In fairness, the member for Peace River interjects that it might be a better investment. I have to say to him in response that for a member of the Reform Party hope must spring eternal.
These borrowed funds would be used to generate operating savings or for venture investments. The operating savings would come from investments in capital equipment and projects which have a payback of four years or less. At the present time the CBC is unable to take advantage of these opportunities due to its shortage of capital resources and the immediate need of addressing physical obsolescence in plants and equipment across the country.
Perhaps a good example of how this proposed borrowing authority would help the CBC was the arrangement reached by the corporation to disaffiliate from its Pembroke, Ontario station and replace it with rebroadcasting towers at a capital cost of $2.2 million.
The subsequent annual savings in payments to the affiliate less the cost of using the towers yielded net savings to the CBC of $374,000. As well the corporation earned an additional $1 million in advertising revenue as a direct result of this disaffiliation in Pembroke. A capital investment of $2.2 million was repaid in under three years. That flexibility to undertake such initiatives is an indispensable tool for the CBC.
It is worth reminding ourselves that under no circumstances would the CBC be permitted to use these borrowed funds to address an operational shortfall and thereby operate on deficit financing.
I say to my friend from Medicine Hat, there is the answer to one of the questions he raised. If he listens to the debate he will get the answers to all these questions. We heard his questions. We not only heard them we had anticipated them beforehand because these are some of the legitimate questions that need to be asked. Nobody has scored the member for Medicine Hat for being unthoughtful. He is very thoughtful about his questions but he rushes to judgment a little too quickly. He decides this is a bad thing before he has fully examined it. However I give him credit for at least knowing the questions to ask.
I repeat to him that the CBC will not be allowed under any circumstances to use these borrowed funds to address operational shortfalls and thereby operate on deficit financing. It is not only a commitment of the government. It is a caveat that will be in the agreement that would be entered into between the government, the Minister of Finance on the one hand and the CBC on the other.
The CBC's borrowing ceiling under this provision would be $25 million. A memorandum of understanding between the CBC and the Department of Finance would, as I have just said, set out the terms and the conditions governing the borrowing authority. Foremost among those conditions is that the CBC would require the approval of the Minister of Finance, in accordance with the established Department of Finance guidelines, for each transaction it undertook pursuant to this particular provision.
We have heard again, particularly from my friends in the Reform Party, some concern about this issue. It is not surprising on the one hand because we know they are for the dismantling or the privatization of the CBC and I respect that point of view as a policy position. I do not agree with it myself and my party does not agree with it either but certainly I respect the point of view. It flies in the face of our position. It is diametrically opposed to what we believe on this issue. We see the CBC as a key national cultural institution.
At the same time I cannot resist mentioning to my friends in the Reform Party that there is a bit of an inconsistency in their position in that we hear them so often talking about the importance of the businesslike approach. I believe the record, what we said on this issue, demonstrates that what we are trying to achieve here is a more businesslike approach for the CBC.
Finally there have been concerns about adequate reporting to Parliament. This is addressed by the procedure under which the borrowing authority will be included in the corporate plan summary which the CBC is obliged to table annually in Parliament.
In the context of the $1 billion crown corporation that we are talking about, the $25 million we are talking about is a relatively small amount. I submit the government is taking adequate safeguards to see that it is done in a reasonable manner.