Special Committee on Cooperatives Committee on July 27th, 2012

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

Thank you.

I thank you for coming, and thank you for all that you do and for helping us learn another angle on what cooperatives do and how they work.

Mr. Marshall, we've heard from I don't know how many credit union-type or cooperative-type lending institutions. Each time, I learn something more. You've grown from a start-up of one to the number of branches you now have. I see that at some point you consolidated some different credit unions to become Mountain View.

You live in a province that has a lot of different cooperatives. Today, we've heard from the gas cooperative and the electrification cooperative in Alberta.

What is your credit union's involvement in cooperative businesses, either start-ups or simply businesses that are cooperatives? In a start-up situation, do you treat a cooperative business differently from any other business that comes forward looking for start-up help and guidance, and certainly on lending?

[Robert Marshall]

On a provincial basis, we're very involved in supporting the other co-op models that you've been exposed to or have heard about, particularly the lumber, grocery, and fuel retail distribution co-ops, and certainly the gas co-ops and rural electrification associations. I'm speaking on behalf of the provincial credit union system in that regard. We certainly look to obtain their business and have them deal with us.

In terms of whether we participate or help facilitate start-ups, absolutely we do, and I think we're probably one of the first choices for start-ups because we understand the model. But does that mean we're any more forgiving on our credit risk policies? Probably not. We still have to make sure they have a viable business case or business plan, that there is sustainability and permanency in that and that they have the cash flow to repay debt—those types of things.

So we certainly understand the models and we're there to support them, whereas I think some other financial institutions may not have that same understanding, and that helps us.

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

You obviously do lending to businesses. In that way, you recognize that our government, through Western Economic Diversification, has a series of different programs, some for microloans, some for business start-ups. Does your credit union take advantage, where you can, of advising your clients to use those programs, along with your being their lender?

[Robert Marshall]

Yes, we do, especially if there's a way that we can complement each other. There certainly are examples of that occurring. Sometimes it's not as easy in smaller rural centres. Some will have to go into a large urban centre such as Calgary or Edmonton to get that type of expertise, but we're there, and we're there to help them and guide them and to provide whatever best solutions there are for them in that regard.

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

I'm betting you're on the ground in Olds, and if someone came to you, you'd know where to look to find that type of information if there's a program out there through Western Economic Diversification.

[Robert Marshall]

Yes, and through Farm Credit Canada—those places as well, you bet.

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

I was going to talk about Farm Credit. You said some things about them. We asked them that same question the other day. They said they're not cherry-picking the agriculture business. I'll leave it at that.

[Robert Marshall]

To the contrary....

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

I recognize you're saying “to the contrary”. So I'll just leave it at that. That's something for our agriculture committee to look at, at a later date, I suppose.

We've met a lot of cooperatives, a lot of cooperative businesses, a lot of cooperative enterprises. We've heard that they have a far greater survival rate. They tend to have a far greater ability to survive over longer periods of time. If we check 10 years later, some businesses won't have made it, but cooperatives will have.

So I'm saying they have some sort of an advantage. I kept calling it some sort of magic formula. I think it's the mini-brains process: one person, one vote. You get a whole lot of people thinking about what you're doing right or wrong.

But you suggested there's really no difference in how you'd look at a lending application. I'm suggesting that if I came to you with a history that cooperatives on their own will have a far greater likelihood to survive, I think you'd be better off lending to them than to standard businesses. Do you not take that premise and run with it?

[Robert Marshall]

No, we'd certainly consider that and, as you say, run with it, but it comes down to whether they have a viable plan in place, especially on a start-up. Once they've been in business for 5 or 10 years, there's historical evidence to support where they're going. It's the start-up. And are the right people in the place and are they committed? And have they done the research, have they spent the necessary time and, in some cases, funds to put together that business plan? I see that's where there's a real role perhaps for the federal government in assisting those types of start-ups. We certainly do, too.

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

Isn't that truly what we're offering through—

[The Chair, Conservative, Blake Richards]

I'm sorry, Mr. Preston.

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

—Western Economic Diversification?

I did make eye contact, Chair. I don't know how you think you can speak to the process.

[The Chair, Conservative, Blake Richards]

You can talk all you want. I'm just going to talk over you. I'm sorry, my friend.

We will move now to Monsieur Bélanger for the next five minutes.

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

Thank you, gentlemen, for being here.

Mr. Rockel, you say you're hoping that the 2012 International Year of Cooperatives will be the beginning of a renewal and enhancement and support for cooperatives. So I hope those words come true. We certainly will do our bit to make that happen.

This morning we had the gas federation from Alberta. They were mentioning that at a certain level of servicing, they can have competition in their territory from the private sector and they can also compete in the private sector territory at that level of consumption of gas. Is the situation the same for the rural electrification associations?

[Merv Rockel]

No, it's not. Each REA has an area, which the Alberta Utilities Commission has said you can serve people in. You can only serve your members. We have a wire-owner to wire-owner contract with the utility companies, which defines who can serve what. Originally, when REAs were formed, back in the forties or early fifties, the agreement was that we would only do farm services, and only under 25 kVAs. Over the years, we have negotiated different agreements with the utility companies to increase what we can serve. We can now serve large farms. If a farmer has a little welding shop, and he starts making corral gates and stuff like that to supplement his farm income, that's still an REA service. But if he were to build a welding shop across the road—

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

Can the private sector come and compete against you in your territory?

[Merv Rockel]

No. There's only one other utility, and that's either ATCO or Fortis.

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

The level of growth will go with the level of development in rural Alberta, presumably.

[Merv Rockel]

Our latest agreement we signed with Fortis is that we can serve subdivisions. We are now serving subdivisions. We signed that agreement, and then shortly after, Alberta boomed, and all kinds of places were setting up subdivisions. So it was really a blessing for us.

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

Are there any clouds on your horizon?

[Merv Rockel]

Yes. Some of the smaller REAs are just like the ripest apples on the tree, and the utility companies want to buy them out. They're offering big bucks for them, too. You know the value of it. It is $20,000 to $25,000 because you have a transformer pole in your yard.

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

Now that you've set it up, they figure that it's profitable enough to buy them out.

[Merv Rockel]

Yes.

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

Hang in there, if I may suggest that to you.