[ Page 2997 ]

The House met at 10:05 a.m.

Prayers.

The Speaker: Members, I have the honour to present this morning the annual report of the Legislative Assembly Management Committee for 1996-97.

Hon. J. MacPhail: In Committee A, I call Committee of Supply; for the information of members, we'll be debating the estimates of the Ministry of Attorney General. In this chamber, I call Committee of the Whole to debate Bill 2.

The House in committee on Bill 2; G. Brewin in the chair.

On section 13 (continued).

G. Abbott: I'm pleased to rise and continue our discussion of. . . . I guess we're currently on section 13 of Bill 2. I want to begin, if I may, with a kind of apology to the minister. In my haste to move an amendment to the act yesterday, I neglected to give the minister an opportunity to respond to a letter from his ministry which I read into the record -- or at least pertinent portions of that letter. I thought to myself: Shuswap, you've been insufferably rude here.

An Hon. Member: And hasty.

G. Abbott: And hasty -- precipitous, hasty and insufferably rude. I thought it would only be sporting to allow the minister an opportunity to respond to this very important letter. Just by way of reminding those few members of the House who may not have been here yesterday. . . . I think virtually every member of the House was in here yesterday, listening in absolutely rapt fascination to the dialogue which went on between myself and the Minister of Municipal Affairs. But there may have been one or two members that missed this particular passage from the letter from the Ministry of Municipal Affairs, so I'll just briefly highlight the major points of it again.

This is to the chair of the South Cowichan Restructure Study Committee. They had written to the ministry asking, "What shall we put in our restructure plan for this potential new municipality in terms of grants for 1998?" to which the ministry responded:

". . .with respect to the recent changes in the annual provincial grants to municipalities, I am not in a position to anticipate what the ministry will provide to any municipality in 1998. In this sense, South Cowichan is in the same situation as all of the existing municipalities. . . . Ultimately, it is the committee which must decide what information to present to the public, as there is no certainty with respect to ongoing grants. In cases where there is some uncertainty, the ministry generally advises a more conservative approach rather than an optimistic one."

So I think this is an interesting if not remarkable admission by the ministry, that in fact what they are doing in terms of the amendments which we are considering to Bill 2 does, in a very direct way, eliminate all the certainty that municipalities might hope to achieve in terms of municipal transfers. But I gladly yield my place to hear the minister's response. Again, I think it's most unfortunate that I didn't allow him this opportunity yesterday. But after feeling rather guilty overnight, I'm looking forward today to seeing that wrong redressed.

Hon. M. Farnworth: I feel terrible, absolutely terrible, that the hon. colleague from Shuswap lost so much sleep last night that he feels. . . .

Interjection.

Hon. M. Farnworth: And he may lust in his sleep; I don't know. But that's for. . . .

But no, it's that he lost so much sleep, that he feels guilty, that somehow he feels that he didn't do the right thing and that I may take offence. Well, I can assure him that I don't take offence. I'm more than willing to answer his question.

Look, Bill 2 is about allocation; it's not about setting the amounts. The potential municipality in South Cowichan has basically received advice that if they want to go into this restructuring, they're going to have to realize that we can't predict what budgets are going to be down the road. We can't predict the amount of money that's available for either restructuring. . . . But you've got to take that into account. When you've made your decision on whether or not you want to incorporate, you've got to look at all those factors and take them into account. This bill does not say how much money will be available. This bill basically deals with the allocation and how we allocate it. So that's what I can tell the hon. member.

But I can also tell him -- and I guess this is sort of straying into estimates debate -- that had we been doing other things this afternoon, I would have been meeting with South Cowichan to discuss their proposal. So I am aware of their issues.

G. Abbott: I appreciate the minister's response. I can't say I feel an absolute or total enlightenment as a product of his response, but the response was interesting, to say the least.

One of the reasons I think this letter from South Cowichan is important is that. . . I've been involved in restructure committees on two occasions in my hometown of Sicamous -- one in the late seventies and early eighties, and another one in the mid- to late-eighties. Of course, when restructure committees try to put together their packages -- essentially their business plans -- for the residents of those potential new communities to consider, they do need to have some indication about what may be expected from year to year. Every new incorporation -- as I mentioned yesterday, and as I'm sure the minister understands -- as is proposed in South Cowichan, essentially involves a business deal with the province of British Columbia. One the one hand, the new incorporated municipality takes on functions which were previously the responsibility of the province, and in return for taking on those responsibilities, the province provides them with grants to offset those costs.

[10:15]

It seems to me -- and again it goes to the heart of Bill 2 -- that stripping away all of that certainty from year to year 

[ Page 2998 ]

would make it difficult if not impossible to recommend to a new potential community that they should incorporate. Howcan they predict in any way what the consequence of that incorporation would be without having something along the lines of what, until yesterday, was section 2 of the Local Government Grants Act?

Hon. M. Farnworth: I understand the hon. member's point. I guess when you're looking at incorporation, you look at it from a whole host of factors. In part, what are the feelings within the community? Incorporations don't always come about because of finances. There's a whole host of reasons why communities choose to incorporate. I guess the advice that you give them, or what you're trying to say to them, is: "You have to look at what resources are available to you." The primary resource is property tax. Even the amount of money that the province currently gives is a small portion of. . . .

In this case, South Cowichan would probably have a community population -- if you take Mill Bay, Cobble Hill and Shawnigan Lake -- of around 12,000, which is not a small municipality. It certainly would be a reasonable-sized municipality on the Island or anywhere else in the province. They have to look at the property tax base that's available to them. They've got to look at the level of services they want to provide and then make that determination of whether incorporation is for them. Under the current system, under this year's allocation, there would be a municipal grant available to them. They have to look at it the same way as every other municipality does.

I guess what I'm saying is: if the member is looking for a guarantee of X amount of dollars each year, that's not there. But what I have said before, and I'll say again, is if we don't have to make substantial budget cuts, if we don't have to, because revenues are down. . . . I can go back to my favourite quote from the member for Delta South yesterday, which was to make the cuts that have to be made to balance the budget. If money is coming in, if finances are coming in and we're able to fund our core areas of health care and education, then there's money there. Then we don't have to make difficult choices, and municipalities know that.

It comes back again to the process that I think will bring certainty and which I want to see put in place -- that is, that through the joint council process we know ahead of time how much money is likely to be available in the coming year. We can sit down with the municipalities and discuss how that allocation is going to take place. Municipalities will know well enough in advance that they can take that into account in their budgeting processes. But an incorporating municipality has got to look at it from the point of view of, I think, "What services do we want to provide?" I think the advice given -- "Look, be conservative, be prudent" -- is good. It would be there whether or not we were under the old formula or under a new formula. So that's the answer, hon. member.

G. Abbott: Actually, I appreciate and agree with much of the response from the Minister of Municipal Affairs. I think it's correct, as he suggests, particularly in a larger municipality -- let's say, 5,000 or 10,000 or 15,000 -- that the percentage of total revenue of a new or existing municipality is going to be less because the tax base is larger. I hope that in my recognition of his point, he will also extend the same recognition to my point: that in municipalities under 5,000 -- obviously the smaller they get, the more important the point is here -- in some cases the percentage of total revenues from provincial grants can be as high as 50 percent. There's some variation here, and that's going to hinge, generally speaking, on the size of the municipality -- although assessment bases and so on come into play as well.

Again, the fundamental point I'm trying to make here. . . . Obviously, the minister's not going to say: "Oh yeah, you're right. We'll change the bill to deal with that." But as best I can, I'm trying to suggest to the minister that we're entering into a new era here, where there is virtually complete uncertainty from year to year about the amount of grant that is going to be distributed. The minister has already explained at some length the process that is going to occur with respect to the joint council and how that amount of money is going to be allocated -- and that's fair enough. But we're going into an era where from year to year we will have, it appears, very little idea of whether municipal transfers will be going up 50 percent, down 50 percent, or whether they will be completely eliminated. Who knows?

Frankly, I am suggesting to the minister that after an experience of one or two years on this thing, the ministry is going to want to look at some mechanism, some amendment to the Local Government Grants Act, which will bring some certainty back into the picture. Not only are municipalities going to find this new era of uncertainty in the global size of the grant difficult, but I think it will also make the life of the Minister of Municipal Affairs much more difficult than it needs to be as well.

I think that the minister should be thinking in the months and years ahead of mechanisms that might be acceptable to his cabinet colleagues which will provide, again, some stability, certainty, predictability. It may not be a mechanism like section 2 was, but I think the minister really should be looking at and thinking about some alternative way to give municipalities some idea of what they'll be looking at from year to year in terms of the global amount to be distributed. I'd appreciate the minister's comments on that proposition.

Hon. M. Farnworth: Now, I understand what the member is saying, and I guess in terms of change. . . . We can't determine or predict the exact dollar figure that would be available next year in the same way that, yes, change can occur down the road. One of the things that I've said we're open to, and one of the things I want to get working, is: if through the joint council process municipalities have ideas on how they'd like to see things progress in future years, if they have ideas on how they'd like to see changes in the Municipal Act take place, if they have ideas on how they'd like to see the grants either restructured or allocated, then I'm willing to look at and discuss all those things through that joint council process. That's what I've committed to, and that's the method I intend that we can make change through. So I'm not going to rule out change, but I don't want to try to bring it in unilaterally.

G. Abbott: Yesterday one of the reasons why we were prepared to move a series of amendments to this bill was to try to develop a better framework for consultation and a better way to sort out what the impact of these changes will be on municipalities and regional districts around the province. One of the very important issues which we talked about yesterday -- but only very briefly -- was the suggestion from the minister that the product of the cuts associated with the changes to the Local Government Grants Act would in no instance exceed 3 percent of total revenues.

The minister made some comment yesterday, as I recall, about the ministry's policy with respect to what was going to be included in the calculation of what were total revenues. I just want to explore that a little bit more now. Maybe we can 

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capture all of this in one question; I don't know. The issue, really, is whether some or all of the in-and-out revenues of a municipality will be treated as part of the overall revenues. For example, will the revenues of a municipality be treated as part of overall revenues? For example, will in-and-out revenues to regional districts be a part of that? Will the in-and-out revenues to school districts be a part of that? Will regional hospital districts be a part of that? Will special projects, etc. . .? Perhaps the minister can give me some definitive answer on this question, or perhaps we need to explore it over a few questions here.

Hon. M. Farnworth: I'm happy to answer the question for the member, and I can tell him that all true municipal revenues are in. Specifically, in response to the question that he just asked: regional district revenues, yes; school districts, no; regional hospitals, yes; and then another area that's excluded is more remote bodies -- such as community health boards; they're not included.

G. Abbott: I appreciate the useful information. As the minister can appreciate, in times like these municipalities contact me as a court of last resort when they're feeling that somehow the ministry hasn't quite dealt with their circumstance appropriately. Just so I got it right: the in-and-out revenue, the taxes that the municipality collects on behalf of the regional district, are included -- and I do want to note that it's a very substantial amount in most instances; school district, no -- that's good, I'm pleased to hear that; regional hospital districts, yes; but CHCs, regional health boards, no.

Interjection.

G. Abbott: Okay, you'd like to clarify?

Hon. M. Farnworth: Some communities have specialized health services, like the Burnaby health board, and those are not included. Let's put it this way: they're not regional health boards or community health councils. There's a very small number of communities in the province that actually have them. They're removed; they're not part of their day-to-day operations.

G. Abbott: Again, just so I'm sure that I've got it right. I do understand the distinction between a regional hospital district, which, of course, is an arm of the regional district structure and exists basically to provide the 40 percent local contribution to new hospitals, and so on. I'm not quite clear from the minister's response whether the new structure associated with. . . . I don't know if it's called New Directions or anything anymore -- or whatever it was that the RAT team developed. So in-and-out funds for RHBs or CHCs or any of that stuff are not going to apply? Okay. Very good, thank you.

[10:30]

If, for example, a municipality received a million dollars in revenue in 1996 for a sewer project for downtown revitalization or for any kind of special project that might be associated with the development of the municipality, if those funds came into municipal coffers, would they also be treated as part of the revenue for the purpose of calculating 3 percent of total revenues?

Hon. M. Farnworth: Yes, that would be included, hon. member.

G. Abbott: I appreciate the directness of the response. I do think it's unfortunate that those kinds of one-time special grants or whatever have been included in the calculation, because I think those kinds of numbers can skew the real impact of the percentage change. But that's the way it is, and obviously municipalities have to live with that.

I also want to explore the impact of Bill 55 -- if we can characterize the changes to the railway taxation provisions in this province as that -- and how that figures into the 3 percent overall maximum impact in relation to total revenues. As I understand it, and the minister can confirm this. . . .

I was going to say that this Bill 55 stuff is really confusing. I'd appreciate it if the minister responded without any help from each side of him, and then we'd be on a really even keel here -- just kidding.

As I understand it, then, the first impact of Bill 55 is supposedly a maximum 1.5 percent impact on total revenues in 1997. I'm asking how that meshes with the overall 3 percent that's supposed to occur here.

Hon. M. Farnworth: Bill 55 brings a smile to your face, like it does to mine.

In a calculation of the grant reductions, the reduction due to Bill 55 was included in the overall calculation, and then we went back from there. So if you are a small community, the effect would be zero; if you are a larger community -- and let's say the reduction was 7 percent -- we simply went back to ensure that the overall, including Bill 55, was no more than 3 percent of revenues.

G. Abbott: Again, just to make sure I've got it right, did I understand the minister to say that for a small community under 5,000, which would receive the benefit of the small communities protection grant, the net effect of the 1.5 percent of new or lost revenue under Bill 55 would be offset or mitigated by the small communities protection grant for a net effect of zero on total revenues?

Hon. M. Farnworth: For communities under 5,000, that is correct.

G. Abbott: Just to make sure I've got it right, using the example of my hometown of Sicamous, which has a very large railway bridge as an important component of its overall assessment base and tax base, they were anticipating that in 1997 there would be some impact from Bill 55. I now understand from the comment that there will be no impact. Is that correct?

Hon. M. Farnworth: The latest census figures give Sicamous a population of 3,028 souls, and that means there will be no effect.

G. Abbott: Effectively, then, the province is assuming, through some mechanism, the first 1.5 percent impact of Bill 55 on that community.

Hon. M. Farnworth: Yeah, through the municipal equalization grant; that is correct.

G. Abbott: Could the minister advise how the mechanism will work here? This becomes very conceptual and difficult for me to understand, because I'm a very straight-line thinker, but I'm sure the minister can put it into terms that I will be able to understand.

[ Page 3000 ]

The idea of Bill 55 was to allow railways in British Columbia to be relieved of some $7 million of railway taxation over four years, I believe it was, commencing in 1997. The idea was that in 1997 the first impact of that, some 1.5 percent, would be felt, and another 1.5 percent next year and so on. So over four years there would be a 6 percent maximum impact on the total revenues of a municipality that had substantial railway revenues.

Could the minister advise me, so that I have a clear conceptual understanding here of how this works, how the province takes the reduction in railway taxation and, I guess, shifts it so that it doesn't affect the municipality in the short term -- or in the longer term, if that's the case?

Hon. M. Farnworth: I too will try and explain this conceptual thing in the way that I just explained it. I've got an affirmative answer. The 6 percent is still going ahead, 1.5 percent per year. However, that impact is factored in with all the other impacts. Okay? Then you're applying the 3 percent rule, which is 3 percent of revenues.

Now we've got the municipal equalization grant which kicks in. And for communities under 5,000, that is where it's offset, through that municipal equalization grant. Okay? So yes, that 1.5 percent is in place. But because of the formula in the municipal equalization grant, it offsets the impact of Bill 55.

G. Abbott: I think I understand all that. I was actually pursuing a more technical line, but that's too confusing for me. Probably we're well advised not to go there, because it quickly becomes so staggeringly confusing that even if you were able to answer my question, I probably would be unable to understand it.

So let me ask a more direct question, then. Just pursuing the small community of Sicamous again, what does the minister anticipate is going to happen in 1998 when the second 1.5 percent kicks in, and in '99 and so on? In the end, does the community end up losing 6 percent of their total revenue maximum? Or is it a 4.5 percent at the end of this cycle?

Hon. M. Farnworth: If the same formula stays in place as it currently is, and you have the same target on the small communities protection program, then the impact would be zero. So if you don't change the formula, then the same conditions apply as apply today, and the impact will be zero. Does the hon. member follow what I'm saying?

G. Abbott: I don't think so. Let's both try again.

Hon. M. Farnworth: If we maintain the same formula as it exists today -- right? -- and you take the money that's available and allocate it in the same way, and the community is under 5,000, the impact is to be zero in terms of cutbacks. Right? If you've got the same dollars, the same playing field, then the impact will still be zero. There won't be an impact. I see the member is nodding, so okay.

G. Abbott: Again, to summarize what I think I understood the minister to say, for those communities under 5,000, over this year and the three years to follow -- all things being equal, if the dollars stay the same as they are in 1997 over the course of those four years -- the impact of Bill 55 on communities under 5,000 will not be 6 percent of total revenues but rather will be zero percent of total revenues. So there will be no net effect of taxation revenue lost as a consequence of Bill 55.

Hon. M. Farnworth: Over the full four years you would have to see an increase in the amount of money that the province makes available in terms of the grant -- because you would have rising costs, let's say, just due to inflation. Okay? But let's say you're looking at next year, and let's say there was a slight increase, that would be the case: there wouldn't be an impact.

But the other thing, too, that you need to remember is that if we sit down with the joint council process and make changes in the allocation formula in terms of how money is to be allocated, that too could have an impact. In fact, conceivably, over four years it's quite possible. So you've got two factors that will be the ultimate determination of what happens. One is the total amount of money that's available. But second -- and, I think, just as important -- is how the money that's available is allocated.

G. Abbott: I want to go on to discuss the impact on larger municipalities of Bill 55 as it is affected by the changes inherent in Bill 2. But before I do that. . . . I think this is a very straightforward question, given that this gets remarkably complicated in terms of shifts of revenue and so on: does the minister anticipate that all of these things will be computer-modelled and be able to. . .? I mean, if the joint council is considering 17 different possible scenarios about how equalization grants and small community grants and other grants could be determined, will it be possible to translate all of those different scenarios into a computer model, so that the impact on different communities of different sizes is known, and so on?

[10:45]

Hon. M. Farnworth: Yes, it would.

G. Abbott: That's just an enormous relief to me, that there will not be people sitting in the Ministry of Municipal Affairs late at night, working feverishly with calculators and pencils attempting to bring reason and order into the realm of provincial transfers to municipalities.

Could we explore what the impact of Bill 55 will be in relation to larger municipalities? In fact, as I understand it, there is some benefit conferred on municipalities as large as 7,000 from the small communities protection grant. Maybe I'm wrong; maybe the minister can correct me on that. I understand there's sort of a diminishing return above 5,000, but it continues for a time.

So hypothetically, let's take Salmon Arm. Salmon Arm is a community of about 15,000 people. They don't have the substantial railway assessment base that Sicamous does, but a considerable one. In 1997, then, am I to understand that the district of Salmon Arm, even if they have substantial railway revenues, should not see an impact of more than 3 percent in total? Is that correct?

Hon. M. Farnworth: That is correct, hon. member.

G. Abbott: So for 1997, the combination -- whatever it happens to be -- of the impacts of the changes to the Local Government Grants Act and the impact of Bill 55 will not exceed the total revenues of the district of Salmon Arm in 1996 -- correct?

Hon. M. Farnworth: Would you just repeat the question, particularly the tail end where you said the. . .? The impression I got when you said "the total impact," the way it came 

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across to me, was that the total impact of Bill 55 would not be greater than the total revenues of the district of Sicamous, which is quite. . . .

G. Abbott: It was a slip of the tongue if I said that. No, in fact I think I was more or less summarizing the point that for 1997, the impact of Bill 55 in combination with the impact of Bill 2 here -- the combination of those two things -- would not exceed 3 percent of the total revenues of the district of Salmon Arm in 1996.

Hon. M. Farnworth: That is correct, hon. member.

G. Abbott: We've explored the impact of these two elements on municipal revenues for small municipalities. I want to move on now to what the impact in 1998, 1999, etc., will be for the larger municipalities. What should they anticipate in terms of 1998? Can they again be confident that the combination of those two elements will not lead to an impact greater than 3 percent of their total revenues for 1997?

Hon. M. Farnworth: I think the municipalities can be confident that we will continue to take Bill 55 into account in terms of total impact. Having said that, it's going to depend, again, on two things: one is the total amount of money that is available for the grants overall; and the second, as I mentioned previously, is the allocation. So in many ways the answer is the same for the larger municipalities as it is for the smaller municipalities.

G. Abbott: Again, just so I'm sure I've got it right, I think that when we talked about the small communities, we concluded that, all things being equal -- and there's nothing to say that all things are going to be equal in 1998, 1999 and 2000, but all things being equal in those three years -- should things continue in a static way as they are today, the impact of Bill 55 and Bill 2 on total municipal revenues would in fact be zero.

I'll pose the same hypothetical situation where again in 1998, 1999 and 2000 all things remain the same: all things being equal, the situation being static, what is going to be the impact of those two larger elements on larger municipalities? For example, is there going to be a guarantee that in those three years there will be no additional impact? They wouldn't, for example, be seeing a 6 percent, 8 percent or any other percentage figure as a combination of those two things in 1998, 1999 and 2000. Or is there some built-in guarantee that's going to go through that time as well?

Hon. M. Farnworth: The member's basic assumption is correct. I mean, all things being equal -- and let's say everything stays the same, or were to rise to take care of inflation over the next four years -- then the member is correct: the cumulative impact would be no more than 3 percent of total revenues. That's assuming the current formula doesn't change. As I said, I don't intend to make an arbitrary change. If any change takes place, it will be negotiated through that joint council process, and then the amount of money that's available would have an impact. But assuming that everything keeps pace, then your assertion is correct.

G. Abbott: I'm going to struggle with this question conceptually, I think, and I hope the minister can bear with me.

If, all things being equal, the proposition is that the impact of Bill 55 and of Bill 2 on municipalities of any size -- and we're talking here particularly of larger ones -- will never exceed 3 percent of revenues from the previous year, I'm puzzled as to how, through that process, the $7 million saving to the railways is achieved over that time. On the one hand, if we have certainty with it not exceeding 3 percent, all things being equal, then how does the $7 million saving occur?

Hon. M. Farnworth: If we want to maintain that $7 million -- you are doing the 1.5 percent each year, okay? -- then in order to maintain the status quo impact, you are going to have to increase the grant. Otherwise that $7 million shrinks over time.

G. Abbott: Do I understand from the minister's response, then, that as the additional 1.5 percent in each of those four years comes into play, the cost of offsetting that additional 1.5 percent will be spread out over the equalization grants of other municipalities across the province?

Hon. M. Farnworth: Let's put it this way: you can't hold to a fixed grant. Okay? In order to accommodate the impact, the grant or the allocation would have to change, because over time the impact gets larger and -- it is conceptual, trying to do this -- increases over time. So yes, you would have to increase the grant in order to accommodate that impact over all the other municipalities.

G. Abbott: I think I've got it, then. So if we take a hypothetical community of 10,000 that has a very substantial railway taxation base -- they don't have the small communities protection -- in 1997 they would be looking at a combination of 1.5 percent impact of Bill 55, 1.5 percent impact of Bill 2, but the combination of those two things would not exceed 3 percent. The same would hold true in following years. In 1998, I guess, when there would be a 3 percent maximum impact, the money that they should have been losing as a consequence of Bill 55 will be picked up by an additional grant through the equalization grant -- if I'm understanding the minister correctly.

Hon. M. Farnworth: Would the hon. member repeat the last part of his question?

G. Abbott: Our hypothetical community of 10,000, with a substantial railway taxation base would expect -- at least back in the Bill 55 era, prior to the Bill 2 era -- over the four years to lose 6 percent incrementally of their total tax base as a consequence of Bill 55. In 1997 they were anticipating losing 1.5 percent or the effect of 1.5 percent. Because of Bill 2, that now comes to a total maximum impact of 3 percent of total revenue. In 1998 the same hypothetical community of 10,000 would anticipate losing an additional 1.5 percent of their total tax base, their total revenues, as a consequence of Bill 55. So at that point, as I understand it, the 1.5 percent that they would be losing as a consequence of Bill 2 is being picked up by their municipality.

What will be the situation for this hypothetical community in the year 2000? They have been anticipating that they would lose 6 percent, but now they're not, as I understand it. All things being equal, they would not lose more than 3 percent. I still can't come to grips with where the $7 million saving, tax-wise to the railways, is going to be realized. Is it just a shift of grants that will achieve that, or what?

Hon. M. Farnworth: That's correct, and it depends on the size of the grant. In a sense, the answer to the $7 million is that if the province increases the size of the grant, the province is itself absorbing the tax saving to the municipalities if it wants 

[ Page 3002 ]

to maintain 3 percent of revenues as the impact figure on the community. That would apply for a community over 5,000 or of 10,000 or what have you. Likewise, it would apply to a community under 5,000 where the accumulated impact is zero. The only other thing you would add on to that is if there was a change in either the formula or an agreed-to change that the impact could be bigger. That would be the only other thing. But at the end of the day, it would be the province. . . .

[11:00]

G. Abbott: It's surprising, but many people's eyes actually glaze over when we launch into these discussions of Bill 55 and its ramifications. But it is obviously a very critical issue for municipalities that have substantial railway assessment bases -- and there are many of them in this province -- and so these arcane, esoteric issues become very important to them. I'm sure they will read with rapt fascination, if they can endure it, our discussion here today on this issue.

I think I'll yield the floor at this point to other colleagues who have questions in this area or perhaps on others. In passing, I do want to note that certainly I'm looking forward to discussing Bill 55 issues in estimates, as well. I want to put forward the proposition I maintained as the chair of the Columbia-Shuswap regional district when I first heard of what was being proposed here. That is, if the objective was simply to gain $7 million of tax ground for railways in this province, given the complexity and difficulty of absorbing all this stuff and the hours and hours of administrative time involved in trying to sort out. . . . I haven't even touched on this today; I'm showing some mercy here. I haven't touched on the whole issue of joint functions and so on between municipalities and regional districts, and how the impact of Bill 55 and Bill 2 comes into play there. That's where we really get into the technical stuff, and I don't want to do that.

Again, I think we have created a kind of monster here in trying to achieve what should have been a relatively straightforward goal. I don't know whether there's any way now for the ministry to extricate itself from this situation or not, but the minister may want to give some thought to how that objective might be accomplished down the line. As I said, I look forward to canvassing the issue further in estimates, and I yield the floor to my colleagues here.

M. de Jong: I seek leave to make an introduction.

Leave granted.

M. de Jong: I hear a rustling in the gallery, and I assume that these are my friends from Abbotsford. Sixty students from Abbotsford Junior Secondary School are here with their teacher, Mr. Born, and some adult chaperons. I know that they are going to be thrilled by the debate they're witnessing here today between my colleague and the Minister of Municipal Affairs. Would all members please make them welcome.

F. Gingell: As we've sat and listened to this debate this morning, one realizes how complex this whole issue is. I wonder if it will be possible before estimates of the Ministry of Municipal Affairs come up to get a copy of the computer calculations that have led to the determination of the grants for 1997. I don't know whether that's already been made available to my friend from Shuswap, but it would be most helpful.

Hon. M. Farnworth: I can get the member information sheets for every community in the province if he desires.

F. Gingell: I know that such a document will be most useful if I suffer from insomnia -- it will help solve it.

One of the other items that affects this issue, though in a small way, is grants in lieu of taxes -- and I appreciate that they're not grants paid by this minister. If one goes to the original document -- which was put out by the Minister of Municipal Affairs on that fateful November 26, I think it was, when the municipalities discovered what was happening to them -- one will note that grants in lieu of taxes have been reduced from some $2.2 million dollars to $800,000.

For many years I served on a federal board that had responsibility for and title to a lot of federal land. The issue of grants in lieu of taxes between the federal government and local municipalities was a matter of great importance, particularly to Surrey and Richmond where the majority of the land was. It was forever a thorn in their side that they were required to service this land and provide for it in all the ways they provided for commercial industrial land right next door to it, but they didn't get any property taxes.

As the years have gone by, the province has more and more recognized that it has a responsibility to pay for the services that municipalities deliver, and the federal government has realized more and more its responsibility. In the backgrounder that deals with the calculation of the totals, I note that the government has taken a step backwards. These grants in lieu of taxes are grants from the Education, Skills and Training ministry, and they deal with the universities and colleges.

My first question is: has this reduction of grants in lieu of taxes from the provincial government also been included in the consequences to local municipal governments, in ensuring that the consequences of Bill 55 and Bill 2 do not exceed 3 percent?

Hon. M. Farnworth: I ask the hon. member to be mindful that these are sort of outside my ministry's estimates. But basically, what I can tell him is that those are grants that occur in future years. They would not have played a part in the calculations for this year, so they would not be part of this year's calculations.

F. Gingell: Do I hear the minister saying that Cap College, Malaspina College, Kwantlen, Douglas, the University of British Columbia -- well, the University of British Columbia is different -- Simon Fraser University and UNBC, who have been paying grants to municipalities in the way of grants in lieu of taxes, will receive those same grants in 1997? That's not what this paper indicates.

Hon. M. Farnworth: The point that I want to make with the hon. member is that grants were paid to universities last year; they will continue to be paid to universities next year. However, grants weren't paid to colleges last year. They were slated to be paid to them next year, but are not going to be paid to them next year. So in that sense, the impact on colleges is zero, because no money was ever actually being paid.

F. Gingell: If I may just divide it into two pieces. . . . Last year I talked to the municipality of Burnaby, who were most interested in grants that they were going to receive from Simon Fraser University. The Ministry of Skills and Training had made a special grant to Simon Fraser to enable them to make this payment to Burnaby, and to Vancouver for the downtown campus, and the same thing had happened in 

[ Page 3003 ]

Victoria. From memory, I believe the grants had not started last year but had started the year before, and they were being ratcheted up each year. So do I take it that the grant for 1997 is going to be paid, and is going to be paid in the amount that was paid in 1996?

Hon. M. Farnworth: If I'm having some difficulty with this, hon. member, in part it's because it's outside my responsibilities as minister. I can't give you a definitive answer, because I think what you need to do on that particular question is ask the Minister of Education, Skills and Training. He's responsible for the program and for the grant, so he's responsible for that allocation. Rather than me give a definitive answer on another minister's portfolio, I think that question really needs to be directed to him.

F. Gingell: I appreciate that the minister is not the member for Esquimalt-Metchosin.

But my question, originally started, was: in the limitation that the change in each municipality's revenue. . .that the grants would protect them -- that they would not lose more than 3 percent -- was the fact that some property taxes had been paid in 1996 as part of their income, which would not be paid in 1997, included in that calculation? Here was provincial property on which taxes had been paid, or grants in lieu of taxes, considered to be property tax revenue by municipalities in 1996 -- would no longer be there; that had dropped their amount. . . . Was that going to be made to form part of the 3 percent guarantee?

Hon. M. Farnworth: I hope this will answer the member's question.

The fact that universities receive money, and assuming confirmation from the Minister of Education that they continue to receive money, there is no impact there, so the 3 percent rule still applies. In the case of colleges, which were not receiving grants to begin with, the calculations were based on the fact that they weren't receiving them. Then, the fact that they were slated to but actually aren't going to, doesn't change the total revenues, so the 3 percent rule would still apply.

[11:15]

F. Gingell: That leads to the conclusion -- which I think you said at the start, but I'd like to confirm -- that this reduction of $1.4 million, shown as grants in lieu of taxes, is purely and simply a mythical amount that was intended to have been paid in 1997 for colleges to start fulfilling their obligations, was never paid in prior years, and now will not be paid in the future.

Hon. M. Farnworth: That is the point, in terms of. . . . This expenditure is outside my ministry -- right? So I really can't comment on what's taking place, how much and why it's taking place. If you want a definitive answer, you're going to have to ask the minister responsible.

F. Gingell: Fair enough. But I take it, then, that if any of this is a reduction, it was not included in the calculations to determine the new grants. The effect of that, if there were any real dollars involved, was not included. Your ministry didn't go to find out all the details of what the consequence would be for municipal tax revenues resulting from changes in grants in lieu of taxes from educational institutions, whether they be universities or colleges.

Hon. M. Farnworth: When the calculations were made, we looked at what is; we didn't look to the future as to what will be. In determination of grants, we pretty much have to look at what it is today, not what hypothetically could be.

F. Gingell: The point I'm trying to ensure is that this item of $1.4 million reduction has not affected any municipality -- i.e., there were no funds that were paid as grants in lieu of taxes in 1996 that will now not be paid in 1997. And for you, in doing your calculations, you looked at the municipal tax revenue and said: "Okay, what are the consequences of Bill 55?" That's good. Did you say: "What are the consequences of the reduction of grants in lieu of taxes"? That's really what my question is.

Hon. M. Farnworth: We didn't take it into account for the calculations that were done in 1996 for 1997. If you were to go down the road you would probably look at an impact, but that's in the future. It hasn't taken place. I guess, we're dealing with this hypothetical situation that's sort of outside the ministry, and trying to make some sense of it. I can tell the hon. member that in the calculations. . . . Again, we looked at what is -- what is actual -- and made the calculations accordingly. The fact that something was to hypothetically happen in the future but in reality wasn't going to happen, and to try and factor that in to make an impact today, to achieve a result that would affect tomorrow, is stretching it extremely -- and complicated beyond belief.

F. Gingell: No, it isn't me that's complicated; it's the minister. It comes down to the simple question: are you absolutely certain that there's no reduction in grants in lieu of taxes by educational institutions to municipalities -- reductions from what was paid in 1996 to what will be paid in 1997? Are you absolutely sure of that fact?

Hon. M. Farnworth: I can say yes. But as I've said to the member, in order for him to get a definitive answer about the future, he's going to have to ask the minister responsible for that future.

F. Gingell: I'm not worried about the. . . . Well, I am worried about the future, but I just want to ensure that there wasn't another factor that you'd forgotten to look at in the guarantee. So as Minister of Municipal Affairs, looking after the interests of municipal government in dealing both with the provincial government and the Crown corporations, seeing these reductions in grants that had been intended to be paid but were not actually paid, does the minister know if municipalities are liable to suffer any other reductions in their revenues from reductions of grants in lieu of taxes from Crown corporations or Crown agencies?

Hon. M. Farnworth: I understand the question, but it really is outside the scope of this bill. This bill deals with allocation, not with amount. The amount is for the future, and what the hon. member is suggesting is taking place in the future with other ministries. As minister responsible for municipalities, I want to be aware of changes that are taking place and to know what's going on so that I have a better idea of demands that I may want to make. But in terms of. . . . You can ask me definitively what's happening in the future; I can't give you that answer.

[ Page 3004 ]

G. Abbott: Unless I'm surprised by a colleague storming into the chamber to ask the minister further questions, I think that pretty much concludes our canvassing of section 13 of Bill 2. I think we're prepared at this point to see division called on it. But before we do that, I think I want to reiterate again, hopefully, some of the points which I have tried to make during the debate on this bill.

Again, I think it's absolutely critical that everyone in this chamber understands that section 13 provides none of the stability, certainty and predictability which was provided by section 2 of the Local Government Grants Act. That section, which, of course, in my view, and I know in my colleagues' view. . . . We most unfortunately saw the repeal of that section yesterday. So there's nothing in section 13 which would provide municipalities, regional districts in British Columbia, with all of those elements -- predictability, certainty and stability -- which were a part of section 2 of the Local Government Grants Act.

As well, during our discussions and debate here, I think we have seen that there is nothing in any of the elements provided in section 13 -- whether it's subsections (a), (b), (c), (d) or (e) -- which would provide for a continuity or certainty of funding from year to year. There is nothing among those elements, alone or in combination, that will provide certainty from year to year. There is nothing, for example -- and I think we made this point very clear yesterday -- in section 13 that ensures that provincial transfers in 1998, 1999 or any future year will have to be anything more than zero dollars and zero cents.

I think the effect of this will be to see the relationship between the province and municipalities and regional districts very much adversely affected as a consequence of the implementation of Bill 2. I think the uncertainty that is inherent in the absence of any sort of continuity or certainty not only will inevitably lead to a deterioration -- if it's possible for it to deteriorate any further -- in the relationship between the province and local government, but also may lead to difficulties within local government itself, as local government comes to struggle with what is a fair allocation of possibly very slim resources provided by the province.

I don't believe that Bill 2 or the approach to municipal transfers inherent in Bill 2 will be tenable in the long term. Whether it's a future NDP Minister of Municipal Affairs or a future B.C. Liberal Minister of Municipal Affairs, I don't think it matters. I think there is a problem with the approach inherent in Bill 2. Whether it's this minister or a future minister, I think we'll have to struggle to find a different approach or a different mechanism to restore some year-to-year certainty in the level of funding in municipal transfers. So I wish this minister the best of luck with his cabinet colleagues in trying to see some mechanism of that sort put in place for the future. I'm not putting forward that proposition on a partisan basis.

In terms of the conduct of provincial-municipal relations, I think something of that sort is going to have to be developed in the relatively near future. Obviously we've got no experience with the bill to approach it at this point. It may be a year or two before the minister realizes the very substantial problem that has been created here. But I know he will realize it, and I hope he begins very early on to start thinking about potential alternatives to the approach that's inherent in this bill.

Did the member for Matsqui wish to rise at this point?

M. de Jong: The danger in sitting and listening intently to this debate is that one's mind has an opportunity to consider some of the additional ramifications of the bill. There was one area that the minister and the member for Shuswap canvassed, and during the course of that debate it occurred to me that there might be some opportunity for the minister to improve upon the provisions of this bill -- insofar as a document and legislation that we really think is indefensible can be improved.

They were talking about the impacts of Bill 55. I think it's a relevant point, insofar as if you are a local government, what you are ultimately concerned about is the cumulative effect of changes in provincial policy that affect a major source of your funding -- a major source of your ability to provide service to local people. I think the minister would agree that one of the things that has impacted many communities in a very substantial way over the past couple of years is the change that has resulted from the imposition of Bill 55 and the amendments to the Assessment Act. It's had a dramatic impact in many communities.

Maybe I'll start there. He may have said this in a more roundabout way, but does the minister agree that when you take Bill 2 and combine it with the effects of 1995's Bill 55, it is accurate to say that the ability of communities to deliver services will be impacted by both those pieces of legislation?

[11:30]

The Chair: Hon. member, it strikes me that this is not exactly specifically on section 13. We're talking about legislation, so tie it in more closely to 13.

M. de Jong: I will. The section we're dealing with, I would submit, directs that in conducting consultations to the extent that they will be conducted, and in establishing funding levels, the government must take a number of factors into account. The question I'm asking, and which I intend to pursue with the minister, is whether one of the factors that should be taken into account is the impact of Bill 55 and the special provisions that relate to the taxation of railway properties. That's how it ties into this section.

Hon. M. Farnworth: I would say to the hon. member that that impact is taken into account and that, in fact, it has been the focus of our debate for much of this morning. So when we looked at things like the 3 percent -- the formula that's in place today -- it takes all those impacts into account.

M. de Jong: It strikes me that the legislation -- this section in particular -- establishes something of a loose formula. It's not a particularly detailed formula, but I think what one is trying to achieve here is a recognition that there are different factors at play in different communities.

For example, in Abbotsford the losses that resulted from the imposition of Bill 55 were close to $1 million because of the nature of the railway property and the value of property in that community. In Mission -- and I see that the member for Mission-Kent, the Minister of Human Resources, is here -- the impact was somewhat different. It was about half a million dollars in that case -- revenues that were no longer available because of changes in provincial government policy.

In a bill of this sort that deals exclusively with establishing funding-level formulas, I'm suggesting that it might be appropriate to explicitly set out recognition of those differences in the legislation. Ultimately, my question to the minister is: can he provide me with his best argument for why 

[ Page 3005 ]

it's not appropriate to set out explicitly that there is a specific piece of legislation that alters the impact these provincial government cuts are going to have from community to community?

Hon. M. Farnworth: First, this act is a framework, and the regulations on how the formula works, or the details of how the formula works, are specified by regulation.

I understand what the member is saying, but the point I want to come back to is that those impacts have already been taken into account in the 3 percent rule. They apply to communities right across the province, and there is zero impact to communities under 5,000.

What I think is important -- where I think we need to be heading and what I've said repeatedly -- is that the amount of money that's available is determined by the Legislature. How that money is allocated is done through this act, but is also going to be done through consultations with the joint council -- with the communities and municipalities of this province at that joint council table. If changes in the formula need to be made, or if there are changes in how impacts to communities. . . . Some communities have argued that maybe we need to spread impacts evenly across the province and have every community take whatever reduction or whatever increase. . . . That's going to take place in that joint council process. It's going to take place with input from municipalities. It's not going to come from me arbitrarily saying: "This is how the formula is going to work."

This is year one. But down the road it's got to be a joint partnership in how it changes. What the member is suggesting may very well be a position of the UBCM. It may very well be a position of the communities to say: "We want you to take this into account by way of a regulation." But I'm not going to prejudge that process right now. We've had three meetings already, and we're starting to address these issues. As the member for Shuswap said -- and here we may have a bit of a difference -- his opinion is that in a year or two, as things unfold, I may see the need to make changes.

What I've said is that the process for change has been put in place. It's not going to happen as of today; it's going to evolve over a period of time, and I think maybe a good 12 months is required. So I think what the member is saying is premature, and I don't believe it's the approach we need to take at this time.

M. de Jong: I could offer a couple of things in response. First of all, it's my understanding that the impact of the Bill 55 amendments are not yet fully known; that in fact there is a phase-in period associated with what are, in effect, cutbacks -- significant reductions -- in the revenues that will be collected by local government.

Secondly, the minister asks that we have faith in his government's willingness to respond to positions that might be taken by the UBCM -- the joint council -- somewhere down the road. I say that we know now. We know at this moment that there is a variable out there that has not yet been completely settled, and that is the effect of the Bill 55 amendments that impact different communities in very different ways. It affects Mission differently than it affects Abbotsford.

The member for Mission: jump in here anytime. This is his chance to defend the interests of Mission insofar as half a million dollars of lost revenues; it's his chance to play that role for which he was elected.

But it is going to impact different communities in different ways, and I'm suggesting that it is appropriate that we remove any doubt. I think that this minister. . . . I have no reason to doubt the genuineness of his commitment to examine this issue and the impact it will have, but who knows how long he'll be in his present portfolio? Who can say what would be in the mind of his successor insofar as applying the formula that is roughly set out?

The member for Peace River North is here. The impact that Bill 55 has had on his constituency, I would suggest, is quite dramatic -- and different, again, from the impact it's had on Abbotsford or Mission or other communities.

I'm suggesting to the minister that because we know it is a variable that exists, that will impact differently and that needs to be taken into account, let us articulate it. Let us be clear in the legislation from this point forward that it is something that government will be considering when these funding levels are set. And that is a submission I make to him.

Hon. M. Farnworth: Here the member and I disagree, but the point I'm making is: are the impacts estimable? They relate to finances. We've taken them into account, we've had considerable debate on that over the morning, and, as I said, I don't see the point in trying to list a particular impact as a reason to consult, when we're already doing that. We've already taken that into account; we've already committed to sitting down with municipalities through the joint council process. The formula is already in place. It's already determined what it will be for the coming year, and any changes that do take place will be as a result of the municipalities who are affected by changes or who want to see changes to better suit their needs. That's the way it's been progressing for the last three months. So with all due respect, I have to reject the member's argument.

M. de Jong: It is with the greatest respect that I say I am as unconvinced by his submissions as he apparently is by mine. I think we could bandy this back and forth at length. Suffice to say, I believe it's appropriate that we send a message to communities right across the province that in calculating these grant amounts, recognition will have to be given of the impact of government policy in an area that impacts on their revenue source in a very substantial and significant way.

So the amendment that I am going to propose is that we add a section 13, section 3(f), which would read: ". . .provisions of the Assessment Act establishing special rules for railway property."

The Chair: Would the member kindly send the wording to the table, please.

M. de Jong: I can do that, hon. Chair, if you can read my writing. Unless I hear differently, hon. Chair, I'll assume the proposed amendment is in order.

The Chair: Make no assumptions, but you are entitled to continue.

M. de Jong: The logic -- insofar as any of us can be accused of having that quality -- behind the amendment relates to the fact that I am not at all confident that the government is going to take into account the dramatic impact of legislation that was passed just two years ago. I think it's 

[ Page 3006 ]

relevant. I don't have any doubt that it's not an issue that members of the government benches like to address. I don't think they like to acknowledge the fact. They didn't like to acknowledge then, and I'm sure they don't now, that they've handed these huge railway companies a massive tax break. But that's what they've done.

The rhetoric we heard up to, during and after the election campaign was quite different insofar as how government policies would impact differently on different people, corporations versus individuals. But here is a piece of legislation that showed a clear preference for huge companies: CP, B.C. Rail, CN. Now, the government doesn't like to talk about that, and their members don't like to talk about that, but of course it impacts very directly on the taxes that local ratepayers are paying and will pay. It impacted very directly on the levels of services that local government could provide to its local ratepayers -- local citizens.

[11:45]

At the end of the day, the question I ask is: what is the government afraid of in being asked to take into account the impact of legislation that affects the ability of local governments to collect revenues? What are they afraid of in being asked to take that into account in setting funding formulas? I haven't heard a satisfactory answer, or one that I find satisfactory, to that question.

Hon. M. Farnworth: The hon. member asks what we're afraid of. We're not afraid of anything. In fact, the points that he raised have already been taken into account. They've been taken into account in the small communities protection program. They've been taken into account in the impact in terms of 3 percent on communities.

I expect that those concerns would be addressed through regulation, which is the appropriate place for them. The member's assertion that somehow they have to be put into the act because the government isn't going to address them, I think, is wrong, because we already have addressed them. As the formula changes, regulation will change. Those changes will come about through discussion with the municipalities, as I've stated already. They'll take place at that joint council table, which is what's already happening.

That's the process that I think it needs to be, because what's going to happen is that we can change regulation. But the municipalities have been kind of hamstrung, because every time they wanted to change they had to come back and amend the piece of legislation. So I have to disagree with the hon. member. We are confident that these changes or the impacts that the member is asking to be taken into account by way of legislation will be addressed through regulation. We have already been addressing them. We've spent most of this morning debating that. You know, maybe we need to get on and vote on this.

M. de Jong: I'm not certain that I follow the minister's argument to this extent. We have within the ambit of the section a subsection like (d), which makes specific reference to the legislative provisions of the Municipal Act. They expressly require the government to take into account the impact of section 820 of the Municipal Act in determining funding levels. How is the amendment that has been proposed here different from what appears in subsection (d), dealing with section 820 of the Municipal Act? Why are all the arguments that the minister applies with respect to this amendment not equally applicable to section 820 of the Municipal Act?

Hon. M. Farnworth: Section 820 is a description in terms of assessments. It doesn't single out a particular impact. What the hon. member is asking -- and where our disagreement is -- is that impacts such as Bill 55 be listed in statute. I'm saying that we should address those concerns through regulation. He's saying that he doesn't trust the government, that government won't do this, or that the government won't address impacts in determining where the money goes or in the formula allocation. What we're saying is that we will. I'm pointing to the fact that we've already done that, as evidence that the government will continue to do that.

I've said that's the direction that we need to go, that we're making decisions regarding allocation and the formula -- that's what this bill is about -- and that we're going to get the amount. We'll sit down with the municipalities. We'll discuss how the allocation takes place. We've already said, in developing this year's grant allocation, that we've taken into account these particular impacts.

The main one that we've been discussing is Bill 55. We've factored that into the grant allocations for each municipality so that small community municipalities aren't impacted, and larger ones, no more than 3 percent of revenues. If we're to make changes in the formula or to take into account impacts, future or whatever, those are going to take place through negotiation, through consultation. They're going to take place in the joint council process. I would rather do it that way than through what the member is proposing.

M. de Jong: Let me ask this. In deciding, for example, to cut the level of funding to the city of Mission by $958,000 this year, did the ministry take into account the converted value of land and improvements within the city of Mission?

Hon. M. Farnworth: That is one of the factors contained in the formula, so the answer would be yes.

M. de Jong: Why is it necessary to specifically articulate that issue in the legislation and not the statutory provisions that I've just referred to? If he's saying they took that into account in any event, why is that reference in the legislation? If we follow the logic, I should trust the government to take into account the Assessment Act, but I shouldn't trust the government to take into account the applicable provisions of the Municipal Act.

Hon. M. Farnworth: Look, Bill 55 deals with revenues. One of the changes that's been made in Bill 2 is around the section that deals with expenditures and revenues. Okay? I would make the point to the hon. member for Matsqui that what he's asking for, in a sense, has already been addressed by the addition of the term "revenues." If revenues are up or revenues are down, that has an impact. Well, that's mentioned in the legislation.

We can go on and on, but basically it comes down to this. The point you're trying to raise has been addressed in the legislation. Impacts are already taken into account in developing the formula, and, in terms of future changes, they're going to take place by regulation.

M. de Jong: Before I allow others to pose any questions they may have, I can't help but make the observation to the hon. minister that he is asking us to be rather selective in our trust of the government. On the one hand, what he seems to be saying is, "Even I, as minister, wouldn't trust the government to properly take into account section 820 of the Muni- 

[ Page 3007 ]

cipal Act," and that's why I believe it's appropriate for that legislation to be referred to specifically. But when it comes to something like the impact of huge tax breaks for huge multinational railway corporations: "Trust us; we'll take that into account, and we don't need to include that reference in the legislation." My suggestion to the minister is that he is being rather selective. I think I understand his obstinacy in resisting the amendment that we are proposing here today, but I don't accept the logic behind it.

G. Abbott: I'd like to rise and just briefly speak in support of the motion that has been put forward by my colleague from Matsqui. I'm going to be very brief, because I think, with his customary brilliance and eloquence, the member for Matsqui has made the case as well as anyone possibly could. He has thoroughly explored all facets of the prism surrounding the reasons why there should be some provision for Bill 55 contained in the formula contained in section 3 here.

I do want to say that I think that this motion deserves support, because as we've said throughout this debate over Bill 2, what is occurring with Bill 2 is a ripping away of the heart of the Local Government Grants Act. It's a ripping away of all the. . . .

S. Hawkins: It's a ripoff.

G. Abbott: It's a ripoff. It's a ripping off of all the stability, certainty and predictability that once was a part of the Local Government Grants Act. Certainly it is my view -- and I know it's shared by all of the folks on this side of the House -- that any measure which we can draw into this Bill 2 that would add some measure of clarification and, as a consequence, stability, certainty and predictability to municipal grants from year to year is a very welcome thing.

As the member for Matsqui expressed, I'm absolutely astonished that the hon. Minister of Municipal Affairs did not immediately leap to his feet to embrace the very generous contribution which the member for Matsqui put forward with respect to this.

I don't want to repeat anything that the member for Matsqui might have said, but I think, again, it's our view on this side of the House that while Bill 55 was certainly a wrong-headed approach to tax reform in British Columbia, and while it conferred a benefit exclusively on big railway companies in British Columbia -- quite contrary to the frequently stated approach of this party and this government to tax reform in British Columbia. . . . We on this side of the House certainly favour a broader tax relief in British Columbia, not the kind of approach that is inherent in Bill 55.

Nevertheless, despite all that -- despite the fact that Bill 55 was in effect a $15 million gift to the big railway companies in this province, for reasons which remain obscure to this day. . . . There is great speculation as to why Bill 55 was ever enacted in the first place by this government -- rather a lot of speculation that the Employment and Investment minister of the day was so anxious to secure some new development projects by the big railways that he was quite prepared to sell municipalities and regional districts in this province down the river to the tune of $15 million. But that's all speculation.

M. de Jong: Water under the railway bridge.

G. Abbott: It is -- again, as the member for Matsqui so eloquently points out -- water under the railway bridge. Exactly right.

Despite all that, hon. Chair -- and I'm just winding up here; I can hear the grumbling of stomachs across the way, and I know people want to move along -- I do support the motion, because it does add an important element to the formula as it appears currently in Bill 2, and I think it will provide in some small way an element of stability, predictability and certainty to a bill in which all of that has been torn away. So I'm very pleased to support the member for Matsqui's motion, and I'm sure all members on this side of the House would be delighted to do so as well.

[12:00]

Amendment to section 13 of Bill 2 negatived on the following division:

             YEAS -- 32

Dalton Gingell Reid Campbell Farrell-Collins Plant Sanders Stephens de Jong Coell Anderson Nebbeling Whittred van Dongen Thorpe Weisgerber Neufeld Barisoff Krueger McKinnon Masi Nettleton Coleman Chong Weisbeck Abbott Hawkins Symons C. Clark Hansen Reitsma J. Wilson

NAYS -- 36

Evans Zirnhelt McGregor Boone Hammell Streifel Pullinger Farnworth Kwan Waddell Calendino Stevenson Bowbrick Goodacre Giesbrecht Walsh Kasper Orcherton Hartley Janssen Conroy Smallwood Robertson Gillespie Doyle Lali Sawicki Randall Sihota Ramsey Cashore MacPhail Dosanjh Miller Petter Priddy

R. Neufeld: I'd like to move that we rise, report progress and ask leave to sit again. I have a few questions to ask, and I don't want to compress them into a couple of minutes.

Motion approved.

The House resumed; the Speaker in the chair.

The committee, having reported progress, was granted leave to sit again.

Committee of Supply A, having reported progress, was granted leave to sit again.

Hon. M. Farnworth moved adjournment of the House.

Motion approved.

The House adjourned at 12:08 p.m.

The House in Committee of Supply A; W. Hartley in the chair.

The committee met at 10:13 a.m.

On vote 16: minister's office, $429,000 (continued).

R. Thorpe: First of all, I would just like to advise the Attorney that my colleague from Fort Langley-Aldergrove is quite concerned that he has not received some replies with respect to items detailed in his note of April 16 to your office. He wanted me to advise you that he's hopeful he'll get that this morning; if not, perhaps he'll have to be here this afternoon to go through this letter in detail. I just want to share that with you.

Hon. U. Dosanjh: I'd like to respond, actually. I am aware of the letter. When you seek several items of information almost a week or so before the estimates are to begin, there is an FOI process. All those kinds of processes have to be gone through. I don't do that personally, nor would I want to. And it takes time. The hon. member is at liberty to do whatever he wishes.

R. Thorpe: I think I'd like to start in the financial area this morning, if I may. My first question is: does the LDB apply the accountability information matrix, as recommended by the auditor general, to its financial management process?

Hon. U. Dosanjh: The books of the LDB are audited by the auditor general.

[10:15]

R. Thorpe: That may be so, but as I'm sure the Attorney is aware, his government is moving forward with enhancing accountability for performance. There has been detailed documentation prepared on this. This accountability information matrix is governmentwide. Notwithstanding who is auditing their books, could the Attorney please answer the question? Is the LDB using the accountability information matrix in their operation, in their financial levels and planning levels, and in the accountability of results?

Hon. U. Dosanjh: I don't believe that the matrix is being fully utilized. In terms of the accountability and performance measures, I understand that the LDB is far ahead of other sections of the government.

R. Thorpe: I guess I thought it was quite a simple question that perhaps could have a simple answer -- perhaps a yes or a no. I don't want to jump to this conclusion, but what I think I'm hearing from the Attorney is that the LDB is not using the accountability matrix as proposed and recommended by the auditor general. I'd just really like a yes or no to that question.

Hon. U. Dosanjh: I've provided the answer.

R. Thorpe: Hon. Chair, the accountability matrix calls for a performance management system that clearly establishes objectives for programs; effective strategies, program design, policy development and planning to meet those objectives; aligning resources, budget information systems and people controls to implement those strategies; performance measures to facilitate accountability; a system of relevant and timely reporting; and finally, real consequences associated with not meeting performance measurements. Is the LDB achieving all of those in its systems, which are apparently much advanced over the rest of government?

Hon. U. Dosanjh: Yes.

R. Thorpe: This government continues to ratchet fees up in every area that they can find moneys in. In attempting to do some research with the LDB on their fees, I found that they have no published schedule of fees. But they were kind enough to provide a list of some areas in which they do have fees. I'm not going to bore the Attorney or the Chair or the other committee members by listing those. I guess my real question to the Attorney is: are any of those fees going to be increased in the coming year?

Hon. U. Dosanjh: If the hon. member is talking about fees such as audit fees and the like, there are no such plans for any increase.

R. Thorpe: Yes, that was one example on the list. I'm assuming from that answer, then, that there will be no fee increases for any of the fees that the LDB charges -- without us all going through the exhaustive list of fees. But one fee that's interesting to me is. . . . I understand that there was instituted a special 5-cents-per-dozen fee for sorting beer bottles. I think that was related to when the brewing industry had an excessive number of private-mould bottles. Can we confirm that that fee is still in place?

Hon. U. Dosanjh: I don't have that information available to me. That can be made available to the hon. member at the earliest -- after the estimates.

R. Thorpe: If in fact that fee is still in place, and if it was put in because of the extensive use of private-mould bottles, and since the industry has now gone to a standard bottle, would the LDB rescind that fee?

Hon. U. Dosanjh: I don't want to engage in hypotheticals, but once the hon. member receives the information, he can certainly discuss that with me.

R. Thorpe: I'd just like a clarification; I didn't hear. . . . Could you advise what the annualized costs are with respect to debit cards at your stores?

Hon. U. Dosanjh: For fiscal '96-97, it amounted to $612,000.

R. Thorpe: So in the fiscal year '96-97, debit card costs were. . . .

Interjection.

R. Thorpe: I was asking the annualized cost to the LDB. Is this the sales or the cost? There's a difference.

[ Page 3009 ]

Hon. U. Dosanjh: That is the cost.

R. Thorpe: And that was $612,000?

Could the Attorney advise if the branch has done any studies with respect to the potential use of credit cards in the LDB system and what the anticipated costs would be?

Hon. U. Dosanjh: There were no studies. A very preliminary in-house estimate was done.

R. Thorpe: If the Attorney and staff could be so kind as to share the internal estimates of the annual cost, I'd appreciate that.

Hon. U. Dosanjh: Yes, that would be available. I'm told you have it.

R. Thorpe: Credit cards.

Hon. U. Dosanjh: We'll give it to you.

R. Thorpe: I appreciate that, Attorney. Somehow, if I had it I would think the words "credit card" might have jumped out at me -- but I might have been reading this late at night.

In looking back over a little bit of history. . . . In 1991 the net income of the LDB to sales was 35 percent. Over the tenure of this government to date, that number has steadily increased, to approximately 38 percent now. Has the LDB established a net income operating benchmark at 38 percent? Is that their internal benchmark?

Hon. U. Dosanjh: The revenue targets for the LDB are established by Treasury Board.

R. Thorpe: I know that the Attorney is not suggesting to me that when the LDB is preparing its plan, it leaves the profit number -- the net income number -- blank, and Treasury Board puts in a number. I know he's not trying to convey that to me, because then the LDB would not be completing its internal business plan.

Interjection.

R. Thorpe: Some of it appears to be very lengthy, by the time lapses last year. Do the LDB have an internal benchmark they use in preparation of its consultation, and is it 38 percent?

Hon. U. Dosanjh: Thirty-eight is a good number, but obviously the business should be as efficient as possible.

R. Thorpe: There are some comments that you want to let go, but you know you just have to. . . . Let me just share that the people of British Columbia -- incidentally, this government has said it will not whack at U-brews and U-vins -- feel that the net income figure of 38 percent. . . . When this government took power, it was a lot less than that. They don't think that's a good number. So I just wanted to share that with you.

I do look forward to discussions with your staff on the amazing ability -- the good luck -- in these trend lines since you took government: 37.8, 38.5, 38.4, 37.9, 38. . . . Amazingly enough, it's projected to be 38 percent again.

Hon. U. Dosanjh: Consistent.

R. Thorpe: Just keep leaving those openings! I guess we'll pursue that at another time.

If we could move into some detailed discussion on the budget. . . . I guess the first thing I'd like to do. . . . The Attorney General may agree with this. One of the largest costs in doing business for most businesses is the number of people that are employed by an organization. I see that full-time-equivalents in the budget for '96-97 -- and we must start there -- were 2,555. Can we confirm if that is a theoretical number or an actual number, to start with?

Hon. U. Dosanjh: I don't understand the question. That is the budgeted number.

R. Thorpe: As we know, in government we have approved numbers and then we have actual numbers. Are they actual bodies, or are those approved positions? That is the question. The 2,555: are they approved, or actual warm bodies?

Hon. U. Dosanjh: That number is the FTE number. There are more bodies than the FTE number, because some workers are part-time -- if that was the question.

[10:30]

R. Thorpe: I'm going to assume, and hopefully rightly -- although I preach never to make assumptions -- that if we're starting at 2,555 and if. . . . I recall a discussion yesterday on the success of an early retirement program. I may have the number wrong, but I think it was 167 or 161 -- something like that. I have difficulty understanding. . . . Maybe I should just ask: where is that number reflected -- from 2,555 down to 2,498? This is showing only a reduction of 85, not 160 or 167 -- whatever the number was we referred to yesterday.

Hon. U. Dosanjh: That obviously is the difference between those who actually took early retirement and those who we were entitled to lose in terms of the FTEs. We were losing about 80 or 85 FTEs, and there were more people than that who actually took early retirement.

R. Thorpe: Are you saying, then, that. . .? I'll just pick these 40 people that are identified as "cash-handling efficiency." Were they included in the 167, or is that an additional number of people?

Hon. U. Dosanjh: Those numbers are quite separate.

R. Thorpe: Well, that's what I thought -- because, for my purposes, it really highlights that somewhere we've. . . . 161 or 167 people have received payments from the people of British Columbia, and that reduction is not reflected in these numbers. So I would like to know: how much is the pay-out for the 160-some-odd people who took the packages? What is the annualized cost to the taxpayers of British Columbia?

Hon. U. Dosanjh: That answer would be available from PSERC in the Ministry of Finance. But let me just. . . . I'm somewhat troubled by the implicit accusation in the hon. member's remarks. You have people who are entitled to take early retirement. They take early retirement. You need fewer people to leave to be able to continue to work.

An Hon. Member: Say again?

[ Page 3010 ]

Hon. U. Dosanjh: The workforce remains as it was; 155 or 160 people leave. We could afford to lose only about 80 -- I'm making simple arithmetic here. So there are 80 workers still remaining, but we've lost 155. You need people to do the work. I don't understand what the concern is here on the hon. member's part. I understand very clearly: 155 or 160 people took early retirement. The argument that the hon. member is making is that that should be the reduction in the FTEs. And I'm saying no -- because we needed more people to do the work. It's not simple arithmetic.

R. Thorpe: Well, it's obvious that. . . . I didn't realize this was such a touchy subject, but perhaps it's just early in the morning. Basically, when you pay people out, you do that for a purpose. Yes, I do believe the information is available from PSERC. But I would also think that these costs should be -- are -- reflected in the LDB. I asked a very simple question: how much does it cost the LDB to give the packages that it did to these 167 people?

Hon. U. Dosanjh: It didn't cost the LDB anything.

R. Thorpe: So no costs related to these individuals are reflected in the books of LDB. Is that correct?

Hon. U. Dosanjh: Correct -- with the exception of any accumulated holiday pay and the like.

R. Thorpe: In looking at the provided projected income statement for the '97-98 budget, I notice that there's a substantial increase in information services -- from $8.6 million to $11.1 million. Could the Attorney General provide, in the broadest sense, the details of that?

Hon. U. Dosanjh: Those relate to computers and Year 2000 development, as well as a payroll system that was brought in.

R. Thorpe: Another information that was provided to me. . . . I believe the Year 2000 development costs are projected at about $1.5 million. The new payroll system -- what would be the projected costs of that, Attorney?

Hon. U. Dosanjh: Hon. Chair, it is $1.3 million for the year.

R. Thorpe: Thank you very much. That's enough on the information systems area.

Just moving down quickly to personnel, I notice an increase there. I wonder if, in the broadest sense, they could give me. . . . Why is it going up?

Hon. U. Dosanjh: That simply represents the FTEs that were unused in the previous year. They're now being used.

R. Thorpe: If we could just quickly look down -- I'm sure we're probably looking at the same page. . . . The capital -- I remember we had a discussion about this last year. I'd just like to know a couple of items. The retail operations -- could we have some highlights on the $900,000 that is anticipated to be spent on retail operations?

Hon. U. Dosanjh: I understand that those are simply operational needs and are very, very detailed. I can get the LDB to provide those details to the hon. member.

R. Thorpe: Did you say needs, or. . .? Is that what you said, Attorney: needs?

Hon. U. Dosanjh: Yes.

R. Thorpe: Okay, thank you. I just wanted to make sure I heard the correct word.

Information services is increasing substantially, to $659,000. Obviously, it probably has something to do with computers, so perhaps a little broader answer than "Computers" would be required.

Hon. U. Dosanjh: It is computers.

R. Thorpe: So is it the purchase of computers, or is it a capitalized lease?

Hon. U. Dosanjh: Purchase.

R. Thorpe: In the area of loss prevention, we note that it's up to $177,000. Going forward, could we have some details on those anticipated capital expenditures?

Hon. U. Dosanjh: That's simply enhancements in the security system, for protection of employees as well as goods.

R. Thorpe: Now, if I recall correctly, all capital has to be approved by Treasury Board. I think that's what I heard yesterday. For these projects, do we, in submitting them, have a threshold return-on-investment criterion to seek these new capital expenditures? And if so, what is that threshold rate, please?

Hon. U. Dosanjh: I'm not an accountant, nor do I understand many of these issues in terms of their total complexity. These are operational needs. Some of the capital expenditures are obviously to meet those operational needs. You can't assign percentage returns to each and every capital expenditure. There is a 700 percent return, I believe, on total expenditures. That question was asked last year, I think, in terms of the issue.

R. Thorpe: Yes, that question was asked last year. You did give that same answer of 700 percent last year if you can recall -- because I recall it very well. I kind of jokingly laughed that the general manager should be in charge of all investments if we're getting a 700 percent return. So there's obviously a measurement difference there.

What I want to make sure -- and I don't want to belabour this point. . . . In a time when the province is telling us that we have to cut back, I have great difficulty in believing that for all capital expenditures, especially when we have a total here of $2.5 million, there is not some threshold.

Now, I understand some have to be made for safety reasons; I understand that. Some have to be made because they're being replaced. If that's what these are doing, if it's for safety and replacement, I understand that a return criterion does not apply. But, if that is the case, then I would just appreciate a simple answer that that is the case. If there are new ones here, new computers or new things, I would be very, very surprised if an internal threshold rate of return is not being applied. If it's not, you cannot be making astute financial decisions.

[10:45]

[ Page 3011 ]

Hon. U. Dosanjh: Hon. Chair, what was the question?

R. Thorpe: The intent of the question was and is that we have been told by this government that we have a cash problem. They haven't admitted we have a debt problem, but we have been advised that we have a cash problem. When we're cutting back on schools and health care. . . .

Hon. U. Dosanjh: You would have, not us.

R. Thorpe: Excuse me, hon. Chair.

The Chair: Just continue, member -- and through the Chair, please.

R. Thorpe: I hope, hon. Chair, that everyone has to direct their comments through the Chair.

I understand that in allocating capital, sometimes capital has to be allocated for safety reasons, sometimes it has to be allocated for replacement reasons, and sometimes it's allocated to improve operations and to create better efficiencies -- the efficiencies that the Attorney General talked so highly of in last year's estimates and again in this year's estimates. My question is rather simple: for those capital investment requests that are looking at efficiencies and not safety replacements and the like, what kind of internal threshold is there established to ensure that the taxpayers of British Columbia are receiving the best return on the investment of their moneys?

Hon. U. Dosanjh: For each of these enhancements or replacements, there is a business case attached to them.

R. Thorpe: This will be perhaps my last question in this particular area. Based on the evasive answers of the Attorney, am I to conclude that there is no established internal threshold rate for capital investments?

Hon. U. Dosanjh: These capital expenditures may amount to $2.5 million. But in the scheme of things they are not large, and for each business case the threshold would vary. That's why I find the hon. member's question tedious, complex, unnecessary and unwarranted. I've indicated to him that all of that information is available to him, case by case, from my officials anytime he wants it. He's had all of this information available to him for some time. But we're here; I'm happy to be here for the next ten months.

R. Thorpe: I'm glad that he wants to be here for the next ten months; it doesn't bother me, either. My question was very simple. If you can recall, hon. Chair, it was that side that turned it into a rather complex issue. So I'm concluding that there is no internal threshold rate. I have not had. . . .

What the Attorney may want to know is that in most business operations, capital is scarce. But I guarantee you and all $1.5 billion corporations making a net profit of $592 million that all of those organizations would have established capital threshold points for new investments.

If I could move along. . . .

Hon. U. Dosanjh: I just finished saying, for these particular issues that the hon. member is talking about -- the ones that he specified. . . . I have indicated that the rate varies from business case to business case. I'm prepared to provide that information to the hon. member, but if you want to put on record distorted conclusions, then I have to stand up and put this back on, and we'll go on for a long time.

R. Thorpe: I was actually going to conclude on that subject, but my intention has never been. . . . And the word "distorted" was the Attorney's word. It was not my word; it has not been my intention. The question was very simple, and it's good standard business practice. There was no intention of distortion. So, if I could attempt to move on now, I do look forward to receiving that detailed information from staff.

Looking at the summary, of moving from $587 million to a profit of $592 million, I note that we've talked about the $1.5 million in computer costs, the $1.3 million in payroll costs, and I see the savings from the reduction in personnel at the head office and the cash reflected. I wonder if we could just have some broad details; I don't want to know every store and every location in the province of British Columbia. Is the $1 million number for increased rents?

Hon. U. Dosanjh: That information sheet is available to the hon. member, and the general manager just indicated to me that we could actually provide you with branchwide information based on individual stores.

R. Thorpe: Thank you very much. I think that would be constructive.

Looking up at what you would. . . . Oh, I shouldn't say that. Some people, in the business sense, would look at the positive increases in revenue; some other people may not necessarily take that point of view.

Hon. U. Dosanjh: What do you think?

R. Thorpe: Well, I think. . . . It doesn't matter what I think. I'd just like it noted on the record that it was a great chuckle and a great smile that the Attorney had on his face, and I'm very pleased about that.

The $6 million increase in markup. I call it tax; you call it markup. Well, perhaps over time we'll agree. Is that the carryover from the increase that was put in in September, '96 -- so this is just annualizing that?

Hon. U. Dosanjh: Yes.

R. Thorpe: The commissions and discounts of a quarter of a million. . . . Are we going to reduce commissions paid to LRSs and agency stores, or is this some other kind of commission?

Hon. U. Dosanjh: I believe that is simply volume increase.

R. Thorpe: Of course, one of my all-time favourites -- it's carrying on from year to year -- is "other income." I see -- I think I see, anyhow -- that this year it's going to go down to an anticipated $3 million. In the broadest sense, can we give some highlights of what that $3 million "other" would be?

Hon. U. Dosanjh: I understand that the hon. member has the answer to it; it's been given to him. It's custom collections and airline billings, as well as the brewpub malt levy.

R. Thorpe: If I do have it, I apologize. Again, if I do, I don't know I do have it. But those three items -- could you just quantify those for me, please?

[ Page 3012 ]

Hon. U. Dosanjh: The custom collections is about $1,130,000; the airline billings is approximately $1.5 million; and brew pubs is $375,000 approximately.

R. Thorpe: Perfect; thank you. Just as I leave this, then, the financial statements say that we're going to -- or you're going to, excuse me -- make $592 million this year, and all of the key business items have been put on here, to the best ability.

Last year there was an audit assessment. I don't know whether that was an internal or an external audit assessment. Do we have any outside audits that we may be contemplating? If there are legal ramifications and details, obviously I don't want those details, just a yes or a no. Are there any internal audits that you're looking to get money from that are not reflected in these numbers?

Hon. U. Dosanjh: No.

R. Thorpe: Thank you.

I. Chong: I just have one question, which may lead to others. But at this point, this is the first. Last year, on October 29, 1996, an article appeared in the Vancouver Sun. One sentence in here stands out: "The liquor distribution branch pockets about $11 in taxes and markup on a $20 bottle of spirits." It says $11 in taxes and markup. What I'd like to know is if he can define for me the difference between a tax and markup and how that is composed in the $11 amount that is garnished from the sale.

Hon. U. Dosanjh: I don't have the breakdown of the $11. I understand there are excise taxes and the like included in that figure. I'm not going to engage in defining a markup and a tax. If a markup and a tax were both the same, that article probably wouldn't have mentioned it as part of the $11.

[11:00]

I. Chong: I guess it's because there has been some confusion over the last while as to whether the additional increases in the costs of purchasing spirits, etc., were markups or taxes. I was just trying to determine, in my mind and for those who ask the question when a 10-cent or 50-cent imposition occurs, whether it is markup or tax and whether you actually allocate the taxes that you collect as revenues to a particular program or whether you allocate those markups to a particular program.

I will just quickly mention, so that the Attorney General can appreciate where I'm coming from, that in addition to this so-called $20 bottle of spirits, the federal government takes in another $6 of excise tax and goods and services tax. That has distinguished itself differently. Here we're talking about someone who walks into a store and buys a $20 bottle of spirits, of which $11 is attributed directly to taxes and markup. They send that collectively to the liquor distribution branch. As I say, I'm trying to determine the difference and also, when that $11 is collected, what programs would specifically be earmarked for that $11.

Hon. U. Dosanjh: Some of the taxes would go to Ottawa, some of the taxes would go directly into the provincial treasury -- markup and the like. At the end of the day the net revenue from the LDB goes into general revenue.

I. Chong: For what I'm trying to understand here, then, if the markup. . . . I can understand that the tax is going to Ottawa, even though they collect their own share, with the balance going to the provincial treasury -- to general revenues, I presume. Then you say the markup goes to. . . . Does the net revenue also go to the provincial treasury? There is a component of the taxes and the entire markup going into provincial treasury. Is that correct?

Hon. U. Dosanjh: Whatever the net revenue is goes into general revenue.

I. Chong: I know it gets rather technical. As I say, oftentimes we have questions from constituents whenever there are changes to liquor prices, and they ask us as members where the allocation of taxes are going.

A case in point is that when there is an increase in our gas tax, it's because it's supposedly for road repairs or capital expenditures. So when we have the same occurrence in the retailing of liquor, again people ask: where would these markups or where would these taxes be going?

What I would like to know from the Attorney General is whether there are some specific programs which were perhaps initiated or some initiatives that were planned which may have caused the additional markup that was imposed last September.

Hon. U. Dosanjh: As I have said, the answer to that question is no. But as I have said, the net revenue from the LDB goes into general revenue. It doesn't go into any specific account.

I. Chong: So in your response, in the first part where the answer was no, the imposition of last year's markup was not geared to any specific program; it was just to meet revenue projections -- is that correct?

Hon. U. Dosanjh: It was a Treasury Board decision.

R. Thorpe: Just moving into, hopefully, the final area here. . . . Currently the tax structure in British Columbia with respect to beverage alcohol is ad valorem. Does the LDB anticipate any change in that in the coming years?

Hon. U. Dosanjh: No.

R. Thorpe: Is the LDB currently, or does it anticipate during this coming year, studying any other types of taxation, perhaps with respect to the introduction of a flat tax in British Columbia?

Hon. U. Dosanjh: There are no plans to make any changes. When these kinds of developments occur elsewhere, branches that deal with similar undertakings are always interested in those developments. I understand that similar developments have taken place elsewhere, but there are no plans to do this.

R. Thorpe: When we look at the profit projection of $592 million this year, I believe that the record shows there probably should be, or will be, no tax increases on British Columbians. I would just like to reconfirm that there are no markup or tax increases anticipated from the LDB for the coming year.

Hon. U. Dosanjh: In the budget projection of $592 million, no change is anticipated of the kind the hon. member is referring to.

[ Page 3013 ]

R. Thorpe: I guess I appreciate the Attorney's answer. I think British Columbians, because of fee increases and ongoing tax increases, are very concerned. I think I would really like as strong a commitment as we can get from the Attorney, because when we talked about this last year, we moved along the same line of thinking and discussion on behalf of British Columbians. And quite frankly, I was amazed that on February 18, 1997, we received a freedom-of-information document that clearly stated: ". . . the LDB will not achieve the revenue target unless markups are increased or expenses are decreased." It went on to say: "If the LDB increases markup rates and consumer prices, supplier groups will strongly protest, and there is a risk that more consumers will be encouraged to make their own beer and wine in untaxed U-vin and U-brew establishments." That can only conclude that taxes are too high.

This document was dated May 10, 1996. We did our estimates in July, and we did have some assurances, although they were guarded, that the plan was before Treasury Board. This plan is not before Treasury Board. It has not been completed yet. We have gone through this analysis, and, on behalf of British Columbians, I would like some strong assurance from the Attorney that British Columbians will not be faced with tax increases in the coming year -- as they were fooled last year.

Hon. U. Dosanjh: I've already actually answered the question, but so that I don't appear to be rude -- as I am never -- I would say again that there are no tax increases or markup increases anticipated within the budget that we have prepared. I can tell you that that is the budget we're working on at this point. I don't, alone in government, control these issues; it would be inappropriate for me to give you an absolute undertaking to do something that is not solely within my power. Treasury Board may make decisions from time to time. But I don't anticipate any tax increases or markup increases within this fiscal year.

R. Thorpe: I realize that some of us would perhaps like you to be the government, but we do realize that you are only part of the government -- contrary to your comments yesterday that the Premier was the government. But that's fine.

This concludes my questioning on the LDB. Again, I must thank the staff here today, and also thank the staff that works throughout the system. I do enjoy, from my perspective, a good relationship with that employee group, and I look forward to working with them. And I thank the Attorney for his assurances that our working relationship with respect to staff can grow over the coming year.

The committee recessed from 11:13 a.m. to 11:20 a.m.

[W. Hartley in the chair.]

I. Chong: The questions I have in regard to liquor licensing and control relate to, I guess, the service tourism industry, where they have concerns that there are a lot of regulations that don't put restaurants and bars on a level playing field. As I understand it, your review came about as a result of one particular incident in Vancouver. The review, as I understand it, is looking at a number of issues, but what it is still not addressing are discrepancies that I think currently exist between the various kinds of establishments. I'm wondering whether the Attorney can provide us . . . how they will be looking at that issue, when they will be looking at that issue and whether it will be addressed as a separate review.

Hon. U. Dosanjh: That is a more fundamental structural change in our system of checks and balances within this industry. That would require a much more thorough and larger review and would create a lot more uncertainty in the marketplace. The hon. member's colleague was talking yesterday about lack of certainty, and that's why we believe at this point it's best to leave those issues untouched until we're ready for a much larger review.

I. Chong: I guess I just want to have some enlightenment that, in fact, there's going to be another review and that that will take place at a time when the ministry is prepared to look at it in the context of changes in competition.

Hon. U. Dosanjh: That's obviously future policy, but one isn't anticipated in the near future.

I. Chong: The other item I wanted to ask a little bit more about was the Liquor Appeal Board. I'm perhaps not as familiar with it as my colleague. Regarding the Liquor Appeal Board, can the minister advise me of the number of cases that are handled on an annual basis and whether that's on the rise or the decline?

Hon. U. Dosanjh: In fact, liquor appeal hearings have gone down, from highs of 25 in '90-91 and 36 in '91-92 to 11 in '96-97, and we are anticipating ten in '97-98 -- and ten would be out of 20 applications.

I. Chong: In light of the number of appeals going down from a high of 36 in 1991-92 to an anticipated ten -- a good 70 percent drop, I guess -- can the Attorney advise whether there's an anticipated reduction in the cost of the administration of the appeal board? Is that a separate function? And can you attribute the work of the appeal board to a separate program within the ministry?

Hon. U. Dosanjh: There's the Commercial Appeals Commission, Liquor Appeal Board, Motion Picture Appeal Board -- all those functions are carried out by the same board. Our portion, the Liquor Appeal Board portion of the expenditure, would remain the same, which is $123,000 for the year.

I. Chong: Excuse me if I ask a question that I probably should have the answer to, but I will ask.

The appeal board that is currently in structure. . . . Are those appointments by orders-in-council or are they part of the ministry's staff? Could he also advise what criteria are required for someone to serve on the appeal board?

Hon. U. Dosanjh: I didn't catch the latter part of the question, but these are all OIC appointments, and they're not part of the staff of the ministry.

I. Chong: The last part of the question I asked was the criteria, and I meant the criteria for those who were suitable candidates to serve on the appeal board -- whether you looked at a broad range of candidates who had experience in liquor licensing or who had experience in the service industry, or whether you just selected members at large.

Hon. U. Dosanjh: Just, essentially, members of the community at large. I remember one of the OICs that went through happens to be a lawyer who might have some knowledge about administrative law and issues around fairness.

[ Page 3014 ]

I. Chong: Just to continue with the appeal board. . . . Again, I'm not just. . . . I haven't had a chance to document the number of people who serve on the appeal board. Knowing that you select from the community at large, is there a concerted effort to ensure that there is representation from a particular group to ensure that those who serve on the board do have a better working knowledge of the industry?

Hon. U. Dosanjh: I don't have the profile of the appeal board here with me, but there's a whole variety of backgrounds represented in the appeal board membership. I do recall that the chair -- whether he is still the chair or not. . . .

I'm told he still is, and has been there for some time and has extensive experience in this area.

I. Chong: Just a final question to the Attorney General: what is the number of people who serve on the appeal board and the maximum length of time they can serve?

Hon. U. Dosanjh: I don't have the exact number available. I'll provide a total list of the appointments to the hon. member.

I. Chong: And the time they're allowed to serve for?

Hon. U. Dosanjh: Yes.

I. Chong: Okay. Thank you.

R. Thorpe: I'll just ask a couple of questions related to last year's estimates, and then I'll move into this year's in some more detail.

One of the things, in reviewing the estimates from last year, was a concern about illicit liquor in the province of British Columbia. I note that the branch was going to increase its staff by five or six and give them the appropriate training to deal with this activity. Could the minister confirm that that in fact did happen?

Hon. U. Dosanjh: No, it didn't happen. Treasury Board rejected the extra five FTEs that we required.

R. Thorpe: That's kind of perplexing. I guess one could only conclude that perhaps Treasury Board, in its analysis, has concluded that illicit liquor has decreased in British Columbia. But from my sources of information that in fact is not true. Can the Attorney perhaps expand upon why Treasury Board refused these people to fight this problem in British Columbia?

[11:30]

Hon. U. Dosanjh: I'm not going to comment on Treasury Board decisions.

R. Thorpe: Well, could the Attorney share with us his views? In his opinion and in the opinion of his staff, has illicit liquor in British Columbia declined, has it stayed the same or has it grown?

Hon. U. Dosanjh: I believe we touched on this issue generally yesterday or the day before -- I think it was yesterday.

R. Thorpe: The day before.

Hon. U. Dosanjh: Yes. Days are kind of. . . . It's kind of a haze.

There is no empirical data at this time on illicit liquor being used in licensed establishments. It is when we begin to do that vigorous inspection and the like that we will determine that, as well as enforcement.

R. Thorpe: I don't want to belabour this point, but one would have thought and one would continue to think that a proposal by the Attorney and his staff to bring in five additional FTEs to combat this problem in British Columbia would have substantive background in such a request, knowing how hard it is to get increased resources.

Could you confirm how much revenue you anticipated being lost to British Columbians and why we were hiring these five FTEs to help combat illicit liquor? How many millions of dollars are being lost to British Columbians, in your estimate?

Hon. U. Dosanjh: Last year we threw some figures around, and they were based on extrapolation of figures from Ontario, where a study was done; that's essentially the basis for those figures. Until we have better data, I don't believe we should pin a figure down.

The branch is engaged in a joint initiative with police and other regulatory agencies to control the importation, manufacture and sale of illegal liquor within the province, and some steps have been taken. It's a joint task force composed of the LDB, the LCLB, the Vancouver police and the Coordinated Law Enforcement Unit. Some work is being done on an ongoing basis, but I don't believe it is at a level where I would want it to be. And obviously we would probably go back to Treasury Board and say: "Give us the resources."

Firstly, we have to appropriately identify the amount of money that we're losing, and that can't be done until you begin to enforce and investigate at the same time.

R. Thorpe: I appreciate those words, but I have been contacted -- and perhaps you have been also -- by groups who sell their products through legal systems, who comply with every law. You and I got off on a tangent last year on this subject about U-brews and U-vins, and then we concluded that's not who we were talking about. And that's not who we're talking about here again today.

It seems unbelievable to me that industry figures -- and I'm sure they've been bandied around to the Attorney and to staff -- of anywhere from $35 million to $50 million, which is a lot of money. . . . If we can't put resources of 5 FTEs, but we can be on committees and task forces that are studying things. . . . I think that British Columbians want to know when we are going to have some action on this particular issue. We've studied the subject. Everybody in the industry knows there is a problem. We say that we are concerned about the social aspects, yet in this particular case we can't get 5 FTEs to combat the issue and, no doubt, probably pay for themselves 20 times over. I would like some kind of response on this issue.

Hon. U. Dosanjh: I understand that the branch has a plan to divert their resources more into inspection and to take them away from licensing if that can be done in a constructive kind of way. The industry figures are estimated totals -- they are not just the licensed establishments -- of consumption of illicit liquor.

[ Page 3015 ]

I'm shying away from talking about the figures. We talked about them last year, and I was new. I learn as I go along, and I think it's inappropriate, particularly for me, to say that it would be $40 million.

I think that we need to begin to work on this. As I've indicated, there is a plan within the branch to begin to assist the work that's already being done by that task force working together. And yes, we need more resources. This is not the only place where we need more resources. We need to put more police in the communities, and I want to do that as well. These are all issues that are important. One can't take it in isolation. That is not to say that this is not a priority; it should be. This is obviously illegal, illicit liquor that's being consumed.

But the branch is working on it. I'm going to take a look at this issue once we get out of here -- which is three months, maybe. I'm sure that by the time the hon. member has the opportunity to examine me next year, the machinery would be functioning.

R. Thorpe: I believe the machinery is functioning now; I just think it has to be oiled and honed better. I also believe that it's an issue of priority. All organizations can always attempt to justify more resources, but it's always an issue of priority. Social policy and social responsibility. . . .

Hon. U. Dosanjh: I've indicated that. . . .

R. Thorpe: Yes -- and just one thing: I want to make sure that we're both singing off similar song sheets on this particular issue. I think we are. It's not just illicit liquor in licensed establishments, it's illegal alcohol everywhere in British Columbia.

But moving on, if I could. . . . Does the branch, in its business plan, have a vision for 1997-98? If so, what is it?

Hon. U. Dosanjh: Hon. Chair, not to belabour the point, but I understand the hon. member has received a copy of a document that I have in hand, which talks about the branch vision, the branch mission and mandate. If the hon. member has any specific questions about it that he thinks we should make changes on, I'd be happy to hear them.

R. Thorpe: Is that not the '96-97 document? Are we not discussing '97-98 here?

Hon. U. Dosanjh: That's true. We are; but the mission, the objectives, the vision. . . . Obviously, no laws on liquor have changed in British Columbia. Policy hasn't changed; compliance priorities haven't changed, although we will be emphasizing dealing with illegal liquor being consumed across the province. So I think that that's the vision. If the hon. member wants me to reread it for him, I'd be happy to do that.

R. Thorpe: I do have both of those documents, and I have read both of them extensively. That's where I got the question. When it is in one document and not in another document, little bells go off. You know, there's not that much difference in training between lawyers and accountants, although accountants would never want to admit that about lawyers. You wish you were an accountant.

I note that most of the mandate remains constant. Inspecting and educating. . . . In light of the earlier comments about illicit alcohol, I just wonder if we could have some brief discussion on inspecting: how many, how often, service standards and schedules -- that type of discussion, please.

Hon. U. Dosanjh: I have a document here which is activity by calendar year, and then there is activity by fiscal year. I'd be happy to provide this to the hon. member through the general manager of the LCLB. It gives the number of inspectors: in '94, 24; in '95, 25; in '96, 26; and there isn't any anticipated change.

And then, for activity by fiscal year, there are warning letters, number of hearing decision letters, number of licence suspensions, claims for liquor seizures. I'll be happy to provide a copy of this to the hon. member.

R. Thorpe: I look forward to getting that, and I look forward to having a dialogue with the general manager of the liquor control and licensing branch.

One of the things that I thought I heard you mention, though, is that there does not appear to be any increase in inspectors going forward. Did I hear that correctly or incorrectly?

Hon. U. Dosanjh: I understand there would be an increase of one, subject to us going back to the Treasury Board with respect to our five, and we will do that.

[11:45]

R. Thorpe: So I guess what we're talking about here, when we take that component and put it together with the component about our concern with illicit liquor, is that maybe we're going to be changing the work methodology of these inspectors to address the problem that we agreed was a problem.

Hon. U. Dosanjh: There is a refocusing going on in the branch: refocusing energies from licensing, if we can do that, into inspections and investigations.

The Chair: Member, noting the time. . . .

R. Thorpe: Thank you, hon. Chair.

In reading the business plan, it says: ". . .taking appropriate compliance action." Is there a document that's published that clearly states what compliance actions will be taken in certain situations? If so, is it possible to get that document?

Hon. U. Dosanjh: There is a document with a 30-point plan in that regard. I'm sure that's a public document available to licensees. The hon. member would be free to have access to that.

R. Thorpe: I'll just finish up on this if I could. I guess what I was really concerned with is that if there wasn't a published compliance, then who was deciding? But since there is a published. . . .

So therefore I'd like to move we rise, report progress and ask leave to sit again.

Motion approved.

The committee rose at 11:48 a.m.

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