Finance Committee on Sept. 21st, 2016

[The Chair, Liberal, Wayne Easter]

That is not a problem. It happens to all of us.

Mr. McColeman, go ahead.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Thank you, Mr. Chair.

Thank you for being here.

Of course, being from Brantford, in the heartland of an industrial community, I know full well the transition that is happening. We are doing pre-budget consultation, and I want your perspective on what the landscape is right now.

I will give you my take on it. The cost of doing business in Ontario is going through the roof, largely because of energy costs, specifically electricity. I have had firms come to my office and show me their bills, which have doubled. They were spending $1,000 a month on that; now they are spending $2,000 a month in overhead costs.

Are you finding this to be a factor for any of the companies you're working with in terms of their expansion plans? I recently had a company come to me and say that they were going to expand, but now they're not. They're going to do it in their plant in Michigan instead of Ontario. Are you finding this kind of effect currently happening in your region?

[Nancy Horsman]

Stepping back one step from that, I would say that Ontario is experiencing moderate growth prospects, just like most of the advanced economies in the world, but it's actually doing quite well compared to most of the provinces. A lot of that is due to robust exports because of strong U.S. sales of automotive parts and consumer goods.

Now, a little more weakness or softness than that is expected over the rest of this year, but the prospects in terms of economic outlook for southern Ontario are quite positive. Private sector forecasts are forecasting a growth of 2.7% this year and 2.5% next year, which is well above the national average.

To your more specific question, at FedDev Ontario, we have seen several instances of the opposite. We have been dealing with applicants deciding between Canada and the U.S., or between Canada and other jurisdictions, and who have decided to stay in Canada. Obviously, the cost of electricity is a cost of doing business, and when it is rising, that is difficult for businesses. Having said that, I feel that what we are seeing in Ontario is quite positive, relatively speaking.

[Phil McColeman, Conservative, Brantford—Brant, ON]

I'm glad you're saying that, actually, because perhaps my information is anecdotal and you have a broader sense and picture of that. As you know, the reason why they were five-year mandates is that we really don't want you to exist in southern Ontario. That is our reality. This agency came into being because of the huge downturn in 2007 and 2008.

That's not criticizing your work. Let's put it in context. It's to say that southern Ontario, if working well, does not need the government to be involved in helping businesses fund their projects, move forward, and create the growth rates, although you've done great work in my community and great work in other locations, I'll give you that.

But that's great news, because it would lead one to think that in the future perhaps we don't need to renew another five-year mandate.

[Nancy Horsman]

I would simply say, as I did in my opening remarks, that Ontario is not immune to the globalization trends, the trend toward a knowledge-based economy and a service-based economy, and the restructuring that's happening in some of the traditional sectors such as manufacturing and automobiles. It's not immune to that. The same kinds of needs for prosperity, innovation, increasing exports, scaling up firms, exist across the country—

[Phil McColeman, Conservative, Brantford—Brant, ON]

My time is running out, so I'm sorry to interrupt. I don't want to be rude.

[Nancy Horsman]

—including in southern Ontario.

[Phil McColeman, Conservative, Brantford—Brant, ON]

There's one last question I do want to fit in.

In the event that the Energy East pipeline were to be approved, what effect would you see from that in businesses in your region?

[Nancy Horsman]

My understanding is that, for the large part, the existing pipeline conversion as proposed and the construction for the new line in Ontario is largely going to be only in the very eastern part of the country. I also understand that the exact pipeline route won't be finalized until TransCanada has assessed and incorporated input from numerous stakeholders.

There will be a positive impact for Ontario if it goes forward, but in terms of the new construction jobs, they will be more limited than, say, in Quebec.

[The Chair, Liberal, Wayne Easter]

Thank you, Ms. Horsman and Phil.

Mr. Sorbara.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Mr. Chair.

I have a quick question about the $920 million that will be invested over the current five-year mandate to carry out these roles. Is that when the mandate ends? I'm sorry. I apologize if I missed that.

[Nancy Horsman]

The last year is 2018-19. It ends on March 31, 2019.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Okay.

I was present at an announcement in my riding where FedDev came and provided what I think was a loan to a company. I forget the company's name, but they're doing some great work and hiring some people. How is the loan portfolio performing?

[Nancy Horsman]

By way of background, the way our funding works is that if it's a funding to a business it's called a “repayable contribution”, which is like a zero-interest loan except that it's based on meeting key milestones of a project. Receipts are submitted and the company is reimbursed. At the end of the project, they have to repay that repayable contribution.

Because we're such a young agency, many of the projects are not in the repayment zone right now, so we have a repayable portfolio that's very low in terms of writeoffs. I do have that that somewhere. I can provide that information to you.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

I'm quite cognizant that this is what we're doing with taxpayers' dollars.

On page 2 of your opening remarks, I would love to get some colour on how this is performed. You say, “The Southern Ontario Prosperity Initiatives include four initiatives that cover a range of business needs in the region.” Can you give me some colour in terms of the commercialization partnership initiatives?

We do hear that in Canada we have great innovators and great researchers but that sometimes there's a vacuum in terms of the commercialization aspect. If you could provide some colour on what you're seeing on the ground in southern Ontario with respect to this, that would be great.

[Nancy Horsman]

Alain is our big champion of commercialization, but I'm going to jump in here for a minute and talk about the Southern Ontario Water Consortium, which I think is a really good example of where universities came together with the private sector and municipalities to provide a place for the testing and validation of water treatment technologies and waste-water treatment technologies.

It provides a true and real municipal landscape for small or medium-sized enterprise to take an idea and test in a true waste-water environment. FedDev Ontario was one of the funders of that project. What's great about it is that it's bringing all of those partners together and making those commercialization opportunities possible.

I don't know, Alain, if you have another example.

[Alain Beaudoin]

That was a very good point.

Building on the example I used earlier of the Southern Ontario Smart Computing Innovation Platform, there's another one. Recently, Minister Bains announced the creation of the new Fraunhofer Institute at McMaster University, which is focused on bioengineering and advanced manufacturing.

Again, it's about how can we bring together the various partners from academia—in this case, the Fraunhofer Institute from Germany—in working with the private sector and accelerating the commercialization of very specific health solutions and devices, which will help those companies be in a position to sell not only in Canada but globally as well. We see a lot of appetite on the ground, in terms of the partnerships between the private sector and those consortia, to have that collaboration.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

I have a very quick question. You're on the ground and you're getting that granular detail from firms. One of the things I've heard in the region I'm from, York Region, and in the surrounding area really isn't touched on by the federal government but does impact development, and it is the development charges that are imposed by the region.

Have you heard from any of your clients or entities down there about development charges being a headwind in terms of manufacturing activity in southern Ontario?

[Nancy Horsman]

I have not.

Can I just say, though, that our writeoff rate is less than 5%?

[The Chair, Liberal, Wayne Easter]

I'm sorry. There are two conversations going on here, and I'm in one. We will probably leave it there.

I do have one thing I want to follow up on. I'd put it this way. It relates to the question that Ms. O'Connell asked earlier on broadband. As I've said to some other regional development agents, we are the finance committee. We will be making recommendations to the government. I think I can honestly say that in this town when there's an announcement in the House, in this bubble people think it actually always happens, and one area is broadband.

I remember Brian Tobin announcing it. I remember John Manley announcing it. I remember this government announcing it, and we announced it again. But the reality out there in an awful lot of places is that we don't have broadband. It affects our ability in Prince Edward Island to attract businesses and even to attract young people in.

I'd phrase the question in maybe a different way than Jen did. If broadband were accessible at the speeds that it should be accessible at, would it make a difference in terms of businesses in the area in which you operate? How critical is broadband in order to attract business, not only into your area but as we compete against the rest of the world?

[Nancy Horsman]

I'm hearing that broadband is an issue in some parts of the southern Ontario catchment area that we operate in. For many parts of it, it's not. We have heard about the issues around broadband. The government has consulted on the innovation agenda, and will be coming forward with ideas and proposals in the budget.

[The Chair, Liberal, Wayne Easter]

Okay. We'll leave it at that.

[Nancy Horsman]

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much for your presentation and your forthrightness in answering questions.

We will suspend for a few minutes for the next group.

[The Chair, Liberal, Wayne Easter]

Could we come to order, please? We're on a bit of a deadline.

We welcome Western Economic Diversification and the acting assistant deputy minister for the Saskatchewan region, Mr. Zolinsky. I believe we've seen Mr. Meddings before, and I think we're going to see him four times this week. We also welcome Ms. Laing, director of policy, planning and external relations.

The floor is yours, Mr. Zolinsky.