Government Operations Committee on Dec. 10th, 2007

[Tim McGrath]

On that particular item, Madam Chair, we had quite a severe flood in Calgary, from quite a significant rainstorm that caused some severe damage. The building was closed for a couple of days. We had to start those emergency repairs right away, before the building was actually sold, and as a result it's just entered into our budget.

Everything else--all the other responsibilities for the Harry Hays Building--reverts to Larco. We're just finishing up this one project, and that required a significant amount of investment.

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

It was $3 million?

[Tim McGrath]

That's correct.

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

The 2007-08 supplementary estimates include $32 million for “Funding for the sale and leaseback of office complexes and lands”. Who's getting that money, and what's it for?

[Tim McGrath]

Most of that money is for work at the Skyline building, the Skyline asset itself. We had purchased the Skyline building for the new headquarters for agriculture and the Canadian Food Inspection Agency.

We're in the middle of finalizing that program. Because most of the contracts had already been let, we didn't continue on and transfer those contracts to Larco. We're finishing that work, and then Larco will take on that responsibility.

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

So that $32 million is for Skyline.

You also mentioned a $236 million increase in spending on real property. Is any of that money going to the seven buildings that have been sold?

[Tim McGrath]

No, it's not.

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

So at the end of the day, this whole deal is predicated on the principle that the value of these buildings will be zero.

[Michael Fortier]

No.

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

That's the way they calculated it to us, but we're seeing this year alone that an extra $6.3 million is going to be paid into one building and $32 million into another building. What obligations do the Canadian taxpayers have to pay, in the coming years, for any further repairs or construction at those seven buildings?

[Michael Fortier]

Over the next 10 years, Larco is responsible for capital repairs. In years 11 to 25, we share things 50-50 on the same capital repairs.

Can I just come back to what you said on the premise for the transaction? The premise for the transaction is not a partisan issue. If you just look at the past decades, if you were to take seven buildings that we've had for more than 25 years and looked at their value 25 years ago, in 1982, Mr. Angus, and if you then looked at the status of those buildings—not these same seven, but any seven—you would see what has happened.

Basically, work isn't getting done. When it's getting done, it's actually costlier than it should be because of all the different checks and balances that we have here in government before we spend a dollar. Indirectly, but very directly, this affects our public servants, because they're housed in buildings that in some cases don't have running water, with asbestos all over the place, so they're not properly....

So that's the principle. We have a deferred capital maintenance bill in excess of $4 billion to face for the remainder of the portfolio between now and 2020, and this is stuff that should have been done before.

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

I agree that it probably should have been done. What I don't understand is that right now for, say, the Harry Hays Building alone, instead of $5 million a year, we're going to be paying $20 million a year. That's going to have to come from someplace. The money that is being accrued from this sale will probably go back into general revenues and we'll never see it again.

At the end of the 25 years, these buildings in key urban locations are going to be worth a lot more money than they are now, and we'll have the opportunity to buy them back at market value? In that case, the Canadian taxpayer will have to make a severe choice, because you're telling me that these seven buildings will make Larco the single largest landlord to the federal government, because there are 12,000 employees. What are we going to do in 25 years, put them out in the street? Or are we going to have to pay the full market value for seven buildings for which we're on the hook to pay, from years 11 to 25, 50% of all the capital costs to make sure those buildings will be worth full market value?

[Michael Fortier]

With respect, I think that's the wrong issue. In 25 years, I doubt the landlord won't want to renew the lease with us. If you ask them why they did this deal—and they actually said this publicly, as you know. I think it has been made available to you the range of bids we received. They were significantly north of anybody else. They were looking for safe, steady, and predictable income flow. They have other types of assets that they consider more risky. They were looking for something perhaps less “yieldy”, but safe and predictable. So I would suggest to you—and I'm not an expert in this, but this is based on everything I've read—that people actually look for governments as tenants. I don't think they'll kick us out in 25 years.

As Tim said, we have 50 more of these buildings around. We always face the possibility that a landlord will, at the end of a lease, not renew that lease. That's why we have a team here that monitors each urban area where we are, and that team plans several years ahead to make sure we have the ability to relocate if that should happen.

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

I'd love to follow up on this premise that we can guess what the landlords will do in 25 years. So we're basing it—

[Michael Fortier]

It's not a question of guessing.

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

—on the unknown, but since my time is running out, I just want to follow up.

I was looking at the Minto deal, because I think that was the first of what could be a series. Whether or not it's frozen, I'm not sure. I'm looking at the latest lobbyist registration system, and I see that Fred Doucet has numerous leases of commercial space interests with Public Works, dating to April 2007, February 2007, October 10, 2007, and October 14. They're all dealing with leases of commercial space or leaseback.

Have you met with Fred at all on any of these?

[Michael Fortier]

No.

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

Are your staff meeting with him?

[Michael Fortier]

No.

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

How does that happen?

[Michael Fortier]

How does that happen? Why don't they meet with him or—

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

No. Whom does he meet with if he's here to lobby to deal with commercial spaces?

[Michael Fortier]

I suspect that what you're reading from must say whom he has met, does it not?

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

He's dealing with Public Works.

[Michael Fortier]

There you go. I think it probably says more than that. I think it says whom he meets with.