Government Operations Committee on Sept. 27th, 2016

[Yasmin Ratansi, Liberal, Don Valley East, ON]

You were. The task force recommendations were for alternate-day delivery. No, not recommendations, because they're not allowed to make any recommendations. It's a discussion paper.

They said alternate-day delivery. One of the recommendations was for community mailboxes, but alternate-day delivery does not seem to sit well with most of the businesses, right? Okay. Fair enough.

On community mailboxes, if in the apartment building Canada Post has the right to put in flyers, and you do not, you'll have the same problem if the community mailbox comes in, won't you?

[John Hinds]

No, because with the community mailbox, we have access to the household, and for alternative delivery, actually, it's a competitive advantage for us because we will be the only piece reaching the household. What we find in suburban Canada, where there are community mailboxes and we have large carrier forces who deliver the newspaper to the door, is that it's more effective if it goes through the door.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

That's fair enough. I'll go to the rural moratorium.

In the rural moratorium, it's about converting the current corporate offices to franchises. When we were listening to other witnesses, they told us that Canada Post is the last mile, so it will deliver past the road, right? If that's the case and nobody else wants to deliver the service, how do you justify converting it? Who will provide the service? Who will go in there? As business people, is it to your competitive advantage?

[Patrick Bartlett]

I think there's a difference between “last mile” and “first mile”. I think most of the postal outlets in rural areas are operating as first mile outlets. Delivery can easily be done in places such as Trinity without a post office being present, or they can have a franchise post office. We're not suggesting shutting down post offices, by the way. We just think mailers shouldn't have to pay solely for that.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Fair enough.

[John Hinds]

What we say is that there's less being done in rural post offices. The postal transformation agenda means that if you're mailing to a neighbourhood town that is five or six kilometres away, instead of them sorting the mail in the rural post office, which was traditionally done, it's now trucked hundreds of kilometres to places like Edmonton or Gateway, sorted there, and then trucked back to the neighbourhood community. We would like to see rural post offices revert to sorting mail for their region.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Fair enough.

When we're talking about Canada Post, we're talking about the corporation and the people. All of you run corporations. Whatever edict you give to your staff or workers, they do it. I'm trying to find that connection between unethical practices of the corporation, which is going to be told to the people....

I'm trying to get a sense of how you resolve an issue that you raise with Canada Post. Small and medium-sized enterprises, I guess, are the biggest users of Canada Post, so can you give me some ideas? We're here to listen to you and get some feedback.

[Daniel Kelly]

Sure.

[The Chair, Conservative, Tom Lukiwski]

Madam Ratansi, that's it. There might be just a minute.

[Daniel Kelly]

I don't think anybody who runs a corporation is of the belief that they can control every single thing that goes on with their employees. Would that it existed.

I will say that I think the challenge is both in terms of policy and then in terms of execution of that policy. Some of the things that have been pointed out are actually by Canada Post's design, so the issue is with management for not creating those processes, or perhaps with government for not creating the processes above the corporation that would provide avenues for appeal, etc. Then, there are also problems on the execution end, where the employee may be overzealous or misapplying a particular policy, with little recourse for private sector users.

[The Chair, Conservative, Tom Lukiwski]

Unfortunately, I have to cut it off there.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Mr. Chair, did you ask them if we could send them questions and if they would be willing to...?

[The Chair, Conservative, Tom Lukiwski]

No, I was just about to get to that, but thank you again for assisting me.

Gentlemen and lady, we have a standard practice whereby if the committee members have additional questions, we ask all of our panellists to please allow us to send those questions directly to you. Conversely, if you have other information you wish to submit to committee members for the benefit of our study, please do so. You can send it directly to our clerk.

Thank you once again for being here. Your presentations have been both informative and extremely helpful.

We will suspend for a couple of minutes. I would ask our next group of panellists to get to the table as quickly as possible so we can try as best we can to keep on time.

[The Chair, Conservative, Tom Lukiwski]

Panellists and colleagues, thank you very much for being here. I trust that all of you have been in the room watching the first session, so you know how we work things around here.

We're going to ask all panellists to please try to keep opening remarks to five minutes or less to allow questions from our committee members. After that, we will have a number of questions, I'm sure, from all on our committee.

First up I have Ms. Dollin, please, for five minutes.

[Lynn Dollin, President, Association of Municipalities of Ontario]

Thank you, Mr. Chair.

Thanks for providing the Association of Municipalities of Ontario the opportunity to appear before this committee and contribute to your discussions about Canada Post. This is an issue that is very important to Ontario residents.

The Association of Municipalities of Ontario is a non-profit organization that represents almost all of Ontario's 444 municipal governments. Municipal governments have many legislative responsibilities and are also seen as the voices for the broader community interests.

AMO welcomes the current efforts of the federal government to explore ways of enhancing postal service across Canada. Communities of all sizes depend upon postal service, whether it is to receive and pay bills, deliver online shopping, or other needs to support businesses, or to hear from loved ones and stay connected to organizations, charities, and others. We appreciate the federal government's decision to slow down the ending of door-to-door mail delivery by undertaking this new review.

AMO is a member of the Federation of Canadian Municipalities. Working with our own membership, we are dismayed by the move to community mailboxes as the postal delivery model for the nation. After the release of Canada Post's five-point action plan, many of AMO's members passed council resolutions expressing outrage with the phase-out of door-to-door mail delivery.

While Canada Post noted that it had a financial challenge, the end of the service would create financial and other issues for citizens and businesses. We heard consistently about accessibility—especially for seniors and people who live with disabilities—and the responsibility for the maintenance and upkeep of community mailboxes. This includes everything from paving, lighting, and snow removal to cleanup and policing related to vandalism and theft around community mailboxes. This last point is absolutely critical for municipal governments: we have no interest in inheriting or being made accountable, directly or indirectly, for a federal service responsibility of maintaining community mailboxes.

The City of Hamilton has acted upon these concerns and is taking the issue to the Ontario Court of Appeal. The city is defending its bylaw that regulates the installation of equipment on, in, or under a municipal road allowance. This includes Canada Post community mailboxes. While we await the Court of Appeal's decision, municipal governments do not see themselves having any role in the maintaining of this new infrastructure placed on our property.

Our citizens in rural Ontario are very interested in this review. Many of them were the first to see the shift away from door-to-door mail delivery. Distances between houses and businesses in rural areas can be significant, and personal transportation options can be limited, and that's not to mention snow. These are also typically areas where larger amounts of Ontario's senior population resides as their youths move to cities.

The concerns of rural communities are reflected in the 2009 Canadian Postal Service Charter, which maintains a moratorium on rural post office closures and establishes service standards for both postal delivery and post office accessibility. It is crucial that any changes to Canada Post's operational services are consistent with this charter.

Some municipal governments have also raised the issue of postal banking. Reintroducing these services may remedy some of the difficulties faced by rural, remote, and northern communities, which have limited access to financial institutions. Some believe that the Internet has been replacing this need. Surprisingly, in Ontario high-speed Internet is not universal. In fact, many parts of Ontario are not yet covered by reliable Internet service.

These are several of the issues that have been raised in our communities and brought forward by municipal governments for your consideration. Should there be changes in door-to-door mail delivery, we urge the federal government to respect municipal decision-making authorities so that there is no conflict with local land use planning, practices, or policies. AMO has endorsed the FCM's three key principles, and they should be reflected in any changes that are made to Canada Post's service.

First, should the federal government decide to continue with the plan to phase out door-to-door delivery, we need meaningful consultations with municipal governments. Land use planning, service delivery, and right-of-way management are unique in each municipality. One size does not fit all. Canada Post must consult with municipal governments so that the location of community mailboxes meets the needs of the community.

Second, we encourage the development of good partnerships between our orders of government. As I said earlier, this sector has no interest in inheriting the responsibility to maintain community mailboxes. Either Canada Post must work with municipal governments to develop agreeable processes to maintain this infrastructure, or Canada Post must compensate us for this work.

Finally, any federal decisions should be in congruence with municipal planning. Any changes to door-to-door mail delivery must align with local strategies and processes aimed at fostering and supporting age- and/or disabled-friendly communities.

We believe that by following these principles both the federal and the municipal orders of government will be best positioned in working together.

Thank you, Mr. Chair.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Mr. Mazer, you have five minutes, please.

[Alex Mazer, Founding Partner, Common Wealth]

Thank you, Mr. Chair, and good morning.

Thank you for inviting me.

My name is Alex Mazer. I am a founding partner of a company called Common Wealth. Common Wealth is focused on expanding access to pensions, working with labour unions, governments, and some of Canada's leading pension plans.

Throughout my career, I've had the opportunity to provide advice on pensions to government ministers, senior civil servants, labour leaders, and pension plan executives. Today, I would like to offer some thoughts on the future of Canada Post's pensions.

As you know, pensions have been a focal point in recent collective bargaining, and they feature prominently in the task force's discussion paper. I believe there is a path forward on pensions that will create value for management, labour, and the government. Such a path will require compromise and creativity, but I believe it is well worth the effort.

I will make three main points today.

First, shifting from “defined benefit” to “defined contribution” can be more expensive than reforming the existing plan and is likely not the best option.

Second, any reforms to Canada Post's plan should follow the principles underlying Canada's best public pension plans.

Third, to achieve the best outcome, the government should consider sponsoring a multi-stakeholder process supported by the right expertise.

A shift to defined contribution is often suggested as a fix for pension sustainability issues. Canada Post's management has recently shifted to DC for new hires within certain segments of its workforce. It proposed such a shift in recent collective bargaining with the Canadian Union of Postal Workers.

While DC plans by themselves create less financial liability for employers than DB plans, the picture is more complicated when there is an existing DB plan, as there is here. A 2014 paper by Dr. Robert Brown, entitled “Shifting Public Sector DB Plans to DC”, examined this issue. Dr. Brown is professor emeritus of actuarial science at the University of Waterloo and a former president of the International Actuarial Association.

Dr. Brown's paper concluded the following: first, converting to DC makes the management of an existing unfunded liability more risky and difficult; second, shifting to DC actually increases the cost of delivering a comparable pension benefit—a 77% increase, according to modelling done by Dr. Brown. These conclusions are consistent with the task force's discussion paper, which states that a shift to DC would be of limited effectiveness in addressing Canada Post's financial challenges.

If a shift to DC is not the right option, that does not mean that reforms to Canada Post pensions are not desirable. The goals of such reforms should be to enhance the corporation's financial sustainability, while delivering as much retirement security as possible. Canada's best public pensions provide a set of design principles that can help guide such reforms.

These principles include, first, joint sponsorship and governance between labour and management. Because this improves oversight and spreads risks, Ontario has exempted jointly sponsored plans from solvency funding requirements. The federal government should consider a similar exemption for Canada Post, provided the plan shifts to joint sponsorship and governance. This would offer a principled basis for eliminating the major source of Canada Post's pension problem.

Second is independence from the sponsor. The most successful pension organizations are at arm's length and independent from their sponsors. Pensions are not Canada Post's core business, yet the corporation retains the complex responsibility of managing the plan. A reformed Canada Post pension could be delivered by an independent fiduciary organization whose sole mandate is to deliver cost-effective retirement security for members.

Third is professional in-house investment management. By having in-house professionals manage investments, Canada's top public pension plans reduce costs and create investment opportunities that help increase risk-adjusted returns. With nearly $22 billion in assets, Canada Post may have the scale to set up its own internal pension manager. It could also consider having its assets managed by another public asset manager, such as PSP Investments, which manages the assets for most federal public pensions.

The fourth principle is some flexibility in plan design. Many leading plans allow for adjustments in the event that assumptions do not turn out as planned. For instance, many plans make indexation contingent on investment performance. Such compromises will not be easy, but they are likely necessary for the plan's long-term sustainability.

To realize these principles in the specific context of Canada Post, the government should establish a dedicated process. Such a process should have a mandate that balances financial sustainability and retirement security. It should include representatives from the corporation and its unions, as well as a mix of cross-disciplinary expertise from the pension community.

That concludes my remarks. I look forward to the committee's questions.

[The Chair, Conservative, Tom Lukiwski]

Thank you so much.

Madam Borden, please, for five minutes.

[Donna Borden, National Representative, ACORN Canada]

Thank you for allowing me to speak to you here. I am a member of ACORN Canada. We're an organization of low- and moderate-income people. We're a membership-based organization and have 80,000 members all over Canada.

The discussion paper, “Canada Post in the Digital Age”, misses the mark when it comes to financial inclusion and the need for postal banking as an alternative to payday loans.

Recent surveys of 250 ACORN members show that 67% use payday installment loans. The problem with financial inclusion in Canada in terms of the use of payday lenders isn't that people don't have bank accounts. In fact, to get the payday loan, companies require that you have a bank account. The problem is that the low- and moderate-income people don't have access to short-term loans for people who are in crisis.

Another major problem is the predatory nature of the payday lending products in getting people caught up in back-to-back loans at high interest—400% to 600% in Canada—in short payback periods.

The idea of postal banking providing an alternative payday lending product is to provide people with a low-cost option in a time of crisis. For individuals who are using payday lenders, the demand for money is non-elastic. This means that the individual will pay a high price for the short-term loan, hence the Canadian Banking Association's comment that the CBA is of the view that providing additional credit to customers who have exhausted other credit lines is not helpful. It's not logical. The point is to provide an alternative to people who are already accessing the high-interest products.

It is true that credit unions are increasingly offering low-cost, low-amount loans to members; however, their reach is low. This is why postal banking could fill this gap and should be structured similar to that model. In fact, it is false that banks offer any low-cost short-term loans to low-income people who are using payday loans. The recent study by ACORN shows that because the banks deny people overdraft protection, lines of credit, and credit cards, that often forces people to use payday loans.

Further, “Canada Post in the Digital Age” quotes the Canadian Banking Association as saying that “many users of payday loan lenders choose the service because of the relative anonymity it affords”. First, people use payday loans because they are in need of basic necessities: food, rent, car repairs, and necessities such as those. Secondly, why the government would quote in their review an organization that represents the biggest corporations—banks—as understanding why people use payday loans, but not consumer groups, is ludicrous.

On the profitability of payday loans, Vancity offers product at 20%, with a much lower payback. This is a model that we would suggest for postal banking. Even in Alberta, with $15 for $100 for a payday loan, in two weeks it's approximately 390%.

Note that Money Mart, the largest payday lender in Canada, is owned by Lone Star, which is owned by John Grayken, who has assets of $64 billion, according to Forbes Magazine. This business model is getting people trapped in back-to-back loans.

Data from British Columbia shows that the average number of loans per payday borrower in 2014 was 4.3, and the number of people taking out 15 or more loans increased by one-third. In Nova Scotia, in a one-year period, 40% of the loans were from repeat borrowers, and 22.3% of the borrowers took out eight or more loans.

People need to have fair-interest and short-term alternatives available across the country, and we think postal banking will provide this desperately needed alternative.

[The Chair, Conservative, Tom Lukiwski]

Thank you so much.

We'll now go to our seven-minute round.

Mr. Whalen, I have you on the list first.

[Nick Whalen, Liberal, St. John's East, NL]

You can take my time today, Ms. Ratansi.

[The Chair, Conservative, Tom Lukiwski]

All right.

Madam Ratansi, and Mr. Whalen, I assume, will want to be the second.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Exactly.

Welcome to the riding of Don Valley East.

Ms. Dollin, I have some questions for you.

We have been consulting a lot. We have spoken to Canada Post itself as a corporation and to the task force members, etc., and we have just come back from Montreal and Blainville, where we have been listening to municipalities.

Yes, we understand that Canada Post took a very top-down approach and was totally non-consultative, and they know that. When you bring about change, you have to consult the stakeholders. The mayors have told us, as you know, “not in my backyard”, but we know that mail delivery is going down and we know that Canada Post needs to reinvent itself. In reinventing oneself, there's no one-size-fits-all solution, because we are a huge country, and we have the urban-rural divide as well.

If Canada Post were to reconsult, would you be amenable to different solutions...? Because we do need solutions.

[Lynn Dollin]

I thank you for the question.

I think reconsulting is a good idea. I do believe in the bottom-up approach versus the top-down approach. We believe in consulting with areas that have community mailboxes that have worked so we can use best management practices, versus those that haven't worked, and there are lessons to be learned from what has gone wrong in those areas. That would be the first approach. Go back to the people where they have had fewer problems and find out how that happened.

The other thing I would suggest is that we look at the work done through one of our member associations, the Rural Ontario Municipal Association, which has done an entire book on looking through the northern and rural lens. I think that is critical when decisions are being made, particularly in northern Ontario and rural Ontario, because, as you acknowledged, one size does not fit all, and what happens in your riding here does not work in Kenora, or Red Lake, or even in rural eastern Ontario.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

You would be amenable to another consultation? I know people say that as a municipality they don't want the expense of managing the boxes or maintenance, etc.

You were listening to the previous speakers. We talked about the rural moratorium. Some people don't want it to stay and some want it to stay. You want it to stay. What would you say? Why do you want it to stay? Why can't the postal office be franchised?