Government Operations Committee on Feb. 5th, 2009

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

If it's not necessarily the increase in the cost per square foot that represents a significant difference, can you tell me what is? Is it maintenance, for example?

[John McBain]

The difference refers not to the cost of the space itself, but to the cost of utilities, so that would include water, sewage, electrical and heat, and that varies. It would include the cost of other aspects of maintaining a large piece of inventory. For example, when we have to move tenants out of one location to another, we conduct a competitive process. When another landlord is successful and we move the people, there are costs in those moves. That's what's built into this total amount.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

In terms of the management of public buildings, when you have more than 2,000 properties to your credit, you have to follow a planning process in which, where a lease has to be renewed in two or five years, you can anticipate—and I believe this is the case—an increase in taxes, the cost of water, garbage collection, and so on.

You told us earlier that you didn't have the figures with you. I'm going to play the devil's advocate and ask you whether it's possible that you didn't plan for a substantial increase in leasing costs?

[Mike Hawkes]

If I could, I'll answer that question, Mr. Chair.

We do plan for them. In our ongoing base for the department's real estate funding, we project out, as long as the leases are in our inventory, what the costs will be on an annual basis. At the time we enter into the lease, we determine by our own estimation what we expect those costs to be in order to be able to make the investment decision in the first place.

What we're doing in the supplementary estimates process is simply seeking the cash when the changes arise. It's already predicted in our investment decisions and our portfolio management decisions.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

I know, but these are enormous costs that you didn't plan for, since you've just asked us for additional funding.

[Mike Hawkes]

No, on our base real estate inventory we spend almost $2.5 billion a year. This is $64 million of increased difference. It's a percentage that reflects what's happening in the economy today.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

All right.

In closing, can you explain to me what the Laniel Dam reconstruction is?

[John McBain]

This is the replacement of a dam on the northern part of the Ottawa River. It had three sluice gates that we determined to be inadequate to handle potential flow in the spring runoff. So it's been the complete reconstruction of that dam. This is part of an agreement we have with the Province of Quebec to transfer the dam, ultimately, to their authority and control. The funds in this supplementary estimate are to allow us to continue and to complete that work, to tear down, effectively, and completely reconstruct the dam.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Very good.

Thank you, Mr. Chairman.

[The Chair, Liberal, Derek Lee]

Mr. Roy, you have 45 seconds.

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

Thank you, Mr. Chairman.

There is something I don't understand in your presentation, Mr. Hawkes. You say, among other things: “The increased volume in this part of the request refers to changes in the office space inventory to accommodate the current population of federal public servants. This would include increased rental rates for leases being renewed [...]”

I don't see the connection between the increase in the number of offices and the increase in rental rates. Perhaps the translation isn't good. You can't say that the increase in the number of offices is due to an increase in rental rates. That's impossible.

[Mike Hawkes]

That's true. It's not just increased rental rates. It's talking about the increased volume of maintenance costs, the increased volume of hydro being used, the increased volume of the different utilities as a result of perhaps the change in use of the space by the tenants. It's the volume of the operation and maintenance costs needed to keep this inventory in the shape it's in. As it gets older it requires more maintenance. So it's not just the volume, meaning the number of square metres of space; it's the volume of dollars required to keep that space at its current level of standard.

[The Chair, Liberal, Derek Lee]

Okay, and none of this, I suppose, was a surprise, was it? Was this a surprise to the department?

[Mike Hawkes]

No, none of it is a surprise. As I said earlier in my remarks, this in fact refers to costs that we've already incurred in the inventory. We're required to give evidence that the costs in fact are increasing.

[The Chair, Liberal, Derek Lee]

Thank you.

Mr. Gourde, you have seven minutes.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Thank you, Mr. Chairman.

I'd like to thank our witnesses for coming this morning. In the supplementary estimates to the department's estimates, there is a budget item concerning inflationary pressures on non-discretionary expenses for the Real Property program.

Can our witnesses give us an explanation of that item?

[John McBain]

In terms of the pressures we face with the program, we have both our lease costs and the operating costs. I'd like to underline that these increases apply to both our leases and our crown-owned inventory. So we have increases that incur to both things we own and things we lease. The nature of those is such that with the agreement we have with the private sector for leases, costs are passed through to us, which increase, or we incur them as the custodian, as the crown owns these buildings. There are increases we can predict but cannot finalize until the actual percentages come to us from either the utilities or private sector providers. So in that respect, that's what we are seeking to address here.

As well, a significant portion of the amount we're asking for relates to acquiring additional space for new program requirements.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Again in the supplementary estimates, you mention that it's necessary to fund additional office space.

Can you tell committee members which departments or agencies need additional office space?

[John McBain]

I could indicate that there's a multitude of departments that have obtained increases in their programs. The top five that I would highlight in these estimates include Health Canada, the Canadian Food Inspection Agency, Canada Revenue Agency, Public Safety and Emergency Preparedness Canada, and Citizenship and Immigration Canada.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

When major repairs have to be made to certain offices or properties that belong to us, the government has to move public servants to other premises. Does that result in additional expenses in the supplementary estimates?

[John McBain]

Yes, Mr. Chair, it does. What we call the quasi-statutory increases include an amount for what my colleague referred to as “swing space”. This is space we acquire to move tenants into while major work is done, and then we move them back into their original space after the major repairs have been completed.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Reference is made in the supplementary estimates to the need to fund the management and rehabilitiation of aging surplus engineering assets.

Can you give committee members a few examples of the aging surplus engineering assets that will be rehabilitated? Where are those assets located, and on what basis do you choose the aging surplus engineering assets that should be rehabilitated?

[John McBain]

In terms of surplus engineering assets, Mr. Chair, there are 22 significant engineering assets that remain in the inventory of Public Works and Government Services Canada. These include bridges; dams; the Alaska Highway, for example; the Esquimalt Graving Dock. These are significant engineering works that we remain accountable for. When we look at those kinds of assets, we need to first of all assess their condition, look at them from a portfolio point of view, and then proceed with the work to maintain them in good operating condition, and also enable the crown to look at possible divestiture.

So in response to the question, what we'd be looking at would be improvements, for example, to the south jetty of the Esquimalt Graving Dock, repairs to the Alaska Highway, work that we plan to undertake on the Chaudière Crossing. These are the kinds of things we would take for structural repairs, investigations and analysis, and longer-term recapitalization.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Mr. Chairman, how much time do I have left?

[The Chair, Liberal, Derek Lee]

You have two minutes left.