Evidence of meeting #7 for Government Operations and Estimates in the 39th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was transaction.
A recording is available from Parliament.
4:45 p.m.
NDP
Paul Dewar NDP Ottawa Centre, ON
I wanted to ask about L'Esplanade Laurier and if you're going to buy it in 2009.
December 10th, 2007 / 4:45 p.m.
Conservative
Patrick Brown Conservative Barrie, ON
Thank you.
I have two questions, and I know Mr. Warkentin has questions as well, if there's any additional time.
One of the previous questions I've heard the minister asked by one of our colleagues on this side referenced the idea that, logically, money could be made if a business was interested. The tone of the questioning was very critical toward the sell-off. Logically, one could also infer that if they're critical now, they would have also been critical at the time when the Liberal Party was in power. I thought maybe you could shed some more information on whether this logical jump is correct or if the Liberal Party, the previous government, was actually looking at sell-offs as well, and if they initiated this plan that is currently evolving.
The second question I wanted you to touch upon is about the ownership risks. Maybe you could share with the committee some of the ownership risks Larco is taking on, and how relieving the Government of Canada—and the taxpayers indirectly—is something that is certainly fiscally responsible.
4:50 p.m.
Minister of Public Works and Government Services
Thank you, Mr. Brown.
I referred earlier to the RFP that was on the table in the summer of 2005, which was basically proposing to spin off as many of the assets as possible, whether they were office buildings, laboratories--anything. Interestingly, nobody qualified for this, which is unfortunate, in the sense that it went out there and none of the experts could qualify since it was so complicated and so well packed. I think we should all feel fortunate that nobody did, because if they had, I don't know what would have happened in terms of a transaction.
With respect to the ownership risk, and I've stated this several times already today, I think taxpayers are willing to underwrite program delivery risk. That to me is very different from a bricks-and-mortar ownership risk, which is what we're really talking about here. We don't need to own those seven buildings to deliver services to Canadians. There will be close to 11,000 to 12,000 public servants still housed in those buildings, still delivering, in some cases, store-front services in the lobby. That won't change.
One example of investments we won't have to make anymore is in the outer shell. I talked to Madame Bourgeois earlier about the 50-50 split on the day-to-day maintenance. What we've totally spun off to Larco is called the outer shell. This is the roof, exterior cladding, etc. It's called a superstructure. We estimate that for those seven buildings it's worth around $350 million over 25 years. These are sums we won't have to invest on the superstructure, which we've passed along to the private sector, where I think it belongs.
4:50 p.m.
Conservative
Patrick Brown Conservative Barrie, ON
That certainly sounds like an onerous risk. I applaud the initiative you've undertaken.
I think Mr. Warkentin has a quick question.
4:50 p.m.
Conservative
4:50 p.m.
Liberal
Mario Silva Liberal Davenport, ON
Thank you, Madam Chair. Thank you, Minister, for being here.
I have a few questions and comments, but my time is short. I apologize if it seems like I'm speeding through what I have to say.
First of all, I understand your situation asked about transfer of risk specifically and the area of infrastructure. We know that municipalities are facing about a $120 billion situation of infrastructure needs. I'm not sure if you're arguing that basically the municipalities should sell all their properties and lease them back so that they can deal with their risk assessment.
Also, in the private sector...and maybe you are aware, but we know what happened under Thatcher's regime in the U.K. in direct relation to that. It did not go very well.
These things sort of go in and out of fashion. Businesses make decisions one day, but I don't think they'll really look at it 25 years down the road, because they could be bought. Some of them would be quite happy if they were actually bought by different companies or through foreign takeovers. Government is totally different. We'd like to be here for at least 25 years, if not longer than that. We know we're going to be needing civil servants as well to carry out duties. They have different priorities and different needs.
The banks or private institutions make decisions, and some are very good and some are very bad. We have several cases of several private companies that we know of that have made some serious decisions. You have to look at the investments that some banks have made overseas as well. On this whole notion you keep talking about of somehow government always seeming to manage things badly and that government is a failure compared to the private sector, I don't buy into that. Maybe you could clarify that for me when you make your statement.
Have you looked at some options possibly that have been created where maybe crown corporations could deal with the leasing of these facilities?
Finally, I would like to also add the comment that we tend to look at numbers only and not at people. I've seen in the city of Toronto where banks and other institutions have basically sold their buildings and leased them back. What happens is that with these particular companies that lease them, the first thing they do is cut services, particularly in the area of maintenance services. Somebody who was making $10 or $12 an hour all of a sudden is making $8 an hour. There's a human face to all of this. I think sometimes we get tied up in all these numbers and forget that there are people out there who are also paying their mortgages and who have lives to fulfill. Sometimes we don't consider all those factors when we make these decisions.
As I said, there are many times that I've seen institutions make decisions, wrong decisions, and they regret it two or three years later. I mean, there are hundreds of them. Just read the paper every day about the many decisions of financial companies. I don't want to talk about Hollinger today, but we know all the different decisions that companies make and then people regret them later on.
4:55 p.m.
Liberal
Mario Silva Liberal Davenport, ON
I really apologize for being so fast, but I had no other choice in the five minutes. Sorry.
4:55 p.m.
Minister of Public Works and Government Services
Okay. The crown corporation is a bad idea. We don't need another crown corporation. There are enough structures up here. Believe you me, that's not something we require.
Fads, fashion--look at 40 years of ownership. I looked at 40 years of ownership of these assets. It's not a fad. It's not a fashion. I'm seeing a trend. Unmistakably, I know where this is going. It's going to another 25 years of bad management. It's not because people here are not competent. It's just the structure around which we're asking them to work.
Madame Marleau was minister, and I see her nodding from time to time. You don't see her, but she knows what I mean. It's difficult. You're trying to invest in a building. You need this guy's approval. You need five people to bid. You need another person's approval, five signatures. It is complicated.
So it's not a fad; it's not fashion. It's just the way things work up here.
What was your last question? It wasn't on Hollinger. I don't want to talk about that. It was on people.
The first people I think about are taxpayers. I'm sure you do as well. The other people I think about are those 12,000 public servants who are in those buildings, some of whom are in the Harry Hays Building. Mr. Dewar was talking about people in his riding who are against this. I don't know about that, but I can tell you, I was in Calgary two weeks ago. I met three people who told me they worked in that building and they were looking forward to having Larco as a landlord and as an owner so that finally work will get done, improvements will happen in that building, for which they've been waiting for several years.
4:55 p.m.
Liberal
Mario Silva Liberal Davenport, ON
Tell me, is the $1.4 billion that's going to be paid upfront money?
4:55 p.m.
Minister of Public Works and Government Services
Yes, it has been paid. It's already in the Consolidated Revenue Fund.
4:55 p.m.
Conservative
Chris Warkentin Conservative Peace River, AB
Thank you, Madam Chair.
Thank you, Minister, for coming yet again. We do appreciate your coming for the full two hours.
In terms of—
4:55 p.m.
Minister of Public Works and Government Services
Was there an option? Nobody told me.
4:55 p.m.
Some hon. members
Oh, oh!
4:55 p.m.
Conservative
4:55 p.m.
Conservative
Chris Warkentin Conservative Peace River, AB
Thank you for coming for the full two hours, Minister.
I think we should discuss a bit the efficiencies that Larco will be able to provide for us. Mr. Alghabra mentioned that this company is going to make a bit of a profit from these buildings. I come from the real estate sector, and I understand it's often small margins, and it's built on efficiencies. I think it's been suggested that we set up a crown corporation to develop the strategies. I think that's probably a flawed proposal because of the size of the country. We're looking at providing services across this country.
So I'm just wondering, in terms of the efficiencies, if we have numbers or if there's been analysis as to how many people...or many dollars are going to be spent on maintaining these buildings in the private sector, compared to what has been the case or would be in the public sector.
4:55 p.m.
Minister of Public Works and Government Services
Clearly, we're underinvested in our assets. One of the challenges we all have—this is a bipartisan issue—is that we're facing a pretty significant deferred capital bill--north of $4 billion--which we're going to have to 'fess up to and deal with between now and 2020. So that's a concern.
At the same time, we have to make sure our public servants work in an environment in which any of us would work were we in their shoes. In some of the buildings, that's fine. In several others, it's not. So that's why these investments are required. The deputy has put together, and is still working on, a plan to improve our efficiencies.
I talked earlier about some of the challenges of addressing these maintenance concerns when you are a government. So Monsieur Guimond has been trying to streamline some of our processes to make sure that if we need to do urgent work.... Tim talked earlier about the Harry Hays Building and the flood. On that one, we acted swiftly. This was an emergency. If we could always deal with any and all repairs and add value to our buildings the way we dealt with the floods in Calgary, that would be great. But I think we all know our limitations. While we're selling these buildings, we're still maintaining a large number of them. So we need a plan, and we have a plan to make sure the work does get done.
5 p.m.
Conservative
Chris Warkentin Conservative Peace River, AB
In terms of the work needed to go forward, obviously we still have a huge deficit to take care of in terms of work. Can you elaborate a bit in terms of the plans for re-establishing some of these current buildings, or providing the work that's necessary to get them up to shipshape?
5 p.m.
Minister of Public Works and Government Services
Well, we're going to need to invest the money. We're going to need to do it in a way where there are no cost overruns. As I was saying earlier, the deputy is working on a plan where, in managing real estate investments in terms of maintenance and what have you, our systems will be much more efficient, and we'll be able to hire trades quickly to do the work and supervise that work in such a way that there are no cost overruns. But we need to commit the funds, and we're going to commit the funds, to these assets. It's very important to the government and to myself that these funds be allocated.
So these are not mutually exclusive. You can be selling seven buildings, but it doesn't mean you're not going to be looking after the balance of the portfolio. We are looking after the balance of the portfolio.
