Evidence of meeting #48 for Government Operations and Estimates in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was buildings.
A recording is available from Parliament.
4:50 p.m.
Professor of Real Property, Academic Director, Real Property Program, Schulich School of Business, York University
The seventies.
4:50 p.m.
NDP
Peggy Nash NDP Parkdale—High Park, ON
It's from the seventies. There's going to be a demographic change. If we look out over 25 years, there are going to be massive technological changes, demographic changes in the workforce. There will be, as you say, a massive influx of people into the city of Toronto.
My question is, if we strike a lease for 25 years, we could be in any number of scenarios. We could be in a scenario where perhaps there are fewer employees and a need for less office space. We could be in a situation where real estate prices are much higher in 25 years. There are all kinds of possible scenarios.
My question is, do we have less flexibility in a long-term lease? I know what it's like to try to get out of a car lease. Do we have less flexibility with a long-term lease? In fact, we do if we can just sell or lease our own property, as Canadians.
4:50 p.m.
Professor of Real Property, Academic Director, Real Property Program, Schulich School of Business, York University
You certainly sacrifice certain flexibility, but you gain other things. In other words, for 25 years you don't have to worry about renegotiating a lease, and you know how difficult it is to do that.
On the other hand, you could build flexibility into the lease. You might have the right to sublet. You might have the right of moving out of—
4:50 p.m.
NDP
Peggy Nash NDP Parkdale—High Park, ON
So these may be other things we want to ask the minister about in terms of the flexibility of the lease.
4:50 p.m.
Professor of Real Property, Academic Director, Real Property Program, Schulich School of Business, York University
That's right. It would be wise for government to say on a 25-year lease there are certain uncertainties and we'll make sure we provide that flexibility.
By the way, that building...there's a good example, in some ways, of why governments shouldn't build office buildings. That is the most inefficient building, because it was designed, if you've ever been in it—
4:50 p.m.
NDP
Peggy Nash NDP Parkdale—High Park, ON
I have been in it many times. I get my passport there. It's a very open concept from the 1970s.
I have one last question. I don't know if you transfer the risk to another party, because you are still paying for it. The people of Canada will still pay for the upkeep and the maintenance, but another party will carry out the work.
My question is around accountability. Right now there is public accountability for Government of Canada buildings. If you get into long-term leases, there's a private party who is responsible for this. Do we not have the potential to lose public accountability and tie ourselves up in litigation in trying to force compliance with leases that are perhaps not being adhered to?
4:50 p.m.
Professor of Real Property, Academic Director, Real Property Program, Schulich School of Business, York University
I would say you have some excellent landlords in Canada today.
4:50 p.m.
NDP
4:50 p.m.
Professor of Real Property, Academic Director, Real Property Program, Schulich School of Business, York University
But on the institutional side, at the level of large office buildings, you have Oxford, Bentall, and Cadillac Fairview. They are good managers because one of the things they do is maintain the value of the asset for their institutions.
We rent the downtown Schulich School from Cadillac Fairview. I wish we had that level of service and quality at the university. Every time I want to paint a wall at the university, I have to go through a process. It's painful.
I asked them how much they allocate for our building for maintenance, and they said zero. I asked how they knew when to maintain something. They said when it breaks, they fix it. The institution says they have to make sure the asset is carried on their books at value, and they have to keep putting money in every year.
I think what we've seen in the last 10 or 15 years is a maturing of the industry and a group of very good professionals who have come into it. This might not have been an option 10 or 15 years ago.
But look at the Canada Pension Plan. I think 17% of their portfolio is in real estate today.
4:50 p.m.
Bloc
4:50 p.m.
Conservative
Pierre Poilievre Conservative Nepean—Carleton, ON
I have one very brief question.
Do you know which provincial governments have gone down the road of leasing space as opposed to owning it?
4:55 p.m.
Professor of Real Property, Academic Director, Real Property Program, Schulich School of Business, York University
I would say that today most provincial governments will not entertain new office buildings. I would say they will continue to look to the private market for space. That isn't to say they don't have public buildings, but I think in the future you'll see less and less.
To give you an example of what they are doing, we signed a deal at the university this week to do the archives on the York campus, and it's a design-build. Essentially, the Ontario archives will in fact have someone build it, someone own it, and someone maintain it, and they'll pay a lease. Why is that? It's because the owner will build in capital and operating....
The dilemma in the old system was that all you cared about was the capital cost and you let someone else worry about operating it. What's good about these deals is that operating it becomes a huge issue. If you're going to sign a 25-year lease, the landlord is going to want to make sure it's a very efficient building. Even in the case of the Ontario archives, they are going to a lease structure.
4:55 p.m.
Liberal
The Chair Liberal Diane Marleau
Are there any further questions?
Thank you very much, Mr. McKellar.
Is our motion ready for debate?
If it isn't ready, we'll go on to future business. Nous irons à huis clos. We're on future business. We're going in camera.
[Proceedings continue in camera]
[Public proceedings resume]
5:40 p.m.
Liberal
The Chair Liberal Diane Marleau
We now continue in public.
Are there any questions?
Who else wants to speak out of camera. This is out of camera.
5:40 p.m.
Conservative
James Moore Conservative Port Moody—Westwood—Port Coquitlam, BC
They are legitimate points, but it's not time to raise them. Wait until there is an actual deal and criticize the deal or scrutinize the deal. These can't be answered without violating confidentiality. That's the problem.
5:45 p.m.
Liberal
The Chair Liberal Diane Marleau
I think what you're saying is okay, but obviously the minister is also quite able to decide what to say and not to say.
5:45 p.m.
Conservative
Garth Turner Conservative Halton, ON
Could I respond to the major points? I certainly understand the need for confidentiality, and I understand the need for the minister to have a certain amount of discretion to be able to do a deal, hopefully to the net benefit of taxpayers. I completely understand that, and it's not my intention to try to diminish this deal on behalf of my constituency, yours, or that of anyone else. I'm not out to thwart that. That is not the intent. It is merely to recognize that any time a government operates behind a self-imposed veil of secrecy, it is the duty of people around this place to question that and to try to see through the veil of secrecy.
A government, particularly this government, which ran on a platform of open and transparent government and accountability, has a greater burden of proof than most governments in the past--particularly because this was its mandate--to prove such to the Canadian people.
So if the minister comes here and gives legitimate reasons why particular points can't be answered or why particular information can't be forthcoming, he can at least try to tell people a little more forthrightly than he has done so far as to why that is the case and when in fact we can expect that.
I don't think it is too much to ask to have these questions put before him, and it is unreasonable for committee members to oppose allowing a minister, who has the discretion to say or not say what he wishes and who has lots of curtains to hide behind, to come here and answer these questions directly.
5:45 p.m.
A voice
We need to have the background to do our job.
5:45 p.m.
Conservative
Garth Turner Conservative Halton, ON
My colleague is quite right. It is information we need to do our job.
5:45 p.m.
Conservative
James Moore Conservative Port Moody—Westwood—Port Coquitlam, BC
If I may, if he would be willing to take a friendly amendment, strike the final paragraph. The reason there is a confidentiality agreement with the two banks, as the minister said before the committee, is because with the assessment of the 40....
Are we in camera or not, by the way?
5:45 p.m.
Conservative
James Moore Conservative Port Moody—Westwood—Port Coquitlam, BC
Well, whatever. When the assessment was done of the 40 buildings, we pared it down to nine, now that we're considering putting an RFP for sale and for leaseback. When that was done, some of the information with regard to the work that was commissioned deals with the value of those buildings. So this is not a government operating within the confines of secrecy. This is the government doing what you describe, which is getting the best possible value for taxpayers dollars.
What I don't want to get into is a situation where, frankly, you say here, “In addition the committee calls as witnesses officials of the two banks commissioned to negotiate and handle the sale and lease”. They haven't been negotiated to handle the sale and lease. What has been received by the department are the two studies, which were $100,000 each from the two banks, with regard to these 40 buildings that we examined. If the committee calls these folks before the committee and they don't come, we know that some members of this committee will grandstand and say, “There goes the Harper government operating under a veil of secrecy and not being fully open with the Canadian public”. No. What we've done is to send a confidentiality agreement with regard to those two studies because we want to ensure that the assessed values of these properties, for which we are going to enter into a procurement, an RFP.... It's so we can get the best possible buy for taxpayers.
You can't negotiate these things in public. This is basic.
So I ask that you strike the final paragraph. Let's talk about the minister and not about the banks.
