Finance Committee on Oct. 17th, 2017

[Monette Pasher]

At the bigger airports, obviously, you have the most volume, so the biggest chunk of screening resources goes to those four airports, and then they top them up. They're actually investing and paying additional to what passengers are paying for screening resources. The smaller airports just don't have the ability to invest further in those screening resources, so it is a challenge. The standard is still the same. I think smaller airports also face airline schedules that can be, at peak times of the day, moving people through the system into the hub airports. It can be difficult to keep up with screening standards in those peak times. I think our biggest challenge is that the hub airports do take the largest amount of the resources for security screening across the country.

I think CATSA-plus is something that is a big priority for our airports. It's only at the four largest. They want to expand it. We would love to see it here in Halifax, for example. It needs to be rolled out to more airports across the country. It speaks to innovation. The research has been done. It really improved things this summer as well. We'd like to see that rolled out more. It is a funding issue, and CATSA needs to be able to move forward with that.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Thank you.

Turning to the Canadian Worker Co-operative Federation. I have to admit I don't have a lot of experience with co-ops in my riding, but I just wanted to clarify the RRSP contribution. It used to be a 10% ownership, or up to a $25,000 cap, but the $25,000 cap was eliminated, if I read and heard correctly, and you'd like that $25,000 cap reinstated but adjusted to inflation. Is that to bring it more in line with, let's say, the average Canadian who can invest into their RRSP up to a certain level, or is there something else there that I'm missing that you may want to clarify?

[Hazel Corcoran]

Previously in worker co-operatives, which are necessarily at least three people, it was judged that nobody has control of this enterprise, so there was no rule about what percentage of any kind of share you would.... That was a brand new rule that came in for all types of enterprises in 2011. At the time that program was set up, I think it was in the early nineties, any worker co-op could participate in the program as long as any individual member didn't have more than $25,000 invested. Then of course those individuals have all the same rules about RRSP ceilings as anyone else does.

The issue is just that it's no longer possible in those small co-ops. You have to have at least 11 people, just by definition, and generally co-ops don't start with that small a number.

[The Chair, Liberal, Wayne Easter]

Thank you, all.

Mr. Kmiec.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

When we're talking about corporate tax I think it's that burden, the total amount you pay as a percentage, that's important. When we talk about property taxes everybody talks about the tax rate. Actually the mill rate is the most important. From my time working for a chamber of commerce that's the most important thing you count on because people have a tendency to confuse the two.

Maybe we'll start with the Atlantic Canada Airports Association. You talked about eliminating the rent for small airports that have under three million travellers. Which airports would that be in Atlantic Canada?

[Monette Pasher]

In Atlantic Canada in 2016, five of our airports began paying rent to the federal government, and they are smaller airports: greater Moncton, Gander, Charlottetown, Fredericton, and Saint John. Most of these airports have fewer than 500,000 passengers. It's an additional burden on them, an additional tax that has to be passed through the passengers.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

The land is an asset of the federal government, so how much are we talking about in forgone revenue that the government would give up?

[Monette Pasher]

Those airports just began paying rent. If you take the example of greater Moncton, I think they're going to have to pay around $500,000 a year in rent. It's a big item off their bottom line. Airports are not-for-profits and that's money they can't invest in their runways in order to grow cargo to ship our lobster, for example. It is a significant number for them but it's not for the federal government.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

I have a question about your members. This committee heard in Vancouver, I think it was, that a lot of these airport authorities are not transparent, that they're not accountable to the local community. Sometimes they don't publicly list their meetings or they don't provide minutes. Do your members do that? Do they make it possible for the public to attend and know about the meetings, know about what decisions are being made?

How much transparency is there?

[Monette Pasher]

The national system airports operate under the Canada Transportation Act, the national airport policy, and they follow those rules very clearly. The federal government has appointees, the community has appointees, and the airport board is filled with community members. These boards are run by the community.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Are your meetings public right now in Fredericton and Moncton?

[Monette Pasher]

No, they're not public, but the airports issue annual reports and they have a public meeting. In terms of the lease agreement with the federal government, they're accountable to one public meeting a year.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

I'll switch to the chamber now. I used to work for the Calgary Chamber of Commerce, I was their national policy researcher, so I appreciate what you do and I know how hard it is sometimes to analyze the tax changes the federal government is proposing.

You talked about certainty and how important that was for business. We saw a government announcement yesterday that said more news is yet to come. They created uncertainty on July 18. Now they've compounded uncertainty by changing things but not declaring exactly what they would do going forward, and there's also no legislation yet. Have you heard from your members already? What did they expect to see from the federal government?

[Patrick Sullivan]

I spent last week with Adam Legge, by the way—

[Tom Kmiec, Conservative, Calgary Shepard, AB]

My old boss.

[Patrick Sullivan]

Our members started speaking to us quite loudly in July. It took a little while, I think, for them to figure out what was going on, but they started speaking quite loudly. Since yesterday we've had some communication with our members. Obviously the announcement only happened yesterday at about 12:30 Halifax time, so we haven't had significant conversations.

We have a committee of senior tax partners, to be honest, who are providing us with some guidance on this.

I would say our members are still very concerned. It does look like there will be additional answers this week. However, I believe the communication that came out from Finance was that there will be some information but legislation won't be written until almost January.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

In terms of certainty for the business environment, there is no certainty.

[Patrick Sullivan]

There is no certainty at this point.

I'll give you two specific examples, very quickly, of a business that is not being sold right now because of that uncertainty. In one example, the purchaser had planned to purchase and given the current tax criteria had planned to fund the loan based on the tax they would pay. Given that they don't know what that tax would be at this point, they've deferred the purchase and that purchase may take place from a business outside of Nova Scotia, so the five jobs that are involved there would leave Nova Scotia. It's a travel business.

There is another business that's an example. Again, an individual has already purchased 40% of the business and he has the right to purchase another 60%, in fact, an obligation to purchase it at a price that was set two years ago. He has now chosen not to purchase that additional 60% because he will not be making the amount of money he thought he would be making when he wrote the contract two years ago.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

I was going to ask about this Halifax start-up culture and these small and medium-size businesses that are emerging here. Obviously these businesses need a lot of certainty that they will make back the capital, and a lot of these businesses rely on family members and friends to finance themselves.

Can you maybe talk more about what the impacts would be? In this region of the country, a lot of people finance their small businesses through family. They don't always have angel financing networks to get it done. Can you just expand on it more? You had given a short presentation, but I think there is a lot more there that we could look at, specifically in this tech start-up field that's here in Halifax.

[Marco Navarro-Génie]

There is a significant and burgeoning high-tech and start-up field in all four provinces. We have some aero industry in P.E.I. This is all over the place, so it's not just in Halifax, although I think the largest concentration is in Halifax.

We know that it is very difficult for new companies to raise capital and it is more difficult here because, as the numbers show, there is less local capital available in Atlantic Canada. Atlantic Canadians save the least of all Canadians, according to our research, so there is a diminished pool of capital and it is largely dependent—not that this is a good thing—on the largesse of governments.

Removing, or potentially impairing, the ability of members of the family, friends, and so forth to be able to provide capital at different points of what is essentially the development of a start-up is.... We know that sometimes when start-ups have good ideas they can bring capital in, but it's along the way—there are several different stages when they become cash starved as well—when family members often step in there. It is all the more important to be able to maintain that ability so that this vital and burgeoning sector of the Atlantic Canadian economy continues.

[The Chair, Liberal, Wayne Easter]

Thank you, all.

We will turn to Raj, and it's unusual but we will have time for about three more quick questions after that before the next panel.

Mr. Grewal.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you, Mr. Chair.

Thank you to the witnesses for coming here today.

My first question is for the Atlantic Canada Airports Association. We hear you guys loud and clear in terms of investing in smaller airports, and that's why the government made the decision to ensure that all airports across the country could apply for funding.

My colleague asked you about the rent portion, and should airports that have fewer than two million passengers be paying airport rent. My question is more on governance structure. Do you think the government has achieved a balance in terms of how the airports are currently governed?

[Monette Pasher]

I think our association views that our airports are run quite well. Even to follow up on Mr. Kmiec's question, they go above and beyond even their boards. They create committees around air service development and noise, and reach out to the communities. They are part of their chambers of commerce, part of the tourism industry association of each province and city, and the country.

I think our airports and boards do quite a good job of reaching out to the community. They are run as not-for-profits, so they essentially are run by the community. They also have committees, with their airline stakeholders, to talk about infrastructure investment. It goes much beyond just the board that operates the airport when you get down to the committee level and all the layers that reach out and consult with their stakeholders.

[Raj Grewal, Liberal, Brampton East, ON]

The previous government did it, and our government is doing a comprehensive review of transportation in this country. In the Emerson report, there was a recommendation that airports be privatized.

What is your association's position on that?

[Monette Pasher]

The Emerson report was great, and there are a lot of great recommendations in there.

In terms of privatization, they looked at four different models. Our view, in terms of a for-profit corporation, would be that there are not any airports in our region that it would work for. I think all of our airports have less than five million passengers. Halifax is coming up to that four-million passenger mark.

It would just increase the cost of travel. Some of our smaller airports wouldn't be able to be viable in a for-profit model.

However, there was one of the pieces of the privatization discussion that was around divestiture. I think down the road that's something that our airports could look at. Could they be divested totally to the community so that they are not on federal land anymore? I think there are many of our airports, especially the small ones, that would be open to that discussion.