Indigenous and Northern Affairs Committee on March 24th, 2011

[Dennis Bevington, NDP, Western Arctic, NT]

Thank you, Mr. Chair.

I'm pleased to have the opportunity to question you on this bill. It's something I have put forward in good faith to give our territory a chance to assert itself in terms of its fiscal capacity, its responsible nature, and its plans for the future. Of course, all of those come together for any government in this country, and I certainly believe that our government is a government.

Over the years we have needed to rely on federal financing through a process similar to equalization to ensure our government can protect the interests of our citizens over 1.4 million square kilometres of a vast land that has very expensive infrastructure requirements and very expensive requirements for its citizens as well. You know that.

When we talk about the 76%, that includes all of what Mrs. Melhorn has spoken to. Is that not correct? In terms of the royalties you accrued on behalf of the people of the Northwest Territories, the federal government collects all those. On the Normal Wells field, you collect between $100 million and $150 million a year. On the diamond fields, which you are totally responsible for, you set the royalty rate. You collect the money. That's a $2 billion industry.

You talked about the relative rates of royalties and taxation. In terms of the 76%, does that also include the dollars you collect in taxation?

[Chris Forbes]

The 76%, just to be clear, was an estimate of the current transfers provided from the Government of Canada, the larger ones, through the territorial formula financing, the Canada health transfer, the Canada social transfer--

[Dennis Bevington, NDP, Western Arctic, NT]

Does it take into account the moneys you collect in the Northwest Territories?

[Chris Forbes]

No. As I said, this is the share of the Northwest Territories revenues. It's a rough estimate that comes from the federal government.

[Dennis Bevington, NDP, Western Arctic, NT]

Are the taxes you collect in the Northwest Territories for the territorial government included in that 76%?

[Chris Forbes]

As I said, no. As I said in my response to the previous question, if you're interested in that kind of figure, you can go to Statistics Canada's provincial and territorial economic accounts and they can provide you with an estimate of the total flows, to and from.

[Dennis Bevington, NDP, Western Arctic, NT]

I find your presentation very paternalistic. You talk about the problems with the bill and you say you're very concerned that somehow this Government of the Northwest Territories won't be able to manage its expenditures within a percentage it set for itself. Does this Government of the Northwest Territories now project its own estimates of revenues and expenditures? What has its record been on that?

[Chris Forbes]

Sorry, just to be clear, I don't think I said anywhere that I was very concerned about the Government of the Northwest Territories' ability to manage. I just raised a couple of considerations. I'm not an expert in what their record is on projecting. I was raising a consideration about one of the challenges of having a limit that moves over time and isn't stable. It's just a consideration, and that was what it was intended to point out.

[Dennis Bevington, NDP, Western Arctic, NT]

To the Government of the Northwest Territories, with the formula you're working on with the federal government now, are you not concerned that if you have to identify projects that are self-financing you'll run into the same situation that he's proposed here, where the revenues that are accruing to particular investments that you make will not perhaps match up every year to your requirements, and then those debts would not be self-financing?

Are you going to be engaged in a process that will mean that every debt you incur will be reviewed every year by this federal government to determine whether you are matching the debt to the revenues you're collecting?

[Margaret Melhorn]

I wouldn't say that. I think once we have established the definitions and are clear on what constitutes borrowing and how it would be treated for the limit, then we would proceed to manage on the basis of those definitions as we go forward, similar to how we do now under the definitions we currently use.

[Dennis Bevington, NDP, Western Arctic, NT]

So you're comfortable that you know your fiscal capacity to manage debt and to manage payments is adequate to cover these situations, which also could be quite variable?

[Margaret Melhorn]

When we get into the situation of borrowing, we like to know what it is we're getting into, what the revenues are that are associated with that debt. For example, when our power corporation borrows for its capital purposes, it's projecting what revenues it's going to generate from that investment, and it puts that into its financing projection so that it knows, based on the sale of electricity, that it will have the ability to pay the debt-servicing costs associated with the debt it takes on. Similarly, if we were to get into any other project that we hope to finance out of the revenues from that project, we would want to have a fair degree of certainty about the revenues it would generate.

[Dennis Bevington, NDP, Western Arctic, NT]

Do you really think this federal government has any need to oversee your borrowing capacity in any fashion at all?

[Margaret Melhorn]

We have confidence in our ability to manage our fiscal circumstances.

[Dennis Bevington, NDP, Western Arctic, NT]

I, too, have that confidence, having been close to this for most of my life. I see that as being something that wasn't an issue, and I'm very pleased to hear what you've had to say about the relationship, because in my conversations with the finance minister of your government we always talked about these two processes going on separate tracks, because they are up there.

[The Chair, Conservative, Bruce Stanton]

We'll have to wrap it up there, Mr. Bevington. We're out of time. Thank you very much.

Now we're going to Mr. Rickford for seven minutes.

Go ahead, Mr. Rickford.

[Greg Rickford, Conservative, Kenora, ON]

Thank you, Mr. Chair.

And thanks to the witnesses here today.

I've struggled enormously with this whole process, and I'm going to ask a couple of quick questions for some certainty and clarity.

Mr. Forbes, to start, how is devolution connected to Northwest Territories borrowing limits?

[George Schoenhofer]

I can answer that. It's not.

[Greg Rickford, Conservative, Kenora, ON]

Okay, it's not connected.

Ms. Melhorn, this is a very serious matter obviously. You said in your statement that “the bill does not define what types of borrowing are to be included in the limit”. Indeed, despite the member from the territories' enthusiasm, what that means is there is no clarity around this particular bill.

I'm concerned. As I understand it, you're in a process right now with the federal government to have the borrowing limit removed all together. That would be your best end game.

Is that true?

[Margaret Melhorn]

Yes, that would be the position of our government.

[Greg Rickford, Conservative, Kenora, ON]

If we were thinking paternalistically and we had a federal member of Parliament intruding on a process that is not consistent with the territories' ultimate goal...the concerns of the federal government notwithstanding, they seem to be at odds with each other. That's just an observation I would make.

I'm curious. You said in your statement that you're committed to the review process that is under way with Canada. There are some consistency issues around accounting and things that have to be sorted out with respect to the other territories.

You say that you haven't done a rigorous analysis on Bill C-530. We're one step, one hour, away from referring this matter back to the House for a final vote. It has a substantial impact on the process you're currently committed to with the federal government.

Is there a specific reason that you didn't do a rigorous analysis? Is the bill unimportant in your mind? In other words, the real process is what you're doing with the federal government, so why haven't you done a rigorous analysis? I'm just curious.

[Margaret Melhorn]

As you indicate, we are in a process with Canada. It's an important process, to clarify what constitutes debt for the purpose of the limit. This has important implications for our fiscal planning and our fiscal management, so we are committed to seeing that process through.

The bill is not a particularly complicated bill. It's fairly easy to determine what the borrowing limit would produce based on the formula it includes. As I indicated in my statement, it doesn't provide any further clarity on what constitutes borrowing than the current Northwest Territories Act does.

[Greg Rickford, Conservative, Kenora, ON]

On a political level, we've heard some inconsistent statements in terms of the position on Bill C-530. I think my colleague will deal with that.

With this devolution process, which is not connected to borrowing limits...maybe you could describe how the devolution process is going, in your view, to make Bill C-530 relevant in the face of a process that is currently well under way with the Government of Canada.

[Margaret Melhorn]

I'm sorry, what is the question?

[Greg Rickford, Conservative, Kenora, ON]

Let's break it down. What is the status of devolution, and what are your thoughts about the fact that we've heard that devolution is not connected to the Northwest Territory's borrowing limits?