Government Operations Committee on Oct. 20th, 2016

[The Chair, Conservative, Tom Lukiwski]

Ladies and gentlemen and colleagues, I call the meeting to order.

I welcome our panellists. For committee members, I should probably, in the spirit of transparency, let everyone know that Debra Button and I are old friends. Second, I have a long-standing and very cordial relationship with the Saskatchewan Association of Rural Municipalities. I promise I won't let those two relationships interfere with my duties. Mr. Lafleur, just to make you feel at ease, although we have never met, my father was the former head of the United Steelworkers of America, so I have quite an extensive union background as well.

Welcome to you all. Thank you for taking time out of your busy schedule to be here.

As you are undoubtedly aware, the minister responsible for Canada Post, the Honourable Judy Foote has engaged and initiated a very extensive consultation process that had two phases to it. Phase one was the establishment of a task force whose job and mandate it was to examine the financial viability and sustainability of Canada Post. They have completed their work. They have tabled their report, and we've had an opportunity as a committee to question them on their work.

Phase two, however, is why we're here today. We have engaged in a cross-country tour speaking with individuals, organizations, municipalities, first nations people, communities both urban and rural, and remote communities across Canada. We've been asking the participants in this consultation to give us their views on the future of Canada Post, and more specifically, to give recommendations and suggestions on how Canada Post can improve both its services and its financial viability going forward. That's why we have invited you here today to participate.

The process is quite simple. We'll ask each of the presenters to open with a brief statement of five minutes or less. I'll try to keep you to that as well as I can. Following your opening statements, we'll have a round of questions from every committee member, and then your comments and your testimony will form part of our final report.

With that brief word of opening, we'll start with Ms. Button, for five minutes or less, please.

You have the floor.

[Debra Button, President, Saskatchewan Urban Municipalities Association]

Thank you very much.

I want to say that I would rather think we were long-time friends. Nothing “old” for ladies, thank you, and please put that on the record.

Good afternoon. I am Debra Button, mayor of the City of Weyburn and president of the Saskatchewan Urban Municipalities Association.

I am here today on behalf of SUMA, representing 444 urban government members. These cities, towns, villages, northern municipalities, and resort villages are home to more than 77% of Saskatchewan's population.

First, thank you to the committee for the chance to provide comments on the future of Canada Post.

The discussion paper makes it clear that the corporation is at a critical stage. The decisions before the Government of Canada and Canada Post are about ensuring the long-term sustainability of mail service.

My colleagues in urban governments are plenty familiar with the challenges of delivering services to the residents of this province. We are responsible for a massive amount of infrastructure, from roads and bridges to water pipes and waste water systems, and for services from waste and recycling to recreation programming, all while working with limited revenue sources and being unable to run a deficit on our operational budget, so we certainly feel your pain.

Canada Post provides vital services to our local governments, residents, and businesses in every corner of Saskatchewan. SUMA members rely on Canada Post to deliver water samples to the provincial lab for testing; for delivery of property tax assessments, utility bills, and notices of bylaw contravention to residents; and to send and receive parcels and bring bill payments to our offices.

The task force report makes note of the nostalgia attached to the local post office for many Canadians. The post office is a local pillar that reflects the community's vibrancy. It's a place to keep in touch, whether running into your friends and neighbours in the office or sending a letter to those across the country or abroad.

However, the Internet and email make it relatively cheap and easy to get information and connect with friends and family. We carry these tools in our pockets. That doesn't mean Canada Post is irrelevant. There is still space for the services Canada Post has traditionally provided. It does mean, however, there are difficult decisions ahead. I'm certainly not an expert at operating a mail service, but I can offer you the perspective of Saskatchewan urban governments through SUMA.

Overall, SUMA is open to Canada Post changing operational practices to save corporate money, but we need you to maintain a high-quality mail service for our members and their residents. We believe this can be a win-win situation. As I said, local governments are familiar with managing assets such as buildings and the costs associated with maintaining these facilities. Canada Post and the government need to decide if the rural moratorium makes sense in the current business environment.

Urban municipalities want good postal service in our communities. How you deliver that service is the least of our concerns. Explore the option of shuttering assets and replacing with franchise locations. By and large, our residents are not as concerned if a post office is in its own building or if it sits in a corner of the local co-op, Northern store, pharmacy, or even the town office. They just want the Canada Post service they rely on.

This model is already in place in larger urban centres and appears to provide an excellent service to their residents. If mail volume is going down, including the ad mail that is making up the bulk of it right now, do we need to maintain daily delivery to households and community mailboxes? An alternate delivery schedule has potential savings of $75 million every year, and SUMA supports a pilot program to test this approach.

However, not every efficiency will work. Community mailboxes may be beneficial to Canada Post, but they won't work in every neighbourhood. In new developments, community mailboxes are built into the design, but the concept may not transfer into older areas. Canada Post needs to respect and work with local governments to determine the right place to locate community mailboxes in well-established neighbourhoods. We need to consider planning standards, private interests, public safety, parking, snow removal, and accessibility when choosing the sites for these community mailboxes.

Local governments know how to find alternate revenue sources, I assure you. We've been able to offset costs by selling advertising on transit buses, signage on hockey rink boards, and naming rights to community centres. Canada Post could take the same approach by advertising on fleet vehicles or store locations. Obviously Canada Post needs to be tasteful and protect the corporate brand, but Mosaic Stadium here in Regina and Crescent Point Place in Weyburn are just two examples of how you can make the most of what you already own.

As I said at the top, I'm here representing more than 77% of Saskatchewan's population. When people come to Saskatchewan, by and large they are choosing to live in urban centres—cities, towns, and villages.

Our communities provide access to high-speed Internet and wireless networks, but there is still a home for traditional mail and parcel services there. Urban Saskatchewan is where people post their mail and pick up parcels, and SUMA looks forward to engaging with Canada Post and the federal government as you make high-quality mail services efficient and effective. We are willing to work with and support you, because our communities have a vested interest in a sustainable postal system for Canada.

Thank you for the chance to speak with all of you today.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Next we have Ms. Sterling, please, for five minutes or less.

[Carmen Sterling, Vice-President, Saskatchewan Association of Rural Municipalities]

Good afternoon. Thank you for the opportunity to address the committee today.

My name is Carmen Sterling. I'm the vice-president of the Saskatchewan Association of Rural Municipalities.

For those who are unfamiliar with us, the Saskatchewan Association of Rural Municipalities—or SARM, as I'll refer to it—is the independent association that represents all 296 rural municipalities in Saskatchewan.

As the review and study of Canada Post continues, SARM wants to ensure that residents and businesses, including major resource sectors, receive adequate mail and parcel delivery service. Nearly 200,000 people live in Saskatchewan's rural municipalities. RMs are also the primary location for many sectors that drive Saskatchewan's economy, including agriculture, oil and gas, and mining. Hundreds of thousands more live in the rural settings of towns, villages, and resort villages.

Rural residents do not currently receive door-to-door mail and parcel delivery. SARM does not believe that door-to-door service is practical in rural Saskatchewan. Instead, rural residents should still be able to utilize central pickup locations. We also do not oppose the transition to community mailboxes in larger urban centres.

We do, however, strongly oppose the closure of any more walk-in post office locations in rural communities. It is also very important that decisions regarding the number of deliveries a week and the delivery days be made at the community level, as each community has different needs.

While many argue that the world is becoming more and more digital, marking postal delivery as obsolete, rural Saskatchewan continues to be challenged by insufficient broadband. Not only does this impact the decisions of residents and businesses to move to rural areas, but it also makes it very difficult for those in rural settings to rely on digital modes of communication. Mail delivery is therefore still a necessary medium of communication for rural residents and businesses.

SARM also wishes to highlight the fact that the Saskatchewan Transportation Company, a provincial crown corporation, plays a significant role in parcel delivery in rural Saskatchewan. However, financial losses have resulted in the cutting of many bus routes. This further reduces parcel delivery options for those in rural Saskatchewan. As such, we cannot afford to lose any more service in rural Saskatchewan.

Understanding the difficulties Canada Post faces, SARM is not opposed to transitioning some pieces of Canada Post to a privatized model, so long as it can be assured that contractors can provide services at a lower cost while also maintaining the integrity and security of the delivery system. We would also support banks and post offices partnering to share space in rural communities. Both play a vital role in creating vibrant rural communities.

Finally, SARM was also concerned to learn recently that date-stamping is no longer practised by all post offices. Instead, some post offices have the technology to cancel stamps without the use of ink stamps. We have been told that these post offices will now only date-stamp mail when specifically asked to by the sender at the post office.

This is extremely problematic for municipal administrators and, presumably, many other organizations and businesses, as date stamps serve as verification that payments and other important documents were mailed before their deadlines. This ensures that discounts and penalties are charged to senders accordingly. SARM believes that it is very important for all post offices to resume the practice of date-stamping to ensure that municipalities and other businesses and organizations can verify when financial and other important payments or documents were mailed.

In closing, the Saskatchewan Association of Rural Municipalities believes that Canada Post must maintain adequate service in rural Saskatchewan and that it must refrain from closing more walk-in post offices in rural Saskatchewan.

On behalf of SARM, thank you for the opportunity to appear before this committee.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Our last panellist will be Mr. Lafleur. You have five minutes, please, sir.

[Donald Lafleur, Executive Vice-President, Canadian Labour Congress]

Good afternoon.

My name is Donald Lafleur. I'm the vice-president of the Canadian Labour Congress. I'm also a member of the Canadian Union of Postal Workers. I'm a postal worker going back to 1977 and a member of the national executive board going back to 1989.

On behalf of the 3.3 million members of the Canadian Labour Congress, we thank you for the opportunity to provide our input into this review.

We believe there are two choices.

The first is to invest and take bold steps to leverage Canada Post's infrastructure to offer improved and new services. This choice strengthens our world-class postal system now and into the future.

The second is to cut services, charge more, and ditch the principle of universality. This choice means lower-quality services at higher costs. It threatens the viability of Canada Post and paves the way for more privatization.

The task force supports the second choice. Look at their options: eliminate home delivery, reduce delivery days, sell 800 outlets, close processing plants, charge user fees for home delivery, and scrap the uniform rate of postage.

Now you have a choice to make.

We urge you to reject all of these options. They're self-defeating. Fewer people will use Canada Post if services are less convenient and more expensive. It's a downward spiral that leads to privatization. That would be disaster.

Let's look at the facts.

Canada Post has made profits in 19 out of the past 21 years, for a total of over $1 billion in net profits. In the first two quarters of 2016, Canada Post made $45 million in profits.

The parcel delivery service is flourishing. From 2011 to 2015, the number of parcels delivered by Canada Post increased by 27%. The service is a growing source of revenue, and Canada Post could increase its market share in the future.

Since the Canada Post Corporation is making considerable profits and its parcel delivery sector is growing, it cannot justify a service reduction. We encourage you to recommend that door-to-door service be restored to the 830,000 households that were denied the service during the conservative government era.

Don't misunderstand me. We aren't arguing that Canada Post should spin its wheels. On the contrary, we believe there are excellent opportunities to invest in Canada Post, diversify its services and increase its revenue. We're encouraging you to make that choice.

Our written submission has lots of suggestions. I want to highlight two.

The first suggestion is postal banking. Postal banks exist in 60 countries, including ones with well-established banking markets. They're contributing to the profits of postal systems. Canadians are not served well by the big five banks, who are raising fees and reducing services. A postal bank can improve access and offer lower fees. It would be useful in the rural and aboriginal communities that the chartered banks aren't serving. It would be an alternative to payday lenders who charge rip-off interest rates that should be illegal.

Over 600 municipalities endorse postal banking. Research commissioned by the task force suggests that 7% of Canadians would certainly use postal banking, and 22% would probably use it. That's a large customer base to start with. Canada Post's own research says they could profitably launch the largest banking network in the country. It's time to think big. We urge you to recommend postal banking as a viable option for the future for Canada Post.

A second opportunity is the government's commitment to transition Canada to a low-carbon economy. Canada Post infrastructure can play a role in this transition and generate new revenue. For example, charging stations for electric vehicles can be added to every post office. In this area Canada is way behind other countries, including smaller countries like Norway. We need to catch up. Canada Post can help the transition to greener transport while raising new revenues. We urge you to make recommendations that will maximize the enormous capacity and potential of Canada Post to diversify its services.

Lastly, I want to address the pension issue.

The financial condition of the pension plan is improving considerably. In 2015, the going-concern surplus was $1.2 billion. This represents an improvement from 2014, when the surplus was $500 million. In the meantime, the solvency deficit dropped from $6.8 billion in 2014 to $6.2 billion in 2015. These two trends are encouraging.

However, the most accurate measure of the pension plan's sustainability is the going-concern surplus of $1.2 billion. This represents the current costs for Canada Post. Based on this measure, the plan is healthy.

Problems are being caused by the solvency funding rules. The rules are unnecessary and counterproductive. They were established in the 1980s to protect employees and their pensions from the insolvencies of employers and of the private sector. It's not wise to apply these rules to Canada Post. There's very little risk of our public postal operator going bankrupt in the near future.

In addition, the rules in question divert a large amount of revenue away from business priorities for investment. There's no reason to apply very costly solvency rules to a public sector entity whose pension plan has a considerable going-concern surplus.

[The Chair, Conservative, Tom Lukiwski]

Sir, I'll have to get you to wrap it up very quickly.

[Donald Lafleur]

I have two sentences left.

[The Chair, Conservative, Tom Lukiwski]

Please go ahead.

[Donald Lafleur]

The provincial governments have amended their legislation to ensure that public sector entities are exempted. It's time for the federal government to follow suit. We encourage you to recommend that Canada Post's pension plan receive a permanent exemption from the requirement to make solvency funding payments.

Thank you.

[The Chair, Conservative, Tom Lukiwski]

Thank you.

We'll start with our seven-minute round with Mr. Whelan, please.

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

Thank you, Mr. Chair, for the floor.

Thank you very much for coming today.

It's interesting to hear the different perspectives of rural Canadians and urban Canadians on the way they use their postal service and opportunities for additional revenue.

As you know, we've been tasked with growing the economy, protecting middle-class jobs, and ensuring that people have access, in the case of Canada Post, to a high level of service at a sustainable cost.

With respect to additional services that might be offered through Canada Post, the rural municipalities say that they would like to see partnerships with banks. When we hear from the urban ones, it's not something we've been hearing very often.

Can you speak a little bit about the appetite of your members for postal banking and whether there's some dividing line among smaller urban municipalities at which you feel they could probably use a banking service offered through the post office?

[Sean McEachern, Director, Policy and Communications, Saskatchewan Urban Municipalities Association]

For clarity, I think what SUMA is referring to is a little bit more about actual post offices being in banks. I'm not necessarily sure it was a postal banking proposal, because there are a number of different credit unions and big banks around a number of smaller communities.

With respect to postal banking, the association looked at the task force report rationale, both pros and cons, for postal banking. I'm not sure SUMA's in the best position to be providing commentary on the benefits of it, but just in terms of what was shared within the task force report, I would question the validity of postal banking within Canada. We have some of the best banks in the world, and they're located throughout different communities.

There's more than just the big banks, however; there's a multitude of credit unions around Saskatchewan that are just as successful as well. I'm not sure that introducing another banking mechanism into our current market is something that is in the best interests of residents.

If it means saving Canada Post—

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

How many of your 440 members don't have banking service in their urban area as it stands?

[Sean McEachern]

We have a total of probably 100 to 130 villages within Saskatchewan, and a majority of those probably don't have banks, but a good number of our larger towns do, and of course our larger urban centres do. Most of our larger service regions would have them.

If you take the southeast corner, Weyburn, Estevan, Carnduff—and the list goes on—are communities that have at least one of the major banks or a credit union.

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

It's hard for me to grasp the scale of Saskatchewan, coming from Newfoundland. When you talk about the “corner”, do you mean that people would be able to drive to a bank within 25 kilometres, or are we talking about hundreds of kilometres?

Maybe this is a question for the rural municipalities' members as well. You seem to think that there is some appetite for a co-sharing of space or some type of partnership. From your knowledge, in the villages and hamlets that need postal and banking services provided, do you see a market and a market need?

[Carmen Sterling]

There may not be particularly for postal banking, but I'm not sure that we can comment on what our members' and our residents' appetite would be for the actual mechanism of postal banking.

The reference to banks and postal services partnering, from our submission, is that in many cases banks are struggling with being able to staff full time or to justify the expense of having a branch that's open full-time, regular hours in some of these smaller communities. Having the ability to partner on some of those expenses, those shared spaces...maybe they can align their opening hours and that type of thing to be able to provide a service.

We think banks are probably a service that has been reduced in our smaller communities. Most of the service that our members receive for postal or banking services is in those small urban areas that are represented by SUMA.

In the case of our residents, our hamlets would be very small and likely wouldn't have either of those services, so we'd be looking to endorse those smaller communities under the SUMA organization to support their having those types of facilities and keeping those post office and bank relationships. There may be other businesses they can partner with as well that already exist in these small areas.

Unfortunately, I can't comment as to specifically what the appetite would be for postal banking.

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

Okay, that's fair enough.

In your more northern communities, do you have any communities that are served by Nutrition North or require service through it or any other types of programs or services that you think Canada Post could offer?

[Debra Button]

Sean was just there.

[Sean McEachern]

Yes, there are a number of communities in northern Saskatchewan that benefit from Nutrition North. A number of those communities have a Canada Post outlet. It's usually quite small. You'd never even know it's a Canada Post office, because sometimes it's just a little ATCO trailer, but they do exist.

In that same vein, around the banking initiative as well, in terms of its tying in with postal, the Northern stores, for instance, actually offer a banking system for northern residents in Saskatchewan. I'm not sure that it extends throughout the country. It's called “We banking”, and it's similar to the type of model that Canada Post would be looking at as well.

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

Fair enough.

In some of the testimony we've heard in other municipalities, there's been a call for Canada Post to explore the option of providing an outlet or service desk for services that would otherwise be provided by municipalities or by provinces. Would your members be interested in outsourcing their service desks or other offerings? Do you think they could leverage Canada Post's network to more efficiently provide the services?

[Debra Button]

Can you give me an example of that?

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

When we were in Edmonton, someone mentioned the possibility that people walking the routes might be able to help enforce municipal bylaws, or that Canada Post could offer licensing—dog licences, hunting licences, things like that—from a service desk. In the case of the federal government, it could be passports. They could offer those services from a joint desk that would be staffed by Canada Post but would offer services that otherwise three levels of government would each have to staff.

Is that something that would be of interest?

[Debra Button]

We've never surveyed our members for that, but it probably would be something that we'd be interested in having a discussion on.

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

Okay. That's interesting. We get mixed answers to that question. It's nice to hear perspectives.

Would you comment, Ms. Sterling?