Special Committee on Cooperatives Committee on July 24th, 2012

[Bryan Inglis]

When we look at our cooperative members—and when I say “members”, I mean we're a second-tier cooperative, a wholesale cooperative, so our members are actually cooperatives as well, farm co-ops, supply co-ops, grain co-ops, grocery co-ops—we're finding we're not getting new members. We've been around for 85 years, and we have 100 members. Some of our co-ops have closed for a number of reasons—for example, there wasn't a need any more. We really are finding that there are no new cooperatives, either producer or consumer cooperatives, being developed or growing. We have opened one or two cooperatives in the last five or six years, and we've seen a significant number of private businesses open in Atlantic Canada. So I do believe, and I mentioned earlier in my briefing, that now is not the time to take our foot off the gas pedal. We need to find a way to help cooperatives start up and grow so we can continue to fuel the system.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

A few people have mentioned that, I believe.

In my riding, a small service cooperative operates during the summer and introduces young people to the cooperative movement. One of you—Mr. Webb, I believe—said that right now in our teaching institutions, our universities, no one, except maybe Saint Mary's, seemed to be teaching this model as part of any curriculum.

What role do you think the provincial and federal governments should have in bringing about programs that introduce the cooperative model to young people?

Mr. Webb.

[J. Tom Webb]

I think this is a very important thing, this whole idea of cooperative development and how you make it happen, especially given the fact that the model is not well understood in business schools and by economists. If we look at Canadian history, we see there are two really good examples. One is the co-op housing model where you had co-op housing resource groups across the country developing very successful housing cooperatives, and that model worked very, very well. And in Quebec you have the regional cooperative development organizations that specialize in developing cooperative businesses. That works very, very well, and that's why the cooperative movement is stronger in Quebec than it is in the rest of the country.

You see that as well when you go to Italy or Spain. Again, you see these cooperative development organizations that are specialized and understand the dynamics of cooperative business, understand how to make them work, and operate with collaboration from agricultural co-ops if the project is an agricultural one, or industrial co-ops if it's an industrial one. I think we need to look at how we create a network like that right across the country, not just in Quebec. I salute Quebec for what it's done. It's an excellent example.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Mr. Inglis, you touched on the Canada Cooperatives Act. How do you think the act should be amended?

[The Chair, Conservative, Blake Richards]

Time has expired. I will of course allow a brief response.

[Bryan Inglis]

I'm not a strong expert on this, and I really can't speak to the specifics of the act, but I do believe there's an opportunity to look at the act to modernize it and to enhance it with the understanding of what needs to be done on the capitalization, understanding that the curriculum is not there, and understanding that the economic development agencies do not understand the roles co-ops play. I believe now is the time to look at the act and modernize it and bring it in to fit our needs of the future.

[The Chair, Conservative, Blake Richards]

Thank you.

Mr. Payne, for five minutes.

[LaVar Payne, Conservative, Medicine Hat, AB]

Thank you, Chair.

I'm actually going to be able to get back and ask that question now. But first of all, I have to say that my wife and I are members of a credit union, and certainly from that standpoint we do participate in the credit unions. My wife is also a member of the Medicine Hat Co-op, which supplies gasoline, medications, and food. I can tell you that with her membership we quite often celebrate when we get our substantial dividend cheque. Of course, part of that is reinvested.

The other thing I wanted to mention is that there are different types of co-ops. For example, in my riding we have an organization called the Red Hat Co-operative Ltd. I don't know if you're aware of it, but there are a number of greenhouses that come together and sell their product to the Red Hat Co-op, which in turn distributes it across western Canada to all the major food stores. That's another great success story from our riding.

However, I just wanted to get back to Mr. Malloy. I know you talked about the high dollar, and my colleague Ms. Gallant talked about some investment in terms of high-technology. I'm just wondering, has your organization invested in new equipment, and has it been able to increase productivity? Has that helped you to compete?

[Jeff Malloy]

We certainly have. When we did the major project five or six years ago we modernized the plant. It certainly helped streamline things.

Again, we find it difficult, because we're seasonal. A lot of our employees are aging, so we find it very necessary now to try to streamline things as much as possible through modernizing the systems that we have, because we find it very difficult to attract young workers to the industry. It is certainly a seasonal industry, and in our case it is dealing with live products, so it's a lot of hours during the summer months, when a lot of young people would rather be scooping ice cream on the beach in Cavendish.

So these are some of the problems we have. As an industry we've certainly undertaken a number of initiatives with the help of ACOA and the Province of Prince Edward Island—and I know there are other programs through New Brunswick and Quebec as well—especially over the last two years, doing a lot of work on opening up new markets. We've also worked on two major projects with equipment that will not so much cut jobs out, but in our case it will probably establish four new products that we could put out in the marketplace with very good success. This is something that as an industry in general we are sharing and trying to do a lot more of, because I think there's a place for it.

I celebrate when other companies establish a new product or a new process or whatever. If it opens up a new marketplace it takes product away from maybe something I'm doing, or whatever. So I think a lot more investment has to be made in those areas to try to expand the marketplace from the traditional products we currently have.

[LaVar Payne, Conservative, Medicine Hat, AB]

Will the new equipment help in terms of your productivity, to reduce your costs on the products you are developing?

[Jeff Malloy]

Yes, the two that we have developed have cut back somewhat on our need for workers. It allows us to put more product through. But more important, it's the new markets and the new products that have been established by it that have helped the most.

[LaVar Payne, Conservative, Medicine Hat, AB]

Okay, thank you.

Do I have any time left, Mr. Chair?

[The Chair, Conservative, Blake Richards]

You have about ten seconds.

[LaVar Payne, Conservative, Medicine Hat, AB]

All right, well thank you very much, and I thank all the witnesses for coming today.

[The Chair, Conservative, Blake Richards]

You saved five seconds for us. That gives Mr. Harris two minutes and five seconds remaining to get the final word in.

Mr. Harris.

[Dan Harris, NDP, Scarborough Southwest, ON]

Thank you, Mr. Chair.

In the spirit of cooperation--because as things are set up in this third round, Mr. Bélanger does not get another opportunity to speak--I'd like to pass my time along to him so he can continue his questioning.

[The Chair, Conservative, Blake Richards]

I have about one minute and 45 seconds for you there.

[Mauril Bélanger, Liberal, Ottawa—Vanier, ON]

Thank you very much, Mr. Harris.

I find it rather untoward that most people get to speak.... Anyway, we'll deal with that some other way, perhaps in camera today.

We won't have time for an answer, so perhaps in writing, to all the witnesses, if you don't mind, I'd like to know your opinion on what the role of large, long-established business co-ops is in either helping or creating start-ups--in terms of expertise and knowledge, and in terms of capital or financing.

I've been involved in one situation where a caisse populaire would not lend to a co-op. I had to personally guarantee the loan for the co-op to get their money in order to keep growing--and they paid back the loan. So I hope they have a bit of egg on their face. However, I found that it was rather awkward for a co-op not to be willing to finance another co-op.

So I want to know if you believe the large, established co-ops have a role, and what it is. If you could send that in, I would very much appreciate it, as I suspect my colleagues would as well.

If I have a few more seconds, Ms. Gallant, if you could find out from that gentleman what the tax advantage is, I think that would be useful for us as well.

Thanks.

[The Chair, Conservative, Blake Richards]

Thank you.

As it is almost 11:30, and this time we are going to suspend in the appropriate timeframe, the meeting is suspended until one o'clock.

[The Chair, Conservative, Blake Richards]

I call the meeting to order.

We have another panel with us this afternoon, and we look forward to hearing from them. From the Prince Edward Island Co-operative Council, we have Mr. Dave Whiting. From the Nova Scotia Co-operative Council, we have Ms. Dianne Kelderman. And from SNB Wood Co-operative Ltd., we have Pamela Folkins, the general manager, and Christina Keating, who is the supervisor of accounting and purchasing.

We'll get right into it. We have two hours. We won't stop at 2:30. We'll stop at 3 o'clock and move to our committee business, of course, at that time.

First, in order, we have Mr. Whiting. I'll allow you up to ten minutes for your opening remarks. The floor is yours.

[Dave Whiting, Executive Director, Prince Edward Island Co-operative Council]

Thank you, Mr. Chair and committee members.

I appear before you today on behalf of the Prince Edward Island Co-operative Council, representing 108 island cooperatives and their 80,000 members. Fully 60% of the population of Prince Edward Island belongs to a cooperative.

On Prince Edward Island, the beginning of the cooperative movement can be traced to 1864 and the Farmers' Bank in Rustico. The bank was started by the poorest of the poor, the Acadian farmers of South Rustico, people who had too little land, too little money, and very little education, but ended up running what was probably the first people's bank in North America, a precursor to today's credit union.

For the next 150 years, the cooperative movement continued to gain ground on the island, strengthening communities and the people who lived in them.

Over the past few years there has been change taking place in Canada. We have entered a new era, an era characterized by fundamental reassessment of government spending at all levels. People who over many years have learned to look to government for assistance in many areas of their lives must now learn to look to each other.

In his book Cradled in the Waves, John Croteau, an American economist who had worked on Prince Edward Island in the 1930s and 1940s, described the community of North Rustico as a hamlet sunken in misery. Families existed on one small meal a day, two if they were very lucky. Tuberculosis was rampant. Buildings consisted of a collection of unpainted homes. There was an ancient cold school and a very small church. When he returned to the island in the early 1950s he found a community transformed. It had a paved road and electric lights; there was an up-to-date school with an auditorium, a library, and a radio in every classroom. There was now a credit union, a cooperative lobster factory, and a co-op store.

The cooperative movement had infused new life and new hope into that community.

In the early 1900s, very few fishermen in the Tignish area of Prince Edward Island owned their own boats or gear. They were forced to rely on boats owned by a private company and to give that company one half of their catch in return for the boat rental. The fishermen rarely saw cash, because the company, which also owned the local store, used currency refundable only at the store. In 1920 the fishermen of Tignish got together to form the very first fishermen's cooperative, which today operates under the Royal Star Foods brand and employs 300 people.

In Tignish today, an Acadian fishing community of 800 with an area market of approximately 4,000 people, there is a co-op store selling groceries, hardware, lumber, and clothing. The only financial institution is a credit union. The health centre is a cooperative. The seniors home is a cooperative, as is the local transportation provider. The Tignish Fisheries Co-op Association sells its Royal Star seafood worldwide.

What is notable about Tignish is that it persists, at this point in time when the global financial crisis has resulted in downsizing by government and private sector, with the resulting financial and emotional pain for so many communities of this great land. Its cooperatives are looking after its people, and its people are looking after their cooperatives.

Ten years ago, a national bank in Mount Stewart, Prince Edward Island, closed its only financial outlet in that tiny hamlet. The branch was not making a profit. It was nothing personal; it was just business.

The credit union moved in, and continues to serve the people of Mount Stewart today. Like the bank, it does not make a profit, has not made a profit, but profit is not the reason cooperatives such as the credit union exist. They are there to help the community. They are there to help the people.

In Tyne Valley, Prince Edward Island, with a population of 226 and an area market of approximately 2,000 people, the very same thing happened 15 years ago. It was a different bank, the same reason, and the same result. The credit union, the people's bank, moved in. Today the Tyne Valley credit union sponsors minor hockey, the school breakfast program, and scholarships for the high school, and most recently contributed $10,000 for a new rescue truck for the volunteer fire department.

Over the years, Prince Edward Island agriculture and fishing cooperatives have worked with governments to abolish poaching, increase inspections, develop regulations, and provide expertise to produce quality products. The relationship between governments and cooperatives on the island has resulted in tremendous successes in agriculture and fishing and has helped put Prince Edward Island on the global map.

In the modern sense of the word, a cooperative is a business or a service owned and operated by the people who buy its products or use its service. It is truly a democratic organization open to all. Each member has an equal say in how the organization is run. Cooperatives are essential to our country's smaller rural communities, communities like Tignish, Tyne Valley, Mount Stewart, and North Rustico, communities that survive because of the cooperative business model.

The Prince Edward Island Co-operative Council fully supports the Canadian Co-operative Association and the six points for a government and cooperative sector partnership put forward by Denyse Guy in her appearance before this committee. We encourage you to incorporate her presentation into your report, not just for the good of Canadian cooperatives but for the good of the people they serve.

Thank you for your time and attention.

[The Chair, Conservative, Blake Richards]

Thank you, Mr. Whiting. You are well under time. We appreciate that.

Next we'll have Ms. Kelderman, for up to ten minutes. Thank you.

[Dianne Kelderman, President and Chief Executive Officer, Nova Scotia Co-operative Council]

Thank you, Mr. Chair and committee members.

My name is Dianne Kelderman. I am the president and CEO of the Nova Scotia Co-operative Council.

I thank you for the opportunity to come before this very important committee during this historic year, the International Year of Cooperatives.

I understand that you have already heard from many of our national cooperative and credit union partners, and you have no doubt heard, and they have shared with you, our impressive Canadian story.

I am pleased to share with you today the results of the economic impact of the Nova Scotia cooperative system. I am also pleased to share with you the impact we have had on the lives of ordinary Nova Scotians and on the cultural and social fabric of our communities.

If you extrapolate the Nova Scotia results you're going to hear across every region, every province, and every territory, with some give and take, you will get a national picture of why the cooperative sector is fundamental to the economy of Canada and, equally important, is fundamental to who we are as a nation. I will refer back to this point later in my comments.

The Nova Scotia Co-operative Council is the provincial economic development arm of the cooperative and credit union sector of Nova Scotia. We are owned, governed, and financed by the 431 cooperatives and credit unions that do business in our province. In other words, we are owned by the people of Nova Scotia.

We are a very significant economic player, with 431 businesses and $5.3 billion in assets. We employ 7,361 Nova Scotians. We provide housing for over 6,000 Nova Scotians. In 34 Nova Scotia communities, a credit union is the only financial institution. In 27 Nova Scotia communities, a cooperative is the main economic driver. Take those two out of those communities and think about the economic impact.

Sixty-five percent of all agriculture done in Atlantic Canada is done through cooperative enterprises.

We are strong and we are stable.

One out of every five cooperative enterprises fails. One of out of three private sector businesses fails.

We have a strong, historic, and proud commitment to rural communities.

To be exact, 309,012 individual Nova Scotians are member-owners of our cooperatives and credit unions. That is one out of every three people, or 33% of the population. We are bigger than any political party, any religious denomination, and any special interest group.

We are leaders in innovation, in building communities, in growing the economy, and in supporting people.

Our small-business support and lending programs over the past seven years have financed 1,158 small businesses, with loan losses of less than 3.5%. These are businesses, by the way, for which we have done financing at high-risk levels.

We have created over 7,500 jobs, as a partnership with these businesses, at a cost of $238 per job to the Province of Nova Scotia. Our motto is “Great Jobs Close to Home”.

Connecting People for Health Co-operative is Canada's first and only online health care clinic. It connects patients and doctors via the web. It is an enhanced health care service, but an uninsured health care service, and it is in total compliance with the Canada Health Act. It is a system that can change and have an impact on wait times. It is a patient portal. It is patient-centric, not government- and big-system-centric. It is a Nova Scotia innovation. It has export potential. And it is financed by the cooperative and credit union sector; it is not financed with taxpayer dollars.

Next is youth, our future.

Our partnerships in Nova Scotia are touching approximately 14,000 young people a year with cooperative leadership, business development, training, and leadership opportunities.

Nova Scotia's first social enterprise fund is our innovation and our capital. We are providing financing, term loans, working capital, and lines of credit for not-for-profits, for-profits, and cooperative societies that operate business enterprises that have a common social and economic goal.

We are a growing sector. On average, 18 new cooperative enterprises are incorporated on a yearly basis in Nova Scotia. In 2011, we had a record year, with 29 new incorporations across all industries and across all sectors.

We have a mentoring program, where cooperative leaders continue to give. It is a network of retired business professionals, cooperative credit union professionals, who mentor existing businesses and new start-ups in our province.

Cooperatives introduce corporate social responsibility to Canada, now widely emulated by the private sector. Credit unions were the first to introduce ATMs, automated teller machines. In fact, the first ATM in Canada was in Petit-de-Grat, Nova Scotia. Cooperatives are business enterprises, democratically owned, governed for the people by the people.

Cooperatives grew by 1.8% last year in Nova Scotia, despite the economic crisis. Our membership grew by 2%. Our top ten cooperatives paid a patronage dividend equal to 11% return on investment. I would suggest that's a good place to put your money.

The cooperative sector is often the first to respond to important economic and social challenges: financing for the forestry program; financing for immigrants, including an immigrant welcoming program; business interventions; governance training for boards; worker buyouts and business succession; and health care and education solutions. We are in the forefront.

There are many opportunities ahead. Cooperatives are putting people first. Cooperatives are creating sustainable jobs. Cooperatives are investing in communities. Cooperatives are on the forefront of innovation. I think the results speak for themselves.

Cooperatives, across all party lines, represent and embody so many of the greatest attributes that define Canada: democratic, fiscally responsible, socially responsible and caring, self-help, self-responsibility, equity and equality, global concern, and commitment.

We believe that actions, choices, and decisions matter. We also believe that people must come first. And we believe that we have a responsibility to be part of the solution and not part of the problem.

In that context, the Nova Scotia context, what do we need or hope for from our federal government?

First, we request recognition, understanding, and respect as a key economic player. We ask that this respect, understanding, and recognition be shown by placing the responsibility for cooperatives inside Industry Canada, where we belong. We are much more than agriculture. Ensure cooperative enterprises are eligible for and are included in all government programs. There is currently a big gap across federal government programs as it applies to cooperative enterprises. Ensure that the public service, the people who work for the federal government, know that cooperatives exist, first of all, and then, secondly, understand that they are unique and important business enterprises. Perhaps this could be achieved through an interdepartmental committee on cooperatives.

Secondly, introduce financial support mechanisms for the cooperative sector that are consistent with those currently available for the private sector—investments, partnerships, and tax credits, as an example.

Thirdly, cease the government practice of using our tax dollars to establish government-funded entities to compete with our businesses. If it can be done and provided by the private sector, then governments should not be competing with us.

Fourthly, consider cooperatives as an exemplary model for Canadian-owned business opportunities. Consumer-owned utilities and public services are just some examples.

The future is ours to invent. Alan Kay, a Nobel Prize winner, really said it well when he said, “The best way to predict the future is to invent it.”

That's what we're about. Successful economics, successful results, successful people engagement should be ramped up; it should not be disengaged at a time when the country needs us so much.

Thank you very much.

[The Chair, Conservative, Blake Richards]

Good. Thank you very much.

We'll move now to the SNB Wood Co-operative. I believe, Ms. Folkins, you'll be giving the presentation. You have up to ten minutes, and the floor is now yours.

[Pamela Folkins, General Manager, SNB Wood Co-operative Ltd]

Mr. Chair, committee members, thank you for the opportunity to appear before you today.

I am Pamela Folkins, general manager of SNB Wood Co-operative Ltd. Attending with me is Christina Keating, supervisor of finance and wood purchase.

SNB is an organization of private woodlot owners that was incorporated in 1974 with 19 charter members. In 2012 we're at approximately 2,000 members. Prior to the cooperative, private woodlot owners were organized and formed an association in 1964. Their objectives were to help wood producers receive a fair price for the forest products, to promote good forest management, and to encourage the production of quality forest products from private woodlots.

SNB's vision statement is as follows: Woodlot owners managing individually and collectively to provide the maximum sustainable ecological, economic, employment, social, and cultural opportunities for the benefit of themselves and future generations.

SNB's mission statement is that we are an organization that strives to provide the best possible services for private woodlot owners in order to help them realize the maximum sustainable value from their woodlot resources.

We also have guiding principles operating under the New Brunswick woodlot owners' code of practice.

In New Brunswick there are over 40,000 private woodlot owners. They own 4.5 million acres of forest land. That represents 30% of the forest land base in New Brunswick. There are seven woodlot owner groups in New Brunswick. At our organization we have approximately 8,000 owners who own approximately one million acres of forest land.

SNB has a sister organization called SNB Forest Products Marketing Board Ltd., which operates under legislation in New Brunswick. The co-op acts as the business arm, and the marketing board provides representation under New Brunswick's Natural Products Act.

At our co-op we employ 12 full-time employees, and depending on activities for the year, we employ 25 to 50 seasonal staff. Our full-time staff are long-time employees and provide 150 years of experience in providing services to private woodlot owners in southern New Brunswick.

Needless to say, SNB is a grassroots organization. The co-op evolved from a few concerned individuals trying to earn a living from their woodlots. They held many kitchen meetings and volunteered many hours working to establish an organization to provide a fair system for woodlot owners to gain a reasonable return for their products.

Most private woodlot owners are also farmers. They are the backbone of the rural economy. The co-op structure provides a very important role. It enhances the opportunity for working together, for lobbying government, marketing our forest products, and sustainably managing our woodlots.

At our first annual general meeting in 1975 we had 500 members, assets of $7,000, members' equity of $2,500, and in the first year a loss of $63. At this past AGM, we're at about 2,000 members, assets of $1.3 million, members' equity of $700,000, and we had a bit of a gain of $65,000 this year. The majority of our years have experienced positive financial bottom lines, and profits were distributed back to the membership based on the business transacted through their organizations.

The mandate of SNB has never been to charge exorbitant service fees, but to provide services to its members at a reasonable level, which of course, in turn, provides a return. The members are very supportive of reinvesting their profits back into their organization, which allows for good cash flow and minimal requirements for borrowing moneys to operate.

SNB members are tremendous supporters of working together and great stewards of their forest land. Wood sales and forest management programs are a very large part of operations at SNB.

Wood sales have contributed as much as $27 million in a year, directly back to the local and rural economy, not including the additional spinoffs.

Forest management programs are administered by our co-op, employing the 25 to 50 seasonal people per year, just directly within our group. As well, there are contractors employing a number of local people who also carry out work on these private woodlots.

With the downturn in the forest industry over the past five to seven years, SNB members and their staff have had to look outside of the traditional box to ensure the survival of their organization. New services and revenue-generating activities over and above selling wood—thinning and planting trees—have been initiated, and research is ongoing.

In the early 1980s SNB transitioned to a new financial institution, Bayview Credit Union. SNB was instrumental in assisting it to establish a branch office in Sussex, New Brunswick, where we are based. We remain with them to this day, and they with us of course.

Looking back once again to the strength of SNB and how we've evolved over the years, we see it's not unique. Co-ops play an extremely important part toward the success and survival of rural communities and their people. Our co-op did not evolve from a large, corporate community. It evolved from the commitment of rural people to improve conditions for each other.

As shared earlier, SNB started out from discussions around people's kitchen tables over many cups of tea. It was incorporated in 1974, because woodlot owners had a vision and a common goal. The co-op started operations in a feed warehouse with a part-time employee, moved a couple of times, hired a full-time manager, obtained contracts with industry as a group to sell its products, established crews to work on people's woodlots, and moved to a new office, working with Bayview Credit Union. Eventually we purchased a demonstration woodlot, developed a Christmas tree operation, purchased another woodlot, and then built our very own office facilities.

The commitment and support of our members was even more evident in obtaining our new office. We could have borrowed the money for the construction, but to continue on the principle of working together, in 1986 members personally invested $88,000 for a five-year period and covered off the cost of building their own facility. We continued to grow, and in 1999 we expanded our office, with members again investing $101,000 in their own co-op.

Over the years we have experienced our share of successes, but not without our share of hurdles. The co-op is not unlike any business. There are ups and downs that require a true commitment, and it will only be sustainable with our members' support.

Co-ops must be respected by our governments and recognized for their contribution to the economy as well as, in our case with a private woodlot forestry, the contribution to the sustainability of our environment—air quality, water quality, etc.—and of course jobs.

We truly believe there is strength in numbers. Working together for the betterment of all is not a new concept. We as a whole must strive to not lose sight of what works well and continuously improve upon it. We are concerned with the state of our industry, the aging workforce, the lack of training, and the sustainability of our economy.

In closing, we wish to stress the importance of maintaining initiatives and strategies for the co-op movement. We strongly urge you at the federal level to provide the framework—work with us—and support for the cooperatives, which are an integral part of the Canadian economy within rural communities as well as the urban centres. Cooperatives deserve to be recognized for their contributions to Canada—no different from big business—and have the same opportunities and avenues.

Thank you again for the opportunity to share with you how we have evolved as a co-op. We wish to continue to sustain and improve conditions for the betterment of all Canadians.

Thank you.