Government Operations Committee on Aug. 21st, 2024

[Stéphane Cousineau]

Mr. Chair, I can look at what's available and get back to you on that.

[Michael Barrett, Conservative, Leeds—Grenville—Thousand Islands and Rideau Lakes, ON]

Well, if there was correspondence, you'll table it?

[Stéphane Cousineau]

Yes, I'll look into it.

[Michael Barrett, Conservative, Leeds—Grenville—Thousand Islands and Rideau Lakes, ON]

That's perfect. Thank you.

[The Chair, Conservative, Kelly McCauley]

Thanks, Mr. Barrett.

We'll go to you, Mr. Jowhari, please, for six minutes.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you, Mr. Chair.

Welcome to the officials.

This is the time we have been looking forward to since yesterday when 99% of our questions were referred to you, so welcome.

I'm going to really frame my line of questioning over the next three hours around three different things.

Number one is going to be really the imperative for the move and why the move had to take place.

Number two is going to be me trying to get a clearer understanding around whether all the policies and procedures were followed and whether we really got value for our money.

Number three, the last theme, will be to focus on the importance of the mission.

You touched on all three of those, but I'm going to try to break it down for Canadians like me who are Tim Hortons double-double users, so let's start with the imperative first.

My understanding is that aside from the cost imperative and some of the needs, there were some new regulations introduced by the board of the now-previous property that restricted the ability of the mission to perform the duties it needed to provide for us to make sure that we could manage over $200 billion of trade in one of the most important cities, as you said, which covers a lot.

Can you please talk about the imperative from the point of view that, aside from the cost, really we were dealt a hand to which we had to react?

[Stéphane Cousineau]

Thank you, Mr. Chair.

This allows us to actually articulate how much of a smart investment this was and how the process was sound and followed all the policies and was well documented as well.

I'm going to turn to Robin, who can articulate the main reasons we had to move and what had evolved in the last couple of years.

Robin, go ahead.

[Robin Dubeau]

Thank you very much. It's a very good question.

The imperative to move was based on several elements. The business case includes, as you mentioned, some restrictions that have been applied by the co-operative board regarding the usage of the official residence. That was one element that was part of the decision.

There was also the fact that the unit was aging, and we had received a report in 2017 that in the early 2020s there would be a need to refurbish or renovate the apartment, and that was the $2.6-million cost that was reported.

There was also another element reported in the business case, which was that since the introduction of the Accessible Canada Act in 2021, the apartment was not compliant with that act.

All of those elements led to an option analysis. What we do in our investment management framework is to make sure we look at the full life-cycle analysis of all of the options. In 2023 we launched this initiative to look at the three options that were available to us and the cost versus benefit of each of the three.

The three elements would be to renovate the actual unit, which would have cost $2.6 million, to replace it with a leased asset, or to replace it with a Crown-owned asset. It all came down to cost at the end of the day, because we had the last option, which was “replace to own”, which would be most beneficial, of course, in the long term. The net present value was calculated on the three options, and we picked the third one, which became the favourite option because it was creating $7.4 million in savings over putting $2.6 million into a renovation for a unit that was still not meeting all of our requirements.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you.

That really covers the imperative from three different angles. There were the restrictions to its operations that were presented by the co-operative board, which played an important role. Even if we refurbished it at a cost of $2.6 million, we'd still have to rely on other venues to be able to execute some of the activities that we do. Also, it looks as though, based on what I'm hearing, due diligence was done.

Now, let's go back and talk about the importance of the mission. One of our colleagues yesterday asked why we wouldn't move it to New Jersey. Let me ask that question: Why wouldn't we move it to New Jersey?

[Stéphane Cousineau]

Mr. Chair, thank you for the question.

There's nobody better placed to actually answer that question than my colleague, the DG of North America, who can talk about the operation, so I will turn to him.

[Mark Allen, Director General, North America, Department of Foreign Affairs, Trade and Development]

Thank you.

I think that all of the honourable members would appreciate the importance of the United States. There's no country in the world that is more important to Canada's economic and security interests.

Within that country, New York is the economic centre. It's also a global economic centre for global capital markets. The committee will have heard the assistant comptroller general of Canada yesterday say that all real property needs to serve a program need. In the case of the Global Affairs portfolio, those program needs include the trade and investment program, the public affairs program and the program providing consular services to Canadians.

[The Chair, Conservative, Kelly McCauley]

Thank you. I'm sorry, Mr. Allen, but that is our time. We'll go to Mrs. Vignola.

Go ahead, please.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you very much, Mr. Chair.

Gentlemen, madam, thank you for joining us today.

You mentioned $7.4 million in savings a few times. Is that in Canadian or U.S. dollars?

[Stéphane Cousineau]

Mr. Chair, that would be Canadian dollars.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you very much.

How long will it take to achieve these savings of $7.4 million, or $7.9 million, depending on what is meant? Is that annually, or over the apartment's service life?

[Stéphane Cousineau]

I thank the member for her question. It will help us clarify the net present value a little.

First, this appraisal takes account of the difference between the sale price of the current residence and the purchase price of the new residence. The transaction will generate revenues directly. Second, that also includes the renovation costs that were avoided.

You asked a question about annual savings. As I mentioned in my opening remarks, the purchase will generate annual savings of $115,000. In fact, operating costs will be cut in half.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

If I understand correctly, the owners' association fees for the current residence, the one now on the market, amount to about $13,000 a month.

Does that include municipal taxes? Also, are we talking about U.S. dollars here?

[Stéphane Cousineau]

I thank the member for her question.

For that level of detail, I'm going to let Mr. Dubeau answer, to be sure that we give you the right figures.

[Robin Dubeau]

That's a great question. I just want to add something to what Mr. Cousineau said.

When we calculate a project's net present value, avoided costs are calculated first. In this case, they amount to $2.6 million. Then we calculate the difference between the sale price of the current residence and the purchase price of the new residence. Here, the list price of the current residence was $3.9 million higher than the amount paid for the new residence. Finally, we update future savings at today's cost. Based on current practice, the calculation covers the next 20 years.

I don't have an exact breakdown—I can give you one if you like—but the monthly costs of the new residence add up to about $10,000, or $120,000 annually, whereas the costs of the previous residence amount to $240,000 annually, which explains the $115,000 in savings mentioned.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you.

So the $7.4 million represents immediate savings, but also savings made over a 20-year period.

For that 20-year period, is there a maintenance plan for the new residence? Over 20 years, maintenance will of course be needed. Cabinet doors can last 30 or 40 years if you're really lucky and they don't get slammed too often, but that's not always the case. It's a bit simplistic, but it's an example.

So, is there a maintenance and restoration plan? If so, are these expenses included in the 20-year estimate of expenditures?

[Stéphane Cousineau]

Mr. Chair, once again, I'll answer the question and then hand the floor over to Mr. Dubeau.

Certainly, there's an investment plan for our entire infrastructure portfolio, which is quite complex. Worldwide, it amounts to $3 billion.

I'll pass your question over to Mr. Dubeau for a more detailed answer.

[Robin Dubeau]

Mr. Chair, it's a good question. Yes, we take into account a percentage for recapitalization.

Excuse me. I'll switch to French.

The calculation for this project's net present value sets annual maintenance costs at 4%, the industry standard, to recapitalize the asset over its useful life.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you very much.

I'll now turn to the deputy consul general.

Mr. McCubbing, you have no doubt met with Canada's new consul general in New York.

[Robert McCubbing, Deputy Consul General, The Consulate General of Canada, New York, Department of Foreign Affairs, Trade and Development]

Mr. Chair, yes, I'm the deputy consul general in New York.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Have you met with the new consul general?