Finance Committee on Sept. 25th, 2017

[Martin Shields, Conservative, Bow River, AB]

So you're not talking about specifically party A applying for a job: party B.

[Michael Atkinson]

No. We're talking about a situation where they know there is work in the construction industry in a neighbouring province or in a northern region of their province, but to go to look for work in that area and be interviewed, etc., there's a cost to that, and it is a barrier.

[Martin Shields, Conservative, Bow River, AB]

How about the use of technology in the sense of searches via technology using Skype and all those types of things?

[Michael Atkinson]

Sometimes that can be used, but if you're looking for a tradesperson, often you want to see a demonstration of their craft ability.

[Martin Shields, Conservative, Bow River, AB]

I appreciate that.

You mentioned something about the gas tax, which I know a little bit about. You also mentioned StatsCan and the population. Many of the communities in the province I live in do it annually. They don't wait for StatsCan. They pay for it themselves, and they're getting to be very successful at doing it technologically. I know that one community of 60,000 people gets a 60% return online without spending a cent. Communities are doing that because they can't wait five years. I appreciate your pointing that out.

You talked about the gas tax model of how money gets to municipalities, which are often the major piece of what you're talking about. How about the current funding model of grants that go through the federal and the provincial to get to them? Do you have any opinion on that process?

[Michael Atkinson]

Well, that's Canada, right? We have a provincial level of government. In many cases, municipalities are nothing but a creature of statute, so they don't have any legal status. It's difficult for the federal government to do an end run in those circumstances.

Quite frankly, the model, with all its complexities, works pretty well. There are some places where improvement can be had, but given our multi-government levels, it's surprising we get anything done at three levels.

[Martin Shields, Conservative, Bow River, AB]

Thank you for that.

You pointed out micro-businesses, and I really appreciate that. I know that micro-business in construction are family groupings.

Do you want to make another comment about that percentage? What's your knowledge of that?

[Michael Atkinson]

Well, yes.

StatsCan's current data says 60.4% of the firms active in the industry are micro with fewer than five employees; 99% of small businesses have fewer than 100.

I want to talk about passive income, which is coming under a bit of an attack by Finance Canada. The suggestion that these companies are keeping money in their businesses to avoid paying tax is ridiculous.

In our industry you have to keep a healthy balance sheet if you want an operating line from the bank. You want to support your bonding limits. In many cases, to have that money in there is also your war chest when things go badly.

[Martin Shields, Conservative, Bow River, AB]

You mentioned a critical piece to that industry, the bonding. That is a financially passive thing. These days the bonding industry is a huge cost. You have to have access to that funding.

[Michael Atkinson]

You can't do any federal government work of any meaningful size without it.

[Martin Shields, Conservative, Bow River, AB]

That's great. Thank you.

I have a quick question for agriculture.

I know of a couple of examples in the feedlot industry where a co-operative with the feedlot industry and government funding produces a world-class animal safety program.

Potato producers of Alberta have also, that's another example.

I know my colleague asked for an example. Do you have one example of a co-operative with your level and producers?

[The Chair, Liberal, Wayne Easter]

You can pass the information to us later if you want to be absolutely clear, Jeffery or Jean-Claude.

[Dr. Jean-Claude Dufour]

Okay.

You're looking for one example where our collaboration succeeded. We have many.

I will take my faculty as an example. In 2000, our faculty created the Institute of Nutrition and Functional Food. At that time we changed our business model. At that time, we received 7% of our annual research fund from the industry. Today we are at 57%. It means $30 million a year. If you want the name of the companies working with us, come to see me after this meeting.

I have many success stories to share with you.

[Martin Shields, Conservative, Bow River, AB]

That's a good example.

Thank you, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

Thank you both.

Mr. McLeod.

[Michael McLeod, Liberal, Northwest Territories, NT]

Thank you, Mr. Chair.

Thank you to all the presenters here today.

I wanted to start off by talking about housing and more specifically the presentation by the Co-operative Housing Federation. I really applaud your efforts in bringing some of the issues forward. I think you have some very good recommendations that would work well throughout all parts of Canada, especially in the Northwest Territories where I come from. That's the jurisdiction I represent.

We've had issues with the operating agreements for social housing for many years. It's been on a sliding scale. It's really been posing challenges, especially in areas of our communities. It's limited our ability to create more stock. That's compounded the issue. Of course our population doesn't allow the funding agreements to be well-balanced for us. We were getting $1.8 million a year for housing from the last government. We can't do much with that.

It's forced our government to spend more money than they can afford; 8% of our budget is being spent on housing, which is probably just about the highest in Canada. I think Nunavut is at 13%, which is the highest in Canada. It's really creating a lot of challenges because now 70% of the budget of the Government of the Northwest Territories is on the social envelope, which includes housing.

I had a chat with Mr. Wong earlier. We have three housing co-ops in the Northwest Territories. They seem to work really well but we only have three. I don't know if that's because of limited financing or what that situation is. I'm not sure how well that's being promoted in the north. I'm curious to know if Nunavut or the Yukon has tried the co-op concept.

I also want to know if you've looked at this or tried it; has it been tried in indigenous communities? We have huge issues in the north because we don't fall under Indigenous and Northern Affairs for housing. We have public communities that are aboriginal.

Maybe we could get you to talk a little on that.

[Timothy Ross]

Those are some very good questions. Perhaps we can have a lengthier conversation about these very complex issues, but also about opportunities moving forward.

Specifically on our focus on the development of new housing co-operatives writ large, members of our own association have said they believe so much in the importance of the growth of housing co-operatives—so that more of our neighbours can enjoy living a housing co-op—that our small association is putting up $1 million for new development efforts. That's how much our members want to give back to communities. We're hoping to augment that in partnership with governments and with anyone who wants to see the growth of housing co-operatives.

As to the role or history of housing co-operatives in offering housing options to indigenous communities, we have a number of members across the country whose housing co-operatives were developed under older urban native housing programs. They are certainly looking to see some sustainability as a result of the national housing strategy.

I hope that answers a few of your questions and would invite a lengthier conversation on more specifics.

[Michael McLeod, Liberal, Northwest Territories, NT]

Thank you.

I have a quick question for the Construction Association. I appreciate the discussion around labour mobility. That is a challenge in the north. Most of our communities are fly-in and fly-out. You could put a diamond mine 500 kilometres away, but it doesn't benefit a whole lot of people if they can't get there. We continue to look for solutions to that problem, and I really appreciate your recommendation.

We have limited public transit. We have one bus in the north, and it's in Yellowknife. It's defined as “public transit”. Also, the federal government still has a lot of responsibility for infrastructure. The Government of Canada is still responsible for all roads in the Northwest Territories.

I'd like to know what measures you would recommend be included in budget 2018 to ensure that infrastructure projects specifically in remote parts of Canada, in the north, can be funded efficiently.

[Michael Atkinson]

First of all, our association has always been on record as saying that we believe priorities should be set by the custodians, not by somebody sitting in Ottawa or Gatineau. I think that's key going forward, since the devolution of custodianship for infrastructure has taken place over a while, devolving to the municipalities, territorial governments, and provincial governments. It's absolutely key that any national program we develop be flexible enough to understand the different priorities and methodologies all across Canada.

With respect to the north in particular, it's absolutely paramount that any national program developed really understand the needs and priority of needs of the north from the people who live there and the people who are responsible for its overall custodianship. That's absolutely key.

[The Chair, Liberal, Wayne Easter]

Thank you all.

To continue while we are with the Construction Association, Mr. Atkinson, you mentioned the apprenticeship training program in the U.K. I don't think information about it is attached to your brief. Could you send the clerk the information on it, or a link to it?

[Michael Atkinson]

Absolutely.

[The Chair, Liberal, Wayne Easter]

Thank you.

Mr. Kmiec.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

I want to continue with you, Mr. Atkinson, where my colleague left off about the bonds. At the beginning of your presentation you mentioned that the small business tax changes being proposed would have an impact on your industry. Speaking specifically about the bonds, could you give us an idea of how much a company needs to hold in order to obtain a federal government contract—just on average, or for a small-sized company?

[Michael Atkinson]

Actually, it's almost the other way around. Our firms in North America—not just in Canada, but in the United States as well— use the bonding facility to leverage their own balance sheets, and they can do so by 15 to 20 times. What the bonding regime does for them is allow them to operate on rather large projects and use contract performance security that doesn't hamper or restrict their other abilities to get an operating line, etc., which would be hampered in situations in which you had to put up letters of credit, for example.

To give you an idea of how important it is for construction companies to have a healthy bonding limit, not only can you not bid on significant work for the federal government without bonds, but if Bill 142 passes in the Ontario legislature later this year, all construction projects in Ontario will be bonded, by statute. It becomes absolutely critical, then, for any firm of any size that works for the provincial government in Ontario to ensure that they have bonding capacity. One way you have by which to do so is to keep a fairly healthy balance sheet.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

At the end of the life of a construction company when someone is considering retirement, when does that usually happen in the construction sector, and what happens to these companies? That's a two-part question.

Is the company typically sold as is or are the assets stripped out of it first? Is it the client list that's valuable? Is it the assets that you've accumulated over time? For a lot of the construction materials and the vehicles you have, they may not be as valuable; they've already depreciated in value and they're not the latest. What happens to that company?