Evidence of meeting #4 for Agriculture and Agri-Food in the 39th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was maintenance.
Liberal
Paul Steckle Liberal Huron—Bruce, ON
You say there was a $35 million shortfall in work not done that was charged for. Farmers paid $35 million, according to your statement this morning, for work that was never done.
Where is that money going to be recovered from? Are the railways going to have to come good for that? What's happened here? Obviously, when people are in default of something, a corrective measure has to be taken somewhere. How do you see that being corrected?
President, Farmer Rail Car Coalition
As I indicated, we have called for the Auditor General to look into this. Certainly we need some well-respected, independent body in this country to, first, look into why the $35 million wasn't spent, and, second, why the farmers of western Canada have been charged three times what they should have been. The $1,500 per car should have been enough to maintain the cars without having to pay the $35 million. So there are really two issues there: three times the amount has been spent, and we still have a deficiency of $35 million.
Conservative
Bloc
André Bellavance Bloc Richmond—Arthabaska, QC
Thank you for your testimony. In the letter you sent to the committee, Mr. Harrison, you speak of your disappointment in light of the government's decision to change the previous government's decision concerning the possibility of selling the hopper cars. You say that farmers should really understand what the repercussions of this decision mean for them both in the short and the long term. This is more or less what you tried to explain to us earlier on. I would like to have a clearer understanding of what the government decision could represent, practically speaking.
We know that when the government transferred the ports and airports, there was a deterioration of the equipment. This deterioration was due to the fact that the government was no longer maintaining them. This was not to the benefit of the community.
In the present case, I was wondering what the difference was and whether or not farmers were not concerned that if the government were to transfer the hopper cars, it would compromise their integrity.
President, Farmer Rail Car Coalition
Certainly we've looked at the airport transfer to not-for-profit corporations, such as we would be if we had gotten the asset.
As far as the integrity of the cars is concerned, we are the users of those cars. There was another study done by the grain commission showing that there is over $10 million in grain dribbling out the bottom of these cars on their way to export.
It's of great importance to the farmers of western Canada that these cars be well maintained. It's in our best interest, because it's our grain that is going to export. I think it's inherent in our business plan and in our maintenance plan. We had contracted AllTranstek, a company out of Chicago that manages the maintenance of 100,000 cars, to help us manage the maintenance. Then we were going to contract that out to the private shops and repair tracks. The railroads could bid on it. It would be put out for tender.
It's in everybody's best interest, for the safety of the car, for the safety of the travelling public, and for the transport of grain, that these cars be well maintained.
Did I catch your point?
Bloc
Claude DeBellefeuille Bloc Beauharnois—Salaberry, QC
Good morning.
I would like you to explain to me how a private company can do the job for less than the railway, as far as the hopper car maintenance is concerned. Where would the savings come from?
President, Farmer Rail Car Coalition
Right now the railroads have a monopoly on the maintenance. We are suggesting that in a commercial system, where they have to bid or compete for the business, history has demonstrated that sometimes prices come down.
Our figures are based on the North American market. We've talked to other car owners about maintenance. It's not as though we picked the $1,500 per car, per year out of the air; it's a hard number. This study backs it up. We're confident that by going to the market, by being nimble and robust and quick to act, and with competitive bidding, we can do it for that amount.
Did you want to add, Bernie?
CEO, Farmer Rail Car Coalition
We're confident, based on our research, that our business plan would have been able to maintain the cars on a long-term basis for about $1,500 per car, per year. There is evidence throughout the industry. Whether or not the railways could match or exceed that is a question whose answer we don't really know, because we've never had access to their information; they have never given us the data. We have a report that looks at one particular year. It certainly might be possible the railways could do it for less, but we don't have the data to be able to support that or to refute it, quite frankly.
President, Farmer Rail Car Coalition
I might add that the Government of Canada owns these cars. You would think they could go to the railroads and get the maintenance records. When you go to your garage about your automobile and ask what they spent on your car, they'll give you an itemized list. The federal government has gone, and Saskatchewan and Alberta. They will not tell you what's been spent on those cars. They say there are no records.
How can you run a business the size of CP and CN and not have accurate maintenance records? That's what we're asking. Some of this is done in this report, and that's why we think the Auditor General's is the right organization to examine this and put the facts on the table, and collectively we'll all benefit from it.
Conservative
NDP
Alex Atamanenko NDP British Columbia Southern Interior, BC
Thanks very much for appearing, gentlemen.
I've been following this whole file for a little while. My party also supports having the Auditor General investigate this apparent misuse of funds, and hopefully that will happen and we'll get some answers.
Right here we're trying to see the best deal for farmers at a minimum cost to the taxpayer, if we can do this efficiently.
My question is this. I understand, according to your calculations, we can maintain these cars, if the FRCC was to take them over, for around $1,500 per car, per year. This would, in effect, strengthen our rural communities by providing contracts to different maintenance companies. I just wanted to clarify that.
My concern is that when your priority is the replacement of cars, that's the number one issue. If the government owns the cars, then obviously it's up to the government and the taxpayer to replace the cars. That's how I would understand it. If the cars are owned by the Railway Coalition, where is the money coming from to replace these cars? It's over $1 billion, and there's a timeline; you mentioned 2011 or something.
I agree with the idea that farmers are in the best position to control their destiny and the cars, and there will be good maintenance and we won't let the railway companies get away with cutting costs and making a profit. Who's going to pay to replace these cars? Is there going to be a lot of cost to the farmers? Those are my questions looking at this.
Those are the concerns. The investigation is important. Hopefully, if it is found this money has been misused, the railway companies will then reimburse the farmers for the millions of dollars they have been charged. I suspect that could also go to buying new cars, but the idea of the replacement I think is a key issue. Who's going to pay for this? I'll stop there.
President, Farmer Rail Car Coalition
Thank you for the question.
I think most of the answers lie in this document, as to how our plan would apply to the revenue cap. Essentially, what it says is the savings, the $3,000 per car that we're overpaying as farmers now, we would put into reserves, as the FRCC. We would have that money in reserves to replace the cars when they need it.
Now the government has made an announcement. It perhaps needs some more discussion and more detail. As we said earlier in our presentation, if the revenue cap was to come down, as the minister mentioned, and if the federal government was to replace the cars, and if the maintenance was done on a competitive basis and it was being monitored very closely, that would be the best solution for the farmers of western Canada. We can take the present decision by the current government and, with some slight adjustments, make it work for the betterment of everybody. But if the government chooses not to replace the cars and turns over that responsibility to the railroads, again, we have major concerns. They will own the fleet, they will maintain that fleet, and it will be at the expense of farmers.
NDP
NDP
Alex Atamanenko NDP British Columbia Southern Interior, BC
So the farmers, since 1992, have been paying $4,329 per car, per year for maintenance?
President, Farmer Rail Car Coalition
That was for one year; $4,329 was for that one year.
NDP
President, Farmer Rail Car Coalition
That's what we're going to ask the Auditor General to examine: what's been paid.
NDP
Alex Atamanenko NDP British Columbia Southern Interior, BC
The government is saying they want to bring this revenue cap down so the farmers will pay less, and you're saying the $3,000 difference would be used to pay for new cars. Would that mean the farmers would continue to pay the $4,300 under FRCC? I don't quite understand how—
President, Farmer Rail Car Coalition
We can't mix the two plans. The FRCC had a complete package, which is contained in this document, and when it is released, you will see how that would affect the revenue cap.
The announcement by the minister, as we understand it, is that the federal government would retain ownership. The thing that is unclear and is not stated is who is replacing them.
In 2011, someone has to start replacing those cars. We're suggesting that if the federal government would take on that responsibility, tender out the maintenance, monitor the maintenance, that's the best situation. And we're prepared to work with the government to come up with massaging its announcement.
CEO, Farmer Rail Car Coalition
Perhaps I could summarize that. There are three options before us. The lowest cost for farmers would be the continued ownership by the.... Let me back up. It seems to me the government has addressed or is addressing the crucial issue that has to do with excessive maintenance costs in the legislation, so I think that is being addressed in some fashion.
One option is the replacement to be by the Government of Canada, and that would be the lowest cost for farmers. It would be the highest cost for taxpayers but the lowest cost for farmers.
The FRCC plan is probably somewhat more middle of the road in the sense that we have to charge a lease fee, ladies and gentlemen, to get our revenues and therefore we will be charging farmers. That will be more than the first option. But it would be a lower cost for taxpayers, and there are some other benefits for the farm community.
The highest cost of the three would be if the railways were responsible for maintenance, and we mentioned it in the opening statements. Again, I can quote Ray Foot in a statement in 2001 before the Canadian Canola Growers Association. He indicated $4.57 per tonne would be the increased cost if the railways replaced the cars. So that more than offsets the potential $2 saving that's been identified.
So there are three options. Ours would be about the middle of the road one. If we have to charge a lease rate, which we will, of course, to pay our costs, there will be some increased cost to farmers.
Conservative
