Industry Committee on Nov. 16th, 2009

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Lake.

Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Mr. Draimin, I want to use an example here to see if I can get really accurately how a hybrid model would work. I'm going to give the example of P3s. Some of the concerns I have over P3s really came to light in Windsor, in our area, where we've decided, in the provincial government, to outsource long-term health care facility beds. So they put out to tender a number of different options, and what ended up happening is that an agency called Versa Care picked up the contract.

Later on they abandoned the contract because it wasn't going to make enough money. It was going to make money, but not enough money. So what this meant is that another bidder came in and picked up extra beds and it delayed their actual facility—that's what they claimed—so we didn't get those beds built for seniors who are still in hospitals, and also in group homes, and so forth, without the proper care.

Now, what's happened, we just learned this week, is that developer owes the city $800,000 in back taxes, and that property has been basically just harvested for steel and so forth—it's an older facility. So once again the public is paying through the nose for this, because obviously with people in hospitals it costs a lot more to care for them there than it does for the daily system that you get.

Say, for example, in your system here, it was an organization like the Victorian Order of Nurses, or some other. Would they then issue out almost like a share? And then you say it's capped at a certain amount, so it's almost like people want to lend money to an organization so they can get some capital and might get their return later on. And if they actually then lost on it, say the value went down, would they be able to claim that at tax time as a loss? How would that work? It was really helpful to get your input with regard to the oversight model from the government that is in the U.K. But also, how would it work operationally?

So, really, is this about getting some capital lent, but maybe not the big gift that people would give right away?

[Tim Draimin]

Right.

If I understand your question, you're asking, for the Victorian Order of Nurses, how would that work in getting the capital?

Maybe something that links where I'm speaking from with what Laura is speaking about is that there is a change happening in the investor universe towards what people talk about, double or triple bottom-line investing, or some people now call it impact investing, or other people call it blended value investing. Investors are willing to make an investment, and they want to get a financial return, but they're also interested in understanding what's the social and/or environmental return that they're also getting. Right now, we have a reporting system that primarily gives us financial returns but doesn't do anything on the social or on the environmental side.

The metrics on that latter piece I think are starting to really grow, and there's going to be a lot more happening that will be useful to organizations like the Victorian Order of Nurses, or other non-profits who decide they want to create a social enterprise that would be like a CIC.

I think that basically it's almost like what you're saying: the Victorian Order of Nurses, or somebody, would create a particular entity to carry out a particular project, they would issue shares, there would be a set price for the share, and people would be buying the shares. In a certain sense they're called shares, and they operate like shares, but in one sense, as you allude to, it's almost like putting out a bond and breaking it up into little pieces and calling each of them a share. Presumably if when they sold it the value was less and they had a loss, it would be a capital loss, and people could include that on their tax return.

But, yes, that's how it would operate: they would be appealing to people who would want a financial return on the share, almost like buying a bond in a sense then, and who also were interested in a social return, and that would be another aspect of what the entity would be reporting on. So people would get a financial return sheet at the end of every year, but they would also get a social report of this is how many beds we were able to create, these are how many people we were able to serve, this is what we're able to do for the community.

[Brian Masse, NDP, Windsor West, ON]

I want to go quickly to Ms. O'Neill and Ms. Cotte.

Is there any work being done, that you know of, to look at more harmonization, for example, with the U.S. and Canadian practices for the meetings, procedures, and so forth? I'm just curious about that. Or is it just looking at creating Canadian standards? Do you have sister organizations in the United States you're working with?

[Laura O'Neill]

In terms of the U.S. investors and advocates we work with, it's really a very loose association, nothing particularly formal. We keep each other abreast of what's going on in the two jurisdictions. We'll certainly pick good ideas out of each other's pockets, but there's no sense of trying to attempt to have a pan-North American corporate law or securities law framework.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Masse.

We'll finish with Monsieur Vincent.

[Robert Vincent, Bloc, Shefford, QC]

Thank you, Mr. Chairman.

I'm trying to understand correctly and to sort things out. If a non-profit organization is funded by the provincial and federal governments, if that organization can issue tax receipts to people who donate to it, and if because of the economic crisis, it decides from one day to the next to create a business which benefits from financial assistance from both orders of government, how can an entrepreneur who's investing his or her own money compete with a non-profit organization that provides tax receipts and is subsidized? That is my first question.

My second question concerns the United States and the United Kingdom. Can you tell me whether in those countries, the various orders of government provide funding to such organizations if they provide income tax receipts to people who have given them donations?

[Tim Draimin]

Maybe I should clarify: the idea would be for enterprising non-profits and charities to create a separate corporate entity to carry out a promising business model. In the examples in the U.K. and the U.S., government money isn't a primary source of capital for those entities. It's coming from individual investors.

In the U.K., it is possible for charitable foundations to make grants to these entities if their purposes are charitable. The entities themselves cannot issue charitable receipts, but they can be the beneficiaries of capital that's already in the charity world.

In the U.S., the idea is that the charitable world capital would come in the form of program-related investments from foundations. There are peculiar rules in the U.S. about foundations making investments in these types of organizations. But I think I can allay your fears: these entities are not being subsidized by government. Government is unleashing the enterprising character of the non-profit community, so that they can create these types of businesses and operate autonomously with the capital they normally raise.

[Robert Vincent, Bloc, Shefford, QC]

That's fine.

[The Chair, Conservative, Michael Chong]

Thank you to all of you.

Thanks to everyone for the testimony, questions, and comments.

[Robert Vincent, Bloc, Shefford, QC]

Finally, I would like to put a question to you, Mr. Chair.

[The Chair, Conservative, Michael Chong]

Go ahead.

[Robert Vincent, Bloc, Shefford, QC]

Previously, we made plans for the first, second, third and fourth hearings. The schedule you distributed concerned meetings where the service sector would be discussed. One meeting was to be devoted to the first sector. We are now on the second meeting on that sector. How is that? It seems that the chair decided that we would have a second meeting on that topic. If we decided together that there was to be one meeting for this sector we are studying currently, why are we now having a second meeting on that?

[The Chair, Conservative, Michael Chong]

It was the decision of the committee that there be two meetings—

[Robert Vincent, Bloc, Shefford, QC]

No, at the outset, we had decided that there would be one meeting for the first sector, another meeting for the second, three meetings on the third and three meetings on the fourth. Someone must take notes, because that is what I recorded.

[The Chair, Conservative, Michael Chong]

Would you like to see further meetings on—

[Robert Vincent, Bloc, Shefford, QC]

No, Mr. Chairman, the committee had decided that in one meeting, we would deal with that file, that in another meeting we would deal with the next...

Wait a minute...

[The Chair, Conservative, Michael Chong]

Mr. Vincent, I think that Mr. Lake or another member of the committee—I forget who it was—suggested that there be a second meeting on this matter.

[Robert Vincent, Bloc, Shefford, QC]

Could you tell me when that was moved? I have attended all of the meetings and I never heard that.

[The Chair, Conservative, Michael Chong]

Very well. The clerk will provide you with a schedule.

[Robert Vincent, Bloc, Shefford, QC]

We had settled on the schedule at the beginning, after concluding our study of Bill C-27.

[The Chair, Conservative, Michael Chong]

Sir—

[Robert Vincent, Bloc, Shefford, QC]

Afterwards, we discussed the matter of our schedule in the lead-up to the holidays. And then, we divided up the meetings: a first meeting, a second meeting, three meetings for the small and medium business sector and three meetings on the tourism sector.

But if we keep stretching out the timetable again and again, we won't have time to discuss certain sectors between now and the holiday break.

[The Chair, Conservative, Michael Chong]

The clerk told me that Mr. Valeriote, Ms. Coady and perhaps also Mr. Lake would ask for two meetings on the Canada Business Corporations Act.