When the committee last sat, it had been considering item 10.4. Economic Development (a) Economic Development Board Secretariat (1) Salaries and Employee Benefits, on page 93 of the Estimates book.
Hon. James Downey (Minister of Industry, Trade and Tourism): Mr. Chairman, I want to take a few minutes at this particular time, if the opposition critic would maybe want to deal with it now or later. I have the appraisals of which I have committed to providing him in the Question Period of two days ago as it related to the Linnet Graphics. I want to just put a brief statement on the record with the tabling of the appraisals.
First of all, there were two appraisals carried out by William M. Mercer Limited. In their letter of March 15 to one of the partners, the chairman of Linnet Graphics on March 15 from William M. Mercer Limited, a respected firm of evaluators, estimated the value of Linnet on projected after-tax earnings in 1995. In their subsequent letter of August 26, 1996--the first letter was on March 15, 1996, and that was on the projected after-tax earnings in 1995, was their evaluation--their evaluation was based on actual audited numbers for 1995, not projected earnings. This resulted in an appraisal value of $1.5 million to $1.8 million. The shareholders of Linnet agreed to sell their shares based on the $1.8-million appraised value, which was also agreed to by the employees.
So the point I am making, Mr. Chairman, is there are two appraisals: one in March which will indicate because they were projecting their after-tax earnings of being a little bit higher, the first appraisal is between $2 million and two-point-something-million dollars, and the after-tax actuals of which were audited numbers for 1995 that, in fact, caused an adjustment in their appraisal and came in at the $1.5 to $1.8. So, not only did the province agree to that appraisal, the other two partners agreed to it, to accept that evaluation because, in fact, they sold a percentage of their shares to the managing partners or the management so that there would be a third ownership by the three parties. So we accepted the evaluation as did the other two partners in the program.
So I am prepared to table those two evaluations for the member's information. One is as of August 26, 1996, which was dealing with the actuals, and the March 15, 1996, which were based on the projected. So I am tabling these two documents for the member. I thought it was important to do that so we could, in fact, if there were some questions flowing from that, we could either do them now or I could deal with them at another time. So I wanted to open the Estimates this afternoon with that information for the member.
Mr. Tim Sale (Crescentwood): Mr. Chairperson, I thank the minister for tabling that information which we had requested. Of course, I have not had a chance to look at it, so I cannot comment on it until I actually receive the document which I presume--[interjection] I thought you were tabling three copies as was the instruction of the House leader. [interjection] There you go. I just knew that would happen.
Mr. Chairperson: The honourable minister is tabling three copies of this document.
Mr. Sale: Mr. Chairperson, I had asked the minister, and he had undertaken to provide information on a number of other issues earlier in Estimates. I wonder if he is in a position to do that at this time.
Mr. Downey: Mr. Chairman, one of the areas that the member had asked some questions and we wanted to get clarifications, basically as it relates to particularly telecommunications, the whole telecommunications portion of what the call centre activities carry out, and that is that their charges, their operational costs as it relates to rates, falls under the federal jurisdiction, anything related under CRTC. Anything relating to the operational and labour responsibilities falls within provincial jurisdictions. So it is a provincial jurisdiction that looks after all the labour issues and all the actual plant operational regulatory activities. As far as the operational side of it, it falls under CRTC for the approvals of their rating. That is the understanding that I get from the department.
In another area that he had asked about--and we had spent a little bit of time on and he was critical, but it has taken some accountants a little longer to figure out the overall balance of payments, or who carries the costs of the shortfall in trade as it relates to the amount of money that has to be accounted for--that is still being prepared by the department. When that is available, I will bring that to his attention as to what the opinion of the accountants is in our department. He can agree or disagree with the explanation, but at least I will provide it for him. I am not sure what other areas, specifically at this particular time, but I will check with my department.
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I am informed by my department that the deputy minister of Labour was also contacted as it relates to any improprieties or infractions or that kind of thing within the call centre industry, and is noted to us that there may be a few, but nothing untoward that would cause for any alarm. That information came directly from the deputy minister. I appreciate again the concern the member raised, and I again also put it on the record: nobody wants to have people working in unfriendly, unsafe conditions that are not conducive to good health and good workplace. So I will do what I can to ensure that that can, in fact, be fulfilled.
Mr. Sale: I thank the minister for the various responses, and I look forward to the document that he is talking about from his department in regard to the issue of the long-term deficit in trade and how that affects Manitoba's economy.
I want to ask the minister if he has a current fair market value for the province's investment in the Vision Capital Fund.
Mr. Downey: I am informed by my department that we do not have a current to-date evaluation, but I can tell the member if there are some of the investments that have been made by Vision that are in the process of being liquidated. In fact, we can probably get a better read on that when the completion of some these activities takes place, but I am told we do not have a current value at this particular time. Well, maybe I want to--[interjection] My answer stands.
Mr. Sale: Mr. Chairperson, this is an area of some frustration for us in the opposition. We have asked the minister for a list of companies. He refuses on the basis of confidentiality. We have asked the minister now for simply a fair market value, and any investment fund that I have ever seen, at least once a year, puts a fair market value on their partnership in terms of the shares that are held.
Vision Capital is a very major capital firm available to Manitoba businesses. Surely to goodness, the minister would be interested at least in knowing a global figure as to whether our investment as a province is at book, is below book. It is just incredible to me that the minister does not have an approximate fair market value of the province's investment in this company.
Mr. Downey: Mr. Chairman, I will answer it in this way, and we tabled our legal document as to why we are not able to disclose the companies. I have just indicated to the member that there are some companies of which there have been investments made that they are in the process of liquidating. I think at that particular time as that happens, I am quite prepared to do what I can to provide the information.
I am confident that the investments made by the province in the Vision Capital that we are in a very solid position. Now that does not give the member any satisfaction. He is looking for hard numbers and hard examples of which to deal with. I hope to be able to provide that as well. I am quite prepared to stand up and be accountable for the money that has been invested in Vision. I know that there are some considerably excellent investments that have been made, and in the overall portfolio mix, I am satisfied that there is a good balance and that there is a very positive return that the province can, in fact, anticipate.
Again, I am not laying any hard evidence on the table, but I am comfortable that that is, in fact, the case. I will provide as much information as possible. I have no reason not to, other than the legal direction we got as it related to the confidentiality of these companies and what it means to the commercial interests.
Mr. Sale: Mr. Chairperson, I am not asking for the list of companies. I have already been refused that. I am saying that I presume that Vision Capital has a year-end. I do not know whether the year-end was December or whether it was March 31. At the year-end, I assume they provided an annual report to their partners. What was the fair market value quoted in their annual report? I cannot imagine that they did not provide it. What was it?
Mr. Downey: Mr. Chairman, I guess the bottom line is, again, that I am satisfied from what input that I have from the department and what knowledge I get from the department, and again I think the proof will certainly be is when some of the divestitures start to take place and the results of those divestitures. I am confident that we are in excellent position, particularly with some of them that are being presented now to the market. If I gave him a number today, tomorrow it may differ because of the certain conditions.
Again, I have a strong belief that the overall benefits for the province which have invested in the Vision Capital, that we are on a plus side in a very good way. But the actual position of which the province is in will not be determined until, in fact, all of the companies--if, in fact, that were to be the case--were to be either sold or valued at a particular time by an appraisal.
So I appreciate the frustration, but I cannot help him any more than I have been able to answer in this particular regard.
Mr. Sale: Mr. Chairperson, the minister can help, and he is simply unwilling to do so. I cannot imagine why, if he is so confident. There is absolutely nothing confidential about the fair market value of the province's investment without revealing the names of the companies involved. It is absolute nonsense to say that you can only value an investment fund when it sells some of its investments. That is utter nonsense. An investment fund is valued annually for the purposes of income tax, for the purposes of reporting assets and liabilities.
No one, no one--and the minister has been a business person in his lifetime--would accept the suggestion that you could tell the value of an auction sale halfway through an auction by virtue of what a particular piece of furniture raised. What was the bottom line at the end of the last fiscal year of Vision Capital when it reported to the province in terms of the value of the province's investment? That surely is not a confidential figure, Mr. Chairperson.
Mr. Downey: Mr. Chairman, I have been informed by staff that they do not have it here. If there is such a number available, I will attempt to get it to the member. I do not have any problem with that if it is available. I think that number can, in fact, be made available to him. I do not have it immediately, but I will attempt to get it for him.
I know what he is saying, what is the value of the government's investment or the estimated value of the government's investment in these companies. So I think I understand the question. I am not trying to avoid answering. I will attempt to get the information for him.
Mr. Sale: I appreciate the minister's good will in that regard.
I want to turn to the question of Linnet which has occupied us for some time. I, first of all, want to ask, I notice that both of these valuations were during 1996, one of them more than two years ago now, the estimate, and the revised approximately 22 months ago in August of 1996. When was the actual agreement to sell the province's shares and to acquire shares from the two other partnerships, so that the management would wind up with 33 percent of the shares? When was that agreement entered into?
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Mr. Downey: It is my understanding, Mr. Chairman, that discussions on the sale began in early 1996, and the actual agreements were signed on March 19, 1998.
Mr. Sale: Mr. Chairperson, there are many ways of valuing a company. Let me say that it is entirely determined by what the interests of the various parties are in valuing a company as to what methodology is used. I think the minister probably could find out from Mercer and company that there are indeed many ways of valuing a company.
This company has never reported publicly except when it was promoting itself, but based on 70 staff, reasonable assumptions about the cost of a staffperson, reasonable assumptions about their overhead, the company had to be doing between $5-million and $8-million-a-year worth of business, and it could well have been doing more than that. The reason that we might say more is that in a presentation in 1996 to members of the Legislative Assembly--this presentation was called Mapping the Future, and it was arranged for by the previous Minister of Natural Resources, Mr. Driedger. In it, Linnet stated that the Manitoba government business represents less than 20 percent of current Linnet work. In that year, the Manitoba government business was over $2 million. So that would suggest that Linnet's sales were over $10 million in that year.
It is not at all unusual for a company to be valued in terms of its sales. I just point the minister, for example, to the latest megamerger in the United States in which Monsanto and Home--I have forgotten what it is called--Home market or Home services have merged, and they have merged to form a company whose capitalization is three times its sales. In other words, the market is valuing this new company at three times its annual sales.
I am told in discussions with respected people in the brokerage market that a value of one times annual sales would be very conservative for a market capitalization of a company. If we even looked at half of one time annual sales, one would come up with a figure of 5 million, not 1.6 million or 1.8 million.
When a company is sold and the partners wish to minimize the capital gains for tax purposes or in any other ways make their personal bottom lines look better, it is quite possible to be very conservative in the valuation. So I wonder if the minister would accept that there are many methodologies of valuing a company and that the term "earnings before depreciation, interest, taxes and appreciation," which is a very common ratio used in the market, would indicate that this company was worth multiples of what it was sold for.
Mr. Downey: No, I would not agree with that, Mr. Chairman. First of all, I think that if he has not taken the opportunity, I would invite him to take the opportunity to read the methodology that was recommended by William M. Mercer. I am sure that the credibility of the Mercer corporation in this kind of work, if he wants to challenge them, that he is quite prepared to do so. I am quite prepared to accept the methodology and we were prepared to accept the valuation which was put in place. Not only were we prepared to accept it, but the two other partners that, in fact, had to sell a percentage of their shares to equalize the third ownership principle, a third, a third, and a third, had to accept it as well.
He, Mr. Chairman, can go through all kinds of alternatives. This one was the one that was, in fact, used. I do not think that William M. Mercer are certainly juniors in this particular business. In fact, I think they are extremely credible, and so I am passing on the information to him which was received on behalf of the Linnet Geomatics International to provide a value for the sale.
Again, I have given the reasons for the two proposals, and I have not much more to say. If he wants to get into, again, the methodology, I am sure that, as an auctioneer, I could talk about different ways of valuing companies as well, and one would be, of course, an item, if you stood up on the end of this table and were to sell one of these tables or chairs at this particular time on this particular day, you would get a price for it which, tomorrow, if you had a different crowd, you might get a different price as well.
That is quite a lot different kind of methodology. It is a long-term, established method of commerce which I do not think would be acceptable to the member if I said that we had sold the Linnet Geomatics by auction. I think that we have used the best, one of the best companies to do the evaluation. We have proceeded to act on that evaluation, as did the other two partners, and I think, quite frankly, when one looks at the overall results that the province has accomplished from the involvement in Linnet, that we are the winners as a province for it, both in terms of having a company here with 60 employees--I am serious about that, I think that is extremely important. We have the activities being carried out in the province and we have made money doing it.
What more would the member, in fact, expect to happen when one went into a business deal like this? We did not lose money. We made money. We have a business here that is providing some 60 jobs, and it has to be here for five years.
Mr. Chairman, again, I can get into ongoing debate as to method of evaluation, but I am satisfied that the maximum value was obtained and it will continue to be operating in Manitoba.
Mr. Sale: Does the minister accept the study by the Nordicity group, which was obtained last year, I believe, by us which shows that Manitoba has approximately one-third of the Canadian average of employees in this field and that their assessment came to the conclusion that the reason for this was at least in part because of the limited ability of companies to enter the field, given the government's dominance and the exclusivity contract with Linnet?
So we have crippled, in fact, the geomatics industry in this province until the exclusivity deal was ended, and we probably have lost money in very substantial ways. Even though he may have a company with 60 employees, quite a number of them are doing what has been described as "grunt work," simply transferring data from one format to another. They are not doing high-end work at all. It is very profitable work by the way, "grunt work," because it is a high volume and a high profit margin, but it is not exactly the kind of work that Linnet advertises itself as doing.
So does he agree with the Nordicity study? Is he aware of that study and its conclusions?
Mr. Downey: I am sorry, I am not sure what study he referred to. Would he repeat that, please?
Mr. Sale: Mr. Chairperson, I will share with the minister copies of the study which were done for his department. He has this study. The study was done for Industry, Trade and Tourism by Les Routledge, senior associate of Nordicity Group, in July of 1995. Does he agree with the conclusions of the study, or was he not even aware of it?
If he is looking for the information I was quoting, it is on page 9.
Mr. Downey: Mr. Chairman, again, I will take this opportunity to advise the member that I will have the department review the report, so I am a little more brought up to date on it than I am at this current time. But I can again go back and say that as far as the actual matter that we were dealing with as it relates to the overall sale of Linnet that we have full confidence in the evaluation that was done.
As far as the details of this study are concerned, I can deal with them at a little later date, but it will take me a few minutes to go over it and see the pertinent points that were brought out again and to see what the overall objectives were as it related to the development of the work that he has put on the table.
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Mr. Sale: Mr. Chairperson, I will summarize the study as saying that Manitoba is lagging behind the rest of the country, that until the Linnet contract was entered into we were on a par with the rest of the country, that we have lagged severely in employment. For example, if we had the number of employees that other provinces in Canada have on average, we would have approximately 300 more people working in this sector than we do. We would have a booming sector. In fact, we would have what Linnet promised but never delivered.
He will find, when the minister reviews it, that Mr. Routledge is a very careful consultant and wants to not anger his employers, but he very carefully says that the problem in Manitoba appears to be structural barriers, which is consultant speak for the monopoly contract with Linnet that was preventing entry of any of the small firms into significant contracts because they could never successfully compete with the deep subsidy that Linnet had.
Mr. Chairperson, press reports during 1995-96 pointed out how Linnet, with the support of the support of the province, effectively took a contract away from Airquest in Brandon and caused that company's bankruptcy. In spite of the fact that Brandon staff did not want the services Linnet was providing, they were not allowed to do anything else. They were essentially told that, if you want access to our Mapping Branch, you get it through Linnet, and that is the only way you get it. So, after many months of negotiating a contract with a small Manitoba company called Airquest, Brandon was forced to walk away from that and Airquest went bankrupt.
As a result, the Nordicity study shows that we have about the same number of firms as other provinces per capita, but we have far fewer employees. What that tells us is that we have a large number of very small struggling firms who have been unable to make a breakthrough. As a consequence, we have lagged employment by at least 300 jobs, if we are at the Canadian average, so it seems strange to me that the minister keeps asserting he has a successful company and a world-leading industry when we are way below Canadians norms for employment. We have forced into bankruptcy at least one firm by virtue of unfair competition on the part of Linnet and its guise as the provincial arm for geomatics mapping.
I am wondering, in the light of all of that, why the minister was so cavalier in the House today about Hydro's entering into an untendered, long-term contract for services with a company that has a record of unfair competition by virtue of its government contacts and has a record, at least on one occasion, of bankrupting, by virtue of its competition, a long-established aerial survey company, Airquest, out of Brandon. How does the minister defend allowing the biggest Crown we have to enter into an untendered contract with a company that the government had just finished severing an exclusivity contract with?
It looks like they walked out the front door after five years and $30-million worth of contracts and walked right in the back door to the biggest user of geomatics services, who, as the minister knows, also co-operates with Centra Gas because of the common interests they have, thereby giving Linnet special opportunities to acquire and maintain business from that other large company. So it seems to me that the government is not at all concerned about the findings of the Nordicity study, which said you have restrained competition and you have allowed this industry to underperform. They do not appear to be concerned about bankrupting a little company a couple of years ago, a long-established, rural-based company, by the way, Airquest, and they do not appear to be concerned about the biggest Crown entering into a long-term monopoly contract with a company that has been shown to not be an effective way of developing a geomatics industry in this province.
I am quite astounded at the minister's cavalier attitude towards this on behalf of at least half a dozen Manitoba companies which I have worked with, discussed this issue with, and, in effect, advocated for, for a level, open playing field across this province over the last two years. These are businesses with significant investment, in many cases, over many more years than Linnet has ever had, and they have been effectively prevented from growing because of this government and this minister's policies.
Mr. Downey: Well, there are several things I do not agree with the member on, Mr. Chairman. First of all, I did not have a cavalier attitude as it related to the Crown corporation, and I can tell him that that is under the direction of a board of directors and management that is separate from government. I am not the Minister responsible for Hydro. I am not in the business of directing them whom they should do their services with.
I want to also correct something that continues to be floated around. That is that the Province of Manitoba for some way did $30 million worth of business with Linnet. That is not true. It is my understanding that the work that was done directly by any government department was approximately a million dollars a year over the past five to six years, so the maximum that we would have done business with them for as a province directly was $6 million. The other agencies, Crown corporations and entities may have carried out business with Linnet, whether it was the City of Winnipeg, whether it was, in fact, Hydro, whether it was, in fact, other Crown corporations, that may be the case, but I can tell him that direct government contracts were in the neighbourhood of a million dollars a year for five to six years.
So he refers to this monopoly business. There has been a lot of other business floating around out there that did not come directly under the direct control of the province of Manitoba. That is true.
Mr. Sale: No, it is not true.
Mr. Downey: It is true. Again, what I am, through MDC, is the individual who will have to answer for the sale of Linnet. As far as the operations and the business that it performed with any government agency, he knows Natural Resources are carrying out some activities at this particular time, the Estimates at this particular time. They were one of the contractors, but it is my understanding that basically that is the amount of work that was done directly by the province.
I wonder if I could just take a two-minute recess, Mr. Chairman. The member may want to carry on. I will listen while you are doing it. I have got a constituent who is here, driven a long way and a lot of hard miles to see me for two minutes. I will be back in two minutes.
Mr. Sale: I do not have any objection to a couple of minutes of a recess. I do not want to carry on.
Mr. Downey: Not a recess, just two minutes. I do not want to be rude and leave you talking to yourself.
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Mr. Sale: The minister's answer is, I think to put it kindly, nonsense. The province may have directly, through its own internal departments, allocated somewhere in the order of a million dollars on average, but the province had an exclusivity contract, and it directed Louisiana-Pacific to sign a $5-million deal funded in large part by stumpage fees, absolutely a wired contract. We have shown that in the past. It was written for only one company to be able to fulfill, and Linnet was the company.
Mr. Jack Penner, Acting Chairperson, in the Chair
The City of Winnipeg was in a similar situation. It was directed to work with Linnet. The Manitoba land-related information system pulled in the crop insurance folk, pulled in Hydro for millions of dollars, and it is easy to document $30-million worth of work which came as a result of the exclusivity contract; absolutely easy to document that.
That is not the issue. The issue at this point is that where Manitoba's companies--and I emphasize I am talking about private-sector, long-term, established Manitoba companies--have been hurt by this exclusivity contract, they believed that the government was ending this arrangement. They were told the government was ending this arrangement. They met with the previous minister responsible, Mr. Driedger, and they were told that the exclusivity arrangement would end. Then they find out that last summer, no tender, the biggest Crown that is supposedly bound by Manitoba government policies on tendering and on the way it does business. Of course, the minister should not tell it who to do business with, but the minister should tell it that it will do business in a manner consistent with government policy, and not tendering a major contract in an area in which Manitoba companies have clearly suffered is not good public policy.
Mr. Downey: Mr. Acting Chairman, again, the member is bringing all kinds of accusations to the table about what was and what did not happen. He does not have one shred of evidence to demonstrate that he is, in fact, right. The other thing I find strange is that, where he is now, on one hand, questioning the sale of Linnet, on the other hand, he is happy that we are doing it so that we are not out there stopping other companies from doing business in a way in which the exclusivity of which he is claiming that the province has provided for Linnet is, in fact, no longer going to be carried out.
So I am a little troubled by the debate he is bringing to the table. Is he happy that it sold, or is he not? Oh, yes, that is right--he will come back and say that it is not my job to ask him questions; he has to ask me questions. Well, I will put it in the terms then--Mr. Chairman, I will assume this--I will not ask him a question directly. I assume that he is now happy that Linnet is sold. I would hope that he acknowledges the fact that the company that did the appraisal used a proper methodology to value the company and that we were able to achieve that value for the company and still maintain the company in the province of Manitoba.
He has not provided any evidence that there has been prohibitive activity taking place. Yes, he has tabled some work that was done, and I think it is a good job that the work was done so that it helps develop government policy and directives. In fact, one could say that the whole process is now completing as we move out of the ownership of Linnet, and it can operate in the capacity in which it was supposed to be doing with the management and the two other partners owning it and carrying out their business in Manitoba. As well, it has very much accomplished, on the international market, considerable successes. That business was not exclusive to it. That, in fact, was open to other companies as well.
Again, I am sensitive, quite sensitive, quite frankly, because I do not want to, in any way, deter the private-sector businesses from developing and carrying on. If he has more information about the company that went bankrupt because of this, I think he should be challenged, and I am challenging him to provide it. He has put it on the record. He will not accept my word on certain things; I am not about to accept his word without more evidence of the fact that this is the case. However, if his argument had any merit to it, then it should not happen in the future, and that should make him happy, if anything makes him happy. It should make him at least feel a little better that we have moved in a way in which he thinks we should have gone.
Mr. Sale: Mr. Chairperson, first of all, we have pushed for the last two years for this company to be sold, and we believe that it was an inherent conflict of interest for the province to have an equity ownership in a company that was supposedly competing on an even field, even playing field, with other Manitoba companies that did not enjoy either the exclusivity contract or the special interest that government had in Linnet's earnings. So, yes, we are pleased that the company has been sold. We assert that it was sold for far less than the claimed value of the company, and that the most conservative possible methodology in valuing the company was used, that the company was sold for considerably less than it should have been sold for.
In terms of the Airquest issue, Mr. Chairperson, probably the clearest discussion of this was on CBC Radio in 1995, October 19, and it is a long series of five programs done by John Boivin quoting the former owner of Airquest, Mr. Snure, and then--I am sorry, Mr. Snure is with the City of Brandon--the dialogue is as follows, this is a direct transcript: Brandon had been looking at computerizing its maps and utility information for years. It had two proposals, a small company, Airquest Resource, put together a hundred thousand offer. Snure said Airquest's proposal was just what Brandon was looking for. Then Linnet Geomatics got involved. It is the largest computer-mapping company in Manitoba with the monopoly to do all provincial government mapping work. Snure says Linnet's system cost a million dollars, far too expensive, and not suited to Brandon's needs.
Snure said the city was leaning towards Airquest. Then the subtle pressure started. Warnings of what could happen if this city chose Airquest, and a quote from Mr. Snure: In terms, if we went with the proposal that was not province-wide, we would kind of be out here on our own. We would not be able to get surveys and mapping, land titles, the Assessment branch information that there would be if we were going towards the Linnet system.
The pressure increased and the project was delayed. Airquest finally went broke. It had financial problems that could not wait any longer. Snure is upset with the way Airquest was squeezed out by the province and Linnet.
Snure quoting again: "In this particular case, it is almost like we were waiting out the small guy to drop out. That is not all that strange, even though no contract had been signed and the province went ahead and mapped the city, and Linnet is developing the computer system. Brandon is now negotiating with the province about what part of the province it will have to pay for. Brandon is going to be buying Linnet's product whether it wants it or not. Now there is no other option."
I think that a respected civil servant with the City of Brandon's word is good enough for me in terms of what happened in this regard.
I also want to quote from a draft of the legal agreement with Linnet: The province shall provide Linnet with such information as the province may have regarding the needs of the agencies with respect to the land-related information system, et cetera; shall cause each of the agencies under its purview to assign an appropriate number of agency senior staff to work with Linnet doing user-needs analysis, business cases, et cetera; shall use its reasonable efforts to assist Linnet in negotiating implementation contracts with the agencies, negotiating agreements; shall develop implementation agreements satisfactory to Linnet with the city and with the agencies; shall develop formal agreements satisfactory to Linnet with the Surveys and Mapping Branch.
The list goes on and on and on. If that is not an exclusivity agreement, Mr. Chairperson, I do not know what is.
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I wanted to go back to the minister's comments about Hydro. The minister is asserting that it is okay for Manitoba's biggest Crown to enter into an exclusivity arrangement with a private company without tendering. I want to know whether the minister will undertake today to contact the Minister responsible for Manitoba Hydro and perhaps even to directly contact Mr. Brennan, the CEO of Manitoba Hydro, and inquire whether he will abide by provincial standards for open tendering, so that Manitoba companies will have a fair opportunity to bid on business for which they are competent and qualified to undertake.
Mr. Downey: Mr. Chairman, I will contact my colleague, the Minister responsible for Manitoba Hydro, to find out the exact and all of the information as related to the tender that the member is referring to so that I have all the information. He has made accusations from his side as opposition. I will, in fact, get the information from my colleague, the Minister responsible for Manitoba Hydro, to make sure that I have that side of it as to why Hydro proceeded, if they did, in the manner which he has indicated. Then I can further decide as to whether or not I should have concerns about it.
At this particular point, it is my understanding that all procedures that would have been carried out by Hydro are normal procedures. However, if there are some anomalies or some reason why that is not the case, I will certainly find out from my colleague.
Mr. Sale: Mr. Chairperson, I can assure the minister that I met with Mr. Brennan before Christmas and that he indicated that indeed they had entered into an exclusivity contract, an open-ended, untendered contract; that I have raised this matter repeatedly and I will continue to raise it on behalf of Manitoba companies whose ability to do the work is unquestioned because they do it in other provinces.
We have a young company here with 20 staff up from four last year that does not do any work in Manitoba because it could not get any work because Linnet had a lock on it all. They are doing similar work to Linnet in British Columbia, in the Northwest Territories, in the Yukon, in Saskatchewan, and now in some American areas. The company is growing like crazy, which is very commendable, but they could not do any work in Manitoba. They are locked out of Manitoba Hydro. They have a product which is exactly what Manitoba Hydro is paying Linnet an arm and a leg to develop for them, Mr. Chairman.
There was no tender. The minister says he will examine the tender. There was not a tender. That is the point. There was no tender, bundled or unbundled, for the services Linnet is going to provide. We are told--and this is something the minister will have to confirm, because we are not in a position to know whether it is correct or not, but we are told that Linnet's staff working with Hydro sit on all of the contract discussions with other companies.
In effect, they become privy to inside information that ought to be proprietary information to those private companies, and so geomatics companies in Manitoba will not bid on even subprojects, because they have no confidence that Linnet will not become privy to their bid and to their information because of its very close working relationship with Manitoba Hydro.
That is inappropriate, Mr. Chairperson. It is inappropriate that a private-sector company should have proprietary information disclosed to another competitor by virtue of that other competitor's close working relationship with that company. That is simply inappropriate, and this government should not countenance that kind of relationship.
I want to ask the minister whether he will undertake to fully investigate this question and to ascertain whether or not fair and open tendering is the policy of Manitoba Hydro and whether they will sever their relationship with Linnet and tender for geomatic services properly in the future, Mr. Chairperson.
Mr. Downey: Mr. Chairman, first of all, I did not say I would look at the tender. I said I would find out for my colleague the process that had been gone through as it related to the hiring of services from Linnet, No. 1. That is what I said I would do.
Mr. Sale: Mr. Chairperson, I simply asked the minister to review the record. I think he did use the word "tender."
The Acting Chairperson (Mr. Penner): It is simply a matter of procedure that is being discussed here, and there is no point of order.
Mr. Downey: Mr. Chairman, point No. 2 as to whether or not there are people who sit on the Linnet board that have proprietary information as it relates to work that is to be done in other areas or other companies, I will find out if that is, in fact, the case. I do not know specifically what he is referring to, but I would think that that would not be a normal situation, but I will, in fact, find out for him if that is, in fact, the case.
Mr. Sale: Mr. Chairperson, let me help the minister a bit with his inquiries. The allegation is that Linnet staff who are working closely with Hydro consult with Hydro staff on contracts that Hydro is letting in other areas of geomatics applications, or might be willing to let; in other words, maintaining the same relationship that Linnet used to have where it was the general and it parceled out small amounts of work, very small amounts of work, over the past five years to some local companies.
In 1996, they told us that the total amount parceled out was $600,000 over the period of time that they had been in the exclusivity arrangement with the province. The allegation is not that Linnet's directors are in this relationship but that Linnet staff are privy to these discussions inside Hydro.
Mr. Chairperson in the Chair
Mr. Downey: Mr. Chairman, again, I said I would check it out. I will. I have his comments on the record. I will further follow up from those comments.
Mr. Sale: Mr. Chairperson, in other provinces, the geomatics base map--if I could use that term--is seen as a public utility absolutely critical to the development of industry and business in those provinces. For example, in American states that are up to speed in this area, the cost of accessing this data is very, very low, because they believe that they will recover all of the costs of acquiring that sort of data on the part of companies and more through the development that comes with those companies.
The situation we have entered into in Manitoba is very different because we gave Linnet a monopoly to develop the base map, and for some technical reasons which I do not understand but people in the industry tell me, the base map is not particularly useful for many purposes--it is useful for crops; it is not much use for gas lines or hydro lines--and because during the time since 1989 when the proposal was being moved forward, and, in fact, for probably a decade before that as well, our survey monumentation system has deteriorated sharply in Manitoba to the point where something in the order of 30 percent of the monuments are either missing or cannot be located--they may not be missing, but they are buried, and they cannot be located. So the cost of land sales is going up as a virtue of increased cost of surveying, because they are often having to sight lines from a long distance away because of missing monumentation.
The survey industry has repeatedly asked the government to make a priority of bringing that system up to date. The survey industry has also raised serious questions about the value of the digital orthophotographs which have been the foundation of Linnet's mapping activities. The cadastral mapping of the province is in bad shape, at least by industry allegation. The implication of this is that our development is being hindered, and we cannot estimate by how much, but the assertion is that it is being hindered by our failure to have an up-to-date provincial base map.
Now, we asked members of that industry to do for us a background paper on this. It is probably not the usual thing that one might do, but I am going to provide the minister with a copy of the NDP's background paper that we had for our caucus to study. It is only four pages long, not a long read, but it indicates for us the problems that we have gotten ourselves into in this field. They are significant.
I want to ask the minister now, as a condition of the sale, what is the current status of the base map that Linnet was engaged in producing for the Manitoba Land Related Information System? Who owns that data? How is it now to be accessed by people who wish to access geomatic information? Does the province own it or does Linnet still own it?
Mr. Downey: Mr. Chairman, again I would recommend that the member ask the Minister of Natural Resources (Mr. Cummings) who in the department that did the contractual arrangement with Linnet Graphics. I was the holder of the shares of the company in the Manitoba Development Corporation, and that would be--to get the answer more immediately--a good place to go.
I can get the information directly for the member. It would consume time if I were to just talk and work to answering it, but I think that would be a better direction. If he is unable to get that information, I will talk to my colleague to attempt to get that for him, as part of the sale agreement. But I cannot answer directly at this particular time. I can assure him that I would be most expedient in trying to get that information for him.
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Mr. Sale: Mr. Chairperson, I appreciate the minister's willingness to do that.
I want to suggest to the minister that it is in his interests as Minister of Industry, Trade and Tourism that he and his staff become fully aware of the implications here for industrial and other developments in our province of not having an adequate base map, at least in the view of other partners in the geomatics industry that I have spoken with, the six or seven companies that I have referenced.
So this is not just a sort of question of, sort of, academic interest. In other jurisdictions in North America, a geomatics user-friendly inexpensive base map that can be accessed by, for example, Maple Leaf--let us use that example. In a situation where there is a good geomatics base map, Maple Leaf could sit in its offices, wherever they are, whether they are in Toronto or Burlington or Kitchener--
An Honourable Member: Brandon.
Mr. Sale: Well, not in Brandon yet--and they could have pulled up all of the target areas in Manitoba on their computers and done overlays of utilities services, current ownership patterns, ground conditions, ground water. They could have pulled up a huge amount of information and been able to assess potential sites very quickly and very efficiently, with linkages out to the various key departments that they would have to deal with.
Companies across North America that are looking for locations will look at areas that have that kind of base map ability because it makes it a whole lot cheaper for them to assess potential sites, and they expect that information to be timely and complete and all that sort of thing. This is a key, and the minister will remember that I asked questions about strategic information, a key area of strategic information for industrial development.
The minister, I hope, would agree with that. I certainly think his staff would, but we have not seen an understanding of this issue on the part of the government, apart from their acceptance finally of the idea of selling the company so that they were not in a direct conflict of interest every time a tender was let. This does not seem to have penetrated that the availability of cheap locational information is critical for companies who are looking at Manitoba, who do not want to necessarily spend a great deal of money coming here and spending time on the ground before they know whether there are half a dozen potential sites for them.
Successful jurisdictions, particularly American jurisdictions but there are some Canadian ones that are moving in this direction, have that kind of information cheaply available in the public domain. It is not something that companies have to pay an arm and a leg to get access to. I just say to the minister that this is a very important issue for our competitiveness as a province, and I would hope that he and his staff would look seriously at how the Linnet sale affects the availability and distribution of the base map. This has particular bearing on rural Manitoba because the city of Winnipeg's base map is of a fairly high quality. It is readily available to industrial development users, but the provincial map, I do not believe, is.
Mr. Downey: As I indicated, I am not disagreeing with the member as to the capabilities that the information made available from activities that Linnet carried out would, in fact, be useful for companies making decisions. I am not absolutely sure how Maple Leaf made their decision. I know they had a company out of Florida that were doing the selection business for them. What they used for technology I am not aware of, but the member makes a good case that that kind of information is, in fact, important to companies that want to develop. I will again confirm for the member, from my colleague, or if he does it directly, as to what the current status is, but he makes a good point as it relates to business development.
Mr. Sale: Mr. Chairperson, would the minister also in that process undertake to make publicly available clear information about how to access that base map on the part of potentially interested users, so this becomes part of the data base that we market our province on and also becomes available to organizations within Manitoba who may well want to be considering developments within our province.
Mr. Downey: Mr. Chairman, I will put every attempt forward to do that for the member.
Mr. Sale: I am prepared to pass this section, Mr. Chairperson.
Mr. Chairperson: Item 10.4. Economic Development (a) Economic Development Board Secretariat (1) Salaries and Employee Benefits $566,500--pass; (2) Other Expenditures $379,000--pass.
Item 10.4.(b) Grant Assistance - Economic Innovation and Technology Council $1,023,900--pass.
Item 10.4.(c) Economic Innovation and Technology Fund $1,000,000 (2)--pass.
Resolution 10.4: RESOLVED that there be granted to Her Majesty a sum not exceeding $2,969,400, for Industry, Trade and Tourism, Economic Development, for the fiscal year ending the 31st day of March, 1999.
The last item to be considered for the Department of Industry, Trade and Tourism is item 1.(a) Minister's Salary $26,300. At this point, we request the minister's staff to leave the table for the consideration of this item.
Mr. Sale: I would just like to extend my thanks to Mr. Dalgliesh and Mr. Cormack for their work on behalf of the province and on behalf of the minister as well. It was a good discussion in Estimates for the most part. I thank them for their part in that.
Mr. Downey: I think it would be appropriate to say on behalf of my staff that they were pleased to participate in it, and thank the member for his comments.
Mr. Sale: Mr. Chairperson, the minister has undertaken a number of commitments on behalf of the issue of Linnet. In closing my questions to him, is he prepared to put a time frame around this? The reason I ask this question is that I have told him frankly, and I have shared information with him, that we have an industry in Manitoba which until now has been lagging very badly, Canadian norms. His own study show that, and industry people who took some risk frankly in meeting with Mr. Driedger, because they were complaining about government policy. Sometimes that is not always seem by companies to be in their own interests to complain that way.
There are six companies that I have worked with on this over a couple of years. They have waited a long time to have a fair opportunity to compete and to show what they can do on a fair playing field. We can debate the wisdom of the Linnet strategy till the cows come home, essentially, except for Manitoba Hydro's, I think, unfair decision last summer. That strategy is now at an end. We need to tidy up some of the details. The details that are critical are the ownership of the data and the accessibility to the data that has been acquired at great cost, and the commitment on the part of the province that all geomatics work will be publicly and openly tendered in the future.
The minister has undertaken, and I appreciate that, to investigate the concerns that I have about the agreement with Hydro. He has undertaken to find out the ownership of the data and how it is to be accessed, and how it can be accessed in the future by companies or by other groups or individuals.
Will the minister undertake to put a time frame around the conclusion of this matter, so that the Manitoba companies that are concerned about this will have a clear time by which they can expect that the playing field will, in fact, be flat and fair, and that data that had been acquired at public expense will be available for them to grow and prosper and to compete efficiently and effectively, as I am confident they can do?
Mr. Downey: Mr. Chairman, I understand the member's question. First of all, I will attempt to get that information, because it is in everybody's interest to have as much information for the companies that want to grow and develop in the province of Manitoba. It is not for us to want to deter that from happening, so I can give him the assurance--I am not going to extend it a year. It certainly would be within limited time available. I am going to be away for a short period of time, as he knows, on an extremely important business event. But I will ask the staff when I am gone to try to make sure we get the answers
Within a month's time, hopefully I could have some responses for him, so that we could, in fact, clear up the concerns that he has. He may not be satisfied with the answers, but at least I can certainly try to do that within a month's time.
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Mr. Sale: Mr. Chairperson, would the minister then agree that at least by the end of June his staff will contact us and let us know what progress has been and what some of the factual information we have requested is so that can be made public? I would urge him to take the opportunity to meet with the companies in this field, ask his staff to put together such a meeting, so he could hear first-hand if they are interested in meeting at this point--I would think they might be, although I do not know that for sure--so that he could hear first-hand the opportunities that they think are here for our province in this field and can understand why they have been so concerned over the years.
Mr. Downey: I will attempt to live up to that commitment.
Mr. Chairperson: Item 10.1. (a) Minister's Salary $26,300--pass.
Resolution 10.1: RESOLVED that there be granted to Her Majesty a sum not exceeding $3,670,200 for Industry, Trade and Tourism, Administration and Finance, for the fiscal year ending the 31st day of March, 1999.
This completes the Estimates of the Department of Industry, Trade and Tourism. The next set of Estimates that will be considered by this section of the Committee of Supply are the Estimates of the Department of Sport. We will briefly recess to allow the minister an opportunity to prepare. [agreed]