Finance Committee on Feb. 3rd, 2020

[Ben Brunnen]

Thank you.

With regard to the interest expense item, we've heard some interest in exploring that from a government perspective. We want to make sure that government is aware that this is a priority for us. We definitely recognize the importance of the eligibility for interest expense, and we would encourage the government to explore the competitiveness implications of any changes, and to also consider any offsets in the event it does want to advance these changes, such as immediate deductibility.

The second point I raised was in relation to changes to large corporation tax administration. This is really a piece that the federal government has had in place for some time. What it does is tie up disputed tax revenues with the federal government, pending the resolution of certain tax disputes. This keeps, effectively, capital on the sidelines, to the tune of billions. We're asking for government to update its administration procedure so it's consistent with other jurisdictions, just remove requirements to effectively have our capital tied up, pre-fund amounts that are in dispute, and expedite the timelines for resolving the disputes.

Finally, our request—the third point that I raised—was in relation to access to capital for small and medium-sized companies. As I mentioned in my comments today, access to capital has been very substantive for our industry from an impact perspective, particularly for the small and medium-sized producers. Tools to temporarily or more permanently find ways to encourage these companies to raise capital would be exceptionally welcome at this point in time. Things such as flow-through shares and funding to help assist with reclamation and remediation are a couple of tools in that regard.

[The Chair, Liberal, Wayne Easter]

Okay. We thank both of you.

For the witnesses who are here, keep in mind that this is one of the difficulties of a big panel. If you do have something you want to add, raise your hand, and I'll catch you and we'll let you in.

Mr. Fragiskatos.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you, Mr. Chair, and thank you to the witnesses for appearing today.

It's no surprise that my questions will be directed largely to Mr. Holder.

The perspective of mid-sized cities matters a great deal. I certainly recognize that Toronto, Montreal, Vancouver and a number of other large cities in this country are economic drivers, but so are medium-sized cities, so thank you very much, Mayor, for offering that perspective today.

I want to ask at the outset about electrification. The transit fleet proposal that you've put forward in your state of the city address captured a lot of attention. I think in large part it's fair to say that the attention has been positive. There's a lot of interest in this issue in this city. Perhaps it could serve as a model if we can do the whole fleet for the entire country. Certainly, we are serious about climate change. We are serious about working with municipalities to advance that agenda. I think this is an important piece of the puzzle on getting there.

I noted that in your presentation you talked about the environmental benefits, which would be obvious. The amount of greenhouse gases that we could prevent from going into the atmosphere is substantial, no doubt, but you also talked about financial savings. Do you have a dollar figure on a yearly basis, Mayor, on the financial savings that we could see by transitioning from diesel to electric?

[Ed Holder]

Thank you.

Through you, Chair, to Mr. Fragiskatos's question, I appreciate that. Let me say at the outset that we received a fair amount of feedback from medium-sized and large communities right across this country in terms of our goal to be the first major city in Canada to have a fully electrified bus fleet. As we did so, we talked about two particular areas.

One is greenhouse gas emissions. If you can imagine, in terms of city-operated vehicles of all sorts, that we would reduce greenhouse gas emissions by 40%, and that ultimately all of our electric bus travel, when fully implemented, would represent a 40% reduction in greenhouse gas emissions, that's huge. It's also huge because in London it was important when, as a council this term, we declared a climate crisis, so everything we do is through the lens of this climate crisis. I think that's partly why the e-bus announcement that I declared in terms of our goal—my goal—was so well received and, interestingly, by the business community as well as the community at large.

One of the things they looked at was savings. There are a couple of things we know. For example, we realize that the initial cost of an electric bus has a higher price tag than a standard diesel bus, but in the longer term we save from the standpoint of going electric versus the diesel fuel, and then the rising cost of diesel fuel. We spend some $7.5 million per year in London, Ontario, and we're a community of just over 400,000 people.

As I used to say and I like to say, we are the 10th largest city in Canada. We don't hear that as often anymore, but I say it as often as I can, only to make the point that we're not the largest, but we are a serious-sized community. We know that over the course of this, millions of dollars will be saved. As the price of fuel increases, that goes right to the bottom line. We're pretty excited about that prospect.

[Peter Fragiskatos, Liberal, London North Centre, ON]

It's interesting to hear about the climate lens from a medium-sized city such as London. We've heard it from representatives from the insurance sector. We've heard it from Ms. Zvan, who was talking about the need to support advances toward a sustainable model of finance.

In your view, Mayor, how could the federal government assist to make this happen? Obviously, when it comes to costs around buses, we could assist with that. That's obvious, but there's a whole infrastructure that ought to be in place to support electrification, and I would think that this also would be an area where the federal government could assist.

[Ed Holder]

Well, look, we're five weeks and a bit past Christmas, but if I had my Christmas wish list, it would be that in the upcoming budget the Government of Canada would announce some really serious commitments toward supporting not just London but any of our communities—small, medium-sized and large communities across this country—to electrify their fleet.

From London's standpoint, we are looking initially at a pilot project. We're undertaking a study that ultimately will be approved by my council, I trust and hope, literally in the next few days, in conjunction with our London Transit Commission. I know that other communities across this country are looking at the same thing. There are larger, medium-sized and smaller communities that say this is the way to go.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Mayor, I have less than a minute left.

We will certainly continue to work—

[Ed Holder]

Sorry, two politicals talking.... I apologize.

[Peter Fragiskatos, Liberal, London North Centre, ON]

That's no problem.

We will certainly continue working together on transportation and housing issues, no doubt. I often hear from members of the opposition, and others sometimes, about infrastructure and that the federal government hasn't worked with municipalities to get investments out the door. I think London's experience speaks for itself.

Now, this isn't an answer that I'm laying up for you, but I think it's clear that the experience vis-à-vis Ottawa and London, when it comes to things like transit, has been a very productive one and we've been able to secure investments for the city.

Could you speak about London's experience in that regard?

[Ed Holder]

Briefly, I had an opportunity in terms of our public transit infrastructure stream to challenge my council when I was first elected to come up with a number of projects that would be both provincially—in Ontario—and federally supported. In 60 days, we came up with a number of projects.

I will give strokes to both levels of government, at the provincial and federal level. We had 10 major transit projects approved. I speak positively about that experience, because that certainly supported London's major initiatives in terms of transit restructuring.

We're not done, which is why the electric bus project is so important to us.

However, in terms of those infrastructure transit programs, I have nothing poor to say about the relationship we've had with the federal government. They've worked well with London, and I appreciate it.

[The Chair, Liberal, Wayne Easter]

We'll have to cut that round there.

Ed, thank you.

We have Mr. Ste-Marie for five minutes, and then Mr. Julian.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

I’d like to thank the witnesses for their contribution to the committee’s work this evening.

My first questions are for the dairy producers.

You operate under the supply management system, which means the quantities you produce are determined by demand, in other words what people will consume, but prices are determined by production costs, with a bit of compensation added in.

The fact that all three recently signed agreements conceded market access means you have a smaller share of the market.

Describe for us, if you would, what the reduction in production quantities looks like. How many fewer family farms are there? How much is each farm losing?

[Alain Bourbeau]

It’s an estimated 1,200 farms. Losses will of course depend on how big the farm is, but they are significant for an average Canadian farm with around 90 cows. It’s greater than what the Maritime provinces produce combined.

As far as financial losses go, the three agreements together have resulted in the loss of nearly $450 million in gross income yearly, on a permanent basis.

That’s a colossal amount, and it’s no accident that we are looking at such high numbers. Our sector plays an important role in the country’s economy. Dairy products are still very much present in the diets of Canadians. When a government concedes nearly 10% of a market that large, the repercussions are going to be big.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

It’s a heavy toll, 1,200 fewer farms. My riding is home to many dairy producers. It’s common for women to take over the farming operation. The number speaks volumes.

You said that an initial chunk of the compensation package had been paid out and that the process has gone well so far. You want the government to clearly set out the terms and conditions for the next compensation payments.

What comes to mind is the first compensation amount announced further to the Canada–European Union agreement. A few years ago, that compensation came in the form of investment programs. I imagine that’s not what you’re hoping to see in the budget.

What terms and conditions are you looking for? What do they look like?

[Alain Bourbeau]

Good question.

Initially, when the government made the announcement, it set out $2 billion for the dairy sector. From that amount, it deducted $250 million that was allocated, about a year later, to what the government called an “investment program.”

This investment program was not a smooth venture, unfortunately. The program was very difficult to manage and was relatively unfair, since the funding was clearly inadequate. This approach was not successful.

From this perspective, the government was responsive to criticism. As a result, in the most recent compensation method, it recognized that the losses incurred by producers are real financial losses. Moreover, the product entries under CETA and the fill rates for the fine cheeses within the allocated quotas are almost 100%. We're talking about 96% or 97% over the past two years.

The damage caused by these agreements isn't theoretical. For the producers and processors, the damage is very real.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Okay. Thank you.

At the end of your presentation, you spoke of taking into account the impact of tariff concessions and export caps. Have you started to assess the magnitude of the impact? Can you explain it again, using figures, if possible?

[Alain Bourbeau]

Yes. I don't want to go into too much detail, but it's important to understand that all dairy-producing countries have a surplus of solids-not-fat. The yardstick used to measure the demand for dairy products is butterfat. The demand for butterfat in the United States, Europe, Oceania and around the world is greater than the demand for the non-fat part of milk, which is called solids-not-fat.

Although Canada has a supply management system, it still exports this type of by-product as well. These by-products are found in skim milk powder form. However, in Canada, the size of this surplus has fluctuated in recent years between 60,000 and 90,000 tonnes. The agreement with the United States introduces an export tax starting at 35,000 tonnes. Clearly, above that threshold, there will be a financial impact for each tonne of surplus. We must either sell it at a loss on other markets or pay the $540 per tonne tax.

If we conduct a simulation based on what we know today, the initial impact will be around $10 million to $20 million upon the coming into force of the agreement or in the first years of its implementation. These are substantial amounts, which will accumulate over the years and will keep pace with the growth in demand.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Okay. Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, Gabriel. Thank you, gentlemen.

I'll go next to Mr. Julian.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

I want to thank all the witnesses.

I'll start with Mr. Stewart and Ms. Dreff.

Does the Insurance Bureau of Canada keep statistics on the number of insurance claims linked to incidents or events linked to climate change?

[Craig Stewart]

Yes, we do. Basically, through a third party, we aggregate every catastrophic event—which would be an event that surpasses $25 million in losses—that can be attributed to severe weather. That would be anything from hail to flooding, ice storms, wildfire, or generally any severe weather event that can be attributed to climate change. We can aggregate those and track them over time. We've been doing that since 2000—well, for several decades, actually.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

If we look back to 10 years ago, then back to five years ago and then look at this year, what is the progression of claims linked to climate change?

[Craig Stewart]

In the early 2000s, losses across Canada averaged around $400 million per year. There seems to have been an inflection point in 2009: in every year but one since 2009, the losses have surpassed a billion dollars. In 2019, the number was $1.3 billion in insured losses. The year before, in 2018, it was $2.1 billion.

It's important to note that no single large event such as the Fort McMurray fire drove those losses. They were actually an aggregation from events of all types—wind, flooding, hail, etc.—across the entire country.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

If we look back 20 years ago, then, over a two-year period we'd probably be looking at about $800 million in claims. In the last two years, there have been $3.4 billion in claims—a quadrupling of the overall claims linked to climate change.

[Craig Stewart]

That's correct.