The Nova Scotia Legislature

The House resumed on:
September 21, 2017.

Public Accounts -- Wed., Mar. 8, 2000

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HALIFAX, WEDNESDAY, MARCH 8, 2000

STANDING COMMITTEE ON PUBLIC ACCOUNTS

8:00 A.M.

CHAIRMAN

Mr. John Holm

MR. CHAIRMAN: Well, good morning. I guess we are ready to get started. There are one or two matters before we do begin that I think the committee has to have a brief discussion on at the end. I am just wondering if it is the wish of the committee to maybe try to conclude by, say, 9:50 a.m. to give us time before 10:00 a.m. to conclude the business, or do you want to schedule that for after 10:00 a.m.? Is 9:50 a.m. fine? Okay.

Well, good morning, everybody. This morning our witness is Mr. John MacLean, who is the Executive Director of Property Services for the Department of Transportation and Public Works. Mr. MacLean, would you like to make an opening statement before we begin the formal questioning period?

MR. JOHN MACLEAN: No opening statement per se, Mr. Chairman. I just want to say that I cannot guarantee I will have all the answers for the questions the committee will put forth. I can guarantee I will answer them as honestly as I can; I will certainly do my best.

MR. CHAIRMAN: Thank you very much. Certainly, if you don't have the answers, sometimes committee members ask for follow-up information and I am sure you will be cooperative in that area as well.

MR. MACLEAN: Yes, certainly.

MR. CHAIRMAN: Thank you. We will begin our questioning. I think, since I am new to the Chair, and we sometimes alternate around, I will begin this morning with the Liberal caucus, and the first round of questioning, we'll say, for 20 minutes per caucus.

The honourable member for Cape Breton West.

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MR. RUSSELL MACKINNON: Thank you, Mr. Chairman, and, Mr. MacLean, welcome to the committee. I would like to cut through the icing and get right to the cake. Obviously, there are a number of issues that the Auditor General has raised in his report that raised the interest of all members of the committee. In particular, two issues: one, a property that is being leased by the World Trade and Convention Centre; and two, another property at 338 Charlotte Street in Sydney.

I would ask, Mr. MacLean, if you would be kind enough to focus on the Sydney property first; if you could give an indication of your, and your officials', involvement from day one.

MR. MACLEAN: Well, if you literally mean day one - although the Auditor General's Report focused on the lease in 1998 - it dates back farther than that, as the service centre was actually opened in 1995, and we became involved at that time.

Our involvement, however, didn't follow the normal process that we go through with client departments; in this case the federal government had the lead in setting up the service centre. There is an agreement of some nature between the province, represented by Economic Development and the federal government and, I guess, the local community development agencies, to set up a centre in downtown Sydney to promote business and downtown development, et cetera. The federal government had the lead. They, in fact, acquired the space; they tendered. There was one bid, we understand - we were not involved at that point - they eventually signed the lease with the owner of 338 Charlotte Street.

The province, as a partner with the federal government in the centre, committed to take their share of space. In that context, we were the department, it is our job to put the documentation in place to in fact secure that space. The rental rate, et cetera, was dictated or it was arrived at by the federal government through their tender process. I believe there was some negotiation with the landlord subsequent to that tender, but he was the only bidder for their tender.

Following that I think it was in 1996-97, for whatever reason, Economic Development and the federal government decided that the centre should be enhanced. In that context Economic Development required more space and there was an agreement subsequently worked out between the federal government and Economic Development that the province, rather than sub-leasing the required space from the federal government, would lease their own space and the lease we had with the federal government would be terminated or surrendered. The federal government would then have their own lease for the space they occupied and the province would have their lease for the space they required. That is the deal that was subsequently approved by P & P and the 1998 lease that the Auditor General refers to is the result of that deal.

MR. MACKINNON: When did your department first become involved in the process?

MR. MACLEAN: Again, are you talking 1998 or . . .

MR. MACKINNON: When the province decided to take over the full leasehold.

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MR. MACLEAN: Certainly after the fact.

MR. MACKINNON: What do you mean after the fact?

MR. MACLEAN: The decision to take over or to enhance or the centre was obviously the client department, Economic Development. I don't know what discussions they would have had with the federal government in terms of improving this service centre.

MR. MACKINNON: Through you, Mr. Chairman, was there any correspondence back and forth between your department and Economic Development?

MR. MACLEAN: Obviously, there was some subsequent to that event, but when we became involved for the 1998 lease, it was after the fact. The decision had been made to expand the centre.

MR. MACKINNON: But you still didn't indicate when you first became involved?

MR. MACLEAN: After the decision to expand the centre we were asked and tasked with, you know, putting the documentation in place that would - for example, the additional space had to be covered by a lease. So we were tasked with doing that.

MR. MACKINNON: Did you offer, Mr. MacLean, any opinion as to whether you were getting value for dollar with what was being arranged?

MR. MACLEAN: At various times we would have.

MR. MACKINNON: Did you do that in writing?

MR. MACLEAN: No. Remember, what was happening in 1997-98 was predicated on the lease that was already in place, the $26 or $27 was the rate that was acquired by the federal government through tender. So in expanding the centre that rate still applied. Where we had difficulties in the 1998 one was having to pay, as well, for the leasehold improvements.

MR. MACKINNON: That being the case, wouldn't it be the appropriate thing for you to notify your counterpart at Economic Development that there would be a considerable cost over and above what would normally be considered to be a leasing arrangement?

MR. MACLEAN: Early on there was an exchange of correspondence with the deputy ministers, probably in 1997 leading up to the 1998 lease. Comments went back to Economic Development at that time from our deputy minister indicating that there were additional costs associated with this that we certainly did not fund and that if, in fact, we were to go ahead with this, the cost would be billed back to the client department.

MR. MACKINNON: Is there any documentation to validate that comment?

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MR. MACLEAN: There is an exchange of correspondence between deputies.

MR. MACKINNON: Could you give an undertaking to the committee to provide that?

MR. MACLEAN: Certainly.

MR. CHAIRMAN: Was that an affirmative?

MR. MACLEAN: Yes, Mr. Chairman.

MR. MACKINNON: In the Auditor General's Report he makes reference to the total cost being somewhere in the vicinity of 30 per cent above market value. However, I noticed in doing some comparative analysis between this one and a number of other properties in and around the industrial area of Cape Breton that there were some factors, I think, that were not considered in doing that analysis, that is my own opinion, one of them being the rental fee for parking. I noticed at 338 Charlotte Street there are 25 or 30 parking spots that no rental fee is being charged. When you look at 25, what I observed anyway, there is no rental fee.

Now, you go down to, let's say, the Commerce Tower, I believe Transportation and Public Works just entered into an agreement there at approximately $28 a square foot? But not entered into the calculations are the parking spaces of which there is a rental fee of $35 per month for parking space. You extrapolate that out over the full length of the leasing for each of them and I think we would come up with a different cost analysis. In fact, instead of saying that we spent $185,000 more than we should have, I think you would have to subtract over $105,000 off that. So you would be down considerably less than 30 per cent. So when leasing arrangements are made, is the parking cost considered?

MR. MACLEAN: When we make leasing arrangements, normally we do not include parking as a requirement or something that we are going to pay for, with the exception of providing parking for deputy ministers and ministers. So if we were leasing a new premise where a deputy minister and a minister are going to be located, as part of our requirement of the landlord, he has to supply at least those two parking spots for free or within the rent. So it is not shown as a separate charge for the parking.

Other parking for clients or for staff of the client department is left up to the client department. For example, if you were tendering for a premise, obviously, there has to be some parking available or, if not at the building, in the building, and certainly within a reasonable distance. So within our tender document, if you were to look at a tender document, you would usually see wording to the effect that parking has to be available within, I am not sure of the exact wording, but a reasonable distance to the premise, but we are not in the business of providing parking. Obviously, as perhaps was the case in Sydney, or it might have been a requirement of the federal tender, I am not sure, but a landlord certainly can, although we ask for two parking spots, he can choose to include five or six.

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MR. MACKINNON: Certainly if you were to look at both these locations, for example, down at the Commerce Tower we are now renting at approximately $28 a square foot and if you add rental for parking space on top of that, in fact, you would be dealing with a case here, tendered or not tendered, that would be far in excess of market value, as opposed to 338 Charlotte Street which actually, when all these costs are factored in, is a pretty good deal. Am I not correct on that?

MR. MACLEAN: I have to say again we don't focus on parking because providing parking for staff, for example, is not one of the things we do. If there is parking at a building, for example, the Commerce Tower, or Harbour Place, that costs $30 a month, $100 a month, whatever and some staff are parking there and they pay for it, that is not something we are concerned with.

MR. MACKINNON: I noticed back in December 1997 that Mr. Emmitt Kelly, Property Officer with the Department of Transportation and Public Works, sent a letter to a Mr. Friedman. I will table this, Mr. Chairman, in case members don't have it and I quote. "This letter is to advise that the Nova Scotia Department of Transportation and Public Works are prepared on behalf of the Nova Scotia Department of Economic Development and Tourism to enter into a ten (10) year lease agreement with you for the additional space on the ground floor . . .".

MR. DARRELL DEXTER: Excuse me, Mr. Chairman, can we have that document?

MR. MACKINNON: I said I will table it.

MR. CHAIRMAN: He is going to table it.

MR. MACKINNON: It would appear to me, Mr. MacLean, there were considerable discussions back and forth between the two departments and I would have thought that with due diligence there should have been some onus on the Department of Transportation and Public Works to raise, at some point in time with the appropriate powers to be, that we weren't getting value for dollar. I don't see that anywhere. You have indicated there is some correspondence back and forth between the deputy ministers. That seems to not have been raised anywhere other than by yourself today. How do you respond to this particular letter by Mr. Kelly?

MR. MACLEAN: At that point, as I said, we were tasked with putting the required documentation in place, the commitment to take the space and to enter into a new lease had virtually already been made.

MR. MACKINNON: The fact of the matter is that it is Transportation and Public Works that does the leaseholds. Only that department can do that, am I correct?

MR. MACLEAN: That is correct, yes.

MR. MACKINNON: If the Department of Transportation and Public Works weren't happy with what was happening, why didn't Mr. Kelly state that? If he was the lead agent for the

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department, why didn't he raise this concern?

MR. MACLEAN: The concern would have been raised, it was raised in various conversations, and I repeat at that point there had already been agreement between the two deputies that the service centre would be expanded and we were proceeding along those lines.

MR. MACKINNON: Did the Department of Transportation and Public Works generally agree that what the Department of Economic Development wanted to do was a good idea?

MR. MACLEAN: A client department, whether it is Economic Development or whatever, their program and what they see as an important initiative, we don't necessarily comment on that, that is for them to decide, for example that the service centre in downtown Sydney was a good idea and it was going to achieve whatever it was going to achieve. That is for the client department to decide. It is not our role to suggest that no, that is not a good idea. (Interruption)

MR. MACKINNON: So it's a landlord that goes around and says, okay if you want to go in location A, your department wants to take the lead, then we will prepare the paperwork for you.

MR. MACLEAN: Again, with Charlotte Street, I repeat when it started in 1995, the federal government as a partner and the lead partner in the service centre took the lead with the province in agreement, they acquired the space on Charlotte Street. What happened subsequent to that, the expansion, et cetera, is within that premise that it has already been chosen as the location for the service centre.

MR. MACKINNON: Going back to the issue, I am going to table another letter here, it was one to Mr. Friedman, December 2, 1997 from Mr. Emmitt Kelly, Property Officer with the Department of Transportation and Public Works. The first paragraph reads, Dear Mr. Friedman: "This letter is to advise that after our telephone discussions and meetings, we have agreed to lease the space next to the Access Centre at 338 Charlotte Street for the Department of Economic Development and Tourism.". That would tell me that there was considerable involvement by the Department of Transportation and Public Works on this issue, going back prior to the time factor you indicated becoming involved.

MR. MACLEAN: What was the date of the letter?

MR. MACKINNON: December 2, 1997.

MR. MACLEAN: I think I indicated or tried to indicate before that prior to the 1998 lease there had already been agreement that the centre would be expanded. The correspondence I referenced between the two departments, which you asked me to provide to the committee, was referenced to the expansion of the space.

MR. MACKINNON: Mr. MacLean, clearly his comments are quite explicit, "after our

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telephone discussions and meetings". Do you have any record of the number of meetings and discussions that Mr. Kelly had with Mr. Friedman on this issue?

MR. MACLEAN: I am sure we could tell you how many, I don't know . . .

MR. MACKINNON: Would you give an undertaking to the committee to table them?

MR. MACLEAN: Sure. The fact that Emmitt is talking to or writing to Mr. Friedman at that point was after the fact. The local development office in Sydney were the ones that decided that the centre should be expanded. There were various commitments made at that time that it would be expanded. Our role comes in after that.

MR. MACKINNON: I understand that. I recall quite clearly when I was Minister of Labour and we were overcrowded in the Provincial Building because for every 15 square feet, there was a person. We had to get additional space. I had general discussions with Mr. Kelly. My discussions were on a proactive basis, let's look at all the different options in Cape Breton and get value for dollar, whichever is the best, whichever can accommodate the staff, best for public service, a whole range of things. There was considerable discussion back and forth, and in the final analysis what we wanted to do, because there was movement in the court system, the Family Court on the first floor of the Provincial Building, has moved down to Charlotte Street because . . .

MR. CHAIRMAN: One minute left.

MR. MACKINNON: Mr. Chairman, thank you. Was that we would go down there. There was quite an exchange back and forth between departments. Quite frankly, the Department of Transportation and Public Works, although we were taking the lead, was quite involved in giving advice on what to do and what not to do. That seems to contradict what you are saying, Mr. MacLean, as per this letter. I am just wondering, how extensive was Mr. Kelly's involvement in this process?

MR. MACLEAN: Not as extensive as you are referring to. It did not follow the normal process.

MR. CHAIRMAN: You have 15 seconds left.

MR. MACKINNON: I can only go by the correspondence. Mr. MacLean is saying the parking spaces weren't involved, but I think it will check that at the Commerce Tower parking is required for the courts. That had to have been part of the arrangement which is over and above what is in the lease.

MR. MACLEAN: Parking was not included as a requirement or to be paid for by the department in the lease. I don't remember just what we put in that original tender, likely there was the requirement to have parking available but not that we were going to pay for it.

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MR. CHAIRMAN: The honourable member for Dartmouth-Cole Harbour.

MR. DARRELL DEXTER: Mr. Chairman, much of this has been examined to some degree by my colleague but just so that I am clear on it, by the time you were asked to deal with the lease on Charlotte Street, it was a fait accompli. Is that fair?

MR. MACLEAN: I think that is fair, yes.

MR. DEXTER: You didn't carry out any negotiations with Mr. Friedman or with anyone else with respect to 338 Charlotte Street prior to the lease being put in place?

MR. MACLEAN: There was no negotiation, I repeat. Remember in 1995, the federal government tendered for the space and did something later on, there was one bidder. They arranged the lease for the whole premise, we subleased from them. But the fact that there was going to be a lease in 338 Charlotte St. was a done deal before we became involved.

MR. DEXTER: The obvious question for me is, who made the deal?

MR. MACLEAN: Again, the province, represented by Economic Development and the federal government and the local development agencies, had struck an agreement in 1994, I guess it was, 1995, that it was a good idea to set up a service centre in downtown Sydney to promote downtown business or whatever. They made that decision, that there was going to be a service centre in downtown Sydney. That then led to the federal government, which was lead between the province and the local development agency, in tendering and acquiring 338 Charlotte Street.

MR. DEXTER: Mr. MacLean, I don't mean to be facetious but are you a hockey player?

MR. MACLEAN: Not anymore.

MR. DEXTER: Okay. That was a lot of skating for a very short question. My question was really simple, who made the deal?

MR. MACLEAN: I am not trying to mislead, I want to be very honest and candid, I am not here to defend Economic Development, but when you say the deal are you talking about 1995?

MR. DEXTER: I am talking about 338 Charlotte Street . . .

MR. MACLEAN: In 1995?

MR. DEXTER: No. The one that is the subject of the Auditor General's comments in his most recent report.

MR. MACLEAN: That would have been Economic Development.

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MR. DEXTER: Do you know who in Economic Development made the deal?

MR. MACLEAN: I don't know about made the deal as such, but there were various people involved. They had a representative in Sydney who we dealt with on this.

MR. DEXTER: Which was who?

MR. MACLEAN: Mr. Sutherland.

MR. DEXTER: Did he tell you that he was the person who made the deal?

MR. MACLEAN: Nobody said they made the deal.

MR. DEXTER: Well it must have come from somewhere; it didn't drop from the sky.

MR. MACLEAN: You won't find any place where Mr. Sutherland, or whoever, said, I made this deal. He was certainly one that we were dealing with in putting the requirements in place.

MR. DEXTER: I guess I am not going to put too fine a point on this; I have asked the question over and over again. If you don't know who ultimately made the commitment . . .

MR. MACLEAN: All I can say is the Department of Economic Development made the commitment.

MR. DEXTER: You don't know who in the Department of Economic Development made the commitment?

MR. MACLEAN: Well, I know we were dealing with their Sydney representative. Now, whether he . . .

MR. DEXTER: Would the minister have made the commitment? Let me put it to you that way.

MR. MACLEAN: Again, I can't say. I didn't have any involvement with Mr. MacDonald, who Stuart Sutherland reported to. I'm not sure.

MR. DEXTER: Okay. You talked a little bit about parking. I don't want to go too far into that because I think you made your point over and over again, but the reality is that when you negotiate a lease, parking arrangements are not part of what you specify.

MR. MACLEAN: Except, as I mentioned, for the deputy minister and minister. We do have to provide for them.

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MR. DEXTER: Yes.

MR. MACLEAN: We do include, as a requirement, the availability of parking within a reasonable distance. Obviously, we know that client departments have customers, and it varies with each department, but we do not make arrangements to, for example, lease or rent that parking, no.

MR. DEXTER: In determining the best value for your money, parking would not be a consideration?

MR. MACLEAN: No.

MR. DEXTER: Thank you. One of the things that arises out of the Auditor General's Report is a question with respect to leasehold improvements. Now, when you are negotiating a lease, do you not negotiate an allowance for leasehold improvements? Isn't that something that the landlord provides you with?

MR. MACLEAN: Normally, we have been, perhaps, lucky in the last number of years, particularly in the local area, because of the market, that leasehold improvements have been included in rent. In other words, when we tender now we tender on what is called a turnkey basis, so when the landlord or the developer comes back with a rate, the required fit-ups, leaseholds, are included in that. That is our normal process.

If I could suggest, in the Sydney situation the federal government does it differently. For their own reasons they get a rate and then they do their own leaseholds. That is what happened in Sydney. Even in 1995, when they went in, they paid for their leaseholds. That sort of sets the stage for what happened afterwards.

MR. DEXTER: But normally when you extract out the leaseholds and do them yourself, that means you get a better rate than market, rather than a worst one. Isn't that a fair. . .

MR. MACLEAN: If we were to do that but, as I said, for the last number of years, and still now, it is easier for us if we just ask for bids based on the landlord doing whatever fit-ups are required.

MR. DEXTER: I'm just trying to focus at this point, and the purpose of this proceeding is to focus on 338 Charlotte Street, and I understand that it is helpful for you to tell us what you are doing now, but, I mean, at that time, what was the normal procedure of the department?

MR. MACLEAN: Well, it has been that way for a number of years, but I repeat, in the Sydney situation, because the federal government was the agency that put the head lease in place in 1995, their procedures are different than ours and they, for their own reasons, want to do their own leaseholds. So that sort of established the stage for 338.

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MR. DEXTER: I'm not suggesting, Mr. MacLean, that there is anything wrong with your department, or with any department, doing their own leaseholds if the cost of those leaseholds get extracted out of the lease payments that you are making. I mean, essentially, we all know that when you get an allowance for leaseholds it is rolled into the cost of the lease and amortized over the term of the lease in most cases, but here you have a case where the leaseholds are extracted, they are being paid for by the department and you are paying an apparently inflated amount for the space.

[8:30 a.m.]

MR. MACLEAN: Whether the $27 is above market or is at the high end of the market you could perhaps argue that, but I accept the Auditor General's comment that $24 was considered market. Clearly in this case, as far as we are concerned, paying for the leasehold on top of that was not something that we would want to do. Again, the stage having been set in the previous lease by the federal government that they pay for leaseholds and the fact that the commitment had been made that this was going to happen, expansion in the centre, et cetera, there was no negotiating position left to us in that case.

MR. DEXTER: So your hands were tied by the fact that this was already in place before it got to you?

MR. MACLEAN: At that time. We understand what rates are and what should be within a rate or what shouldn't be, what is high and what is not, I mean we are not stupid. Since the Auditor General's Report highlighted this, we have gone back to the landlord suggesting that we no longer see a requirement for the additional space in 2001, therefore, we want that deleted from the lease. We are also suggesting that, in our view, the leasehold should have been included in the rate in the first instance. We haven't got a response yet, what it will be, I can't volunteer.

MR. DEXTER: I can just imagine what the response will be.

MR. MACLEAN: We remain hopeful.

MR. DEXTER: As do we. When you are negotiating these leases do you know what the average leasehold allowance would be? It is negotiated on a per square foot basis, isn't it?

MR. MACLEAN: Normally, that is right, a bid or a negotiation is referenced to so many dollars a square foot of usable space. Obviously, it depends on the space, there is no normal allowance as such. You are in the Bank of Montreal Building or Centennial Building?

MR. DEXTER: The Centennial Building.

MR. MACLEAN: If you were to completely renovate your space, we would probably think in terms of $25 a square foot or something like that to renovate it, because your space already has carpet, it has this and that. If you were to ask me about some other building downtown that has

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virtually none of the things or finishes that you have, it is a bare building and perhaps old, then obviously the cost per square foot is much increased.

MR. DEXTER: In this case, this building was already finished, wasn't it?

MR. MACLEAN: Not the portion that was being expanded.

MR. DEXTER: What was the portion that was expanded?

MR. MACLEAN: Technically, it was around 1,500 square feet but with the expansion there was also - and I don't know the full details, I am a few steps removed from the actual renovations themselves - in addition to the bare space that was being picked up and renovated, to incorporate that space would put space with the space that was already there, there were other renovations that had to go on within the space that was already under lease. So it is probably in the order of perhaps 3,000 square feet that was renovated in 1997-98.

MR. DEXTER: I am not a whiz at this but my simple calculations would put that at about $63 a square foot for renovations.

MR. MACLEAN: Yes.

MR. DEXTER: That's a pretty high cost for renovations, wouldn't you agree?

MR. MACLEAN: It is high, but I repeat, in terms of the portion of the building that had to virtually be completely redone, that certainly increases what your per square foot cost is going to be as opposed to doing some normal renovations. Remember, the renovations or that work was tendered, there were five or six bids and they were virtually all within a few thousand dollars of each other. So, clearly there were five or six contractors who calculated that the cost to do the renovation required was what we ended up with.

MR. DEXTER: The Auditor General is sitting behind you. I did ask him last week about the amount of space that was renovated. My recollection was that he was under the impression he thought it was somewhere in the vicinity, I thought you said, 1,200 square feet at that time. Am I wrong on that?

MR. ROY SALMON: Yes, as we understand it, there was approximately 1,200 square feet to which the costs of renovations applied.

MR. DEXTER: That is a wholly different situation. If you take $189,000 and you divide it by 1,200, you get $157.50 a square foot for your renovations and for your leasehold improvements. That is primarily the new space that you are taking on. You said 1,500, but the Auditor General says 1,200 square feet. Now what was going in there that was going to cost $157.50 a square foot?

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MR. MACLEAN: Well, again, with respect to the Auditor General, certainly the 1,200 or 1,500 square feet, that was the new additional space being picked up and that, of course, had to be renovated. But I repeat, as I said just a little earlier, there were also renovations required in some of the existing space to incorporate the new space with that. The new space being picked up had to be completely redone. There was wiring that had to be put in, or taken out; there was air exchange; there was really nothing there that was usable. That certainly had a lot to do with the price we ended up with.

As far as we are concerned, yes, very expensive, but you had five or six contractors, and the leasehold requirements we asked to be done or the requirements, when all was said and done, the finishes in the office are fairly standard. They are no different than we would do for you in the Centennial Building, but the difficulty here is how far back we had to go starting with the raw space that was there. It was virtually redone.

MR. DEXTER: You had to put in sprinklers?

MR. MACLEAN: Probably.

MR. DEXTER: Is that something that a tenant coming into a building would be responsible for?

MR. MACLEAN: Not normally, no.

MR. DEXTER: I mean, that is a continuing benefit to the landlord, until the building falls down, isn't it?

MR. MACLEAN: Yes.

MR. DEXTER: Have you seen this?

MR. MACLEAN: Yes, we provided that.

MR. DEXTER: I am not sure what reference, do you have it in front of you, Mr. MacLean?

MR. MACLEAN: No.

MR. DEXTER: I wonder if we could give him a copy.

There is an allocation here. I guess it is the sixth one down, looks like aluminum frame windows. Is that a normal leasehold improvement cost? Are they putting in new windows or are they replacing the windows that are there?

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MR. MACLEAN: I repeat, the raw space or the additional space that was picked up was completely redone.

MR. DEXTER: Windows are . . .

MR. MACLEAN: Including new front entrances, yes, or a new front entrance.

MR. DEXTER: Well a front entrance is one thing, what I am asking is, were they putting windows in?

MR. MACLEAN: Well, as part of the front entrance, yes.

MR. DEXTER: But it is not the windows in the walls . . .

MR. MACLEAN: Inside?

MR. DEXTER: No, going to the outside.

MR. MACLEAN: Again, I don't know the details but there were windows. I am assuming that they had to do with the front entrance, but they could well have been on the side, as well.

MR. DEXTER: I find it somewhat staggering that you would rent a space that would cost you almost $200,000 to renovate. Given the market as I understand it in Sydney at the time, you must have looked around after you saw this come in and gotten some idea of what the actual cost in that market would have been at the time?

MR. MACLEAN: Well, we don't have to look around. We know what renovations should be. But I repeat, taken in and of itself, the cost that you see to do that work, there were five or six bidders and that is what it was going to cost you to do that. It is not as if somebody inflated it, it is the amount of work that had to be done. Now I don't argue with you that the amount of work that had to be done, certainly, why would we do that? That is questionable and we would not under normal circumstances do that type of thing.

MR. DEXTER: So you are clear, I am not disputing that this was the actual cost of doing the renovations, I am sure it was and I am sure it was tendered. I am sure as you pointed out, five or six people bid on it, but the question is, why would you negotiate space which would require you to do renovations to the extent that were apparently required in this case? When you are going as far as the sprinkler system, that is pretty far down the road in terms of providing a continuing benefit to the landlord at the expense of the department.

MR. MACLEAN: Well, we did not negotiate. That is the crux of the situation. We did not literally negotiate this deal. The commitment to expand in that space was in place. We were left with pulling it together at whatever cost.

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MR. DEXTER: I realize that you were handed this and you were told to put the documentation together, put the lease together. At that point, did you object to it? Did you object to your minister or did you object to the Deputy Minister of Economic Development? You know at this point that this is a bad deal.

MR. MACLEAN: I know it is an expensive deal. I don't know the value of the service centre, that might have been extremely important to Sydney and maybe the results from having it there are good. We didn't talk to the minister directly about it or complain. I repeat, at that time what was given to us was a fait accompli and we had to put the document in place, at least to make it legal so to speak.

MR. CHAIRMAN: I will turn it over to the PC caucus.

The honourable member for Eastern Shore.

MR. WILLIAM DOOKS: Thank you, Mr. Chairman. Good morning, Mr. MacLean. I want to take a trip now and leave Cape Breton and come to Halifax. I would like to ask some very simple, pointed questions about the World Trade and Convention Centre and if the Auditor General would like to jump in at any given time, that would be okay as well. The province owns the centre itself, does it not?

MR. MACLEAN: In a fashion, it is a Crown Corporation. The province supports it, I understand.

MR. DOOKS: What would that facility be worth, the whole physical structure?

MR. MACLEAN: I wouldn't have any idea. I wouldn't venture an opinion now. We have nothing actually to do with the centre. I am not familiar with its operation or the structure so to speak. Of course we lease some space there and that is the extent of our relationship with the centre.

MR. DOOKS: Maybe the Auditor General could clarify that. Does the province have assets there in the World Trade and Convention Centre?

MR. SALMON: The Trade Centre Limited is a Crown Corporation and does publish annual audited financial statements which should be available. I have not seen them recently so I wouldn't want to comment on the value of the property.

MR. DOOKS: Well, what type of money would the province have tied up in that facility?

MR. SALMON: I can get you that information. I don't have it at this point in time.

MR. DOOKS: Do you have knowledge if the centre pays taxes to the HRM?

[Page 16]

MR. SALMON: I can get you that information. I cannot give you an answer specifically right now.

MR. DOOKS: Would there be a mortgage on that facility?

MR. SALMON: No.

MR. DOOKS: There is no mortgage? So it was developed, started, completed, engineered in 1975-76, back in those days?

MR. SALMON: Something in that time-frame, yes, sir.

MR. DOOKS: The intent, I think at that time, was clearly to develop the downtown core, to enhance the convention facilities of the centre, to bring business downtown. Would we be fair in saying that?

MR. SALMON: As I understand it and to provide a facility for recreation and other events, yes.

MR. DOOKS: Well, I guess, back to Mr. MacLean. At what time did Nova Scotia enter into a lease with the Department of Economic Development in that centre?

MR. MACLEAN: The first lease?

MR. DOOKS: Yes.

MR. MACLEAN: Obviously when it was completed, perhaps mid-1980's if I remember correctly.

MR. DOOKS: Did the Department of Economic Development take . . .

MR. MACLEAN: Development at that time, yes.

MR. DOOKS: It is clear, I think, as well that we are probably paying above-average rent for that facility, as well, as is in the Auditor General's Report. Is that true?

MR. MACLEAN: Yes.

MR. DOOKS: When last was that lease renewed?

MR. MACLEAN: 1997, I believe it was, something of that nature.

MR. DOOKS: Is it the practice of government to enter into leases and to pay above par? That

[Page 17]

is confusing, I am just listening to some information about Sydney and now Halifax itself. Why is it that we enter into this type of lease?

MR. MACLEAN: Again you are talking two leases out of 300, just as a reminder so there are a good number that the Auditor General's Department looked at and there was no problem with them. In this particular instance, when that lease was expiring, we recommended that it be tendered. In hindsight, I am not sure if that was the right recommendation. Here is a Crown facility, perhaps the government should have space in there as opposed to leaving something empty because the province, if there was a shortfall in income, they would have to prop that up anyway. In any event, we recommended that it be tendered and then subsequent to that, as we start negotiations, we recommended or we were trying to negotiate on the basis of market rent, we thought that was appropriate at that time.

MR. DOOKS: So we took the approach because it is a Crown Corporation that we should have a presence there as a government and pay above par and you are also telling . . .

MR. MACLEAN: Not above par at this point. We recommended and we started negotiation on the basis of market rent. We thought that was what we should be paying.

MR. DOOKS: I am just going to stop you and go back to the Auditor General. In comparison to other facilities in the city, when we are talking about leaseholds, are we paying more than what we should be paying to have a presence at the World Trade Centre, the Department of Economic Development? Yes or no.

MR. SALMON: There are two parts to that question. Number one, the rental rate for the space in the World Trade and Convention Centre is clearly above market rate. Whether or not that is an appropriate premium to pay to have a presence in that facility . . .

MR. DOOKS: Is the question.

MR. SALMON: . . . is a different question.

MR. DOOKS: At that time when we renewed that lease, let's look across Halifax and we know that the department has to be located probably in the downtown core, were there other spaces available at that time that we could have leased instead of going to the World Trade Centre? That is very confusing to me, taxpayers' dollars, and we decide to spend extra money because we simply want to put a presence and the department in a facility that is a Crown Corporation simply because we feel that we should have it there, with the understanding that that centre does demand a higher rate for rent. It is a very beautiful centre and I can understand that, but what I am speaking of is the taxpayers paying for a facility without any real reasoning. What about the tendering process? How do we go out and make this type of decision? You are also saying that there are only two facilities in Nova Scotia that we are paying above par (Interruptions)

[Page 18]

MR. MACLEAN: No, I am saying the Auditor General's office, in their review of our leases and they had full access to every lease, determined that these two of the leases that they selected were not done according to normal procedure. In the case of the Trade Centre, I repeat, we tried to negotiate on the basis of market rent. There was approval from the Priorities and Planning Committee from submission by Economic Development that, in fact, we would pay the $25, $26.

MR. DOOKS: For whatever reason, it just brings the question.

MR. MACLEAN: Could I just add to that. The reason probably is perhaps not a good one but if we weren't paying the $25 then whatever that shortfall was would likely have to be paid by the province in some other fashion, and maybe that is the appropriate way of doing it, subsidy. They had a rationale for why the additional funds should be paid to the centre. We don't agree that should be in rent but nonetheless.

MR. DOOKS: Well, we have the Westin, we have the Sheraton, they also provide convention-type settings. We also have another Crown Corporation that we are contributing funds to to make sure that it survives, I would think, if we are paying extra rent and if there is a movement that wasn't the norm to go in, and some of the processes were put aside to facilitate extra revenue or to gain extra revenue, to me that is interfering with the private sector. The question is, would the centre survive if we were to remove the Department of Economic Development from that and relocate the department in some other somewhat cheaper facility in the downtown core?

MR. MACLEAN: I don't know. In this current market where there is such a demand for space, it could well be that the space could be leased up. I am not sure. But to do something at this time, when the rents are no longer, or at least the market is no longer, in the $13, $14 range, I am not sure the expense of moving - you have a lease in any event, so you are locked in, you can't get out of leases. I am not sure that would make economic sense.

MR. DOOKS: As a Crown Corporation, we are responsible for the facility, basically the physical building.

MR. MACLEAN: Again, I don't know the operation of it. I do know the province is involved in some fashion.

MR. DOOKS: Are you only involved in the lease, are you not involved in the maintenance?

MR. MACLEAN: No. We are leasing from the centre; to us the centre is our landlord. It is as simple as that.

MR. DOOKS: Maybe the Auditor General could answer that question. As a Crown Corporation, are we, the province, responsible for the physical building? Do we own the building? Are we responsible for the maintenance of the building?

[Page 19]

MR. SALMON: The Trade Centre Limited is a Crown agency and is responsible for the operations and maintenance of that facility; if you take it as the government entity, yes.

MR. DOOKS: They provide services, gather their rent, their lease or whatever, to provide money to maintain, to run the operation as a business?

MR. SALMON: Yes. That includes the Convention Centre and the Metro Centre and the lease with the Mooseheads for the hockey operations and everything else that goes on in that facility.

MR. DOOKS: Does the HRM contribute anything now to the Metro Centre or to the World Trade Centre, any type of funding?

MR. SALMON: As I recall, and it goes back a number of years since we have had any audit involvement with the Trade Centre Limited, yes, the HRM is a partner in the operation.

MR. DOOKS: As a Crown Corporation, I guess you could say that we do own it under those restrictions. Has anyone ever approached the World Trade Centre private sector people to purchase that building, to buy the asset, to take over the Crown Corporation from the private sector?

MR. SALMON: I have not personally, nor has my office, examined that issue or seen any documentation to that effect. I have seen some rumours in the newspaper to that effect.

MR. DOOKS: Sitting here and listening to some of the comments from the chaps in Cape Breton on that issue, I am wondering how this fits in in relation to the private sector, the Westin, the Sheraton, and all of these other people trying to be competitive? When we see a Crown Corporation, whatever answer you want to take with that, we know the province is involved, we know that for some reason we are renting space for whatever reason it may be, political or to support or to help that facility, it still takes away from the fair play of other private sector businesses being competitive in the market.

These questions come in to play. What business do we have as a province interfering in that private sector realm? I don't think it pays taxes. I think that is handled through the grant with the HRM, so therefore the city is losing revenue, on and on and on. We are paying, I believe, more than we should for the Department of Economic Development. Some of these questions I would like to have answered.

I know it is maybe a little confusing trying to split the questions between both management and the Auditor General, but I would like to know what the building is worth? I would certainly like to have some explanation rather than that was the will at the time, why the department is in there when there are other spaces, I believe, in Halifax that are available to lease? I would like to know about the tax issue. We have a major downtown facility in the middle of Halifax, and if the Halifax Regional Municipality is gaining any revenue of taxation, I would like to know what the cost to maintain that building is a year, so I would like to have a copy of the World Trade and Convention

[Page 20]

Centre's audit report. I think I will pass it on. Thank you.

MR. CHAIRMAN: Were there any questions or specific requests to any individual?

MR. DOOKS: I have asked a number of questions and I think you have to determine whose responsibility it is to bring back that information to me. What I am saying, Mr. Chairman, is that the province has a responsibility. The budgets are coming up and this question is coming from me. You know I have a history behind me of the private sector. I am concerned about the . . .

MR. CHAIRMAN: I am not trying to interfere, but you had posed a number of questions and the clock is running out. If you feel satisfied that the questions that you put forward can be answered, it may be to your advantage to allow a response.

MR. SALMON: I can undertake to work with the Committee Clerk to get you information on the operations of the Trade Centre Limited, including the audited financial statements. Your question as to whether or not government should be in the business of competing with the private sector is really a public policy issue that I cannot address. That is not within my mandate to comment on whether it is appropriate or not for government to be in the business of operating a facility like that, but I can get you, or assist the Clerk in getting you the financial information that will tell you the extent to which that is a profitable operation, to the extent to which it pays or does not pay taxes, and the extent to which there is a value to that property. We will get you that information.

MR. CHAIRMAN: There is a little less than five minutes remaining in the first round.

The honourable member for Pictou East.

MR. JAMES DEWOLFE: Thank you, Mr. Chairman, and, Mr. MacLean, thank you for being here. I certainly want to commend you for keeping your composure and putting such a brave face on this situation, and protecting your department and your superiors. Given the circumstances that you were caught in, a situation that you really weren't responsible for, I certainly have to commend you for that.

You indicated that you were involved to some extent in putting the lease together, yet someone else set the price and did all the groundwork. I am wondering how many times prior to this incident - that is the Charlotte Street one that I am referring to - were you left outside of the transactions, and fully realizing that you have already mentioned that we are talking about two leases out of 300, is that correct?

MR. MACLEAN: Roughly 300.

MR. DEWOLFE: So out of those 300, how many times has this sort of thing happened?

MR. MACLEAN: It is certainly an anomaly. We normally have - or we do have, pardon me,

[Page 21]

in our client departments, we serve every department - a contact person in the department whom we deal with on space issues, the department's requirements, and as we move along in acquiring space it is funnelled to us through that person. So normally that process, virtually in every lease, works very well and we are, again, normally involved right from the get-go. There is now in place, or back in place I guess, the Space Utilization Committee which was not in place in 1997, and the client department, if they want to expand their facility or there is new space, their request comes in to the Space Utilization Committee which looks at it, analyses it and decides whether, in fact, what they are asking for is appropriate and we are involved with the Space Utilization Committee right from the front end. So, in most instances we are there at the beginning and follow right through.

[9:00 a.m.]

I guess in the Sydney situation our normal contact was not involved so we were dealing with people, perhaps and likely for their own good reasons whose goal was to have this centre set up. They were not necessarily familiar with our procedures and space requirements. So that played perhaps a part where this one was not done in the normal fashion. They were doing things that perhaps normally we would be left to do.

MR. DEWOLFE: That was kind of a roundabout way of getting to the point, maybe you should summarize your answer. As my honourable colleague mentioned, you were skating around one of his questions and the hockey game is over, sir. I would appreciate it if you could summarize it and talk about who they are and perhaps you could get to the point on the answer?

MR. MACLEAN: Not purposely trying to skate around I assure you, I am just trying to give a clear answer, but I take note of your comment.

MR. DEWOLFE: Well, again, I will say perhaps you could summarize your answer. Who are "they", for instance? You keep saying "they".

MR. MACLEAN: In connection with Economic Development, the person around the Sydney office at the front end, or the beginning in 1995 there was also someone here in Halifax that we were dealing with.

MR. DEWOLFE: At any time did you feel that the Minister of Economic Development was playing a major role in getting this thing going?

MR. MACLEAN: I cannot say that we did at the time we were doing it. We don't get involved necessarily with ministers as such. Certainly in hindsight we have heard the many comments.

MR. DEWOLFE: Somebody in high places was getting this thing going without your involvement, obviously, to take it to where it was finally dumped on your lap? It was a done deal. You already indicated that.

[Page 22]

MR. MACLEAN: The people we were dealing with, obviously, report to somebody, but I cannot comment on who that was.

MR. DEWOLFE: And the Minister of Economic Development at that time was?

MR. MACLEAN: In 1995 it was Mr. Bragg and subsequently it was Mr. Manning MacDonald.

MR. CHAIRMAN: Your time has expired. We will go back to the Liberal caucus for 10 minutes.

The honourable member for Cape Breton West.

MR. RUSSELL MACKINNON: Thank you, Mr. Chairman. Mr. MacLean, in the Auditor General's Report, Page 158, Paragraph 9.41, " . . . the Department of Transportation and Public Works was not asked to negotiate the lease, even though it has legislated responsibility for property management . . .". You indicated, Mr. MacLean, that your contact person wasn't involved in this process. Who is your contact person?

MR. MACLEAN: Our normal contact person is Ernie MacCulloch at the Department of Economic Development.

MR. MACKINNON: I see. So if he wasn't involved, then normally that would signal things are not going the normal course of leaseholds, how you would become involved from one department to the other?

MR. MACLEAN: I am not sure you can say that just based on that.

MR. MACKINNON: You are the executive director?

MR. MACLEAN: Yes.

MR. MACKINNON: You are responsible?

MR. MACLEAN: The client department can choose who they want to, in fact, deal with an issue. All I am saying is that with Economic Development normally that was Mr. MacCulloch. In this instance there were different people perhaps because this was a new initiative being set up so they were tasked with setting it up.

MR. MACKINNON: Let's put it this way. Mr. MacLean, when was the head lease changed?

MR. MACLEAN: With the 1998 lease.

[Page 23]

MR. MACKINNON: Were there any conditions attached to that when it came from P & P or Cabinet?

MR. MACLEAN: I don't recall conditions. I am not sure what you mean by conditions.

MR. MACKINNON: Well, obviously, if there was going to be a change of a contractual arrangement taking over the federal aspect of it, there would had to have been some approval by P & P?

MR. MACLEAN: Excuse me, yes. Clearly Economic Development did go to P & P to seek approval for the new arrangement.

MR. MACKINNON: When did they do that?

MR. MACLEAN: In 1998.

MR. MACKINNON: When?

MR. MACLEAN: I am not sure of the month, but prior to the signing of the lease.

MR. MACKINNON: Do you have the documentation on that?

MR. MACLEAN: Yes, we would have documentation.

MR. MACKINNON: Would you provide that to the committee please?

MR. MACLEAN: Yes. Just to be clear, you are talking about the submission to P & P and what came after?

MR. MACKINNON: Yes. Mr. MacLean, you have indicated that P & P or Transportation and Public Works were not involved in the process. I am going to table a letter here dated August 14, 1997, that is signed by Mr. Bert Loveless, Deputy Minister of Economic Development and Tourism. It is addressed to Mr. Bruce Atwell, Deputy Minister of Transportation and Public Works. Essentially, in a nutshell, it outlines that Economic Development would like to expand its Sydney office - I am going to have that letter circulated, Mr. Chairman, for all members to review - and essentially asking for the involvement of Transportation and Public Works.

I will table another letter dated September 2, 1997 addressed to Bert Loveless from the Deputy Minister of Transportation and Public Works, Mr. Bruce V. Atwell, essentially outlining that there is no money in Transportation and Public Works' budget, essentially putting that over on the shoulders of Economic Development and Tourism, but in the final paragraph he states ". . . on this understanding, we will have Emmitt Kelly contact Mr. Kennedy and the landlord and see what arrangements can be worked out.". To me, that contradicts what you stated earlier, that the

[Page 24]

department was not involved.

What is the line of communication in the Department of Transportation and Public Works with regard to leasehold management? Obviously you are the executive director. We have the deputy minister giving some indication that there is involvement as far back as August, you are not able to tell us when the directive came from P & P, and the terms of reference on that directive and exactly who is involved in the process, because I see a lot of discussion here in reference to Mr. Emmitt Kelly yet you have indicated he is kind of unattached to the process.

Could you please clarify why there is so much confusion as to the lines of responsibility? When you started off in your introduction, you said you would try to be as honest as you possibly could. For me, that is not good enough. I want honesty, I don't want skating around the ice, I want clear-cut answers. Do you have a responsibility on this or do you not?

MR. MACLEAN: Clearly Transportation has a responsibility for leasing premises. I repeat, in this instance you see Emmitt involved. We were not as involved as we would be with virtually every other lease. The fact is that Emmitt was going to make arrangements, the commitment to take the additional space had already been essentially made. The 1997 arrangement, where we were going to expand the space, that changed later on to what P & P approved, a 10 year lease, and in fact the province was going to take back a space it was sub-leasing with the feds and lease its own space, and the feds would lease their own space.

When you say I can't tell you with regard to the P & P approval, I can't remember the exact date, it was April sometime. The P & P approval approved the 10 year lease and the taking, I think it was 6,000 square feet initially and then adding 4,800 square feet that the federal government had, we would add that in 2001.

MR. MACKINNON: Mr. MacLean, clearly you knew you were coming before this committee today, you knew this issue was on the agenda, and you knew that the committee was seeking to get the proper information to do a complete analysis on this, and yet you have failed to provide that. My question is why?

MR. MACLEAN: What proper information, what more information are you talking about?

MR. MACKINNON: Well, clearly when the directive that you suggest, and obviously it was approved by P & P, on changing the head lease, that would be an integral piece of information on doing a proper analysis on this. You have indicated that this was essentially all Economic Development and Tourism's doing, but yet the paper trail that we have been able to deal with clearly indicates quite the contrary, as far up as the deputy minister level. If you are the executive director, why is there such a break in communication between you and the deputy minister?

MR. MACLEAN: Again I don't follow what you are saying. The fact that Economic Development took the lead and made commitments doesn't mean - as I say, you have letters there,

[Page 25]

Bruce Atwell, Emmitt Kelly, that we became involved to pull the thing together.

MR. MACKINNON: So you were involved.

MR. MACLEAN: Obviously. We said that initially, putting the documentation in place. We did not make the commitment for the space, that was already done. We put whatever documentation was required after that commitment was made by Economic Development.

MR. MACKINNON: I realize my time is getting short.

MR. CHAIRMAN: You have just a little over a minute.

MR. MACKINNON: Just focusing, I guess I am somewhat perplexed because personally I believe we are getting a lot of contradictions here by Mr. MacLean. I am perplexed how he is defending the Commerce Tower deal and yet coming from Glace Bay, the court facilities, where there was an offer of $20 per square foot, which is $8 per square foot less than going into the Commerce Tower, notwithstanding the cost of the parking, there was free parking in the Glace Bay area, and trying to fill in with the government's intent to try to be fair to all the various communities, why did the Department of Transportation and Public Works opt for going at $28 a square foot rather than $20 a square foot?

MR. MACLEAN: It is not Transportation and Public Works opting for that. The client department, in this case Justice, they decide . . .

MR. MACKINNON: Justice bypassed the normal process . . .

MR. CHAIRMAN: Maybe we could have the answer finished.

MR. MACLEAN: A client department decides what their programs are going to be, if there is consolidation or if there is this or that they are going to close offices. We don't decide for a client department those issues. Justice, for their reasons, decided that the community is better served by having all court facilities located in one location. That involved closing down courts in a number of locations including Glace Bay.

MR. CHAIRMAN: There may be time to come back. We will move on to the New Democratic Party.

The honourable member for Dartmouth-Cole Harbour.

MR. DEXTER: Mr. Chairman, thank you for the opportunity to pursue this a little further. I just wanted to follow up on the line of questioning I had last time. I don't know if you have done the math on this. If you rolled the leasehold improvements into the lease on the Charlotte Street property, the one we are talking about here today, do you know what the effective lease rate

[Page 26]

becomes?

MR. MACLEAN: I think if you advertised at $189,000, that would add another perhaps $4, $5 a square foot to it.

MR. DEXTER: So instead of, I think what you had there at $27.69, you are now paying $31.69 a square foot.

MR. MACLEAN: If you do that, yes.

MR. DEXTER: My calculations say that that adds about $1,500 a month to the lease every month for the next 10 years.

MR. MACLEAN: I haven't done the math, but if you did that calculation, that is possible.

MR. DEXTER: Do you know what other leases you have in Sydney and what you are paying per square foot for them?

MR. MACLEAN: We have a number of leases. They range from $28 or $29 down at Harbour Place for the Department of Justice, we have other leases that are $15, $19.

MR. DEXTER: In the materials that we were given in preparation for coming here there is a list, this comes as part of a document which is called the Real Property Management Report and Recommendations dated June 1999, and it has a list, Appendix 2, Downtown Halifax Buildings, Office Space Leased and Owned. This is what it says: Joe Howe Building, cost per square foot, $7.00; Centennial Building, cost per square foot, $15.21; Founders Square, $13.29; Maritime Centre, $12.81.

MR. MACLEAN: I apologize, was your question before about Halifax or Sydney?

MR. DEXTER: No, I am trying to rationalize these things. Your cost per square foot in Halifax appears to be, even in Purdy's Wharf where the average cost per square foot is $15.39, well below half of what your cost in Sydney is going to be.

MR. MACLEAN: It is supply and demand; the market determines basically what you are going to pay. I mentioned earlier that we have enjoyed a very good market in downtown Halifax for the last five to seven years; we have had gross rates, turnkey, as low as $10-something. The Joseph Howe one you mentioned, that is not actually the full rent because I think that just is operating costs. That is a lease-to-own building, so the rental portion of it, I guess, is paid for, not from our budget, so it doesn't show up there, but clearly in downtown Halifax, we have had rents like that. They are tendered. That is what the market has been. Sydney is a different market.

MR. DEXTER: Yes, of course, and would you describe it as constricted or is there a shortage

[Page 27]

of office space?

MR. MACLEAN: In Sydney?

MR. DEXTER: Yes.

MR. MACLEAN: Yes, there are clearly only a handful of developers, maybe even less than a handful down there in Sydney, and there is a limited amount of space available compared to here.

MR. DEXTER: At the time that this lease was made, do you know whether or not the government had, on inventory, available space in Sydney or the surrounding areas?

MR. MACLEAN: No, we would not have. One of the things we do if we are asked to acquire space for a client department is, we obviously make sure that we do not have any, for example, Crown-owned space available or lease space that for some reason is not fully used; we don't maintain any amount of vacant space, whether it is leased or owned. If you were to go to Sydney now perhaps, and went through the Provincial Building, you would see some vacant space because when the new Access Centre was set up, and the Registry of Motor Vehicles is part of that and they moved out of the Provincial Building, you would see that space currently vacant; however, it is being renovated or will be renovated to accommodate Community Services coming from some other leased premises. So our first goal is that we make sure that any free space that we own is fully occupied before we go to the market and rent space.

MR. DEXTER: Now you indicated to us previously that really this was handed to you as a fait accompli, so even if there had been space available somewhere else I assume you couldn't have used it were it available, and I am just wondering, have there been internal changes put in place to prevent this from happening again?

MR. MACLEAN: Well, there is no internal change required within our department. The majority of other leases are handled properly and according to procedure.

MR. DEXTER: This one was handled improperly in you view, was it?

MR. MACLEAN: It wasn't done according to the procedure we would certainly have followed if we were given a free hand.

MR. DEXTER: I am not sure if you mentioned this earlier or not, but there is a space committee that looks after the utilization of space. Is that correct?

MR. MACLEAN: The space committee is the committee that receives requests for additional space, changes in space, new space, and decides whether that requirement, is correct or not, and if they approve or not approve the client department's request. With the approval of the space committee, then the Department of Transportation and Public Works proceeds to acquire the space.

[Page 28]

MR. DEXTER: Was that committee done away with at one point?

MR. MACLEAN: The way it is set up now is different than it used to be but it was a committee that was in existence for many years, certainly back to when I joined government in the late 1970's until 1993 with the change in government. With that the committee just ceased to operate.

MR. DEXTER: Do you know on whose instruction?

MR. MACLEAN: It wasn't on instructions, it just went into limbo. There was no active decision made, that basically it is gone. It was just the fact that there was a change in the government organization and it ceased to function. We were only able to get it re-established in, I guess it was January 1998, and it has a different configuration than it had previously, but it began functioning again in January 1998.

MR. DEXTER: With respect to the rental of the Charlotte Street property and the conversations that you had with people, did it become clear to you that there were political considerations at play?

MR. MACLEAN: We didn't have those types of conversations. We are apolitical and we try to be objective and carry out what we are supposed to do objectively. Again in hindsight, we hear various things. I don't know if we heard things at that time, I don't recall. We certainly didn't and don't deal with the various elected officials. That's not what we are up to.

MR. DEXTER: Well, I am sure, Mr. MacLean, as you mentioned earlier, and I would agree, you are not stupid. You see something like this happening, you know that it is an expensive deal, you know that it is . . .

MR. CHAIRMAN: The time is expiring.

MR. DEXTER: Surely at that time there must have been some talk about why this was happening?

MR. MACLEAN: What we would see was that the federal government and the provincial government came to an agreement and decided that a service centre was an important initiative to be set up in downtown Sydney for whatever reasons. Whether we agreed with where it ended up or not, it didn't matter. The decision was made that this was going to be good for Sydney, that it would improve business or enhance business of some sort so that is what we would have seen at that time.

MR. DEXTER: I have a really brief and unconnected question, so as a short snapper I will throw this out to you. My colleague last week mentioned a building in his constituency known as the Mines Building. He indicated that it was renovated about 10 years ago, that it sits empty, while space is being leased in New Glasgow for offices. I guess from the taxpayers' perspective, they want to know why it is you are leasing buildings and buildings are sitting empty?

[Page 29]

MR. MACLEAN: I haven't been in the Mines Building for some time but a year ago, I guess it was, or something of that nature, the Mines Building was turned over to the Nova Scotia Museum. It was surplus to the Department of Natural Resources a couple of years ago. We tried to market it without success, tried to dispose of it, because there wasn't a requirement for the space. Subsequent to that, the museum for the Department of Education did have a requirement for it and it was turned over to them at that time. I don't know just what they have done with it since then, but clearly their requirement was spelled out and it made sense to us.

MR. CHAIRMAN: The member for Colchester North.

MR. WILLIAM LANGILLE: Thank you very much, Mr. Chairman. We have certainly dealt with the Charlotte Street property a lot this morning, and I guess that is where I want to continue right now. First of all, I would like to identify the owners of the Charlotte Street property which we referred to this morning. Who are the owners?

MR. MACLEAN: Well, as I said, the Friedmans, through a numbered company, I guess, owned the property.

MR. LANGILLE: Who are the Friedmans? Do you have the first name of the owners?

MR. MACLEAN: Louis Friedman and Ben Friedman.

MR. LANGILLE: What is their background? I don't mean politically now, what I am talking about is, what is their business background?

MR. MACLEAN: I don't know the Friedmans at all. Although we have leased in the Sydney market for many years obviously, we have never to my knowledge dealt with them. I don't recall that they have ever bid on any properties. I really don't know them at all. When this started, we didn't have any knowledge of who they were.

MR. LANGILLE: Now the Department of Transportation and Public Works are responsible for leases to government buildings in Nova Scotia. Is that correct?

MR. MACLEAN: Yes.

MR. LANGILLE: In this case, were you circumvented by the Economic Development Department?

MR. MACLEAN: There is no, you know, yes or no answer to that. The procedure was not the way it normally is. We were not involved to the full extent that we should have been. As Mr. MacKinnon has pointed out, we did have involvement, but not the normal involvement that we would have had right from the start.

[Page 30]

MR. LANGILLE: Who was the Minister of Economic Development in 1998?

MR. MACLEAN: Manning MacDonald.

MR. LANGILLE: Did he also serve on Priorities and Planning?

MR. MACLEAN: Yes.

MR. LANGILLE: Was the lease for Charlotte Street approved by Priorities and Planning through Economic Development?

MR. MACLEAN: Yes.

MR. LANGILLE: What was the role of the Department of Transportation and Public Works at that time?

MR. MACLEAN: To put the documentation in place, to see that the leaseholds were carried out.

MR. LANGILLE: But Transportation and Public Works did not negotiate the lease, is that correct?

MR. MACLEAN: Not as such. Again, the way the lease ended up was basically just a carry-over from the original arrangements in 1995 when the federal government first went in there.

MR. LANGILLE: Right. Do you know what riding Mr. Manning MacDonald represents?

MR. MACLEAN: No.

MR. LANGILLE: Does he represent this riding that we are talking about on Charlotte Street?

MR. MACLEAN: I don't know.

MR. MACKINNON: Yes.

MR. LANGILLE: My colleague to the left said yes, so I take it that he does. Thank you very much.

MR. CHAIRMAN: That is the member for Cape Breton West you are referring to.

MR. LANGILLE: Yes. There has been a lot of referral to ice-skating today, but I notice there has been a lot of stick-handling too. Anyway, I want to get into some renovations now. Is it usual for Transportation and Public Works to do exterior renovations as part of a lease?

[Page 31]

MR. CHAIRMAN: Not usual, no.

MR. LANGILLE: The Auditor General referred to 1,200 square feet being renovated and I think you referred to up to 1,500 square feet?

MR. MACLEAN: I am using 1,500; 1,200 compares to what the Auditor General is saying. We are talking about the same space. That was the raw additional space that was being added. The renovations extended somewhat beyond that to incorporate the existing space with the addition. The addition wasn't to stand alone separately. It was to be incorporated with what was already there. So there were renovations in the existing as well, but the lion's share and the fact the leasehold cost what it did was to a large extent, or the major extent, because of the condition of the additional space that was being picked up.

MR. LANGILLE: To build a 1,200 square foot bungalow, at $100 a square foot would be $120,000, is that correct?

MR. MACLEAN: Yes, that is the math, yes.

MR. LANGILLE: Approximately which I think was well above the cost per square foot now. So to do this lease what are we looking at per square feet for 1,200 at $189,000?

MR. MACLEAN: Well, divide the $189,000 by 1,200 if you use the 1,200. I am saying the costs were extended somewhat beyond that. So that would not give you the correct figure. The $189,000, that was not the cost just for the 1,200 square feet.

MR. LANGILLE: Are you aware that the Department of Transportation and Public Works leases property in Debert Industrial Park in Colchester North?

MR. MACLEAN: Yes.

MR. LANGILLE: At $5.00 a square foot going up to $9.00 a square foot?

MR. MACLEAN: Again I am not close enough to that one to know specifically.

MR. LANGILLE: Who establishes the norm for the price per square foot in Sydney? What is the fair market value for price per square foot?

MR. MACLEAN: I would not disagree with the Auditor General where they determined that $24 was perhaps what the market was. We have rents and leases there that are above that and not including 338 Charlotte Street and some are below that, but when you say who establishes, obviously, the market would establish what the market price is - supply and demand.

MR. LANGILLE: Supply and demand. What would be the demand right now in Sydney for

[Page 32]

office space? Do you know the amount of square footage that is vacant right now in Sydney?

[9:30 a.m.]

MR. MACLEAN: Not off the top of my head, no. I would suggest there is very little first-class office space available because there are not very many so-called first-class office buildings in Sydney - Harbour Place, Commerce Tower.

MR. LANGILLE: So getting back to the tendering for the office space, there was only one person that offered the space, is that correct?

MR. MACLEAN: That is my understanding. Remember the federal government tendered that originally. We had no part in that. So it is second-hand information but we understood there was only the one bidder and there was something with regard to the bid that led them to perhaps negotiate after the bid but, in any event, the response to their original call for tenders was one bidder.

MR. LANGILLE: Would you know who the Minister of Public Works and Government Services for the federal department was at that time?

MR. MACLEAN: No, no.

MR. LANGILLE: We are talking about 1995, aren't we?

MR. MACLEAN: Yes, 1994-95.

MR. LANGILLE: 1994-95?

MR. MACLEAN: Yes.

MR. LANGILLE: That was a Liberal Government, wasn't it, sir, at that time?

MR. MACLEAN: Federally?

MR. LANGILLE: Yes.

MR. MACLEAN: I believe so.

MR. LANGILLE: Those are all the questions I have.

MR. CHAIRMAN: There are about two minutes left in the PC time.

The member for Pictou East.

[Page 33]

MR. JAMES DEWOLFE: I guess we will be coming around again for a short summary anyway.

MR. CHAIRMAN: Four to five minutes.

MR. DEWOLFE: So in the remaining time I will go back to the costs associated with the renovations and I am just looking at them. Some of them seem exorbitant to me having just gone through the process of building a house myself. I know drywall is one of the least expensive parts of building a house and even to get it installed, even if Bob Vila, for heaven's sake, comes and does it at his costs, the cost of putting up a sheet is about equivalent to the cost of a sheet. So when you look at $21,998 for drywall and acoustic, which is the ceilings and so on, if you took half that and just said for rough figures then $10,000 for the actual materials and another $12,000 to put them up. Then you are talking at $5 a sheet, probably 2,000 sheets of drywall, so you could do half the cottages around the lake there with 2,000 sheets of drywall. So there is something in my mind awfully wrong with some of these figures that come in here because that is really a high price and I think certainly something that should be looked into a lot closer.

I will certainly reflect back again to the exterior windows there at $16,000. We should never allow that - and I know we have 27 seconds left - but we should never allow this to ever happen again in any agreement, putting in leases, and, quite frankly, it probably ruins the day of our Auditor General when he has to see this sort of thing going across his desk and I feel sorry for him in that regard.

MR. CHAIRMAN: We have probably got time for four or five minutes per caucus if the Liberal caucus would like to . . .

The honourable member for Dartmouth East.

DR. JAMES SMITH: Mr. Chairman, just very briefly on a point of clarification. On the information from P & P, I just want to be clear that we have requested Mr. MacLean to bring forward the presentation that his department made to P & P and could we also include the response? He said that P & P had approved the tender. If we could have that information and the correspondence surrounding those matters as well, I am not sure, I think it was asked for, but I wasn't clear.

MR. MACLEAN: Yes, I undertook to provide a copy of the submission and the response from P & P, yes.

DR. SMITH: Great, thank you very much.

[9:33 a.m. Mr. David Morse took the Chair.]

MR. CHAIRMAN: I would like to recognize the member for Cape Breton West.

[Page 34]

MR. MACKINNON: Thank you, Mr. Chairman. Mr. MacLean, who does Emmitt Kelly report to?

MR. MACLEAN: He reports to the Director of Accommodation and Facilities Management now.

MR. MACKINNON: Who is that?

MR. MACLEAN: Mr. Don Sutherland.

MR. MACKINNON: At that particular point in time when all this 338 Charlotte Street was on the go, who did he report to?

MR. MACLEAN: I believe it was Don at that time as well. I had previously been the director. The position Mr. Sutherland has now, I held that position and then became Acting Executive Director, so at that time I was Acting Executive Director, if memory serves me correctly, and Mr. Sutherland would have been acting director.

MR. MACKINNON: That seems to contradict - I recall a conversation with Mr. Kelly, after this issue was first raised by the Auditor General. I took the liberty of contacting Mr. Kelly, and Mr. Kelly advised me that he reported to you on this particular issue. That seems to be supported by a letter that was signed by Mr. Bruce Atwell, addressed to Mr. Bert Loveless dated October 7, 1997, where the deputy minister indicates, ". . . I have asked that Emmitt Kelly from my Real Property division contact your Mr. Kennedy to arrange for the space as quickly as possible.". This letter is cc'd to John F. MacLean, Public Engineer, A.A.C.I., A/Executive Director, Real Property Services, that is yourself.

MR. MACLEAN: Yes.

MR. MACKINNON: Obviously you were in the loop during these discussions and negotiations.

MR. MACLEAN: Yes, I didn't say I wasn't in the loop.

MR. MACKINNON: Oh, well, Mr. MacLean, to be quite specific, you indicated and left the impression that Transportation and Public Works were circumvented on this entire process and just essentially sat down and wrote up a lease as you were directed by P & P. You indicated it was P & P that approved the terms of reference on the lease.

MR. MACLEAN: P & P approved the basic terms of the lease, 10 years, and the additional space in 2001. To be correct, I didn't say we were completely circumvented throughout the whole process.

[Page 35]

MR. MACKINNON: Well you did . . .

MR. MACLEAN: No, not through the whole process. We were involved but not as involved as we normally are throughout the whole process. Meetings went on, there were discussions that we were not, or Emmitt was not, included in. As far as Emmitt's reporting, we don't operate in terms of a hierarchy. I am not acting executive director I am Executive Director now, Don Sutherland is Director. That doesn't mean that I don't deal with Emmitt or any other property operators on a particular issue.

MR. CHAIRMAN: You have 45 seconds left.

MR. MACKINNON: I realize my time is short. Mr. MacLean, the Conservative caucus have alluded to the fact that privatization is in the offing with the World Trade and Convention Centre. Has there been any discussion with you or officials within your department, on the issue of privatizing the World Trade and Convention Centre?

MR. MACLEAN: No, none at all.

MR. MACKINNON: Obviously "you wouldn't be in the loop" on that particular issue if there were?

MR. MACLEAN: As I mentioned earlier, we have nothing to do with the Trade Centre other than we lease space from them.

MR. MACKINNON: Were you involved in the discussions on moving the court facilities from Glace Bay to Sydney?

MR. MACLEAN: Yes, we were involved.

MR. MACKINNON: So you approved it?

MR. MACLEAN: It is not a case of approving, as I said the client department's program, they decide where they want to locate their offices, if not specific to a location, but consolidation . . .

MR. MACKINNON: Will you table the information on that also?

MR. CHAIRMAN: The honourable member for Sackville-Cobequid.

MR. JOHN HOLM: Mr. Chairman, a few brief questions. I can't help, as I begin, making the observation that it is interesting that the member for Cape Breton West has these government documents that members of this committee didn't have and maybe we can find out where those documents came from. A couple of questions if I might.

[Page 36]

First of all, between 1993 and 1998 the Space Utilization Committee had been set in abeyance or not functioning. During that period of time, did departments regularly come to the Department of Transportation and Public Works and tell you what they wanted?

MR. MACLEAN: The process of space, getting space, adding to space continued between 1993 and 1998. Departments continued to come to us with requests for space. They didn't come to us and say get us this (Interruption) But they did come with requests.

MR. HOLM: I have been around this place long enough to remember the Space Utilization Committee prior to the 1993 period and, in order for departments to be able to get approval, there had to be approval through the Space Utilization Committee. During the period between 1993-1998, did that Space Utilization Committee evaluate requests from departments for space?

MR. MACLEAN: Between 1993 and 1998, the Space Committee didn't exist.

MR. HOLM: Okay, it didn't exist. So during that period of time, if a department wanted to increase their space or to do different things like that, what was the process that was followed? Did those departments then go, would the ministers then go to P & P to get P & P's approval, or what was the process?

MR. MACLEAN: The process was they would come to us and we would review their request, likely it would involve our deputy minister and we would approve or otherwise.

MR. HOLM: So the approval for all of the others went through the Department of Transportation and Public Works?

MR. MACLEAN: Yes, during that period of time.

MR. HOLM: Is this the only situation that you are aware of where the request did not come to the department for evaluation and approval before the deal was agreed to?

MR. MACLEAN: Yes, to my recollection.

MR. HOLM: So this is unique situation. This one situation on Charlotte Street in Cape Breton is the only case where the process of getting the department's approval was circumvented and you were then given a done deal?

MR. MACLEAN: Again, I don't like the word "circumvented", where it is all encompassing, because as Mr. MacKinnon pointed out we did have some involvement . . .

MR. HOLM: I appreciate that. You had involvement in putting together the documents, but you were not asked for approval of this particular lease; you were given space and you were told how much you were going to be doing. Am I correct in that?

[Page 37]

MR. MACLEAN: I think that is fair.

MR. HOLM: The next question is, do you have a copy of the tender that the federal government called for this space?

MR. MACLEAN: No, we asked for a copy of it, but their policy is not to . . .

MR. HOLM: The federal government? We entered into an agreement and took part of a lease arrangement with the feds and we didn't even receive a copy of the tender that they put out?

MR. MACLEAN: That is correct. I am not sure that is unusual. We asked to see a copy of it. We lease space from the feds in various locations, they lease some from us.

MR. HOLM: If the feds asked for information on a tender and how we went about to ensure that we get the best bang for our buck through a tender process, if the feds asked for a copy of our tender, would that not be provided to them? Wouldn't it in fact be a public document?

MR. MACLEAN: If they asked us?

MR. HOLM: Yes.

MR. MACLEAN: Yes.

MR. HOLM: But the feds would not provide us or share the information on the tender?

MR. MACLEAN: They shared the information in terms of the rate and that, but they would not give us a copy of the tender. To be fair to them, I am not sure that we pursued it and went after them, like you have to give it to us. We asked for it and their policy was that they do not provide it to us.

MR. HOLM: So we have no idea if that tender call was a reasonable one, or if it was crafted in such a way that really there may only be one who may be able to bid on that tender? We have no information on it?

MR. MACLEAN: No. We know the square footage they tendered for, we know or understand that there was one bidder, but we don't know the boundaries that they established for the tender.

MR. HOLM: Okay, thank you. I will just close with this final comment. I personally do not hold Mr. MacLean responsible for the arrangements that were made. These were decisions that were passed to him, and I certainly don't think that he should be the one who should be wearing the responsibility for what appears to be a very poor deal for the taxpayers of the Province of Nova Scotia, but very good for some others.

[Page 38]

MR. CHAIRMAN: The honourable member for Pictou East.

MR. DEWOLFE: Mr. Chairman, how much time do we have?

MR. CHAIRMAN: You have five minutes.

[9:44 a.m. Mr. John Holm resumed the Chair.]

MR. DEWOLFE: Thank you, sir. Mr. MacLean, I don't want to beat this to death, and we have covered everything over and over again. Your skates must be getting a little dull by now. (Laughter) You are doing well, sir. Mr. MacLean, would it be fair to say that the Minister of Economic Development was in a conflict of interest by leaving you out of the negotiations, but also because he gave the decision-making authority to Priorities and Planning for which he was also responsible?

MR. MACLEAN: I am uncomfortable commenting on what a minister did or did not do. I can say the department perhaps did not include us as they should have, but I cannot comment on what Mr. MacDonald did or did not do.

MR. DEWOLFE: Obviously, in your mind, I would like your opinion on this, would you say that it really was a bad deal?

MR. MACLEAN: It was not a good deal to the extent that the leaseholds were on top of the rent which if not above market, certainly were at the high end of the market. It was not a good deal where we were committed to take 4,800 square feet in 2001 without having a specific requirement identified for it.

MR. DEWOLFE: Something that never came up, and I have to admit I don't know the property down there, I have an idea which property it is, but I am not sure. What is the value of that building? What is the assessed value of it?

MR. MACLEAN: I don't know offhand.

MR. DEWOLFE: Would the Auditor General know?

MR. SALMON: No, I am afraid not. We don't know the value of the property.

MR. DEWOLFE: It is worth considerably more now than it was then I would think?

MR. MACLEAN: If reassessed today I assume with the leaseholds that were done, yes, that would enhance the value.

MR. CHAIRMAN: The Department of Municipal Affairs could probably provide that to us

[Page 39]

if we wanted it.

MR. DEWOLFE: It would be appreciated if you could get that information. So the Liberal Government of the day, the bottom line is that they completely disregarded your legislated responsibilities and negotiated and executed a lease on the Charlotte Street property outside of the normal established property management function of government. That would be a fair statement?

MR. MACLEAN: I am not sure saying completely would be a fair statement. It was not done in the normal fashion. We didn't have the full input that we should have had and we do have with virtually every other circumstance, but we did have some involvement as it went along. So I cannot say they completely did whatever.

MR. DEWOLFE: You sort of indicated that before this lease was signed that it was an anomaly, but since then such an agreement, such a situation you have never been faced with. That is right, isn't it?

MR. MACLEAN: That is fair, yes.

MR. DEWOLFE: Yes and, hopefully, you won't be faced with that type of decision making in the future under the present government.

MR. MACLEAN: We would not want to repeat the same circumstance, no.

MR. DEWOLFE: No, exactly. I guess what I get out of this, Mr. MacLean, is that when this lease was signed, it was certainly a dark day for Nova Scotia's taxpayers?

MR. MACLEAN: It was a costly lease or it is a costly lease, yes.

MR. DEWOLFE: Yes, it is and where we go from here, hopefully, is that we learn from the mistakes that were made in the past and we ensure that this sort of thing is never allowed to happen again.

MR. MACLEAN: I would hope so.

MR. DEWOLFE: This committee that was set up, you have indicated there is a Space Utilization Committee in place now?

MR. MACLEAN: Yes, since January 1998.

MR. DEWOLFE: So that in itself should ensure that the future is much brighter for the taxpayers with regard to leased properties?

MR. MACLEAN: Yes, that is the role of the committee, to review requests for space and to

[Page 40]

determine if they are legitimate or not.

MR. DEWOLFE: One suggestion I will make, that we made at the last meeting on the subject, was that I hope we utilize existing space that we own and put it to good use. Thank you very much.

MR. MACLEAN: That certainly is just a normal policy. We do that. Any Crown-owned space, we look to see if there is space there before we go out to rent space, yes.

MR. CHAIRMAN: On behalf of the committee I would like to thank Mr. MacLean for your appearance today. We look forward to receiving the information that has been promised, hopefully before our next meeting which will be in a couple of weeks.

MR. MACLEAN: Yes, that is fine. Thank you very much, Mr. Chairman.

MR. CHAIRMAN: We have reached the time agreed upon earlier to deal with other matters. I am aware of one, we have been requested to provide a subpoena for one of the witnesses who is to be appearing on April 5th on MacNeil's Cove. The request comes from the witness himself, as I understand it - his supervisor. Maybe if you wouldn't mind, you could just give us the details.

MS. MORA STEVENS (Legislative Committee Coordinator): If I may, it is dealing with Brian Spicer, appearing before us on the Bras d'Or Waterfront Project. His direct supervisor, Doug Foster has requested the subpoena. It is a normal procedure that they request when people appear. I said we haven't done it in the past, it is something that is available to us so I said I would bring it to the committee.

MR. CHAIRMAN: The request is coming from them and it may even have something to do with collective-type of agreements in terms of contractual requirements. What is the wish of the committee?

Is it agreed?

It is agreed.

I think it is proper that we have somebody move it.

MR. MORSE: I would make that motion.

MR. CHAIRMAN: It is moved by the member for Kings South that that the subpoena be provided. Discussion?

MR. MACKINNON: On that particular issue, what other officials are coming on that particular date from the regional municipality?

[Page 41]

MR. CHAIRMAN: If I may, a list was provided last week with all of the tentative witnesses. I don't know if there have been any changes since last week.

MR. MACKINNON: Who are the witnesses that are going to be appearing on that date?

MS. STEVENS: What we have so far are: Brian Boudreau; Clifford MacNeil; Brian MacSween; Brian Spicer; David Muise has yet to confirm but he is getting back to me; and also Michael Brogan, I have to confirm with him.

MR. MACKINNON: The reason I ask that is because if we have to issue a subpoena, by request or whatever, if we are going to issue a subpoena to Mr. Spicer, we might as well do it with Mr. Muise as well because it is the same process, the same regional body, and we wouldn't want to just let it linger down to the wire and then all of sudden have it become a question. My understanding is that there were discussions between Mr. Muise and Mr. Spicer on the permit process. It is entirely up to the committee. I certainly support the motion.

MR. CHAIRMAN: If I could, just on that, Mr. Muise of course wasn't the solicitor at the time and it wasn't in his capacity as His Worship the Mayor, and it is not our tradition to issue subpoenas. We have the power to do it and if we need to do it we can do it. Here we have a request. Maybe we could handle it this way, in the discussions with Mr. Muise, maybe Mora could ask if it would facilitate or if he would prefer to have a subpoena for the same kind of reasons. If that is his wish, then we could issue the subpoena; I am speaking here personally and maybe it is not my spot as Chairman to be saying that, but it wouldn't be my wish to issue the subpoena if it is not going to be necessary or if it isn't something that is requested. But if it is in the same kind of conditions as the other witness, with that kind of an understanding.

MR. MACKINNON: Sure. I have no problems with that. Speaking from experience and understanding the culture and how the process works there, the last thing you would want is at the eleventh hour to be advised well, no I can't come. Then you don't have all the stakeholders here, when really you would want them all here. So that it doesn't evolve into another situation on a future day. No sense prolonging it, get everybody at the same table and there will be no buck-passing. So, I agree.

MR. CHAIRMAN: Is there need for another motion to be placed or . . .

MR. MACKINNON: No, I am quite satisfied, Mr. Chairman, leaving it in your capable hands. Use your judgement, I would say, as long as we have them all here.

MR. CHAIRMAN: We can't necessarily have them all here. I don't hear that if Mr. Muise says that he doesn't wish to have a subpoena and if he doesn't wish to attend, I don't feel that I would have the direction from the committee then to issue a subpoena.

MR. MACKINNON: That is the issue, Mr. Chairman. I believe the committee should give

[Page 42]

you some direction on that because my understanding is that Mr. Muise was quite involved in giving direction and legal counsel on the permit process to Mr. Spicer. I think that it is very important that Mr. Muise be here.

MR. CHAIRMAN: I am at the will of the committee. I see the committee is starting to vote by their feet. This is an issue - we have three minutes left - I have to have some kind of direction. Certainly, if Mr. Muise says that he doesn't wish to have a subpoena and he should decide that he is not going to appear, on the basis of what has been said so far today, I don't feel I have the authority to say that this committee would be issuing one.

MR. MACKINNON: Mr. Chairman, I would amend your motion to . . .

MR. CHAIRMAN: It would have to be a new motion, because the last one was carried.

MR. MACKINNON: I move that Mr. Muise should be subpoenaed to appear if he refuses to appear.

MR. CHAIRMAN: Is there any discussion on that?

MR. MACKINNON: We should know within seven days of that.

MR. MORSE: I would suggest that we ask the Chairman for his views on this because I personally would be content with going with the Chairman's wishes.

MR. LANGILLE: If there is an indication Mr. Muise will not appear, then you have to look at a time limit in serving a subpoena. I don't know if you might have the time limit. We don't know if he is going to appear or not. Therefore, I think we either subpoena him or we don't.

[10:00 a.m.]

MR. CHAIRMAN: If I could throw this out, first of all I don't know why he may or may not be able to appear. I have no idea what Mr. Muise's schedule is. Secondly, if we are going to be issuing a subpoena to him, are we then going to be issuing subpoenas to all of the other potential witness, because although they have agreed to come they could change their mind at a later time and this could have ramifications for all future meetings.

MR. MACKINNON: Mr. Chairman, if I may, this is rather unique. This is the individual who gave legal advice on the permit process. It is absolutely imperative that he be here to give confirmation as to whether the permit process was required or not required, because obviously that was a major issue that was raised by previous witnesses and that is part of the reason why we are going back to revisit the issue with Mr. MacSween at Natural Resources, as well as Mr. Boudreau's involvement, not only as a representative of that organization but also as a municipal councillor. I think it is absolutely imperative that Mr. Muise be here.

[Page 43]

MR. CHAIRMAN: A motion has been made. I think that motion should be voted on but not just left to the discretion, I am sorry, of the Chair.

MR. MACKINNON: Mr. Chairman, I so move that Mr. Muise, subject to his not giving confirmation within seven days that he is going to attend, prior to April 5th, that he be subpoenaed.

MR. CHAIRMAN: That is the motion. Is there any more discussion on that motion? Are we ready for the question? Would all those in favour of the motion please say Aye. Contrary minded, Nay.

The motion is carried.

Any other business for today?

MR. MACKINNON: Mr. Chairman, I have one for a future day, if I could, because it involves provincial funding, as well as municipal funding and federal funding and concerns have been raised to myself over the last year with regard to CBCEDA, the Cape Breton County Economic Development Authority, in receiving value for dollars. There has been considerable concern raised there because the chairman of that particular authority is also a senior member of the Cape Breton Regional Municipal Council. I have received considerable complaints about receiving value for dollar and I think it is an issue that we should visit. I will just table it for the respective caucuses to consider.

MR. CHAIRMAN: This is a request then that you are going to be bringing forward for future witnesses?

MR. MACKINNON: Probably at the next meeting, whenever it is convenient, I will allow enough time for the respective caucuses to give some consideration and I will write up an official list.

MR. CHAIRMAN: Thank you. I guess my preference, unless I am being directed by the committee to do it a different way, would be for any requested witnesses or topics to be made preferably in writing so that we have something in hand to consider. Hopefully, every meeting or every second meeting as well we will be getting an updated list of potential witnesses and dates so that we know exactly where we are going.

MR. MACKINNON: It is just that it came to mind because of the Access Nova Scotia issue.

MR. CHAIRMAN: Our witness in two weeks time is Mr. Jim Spurr, who is the deputy minister dealing with the sale of Sysco.

We stand adjourned.

[The committee adjourned at 10:01 a.m.]