Government Operations Committee on Dec. 5th, 2007

[Charlie Angus, NDP, Timmins—James Bay, ON]

Thank you, Madam Chair.

I have presented a motion to the clerk--because I think the details are very important--that we ask the minister to release all the relevant documents surrounding the confidential information memorandum. That would include the operating expenses, the taxes, the management fees, and the detailed schedule of capital improvements. I have submitted that to the clerk. I just thought I would bring that to your attention.

I would like to pick up on my colleague's question, because I think it is a big issue--what we are going to do at the end of 25 years. I don't think we need a professor to tell us this is a great time to sell--of course it's a great time to sell. But what about having to buy it back?

Since I haven't seen a plan to get rid of the public service in 25 years, I'd like to talk about what happens at the end of this deal. It looks to me like we're looking at an elaborate accounting shell game here. This government will get an incredible one-year boost in their bottom line and look like they're managing our assets well--they'll have amortized the loss to the taxpayers over the 25 years--until the moment comes when key pieces of urban real estate are no longer in our hands and we have to find a place to put our staff.

I don't know if this was in the purview of your study or not, but if we go back to 1982 and look at the real estate value of federal buildings in key urban markets like Calgary, Toronto, Montreal, and Vancouver, what the value of those buildings would have been in 1982 compared to what they are in 2007, we'd see they've probably jumped fivefold to tenfold.

Have you looked at any of the realistic costs, the real estate values, given the previous 25 years and what we would be expecting in the next 25 years?

[Michael McCracken]

That's not been part of our charge, so we don't have an ability to speak to that specifically on the government building side. We certainly are not unaware of what's happened out there. But keep in mind that our forecast, at least, over the next 25-year period doesn't show the same rapid rate of inflation that occurred in the late seventies and early eighties that was part of the story of escalating prices in non-residential real estate.

But who knows what the future holds? I think you'd want to do several different scenarios to get a guide on what's happening.

[Charlie Angus, NDP, Timmins—James Bay, ON]

I guess my concern here is I'm looking back to 1982, the 25 years counting back from here. Take, for example, urban real estate prices in Toronto. You're not even looking at the same world any more.

So unless you put a figure, whatever that figure is, on where we're going to be to deal with the thousands of placements that we're going to need in those key urban areas for civil servants, there's a considerable booby prize sitting there at the end of this.

Would it not have been reasonable for someone who's trying to sell this to the taxpayer, to the government, to have put a fair price on what we're going to be looking at when we reach that 25-year period?

[Michael McCracken]

It would certainly be part of their overall analysis, I suspect, at DPW or the Department of Finance, who would be the ones responsible for this type of a long-term transaction, but we haven't done it. In some sense it's not the union's responsibility to worry about the 25 years out. They're worried about losing the buildings now and in the second tranche, and that's where their concerns are.

[Charlie Angus, NDP, Timmins—James Bay, ON]

You estimated that in the first year of operating, costs for the Harry Hays Building in Calgary will jump from $5 million to $20 million, the Canada Place from $7.2 million to $22 million. Are you expecting that as a one-time massive increase, or is this going to be part of the ongoing costs that will be stuck to the Canadian taxpayer?

[Michael McCracken]

No, I should make clear that these are the annual costs--

[Charlie Angus, NDP, Timmins—James Bay, ON]

These are annual costs?

[Michael McCracken]

--for the first year, so that you keep on giving. And then of course the lease is escalated, so after five years you'll be paying a higher amount. Keep in mind, if you own the building you're not escalating your return. You are essentially having to pay here the additional lease.

Your operating costs, we're saying, are the same in the two situations. The only difference between these two are operating costs. In the case where you own the building, you keep the net profits from your parking, and when you don't own the building, then the lessor gets those net profits from the parking.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Okay. We're giving any of the profit value that offsets the costs of these buildings. Our costs are going up at the Harry Hays Building fourfold as soon as this kicks in within year one, yet you said that any of the responsibilities for leaks in the roof and the foundation cracks go back to the tenant?

[Michael McCracken]

Unless they are specified in this set of claims that were laid out, yes. This is a net-net-net lease: it's net of operating costs, it's net of utilities, it's net of capital cost except otherwise specified.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Okay. But in the real world, what tenant would ever sign onto an agreement like that unless they were a country bumpkin and never read a contract?

[Michael McCracken]

It's a question of price.

[Charlie Angus, NDP, Timmins—James Bay, ON]

I don't see any benefit here that we're giving prime urban real estate to an investment company that's protected at every single level, and the costs continually come back to the taxpayer.

[Michael McCracken]

Don't forget that one part of the transaction in year zero is you're getting a big bundle of money; you're getting $1.4 billion, say, in cash. That's not going to DPW, and it's not going to the departments who are involved in individual buildings; it's going to the government. So that's the offset to all of this. Whether it makes sense or not is the issue that Public Works has to answer to.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Madame Ducharme, I'd like to ask you about the Musqueam Band's injunction.

I worked for a tribal council for a number of years, and I know for a fact that getting a court injunction to stop an action is not an easy thing for a first nation to do. You have to first of all establish a pretty impressive paper trail with government so that the government would have been very aware of concerns raised at each point along the process. Why is it that this process was allowed to go pretty much to the week of sale before the government suddenly realized that they had blown it considerably and had to pull those two buildings out of the sale?

[Patricia Ducharme]

I can't answer that question. I can't explain the government's failure to consult with the Musqueam. The Musqueam have a longstanding claim to their territorial lands in metro Vancouver, downtown Vancouver. Quite frankly, I was shocked to realize that there had not been consultation prior to putting these buildings on the block.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Did the Musqueam Band indicate to you the efforts they had made to make their concerns known to the federal government before they had to go to the extraordinary steps of actually having to take it to the Federal Court?

[Patricia Ducharme]

No. We had a discussion about what was happening when I met with them.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Okay. Thank you very much.

[The Chair, Liberal, Diane Marleau]

Before you complete, I think you have a motion on the floor. Did you want that debated at this time?

[Charlie Angus, NDP, Timmins—James Bay, ON]

Yes, I would certainly like to bring that forward, because I think it's germane to the discussion we're having right now.

[The Chair, Liberal, Diane Marleau]

Yes, it is.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Would you like me to read it?

[The Chair, Liberal, Diane Marleau]

Yes, please.

[Charlie Angus, NDP, Timmins—James Bay, ON]

My motion is that the committee call on the Minister of Public Works to immediately release to the committee the confidential information memorandum for the sale of federal buildings to bidders that outlines operating expenses, taxes, management fees, parking income, and detailed schedule of capital improvements.