Evidence of meeting #41 for Government Operations and Estimates in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was secretariat.
A recording is available from Parliament.
Liberal
The Chair Liberal Diane Marleau
This is a real challenge. There's no doubt in my mind that nothing is perfect, and selling them will not necessarily solve the problems.
Assistant Secretary, Government Operations Sector, Treasury Board Secretariat
Precisely. Selling them and leasing does not mean Valhalla. There's a tremendous amount of work associated with lease management, lease negotiation, and then management of the ongoing contract renewals, and so on. There's no reason to believe that leasing will necessarily be the perfect solution.
Liberal
Conservative
Chris Warkentin Conservative Peace River, AB
Thank you very much.
I appreciate your testimony this afternoon. We appreciate it when you do come, and it's great to see you here.
I have just a couple of questions, and I'll begin with the whole issue of the $4 billion that's bandied about in terms of the perceived or the actual cost to retrofit the buildings. Specifically, because we know now that there are so many buildings, what type of buildings are the worst? Are we looking at lighthouses that are in disrepair and currently aren't being used, or are we talking about office buildings that have the majority of this deficit?
Assistant Secretary, Government Operations Sector, Treasury Board Secretariat
That $4 billion figure, sir, relates to office buildings only. In one respect, it may be the tip of the iceberg. It doesn't tell you what the recapitalization outstanding costs are in terms of special purpose buildings.
Conservative
Chris Warkentin Conservative Peace River, AB
I guess that would be limited to office space. Would that include crown corporation buildings as well? I'm wondering about post offices and so on.
Assistant Secretary, Government Operations Sector, Treasury Board Secretariat
No, sir, it's just relating to the—
Bloc
Richard Nadeau Bloc Gatineau, QC
The interpreter is telling me that he cannot hear what Mr. Warkentin is saying and therefore there is no translation.
Liberal
The Chair Liberal Diane Marleau
There's something wrong. They're not understanding you to translate. Speak and we'll see whether—
Conservative
Chris Warkentin Conservative Peace River, AB
It was with regard to the $4 billion deficit that's perceived to be there. That was the premise of the question.
Liberal
The Chair Liberal Diane Marleau
Are the people sitting at the back understand everything? Yes? Very good.
Conservative
Chris Warkentin Conservative Peace River, AB
Perfect.
I think you were saying that, for the most part, those were just office buildings, and it did or did not include other crown corporation buildings.
Assistant Secretary, Government Operations Sector, Treasury Board Secretariat
It does not include crown corporate holdings and does not include recapitalization costs associated with special purpose space.
Conservative
Chris Warkentin Conservative Peace River, AB
Okay. So basically what we're looking at is $4 billion as being at the tip of the iceberg. What has the plan been for the last 10 years in terms of trying to resolve this $4 billion deficit?
Assistant Secretary, Government Operations Sector, Treasury Board Secretariat
There is an annual exercise between the Treasury Board Secretariat and the Department of Public Works where Public Works comes to the secretariat and says--in very global terms, not building by building or issue by issue--that they have certain pressures on their accommodation budget that are what we call non-discretionary. There are discretionary costs that are separate and apart from that. The non-discretionaries would be things like payments in lieu of taxes, inflation on leases, and interest. Recapitalization falls almost in a grey zone, because not all recapitalization must be done today.
There is a negotiation between PW and TBS around other investment decisions--and we would particularly look at the health and safety issues--and then a recommendation is made to the Treasury Board, the cabinet committee, on adjustments to the PW base. Madam Chair would know this exercise well. That happens annually.
We top the department up by a certain amount. They are required to justify that amount, because we must be confident that it's not more than required. Often they don't get everything they ask for. We do, as a government, make choices to defer certain investments and--
Conservative
Chris Warkentin Conservative Peace River, AB
Has deferring these investments led to a growing deficit? I mean, has it been $4 billion for the last 10 years, or has it grown in that period of time?
Assistant Secretary, Government Operations Sector, Treasury Board Secretariat
It goes up and down. The $4 billion is actually calculated on a percentage basis. PW takes the total value of the inventory and applies a percentage to it to establish the recap rate, as they call it. That's why I say it's not a building-by-building calculation.
Conservative
Chris Warkentin Conservative Peace River, AB
So in some ways the $4 billion may be a shot in the dark. If we were to retrofit these buildings, we might be looking at something totally different by the time the projects were completed.
Assistant Secretary, Government Operations Sector, Treasury Board Secretariat
You would likely get a higher number. I don't think you'd get a lower one.
Conservative
Chris Warkentin Conservative Peace River, AB
Okay. I guess that gives us some information as to where we are today. It's not favourable, but that's the way it is.
Just for a moment, I see they are proceeding with some work on the West Block. Is there any idea as to what the possible cost of retrofitting that and getting it up to current health standards will be?
Assistant Secretary, Government Operations Sector, Treasury Board Secretariat
I can tell you that what has been looked at on the West Block are urgent health and safety concerns. You are on the Hill all the time, and you would have seen the scaffolding and netting.
Costing is very hard to predict, given the age of those buildings and the unique work that needs to be done. I wouldn't want to venture a cost.
Conservative
Chris Warkentin Conservative Peace River, AB
I can appreciate that. Thank you.
I know we had this discussion of the leases. The chairperson, who has been minister, talked a bit about buildings that were leased and fell into bad condition. I'm wondering if the department is still entering into triple net leases or whether they are moving to a situation where the landlord is fully responsible for the upkeep of the buildings.
Assistant Secretary, Government Operations Sector, Treasury Board Secretariat
It's a bit of a case-by-case scenario. I know in some cases recently they've done triple net leases.
I would caution you by saying that I am a taker on this. When they tell me it's triple net, they explain it to me. I'm not an expert in leasing, so they have to walk me through what this means.