Evidence of meeting #4 for Special Committee on Cooperatives in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was cooperatives.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Jeff Malloy  Chief Executive Officer and General Manager, Acadian Fishermen’s Co-operative Association Ltd.
Bryan Inglis  Vice-President, Agriculture Division, Co-op Atlantic
J. Tom Webb  Adjunct Professor, Sobey School of Business, Master of Management in Co-operatives and Credit Unions, Saint Mary's University
Dave Whiting  Executive Director, Prince Edward Island Co-operative Council
Dianne Kelderman  President and Chief Executive Officer, Nova Scotia Co-operative Council
Pamela Folkins  General Manager, SNB Wood Co-operative Ltd
Clerk of the Committee  Mr. Paul Cardegna

10:40 a.m.

Conservative

The Chair Conservative Blake Richards

Your time is about to expire.

10:40 a.m.

Conservative

Ray Boughen Conservative Palliser, SK

Time has expired—darn, I shouldn't have asked.

10:40 a.m.

Conservative

The Chair Conservative Blake Richards

Your time now is officially up.

We will move to Mr. Harris for five minutes.

10:40 a.m.

NDP

Dan Harris NDP Scarborough Southwest, ON

Thank you very much, Mr. Chair.

Thank you to all for the exceptional testimony you've given already this morning.

Mr. Inglis, in your opening remarks you said, as part of your conclusion, that now is not the time to take the foot off the gas pedal. With the cuts to the CDI, it would seem that not only have we taken the foot off the gas pedal, but we've actually slammed on the brakes. This is the case of a successful program that's been bearing fruit. We believe that it should continue to be allowed to bear fruit and to grow new cooperatives.

You've mentioned several of the challenges new co-ops face. Dr. Webb, you also mentioned those.

You mentioned also a misunderstanding about the funding of co-ops. Is this something that exists primarily in the financial sector? Is there even a misunderstanding among the credit unions from time to time? Could you elaborate on that a little bit?

10:40 a.m.

Vice-President, Agriculture Division, Co-op Atlantic

Bryan Inglis

Yes.

It's mostly the financial side and the capitalization side of the funding of co-ops. And it is in the credit unions as well as on the traditional banking side. To give Farm Credit their due, Farm Credit is probably one of the stronger ones. Certainly in Atlantic Canada, in my experience, they've been very good at recognizing cooperative lending, and they understand it. I think it's fair to say that Farm Credit probably has been very good if you fit into their agricultural model. If you're into housing cooperatives or into consumer cooperatives, then of course Farm Credit doesn't lend to them, so there is a gap there.

Yes, I think we have taken our foot off the gas pedal. I appreciate that maybe things need to be modernized. Maybe there needs to be an adjustment, but to cancel it 100% I think is just wrong. We should have looked at an opportunity to maybe have it evolve and find a way to strengthen it so that we can grow our rural economy in Atlantic Canada.

I keep saying “rural economy”, because I think there's a huge need for that. We have urban co-ops. We have some real needs and opportunities to develop some urban cooperatives around Atlantic Canada. But I truly believe that through cooperatives we can strengthen our rural economy. Now is the time to not take our foot off the gas pedal, so to speak.

10:40 a.m.

NDP

Dan Harris NDP Scarborough Southwest, ON

No, we certainly agree with rural cooperatives, especially in the area of food, for instance. We heard from Gay Lea Foods, the last time we were seeing witnesses, about the investments they've helped to make in local communities to keep grocery stores so that people can continue to buy food. It's the same situation in rural communities all over the country—if one business pulls out, the community has to come together or the community won't exist any more.

Now, you mentioned housing co-ops during your opening remarks and that you don't spend much time talking about that sector. That one's of particular importance to me, being in an urban riding. We have several housing cooperatives in my riding and hundreds of units, some of which are subsidized. You mentioned housing for the elderly and for people with disabilities. What kinds of programs have you been offering?

10:40 a.m.

Vice-President, Agriculture Division, Co-op Atlantic

Bryan Inglis

Well, I'm very excited about this. Again, it's something we don't talk a lot about. It's something we started back in the seventies when one of our senior management went over to Europe and brought back the fact that we should develop co-op seniors homes. Working with CMHC back at that time, we managed to put some models together in Atlantic Canada, where we have some very strong seniors cooperatives.

However, we've moved beyond that. We have two projects on the go. One of the latest projects we call Tannery Court. We've recognized that there is a need for what we call the working poor: single people who work but barely make enough money to provide proper housing for themselves. So we've put up five models in New Brunswick where these people can live. There's a 400-square-foot apartment. It is tiny, but it's safe, and it's clean. They're cooperatives. It's a great opportunity to grow that model.

Another one is that we're finding that there are a number of elderly people in rural communities who have money. They have retired back to their rural communities, and they want to take their money and invest it in a group whereby maybe ten elderly couples come together and form their own cooperative. We have one in St. Andrews, Nova Scotia.

10:45 a.m.

NDP

Dan Harris NDP Scarborough Southwest, ON

Sorry, but I have to cut you off so that I can get in one last question. As a follow-up on the rural, if you want to share that information with the committee, please do so.

Now, you mentioned CMHC. We've heard from cooperatives already that they're having trouble with lending and extending through CMHC and with the interest rates they're being asked to pay. Have you experienced the same kinds of problems?

10:45 a.m.

Vice-President, Agriculture Division, Co-op Atlantic

Bryan Inglis

Yes. Our program has been diluted significantly compared to back when we really had a strong relationship with them. We have done some fabulous projects with them over the last probably 30 or 40 years, but those programs have pretty well dried up.

10:45 a.m.

Conservative

The Chair Conservative Blake Richards

Sorry, the time has expired on your questioning.

We'll now move to Mr. Lemieux for the next five minutes.

July 24th, 2012 / 10:45 a.m.

Conservative

Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON

Thank you very much, Chair.

Thank you to our witnesses for being here.

I'm really glad that we're focusing on co-ops. I think there's important testimony that's coming out that Canadians need to be aware of, and this is a good forum for them to learn about the strength of co-ops and how well they're doing across Canada. Certainly some of the witnesses we've heard from have indicated that co-ops are in a strong position. They're more than twice as likely to survive an economic downturn as a regular business. Asset values are high, revenues are high. We had a witness from a financial co-op at our last meeting saying their balance sheet has never been better.

This leads me to want to correct something that Madame Brosseau said. She said the government has cut funding. I think it's fair to point out that funding wasn't cut. There was a program that reached its natural conclusion, its natural end. It had been in place for ten years, and I think it's fair and reasonable that Canadians expect governments to review their programs to determine if those programs have achieved their aims and goals. So the funding wasn't cut. The program just came to a natural conclusion, and it wasn't launched again for another five years. It's important to point that out, because there is a difference between the two.

I think it's important that the testimonies we're hearing, which is where I started my comments, actually substantiate that co-ops are doing very well. They've been doing very well over these past five to ten years.

I want to follow up on something Mr. Webb was saying. Mr. Webb, you and other witnesses, like Mr. Inglis, were talking about some of the credit challenges that face co-ops--for example, when you seek loans or financing to expand operations and that type of thing. I know you're doing a research program on accounting within co-ops, so I wonder if you could explain what the challenge is here. Does it have to do with the members owning the assets, and not necessarily the co-op?

I have a second question I'd like to ask quickly. Do financial co-ops—people who are co-ops themselves and who are in the business of lending money—have the same challenge when they look at loaning money to co-ops, or do they see co-ops completely differently? Do co-ops have better access to funding through a financial co-op because they are a co-op and they understand exactly what the challenge is?

Thank you.

10:45 a.m.

Adjunct Professor, Sobey School of Business, Master of Management in Co-operatives and Credit Unions, Saint Mary's University

J. Tom Webb

Let me respond briefly to that. The biggest part of the challenge is that many people in financial institutions do not understand what a cooperative is or how it operates or how it could be successful, because it doesn't fit the business model with which they are familiar. So you have that lack of understanding. That also extends to many people who work in government departments. Many of our people in government departments have no idea what a cooperative is or how it works or how it could be a successful business model. That's part of the challenge.

The second challenge is the one I referred to earlier, where Revenue Canada rules around RSPs make it very difficult to invest in cooperatives. So I may have money I would like to invest in cooperatives, but it's not very easy to do so.

When we get to financial cooperatives, you're absolutely correct, the financial cooperatives do understand the cooperative business model much better. But you need to remember that the financial cooperatives in Canada started out not as financiers of cooperative businesses, but rather as consumer finance organizations. Credit unions were created because farmers and ordinary people couldn't get a loan from the bank for a home or for a small business or for a car, or whatever; they didn't qualify. So they formed credit unions in order to solve a market problem they were facing, which was that the banks didn't want to respond to them.

10:50 a.m.

Conservative

Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON

Credit unions have moved far beyond that now. Today they're large, they have lots of assets. The question I'm asking is, because they're co-ops and because they find themselves where they are today with strong balance sheets, and because they do lend money now to businesses and other co-ops, will they more easily lend large capital amounts to other co-ops? Or is this a more fundamental problem in understanding the balance sheets within co-ops themselves?

10:50 a.m.

Adjunct Professor, Sobey School of Business, Master of Management in Co-operatives and Credit Unions, Saint Mary's University

J. Tom Webb

No. I think they do lend far more easily to other cooperatives. You do have a regulatory problem. In Spain, for example, the Bank of Spain moved in to tell the Caja Laboral Popular Coop de Crédito, which is a very strong and very highly rated financial institution, that they felt they had too much of their money invested in co-ops, and that they really shouldn't be investing in co-ops nearly so much. So they persuaded them to invest in nice triple-A-rated stuff like some Lehman's stock, which they held when Lehman's went under.

Regulatory pressure is a problem, because the regulators are not particularly good at understanding the cooperative business model and how it works and why it works. So they put pressure on cooperative financial institutions, whether they're in insurance or credit unions, to be very careful about why they were loaning to these co-ops. But they don't go and put pressure on the banks to say how come you're not making 10% of your loans to co-ops. There is an imbalance in terms of the situation.

I have a final comment. I think that co-ops also have failed to define what I would call a cooperative capital model. In other words, I think cooperatives offer a very viable breed of capital people can invest in, which I would call cooperative capital. They haven't done a very good job of defining that model or marketing that model, but I think there's a lot of potential in it. Again, there is also a government regulatory role in making it easier for them to do that, and making it possible for them to do that.

10:50 a.m.

Conservative

The Chair Conservative Blake Richards

Thank you, Dr. Webb. Time has well expired, but I did want to let you have a chance to answer that.

We'll move now to Mr. Allen for the next five minutes.

10:50 a.m.

NDP

Malcolm Allen NDP Welland, ON

Thank you, Mr. Chair.

Thank you to all.

Mr. Malloy, if I could start with you, I want to ask you about something I believe I heard during your presentation earlier, and you can help me if I misheard. When you talked about your seafood cooperative you said that if fishers in P.E.I. didn't have the cooperative they basically would have no place to sell their catch. I know specifically you're talking about shellfish, primarily lobster and crab. Is my understanding correct on that?

10:50 a.m.

Chief Executive Officer and General Manager, Acadian Fishermen’s Co-operative Association Ltd.

Jeff Malloy

Yes--this year in particular. Most years it's obviously not an issue. In terms of the upcoming season starting August 9, because of the situation in the U.S., with their season starting a month earlier than it really has ever started before, there's a glut in the market. There were several meetings last week in New Brunswick, for instance, with a lot of the bigger processors, and they're not even going to buy from that season this year. That's certainly going to put a downward pressure on the price to the fishermen, but it will also affect the ability of some fishermen to even have a home for that product. Right now there are only two processors, both of us co-ops, on P.E.I. that even process from that season. If it weren't for us there certainly wouldn't be a home outside of P.E.I. for that product. This year in particular it's good. We're probably fielding a lot of questions right now about joining this type of deal. It will be interesting in the next few months, for sure.

10:55 a.m.

NDP

Malcolm Allen NDP Welland, ON

I think what your story contrasts is two business models. One business model, which is investor-oriented, would say there's a glut in the market and the prices are down, so I don't need to buy any this year, so you're on your own, folks; tie your boat up, do whatever you need to do, we don't really care. But in your particular case, they are basically owner-operators and they operate their own boat and they're owners through shareholders of the seafood company that made a collective decision that somehow we have to balance the risk in the management among all of us and we're going to take that catch and work through that particular problem, rather than just simply somebody offloading a problem to somebody else and say see you later.

I want to get to you, Mr. Inglis, because you talked earlier about not taking your foot off the pedal. With the greatest regard to my friend Mr. Lemieux, who says the program came to an end.... He's right, and I don't dispute that when he talks about whether funding has been taken away or not; it was a program that ended. In Mr. Lemieux's words it was “successful”. I don't think people doubt it. And he referred to some success stories. But it seems to me you were saying, sir, and help me with this if you can, that we could continue to be even more successful if we were to revise the program, enhance the program, change the program, innovate with the program, not just say the program is over and we have nothing else to offer. Is that what you're helping us understand?

10:55 a.m.

Vice-President, Agriculture Division, Co-op Atlantic

Bryan Inglis

Yes. I believe now is a great time to enhance, to modernize. There is nothing wrong with the program ending. We have this happen all the time. The federal government has had lots of subagreements over the years that have evolved, right?

I think we should learn from the past. We've seen that the cooperative has had a very strong presence in Canada. There's an opportunity to modernize it, to evolve it into something new, and to learn from the past. Let's jump-start to the next level. There's a local food movement. The values and principles of younger children are very cooperative-based. This is a great opportunity to enhance what was already there.

So yes, I respect the fact that they ended it; I think actually, probably.... Once it's ended, that's great, but let's put together a nice, modern, enhanced program that fits today's world.

10:55 a.m.

NDP

Malcolm Allen NDP Welland, ON

I was really interested earlier when you talked about rural communities. I know that in the agriculture committee we talk about rural communities because they tend to be farmer-based. In a lot of cases, that tends to be the piece of the economy that is central to rural communities in a lot of provinces—not all, obviously, but in a lot of them. Sometimes it's mining, sometimes it's forestry, sometimes it's fishing. In a lot of places, though, it is farming.

You articulated earlier the need to do certain things. You talked about a feed mill in your presentation. In view of that...

I know that my time is going to run out. Mr. Richards will tell me pretty soon that my time is almost done.

10:55 a.m.

Conservative

The Chair Conservative Blake Richards

You're correct.

10:55 a.m.

NDP

Malcolm Allen NDP Welland, ON

Can you lay out for us what you'd like to see when it comes to the Canada Cooperatives Act and what kind of changes we'd need that would enhance the ability of rural communities to not only sustain themselves but indeed perhaps even grow a bit and not continue to shrink the way we see them across the country?

10:55 a.m.

Vice-President, Agriculture Division, Co-op Atlantic

Bryan Inglis

The opportunity is to allow programs to help capitalize cooperatives in rural communities. We're seeing a lot of people who want to go back to the land. We can see the local food movement, and we can see it's not just farming. People who are retiring in rural communities want access and want to create their own seniors housing cooperative for small groups. They want to be able to....

I call them “back-to-the-landers” almost. They're not just farmers. They're growing their own food. There are opportunities for cooperatives all across rural Canada. Actually, there are opportunities even in urban areas of the country. These people are getting together community gardens and they evolve into farmers' markets on that side. So there is a huge opportunity for this niche.

Again, that's why I think we should put our foot on the gas pedal and not take it off.

10:55 a.m.

Conservative

The Chair Conservative Blake Richards

Thank you very much.

Seeing that the clock shows it as almost 11 o'clock, we will now suspend for lunch and reconvene at one o'clock.

10:55 a.m.

Liberal

Mauril Bélanger Liberal Ottawa—Vanier, ON

Hold on, Mr. Chair. We are supposed to go until 11:30, if you look at the schedule.