Special Committee on Cooperatives Committee on July 27th, 2012

[Mathieu Ravignat, NDP, Pontiac, QC]

Mr. Marshall.

[Robert Marshall]

I think from the credit unions' perspective, and certainly from a smaller credit union's perspective, we're there to serve our local membership. We're not out in world markets trying to be creative or what have you. We understand our markets that we operate in very intimately.

What typically happens when you go through a boom and a bust cycle—when things are going south and they're not doing as well, or when things aren't so good and then other institutions start declining—is that people within our communities tend to migrate towards the credit unions.

I don't want to paint the picture that it's a lender of last resort. When times get tough, we're there. We may not be able to help in every situation, but we care about our communities and the people who make up our communities, and we want to see that everyone gets through it.

We'll certainly work with communities in that regard, but when times get a little tougher, we typically see a bit of a surge in our membership. We pick up a bit more business and so on.

It's that perseverance and intimate understanding over the last 60 years that I think has put us in the position we are in today.

[Mathieu Ravignat, NDP, Pontiac, QC]

Mr. Marshall, you touched on this idea of innovation and how maybe one of the differences is not always trying to be innovative. I don't know if you're familiar with

the Caisses Desjardins,

which is one of these incredible credit cooperatives in Quebec, and really across Canada now. It's quite innovative in a lot of the financial-based products that it offers to its clientele.

What I find interesting is that we think the major driver of innovation is necessarily competition. Do you have some thoughts on that?

[Robert Marshall]

I think competition will drive that creativity or innovation.

With respect to Desjardins, they are a very significant credit union in Canada and have substantial resources to be as innovative as they are. They're very cohesive in that aspect.

I think that's one of the downfalls of the credit union system in Canada, with the exception of Quebec; we may not be as cohesive in pooling our resources to try to achieve the same types of innovation. That's a lesson we're learning as we go along. We can do a lot better job of that, too.

[Mathieu Ravignat, NDP, Pontiac, QC]

Let's dig deeper on that point, if you don't mind.

Am I out of time?

[The Chair, Conservative, Blake Richards]

Sorry, your time has unfortunately expired.

[Mathieu Ravignat, NDP, Pontiac, QC]

Already. Okay.

Thank you very much, gentlemen.

[The Chair, Conservative, Blake Richards]

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

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Thanks, Chair.

And thanks to our witnesses for being here.

Actually, I want to provide a little bit of a preamble on how impressed I think each committee member is here by the strength of co-ops. We've been receiving a very positive and cohesive message from all of the different-sized co-ops involved in all of different sectors of the economy. The growth has been impressive. I'm thinking of growth in balance sheets. I'm thinking of growth in assets. I'm thinking of growth in membership. We now have 9,000 co-ops, with 18-million members across Canada. So it's very encouraging.

Of course, I think Mathieu mentioned that a co-op is more than twice as likely to survive an economic downturn or difficult economic circumstance as a business, which is also quite remarkable when you think about it.

I just want to touch on what Madame Blanchette-Lamothe was talking about because there was tough talk about the CDI, or the co-op development initiative. Just to correct the record, it wasn't cut, it wasn't cancelled. It just wasn't renewed. It's important to understand the difference because it's been running for two terms of five years, and it simply reached its natural conclusion at the end of its second term of five years. So it simply expired, like all programming does, especially when it's achieved its goals. This is, I think, what we have heard, as a committee, in terms of co-ops. They have grown. We had a witness here just yesterday, I think, saying that in Quebec over the last five years 595 new co-ops have entered the scene. That's astounding.

The challenge we have as government is that we find ourselves in a $23.5 billion deficit, which is roughly 8% to 10% of the revenues of government. This is a very important factor because difficult decisions must be made. I don't think anyone recommends running with a 10% deficit.

In fact, that is my question. I already know the answer, but I'll put the question to you, Mr. Marshall.

Do you operate at a 10% deficit? If you did, would your members demand that you rectify this situation, look at your expenses and balance that budget?

[Robert Marshall]

From a regulatory perspective, we wouldn't be able to sustain our business model in a deficit position. We have capital requirements that are actually increasing because of Basel III. We're held to those same standards in most aspects. So, no, we wouldn't be able to run a deficit at all.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

I suspected that. I think it's the same for Merv and Dan. Your association doesn't run at a 10% deficit. My guess is that if you did, your members would demand that it be rectified.

Just as your membership has one vote per member—one member, one vote—one Canadian over the age of 18 has one vote, too. We're responsive to Canadians, and this is what they're demanding. Difficult decisions have to be made, and all three of you know about difficult decisions that have to be made throughout the life of your particular groups and associations.

I did want to touch on education because I think it is really important. We've had a number of witnesses talk about education. I'm thinking of education of the public now. Canadians have a concept of a co-op. It might not be as expansive as it should be, and they certainly might not know the successes that I was just outlining and that we've heard about from you.

I'm wondering about your work with higher level cooperative associations, for example, the Canadian Co-operative Association. Is there basically a budget for advertising education, informing Canadians about co-ops, the success of co-ops, the strength of co-ops?

Just to give an example, I'm in agriculture. I'm watching the Dairy Farmers of Canada. They're running a very strong campaign to educate people about farmers, milk production, all of those types of things. I think it's paying off, as Canadians want to know more about local agriculture. They want to know more about Canadian farmers. They're open to this. I have a feeling they'd be very open to learning more about co-ops—what you bring to the table, what your strengths are, what your successes are.

I'll start with Mr. Marshall again. Do you have a budget for that or, in your discussions with higher entities, do they have a budget for that? And what do you think about that?

[Robert Marshall]

Locally, at our own credit union, yes, we have a budget set up to educate our members and potential members within our communities about who we are. It's a very difficult task, especially with non-members, to engage them and have them start to garner a better understanding. So it's a tough road.

In terms of our provincial representation with Alberta Central and with Canadian Central, I know they have some funds set aside for that. To what degree and such, I couldn't recite any facts. But I would be happy to get back to you with that as well.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Okay.

I'd just be interested in knowing what the initiatives are—

[The Chair, Conservative, Blake Richards]

Sorry, the time has expired.

If you want to get back to us with that information, Mr. Marshall, I'd ask that you submit that through me, through the clerk. We'll distribute it that way, if you can get us that information.

We now have Mr. Allen for the next five minutes.

[Malcolm Allen, NDP, Welland, ON]

Thank you, Chair.

I always love listening to my friend, Mr. Lemieux, explain about deficit financing and choice. But then again, it's about choices.

If my memory serve me right, the actual capital infusion into the CDI granting program is $4 million. Mr. Lemieux would make it sound as if it were $4 billion, with a b, rather than $4 million, with an m. Quite frankly, not to be trite, $4 million falls off the Minister of Finance's desk when he shuffles paper. So to suggest that somehow this is a driver of the deficit is a bit extreme, I think, from my friend. But he's certainly tried over the last three days to make sure that this gets inculcated into this piece, even though, for the credit unions, which are successful, to continue to be successful....

I might add, and I look to you, Mr. Marshall, that as a credit union, I think you pay income tax.

[Robert Marshall]

Yes, we do.

[Malcolm Allen, NDP, Welland, ON]

If you were more successful, would you pay more income tax?

[Robert Marshall]

Yes, we would.

[Malcolm Allen, NDP, Welland, ON]

You might actually offset the $4 million dollars he's looking for. It seems that it would be a small investment if he got $8 million back. That would help his deficit. I wasn't really sure about that, as I'm an auto worker, not a finance guy.

Mr. Rockel, I used to be an industrial electrician, so I get the wire thing. There were a couple times you said things about the apples. Just to crystallize that and make that clear to folks, you signed one heck of an agreement with, I think you said, Fortis, which said that you could actually do subdivisions. It's really unheard of for a rural operator, if you will, in the electrical system to be able to get a subdivision, because a line from house to house in a subdivision is exponentially shorter than a line from farm to farm in a rural piece.

I think you started to say things about your being like a shiny apple. Are you telling me that what's basically happening now is that the other utility companies are looking at you and saying that they'd love to pluck that subdivision back from you? And you can keep the wire out in the rural part, especially when you might be in areas where the customers are kilometres apart.

[Merv Rockel]

We're in the process of negotiating.

There are two major utility companies in rural Alberta. One is ATCO, and another is Fortis. ATCO has a different wire-owner to wire-owner agreement with their REAs.They can only service single acreages. They do not have the agreement to serve subdivisions.

Some of these REAs are small. There are only 150, and some are down to 80 people. The utility companies do the services for the REAs. Some REAs have bought their own equipment and diggers, and they operate just like utility companies. Others hire the utility companies to do it. Right now, some of these smaller REAs, if ATCO or Fortis were to buy them, would increase their assets and get a 9% return on them. If they have that money and put it in the bank, they would get only 1.5%. So it's to their advantage.

[Malcolm Allen, NDP, Welland, ON]

I'm not sure if it was you, Mr. Rockel, or Mr. Astner, who talked about having a micro-generation program on a farm, whether it be solar or wind, etc. You actually have the meter that goes in both directions to make it easy for those who don't understand it. Clearly, you must have an agreement with your supplier, your generator, in the sense of allowing folks to get back in and feed the line. If I have enough kilowatts on a farm or on my property, I can actually be a generator. In fact, I am a generator. I could be a net generator if I actually produced more than I consumed.

Do you have a direct agreement? In other words, if I bought property in one of your REAs and moved to Alberta tomorrow and set up that system, could I automatically get in, or is there a longer-term process for micro-generators?

[Dan Astner]

There's a restriction on the size of the micro-generator in that you cannot produce more than what you will consume over a given period of time.

In Alberta, all generation has to go through the Alberta electric system operator. They're the ones they are basically selling that energy to, unless it's contracted separately to a specific firm. All agreements and all flow of electricity has to go through the electric system's operator, and it's dealt with from there.

[Malcolm Allen, NDP, Welland, ON]

Not a net—

[The Chair, Conservative, Blake Richards]

Sorry, Mr. Allen, your time has expired.

[Malcolm Allen, NDP, Welland, ON]

—beneficiary.... It's done automatically?