Thank you very, very much.
Thank you for the work you've already done studying the issue of heritage in Canada, and now today studying this bill.
I also want to start by thanking in particular John Aldag for the fact that we are here discussing this at all. It has, in my view, as much, if not more, to do with him than with me. That, I think, says something about this bill.
I should say a bit about why I chose this as the subject for my bill.
I'm a former House leader. I have no illusions about my ability to count. I knew if I wanted to have something that was going to have any prospects of success, I would have to select a subject matter that was worthy, that was non-partisan in nature, that could do positive things for the country, and that, as a result, could earn support from all sides. This bill is exactly such a bill, and it addresses what I think has been an outstanding policy need in our country for some time. In fact, this bill builds on work that was done previously under both Conservative and Liberal governments but that has never been brought to a satisfactory conclusion. You, as a committee, have an opportunity to complete that work and to fill a very important policy void, at least in part, obviously not in its entirety, that calls out for federal involvement, as I think you heard from many witnesses.
The purpose of Bill C-323 functionally is to establish a tax credit for 20% of the cost of the restoration of heritage buildings. The rest of the cost, the remaining 80%, would then also be able to benefit from an accelerated capital cost allowance, for a three-year writeoff, whereas a normal project of that type might take a little longer to write off under the tax rules.
The tax credit and the accelerated capital cost allowance would apply only to properties that are on the Canadian Register of Historic Places, so in that sense their impact is limited and their scope is limited. As well, the work that was done, the costs for which the benefit of the credit is being sought, would have to be certified by a professional engineer as having followed the “Standards and Guidelines for the Conservation of Historic Places in Canada”, which have been prepared by Parks Canada. It should be noted that both the Canadian Register of Historic Places and the “Standards and Guidelines for Conservation of Historic Places” were developed within the Department of the Environment in anticipation of exactly a tax credit policy such as this, and they are there to support it. So we're in the fortunate position of being able to bring forward legislation for which that infrastructure has already been built in the department with legislation like this in mind.
Why does it matter that we preserve heritage buildings? When we think about the places we like to visit, the places that attract people from around the world, we think of places like London, Rome, St. Petersburg, and Paris. People want to go there because they will be surrounded by beautiful heritage buildings. Those buildings help to define those places. They tell us who we are. They tell our stories. And it's no different here in Canada. In Canada the places we find enjoyable to visit, the places where people want to gather and want to go are overwhelmingly the places with well-maintained and preserved heritage areas. Think of the Distillery District in Toronto or the Old Port in Montreal. Think of quaint small towns, whose main streets you like to visit and shop in. There's a reason for that, which is that those places tell our stories. We feel when we are there that we are absorbing what's gone before us, what has made us what we are, and what a place is all about, in a very physical way.
I think that's one reason it's important. But why take the step forward in terms of a tax credit to help preserve these buildings? The reality is, as anybody who has been involved in owning a heritage building or in a business that's in one knows, that while there's a strong public interest in preserving such buildings and seeing the restoration, there is an extraordinary cost. The cost of preserving a heritage building is usually well in excess of the cost of demolition and new construction of something equivalent. We've lost 20% of our national heritage over recent decades, according to evidence you've heard, because sensible people in business, who look at the cost of restoration and look at the cost of new construction will usually opt for new construction because it is financially advantageous.
When we ask individuals to restore and preserve a heritage building because it's good for society, it's good for the community, we are asking them to assume privately the cost of maintaining what is a public benefit for the entire community. The policy rationale is if we're asking them to bear that public burden privately, it is incumbent upon us to assist them somewhat, in fairness, if we actually want to see those historic buildings preserved. When a heritage designation falls on a property, that is one of the consequences. We put barriers in front of what they can do with it, and so on. Our laws fundamentally respect property rights. Those are not permanent barriers ultimately.
There's always the option of demolition. There's a real cost there. We don't want to see that demolition occur. We want to see the buildings maintained, restored, and become vital parts of the community. That's why the policy rationale for this bill is solid. If we accept that heritage buildings are a value, is this the right approach, correct approach, or positive approach to preserving them?
This tax credit is very much modelled on a U.S. program that you did hear evidence about, the heritage restoration tax credit. That program has been highly successful over recent decades. It's a rare program that actually returns more to the public purse than it takes away from the public purse. There have been abundant studies to that effect. You heard about the Rutgers study that regularly looks at it on an annual basis, and calculates that for every dollar impact on the public purse in terms of a credit going out, $1.25 or more gets returned to the public purse every year in the United States.
I'm often skeptical of these kinds of arguments because anybody who has been.... I think of Mark here. As a mayor he probably had all kinds of economic input. The basic rationale tends to be that if you just spent all the money there was in the world, we'd all be millionaires, because that's the kind of economic impacts these people put in front of you. This is actually a different kind of case. These have been so clearly studied and the results are so apparent.
I look at the Urban Land Institute which operates here in Canada as well as in the United States, and also around the world. It puts out a quarterly magazine. I was looking through it about six months ago, as we were working on this bill, for totally separate reasons just because of my interest in these things. What struck me was that it was an edition where it focused on all the top projects in North America. Virtually every single one in the United States that was a success story had taken a derelict downtown area and made it into a vibrant hub of commercial, economic, retail, and entertainment activity where people wanted to go. Almost every single one involved heritage restoration and a heritage restoration tax credit.
These have all been showcased as the best projects in the country. The fact that the restoration tax credit was present in virtually every one of them spoke volumes to me in a country like the United States where there's no real kind of planning push against suburbanization like we have here. I saw in that the very real economic impact that was occurring.
In the U.S., about $1 billion a year is spent on these credits, or at least those are the benefits that go out in the credits. They tend to generate about $5 billion a year in economic activity, and about $1.25 billion a year goes back to the public purse. They're netting out in a positive result to the public purse. That's very significant, and the evidence is there, as I said, from the Rutgers study and elsewhere.
In Canada, we've had a little bit of an example. We had a trial program which was a grant-based program, but Deloitte did some work reviewing its success in looking forward to a tax credit program. By its projections, we would have a similar kind of return here based on the evidence in front of you from witnesses between $1.25 to $1.90 for each dollar that would be a credit impact. You would have that much going back to the public purse. There would actually be a net gain.
It's not the only place where that's happened. I use the analogy, and some people have said this is a boutique tax credit. In fact, I put more on the grounds of something like the science, research and experimental development tax credit, a tax credit that we engage in the society, because we want to encourage certain economic activity that's desirable to make our economy and our country a better place. In Canada, that's about $4 billion a year, I believe. About 85% of our research and development spending goes out through that credit. It's done by the government, because we believe it is a worthy way of encouraging desirable economic activity that makes our country stronger and creates economic growth. If you're talking about analogies, that is the strongest analogy to that kind of a tax credit, the SR and ED credit compared with what we are talking about here.
I want to draw your attention to an amendment that needs to be made here. It is only in the French-language version, at line 11, on page 3. Right now, the way it reads, the way it was originally drafted, basically the effect is that the capital cost allowance would be applied against income tax payable, rather than deducted from your income from which tax payable would be calculated, so you'd be getting two credits instead of an accelerated capital cost allowance. We need to correct that, so we're asking
that Bill C-323, in clause 1, be amended by replacing, in the French version, line 11 on page 3, with the following:
déductible dans le calcul du revenu d'un contri-
The way it would be calculated, the capital cost allowance goes against the revenue that's going to be taxed.
I'm happy to take as many questions as you have.