment of their interest if they would renew their bonds and to refuse to pay interest to bondholders who wished to redeem their bonds. That was the position that the department initially took that that was appropriate.
I wonder whether in the light of the correspondence that I shared with the minister and the correspondence that he had from the Reynolds', whether he has had a chance to review that position and whether in fact it is still the position of the department that it is possible for a Grow Bond corporation to change the terms and conditions of the bonds for some bondholders and not others. I believe that would not be allowed under any Securities Commission approval, and it should not have been allowed in the case of Care Corporation, if indeed it was allowed in the end.
So I want to ask the minister to clarify what happened in regard to the bondholders of Care, some of whom renewed, some of whom did not. Did the ones who renewed get their interest paid and the ones who did not renew fail to have their interest paid, or were all bondholders treated equally in that situation?
Mr. Derkach: I do not want to get into a controversial debate with my honourable friend, but I have to correct him. I know he wants to take credit for some of the things that happened with regard to Woodstone, but let us put the facts on the table. First of all, a year in advance of any issues coming forward with regard to Woodstone, the Department of Rural Development asked for an audit to be done of four programs in the Grow Bonds area. One of those of course was Woodstone.
We understood that there were difficulties with Woodstone. It was not as though we were trying to sweep them under the carpet in any way, shape or form. In all fairness, the member, through sources, also did identify that there were issues with Woodstone and did bring them forward. I am not denying that, but the department was already in the process of dealing with the situation and, as minister for the Grow Bond program, I did approach the Minister of Finance (Mr. Stefanson) to ask for the audit. This was well in advance of the member for Crescentwood (Mr. Sale) highlighting the issues to our attention.
So that work was being undertaken by both the Department of Rural Development and Finance. However, those are not issues that we are going to write about, and they are not issues that we are going to publicize in the papers. They are internal workings within government and within the program. So there were corrections that were required, and they were taken as advice from the Auditor and necessary steps that needed to be implemented, and action was taken on them.
* (1620)
With regard to the Care Corporation, it was the bondholders and the local bond committee, bond corporation, who made the decision with regard to how they were going to deal with the bonds. That was not something that required our blessing or our advice. The bond corporation took it to their bondholders; the bondholders agreed with the process that was laid out by the bond corporation.
So it was not something that we initiated, it was not something that we promoted, it was not something that we were a part of. This was certainly an action that was taken by the local bondholders in an attempt, I think, to try to save the corporation, to try and save the company, to try and save the jobs that were at that time present in the community of Teulon. So I do not think there was any underhanded approach or underhanded action that was being taken by anyone. It was simply a bond corporation that was acting on its own advice and also then I guess on the approval of the bondholders.
Now with regard to Mr. Reynolds, he did write to me. I think, if I am not mistaken, Mr. Reynolds has been paid out. Unfortunately, he wrote to the bond corporation. I remember being on the Peter Warren show and a phone call came in from Mr. Reynolds from British Columbia. At that point in time, I did not have any knowledge of his letter to the bond corporation. I had not received it at that time, and I indicated to Mr. Reynolds that I would indeed be finding out what his situation was and would be responding to him. Since that time there has been, of course, some communication with him through the staff in our department, and my understanding is that he has been paid out for his bond.
Mr. Chairperson in the Chair
I am happy also to say that through the struggles that the Care Corporation has gone through, we have been able to reach a situation where there has been a restructuring of the company, where the company is once again operating, where they are optimistically looking at increasing the number of jobs in Teulon. Yes, we did pay out the bond, but I am confident that as we progress from here, not only are we going to see a company that is going to be viable in that community, but the money that we paid out on the bond will probably come back to us in terms of the tax revenues that are going to be generated on the jobs that are created in that community. Yes, it has been a struggle, I am not going to deny that, but I am happy to say that, so far, the resolution to that has been positive for that community and for the people who work there.
Mr. Sale: Mr. Chairperson, I want to ask the minister to put himself in the position of an investor as a Grow Bond investor, and a local company, a Grow Bond corporation comes to you and says, well, Mr. Minister, you are a wealthy farmer and you have got lots of investments in various things, and we know you have got cash that you want to invest in our community. The minister, being a good corporate citizen as well as a good local citizen, says, yes, I would like to do that. Tell me about it. The Grow Bond company says to you, well, you are going to invest in XYZ corporation and hold one of their bonds for five years at 8 percent interest. You can renew those bonds after five years, if you want, at a new interest rate or if the company makes it available to you, you can take an equity position, or you can redeem your bonds at the end of five years. You say, well, it seems like a fair deal to me, good interest rate, local jobs, I will do it.
Part way into that five years, somewhere close to the end of the five years, you are called to a meeting of other bondholders. Now, your contract, you thought, was with the company, but you are called to a meeting of the Grow Bond corporation and a proposition is put to you. Do you want to forego your interest entirely and get your capital back, or do you want to reinvest your capital? We will promise, cross our hearts, going to heaven, we will pay your interest in the future, and we will pay you back the interest we owe you already.
Now, would the minister feel that he perhaps had the deck shuffled a bit and the goal posts moved? In fact, he was being offered quite a different proposition than he had originally signed up for. Some bondholders were going to take a risk of reinvesting and, for that risk, they were going to get their interest arrears paid. But he was not, because he could not afford to reinvest. His farm had gone belly up; the Wheat Board had taken away his barn and his combine, and he was just in a terrible situation. His brother, the Minister of Agriculture (Mr. Enns) would not loan him an elk to breed and he was in a tough situation.
Now that is the situation that Mr. Reynolds was put into. I mean, in all seriousness, do we want to be offering Manitobans the chance to invest in their local community and then have the terms and conditions of those investments changed part way through? This really goes to the credibility of the program. I do not think it helps having already had several hundred bondholders paid out and then having one situation, where the rules were attempted to be changed in the middle of the game, because I do not think we want that. I do not want it, as a person who supports this program. I do not think the minister would want it as a person who supports the program. As an investor, the last thing you want is somebody to change the rules in the middle of the game because an investor is prepared to take risk. The minister has correctly pointed out, this is a venture capital program. But venture capitalists of any size do not like the rules being changed part way through the venture. That is what was being proposed in the Care situation.
I wrote the minister about this and his response was: Well, that is the Grow Bond corporation's prerogative. I do not believe that would have been legal under the Securities Commission. I do not believe they could have changed my contract unilaterally without my consent, and that is what they did to Mr. Reynolds and others.
Now, I do not know the outcome of that because the company failed, but I put the hypothetical case to the minister. Are we prepared to tolerate companies changing the rules in the middle of a Grow Bond game, changing the interest rate, which they also did, as well as changing the question of whether interest would be paid or not? I do not believe that was proper and I would be interested in the minister's response.
Mr. Derkach: First of all, when the individual entered into the agreement with the bond corporation, because the bond corporation are the ones who sell the bonds on behalf of the company, then the agreement was such that the least the individual could expect to get out of it would be his initial principal investment. That is the portion that was guaranteed by the province.
Now, if you enter into a venture capital agreement with any corporation, that kind of a guarantee does not exist. Your principal can be decreased, you can lose it all, or, perhaps, you stand to make some money. [interjection] Pardon me? You have been there and done that.
In this case the guarantee that the individual had and, again, it is a drawing card to have local people invest in a local enterprise that he would or she would receive the principal amount back.
As I understand it, when the bond corporation called the meeting, the first option that was offered to all of the bondholders would be that they would get their principal back, which is the guarantee under the legislation. What they were trying to do was to preserve the company, I guess, for the community so they offered an option to the bondholders, and if the bondholders agreed with it, that is the way that they would proceed. So they offered some conditions with regard to future payments of interest and that sort of thing. The department does not become involved in that process at that point in time. As a matter of fact, that was initiated by the bondholders on their own.
* (1630)
So I guess for the bondholders, once the majority of bondholders had agreed--and I think there was a percentage that had to agree to it before they would proceed--those bondholders who were not willing to participate would still be protected under the legislation in that they would receive their principal back, but they would not share any of the future growth of the company because, basically, that was still undetermined, and they were getting out of it at that time. If you got out of it at that time, you were not eligible for any interest anyway. Every bondholder could have got out of their contract at that time and received zero interest because there was nothing in the company to pay interest with.
So what some were doing, I guess what the bondholders decided was, yes, this is an important company for us in this community, so we would vote to have our shares continue with the company in the hope that we would get some interest at the end of the day. Failing that, we will get our principal back, and we will ensure that the jobs do exist in this community. I guess if you tested it in court, it could go either way, and I am not sure, because I am not a lawyer, how this could end up. But I would simply say that the community was acting in the best interests of the jobs that were there and of retaining that company in their community. I do not believe that they were trying to purposely do something that was illegal, something that would cause a disadvantage for an investor in any way. I think they valued their investors, and as a province, our role in that was to make sure that at the end of the day, if that restructuring plan did not work, we would still live up to the commitment that was made, and that was to ensure that every bondholder would receive his or her capital investment or the principal investment back.
Mr. Sale: Mr. Chairperson, through you to the minister, I understand exactly what you have said, and I do not disagree that those are the facts of what happened. The question is: was that an appropriate thing to happen under The Grow Bond Act as it currently exists? It seems to me that one of the duties that the minister has under the act is to enforce all of the regulations which have to do with how a prospectus is issued and the terms and conditions of that prospectus. The minister may correct me, and I may well be in error in this, but I do not believe that under The Securities Commission Act, which does not--and this is one of my problems--apply to your Grow Bonds, but if this were under The Securities Commission Act I do not believe that any number of investors, it does not matter whether it is a majority or not, could vary the terms and conditions of a debenture, a bond, unilaterally without the consent of the bondholder, because the bond is a contract, and under contract law one side of a contract cannot vary the contract unilaterally.
So I think the minister needs to, at least I would hope the minister would take this seriously under advisement and recognize that whatever the good intentions of the bond corporation were--and I am not challenging that they had some good intentions here. I am suggesting that if the investors of Manitoba understood that the minister believes that it is proper for a Grow Bond corporation to unilaterally change the contract part way through, he would seriously jeopardize investors' willingness to invest.
I am sure the minister has been party to a lot of investments and a lot of contracts in his years, and he would not make a contract that he believed could be unilaterally changed by the other contracting party. You simply would not do that because there would be unknown risk, unquantifiable risk. You would want a huge risk premium if you thought that a contract you were entering into could be unilaterally varied.
Now, I am not asking him to go back and reopen Care. I am simply saying in principle I really think he and his officials should consult someone with Securities Commission background or legal experience and make a policy decision about whether it is proper ever to go back in and change a contract against the will of even one shareholder or one bondholder.
I think the minister will know that under various Securities Commission regulations minority shareholders have rights, and they have the right not to have their contracts varied without some form of redress. I think this was a very unfortunate precedent that was allowed to be set. I do not want to go into the details of Care. I am trying to ask a serious question of principle here, and it also goes back to the issue of whether or not we would not be wiser to have all of the prospectuses issued under the Securities Commission. Now that we are complying with most of the Securities Commission-type regulations, why not remove this problem and put all of these prospectuses under the Securities Commission?
Mr. Derkach: Mr. Chairman, when the bondholders entered into the contract, the contract had only one guarantee, and that was that the bondholder would receive the principal of his or her investment back if the company failed. There was no guarantee under the terms of the contract that there would be a specific amount of interest paid, so when one enters--[interjection] No, if any investor enters into a contract under the Grow Bond Program, the only guarantee that is there is that the principal amount of money that is being invested will not be lost. There is no guarantee about interest. There is no guarantee about return to the investor from the company.
Now, Mr. Chairman, in order to make the program work, I think it is important that the local bond corporation be able to have some ability, I guess, to discuss with its bondholders whether or not there are ways in which a company might be saved by altering not the contract but altering what might be the return on that investment down the road.
So the basic principle of the contract was never altered, and that is really what our guarantee speaks to, and that is that the investor will receive at least the principal back on his or her investment. So there is no assurance that the business that they are investing in will be able to maintain a level of return to the investor of any amount, and there is no guarantee that the company or the business will declare a dividend or an interest rate to the bond corporation at any time.
So once again, regardless of whether it is Care or whether it is another company, if the bondholders wish to get together and decide to continue an investment with the hope of getting a return down the road, that is not something that we are promoting or not something that is being, I guess, spearheaded by the department at all.
Mr. Sale: The minister, I think he is honestly trying to answer the question, but he is confusing terms and using them in a confusing manner. The contract, in my understanding, is set forth by what the bondholder signs when he buys a bond or she buys a bond. The prospectus sets out the expectations of that contract. That is the purpose of a prospectus. It tells you about the company; it sets out the interest rates; it sets out the rights of the bondholder. It is essentially the contract. The signed document that the bondholder signs then is the actual instrument.
* (1640)
The guarantee the minister speaks about has never been in question. I understand, we all understand, that the only guarantee here is the capital that is invested, but the agreement, the contract between the bondholder and the corporation, is for a specified term at a specified rate of interest. The interest is not guaranteed, but it is stated to be, intended to be, 10 percent or 4 percent or whatever the interest rate is. And there is nothing in the prospectus. I have read 15 of them. There is nothing in the prospectus that says that at some point down the road the terms and conditions of this prospectus may be changed. We cannot expect people to invest on the basis that some time in the future there may be a meeting, and your rights under this bond that you hold may be varied by us shareholders.
So I guess, maybe, rather than ask the question in the way I have been asking it, maybe I should ask it a different way. Would the minister be prepared to insist that in every prospectus there is a warning right at the front? On the front page it already says the material in this prospectus has not been passed on or approved by the department. There is already that kind of warning that says prospectuses are a kind of buyer beware. But would he be prepared to also insert a phrase that says buyers should be aware that at any time a meeting of bondholders may, by a majority vote, vary the terms and conditions of interest and duration of the bonds?
Because that is what happened in the Care Corporation situation. They changed the interest rate, and they changed the question of whether interest would be paid to certain bondholders and not be paid to others. So would he be prepared to have investors see that warning right at the top of their prospectus? I think the answer, I suspect, is no, because who would buy the bloody things? That is the issue.
Mr. Derkach: In the prospectus there is a statement that says that no actual dividend, interest or other return is guaranteed by the bond corporation or the government of Manitoba. That is laid out fairly clearly and succinctly, so that no one who buys a bond is under any illusion that there is going to be a guarantee of return on their investment.
Having said that, the conditions that the member speaks about were ones that would not affect the guarantee of the bond. There is no guarantee threatened of the bond, so you have to allow the bondholders and bond corporation to be able to meet from time to time and by vote, depending on what the majority requirement to pass a vote is, be able to agree on a process within the parameters of the contract that was issued and the guarantee that was provided by the province.
In this case, it appeared that all of those conditions were met and that they indeed did not break the spirit of the guarantee that was provided by the Province of Manitoba, so that when Mr. Reynolds decided that he did not want to participate, he still received his principal.
Mr. Sale: Mr. Chairperson, I think we are going to have to agree to disagree on this one. I believe that Mr. Reynolds was in a very difficult position because he was a major bondholder. He was not a small bondholder. This is an important part of his retirement income, both he and his partner, who is, by the way, a former civil servant of this government. They needed the income, and they were put in the dilemma of, do we cash in our bonds and put them some place else, or do we take the risk that maybe we will get some of our back interest if we renew the bond?
That is a situation that is an extremely difficult situation to be put into. They believed it was unfair because those who chose to take the risk of reinvesting might get the past interest paid to them when they were in the same class of bondholder as the Reynolds were, but the Reynolds would not receive that interest. They believe that was unfair, and I believe that on the face of it, at least, it is unfair. The interest was owed; there was no dispute about that. The Reynolds are creditors of the corporation. They were owed the interest. They will never get anything, but the promise was, we will pay some people if they stay with us, and we will not pay others if they redeem. I think that just on the face of it, to me at least, it is an injustice, and I am sorry the minister does not see it that way. But I will not belabour that point any further.
I do want to ask about the department's policy in regard to taking equity positions in companies that have failed. Here, I use the example of Crocus Foods in Portage. I am very pleased that Crocus is doing well, or at least that was the last report I had, which was several months ago, that Crocus was doing well, and that the government hoped to resell the company at some point back to local investors, whether it would be employees or new owners, and indeed that may have already happened. I do not know whether that is the case or not, whether it has indeed been divested from the Manitoba Development Corporation where it was held.
I want to ask the minister: when I reviewed the Manitoba Development Corporation statements, the corporation showed its investment in Crocus Foods as, I think, in the $600,000 region, but it did not disclose that the government had written off its Grow Bond investment in Crocus, and there did not appear to be any attempt on the part of MDC to recover out of any future sale of that corporation any or part or even all of the written-off Grow Bond. It appears that when a company fails to meet its Grow Bond, the bond is simply written off; the company's books, if the company stays in existence, are lightened by that amount. There is no attempt in future to get that money back in whole or in part either through taking an equity position or by taking a third or fourth position to other creditors. In the case of Crocus, it may well become a valuable asset, but it appears that we have written that money off and will not attempt to recover it. Is that the current policy, and does the minister feel that is appropriate?
Mr. Derkach: Mr. Chairman, with regard to Crocus, first of all, I have to say that the company was restructured in such a way--and I think this is the only company which we took through the process of the MDC taking the equity of the company and then buying the equity and running it. There are discussions ongoing at the present time to sell the company, and in the sale of the company we will certainly be attempting to recover the cost of the Grow Bond so it is not an issue which has been forgotten about or written off.
This particular one is of special interest because not only has the company continued to exist, but indeed the employment numbers have gone from the 19 that were present there when the company was shut down to 48 employees in the company at the present time. It is a good initiative for the local area, and because it has now a successful track record over the last year or so, I think there is hope that his company can be sold and that we can indeed recover the bond and the acquisition costs.
Mr. Sale: Mr. Chairperson, that is what my confusion is. I read the statement of the Manitoba Development Corporation and I did not see any liability or asset, depending I guess how you look at it, being held for the Grow Bond. It simply is not there in the statement that MDC has put forward. I asked the Provincial Auditor that question, and the Auditor seemed to think that the Grow Bond was simply gone and had been written off against government reserves set aside for that purpose, and that there is no contingent liability on the books there that would allow recovery at this point.
If the minister is intending to recover, perhaps he could talk with his colleague the Minister of Industry, Trade and Tourism (Mr. Downey) and find out how that gets reflected into MDC's books because I do not believe right now there is any equity position being shown for the department. There is no note that I am aware of in the statement suggesting that some kind of reserve liability is being applied against the value of this company in future, or whatever the right kind of accounting term would be.
* (1650)
Mr. Derkach: Mr. Chairman, personally, I have not looked at MDC's report, so I cannot speak to that, but let me just say in our dealings with Crocus Foods, we have entered into a performance arrangement, if you like, with the proponent to recover the cost of the bond and also the acquisition costs, so that is calculated into the potential sale of the corporation. However, I cannot speak to the report that is in the MDC report; therefore, I really cannot comment on that, I am sorry. But I can get the information for the member.
Mr. Sale: A quick last question, then a request. Mr. Chairperson, we will be going into I, T and T Estimates sometime in the next few weeks. Could the minister undertake to give us a note or an explanation of how the Grow Bond amount is being reflected in the government's equity position in this company? I can assure him that what is shown as what MDC had to pay out to buy the bank's interest out--and that is all that is being shown in the MDC statement as far as I could make it out. So, if there is more equity there being held, then we would appreciate some indication of just how that is being reflected.
Mr. Clif Evans: Just a quick couple of questions on Grow Bond. If the minister could explain the footnote 1: "The decrease in Other Expenditures is due to a projected decrease in the allowance for doubtful guarantees"--can the minister explain that line?
Mr. Derkach: Annually we make a calculation on potential defaults, and so a number is included in that. This year that number is down, based on the projections that have been calculated by the department.
Mr. Clif Evans: This number, and I guess if we went back to our Estimates book, and I do not recall--last Estimates it was a million, eighty-eight. Was this number on a much higher scale as the Grow Bond issues have come into place, or was it pretty well a set amount?
Mr. Derkach: This is calculated annually, and last year it was significantly higher than it is this year.
Mr. Clif Evans: I know he says it is calculated annually. Do we see a projected decrease in that line for the next fiscal year, or is it a hit and miss every year? It is just on the projection of the Grow Bond issues?
Mr. Derkach: The department looks at every company on an annual basis, and they determine what level should be allocated for potential default for each of the companies. Then a figure is calculated out, and that is what we include in the Estimates.
Mr. Clif Evans: So, obviously, by the decrease of the allocation, the minister is confident that the Grow Bond issues that are in place right now are in a stable situation and the allocation of necessary backup funding is not necessary for this fiscal year?
Mr. Derkach: Although we cannot predict precisely what might happen, this is our best estimate of what we anticipate for the coming year.
Mr. Clif Evans: Again, could the minister just explain exactly how the department comes to this conclusion of $1,088,000 or $600,000 or $2 million?
Mr. Derkach: There is a formula that is used for new companies that have just started and also another formula that is used for expanding companies. That formula is then applied to each of the companies that we know and adjustments are made to come up with a number.
Mr. Clif Evans: Can the minister just provide me with a copy or a basis on how they work it? It does not have to be right today. The minister can provide it at a later date just for my information.
Mr. Derkach: It is a fairly simple formula in that for new companies we would allocate about 16 percent and expansions are at about 3 percent. Then you look at each individual company and see whether or not an adjustment is required up or down from that.
Mr. Chairperson: Shall the item pass? Pass. (2) Other Expenditures $688,000--pass.
Item 6. Rural Economic Programs (b) Rural Economic Development Initiatives (1) Salaries and Employee Benefits $303,400--pass; (2) Other Expenditures $102,100--pass; (3) Programs - Operating $7,742,300.
Mr. Clif Evans: I know that we have discussed the REDI program over the years since its implementation. I am hoping that there are no difficulties whatsoever within the REDI program. I am sure there are not, none that I have heard, none that I have been made aware of. I must say, I have seen some positive results through the REDI program in my area itself as far as feasibility studies and whatnot and some of the programs that are made available.
I would like to ask the minister, the Community Works Loan Program was implemented, I believe, in the '95-96 year. Can the minister indicate how many communities or community works programs have been established in the province since its inception?
Mr. Derkach: There are 38 Community Works Loan Program projects, and there are several that are awaiting approval and are being worked on at the present time.
Mr. Clif Evans: Can the minister indicate out of the 38--when the program being established, is there anything that provides, comes back from the program and from the community that has a program available, comes back to the minister's department as far as any sort of a reporting system as to how it is developing and how it is working, who is getting loans, who is not?
Mr. Derkach: There are quarterly status reports that come back to the department on all of these projects, yes.
Mr. Chairperson: Order, please. The hour being five o'clock, time for private members' hour. Committee rise. Call in the Speaker.