Government Operations Committee on May 15th, 2007

[Peggy Nash, NDP, Parkdale—High Park, ON]

One of the issues that have been given as a rationale for selling buildings and leasing them back is the need for ongoing investment in maintenance and renovation. Obviously with the retrofitting of buildings there'll be greater costs, whether the buildings are owned or leased.

But I'd like to know the amount of money or the percentages of moneys that have been set aside for work on existing government-owned buildings. How does it operate? Is it a percentage amount or a fixed amount? How is it undertaken?

[Daphne Meredith]

Tim, could you please answer?

[Tim McGrath, Acting Assistant Deputy Minister, Real Property Branch, Department of Public Works and Government Services]

Yes, we have a funding protocol with Treasury Board that's called our national investment strategy. With that, we assume that 4% of the inventory should be off-line every year for retrofit. And from that, we apply a factor of around $1,800 per metre to carry out the retrofit of the assets. That translates into, for our crown-owned facilities, about $200 million a year that we have available for capital improvement and capital upgrades to the assets themselves.

Part of our challenge is that the national investment strategy didn't come into effect until the mid-1990s. We're still dealing with a huge backlog of deferred maintenance. We just haven't had the opportunity to get caught up to that level.

The other issue is that it's not price-protected. Although there's a formula in place, every year your spending dollar gets eroded by the impact of inflation.

So that's been our challenge.

[Peggy Nash, NDP, Parkdale—High Park, ON]

But that money is in the budget and it continues to be there, and every year work is done on that.

[Tim McGrath]

That is correct.

[Peggy Nash, NDP, Parkdale—High Park, ON]

How would you expect that to compare if buildings were sold to the private sector and that money factored into lease agreements? I assume you would factor in a similar amount to be built into any agreement so that the work could be undertaken by the new owner.

[Tim McGrath]

Yes, and actually, in the case of the real estate sale--going back to a previous question--for the first ten years, the new owners are responsible to upgrade the buildings. We have a very detailed work plan that is part of our package going out to potential bidders. They will have to undertake that work as part of the agreement, to bring the buildings up to standard—

[Peggy Nash, NDP, Parkdale—High Park, ON]

Which is similar to the work that's being done by the government.

[Tim McGrath]

That's right, but at their price, at their cost, with no pass-through to us.

So that's on their ticket. Will it show up? Yes, it'll show up in probably reduced proceeds from the transaction, but they will be responsible and accountable to undertake that work for us.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Okay.

Thank you.

[The Chair, Liberal, Diane Marleau]

Mr. Turner.

[Garth Turner, Conservative, Halton, ON]

Thank you.

I'd like to follow up on some things that Peggy was asking you. It's exactly the road I wanted to go down.

First, though, I was interested to hear about this package of retrofit to potential bidders for these nine properties that are now for sale. Can we get a copy of that?

[Tim McGrath]

Those reports are engineering reports. They're part of our data room or data link. Potential purchasers can go in and view exactly what the programs of work are on each of the various assets.

I don't believe there's a problem in making them available. They're just engineering reports that outline exactly what work has to be carried out.

[Garth Turner, Conservative, Halton, ON]

But they detail the work that we expect a landlord to take on during the first ten years of the lease, correct?

[Tim McGrath]

That's correct.

[Garth Turner, Conservative, Halton, ON]

Are they available now to the public?

[Tim McGrath]

I would have to check. I'm not trying to withhold them. If I can make them available, I certainly will.

[Garth Turner, Conservative, Halton, ON]

Okay. Well, we would like to see them, I believe, if we could, please.

So we're selling nine buildings and keeping some 300. I gather that's roughly the inventory for the federal government right now. And I believe there's a repair bill outstanding that is somewhere around $3.5 billion, correct?

[Tim McGrath]

That's correct.

[Garth Turner, Conservative, Halton, ON]

How the heck are we going to finance that at $200 million a year?

[Tim McGrath]

That's the challenge we have. We don't feel, unless we go and make application and submissions to Treasury Board and ask for that money, that.... When we're competing with other priorities of government, it's probably not of the highest priority.

So we have to look at other ways, and one of them is certainly the Way Forward initiative we've undertaken to improve our own cost-efficiencies. We're hoping some money will come from that. We also have an ongoing national investment strategy that does give us funding.

But we are short. There is a gap of around $200 million a year.

[Garth Turner, Conservative, Halton, ON]

Right. And that's a huge gap. Obviously it's going to take you 20 years to catch up--if nothing else falls apart right now, right?

[Tim McGrath]

Correct.

[Garth Turner, Conservative, Halton, ON]

And that's not likely to happen.

How bad is some of the inventory? How critical are some of these problems? Are we having to take space off-line because it's just not habitable?

[Tim McGrath]

West Block is probably a good example of space that needs to be taken off-line because you can't get to it soon enough. There are other buildings. There are a few buildings in Ottawa that will be taken off-line before we get to those critical issues.

So there are buildings. Our inventory is probably in better shape than other custodians'. We have just a portion of it. There's also the Department of National Defence, and the lab situation in the country. There is an infrastructure issue with government infrastructure.