Special Committee on Cooperatives Committee on July 27th, 2012

[The Chair, Conservative, Blake Richards]

Thank you very much.

We'll move now to Mr. Boughen.

You have the next five minutes.

[Ray Boughen, Conservative, Palliser, SK]

Thank you, Chair.

Let me welcome our guests here this morning and thank them for sharing their expertise with us.

Listening to what you've shared with us earlier, Peter, can you put a little more meat on the bones about how the kitchen table evolved into the organization it is today, the ups and downs, and certainly the successes?

[Peter Harty]

The first co-op that I spoke of, south of Calgary, had a pipeline going through the area that actually exported gas to California. The local farmers wanted to know why, if we're exporting Alberta gas, they couldn't have access to it. Some of the people who actually worked for the companies and had some experience in pipeline construction got together and said that if they could get a contract with a company that would buy their gas, they could distribute it to the people in the area. It took a while, but they were able to get it started. In fact, at that time, some of those original people had to put up personal guarantees. For example, on a $10,000 project one of them put up a $5,000 personal guarantee to get money to get that started.

After the first one got started, their neighbours would say, hey, you guys got gas and we want it too. They'd go to them for advice and over the first eight or nine years they formed up to about 25 co-ops basically in southern Alberta, mainly in the Calgary east area. They formed small co-ops but for a lot of them, when they went to the government, the latter would say that's too big an area and that they couldn't service it. So their franchise area was cut in half from what they were applying for. It took time to get even the government on board, but eventually there were enough of them going that they said it looked viable and they'd help.

[Ray Boughen, Conservative, Palliser, SK]

Since then you've moved into the electronic game with the reading of metres with no wires attached?

[Peter Harty]

Yes.

As I mentioned, a year or two ago we got approval to do the wireless reading of the metres. Right now we're reading about 40,000 metres.

Some of the co-ops have a hand-held device whereby they can drive down the road and the operator can push a button and read the metres, say, two miles on each side of that road and it goes onto his laptop. Others are flying over their area in a plane and reading the metres from the plane. Then there are others who have the wireless Internet system whereby they obtain the readings of the metres through the Internet.

[Ray Boughen, Conservative, Palliser, SK]

Neat stuff.

Thank you.

Nigel and Dale, how do you measure success? You started as a small organization and you've grown. What factors do you look at to say that you're a success here but not a success over there, that you should be putting more money into other credit unions or co-ops that may be struggling? Could you let us know what your views are on that?

[Nigel Mohammed]

I mentioned earlier that within the mission of the Assiniboine Credit Union there are really three key stakeholders that we use to measure our success. That comes down to our members, our employees, and the community that we serve.

The way we measure our success as a financial cooperative is by using, what we call internally, “a balanced scorecard approach”, where we have a number of indicators, with the financial one being only one of those indicators, whereby we would establish targets and set objectives for achieving everything from growth to profitability, efficiency, and delinquency asset quality—all of the usual financial indicators. But we also have a mandate and a responsibility to ensure within the organization things like employee satisfaction and whether our employees' profile represents the community that we serve in terms of diversity. We also want to measure our carbon footprint as a company, the type of branches that we build, whether in fact they are environmentally efficient, using recyclable materials, and so on. And in terms of our procurement policies, we want to measure whether we're purchasing from socially responsible vendors, using local resources, and so on.

A very short answer is that our balanced scorecard approach looks not only at indicators, including financial ones, but also at how we make a difference in the community through our partnerships, as well as within the company in terms of our employee engagement and representation reflecting the community demographics. As well, we look to ensure that how we lend our money—in terms of my specific goal—is making not only an economic impact but also a positive social and environmental impact in the communities we serve.

[The Chair, Conservative, Blake Richards]

Okay, thank you very much.

That's the end of that round.

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

[Malcolm Allen, NDP, Welland, ON]

Thank you, Chair, and thank you to all.

To Mr. Harty and Mr. Crush, do you have competition in Alberta for gas in the rural areas? We end up with Enbridge in my neck of the woods—not my favourite guy in the world. But are you competing against any of them in rural areas? Where I live in the city, I have Enbridge. I have a rural property, and Enbridge won't give me the time of day. It's a long pipeline from Alberta to my place in southern Ontario, so I'm not going to be your customer, unfortunately.

[Peter Harty]

Well, 50 years ago the private companies of the day picked the small towns, the cities, the concentrated areas that were close to their pipelines. They served them. The areas that were uneconomical, they didn't serve. So when the co-ops were formed, the Government of Alberta gave franchised areas. Where the ATCO of the day was serving, they got a franchise for that area, and then the co-ops were beside them. If a load is over 10,000 gigajoules, even if it's in their area, we can bid on it; if it's in our area, they can bid on it. But for loads below that amount, we have a franchised area that we have to serve, and they have their franchised areas.

[Malcolm Allen, NDP, Welland, ON]

You're a federated system, so below you are individual co-ops.

[Peter Harty]

That's correct.

[Malcolm Allen, NDP, Welland, ON]

I was looking at you on the web, where I see there's a large number of them. I didn't get a chance to count them all, but just flew through them very quickly. There's a fair number of them. So when you look at that infrastructure that's in the ground—because clearly, some of it's been in the ground now for 50 years—what is the model you use for financing, when it comes to renewing or repairing or doing that? Is each individual co-op responsible for its area, or do we do it in a large scale under the umbrella of the federation?

[Peter Harty]

Each co-op is responsible for their area. They set their own rates. They carry their own reserves. They have a limit. If somebody wants to build a new house and have gas to it, they have an amount that they pay for a connection. If the service is more than that, as I said, the government has a grant that splits the cost above that basic price, which is now about $5,500.

For expansion, we have reserves and we can get sharing grants. But it's limited to the amount that's available each year. If the amount that is applied for is greater than the amount available, then it's proportionate to what there is.

[Malcolm Allen, NDP, Welland, ON]

There still is today this combination of the co-op working with the provincial government—to certain limits and levels, but there is still this financial tie between the two.

[Peter Harty]

Yes.

[Malcolm Allen, NDP, Welland, ON]

Mr. Mohammed—and I'm going to use Mr. Harty as an example—I refer to the comment you made earlier in response to Mr. Lemieux's question about financing in sole-proprietor enterprises or even small incorporated businesses versus the co-op model. You talked about how in the co-op model, the decision-making process is spread out, if you will, because it's a democratic process with the co-ops, and if I'm a sole proprietor, I make the decision. If want to go ahead, I go ahead.

I'm not picking on you, Mr. Harty, but I'm using the example of you and your group when your decision-making body said no to wireless Internet. Now, if the board had thought that folks were going to go for this and had come to you for money and said, “We want to do rural wireless broadband—we want to follow the model that we were successful with in the co-op in gas distribution,” when you're looking at that, you have two things to consider, isn't that right? You have a board, and you probably would ask them, “Have you made the ultimate decision or are you simply out there looking for something?”

Is that part of the process that you would look at as a lender, as to what happens? Clearly, if you'd said yes to their suggestion, you'd have found out later on that actually their members had said “No, thank you”.

[Nigel Mohammed]

It's a good example. It's a classic example of what we said earlier about almost normalizing this structure, called the co-op structure, within the financial sector. There seems to be such ambiguity about the decision-making process and how decisions are made within co-ops that traditional banks or lenders, and even some statutory government boards, such as the BDC, because of their unfamiliarity with the decision-making process, may feel that there is more risk attached to it.

If a business, as you've just expressed, comes to us for financing, we focus on two things. One is the viability of that business idea and whether the numbers make sense. The other important aspect, of course, is security.

Peter mentioned earlier, in his example, that one of the individuals has to provide a personal guarantee for $5,000. If a lender is satisfied with the viability issue and the business case, then the question is about security. Lenders want to tie in someone or something, in terms of a guarantee, even if it's an unincorporated company. With a co-op structure, there are a number of owners. Therein lies the challenge for a traditional lender, who says, “I'm going to have a hundred personal guarantors, because they're all legally owners of this co-op”.

That is a role that perhaps the government can play. In the absence of having each individual personal member provide a guarantee for security purposes, perhaps that's the role the government can play. It can provide a loan guarantee to negate the need for individual members providing personal guarantees for a start-up or for an expansion project.

To your question, we would assess the viability, the business case, and of course, the collateral. But before any decision were made and executed legally, in terms of a document, we would need to know that resolutions to enter into that legal contract with the co-op had been passed appropriately. That would mean a board decision in most cases.

[The Chair, Conservative, Blake Richards]

Thank you very much.

That concludes that round. It also will conclude our panel this morning. We appreciate all three groups for your contribution. It's been very informative. We appreciate your testimony and your answers to the questions.

I'll now suspend the meeting.

[The Chair, Conservative, Blake Richards]

I call the meeting back to order.

I apologize that we're a little late getting started, but we're having some technical difficulties with our video conference. It's being worked on as we speak. We're hopeful that by the time the other witnesses are required, they will be available and there will be no further difficulties with the audio.

We have with us Ms. Jodie Stark, the vice-president at Concentra Financial Services Association. Then, if we're able to get the technical difficulties worked out, we'll have the Community Health Co-operative Federation Ltd., with Mr. Tim Archer and Patrick Lapointe. Hopefully, we'll be able to get this sorted out and have their testimony as well.

Ms. Stark, you have up to 10 minutes.

[Jodie Stark, Vice-President, Legal and Corporate Affairs, Concentra Financial Services Association]

Thank you.

Mr. Chair, committee members, my name is Jodie Stark, and I'm vice-president of legal and corporate affairs at Concentra Financial. Our head office is located in Saskatoon, Saskatchewan. I'm please to have the opportunity to present to all of you today.

Concentra Financial is a successor of the Co-operative Trust Company of Canada, which has been operating since 1952. Concentra Financial is the only federal retail association in Canada operating under the Cooperative Credit Associations Act. Concentra has the broad powers of a national bank and is federally regulated by OSFI, CDIC, and FCAC. Concentra was designated as one of Canada's 50 best managed companies for the ninth consecutive year in 2012, and employs 287 staff across Canada.

Concentra exists to enable credit unions to optimize their financial performance and to provide full service offerings to their members. Recently, the federal regulators have expressed concerns that regionally based credit unions may be at greater risk than banks, as their operations are local and subject to the economic conditions within that region. Concentra is able to mitigate that risk, by acting as a financial intermediary through offering syndicated loans and investment opportunities for mortgage pools to credit union partners, which in turn diversifies their investment portfolio. In addition, Concentra offers advisory services to assist our credit union partners in managing their operations. We also operate a liquidity bulletin board, which allows credit unions the ability to post and acquire liquidity when it is available within the system.

Concentra Financial's wholly owned subsidiary, Concentra Trust, provides trustee services to almost 80% of Canada's credit unions outside of Quebec, so that registered-plan programs can be offered to credit union members. The credit union system supports the initiatives of the federal government in developing these savings programs so that Canadians can save for the future and be self-sufficient. Concentra enables credit unions to service these registered programs. Concentra Trust also provides trust and estate services to members of credit unions. Concentra's profits are returned to the system through charitable donations to community-based initiatives across Canada and through dividend payments to its owners, who are credit unions, centrals, and other cooperative entities.

SaskCentral has provided to you a brief that outlines the statistics showing the strength of the credit union system in Saskatchewan. I'd like to take this opportunity to share with you the importance of credit unions and cooperatives to Saskatchewan residents.

Before the formation of our province, our land was populated by first nations, Métis, and Inuit. These cultures were governed primarily by the same principles as today's cooperatives, with an emphasis on self-government and self-sufficiency. It has been said that they were the first cooperators to exist in North America.

By 1910, the first credit union in western Canada was developed in Wapella, Saskatchewan. From there, the cooperative movement blossomed and provided insurance, financial services, and retail products. Throughout the Great Depression and the drought of the 1930s, consumer and producer cooperatives ensured the survival of many Saskatchewan communities.

In 1928, the Saskatchewan Co-operative Youth Program was formed. Remarkably, that youth camp continues even today, and my daughter attended their program just last summer. The Federated Co-op was also formed that same year, and is now one of the most profitable businesses in Saskatchewan.

One of the advantages that cooperatives and credit unions have over larger traditional institutions is the ability to be innovative and creative in finding solutions. The Co-operative Commonwealth Federation, or CCF party, formed in the 1930s, was instrumental in the development of the universal medicare program, which was launched in our province in 1962. Coincidentally, my family was one of the first in Saskatchewan to be issued a health card at that time.

The Centre for the Study of Co-operatives was established at the University of Saskatchewan in 1984. In 1985, the first debit card in the world was piloted in Swift Current, and I recall my father explaining to me how to use the new ATM machine at our local credit union. He told me that electronic banking would change the way we do business, and how true that is. Three years later, my father walked me down the aisle, and I was wearing a wedding gown purchased from our local Pioneer Co-op.

Credit unions and cooperatives not only provide innovation to benefit Canadians, but, for many communities, they also provide the infrastructure. From gas stations to grocery stores and retail outlets to credit unions, cooperatives are the very heart of so many communities. Many of my friends graduated from college and went on to be employed by cooperative entities, enabling them to remain in their home province. I do my banking at a credit union that is managed by people I personally know and trust. My groceries and fuel also come from co-ops. In Saskatchewan, credit unions build buildings and operate the only financial institution in many communities. They sponsor sports teams and arenas, and almost every major centre has a credit union name attached to it.

It is no wonder that 5.2 million Canadians are members of credit unions, which represent community, giving back, and a sense of belonging.

Not only have credit unions been instrumental in establishing an infrastructure in developing nations, along with the early settlers in western Canada, they have also survived and flourished in the face of economic crises. From the stock market crash in 1929 to the recent economic crisis in 2008, banks and shareholders suffered great losses. However, credit union members took comfort in knowing that their money was safe and being managed locally by people they know and trust.

Scandals continue to erupt, involving executives of large banks and investment firms, something that is unheard of in the credit union system. Saskatchewan credit unions do not rely on government funding or bailouts, and these credit unions provide a 100% guarantee on members' deposits. Credit unions also offer financing to farmers and small business owners when traditional banks turn them away.

Cooperatives ensure that cultural traditions are sustained, while still engaging the youth, and they provide opportunities for development of first nations communities, small towns, and large urban centres. They are all encompassing and are embedded in the very fibre of what makes Saskatchewan the successful province it is today.

It is no coincidence that Saskatchewan has grown stronger in the last few years while many other provinces have struggled to survive the crippling economic crisis. Our reliance on our own people—our greatest natural resource—guarantees resilience in the face of diversity. It is our spirit of co-operation and self-sufficiency that creates our own success.

On behalf of Concentra and our partners in the credit union system, I ask the federal government to support the unique governance principles that make up the framework of credit unions. Now that we have the ability to form federal credit unions, I ask that the government refrain from considering and treating these credit unions simply as banks. To do so would be to threaten the very structure that has provided members with stability in the system for the last century

I also ask that the government consult with the credit union system on all matters relating to financial legislation. Although we have 5.2 million members, we are not always recognized as having a collective voice. However, we do have trade associations that represent us and are available for consultative purposes.

It is critical that we be considered when legislation is being developed or amended. I will provide a more detailed brief for this committee's review, which is being prepared.

Mr. Chair, Concentra Financial wishes to thank this committee for undertaking this study in recognition of the International Year of Cooperatives.

In conclusion, I want to thank you for this opportunity to provide a Saskatchewan perspective, and I would be happy to respond to any questions you might have.

[The Chair, Conservative, Blake Richards]

Thank you, Ms. Stark. I appreciate that presentation. We look forward to giving you the opportunity to answer some questions in a few minutes.

Hopefully our technical difficulties have been worked out. We believe that they have.

Can you hear us, Mr. Archer, and Mr. Lapointe?

[Tim Archer, Executive Director, Community Health Co-operative Federation Ltd.]

Yes. Can you hear us?

[The Chair, Conservative, Blake Richards]

We certainly can. That's great. We're glad to have you with us.

From the Community Health Co-operative Federation, we have Mr. Tim Archer and Mr. Patrick Lapointe. Thank you for joining us.

You have the floor now, for 10 minutes, to make an opening presentation to the committee.

[Patrick Lapointe, Member, Community Health Co-operative Federation Ltd.]

Thank you for the opportunity to present to you.

We're representing the Saskatchewan Community Health Co-operative Federation. We're a federation of Saskatchewan's four cooperative community health centres.

The community health centres are not-for-profit, citizen-owned health centres. We provide multi-disciplinary primary health care services to about 70,000 people in the province of Saskatchewan. We have a particular focus on the vulnerable in our society: the poor, first nations persons, the frail elderly, and persons with disabilities.

We've been in operation since the introduction of medicare in Saskatchewan.

We're not only here to talk about the cooperative health centres in Saskatchewan but also about cooperatives in Canada that provide health care services. There are about 117 cooperatives in Canada offering services that range from health centre services like ours to home care service delivery and paramedic services. About 65% of these organizations operate out of Quebec.

There are three provincial federations of health care cooperatives. Two of them are centred in Quebec. One represents home care service delivery. The second represents paramedic services in Quebec. And then there is our federation, representing the health centres.

We believe that the cooperative model has great potential for the provision of health care services across Canada. In Canada and other countries, cooperatives have had great success in the delivery of health care services.

While there are only 117 cooperatives in Canada, in other countries in the world, such as France, Japan, Spain, Scandinavia, and in South America, they are very involved in the delivery of a broad range of services. I'll give you a sense of the breadth of the services that health care cooperatives are engaged in.

There are professional group cooperatives where groups of physicians are involved in the direct delivery of planning health care services through the cooperative model. In Spain and Japan, there are hospital services delivered through the cooperative model. In Scandinavia, there is often long-term care delivered through the cooperative model. There are other multi-disciplinary health care centres in other countries of the world like ours. There are holistic health centres. Frequently, health insurance is provided in the cooperative model, and in fact, in Canada, The Co-operators market a multi-dimensional health insurance that people purchase across Canada.

Finally, cooperatives are very much involved in special needs housing, including housing for the elderly, long-term care, and housing for low-income persons.

We believe the cooperative model is an ideal vehicle to help health care delivery into the next millennium. And Tim is going to talk to you a bit about what kinds of opportunities and strengths we bring to the table in the delivery of health care.