[ Page 3011 ]
Routine Proceedings
Miscellaneous Statutes Amendment Act (No. 5), 1987 (Bill 68). Committee stage.
(Hon. B.R. Smith) –– 3011
Mr. Jones
Mr. Williams
Hon. Mr. Brummet
Hon. Mr. Couvelier
Hon. Mrs. Johnston
Ms. Smallwood
Mr. Rose
Mr. Loenen
Legislative Assembly Allowances And Pension Amendment Act (Bill 69). Second reading
Hon. Mr. Veitch –– 3017
Mr. Rose –– 3017
Hon. Mr. Veitch –– 3018
Property Purchase Tax Amendment Act, 1987 (Bill 60). Committee stage. (Hon. Mr. Couvelier) –– 3018
Third reading
Assessment Amendment Act, 1987 (Bill 67). Committee stage. (Hon. Mr. Couvelier) –– 3018
Mr. Clark
Mr. D'Arcy
Mr. Rose
The House met at 10:09 a.m.
Prayers.
MR. JANSEN: Mr. Speaker, in the House today is a good friend and supporter from Vancouver, Michael Cytrynbaum. Would you please make him welcome.
Orders of the Day
HON. MR. STRACHAN: Mr. Speaker, I call committee on Bill 68.
MISCELLANEOUS STATUTES
AMENDMENT ACT (No. 5), 1987
(continued)
The House in committee on Bill 68; Mr. Pelton in the chair.
HON. MR. STRACHAN: Mr. Chairman, the orders of the day point out that the committee adjourned on section 38, with section 22 postponed.
On section 38.
MR. JONES: Just one further brief comment on this section.
It seems to me that this is an interesting mix of private and public enterprise, and I think it would be more appropriate for something to be presented from this side of the House, rather than the government side. Certainly we've seen of late on the government side a mania with privatization: wanting to privatize the public assets of this province. We've seen from government a tremendous increase in funding private schools in this province. We've seen a reduction in the term required for the establishment of such schools. And we've seen an increasing marriage between the Ministry of Education and the independent schools of this province. However. this is for the government a curious mix of private and public enterprise. I think it is not an unreasonable one. The minister assures me that there will not be a cost to the taxpayer for this particular program; that the initiative came from a school board in this province, so obviously there was good consultation there. So in light of that, Mr. Chairman, I have no real difficulty with section 38 of this bill.
MR. WILLIAMS: It does seem strange, Mr. Chairman, to see the kind of flaky detouring that goes on in this administration in one short year.
MR. RABBITT: Shame!
MR. WILLIAMS: Shame? What else would you call it? You've got this mad drive to the right over here saying "Sell it off, sell it all off." Nothing will be left of B.C. Hydro but the wires, that's all. And then you say: "Ah, but we want our schools to go into business." Come on! What do you stand for anyway? You stand for whatever flaky idea you heard this morning. That's what you stand for over there.
Don't shake your head, Madam Minister of Municipal Affairs. You know, you've got a boss that's ideologically driven except that every now and then he just lets go of the wheel. It veers from the right, then lets it go to the left for half an hour, what the heck. "Let's have some fun here; I get bored with consistent policy." That's what is going on over there.
What sense does it make? How many school districts have we got in British Columbia? Thirty of them?
MR. JONES: Seventy-five.
MR. WILLIAMS: Seventy-five. Seventy-five school districts can go into business. If I were up in the Nass, I'd be interested in some little diversion down in Tahiti. It has all kinds of interesting possibilities, and if I was a school board member, I'd be very interested in making visits to Hong Kong. Fascinating. Wonderful. But what's it all about?
[10:15]
AN HON. MEMBER: Privatization.
MR. WILLIAMS: Privatization, yes. Now if I had to think about the most unlikely businessmen in British Columbia — and I hope the teachers will forgive me — I might pick the teachers. Oh, and we're getting some applause over there on the government side. But that's what you're saying — that you want them to go into business. And where do you want them to go into business" Why, in the toughest, competitive little entrepot in the world. Hong Kong. Some might even think you had a twisted sense of humour in terms of that.
Come on, let's 'fess up. Your boss heard this idea and said: "Well, that's fantastic. Imagine the schools going into business. Why not?" And you know, it has the ring of truth, doesn't it? You can just see it. The back bench can see this is the way business is done in British Columbia these days. Sure, we're selling everything else off — but why not? Let's get the teachers into business. Come on! When there's so much to be done in terms of doing a proper job, setting standards of excellence, getting kids going on into university and avoiding the dropout problem and having our problems in the regions where the kids don't get to universities and colleges — the worst in the country, pretty well.... We've got serious problems here, right at home, and we're not dealing with them satisfactorily. Why should you give this diversion to a few elite school boards that would like to try marketing their product in the Far East? Come on!
What are they really selling? Are they really selling the world's greatest expertise in education? I would hope that's so, but I don't think so. What we're really selling is some kind of free, open province and some kind of future immigration ticket. Isn't that what we're really selling, if we're honest with ourselves? Is that what we should use education for? I don't think so. Some kind of narrow bridge out of a colony that is going to disappear within a decade. I don't think so.
It's clear that it's just another flaky idea that happened to get through. Somebody in the lineup at Fantasy Gardens buzzed in somebody's ear one weekend morning, and it was a fine idea, why not?
MR. RABBITT: Shame, Bobby!
MR. WILLIAMS: Shame! Yeah.
That's how some of this happens. It's very clear. There is no consistent policy direction in this province any more. It's erratic; it is an erratic game. That same erratic stuff....
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You've moved him out of this building this week. You've managed to get him lots of appointments, so we won't see him all week, because the erraticism was becoming all too clear last week. I'm sorry that the Premier is not here today to back up his latest clever idea that he heard some weekend morning; because that's clearly where it came from. I can't believe for one minute that this came out of the people who really want to build a better educational system in British Columbia.
HON. MR. BRUMMET: I believe we are making progress, but the remarks of the member from Burnaby.... He apparently, since yesterday, has read the legislation and now understands it. It would be most helpful if the member for Vancouver East would also read the legislation so that he might understand it. I'm sure he would then support it as well. It's interesting how that member, in not understanding the legislation, has talked about privatization efforts in British Columbia through this measure. The legislation clearly says that this is one step in the Pacific Rim initiatives in education to try to get a better coordination between the Pacific Rim countries and ourselves, and this is one step to say it can be done only outside the province.
MR. JONES: I want to thank the minister for helping educate me. He did send me some information on the Pacific Rim initiatives program. I have it here, and as soon as I master Mandarin Chinese I will fully understand all the implications of this legislation. Perhaps this is how communication happens in cabinet. Perhaps this was the communication between the Premier and the Minister of Education, to put the bug in his ear to come up with this program.
What I clearly indicated to the minister yesterday I'll reiterate today; maybe it's not clear and maybe it requires a number of repetitions. I have some difficulty — and the reason I don't have any trouble with this aspect is because the minister assures me that it's not a cost to the taxpayer of British Columbia — with a $12 million program that is not focused on the problems in our own backyard, and I hope the minister understands that. In my view, the Pacific Rim initiatives have not changed since yesterday or the day before or the day before that.
This particular aspect which we're focused in on now — not in principle in second reading, where I clearly communicated to the minister my difficulties with this program.... As far as section 38 goes, because there is no cost to the taxpayer and because it was initiated by a school board in this province, I don't have any great difficulty with it. I don't know if it's the direction we should be going, but because it's not going to be a burden to the citizens of this province, I'll have no difficulty supporting it.
But on the $12 million I have serious questions that the minister has not yet answered, and I would hope for an answer at some time.
MR. WILLIAMS: The minister's an old teacher, a former teacher, and we're all ears and willing to listen more. He has shown such tolerance the last couple of days. If he has a great educational job to do, he can maybe start with the Legislature.
Isn't what you're really saying, Mr. Minister, that the private sector hasn't done the job here and that the public sector should get out there and move into that world of competition? Isn't that what you're saying? No, that's not what you're saying. You're letting the school boards go into business. You want them to get into for-profit education abroad. Is that correct? You're shaking your head no.
HON. MR. BRUMMET: Have you read it?
MR. WILLIAMS: Have you read the legislation — that's the way I read it. Maybe you can explain it. You want them to go into business abroad and you want them to make a buck.
That's clear, and you're starting in Hong Kong. That's clear from what you've said anyway. Where does it all lead to when you're dealing in public policy — that's what you want to know. And you can wrap it up in all that gauze and cotton batting and say, "Oh, it's part of our Pacific Rim initiatives stuff," but come on! You're sending them out into that wild world of free enterprise and competition, and where is it going to lead?
Is it any more than an immigration ticket in the end? You haven't answered that. Is that the real appeal of a British Columbia institution in Hong Kong — an immigration ticket? I think so. Well, say that that's the game you're in, that that's the business you're in, that that's what you want this province to be. Say so; don't put it in all that Pacific Rim initiative stuff.
How much money do you want them to make? What do you want them to use the money for? Where will the profit go? If it's going to be a for-profit institution, what's the profit going to do? Is it going to benefit that school board in British Columbia? Will it be dissipated in school boards flying back and forth to Hong Kong? Where will it go? Those are reasonable questions. Where would your next target be in terms of a British Columbia school abroad?
Is it only in the places where you think a big buck can be made, or might it play some social role in some interesting way somewhere else? Some of my friends have mentioned Managua. That's a fascinating idea, but would this minister approve a British Columbia school in Managua, Nicaragua? Or are there some clear biases here that just see this as a fast buck game in a colony that's going to disappear within a decade?
HON. MR. BRUMMET: It's tempting to let some of these ludicrous statements just pass. The member has said that we're getting teachers to go into business. The teachers will be employed like they are now — by the school board. He missed that point.
The second one is that the school board isn't going into business. They're allowed to incorporate a company to run this school. They're not allowed to loan them any money, and there are all kinds of protections there. I guess the member for Vancouver East has his own vision that there's got to be something wrong if the government is doing it, so he's translating it to suit his purposes. I think you have to read all sections of this section.
MR. WILLIAMS: Let's settle this. We've had a hundred years of public schools in British Columbia, and never before has any administration in this province seen the need for a private school corporation to be established out of the public school sector. All of a sudden you birds do.
Interjection.
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MR. WILLIAMS: Come on! For a hundred years we've had a system that has served us reasonably well, and now
HON. MR. BRUMMET: Read 3(a).
MR. WILLIAMS: "Is located outside the province." I understand that, Minister. You have been playing the game all morning long as if I didn't. You haven't been listening clearly if you think that's what the problem is. I know you're talking about some facility abroad. Is that the point you're trying to make?
Interjection.
MR. WILLIAMS: Yes, I do understand that, and that's why it concerns me, Mr. Minister, because we have never before had a British Columbia school from the public sector abroad. We have a lot of private sector schools already that cater to these needs, and do so reasonably successfully.
What is it? You just think there's a buck to be made, so the public sector should move into it? You shake you head and smile, but how do you tally that against all of the other ideological garbage we've been listening to for many months now in terms of privatization? It does not fit at all. As I've suggested, if it's anything more than an immigration facility, I'd be surprised, because in the end that's what a lot of the exercise is with private schools in British Columbia. That's why they have appeal. It is a preliminary immigration game. You may bang your head all you like, but that's the reality.
How can you explain, all of a sudden, the need after a hundred years for us to establish some kind of educational institution abroad?
MR. LOENEN: You're a dinosaur.
MR. WILLIAMS: Let's hear from the member for Richmond (Mr. Loenen) then, Mr. Chairman. If he thinks it's a dinosaur idea not to endorse this proposal, then let's hear from him. Let's see why he stands for this exercise of enterprise in the school sector, in terms of them making a buck in Hong Kong. Why?
HON. MR. BRUMMET: How long are you supposed to prolong this?
MR. WILLIAMS: You're not giving us any answers, Mr. Minister. That's what I'm saying. You're supporting the idea that it's just another flyer from the Premier that you're going along with. Shake your head all you like. That's what we get: no consistent policy out of this administration; zingy flyers all of the time. This is one of them.
There are 75 school districts. Have you got all 75 of them asking for this privilege, or one or two that see a fast buck being made on the lower mainland?
[10:30]
Interjection.
MR. WILLIAMS: That's the way it looks to me, and it doesn't seem straightforward at all. It seems gloriously inconsistent, which is the pattern we get out of the Premier of British Columbia.
HON. MR. BRUMMET: I would just like to explain that I have tried to answer the questions that have been asked that are relevant. The accusations and all of the speculation about what other things are being generated in that member's mind, I can't answer those, because they aren't questions. You can't answer something that has no basis in fact or intelligence.
Sections 38 to 45 inclusive approved.
On section 46.
HON. MR. COUVELIER: I thought it important to rise and make a few comments on this particular section. There are currently 23 court actions in process or pending regarding refunds of tax paid on explosives and fuels which have been disallowed on the basis that they do not qualify as direct agents. The potential revenue loss from these claims alone is $31 million. If no amendments are made, more claims can be expected as a result of the Canada Cement Lafarge Ltd. court decision, leading to further erosion of revenue and prolonged litigation. Therefore there is a retroactive tax ruling implied in this section, and I wanted to so alert the House.
Sections 46 to 53 inclusive approved.
On section 22.
HON. MRS. JOHNSTON: Mr. Chairman, in response to a question put forward by the member for Surrey-Guildford Whalley (Ms. Smallwood), I would like to clarify the properties involved in the exemption.
There are two zones on the property now: a public assembly area and a residential area. The public assembly area is being used for educational purposes and is the only area covered for property tax exemption. The property classed as residential area is presently up for zoning to permit development of 180 townhouses, but it is not included in the exemption.
MS. SMALLWOOD: Just one further question. Basically, this amendment includes the name of the Bible Fellowship Housing Society. Then it goes on to explain that the property that will be exempt is only property being used for educational purposes. Can the minister tell us what part of the property held by the housing society falls under educational purposes?
The other question I asked the minister yesterday was why this school is getting special privilege. Why is it receiving exemption comparable to a public school?
HON. MRS. JOHNSTON: I thought I had clarified that point yesterday. It isn't getting special exemption. It is still liable for local improvement taxes and fire and drainage charges, which would be levied against other properties. They are getting the same treatment as other educational facilities. The legal descriptions spelled out in the bill would cover the properties qualifying for the exemption. To qualify for exemption, the property must be used for educational purposes. I don't know how much clearer I can make it. There is a school on the property.
MR. WILLIAMS: Could the minister advise us what happens with respect to this land when it's not used for this purpose?
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HON. MRS. JOHNSTON: It would then be called upon to pay taxes if it was not used for educational purposes.
MR. WILLIAMS: Could you advise us where it says that in the amendment?
HON. MRS. JOHNSTON: Under section 20(l), "college property means land and improvements that are owned or leased by the college or by the Bible Fellowship Housing Society on behalf of the college, but 'college property' does not include land and improvements used or occupied by the college for any purpose that is not an educational purpose". Only property used for educational purposes will be exempt from taxation.
MS. SMALLWOOD: I would like further clarification. This is the third time I've asked this question. The only difference in this amendment to the previous bill is the inclusion of property owned by the Bible Fellowship Housing Society. A housing society is not a society that is held for educational purposes, unless of course the purpose of the housing society is to educate people in housing. I am unclear as to the purpose of including the Bible Fellowship Housing Society in this amendment, if indeed the government is not exempting the housing society from paying taxes.
HON. MRS. JOHNSTON: Mr. Chairman, it seems to me somebody's looking for a bogeyman underneath the bed. Part of the property is registered in the name of the Pacific Bible College; part of it is registered in the name of the Bible Fellowship Housing Society. Only the property used for educational purposes is exempt, under this bill, from the payment of taxation. I don't know how much clearer you can get.
MR. WILLIAMS: It's just a matter of clarification. Has the housing section always been in separate title under the housing society, or not?
HON. MRS. JOHNSTON: Mr. Chairman, my understanding is that it has been; and that's where we slipped up when the initial bill was brought forward in '84-85. It was not determined at that time that there were two ownerships for the property used for educational purposes. We did not realize at the time that part of the property, because of the separate ownership, did not qualify for the exemption. So we're really cleaning up what we thought we had accomplished in '84-85 when the original bill was introduced.
MS. SMALLWOOD: In discussions with the municipal collector, I was told that the property is one roll; that the original bill in 1985 only named the Pacific Bible College; that it did not name the Bible Fellowship Housing Society; that the property held by the housing society has continued to be taxed since 1985; that the housing society has not paid taxes since 1985; that upon the tax sale being initiated in September, the housing society paid half, to postpone it; that the whole title, the property in whole, is not listed under two separate names as two separate parcels, but is one parcel under two names; and that the whole property was up for tax sale, not just the portion held by the housing society but the whole property.
This bill exempts from taxes the properties held by the Pacific Bible College and the housing society. They are not separate. They can't be treated differently unless they are separate titles held separately by the two organizations. This bill exempts a housing society; it wipes off the taxes. In 1985 this government excused the taxes. Now again we are excusing past taxes, and saying that they don't have to pay taxes if it's used for educational purposes. What educational purposes are being conducted by the housing society?
HON. MRS. JOHNSTON: Mr. Chairman, it would seem to me that the land titles office registration showing the ownership of the property is not what should be up for debate here. It could be owned by Joe Blow...
MR. WILLIAMS: Or Bob Williams.
HON. MRS. JOHNSTON: ...or Bob Williams, or whomever.
What we are saying is that when the original legislation was introduced, there were two registered owners of the property. For whatever reason we were not made aware of the ownership or part-ownership of the Bible Fellowship Housing Society. It was our understanding that all of the property was registered in the name of the Pacific Bible College. We are not, in this amendment, giving the Pacific Bible College anything that we didn't think we gave them in 1984 or 1985, whenever the initial bill was brought forward.
So to clarify again: there are two zones on this property. Part of the property is zoned for public assembly, and you can have more than one zone on one piece of property. You can have a portion of one parcel zoned for public assembly, and it appears that this is the case here. A portion of this property is zoned for residential use. Only the portion that is zoned and used for public assembly falls under this exemption.
My assistant has talked to Wayne Vollrath, the municipal clerk, Dennis Atkinson, the municipal treasurer, and Ken Greenwood, the municipal tax collector, between yesterday and this morning in an attempt to clarify, and this is the information that was brought back to me. So there's no confusion in their minds that the exemption applies only to the property that is being used for public assembly and educational purposes. But the property in this case happens to have two owners, even though it is one piece of property, and for whatever reason we seem to have omitted any reference to the Bible Fellowship Housing Society.
It seems that the word "housing" is throwing you off and causing you concern. Hon. member, I would be concerned if I thought that we were somehow giving non-educational-use property an exemption. But I'm satisfied, with the information that has been brought back to us from the municipal hall today, that only the property being used for educational purposes continues to be eligible for an exemption. I don't think I can make it any clearer than that.
[10:45]
MR. ROSE: I haven't had much of a chance to read the transcript of what went on at the private bills committee some two years ago, but I think there are some pertinent things here.
At that time Reverend Hunt applied for forgiveness of a certain portion of his property. I asked him and he said: "The $100,000 is a forgiveness of the swamp and the creek, is that right? Municipal property taxes." The argument at that time was that he wanted forgiveness because it wasn't any good for anything. He was given a forgiveness of $100,000 back taxes
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going back to 1979, according to this information that I have here. Again, I admit that I haven't had a chance to go through it with a fine-tooth comb. When this thing came up I recalled that, and our chairman here was present at that meeting as well. So there's a lot of money changing hands around here.
At the time there were some school taxes forgiven as well, and I want to be very careful about this because I haven't found it in the transcript. I would hate to ask for this to be stood again, but nevertheless it seems to me that there were school taxes here. Why are we concerned about the school board? What is the significance of the twenty thousand? And then the clerk, Mr. Izard, answered that. He said: "If I could answer that...because I brought it up. The reason why I suggested the school board be contacted is that we contacted the Surrey council, or at least the municipal clerk, who had advised us there was no problem from their point of view...."
So the Surrey council at that time had no objection to forgiving about $100,000 worth of taxes, $20,000 of which was school board taxes. At that time my recollection is that Reverend Hunt was a member of the school board, which hardly seems to me what we'd call an arm's-length relationship.
Anyway, what he got back for his swamp and his creek — no mention of the fact that it was a single title or a double title or two pieces of property — was $100,000 which was forgiven on that piece of property. And I guess it's been forgiven ever since. Well, that's what this says. At the same time we were having tremendous restraint in the school board budgets, especially in Surrey because they were about $1 million a year short. The formula delivered $1,000 less per student than they really needed.
We're forgiving school taxes to this outfit. We just didn't think that was quite ethical, as a matter of fact. There's a lot more to this, if we had time to go into it. There's a good deal more to it. Can I have the minister's assurance that if this portion of swamp and creek as described in this thing.... Are we going to get the $100,000 back? If we've got the forgiveness, now that we're going to change it.... We'll perhaps change its zoning into something that might be suitable for residential development; it was nothing but a swamp and a creek and worthless and full of alligators the last time we heard about it. I invite the minister to go over it and see what the debate was and what we were told. I don't think that the witness — in this case, Mr. Hunt, and he also, I believe, had legal counsel with him — was quite upfront with us there. I would have a great deal of.... I won't vote for this, because I can't vote for it. Can the minister assure the House that the money that was forgiven will be paid back?
HON. MRS. JOHNSTON: Mr. Chairman, I'm not aware of $100,000 being forgiven. I've been trying to explain that because of the way the original legislation was drafted, showing only one ownership, they have never been able to qualify for the exemption that we thought we had given them at that time — strictly because of the property ownership. We agreed to it, we went through the Public Accounts Committee, the legislation came into this House, a unanimous vote approved it. Because there were two registered owners, because of that technicality, they have never been able to receive the exemption. I'm just trying to clarify that with this amendment and clear up the technical oversight in the preparation of the original legislation. There is nothing new in this bill that wasn't proposed and supported by the Public Accounts Committee in the report that you're reading.
MR. ROSE: With respect, I would be very pleased to share this document with the minister. I just don't have a chance to make a copy of it right now. Let me read from one other point. This is a testimony that took place — and I can give you the date and the page number and all the rest of it. This is from May 29, 1985.
"MR. ROSE: And you owe the school board something like $48,000, or you could be liable for that if this bill doesn't pass.
"REV. HUNT: That's correct.
"MR. ROSE: What we're authorizing is a forgiveness of an indebtedness of something like $48,000 for schools and $3,000 for hospitals and $600 for the GVRD, and we're saying to the citizens of Surrey: 'You make that up some other way for those costs. We want to give this money to Reverend Hunt and his school.' All right? That's essentially what we're talking about, isn't it? Am I stating it fairly?
"REV. HUNT: Mr. Chairman, the word usage that I would be using for that situation would be that these exemptions should have been properly given at a much earlier date.... "
Reverend Hunt said they should be properly given at a much earlier date; what the minister giveth, she now taketh away. It's another minister,
Interjection.
MR. ROSE: Oh, I'm sorry. The minister is getting a briefing.
Could I read that part? Mr. Hunt responds to me: "The word usage that I would be using for that situation would be that these exemptions should have been properly given at a much earlier date." If they should have been properly given at the much earlier date. now you're saying that you're taking them back. So collect it. I think it's a scam that up to $100,000 — maybe double that by now – has been forgiven incorrectly. I think that the committee itself wasn't given all the information which we needed at the time. I think that what we should do here, if the House agrees, is to stand this one more time until the minister has a chance to look at this material; then we can come back to it. It may be that it's clearing up a wrong, but if the wrong was perpetrated and the citizens of Surrey, their schools, their schools and hospitals have been deprived of a certain amount of money over the years, then I think we are entitled to have it back. I'd like the minister to think about that.
HON. MRS. JOHNSTON: I see no point in standing it down. I recall the discussion that took place. I read the report that resulted from the committee meeting that was held in '85, and somewhere along the line.... The members opposite either don't understand or don't want to understand what we are attempting to do here. I think it's very unfortunate if the anti-private school prejudice comes through in dealing with this particular legislation. We have many private institutions in the province that are dealt with in exactly the same way we are attempting to deal with the Pacific Bible College. But for reasons unknown to me there appear to be two ownerships. We are trying to correct that because until we correct it, the Pacific Bible College does not qualify for
[ Page 3016 ]
the exemption that this Legislature thought it had given them in '85. That's clearly and simply all we're doing here today.
MR. ROSE: I would just like to correct the minister gently about the anti-private school bias. We are pro public school, and nobody here will ever deny that. But I would like to find in all these bills one instance of a college — including Trinity Western and these other foundations, and including this bill — that we voted against. We did not. What I'm concerned about is: did we vote without proper knowledge of what was going on? I submit that we probably did, and it has nothing to do with whether we're pro or anti a particular form of education. We have these schools; they exist. As long as they provide the proper curriculum for young Canadians, it's the parents' choice. We could argue that one all over again, and I don't intend to do that here.
But that's not the point. The point is that I don't think any group — whether it's a church, a school, a lodge, a synagogue or a temple — should be forgiven on grounds that might be specious. It's not clear in my mind yet, because we have had very little opportunity to refresh our minds on this. This thing came in on Friday, we began to debate it yesterday, and we didn't have the background. Even the minister stood it down because she didn't have the background. One should not impute motives to hon. members.
MR. LOENEN: I would just like to say that from my information, this is a pure technicality. If you want to debate the concept.... We've heard the House Leader of the opposition say that perhaps we're depriving the other residents and citizens and taxpayers of Surrey of some needed funds. This concept of exempting private educational institutions and churches is well-embedded. It happens in every municipality all the time. If this were a school rather than a college, it would be dealt with at the local level. I'm sure there are all kinds of private schools in Surrey that have the benefit of having their property that is used for educational purposes exempted. There's nothing mysterious about it. We're not depriving anybody. This particular section before us is of a purely technical nature.
MR. ROSE: Let me try to enlighten the hon. member by quoting again from the transcript. I could quote, but I won't. I could find it here somewhere, but I won't bore you with that; I'll just repeat what I said earlier. When I asked Reverend Hunt whether he was asking forgiveness on the school, he said no. He was interested in getting an exemption on the swamp and the creek. It wasn't the property used for.... His argument was quite the contrary. He was getting the benefit for the school, which is legal. Nobody objected to that. But it was the swamp and the creek. I said: "Is it the swamp and the creek, where the alligators are? Is that your allegation?" And he said: "Yes, that is correct." And you can look in here.
HON. MR. VEITCH: Who's the alligator?
MR. ROSE: Reverend Hunt — and he came without counsel, I'm told.
MR. LOENEN: I don't know what transpired in the hoary past. All I know is what's in front of us, and we're talking about that chunk of the property which is used for educational purposes. I think that is a well-established precedent in our society. It happens all over the place and there's nothing mysterious about it.
MS. SMALLWOOD: On the request to stand down, I think that it's a legitimate request, given the fact that we haven't had an opportunity to look at the debate when the first exemption happened. I want to point out again to the member from Richmond — who seems to be functioning as the representative of the housing society or the minister — that the question here is: why is a housing society looking for exemption for an educational facility? Why is a housing society holding property in an educational facility? That seems to be a pretty basic question that needs to be answered before this House goes about exempting such an organization from paying taxes.
MR. WILLIAMS: Just for clarification, if the minister could advise: as I understand it, then, it's a jointly held title but a single parcel of land, and the ownership was with both the college and the housing society. So it was not clear, then, where the breakdown was between these two owners, in effect — who are probably the same people.
[11:00]
HON. MRS. JOHNSTON: Probably.
MR. WILLIAMS: It would seem, then, that the problem could be that wherever that imaginary line between the housing society and the college would be, it would be flexible. We don't know, but it could be. It's something between those two owners, presumably. It's not a matter in land registry; it's not a matter in Surrey municipal hall. It's between those parties.
HON. MRS. JOHNSTON: If I understand correctly what the member has asked, it's how and who will draw the line. I can tell you that when I was on Surrey municipal council, if there was a large parcel of land with only a portion of it being used for worship or education, the municipality determined which portion of that land should qualify for the exemption and which portion of the property should not. I have to assume that that is probably still the case.
MR. WILLIAMS: That helps clarify. It would seem that their problem — just for clarification purposes — is that because of the joint ownership, the municipality has not since 1985 given the exemption even for the college part. Is that correct?
HON. MRS. JOHNSTON: That's my understanding.
MR. WILLIAMS: So this, then, clarifies it and gets it limited to the college, and that's it. But we have that interim period of time where it's unclear, since the legislation came in previously. Does that mean that these two institutions are going to pick up that tax bill for that intervening period?
HON. MRS. JOHNSTON: This takes it back for the taxation year 1985, to coincide with the initial legislation. Anything prior to 1985 that may have been given by way of forgiveness or grant would have been done by the municipal council, using their other authorities; it wouldn't be anything to do with the provincial government.
[ Page 3017 ]
Section 22 approved on division.
Title approved.
HON. MR. VEITCH: I move the committee rise and report the bill complete with amendment.
Motion approved.
The House resumed; Mrs. Gran in the chair.
Bill 68, Miscellaneous Statutes Amendment Act (No. 5) 1987, reported complete with amendment to be considered a the next sitting of the House after today.
HON. MR. VEITCH: I call second reading of Bill 69, Madam Speaker.
LEGISLATIVE ASSEMBLY ALLOWANCES
AND PENSION AMENDMENT ACT
HON. MR. VEITCH: In moving second reading of Bill 69, I would say that there really are two aspects to this bill. The bill would clarify that the Board of Internal Economy, established under the Legislative Assembly Board of Internal Economy Act that was passed earlier in this session, has the power to determine the indemnity and expense allowances of members of the Legislature and certain members on both sides of the House who occupy designated positions of responsibility, such as the Leader of the Opposition, the Speaker, the Deputy Speaker, the Whips, the official opposition House Leader and some other sundry positions.
[Mr. Speaker in the chair.]
The Board of Internal Economy initiated a salary and expense adjustment for members and these designated persons in September of this year. No further increases are contemplated at the present time. At that time the basic salaries of the Members of the Legislative Assembly were increased by 3 percent effective November 1, 1986, and a further 3 percent effective April 1, 1988. In addition, the allowance for the Leader of the Opposition will increase from $24,762 to $30,000.
The other part of this bill is to increase the salaries of the Premier, members of the executive council and parliamentary secretaries. Members might care to note that no increase has been forthcoming to the Premier, members of the executive council or parliamentary secretaries since 1982. In fact, in late 1982 the designated salary was rolled back by 10 percent as a restraint measure, and remained so to this day. Prior to that, I believe all salaries were rolled back by 10 percent in 1976.
The increase to the Premier, the members of the executive council and the parliamentary secretaries is specifically set out in the bill, and I want to assure the House that these adjusted salaries are by no means out of line with salaries paid to similar persons in other jurisdictions. In fact, in balance they are quite modest. This bill will increase the Premier's salary to $45,000 per year. This will make the Premier's salary comparable to that paid to Premiers in Newfoundland and Ontario. It will be less than the salary paid to Premiers of Alberta and Quebec.
Insofar as ministers are concerned, the salary of $39,000 is roughly comparable to that paid in other jurisdictions such as Quebec and Alberta. Inasmuch as there has not been a salary increase in almost six years and the....
MR. WILLIAMS: Where are your friends, Elwood?
HON. MR. VEITCH: I hope I have some on the other side when I need them.
Inasmuch as there has not been a salary increase in almost six years and there were rollbacks of 10 percent and these increases are statutory and not likely to be changed again at an early date, it is readily apparent that these adjustments are warranted at this time. I move second reading.
MR. ROSE: I don't know why it is, but I always get the job of speaking to these things.
Interjections.
MR. ROSE: Well, I rather hope I am. It is very difficult to speak about these things without sounding self-righteous.
MR. WILLIAMS: But you'll try.
MR. ROSE: I'll do my best, although it is a quality for which my party is well known at times.
Everything that the minister has said about the rollbacks and no increases applies equally to MLAs, not just to cabinet ministers. So if you can justify an increase of 3 percent for MLAs, it is very difficult to justify 8 or 9 percent for cabinet ministers. However, few of us are without sin in these matters, and when we're dealing with our own salaries we sometimes have a double standard. I think it's going to be very difficult for us to support these rather large increases in cabinet salaries.
The other parts of the bill are fine. No time that I have ever heard of was the right time to raise salaries for elected members. I have been involved in these things since about 1970. I’ve been through three federally and two provincially. I thought we had this matter settled with the Board of Internal Economy. Before 1982 we thought we had this whole matter settled for cabinet ministers and MLAs, because we had a formula, and the formula was tied to the cost of living. A formula of a similar kind operates in Ottawa, and it clicks in just the same as the increases to the old age pension — without any debate, without any of this business about our rewarding one another and rewarding ourselves. Because everybody knows that politicians never deserve a decent income.
Your Premier is going to get the magnificent sum total of perhaps something like $80,000. Is there anybody in the NHL who makes less than that? So we can certainly argue on both counts.
AN HON. MEMBER: The guy running the Zamboni and the organist.
MR. ROSE: The Zamboni driver.
At this time of restraint and high unemployment and all the rest of it, I don't see how we can support that kind of raise for cabinet, because people are losing their jobs, people are lined up at various charities, and we hear it on the air all the time. So it's not the right time again, and it never is.
[ Page 3018 ]
I think we could handle this very easily if we would set up an independent commission. If the commission rather than ourselves made these decisions, if we were tied to some sort of judicial rate, or something like that, it would be far better than this messy business, because we chicken out all the time. We chickened out in 1982 and ruined a perfectly good formula. I wasn't here at the time, but there was a little bit of grandstanding for a rollback then. Consequently, we've been stuck ever since until we had the Board of Internal Economy. I would like to make it very clear to all the press, including the Province newspaper, that the board had nothing to do with the cabinet raises. We're not part of that.
While ours was a modest 3 percent, for which we got criticized roundly, this certainly is excessive. The minister says that it is not likely to occur shortly again and this is really catch up. I think you could use that argument on all the salaries. The fact is that it far outstrips percentage wise the award to the MLAs. As a matter of fact, it comes on top of it.
While we approve and applaud the Board of Internal Economy and approve some raise for members of cabinet, we think it's excessive and wish they hadn't done it. On the basis of section 4 anyway — I know we're not dealing with the sections now — it would be very difficult for me and my party to support that.
HON. MR. VEITCH: Mr. Speaker, the hon. opposition House Leader is quite correct: there are few without sin. He stated that there was no correct time for wage adjustments.
When one considers the salaries of executives.... Indeed, he mentioned a perhaps not so significant player in the NHL and the salaries that we're given. I don't see the salaries paid to the Premier or members of the executive council as excessive in any way, shape or form. When one considers the salaries of some of the people we employ in government service, they're not excessive but they are certainly far and above the salaries that members of the executive council get.
While the opposition House Leader mentioned that the Board of Internal Economy gave adjustments of only 3 percent to members, there was an adjustment for other members. The Leader of the Opposition was one of those, and that adjustment was $5, 248 or 17.46 percent. So it's not without precedent.
I agree that there is no right time, but I still believe that these increases are warranted. I move second reading.
Motion approved on division.
Bill 69, Legislative Assembly Allowances and Pension Amendment Act, 1987, read a second time and referred to a Committee of the Whole House for consideration at the next sitting of the House after today.
[11:15]
HON. MR. STRACHAN: I call committee on Bill 60.
PROPERTY PURCHASE TAX
AMENDMENT ACT, 1987
The House in committee on Bill 60; Mr. Pelton in the chair.
Sections 1 to 11 inclusive approved.
Title approved.
HON. MR. COUVELIER: Mr. Chairman, I move the committee rise and report the bill complete without amendment.
Motion approved on division.
The House resumed; Mr. Speaker in the chair.
Bill 60, Property Purchase Tax Amendment Act, 1987, reported complete without amendment, read a third time and passed.
HON. MR. STRACHAN: Committee on Bill 67.
ASSESSMENT AMENDMENT ACT, 1987
The House in committee on Bill 67; Mr. Pelton in the chair.
Sections 1 and 2 approved.
On section 3.
MR. CLARK: I'd like the minister to allay my concerns, because I think the committee struck by the previous Minister of Finance, the industrial assessment task force.... My reading of that report was that it was a very good one. It recommended a very sophisticated approach to valuation of industrial property. From this section 1t's quite clear that the Minister of Finance has rejected that comprehensive and sophisticated approach, and in fact has replaced it with what appears to be a very simplistic approach to the valuation of industrial land: cost less depreciation. It seems to me that while simplicity has its merits in terms of taxing, it may in fact significantly undervalue industrial assets in the province.
Recognizing that at the time of significant recession, like 1981-83, this system introduces stability and may be more adequate than what we had, in times when the market is higher it seems to me that it has the potential to dramatically undervalue property. Maybe the minister could give us some justification for what appears to be a very simplistic approach to industrial valuation.
HON. MR. COUVELIER: I'm not aware of any approach dealing with this complicated subject that might be accurately described as simplistic. It is true that the recommendations of the special task force struck to consider this question over a year ago — to use the phrase used by the hon. member — developed a sophisticated approach to assessments. I suppose that if by sophisticated you mean difficult to understand, difficult to police and difficult to enforce and interpret, I would have no difficulty agreeing with the definition.
It seems to me that one of the problems we've got in this whole issue has been for the government to adequately explain its intent as it related to cost value and assessed value. The repeated efforts by predecessor governments to deal with this question have inevitably resulted in appeals being lodged on very fine esoteric nuances of phrasing, and as a consequence we've had the courts determining.... By courts I mean the appeal boards, so I use the generic term, I guess. We've had other bodies interpreting our intent.
One of the obligations of government is of course to write laws, but it's also an obligation to write laws that clarify its
[ Page 3019 ]
intent. What we've done here is bring forward a clarification of our intent, and necessarily a simplification of the method that would be used to determine such things as costs.
I can assure the member that the recommendations submitted by the task force he referred to were not, to my knowledge, endorsed by anybody other than possibly the hon. member opposite. The Union of B.C. Municipalities were on record as opposing its recommendations in respect to determination of costs. The private sector, to a man, to the best of my knowledge, were opposed to it. I received mail on the issue from nearly every organization that represents industry. So if the hon. member opposite believes that the formula suggested by the task force was appropriate, then I suggest, were it put to popular vote, he would be a voice of one. I don't think that there is any doubt by those who know the issues and have studied them that the recommendations made by the task force would not work. It was as a consequence of that, and the absolute inability to find any common ground among the people impacted and involved in the issue, that those suggestions were not supportable.
You had best understand, for the benefit of some of the interjectors across the floor here, that we are liaising with not only the municipal governments — one side of the equation — but also private industry, the other side of the equation; that is to say, the beneficiaries of the taxation authority and the payers of the taxes. So it is not as if we've been involved in a one-sided dialogue here; we've been intimately involved with both sides.
MR. CLARK: It's not surprising that the industry is concerned; they would like to pay no tax. But one of the problems I have is that we have a task force struck by the previous Minister of Finance, and the people on the task force had all the credentials in the world to deal with assessment. They gave a great deal of thought and consideration to the problem and came up with a proposed solution. In fact, they came up with three different potential solutions, and suggested one. Then the minister brings in a bill that doesn't take into consideration any of those recommendations. Maybe the minister could tell us who came up with this formula. You struck a task force; you don't like their recommendations. Is this an in-house recommendation, or is this the industry's recommendation? I mean, did this come from your ministry? Did it come from the municipalities? Did it come from the industry? To me it seems suspiciously familiar to some of the recommendations made by, say, the mining association.
If you're going to reject the analysis put forward by your government's task force, it seems to me that you have to give more rationale than to simply say that the industry is not in favour, and you have to justify why you came up with this new approach.
HON. MR. COUVELIER: I'm always grateful to the hon. members opposite who tell us what we must do. It's informative.
MR. D'ARCY: Can the minister tell us how the government intends to determine what the depreciation is on any particular industrial property or the improvements thereon and, in particular, as that depreciation relates to what the government is going to define as the replacement cost? In other words, does the depreciation apply to the replacement costs or the market value or the original cost?
HON. MR. COUVELIER: I wanted to verify that there's no section dealing with depreciation specifically. I assume, therefore, that the member is referring to the section dealing with cost, which is a mixture of our cost calculations less a depreciation factor,
If we take cost as defined and deduct depreciation based on the effective life of a plant, taking into account the rate of technological change in an industry, the result is a value that is close to market value before adjustments for the impact of changes in external economic conditions. The subject is very technical in nature, and if the hon. members would like to receive a technical dissertation that would glaze the eyes and confound the issue, we'd be delighted to bring in some technical people to do that. I think what we should be doing as a matter of practice, however, is looking at the issue in global terms and trying to get some idea about the approach being taken here.
We have developed a formula which is a mixture of actual costs, replacement value and reproduction value. This formula does require the production of a manual for use by the industry and by the Assessment Authority. These manuals are now in production and will be in place within a matter of a month or so.
For a little bit uncertain as to what amount of detail the hon. members would like.
[11:30]
MR. D'ARCY: I m not quite certain whether that was an attempt at bafflegab because the minister doesn't understand the question or because perhaps I didn't articulate it properly.
The example I might use is.... You see, my concern here is that we have a government which, certainly for the first time in my living memory, wants to move away from fair market value when it comes to setting assessments. Certainly that was the watchword of the original Assessment Act when the former member for Vancouver East, as Finance minister, brought it in in 1973 or whenever it was. That has been the watchword that the Assessment Authority has operated on, and that was the basis that the hodgepodge of municipal assessors operated on before that. Now we have a section of the bill which says: "We want to go to replacement value of improvements of industrial property, less depreciation." Say it quickly and it may not sound too bad.
The example I would like to throw at the minister is: suppose you have a pulp mill which cost $40 million in the late 1950s — $40 million in 1960 dollars, let's say — and let's suppose that same mill sold in 1986 for $80 million 1986 dollars. But everyone knows that to replace that mill from scratch in 1987, for the same quantity and the same quality of market pulp, might cost ten times the sale price: in other words, $700 million to $800 million.
Is the mill going to be taxed on the $700 million to $800 million or is it going to be taxed on the $80 million? And if there is depreciation that's going to come off that before the assessment is set, is it depreciation off the $40 million, depreciation off the $80 million, or depreciation off the $800 million that it might cost to replace that mill today? If the minister can’t come up with a firm answer, we might see some glazed eyes in the boardrooms of this province when they get their tax bills.
Just to follow with another example, what about a largely depleted mine? Let's take the Sullivan operation in Kimberley, which has been in operation for 80 or 90 years in this province and is largely depleted. Unless they find some new
[ Page 3020 ]
ore — and they've been looking for it for 80 or 90 years, unless they find something they've overlooked — that operation is going to be shutting down in the next few years because there will be no ore at all — not just a reduced value of ore but no ore at all. Is that operation to be taxed on its replacement cost when in fact there is no more ore there? That is a point that has been constantly made by the mining association, and I would say it's a very good point to be made.
HON. MR. COUVELIER: Now I'm beginning to understand where the hon. members of the opposition are coming from. We are evidently dealing with an act that was inadequately managed during their term of office way back in the ancient days.
The fact of the matter is that this whole question of market value is the root of the problem that has resulted in all these appeals, combined with the downturn in the economy. It's clear that it was timely for us to deal with that inadequacy if only to clarify what the government's intent is in relation to the question of cost and how depreciation should be determined.
If I understand the example given, the member talked about a pulp mill that originally cost $40 million in 1960 dollars. It was sold in 1986 for $80 million, and the member said that it has a replacement value of $700 million to $800 million. That's the example given. I wonder about those spreads; it's a pretty horrendous adjustment.
In any event, aside from that question, the approach that this amendment would take is to introduce a modified replacement value method which assumes a 20-year lifespan of the operation. The taxing rates are set out in the manual that I mentioned earlier and would be phased out over 20 years.
The question of how we should be assessing new versus old facilities is, of course, the whole basis on which the manual is constructed. Because of the intricacies of that dilemma, there have to be formulas arrived at; these are modified formulas — modified on the basis that they are not true replacements. They are sensitive to the particular industry or sectors that they are assessing, and they are managed by professionals.
The act is not unique or different in the sense that it requires subjective decisions by the assessors. Hopefully, however, the manual will clarify some of these definitions so that the number of appeals will be reduced and there will be more certainty, not only for the municipalities but also for the taxpayers.
MR. D'ARCY: What we've heard is a great example of bafflegab by a minister who is trying to justify, from a socalled, self-proclaimed free enterprise party, moving away from the concept of fair market value for the establishment of assessments for property taxation purposes, something which no centre or centre-left government in this province ever contemplated. I want to get the minister back on the straight and narrow. The fact is that the reason there have been so many appeals, and so many successful appeals, is that the assessment procedures have been less than adequate.
Mr. Minister, what is wrong with any property owner-residential, commercial, industrial — having a right to have his day in court? That's all that's been going on: people with their right to have a day in court over re-examining their assessment. If assessments have been too high, then there's something wrong with the bureaucratic procedures, the yardsticks that have been applied. Let's remember that presumably the government and the assessment authorities have the right to have their day in court to increase assessments if they wish.
It's clear, Mr. Chairman, if we go over the history of this machinery and equipment and industrial taxation over the past few years, the government swung the pendulum far too quickly in the late seventies, when the former member for Saanich was the Minister of Finance. Industrial taxes went up far too quickly relative to other forms of taxation. The recession hit, and the government then reacted — the former Social Credit Minister of Finance from Saanich overreacted — by reducing machinery and industrial tax too much, too quickly, and the result was that there was an increase in pressure on other forms of property taxation, as a phased-in thing carried on through to the 1987 taxation year. The result was that commercial and residential taxes went up drastically. There was hardly a community in this province that didn't see residential taxes in 1987 increase at a faster rate than the inflation rate. There was indeed a certain — perceived at least — reaction of municipal voters last October to those increases in taxation. And now the government is saying: "We're going to take some more money off those industrial taxpayers, because we went too far before."
My concern is: what about the depleted mines? What about the older sawmills? What about the older pulp mills in this province? We have a lot of industrial operations in this province that are more than 20 years old. How do they fit into this 20-year declining program that the minister wants to talk about? Sure, we would like to see these operations modernized. Sure, we would like to see every operation in the province, of any sort of industry, to be totally state-of-the-art, 1987, absolutely first-class 1n terms of any technology or industrial efficiency in the world today. Some of them are attempting to do that. But are they going to do that if they're looking at a taxation regime which is going to tax them in advance, even before they get there? Particularly when we're looking at the mining industry, when we know very well that a mine depletes. While another mine may start up in some other part of the province mining some other commodity, you cannot look at a mining operation as an industrial operation in the same way you look at a manufacturing plant that produces manufactured goods based on raw materials in secure supply.
The whole thing, Mr. Chairman, is that the government wants to move away from fair market valuation, and fair market valuation has been set in the marketplace. I agree that there's a problem with industrial properties: major ones don't sell frequently. But what is wrong with allowing industrial property owners to have their day in court? The industries themselves concede that most of the major appeals have already been heard. They have been successful, in whole or in part. What's wrong with that, Mr. Chairman? It's a democracy. Why shouldn't people have an opportunity to have their day in court? If the government doesn't like the court proceedings, they have an opportunity to change the rules — and I guess that's what they're doing. But I know of no act in this province, in my experience, which sets property taxation assessment levels at anything other than fair market value.
Sure, the duly elected municipal authority — just like the duly elected provincial government — has all kinds of opportunities to set the tax rates and vary them according to the will of the duly elected municipal or provincial authority of the day. But we have yet to see anybody mess around with the
[ Page 3021 ]
assessment levels, based on political decisions. That's what we're getting here. We are giving the minister of the Crown and his advisers the opportunity to mess around with assessments based on political considerations. Mr. Chairman, I'm strongly opposed to that, and I am absolutely amazed that a government that likes to proclaim itself of the guardian of the free market system and free enterprise is going to take something away which has traditionally — in this province, in the rest of North America and the rest of Canada — been set by the marketplace only, and take it into the hands of the minister of the day.
HON. MR. COUVELIER: Mr. Chairman, my comments were described as "bafflegab." I've never seen such a manufactured argument in all my life. I'm going to tell the hon. member categorically: this government is opposed to political interference of assessments. We join with you in opposition to this oppression. It will never occur as long as the Social Credit government is in power in this province.
This government also agrees with you, hon. member, that local taxes have to have some stability and that there must be some day in court for appellants who are aggrieved by actions of the Assessment Authority. This government stands unalterably opposed to people losing a day in court. We join with you in sharing the pleasures of life in British Columbia, which ensures people will have a day in court. Of all the nonsense — to try to fabricate a case that you and you alone are in favour of a day in court. What absurdity! The whole act ensures that that day in court will be fairly heard, and heard by people who are expert in the profession.
The hon. member has ranged through section 3. Section 3 has many clauses. Obviously he was so excited that he would like some more detail. I am prepared to provide it, if the House will bear with me. Dealing with all the sections in section 3, hon. member, so that your level of knowledge is raised a little bit, I will give you further information.
Dealing with section 26.1 and cost, this important subsection establishes the cost basis of the new cost-less-depreciation method of industrial assessment being created by this bill. The new basis replaces market-value assessments for industrial plants included in the new major industrial property class created by this bill. The cost basis is the cost of replacing an existing industrial improvement with an improvement of the same size that is built to serve the current function of the improvement and constructed using generally accepted building materials and techniques.
In choosing a cost basis for the new industrial assessment approach, the government had three conceptual options: historic cost adjusted to reflect increases in construction costs since the date of construction, replacement cost and reproduction cost. Each of these had distinct advantages and disadvantages.
[11:45]
Historic costs have the advantage of being documented. However, if they are not increased to reflect current construction costs, the resulting assessments fail to reflect inflation and thereby undervalue old plants relative to new plants. This creates serious inequities and discourages innovation and new investment. If historic costs are increased by the rate of inflation, they will, depending on the assumptions made, be similar to either replacement or reproduction costs. Of these two latter alternatives, the use of replacement cost is more subjective and provides less certain values. This is because it incorporates the impact of technological change on value by requiring that assumptions be made as to what type of plant would be built if a particular plant were to be replaced today. Reproduction cost assumes that the plant will be replaced with an exact replica and is therefore less subjective — more certain but less realistic.
The approach taken in the legislation is a compromise between replacement and reproduction cost, designed to be as fair as possible within the constraints of stability, certainty and predictability. It requires that a calculation be made of reproducing the existing plant design that permits both the substitution of modem construction techniques and specific adjustments where buildings are not used for the purpose for which they were originally constructed.
In order to ensure consistency of application by assessors, the definition also provides for the establishment of cost manuals to be used in the determination of the cost of particular industrial buildings. The assessment is based on the market value of the land, and the value of the improvements is determined on the basis of cost as defined in subsection (1), less depreciation, as determined under regulations that will be pursuant to this section.
In order to put the approach into perspective. It can be said that by taking cost as defined and deducting depreciation based on the effective life of a plant, taking into account the rate of technological change in an industry, the result is a value that is close to market value before adjustments for the impact of changes in external economic conditions. As a result, equity in valuation is maintained, but the effect of volatile market conditions, especially in commodity markets, is removed from the values used for assessment purposes.
Dealing with the question of industrial improvement, this important subsection defines the properties to be included in a new major industrial property class. These properties include mines, aluminum and metal smelters, petroleum and natural gas plants, sawmills, plywood plants, gypsum board plants, pulp and paper mills, fertilizer plants, plastic plants, cement plants, insulation manufacturing operations, glass plants, shipbuilding plants and cargo-loading facilities. The intent is to include about 400 major properties. These industrial plants were chosen on the basis of three criteria. First, they had to represent substantial and unique assessment problems that created a high probability that the assessments would be disputed. Second, they needed to be major industrial plants. Third and finally. Inclusion was generally, but not always, based on the degree to which the plants are located in small to medium-sized communities.
This new subsection establishes the major industrial property class to which the new cost-less-depreciation approach will apply. The class consists of industrial improvements as defined in subsection (1) and associated land. It is anticipated that regulations under section 26 of the Assessment Act will allow municipalities to levy a separate tax rate on major industrial properties. This new subsection describes how property in a new industrial property tax is to be assessed. It also lays the groundwork for a long-term solution for tax base erosion, by providing that the taxable status of industrial improvements constructed after September 30, 1989, will be based on a precise, regulated listing of what is and is not taxable.
In more detail, it orders that the two existing exclusions from the property tax base do not apply to industrial property. These exclusions are the landlord and tenant test and the machinery and equipment test. Both of these tests are vague
[ Page 3022 ]
and subject to dispute. As a result, property has been removed from the municipal tax base, only to have to be put back in by provincial legislative amendments.
Section 26.1 (4). This new subsection provides for the phasing in or adjusting of assessment values or taxes determined under the new approach. The reason for this section 1s that the goal of the policy is to provide stability without increasing taxes on any particular industrial property by a significant amount. As a result, provision for some mechanism to phase 1n changes is necessary.
I notice from the comments and the conversations that the hon. member who had such curiosity under this section has glazed-over eyes and has stopped listening. I can only assume, therefore, that the amount of detail I'm providing isn't really what he had in mind. Maybe I'll sit down and let the hon. member continue with his questions.
MR. CHAIRMAN: Before we proceed, the Chair understands that the Minister of Health would like leave to make an introduction. Shall leave be granted?
Leave granted.
HON. MR. DUECK: It's my pleasure to introduce to the House a couple of friends, businessmen from my constituency, Mr. Jake Kingma and Mr. Ray Feenstra. Would the House please make them welcome.
MR. ROSE: I would like to congratulate the Minister of Finance on his oral reading. I'm less certain about his comprehension, but we certainly enjoyed that soliloquy that we heard. At least we didn't stimulate him into any aerobic orations like he made the previous time.
I would like to ask the minister a direct question, if I may: whether or not under section 26.1(1)(f) and (g).... Please don't read that whole page 2 on Bill 67. Would, for instance, a new dry kiln in a mill qualify and be considered for tax relief under this new policy as outlined in 67? If you look at (f) and (g), it may be the case.
HON. MR. COUVELIER: The answer is yes.
MR. ROSE: That would give it certain exemptions and certain relief, is that true? It gives it certain relief under this bill, contemplated on a cost basis, as explained.
HON. MR. COUVELIER: I'm not sure what the hon. member means. A dry kiln under this section would be assessable. Okay? And you're asking if it would have some relief.
MR. ROSE: No. It would be assessable under this section.
HON. MR. COUVELIER: Yes, it would be.
MR. ROSE: It has a certain relief under this section as well, has it not?
HON. MR. COUVELIER: In the sense that it would be....
MR. ROSE: The reason I asked the question was to know whether or not it would be taxable. At the moment they aren't, because they're not considered structures or buildings. I think that that is unacceptable. So now you have a situation where they become taxable because they've been tax-exempt and there's been a huge tax relief on the basis of their definition as a building or not. They were not considered a building, and the regional manager for the lower mainland in the Assessment Authority was complaining bitterly that these huge structures worth thousands if not millions of dollars were not taxable. I wanted to get it clarified that they now are.
HON. MR. COUVELIER: They are. They weren't.
MR. D'ARCY: I enjoyed the minister's discourse. He must have thought that this was question period and he had to fill out the time. I even enjoyed the 5 or 10 percent of his remarks that actually dealt with the subject that I raised.
I'll have another go at this. Let's just suppose that there is a major industrial owner and taxpayer in this province that happens to be operating a smelting and refining facility largely built in the 1920s. They produce refined lead, silver and relatively minor amounts of other elements such as gold, antimony, cadmium, bismuth and so on. Let's suppose that they are in the process of spending $400 million to replace this facility, which is 50 to 60 years old, depending on which part of it you're looking at, with a brand-new, modern, externally and internally clean operation. Under this section of the act, are they going to be taxed on the basis of the old facility, which is dirty and inefficient and expensive to operate? Or are they going to be taxed on the facility which they are installing and which may not be in full operation for the next four to five years?
HON. MR. COUVELIER: There are many aspects to the question as phrased, and it's difficult to give any generic answer. I take it the major thrust of the member's question was whether this theoretical example would experience any significant tax increase as a consequence of these changes. I sense that's really what you're talking about. Because if you want any more than that, we'll have to get the technicians in to talk about the various aspects of how market value will be determined, which is a function of cost, depreciation, replacement and a whole lot of other niceties.
But in answer to the general question — whether this theoretical plant would experience a significant increase in taxation — I can tell the member that we do not anticipate that. The member would understand, however, that by virtue of this government's initiative to elevate the decision-making authority of local governments, to some extent this decision is in the hands of the local government taxing authorities. If, however, this government finds such freedoms abused, I can assure the hon. member that there are adequate remedies at hand for us to deal with those unexpected events.
MR. D'ARCY: I hope the minister understands that we on this side of the House have no objection to the streamlining of these evaluations. But simply an expression of "we don't anticipate a problem" may be fine in here. I mean, we're all hon. members, and I accept what the minister has to say. The question is whether Cominco Ltd. anticipates a problem. I think that's what the real concern is out there.
[12:00]
Let's remember the way I read the bill — and, indeed, the convoluted way the minister has gone about explaining this
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section — it would appear to be quite possibly irrelevant whether the company was in fact modernizing and spending this $400 million right now. It would seem to me they could be taxed the increased amount, or the assessment can go up by the increased amount, even if they weren't doing anything or even planning on doing anything. While that doesn't apply to them, it could well apply to other industrial operations in the province which are, as I mentioned in my earlier remarks, in excess of 20 years of age. There are a number of those.
Altogether, I'm not finding the minister's comments on this extremely satisfactory. Yes, of course, we know that municipal authorities do have the option of applying variable mill rates to industrial operations. They already have that. If they have that now, why do we need to change this particular section? Is it to give them more power, or is it to restrict the options of the duly elected local authorities when it comes to taxing industrial operations?
In view of the fact that large numbers of industrial operations in the province are obsolescent — I don't believe that's any secret whether you are looking at the mining industry or the pulp and paper industry or the forest industry or, indeed, some of our other manufacturing operations — there is a great need over the next few years for industry to find the investment dollars to modernize and hopefully expand a whole variety of operations in this province, if we're to maintain our ability to compete in world markets, since most of the products of these particular operations are not sold domestically but are sold internationally.
I have a concern that these taxation changes and these assessment changes could restrict the options of industry in this province to modernize their industrial plant facility across the board, which I feel is absolutely essential if we are to maintain our manufacturing and production levels and stay competitive in the world markets in the late 1980s and 1990s.
The House resumed; Mr. Speaker in the chair.
The committee, having reported progress, was granted leave to sit again.
Hon. Mr. Strachan moved adjournment of the House.
Motion approved.
The House adjourned at 12:03 p.m.