The Nova Scotia Legislature

The House resumed on:
September 21, 2017.

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HALIFAX, WEDNESDAY, NOVEMBER 20, 2002

STANDING COMMITTEE ON PUBLIC ACCOUNTS

8:00 A.M.

CHAIRMAN

Mr. William Estabrooks

VICE-CHAIRMAN

Mr. James DeWolfe

MR. CHAIRMAN: If I could begin our session. As we look at the clock and it rolls on to 8:00 a.m., I know that each of us have other commitments and another busy morning here in Halifax. I would like to welcome our witnesses to this hearing of the Public Accounts Committee. I am going to ask our witnesses to introduce themselves in a moment, but first I will ask my colleagues, if they could, each in their place, to introduce themselves.

[The committee members introduced themselves.]

MR. CHAIRMAN: I welcome members, and Mr. Salmon and his crew here - crew, wrong term, it's too athletic for this event, isn't it - your staff. It's nice to have you here again, Roy. Our witnesses, if you could introduce yourselves. Who would like to go first?

MR. GREG BEAULIEU: I'm Greg Beaulieu, Senior Policy Analyst, Department of Tourism and Culture, with responsibility for the NSLC.

MS. SHEILA O'LEARY-JONES: Good morning, my name is Sheila O'Leary-Jones, Vice-President of Finance with the Nova Scotia Liquor Corporation.

MR. ANDREW BARKER: Good morning, I'm Andy Barker, President of the Nova Scotia Liquor Corporation.

MR. JOHN STRICKEY: Good morning, I'm John Strickey, Vice-President of Merchandising and Marketing, Nova Scotia Liquor Corporation.

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MR. CHAIRMAN: Good morning to all of you. I have the pleasure of introducing to you the late member, in terms of the clock, the member for the beautiful Colchester-Musquodoboit Valley, who was commiserating the results of the hockey game with me last night. Mr. Taylor, it's nice to see you here.

MR. BROOKE TAYLOR: I'm very sad today. (Laughter)

MR. CHAIRMAN: Let's not go too far with that. I've explained to our witnesses in advance that I will be asking them to keep their comments to 12 minutes, 15 minutes at the very outside. I see we've been provided with opening comments, and I appreciate that. I would assume that, Mr. Barker, you're going to begin. The floor is yours.

MR. BARKER: Mr. Chairman, good morning to you and to the other members of the committee. First, I would like to thank you for the opportunity to take a few minutes to update you on the organization, some of the current activities and our recent performance. I promise to keep my remarks brief.

As you know, the NSLC became a Crown Corporation in August 2001. At that time a new board of directors and a new chairman of the board was appointed. I joined the corporation as the new president in May 2002. Currently the NSLC operates 100 retail stores throughout the province. The NSLC is focused on providing a high level of customer service, and our stores will manage nearly 16 million transactions this year. Additionally, there are presently eight agency stores located in rural areas of the province. These agency stores were implemented over the past 9 to 12 months to enhance the service in rural areas where there was no local NSLC store. Recently, Unisys Canada has completed an independent review of this initial test with the overall positive results being reported for customers, the communities, the agency store owners and the NSLC.

The government recently announced approval for up to four private wine and specialty stores in HRM, the Sydney area, Kings County or Lunenburg County. Fourteen proposals have been received, and the selection committee has made a recommendation to government for final selection and announcement shortly.

The NSLC employs over 900 people, consisting of approximately 490 full-time employees, 165 regular part-time, and over 300 casual employees throughout the province. Nearly 85 per cent of our full-time and part-time employees, including our store managers, are represented by three locals of the Nova Scotia Government Employees Union. We have recently concluded negotiations and are in the process of finalizing a two-year agreement with these three locals. As would be expected in a retail organization, over 90 per cent of the staff work in our stores or in our warehouse.

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Over the past several years, the employee complement within the NSLC has declined as part of our ongoing strategy to be an efficient retailer. This has been accomplished through normal attrition and early retirement initiatives to reflect our focus on the elimination of redundant activities, simplification of business process, integration of activities, and the expanded role of technology. An example of this direction is our recent review of the executive, which resulted in a reduction in the size of this leadership team to six members, through the elimination of one executive vice-president and one vice-president position.

Staff development is a major area of focus within the NSLC and staff participate in training sessions and module programs in skill areas such as retail, customer service, product knowledge, management, safety, and merchandising.

The NSLC currently lists approximately 2,000 products and our stores carry a selection of these products to meet the specific needs of the customers in each of our stores. Of interest, these products are sourced from 343 suppliers in 43 countries around the world. Additionally, the NSLC has placed significant focus on developing the merchandising and promotion of locally manufactured and produced products. We are continually looking at new initiatives to enhance selection. The Beers of the World program and the recent Port of Wines Festival are examples of some of the very successful programs. Another recent example is the new rum shop concept that is being launched this month to feature and expand our premium rum selection.

In addition to our normal product selection the NSLC offers industry-leading Port of Wines selection. This program is in place at our dedicated store here in Halifax and in 24 specialty sections located in various NSLC stores throughout the province. This product selection consists of a core listing of generally available premium products and a range of products that may only be available on a one time or occasional basis.

The NSLC markets to the consumer through a wide range of promotional and merchandising programs. These programs are developed through supplier partnerships and products are promoted through value-added offers, monthly price specials, the red tag program, and in-store display initiatives. These programs are designed to provide value added and price options across a variety of products to maintain a competitive supplier environment in Nova Scotia.

In addition to the above, the NSLC offers a number of other unique services. "Bottle your own wine", Nova Scotia was a first in Canada and is currently available at seven of our stores. Nova Scotia was the first province to offer a store-in-store concept with a liquor store operated by NSLC employees positioned inside a grocery store. We presently have 12 stores with this concept.

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Another key area of focus for the NSLC is the education and promotion of social responsibility. The organization actively supports programs such as Blue Thunder Police Band, Don't Buy for Minors, Safe Graduation and Plan Ahead to Get Home Safe. A major success is the Check 25 program, which is designed to increase the awareness of underage drinking by requesting ID from anyone who appears to be under the age of 25. Over this past year over 250,000 customers have been challenged, with slightly over 60 per cent denied service.

The organization and staff were involved in supporting numerous fundraising activities such as the United Way, IWK Hospital, Children's Wish, Crime Stoppers and community events, both through employee fundraising initiatives and in-store programs.

Finally, I would like to comment on the recent financial performance of the corporation. Last year, sales increased to over $390 million and a transfer of nearly $144 million was made to the government, an increase of almost $7 million. This was the seventh straight year that an increase has been delivered to the province.

The NSLC team is very proud of the support that the organization has provided and will continue to provide to Nova Scotia. I would like to thank you for allowing me the time to make these remarks and I would be pleased to try to answer any questions you may have. Thank you.

MR. CHAIRMAN: Thank you, Mr. Barker. Are there any other witnesses who have anything to add at this stage? First of all maybe, in future, as chairman, I will be asking for prepared opening remarks in advance because you certainly have stayed within your guidelines and I appreciate that because on occasion, the clearing of the throat at 15 minutes means, give us back the microphone, but thank you for staying within the guidelines.

Our usual format is that we will now turn 20 minutes of the next hour over to each of the three Parties present. The first 20 minutes belong to the members of the Official Opposition. Mr. Steele.

MR. GRAHAM STEELE: Mr. Chairman, I'm going to direct my questions to Mr. Barker but, Mr. Barker, if you feel that you want to toss if off to somebody else, please feel free. I want to focus on something that has bothered me for a while about the operations of the Liquor Corporation and it's something, Mr. Barker, that happened before you arrived but I'm sure you're aware of it. In order to lead you through, what I would like to do is table some documents. I have two copies here and I will just ask our committee clerk to pass one directly over to you, Mr. Barker, in order that you can follow my questions.

Last year, as part of the budget cycle, it became apparent that the government had simply ordered the Liquor Corporation to raise more money. Traditionally in Nova Scotia that's fine, the government can do that; the government can do that if they are willing to raise

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the liquor tax. Governments from time to time, in the past, have raised the liquor tax but this year was different. This year what was effectively a liquor tax increase occurred simply by the minister writing a letter to the Liquor Corporation saying I order you to raise more money. I thought that was peculiar, possibly illegal, so I starting looking into it.

What I did in the Spring session of the Legislature was file a written question saying would the minister table the directive - my written question is the first document in the pile - and then later the minister answered and he answered with two letters. The first letter - the third document in the package - is a letter from Rodney MacDonald, Minister assigned the supervision of the administration of the Liquor Corporation, to Peter McCreath, Chairman of the Board. It is only two sentences, Mr. Chairman, so for the record I'm just going to read it. " Enclosed please find a letter from Treasury and Policy Board requesting changes to the business plan and revenue estimates of the Nova Scotia Liquor Corporation. Please direct staff to make the necessary changes and provide an updated plan to Treasury and Policy Board as soon as possible."

Attached is a letter from Treasury and Policy Board, dated February 26th. This letter is from Vicki Harnish of the Executive Council to the minister. In this letter - this is really the order and it's a longer letter, so I'm not going to read it - basically what it says is Cabinet has met and is ordering the Liquor Corporation to raise $7 million more dollars than was in its business plan. And Vicki Harnish says to the minister to please convey this to the Liquor Corporation, which the minister, of course, did.

Now we have the directives on the table and I thought to myself, what makes the minister think that he has the legal right to do this, just to write a letter and order the Liquor Corporation to raise more money? So I tabled another written question saying - that's the next document - what is your statutory authority for doing this? Well, you will see the minister's reply there and it says - and again, this is one sentence, Mr. Chairman, so just for the record I'm going to read it . . .

MR. CHAIRMAN: Excuse me, Mr. Steele. I assume we will be receiving copies of all this correspondence?

MR. STEELE: I've given a copy to the clerk and I gather it's being copied right now, just the way documents have normally been handled in this committee.

MR. CHAIRMAN: That's fine, thank you.

MR. STEELE: So the minister's answer is: "My direction to the Nova Scotia Liquor Corporation is based upon authority found in section 22 of the Liquor Control Act giving the Minister authority to approve the business plan of the Corporation."

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So fine, I looked at Section 22 of the Liquor Control Act, which is the next document in the package, and I absolutely defy anyone to read that section and tell me that it gives the minister the authority to order a backdoor liquor tax increase - quite apart from the fact that it only applies to events happening in 2003 and beyond.

I will give the minister the benefit of the doubt and say, okay he made a mistake by quoting that section, maybe he was referring to Section 21, which is for the current fiscal year. But again, I defy anyone to read that section and say that it gives the minister or the government the authority to impose a backdoor liquor tax increase. So my first question to you, Mr. Barker is, to your knowledge, when this directive was received from the minister responsible for the Liquor Corporation, did the Liquor Corporation seek a legal opinion about whether the minister had the authority to do this?

MR. BARKER: My understanding is that that did not occur.

MR. STEELE: Can you tell me why the Liquor Corporation didn't - this is an unusual thing, this has never happened before. For the first time in Nova Scotia, rather than raising the liquor tax in the budget, the minister has chosen simply to write a letter to the corporation ordering them to raise more money, highly unusual. Do you have any thoughts on why the Liquor Corporation didn't check to see if this was even legal?

MR. BARKER: I think the only comment that I would make is that under past practice we submit a budget, as is quoted here in Section 22, to the government by the end of January of each fiscal year and I think that process happened as per normal. The particular situation you are speaking of, I can't really speak to directly, so I can't really offer an opinion of why that might have occurred.

MR. STEELE: What was the net revenue figure that was contained in the business plan prepared by the Liquor Corporation, do you recall?

MR. BARKER: The amount of the increase, sir?

MR. STEELE: No, not the amount of the increase. In the original business plan that was drafted and submitted to government, what was the revenue figure to government?

[8:15 a.m.]

MR. BARKER: It would have been approximately $153 million.

MR. STEELE: Okay, so $153 million, the government orders the Liquor Corporation to raise $7 million more and the figure that actually ended up in this year's budget was $160 million.

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MR. BARKER: That's correct.

MR. STEELE: Now, just as an aside, in the directive from the government, the so-called directive - that was the minister's word, by the way, it's not my word, the directive - it says that the Liquor Corporation should do what it can to decrease expenses as well as raise revenue in order to produce the net figure of $7 million. Yet it sounds like what happened was that all or almost all of that $7 million was raised simply by an across-the-board price increase. Is that correct?

MR. BARKER: What happened is in the base budget that was submitted, a number of efficiencies had already been built in. When the amount was increased by $7 million, virtually all of that $7 million was through the tax increase. That's correct.

MR. STEELE: Now, to your knowledge, and I know this was before your time Mr. Barker, but to your knowledge, when's the last time that there was an across-the-board price increase in Nova Scotia? Not driven by taxes but driven by the corporation's own decision making.

MR. BARKER: I'm sorry, I can't give you an accurate number, but I believe it's several years ago now.

MR. STEELE: When you say several, I don't know if any of your colleagues there know - are we talking many years ago? Are we talking two or three or are we talking quite a lot longer?

MR. BARKER: Our opinion, I guess collectively, is 1993-94, something like that.

MR. STEELE: Okay, so it's been eight or nine years since there was an across-the-board price increase. Let me go off on another small tangent here - what is the normal way that the Liquor Corporation sets prices for its products? What are the factors that go into the mix?

MR. BARKER: Our prices are driven by the f.o.b. cost of the products coming from the manufacturers and, of course, the mark-up goes on top of that and that results in our retail price.

MR. STEELE: And the Liquor Corporation, I assume, has a standard mark-up which differs, if I recall, by product line, but within a product line it's fairly standard.

MR. BARKER: That would be correct.

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MR. STEELE: So, when the Liquor Corporation does its business plan, am I correct in thinking that the increases in revenue are mainly driven by increases in volume and not really by increases in price?

MR. BARKER: That would be very correct.

MR. STEELE: So this directive from the government was unusual because for the first time in many years the Liquor Corporation found itself given a revenue figure that wasn't driven by its own internal business planning, isn't that right?

MR. BARKER: It was added on after the budget process, that's correct.

MR. STEELE: And, what kind of internal discussion, if any, was there in the Liquor Corporation about this highly unusual directive from government? What was the thought process in the corporation when this directive was received?

MR. BARKER: It's difficult for me to speak to since I wasn't here, but I suspect that it was very difficult.

MR. STEELE: I wonder if either of your colleagues were there and would care to comment on that.

MS. O'LEARY-JONES: It's not unusual when we're preparing a business plan or a budget to have a number of different reviews, especially when we're doing our details at the beginning of the process. It was unusual to come back with a number to say this is what we're looking for, but the minister does have the final approval on this. So, when the directive came back the first thing that we would normally look at in any type of review, when we're reviewing the budget and business plan, is to review all elements of that. So, whether that's volume, whether that happens to be cost efficiencies, to take a look at that and as a last resort, to put through some price adjustments. When that did come through, there were some very detailed meetings where we had to review all our efficiencies or operations, were there any processes that we could essentially gain some dollars that particular way and some programs that we didn't see that we needed to have done for the particular year, where the volume estimates that we had put together - did they seem reasonable? Supplier price adjustments that normally go through in a given year, looked at those, then of course, the very last item would be then to adjust our actual mark-ups in order to achieve a bottom line number of $160 million.

MR. STEELE: What it sounds like to me is that these increases were completely independent of any business planning process within the Liquor Corporation and that the one and only reason why the across-the-board increase was imposed, was in order to meet the government's directive. Is that fair?

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MS. O'LEARY-JONES: From my perspective, as VP of Finance, I look at those any time that I'm putting some numbers together. The entire team gets together to produce a business plan, of which one element of that is going to be your volume and your prices, you want to take a look at those particular things. So to have a directive or be asked the question initially, which was is there any opportunity to have some additional dollars for net operating income, please take a look at it, is not an unusual request.

I guess the unusualness of this case is probably the $7 million that was requested. So, do we go back to review it again after we do the budget? It's not something we just put together in five or six minutes, we prepare a preliminary, we look at it as a group, as a team - do all these things make sense, are they reasonable based on the economy and based on your strategies and objectives with the organization? That would be the normal thing that we would go through.

MR. STEELE: Do you know if anybody at the Liquor Corporation considered just saying no? No, we are not going to do this; no, we are independent of you; no, we set our own business plan; no, we're not going to raise our prices - did anybody think of just saying no?

MS. O'LEARY-JONES: I believe there was probably some discussion to say, in order to be able to raise those particular dollars, or in order to have our net operating income with an additional $7 million, these are the elements that we will need to change within the organization.

MR. STEELE: Was there any discussion at all of the possibility of simply refusing to do the government's dirty work and raise an extra $7 million?

MS. O'LEARY-JONES: Simply refusing - the answer's probably no. He does have the final right to approval of the budget and you're hoping that you do the best job you can in order to put that business plan together, but there is always that possibility to say we're looking at these particular things, can you go back and redo the business plan or re-look at particular programs or re-look at the volumes, or re-look at the sales dollars.

MR. STEELE: Did anybody even consider the possibility that the minister had absolutely no statutory authority for writing that letter?

MS. O'LEARY-JONES: No.

MR. STEELE: You see, here's the problem. I don't think there's a judge in Nova Scotia who would read Section 21 of the Act - not the one the minister cited to me, but the one that I think he probably meant - who would read that section and read it as allowing the minister to impose a backdoor tax increase. There's a principle of interpretation in law that if you're going to impose a tax it has to be clear. Judges don't let governments sort of read

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between the lines and kind of squint at a statutory provision and say yes, maybe that allows them to impose a tax. What they say is if you're going to impose a tax, which is the big hammer that a government has, it's got to be absolutely clear that the government has that authority and it simply doesn't say that here.

MS. O'LEARY-JONES: Perhaps I could answer another way. Somebody who is working for a retail organization or any type of organization and being the finance person, head of the finance area, for any plan that you're putting together there is going to be an approval process to say here's our best laid plans, these are our strategies and objectives and opportunities we're going to take advantage of during our next fiscal year - whatever that happens to be, or a long range plan - and there's a number of approval processes you would normally go through in a normal organization or in any type of organization, retail or otherwise.

So, in my experience, going through a budget process or a business plan process, there are a number of steps and there is always that time when there will be questions asked from people who have a higher authority, who have the final approval, to determine if that business plan is feasible, realistic for that particular day, to say can you take another look, are there other opportunities? - and take every opportunity with one of those elements being, especially in retail, one of those things is adjusting your markup structure.

MR. STEELE: Here's the problem though. The Liquor Corporation, historically in Nova Scotia, has been set up to be independent of government. Right from its very beginning the idea was that it would be divorced from the normal political process because politicians, back in the days when it was set up especially, they loved to get into the liquor business. Liquor and politics have been intertwined in Nova Scotia, not always in good ways, and up until recently the Liquor Corporation, or the Liquor Commission as it was until recently, has really exercised that independence. I am aware, personally, of several instances over the past decade or so when the government tried to impose something on the Liquor Commission and the Liquor Commission said, no, forget it, we are independent and just because you want us to do it it doesn't mean we're going to do it. What has happened recently, of course, is that the new Liquor Corporation now has a board of directors where the majority of members are the minister's political and, at least in one case, personal friends. So they're not going to say no to the minister.

You have a chairman who, in addition to being a loyal Conservative, is registered to lobby the minister through his private company that he operates to run lobbying services. So I don't know if he was lobbying the minister at the time, but maybe his lobbying contract was there already, I don't know, maybe it was on the horizon, I don't know. This is exactly the reason why we expressed a concern about the different roles that the chairman of your board has, because on the one hand, he's in charge of the Liquor Corporation and, on the other hand, he's lobbying the minister, not on liquor business, but on other stuff, and he has no

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interest in annoying the minister. He's got no interest in asking the minister hard questions like, what makes you think you have the right to do this?

Then, in addition to that, Mr. Barker, if I can go back to you, you will notice that there's one more page in this package and it's a page from your contract. Your contract was tabled in the Legislature, but it wasn't the signed version. So it's what I would refer to as a draft contract. Are you aware of any differences between the draft contract that was tabled in the Legislature and the final version that was signed by you and on behalf of the province?

MR. CHAIRMAN: Mr. Barker, before you answer that, Mr. Steele, you have two minutes remaining.

MR. BARKER: Based on what I'm looking at here, it looks identical.

MR. STEELE: I guess here's the key, there are a number of bonus provisions in your contract, one of which gives you $20,000 if you achieve the target of net revenue of $160 million. I don't know how it looks to you, but it just looks odd to me that somebody should get a $20,000 bonus for doing what the government has ordered him to do. Do you have any comment on that?

MR. BARKER: Only from the standpoint that this was put together by the board of directors at the time, and questions around why it was made up that way are probably more for them.

MR. STEELE: Let me try to summarize the story that I've been trying to tell here and how it looks. Traditionally, in Nova Scotia, if a government wants to raise money on the sale of liquor they do it by imposing a liquor tax, or increasing the liquor tax. This year, for the first time in Nova Scotia's history, the government achieved - it had the same effect of imposing an increase in the liquor tax except they did it differently. They did it by writing a letter to the corporation saying we basically order you to increase your prices. Instead of exercising any independent judgment, the Liquor Corporation has a tame board of directors, a chairman who's in a real or perceived conflict of interest and a CEO who gets a bonus for following the government's order. So there's nobody at the Liquor Corporation who has any interest in asking those hard questions. So everybody wins except for the poor put-upon consumer who, for the first time in nearly a decade, has had to deal with an across-the-board cost increase . . .

MR. CHAIRMAN: Mr. Steele, put your question.

MR. STEELE: I'm just summarizing, Mr. Chairman, the across-the-board price increase which is simply a liquor tax.

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MR. CHAIRMAN: Your time has elapsed. Mr. Barker, do you have any response or do any of the witnesses have any response they wish to offer to Mr. Steele's comments?

MR. BARKER: Not at this point.

MR. CHAIRMAN: It's 8:30 a.m. I will give the next 20 minutes to members of the Liberal caucus. The member for Lunenburg West.

MR. DONALD DOWNE: Thank you, Mr. Chairman. I welcome you here today to this warm setting. It's a good time to think about having a cold one, right. Most Nova Scotians who are listening to this debate or who will be watching will ask, when are beer prices going down, when am I going to pick up a six-pack of beer and go home and have it cheaper than I'm paying right now? Any indication of when liquor prices will be going down in Nova Scotia?

MR. BARKER: It's very difficult to imagine the prices actually going down, but what I can tell you is we do look at running different segments of all products. So we do have an economy beer segment, we have a premium beer segment, and we do that with all products. So while the prices may not go down, there is a choice for the consumers to make.

[8:30 a.m.]

MR. DOWNE: So we can spend more, but we're not going to get it any cheaper. Beer prices did go down a few years ago, didn't they?

MR. BARKER: Did they actually? I'm not aware of that.

MS. O'LEARY-JONES: We went to a harmonized sales tax and I believe there was an across-the-board. We determined at that time it was more prudent to let the prices drop based on the harmonized tax of 15 per cent and it used to be HST and GST at that time.

MR. DOWNE: In the Auditor General's Report there were a number of areas where the Auditor General, two years ago, had made recommendations to you. What have you done about those recommendations since this assessment was presented to you two years ago? Could you provide - how about doing it this way. If you have a comment, I would appreciate it; secondly, can you provide in writing exactly what you've done in reference to what the Auditor General's recommendations were to you two years ago?

MR. BARKER: Absolutely.

MR. DOWNE: Have you complied with any of the recommendations?

MR. BARKER: Yes, as a matter of fact we have addressed them all.

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MR. DOWNE: In this study that was done, PricewaterhouseCoopers did a study and they talked about various options for the corporation to go forward, or make more money, and things of that nature. They talked about agency stores as an option call, to close 30 of the government stores and create 60 agency stores. Have you read that study? Are you familiar with that study?

MR. BARKER: Yes.

MR. DOWNE: Where are you in regard to your corporate plan in regard to doing what the PricewaterhouseCoopers' study had recommended you to do?

MR. BARKER: At the time when we did the review, a number of options were looked at and that was certainly one of the options that was discussed and put forward. There was also a variety of other ones that we looked through plus other ones that have now arisen, if you will, as we've gone forward. So we continually look at those options as we go through as a normal part of our business planning.

MR. DOWNE: So you are still looking at the possibility of expanding agency stores to the level that you're talking about and that would be up to 60 and you're looking at closing some 30 current stores that are in place that maybe are not meeting the threshold that you would expect in regard to a return on investment or volumes of sales?

MR. BARKER: At this point we do not have a mandate from the government to do any kind of an increase in the agency store network. So we are not at this point planning to do that.

MR. DOWNE: Do you have a mandate by the government to close stores that are not as profitable as say some other stores?

MR. BARKER: Absolutely not.

MR. DOWNE: So what's the criteria for closing a store?

MR. BARKER: At this point we have no plans to close any of our stores and, therefore, we have no criteria to do so.

MR. DOWNE: You mentioned that there are eight agency stores in rural Nova Scotia and there are a number that are presently - 16, is it, that are currently in grocery stores?

MR. BARKER: Twelve.

MR. DOWNE: What stores are they in?

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MR. BARKER: The actual stores are hosted by the grocery chains of either Sobeys or the Real Canadian Superstore chain.

MR. DOWNE: How many Sobeys and how many of the other stores?

MR. BARKER: Actually there are six of each.

MR. DOWNE: And they're based on volume, it's where the volume of traffic is, people go grocery shopping, they pick up some wine or some sort of spirits afterwards. You mentioned about what's before Cabinet, I take it, or before the minister, about wine stores - this would be similar to what they have in Ontario or western Canada where they have these vats and you can actually make your own wine in large volumes - what were we talking about there? Can you explain a little bit more?

MR. BARKER: Is this to bottle your own wine that you're . . .

MR. DOWNE: You mentioned earlier in your presentation the private wine stores.

MR. BARKER: Yes, the actual private wine stores will be retail stores so they will sell an already packaged product, but they will sell different products than we currently offer through the NSLC outlets.

MR. DOWNE: And you're looking at four locations?

MR. BARKER: At this point in time the government has approved four, or up to four locations.

MR. DOWNE: Up to four and the four short-listed ones are what?

MR. BARKER: At this point in time the recommendation has gone into the government for final decision. We had 14 submissions. Our recommendation has gone to them which they will ultimately approve and we will be announcing shortly.

MR. DOWNE: And the short list, can you tell me what the short list is? You said Lunenburg County, or Lunenburg, or Bridgewater?

MR. BARKER: At this point in time the submissions that came in were all from the Halifax regional area with the one exception being one from the Sydney area as well.

MR. DOWNE: You mentioned the agency stores. Do you envision more agency stores in the province and, if so, when do you see that happening?

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MR. BARKER: At this point in time in discussions with the government, there is no mandate to increase the number of agency stores. It is something that we would probably look at on an ongoing basis, but at this point it is not receiving a lot of effort because there is no mandate to move forward.

MR. DOWNE: So if you didn't have a mandate, if the government said, well, you know, what makes good business sense and also a social responsibility for certain areas, how many more would you put? Obviously you have a sense, you already know where those areas should be from past studies. How many more do you see possibly going in that would meet a requirement socially and economically to make more money?

MR. BARKER: Absolutely, I think that's a fair question. We have probably received upwards of 30 letters from individuals across the province who have interest in potentially owning an agency store some day and our response has always been that if and when the government approves any type of expansion, we will go through them on a case by case basis because each one has very unique characteristics and we would have to go through it working with a lot of the information we've now gained from the Unisys study.

MR. DOWNE: So those 30 letters, those 30 areas in the province, would they then in turn be lobbying the government, they're lobbying you to do it, are they currently lobbying the government to expand to those 30 locations?

MR. BARKER: I'm not aware of any lobbying directly. They have certainly I guess acknowledged their interest in potentially being considered for an agency store, but I wouldn't say I'm aware of any lobbying at this point.

MR. DOWNE: Have they in the letters that they've sent to you copied off to the minister or to their local MLA, or to their representative?

MR. BARKER: In general I would say no.

MR. DOWNE: Have any letters been that way?

MR. BARKER: There may be one or two.

MR. DOWNE: Can you prepare those letters and provide those to us?

MR. BARKER: Certainly.

MR. DOWNE: So we can walk down this avenue for a second, the minister would then come back to you and say, now, I would like to see us expand from the current level of eight agency stores to 12 and, by the way, here are four letters that I have received, will you

[Page 16]

set these up; or how would the minister direct you to do one more or three more, or five more, or 30 more that you have letters for?

MR. BARKER: It's difficult to know because it hasn't happened, but in discussions we have had, if and when that time came, the minister would be looking for some input from NSLC, so we would do an evaluation. We would come back with a recommendation for the government to look at.

MR. DOWNE: And that evaluation would be based on what criteria?

MR. BARKER: A variety of things, starting with the sales, the product mix of the customers required, whether or not the sales were seasonal, where the store was located, was there in fact a shortage right now of customer service to the nearest NSLC store, I mean a variety of trade area considerations, we would be looking at them all.

MR. DOWNE: So then in turn you would come back with a short list, is that how you would present back to the minister? If they say we want five more, you would give a short list of five or would you give a short list of 10?

MR. BARKER: What we would do is we would identify some areas where we believe service was required. We wouldn't be identifying specific locations or anything like that, but it would be areas of geography or we believe there might be a service component that was required.

MR. DOWNE: Where does the board of directors sit on this? I mean do they go and ask you to be involved in it? Are they involved with that process or do they say you do it and bring it back to us and we will rubber stamp it or do they have any impact in where those geographic locations are established?

MR. BARKER: Again, the process has not happened so it's a little bit of a speculation, but in past discussions what we have done is we have brought recommendations to our board first to get their input. They often have a different point of view or perhaps a different angle and at that point in time we will collectively finalize a recommendation to go to the government.

MR. DOWNE: Their point of view or angle, what do you mean, would that be because they have an area that they may have been lobbied on, and think that's a good idea to have it there? What do you mean, they have a different angle?

MR. BARKER: A number of our board members have a very successful business background and they may look at it quite differently from the standpoint of a different perspective. We also have at least one board member who is very familiar with the industry

[Page 17]

and quite often brings to the table different comments about product selection, for example, product distribution, different trends of the industry.

MR. DOWNE: But you're a professional and you're all very successful business people in your own right. You're one of the most successful corporations we've got. So your professional team isn't as good at bringing that information forward as your appointed board of directors?

MR. BARKER: No, I wouldn't say it that way. What I would say is the board is used as a very useful sounding board.

MR. DOWNE: Then, after the sounding board of the board, which is government appointed by the minister and by OIC for people who are of like-minded attitudes toward their political Party, maybe, then it goes to the Cabinet or it goes to the minister?

MR. BARKER: At that point we make the recommendation directly to the minister.

MR. DOWNE: Then the minister will go to Cabinet?

MR. BARKER: I believe that would be the process.

MR. DOWNE: And then it's approved through that process. You haven't had the opportunity to do that yet. Do you have a policy or would you be drafting up a policy, would you be giving to the minister guidelines on how you would like that process to be done? If you need to have four more stores opened, would you be able to hand the list of four, or do you have to go with eight or 10 and let the minister handpick the four out of the eight or 10? Do you have any guidelines at all to establish some sort of independence, as it were, of the Crown Corporation?

MR. BARKER: At this point there is no policy in place, no.

MR. DOWNE: Should there be a policy?

MR. BARKER: I don't think we need a policy. I think we probably need a practice or an understanding, but at this point it has not come up on the table, in terms of discussion, so we have not had that discussion with the minister.

MR. DOWNE: Do you see how this could be manipulated for an individual's personal benefit?

MR. BARKER: It's unknown. I would be speculating.

[Page 18]

MR. DOWNE: But there is enough room to drive a Mack truck through the process right now.

MR. BARKER: It probably depends at the end of the day . . .

MR. DOWNE: Or a Kenworth or a John Deere. (Laughter)

MR. BARKER: . . . how much the recommendations of the NSLC are considered by the government.

MR. DOWNE: The government controls the process, that's what you're telling me.

MR. BARKER: The government approves the process.

MR. DOWNE: They approve it and they control the process, as I understand it. You were also asked by the Department of Finance - it has been alluded to that the minister gave a directive - is the Department of Finance involved with your operation in any way, where they would ask what your projections are for next year, when they do their analysis of revenue? (Interruptions) I sense that you want to answer this question.

MS. O'LEARY-JONES: The Department of Finance, finance being my background, I guess I would. The involvement of the Department of Finance would only be from the process of when we're going through a business plan and our forecast, and eventually our dollars. It's purely for information purposes only, to give to them. They would then put it together as their total plan, for revenues that are coming into the province. Us being just one of the departments. Of course, the allotted dollars that we have in there, I'm in constant contact with them. We're distributing dollars to them on a daily basis, and our business plan is extremely important to them. But as far as their input to direct us to do anything, no. It's purely information going from our organization to them.

MR. DOWNE: They have no targets that they establish for you?

MS. O'LEARY-JONES: Not since I've been with the NSLC, no.

MR. DOWNE: Bayers Lake, the warehouse. It's a huge warehouse. Is that economically viable, to have a warehouse that size for the type of business that you're running? We talk about new efficiencies and business approaches, same-day deliveries, inventory controls. That warehouse, has that been a bad business decision?

MR. BARKER: It's a broad question. Let me, maybe, talk about a couple of things. As you're probably aware, in years gone by, the NSLC had up to five warehouses, at different points in time, scattered throughout the province. All those warehouses were consolidated back in 1987, of course, in the 110,000 square foot warehouse in Bayers Lake. In terms of

[Page 19]

efficiency, as the industry has moved, we have changed our in-store design significantly. In the past, probably 50 per cent of each store was given up to warehouse space, in other words, storing product, and that allowed the warehouse to make less frequent deliveries.

As we've moved forward and become more of a retailer, we have changed that now, and I would say, in most of our stores, 80 per cent to 90 per cent of the store is now selling area. As a retailer, that's what you want because, of course, your sales go through the selling area and not through the warehousing part. As the warehouses in the stores have gotten smaller, the amount of the deliveries and the frequency of deliveries have increased. This requires us to have much better efficiencies at the warehouse end. So, as a matter of fact, that 110,000 square feet today is probably almost exactly the right size for the business that we're doing.

MR. DOWNE: Because we're going into the smaller stores and the boutique stores or the grocery stores, type of thing, where you don't need to carry the inventory there, you need to carry it at head base. So, it's a good decision, is that what you're saying?

[8:45 a.m.]

MR. BARKER: There is that part of it as well, and as we expand product selections . . .

MR. DOWNE: Do you have any analysis on that, to show that it's a good, viable, economic decision?

MR. BARKER: Only from the standpoint that we are spending less than we were when we had five warehouses, for one thing. Secondly, as I said, the throughputs of the inventory turns on the warehouse are at least up to industry standards, if not better than.

MR. DOWNE: Great. Your financial plan with Finance, do you have a one-year plan, or do you have a three-year plan, or do you have a five-year plan, or do you just go year-by-year?

MR. BARKER: We currently have a five-year plan.

MR. DOWNE: In that five-year plan, what is your projected growth over the next five years?

MR. BARKER: In terms of net bottom-line revenue? We grow at approximately $4 million to $5 million per year, over the next five years.

MR. DOWNE: A $4 million to $5 million increase.

[Page 20]

MR. BARKER: Per year. That's largely predicated on volume and changes in product mix.

MR. DOWNE: Is there any indication that you're going to be increasing your marginal take? What's the margin increase? How much have you increased the price of spirits? I know wines are different than spirits, and then beer, and so on and so forth. That's increased since the government changed, I understand, a fair amount, as we've talked about in this House. Is there any indication that you're going to increase those levels again?

MR. BARKER: No, in the five-year plan we've assumed the base of this particular year. Going forward, all of the gains are based on volume increases and changes in product mix. What I mean by that is we are moving, as a society, in Nova Scotia to more premium wines, to single-malt scotches, to a variety of products that have a higher price point.

MR. DOWNE: The corporation, the way you're set up now, it's a little bit different than it was before, the way the structure is set up for the Nova Scotia Liquor Corporation. Are you in a better position to be privatized now than you were? Is it easier for you the way your structure is set up now to be privatized than it was?

MR. BARKER: I'm not sure I see very much of a difference at all.

MR. DOWNE: So the privatization issue could still be handled through the way your structure is set up now?

MR. BARKER: I assume so.

MR. DOWNE: Is there any indication that you're looking at privatizing?

MR. BARKER: No. At the end of the review that was conducted about 18 months ago, that was sort of the definitive statement at that point. We have not looked at anything like that now.

MR. DOWNE: That review of 18 months ago about privatization, is that a public document that you could present?

MR. BARKER: Absolutely.

MR. DOWNE: Who was that done by?

MR. BARKER: PricewaterhouseCoopers.

MR. CHAIRMAN: Mr. Downe, you have two minutes.

[Page 21]

MR. DOWNE: There's no indication that the marginal take is going up or the percentage is going up. Taxes are up to the Minister of Finance and/or, in an indirect way, through Minister Rodney. You're protecting a $4 million increase in revenue, net, in each of the next four to five years. You are basing that on the fact that people are moving to a higher end, a more expensive-type liquor, wines and scotch, things of that nature. The projection that you have on those, does that mean that you're going to be lowering those costs to the consumer in any way?

MR. BARKER: No. Those assume a pricing similar to today at the base, and then, as I say, the change is going through on volume.

MR. DOWNE: The restaurant industry always wants you to lower your percentage take to them. They pay a higher percentage to buy wines to sell in the restaurants. They always say, if you give it to us cheaper, we will sell it cheaper in the restaurants. Has there been any discussion with regard to lowering it any further?

MR. BARKER: Not that I'm aware of, no.

MR. DOWNE: Would you support that or would you reject it?

MR. BARKER: You're absolutely correct, that is their position. At this point in time, we obviously don't share that position.

MR. DOWNE: Have you seen any evidence, when they did lower it, that it showed a reflection of lowering the price in the restaurants?

MR. BARKER: Not that I'm aware of, no.

MR. DOWNE: Would you have done a study to determine that, because you knew they were going to come back and ask you that question?

MR. BARKER: Not definitively that I could refer to right now, no.

MR. DOWNE: So you wouldn't support lowering the price of wines to restaurants, so that they could lower their price to the consumer?

MR. BARKER: At this point, I think what I'm saying is that I'm not aware of any situations where lowered prices resulted in a lower price to the consumer.

MR. CHAIRMAN: It's 8:50 a.m., and the next 20 minutes goes to the government caucus.

The honourable member for Kings West.

[Page 22]

MR. JON CAREY: In your opening comments, you certainly portrayed an image of being socially responsible, being involved in education and promotional means for showing a responsibility. That's one area that's very important, in my opinion. You spoke of Blue Thunder Police Band, Don't Buy For Minors, Safe Grad and Plan Ahead to Get Home Safe.

Could you elaborate on that to the degree of the financial impact that it may have?

What do you contribute? Do you contribute staffing, advisors, financially? Is there a percentage of your sales that goes for this? How do you work that?

MR. BARKER: Certainly, just maybe by way of slight background. We operate in

a socially responsible manner in a number of different fashions. From a direct delivery point of view, we have a budget of approximately $50,000 or $60,000 a year that we use to fund the number of the programs that you've just mentioned. Of these monies, many of those dollars are shared with suppliers on various programs. So we may well partner with a supplier to do a particular program. The supplier may actually offer to sponsor the entire event, if it is an event type of social responsibility.

Aside from that, we also have a built-in to our operational standards, in terms of our Check 25 program. There's no pure cost to the Check 25 program, but it is simply that our staff do it as a normal part of the operation. We actually are able to offer social responsibility at the program level, and to the day-to-day in store level as well.

MR. CAREY: Maybe you've answered it, but I was looking for, is there an actual financial commitment on your part as percentages of sales towards education, safety programs, advisory staff or is that any part of your business plan?

MR. BARKER: Built in the business plan is a budget item, but it's not based on a percentage of sales. It's more based on an as-needed, or the programs that are available basis.

MR. CAREY: I guess I'm a little disappointed maybe. How do you determine as needed?

MR. BARKER: What we do every year as part of our business program, we put together a schedule of social responsibility programs that we wish to run across the year. And there are some natural dates for that. For example, graduation dates, back to school dates, various programs have natural windows. When we line those programs up, that gives us a slate or a schedule of the programs we will be running for that year. Those then translate into a budget to make those programs happen.

MR. CAREY: But there's not an actual line item of your financial commitment to these?

MR. BARKER: Only from a budget perspective.

[Page 23]

MR. CAREY: Further to that, the Safe Grad and the Safe Prom Programs, when you go into that area of it, again are all things handled in the safe way, like safe use of alcohol, education, and responsibility to these organizations. Is there significant difference in the program that you have there from what you have with these other people that you had?

MR. BARKER: From the standpoint of the past?

MR. CAREY: In the past you gave three examples of your social responsibility commitments, and then as you go into Safe Grad, Safe Prom, for example MADD, would you have any direct connection with those types of organizations? Again, I'm looking I guess to just find out if there's any actual financial commitment from your business?

MR. BARKER: Certainly, Mr. Chairman, I'd suggest maybe I'd pass over to John Strickey.

MR. JOHN STRICKEY: With regard to our social responsibility programs targeted at specific areas such as Safe Graduation. Through the course of the year we look at - particularly graduation or kids being out of school - four times of the year. We significantly increase the presence at retail of our ID checks. We support that with a couple of the schools where we will provide some money for them, for graduation, education vis-à-vis Don't Buy for Minors, drinking and driving.

We also will run, within a couple of the local newspapers, ads depicting the fact that it is safe graduation week and that we do support it. At retail we will increase the visibility of our Check 25 program, and will do that through signage. We will do that through staff identification. We usually also do refresher courses with our staff prior to graduation on acceptable forms of identification, things to look for, particularly when it comes to buying for minors who are underage. We will significantly target to increase our challenges at the cash register, keeping in mind that at that time of year, we know there will be increased activity with regard to people looking to buy for underage within our retail environments. We see a specific spike in the vigilance that our retail people will take on the sale of beverage alcohol. So it is a combined effort and it's in conjunction with corporate, the schools that will participate and also some advertising support for that.

MR. CAREY: Just to clarify, you don't have any specific budget or percentage of sales towards your program?

MR. STRICKEY: We will target, every year, a social responsibility program, and we do allocate budget dollars for that.

MR. CAREY: How much money do you spend?

[Page 24]

MR. STRICKEY: We will spend about $60,000 a year directly on supporting things such as Safe Graduation. We're also involved in the metro free ride program around New Year's. We also support Plan Ahead to Get Home Safe Program through the month of December. We have around 250 schools that are involved in that program. We provide brown paper bags for them. We have a program established where the kids - and this is mainly in the lower grades, elementary - will write messages on the bags around a program that we've designed to discuss the issue of drinking and driving, obviously, mainly with their parents. Those bags are then sent to NSLC stores. There will probably be 50,000 of them and, in the second week in December, those bags are given out to customers as they purchase product. We will support the Plan Ahead to Get Home Safe Program with, probably, again, some media support in around November and December and then selected times throughout the course of the year.

Also in conjunction with the schools participating in this we have one of our vendors, our partnerships provide free computers and also some educational software. All the schools that participate, their names go into a draw, and every year there are - I think it's two computers with some software given away to the schools that participate in the Plan Ahead to Get Home Safe Program.

As far as additional dollars, the fact that our retail staff are involved on an ongoing basis, we don't necessarily source that out from a dollar standpoint, but we would run a number of training programs directed at Check 25 and we anticipate, on a yearly basis, approximately 500 of our retail staff would either go through the program or would go through a refresher on the Check 25. So we don't break that out as a separate line item, that's just incorporated into our total budget responsibilities.

MR. CAREY: Thank you. Has there been any evidence of sales to minors or liquor-related crimes in the communities served by the agency stores?

MR. STRICKEY: Based on the report that was just prepared there has been, to our knowledge, no evidence of that.

MR. CAREY: Do you have any evidence of a decrease in bootlegging in the areas where these have been set up?

MR. STRICKEY: Well, I think we're only speculating, we wouldn't know that first-hand. Again, based on the report that was prepared, I think one of the RCMP detachments made a comment about it, but it wasn't a sustained comment, they just felt that there were some benefits; felt one of the benefits was the possibility of less drinking and driving because of the agency store. The other common, I believe, was that they felt that maybe there was a reduction in that activity, but they were very clear on saying that this was not a substantiated comment by them.

[Page 25]

MR. CAREY: So in your next year's planning or when you do some discussion, are any of those things taken into consideration? I realize the RCMP has the responsibility for enforcement and so on, but is it a consideration by your company?

MR. STRICKEY: What exactly are you . . .

MR. CAREY: To try to monitor the actual effect of your stores in the community.

MR. STRICKEY: When you look at our retail stores we do run, again, with our retail people, on our Check 25 program how many challenges have taken place in a store, we will also look at the refusals that have taken place within a particular store or even a geographic area. If we feel that, and we work very closely with the local authorities on this, in a specific area there may be increased activity, then we will certainly endeavour to get involved with the local authorities and our people at retail to see what we can do to help solve the issue.

We challenge, on a yearly basis, approximately 250,000 ID checks within our retail stores. We will refuse service to approximately 14,000 people in the course of the year. There's probably another 2,000 to 3,000 who are refused service because it's our belief they may be buying for minors. That's not as definitive as someone who doesn't have an ID but we do monitor that store by store and also on a geographical area, so it may be the Sydney area or the Pictou County area, whatever would dictate it. We're in close contact with our retail people plus the local authorities within those areas.

[9:00 a.m.]

MR. CAREY: Thank you. I'll pass the remainder of my time over to Mr. Taylor.

MR. CHAIRMAN: The honourable member for Colchester-Musquodoboit Valley.

MR. BROOKE TAYLOR: Mr. Chairman, successive governments have somewhat on a routine basis performed studies or reviews of the Nova Scotia alcohol retail business and I think the latest review essentially concluded that we have one of the most effective and efficient systems in all of Canada and maybe even further than that. I think that's a compliment and a tribute to the NSLC personnel, and certainly the employees and of course, management. From rare visits to the Truro or Stewiacke, Halifax International Airport, Middle Musquodoboit, Elmsdale NSLC outlets . . .

MR. CHAIRMAN: Excuse me, Mr. Taylor, are those the only outlets that you're responsible for? (Laughter)

MR. TAYLOR: Well, Mr. Chairman, I must carry on here. You may put me off track, but you know the chairman always advises to stay away from the rabbit tracks so I'll do that.

[Page 26]

My question is - I want to make the point that these employees at the NSLC retail outlets do a heck of a good job, there's no question about that, but sometimes employees will, when they have an opportunity, buttonhole you and comment that, gee, I've been working at the NSLC for eight to 10 years as a RPT and I'm sure human resources is very familiar with that acronym - regular part-time or casual employees - and I'm just thinking with sales of $390 million or more, transferring $144 million to the Nova Scotia Government, somebody should be looking at possibly enlarging the number of - I don't know whether they are full-time equivalents or full-time employees or what - but that's a common complaint that employees have. They're making major commitments and undertakings for years and years but they are really having difficulty getting employed on a full-time basis. Of course, with full-time employment as you would know, Mr. Chairman, comes benefits. So, I just wonder if somebody on the other side has any thoughts on that.

MR. STRICKEY: I think it's a normal course of both our budget and process and just the business aspect. We review our staffing levels on a regular ongoing basis. We basically run within our stores - and I will exclude managers for the time being - full-time RPTs and both of those are unionized and then we have a component of staffing which is casual. In the last number of years, we have, based on our staffing, done some rationalization and in a number of stores we have actually increased our full-time complement throughout the province. We entered into an agreement a number of years ago with Local 470 that represents the clerks, to go to province-wide postings. Before that, any full-time jobs were restricted to very small areas and now when a full-time job is available in one of our retail stores that job is posted to RPTs across the province.

Sometimes what happens is there is a perception that in a geographical area you might have some RPTs who have been there for a number of years who have not attained full-time status, but that doesn't necessarily mean that we haven't, in fact, promoted people to full-time positions. When we look at the complement of RPTs in the last five years, we have less RPTs in our stores today than we did five years ago, and we have more full-time staff in our store today than we did five years ago, so there has been a transition, but that has been based on staffing level reviews really dictated by how our business has grown over the last number of years.

MR. TAYLOR: Mr. Chairman, I think the transition is moving too slowly, quite frankly, and another comment I hear - and I would welcome a response and I say this with all respect - a number of folks, and you don't have to be talking to an NSLC employee down in the trenches to hear this comment, they feel that management is receiving a disproportionately larger percentage of wages and salaries than those employees out there working in the NSLC, and I realize you have to have professionals on all fronts, but I wonder if anybody on the other side has some numbers relative to management versus employees and just what that discrepancy might be.

MR. STRICKEY: When you say management, are you referring to store managers?

[Page 27]

MR. TAYLOR: Well, no, but that's a good point. I'm a little bit, I guess, perplexed as to why store managers are members of the union, and I understand they have a relationship with management, and you know usually if you're a manager you're in management, but in the liquor store system, in the retail system, that's another concern, seeing as how you bring it up. So maybe I'm not making myself clear, perhaps you could tell us the number of people who are in management and, if it's a fair question, do you have the information, the salaries and wages collectively of management versus the number of employees?

MR. STRICKEY: We wouldn't have that information with us, but we could certainly provide that information to you.

MR. TAYLOR: I would welcome that, sure, Mr. Chairman.

MR. STRICKEY: We could certainly do that.

MR. TAYLOR: I would like that. Two minutes, Mr. Chairman?

I wonder what provision is in place that enables the managers - I'm sure it's in the collective agreement - I'm just wondering the rationale, as you understand it, for the store managers to be members of the employees' union and also be managers. It seems almost like a dichotomy at the very least, so perhaps you could enlighten . . .

MR. STRICKEY: Well, I'm not sure I can. That was in place prior to me being employed by the corporation and I think that was something that happened certainly many, many years before my time. I'm not sure anybody here would be able to actually provide you the details with respect managers within the NSLC stores being part of the Nova Scotia Government Employees Union, but again if it's something you would like us to send you some information on, we can certainly do that.

MR. TAYLOR: Do I still have one minute, Mr. Chairman?

MR. CHAIRMAN: You do. One minute, Mr. Taylor.

MR. TAYLOR: Yes, just another quick comment. From time to time managers through whatever, attrition, retirement, will be out of the system at a retail outlet. A long-time employee, or perhaps even a short-time employee, will perform that function and do a darn good job by all accounts - and this probably comes down to something in the collective agreement again - because a manager in the union, that employee doesn't have an opportunity or a chance in whatever to move up, so to speak, even though they carried out all the functions maybe for two or three months, and it has happened, they can apply, but if somebody from another location, another community - in some cases counties miles away - comes in and takes that position, I don't know if there's any way of dealing with that.

[Page 28]

MR. STRICKEY: If I can just respond to that, that is part of the agreement that we have with both our unions, Locals 1670 and 470, and you're absolutely right, we will have a manager retire and within that store we will have one of the clerks who will assume that responsibility. Having said that, there are other clerks who may have over a period of a five-year period, or a 10-year period, when the manager is not in the store, a clerk will always assume the responsibilities of that manager.

So you're absolutely right, sometimes the dynamics of it do not look right where a manager might have retired. We send a posting out. Again, it's province-wide. We have a clerk in that store who might have assumed that responsibility for an eight-week period or a six-week period. They're in the competition, but they're not successful. It doesn't mean, however, that the individual who has won that is any less qualified. What we're saying is based on a competitive process we go through, we believe that person is in fact more qualified. That person could have been an employee in a store for 10 years and collectively over the 10 years would have replaced that manager maybe for the equivalent of 12 weeks or 15 weeks. So, again, the fact that it has gone to province-wide postings, I think there's a dynamic there that sometimes in the individual store doesn't quite look right, but it is open and fair to all members.

MR. CHAIRMAN: We are going into our second round now and we will divide the time up evenly and allow time for a wrap-up. So I will allow each member of the respective caucuses 13 minutes each. Mr. Steele, you may begin.

MR. STEELE: Mr. Chairman, the thought that I was trying to express when the chairman so correctly cut me off because I was running overtime in the last round was that, in my view, the government imposed an illegal liquor tax increase. Instead of doing it in the budget and being accountable to the Legislature for it, the minister hit upon this notion that all he had to do was write a letter. All he had to do was write a letter ordering the corporation to essentially raise its prices because that was the only option available to you, and the Liquor Corporation said aye, aye, captain, and did it and imposed the first across-the-board increase in nearly a decade.

This scheme of the minister wouldn't work if we had an independent Liquor Corporation which is what I thought that we had, but it's a demonstration to me - this is my opinion of course - that this is the danger you get into when you have people appointed to a corporation for the wrong reasons, who are appointed because of their political and personal ties to the political powers that be, because then their ability to exercise any independence of judgment has disappeared. I have expressed my concerns about the chairman and what I perceive to be the conflict of roles that he has and, Mr. Barker, I have expressed my concern about the fact that you stand to gain a pretty substantial bonus simply for doing what the government has ordered the corporation to do.

[Page 29]

Everybody wins here except for the consumer because it's the consumer who got stuck with the across-the-board price increase with no recourse, with no accountability, just because the minister wrote a letter and if we let the minister get away with this, it means we will never see another liquor tax increase in Nova Scotia, not ever, because the government doesn't have to do it anymore. If they want more money, all they have to do is write a letter saying we order you to raise more money and so that will be the end of liquor taxes in Nova Scotia. So that's my concern. I think it's a real concern. So my question to you is, Mr. Barker, now that that concern is on the table, what do you think the Liquor Corporation can do about it?

MR. BARKER: I think it's a good question that you bring up and I think it's one that we would have to address should it happen again. At this point in time we're talking about something that is sort of in the past, if you will, and at this point there is nothing on the table going forward.

MR. STEELE: But, you know, I don't think we can just say that it's - I'm putting words in your mouth, of course, exaggerating slightly - but let's not just let bygones be bygones, you know, it's water under the bridge because if it is truly an illegal tax increase, the government has no right to collect the money, the government in fact has a duty to refund the money to the people who have had this illegal tax imposed on them and even if you don't accept that, there's nothing stopping the minister from writing the same letter to you next year saying that we order you to raise another x number of million of dollars. I would think that we all want to know what the situation is before that happens again. So, for example, one option available to the corporation is to seek independent legal advice and then make that opinion public. Is that something the corporation would be willing to do?

MR. BARKER: It's a discussion we could have with our board.

MR. STEELE: But the board is part of the problem, Mr. Barker.

MR. BARKER: But the board also is charged with the responsibility for governing the corporation.

MR. STEELE: But the corporation's board has a majority of members who are the personal and political friends of the minister. They have absolutely no interest in investigating this. So where does that leave the consumer?

MR. BARKER: I understand your question. I guess my comment would be that that's in the political arena and if there's a legal challenge to the process, that will happen and it is something that we would have to react to one way or the other should this occur again.

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[9:15 a.m.]

MR. STEELE: In the liquor . . .

MR. CHAIRMAN: Excuse me, Mr. Steele - I believe you're interested in answering that Ms. O'Leary-Jones?

MS. O'LEARY-JONES: Just a comment, as far as the executive team of the corporation, no matter what corporation you're working for we are charged with the responsibility - you do up a business plan, you have your strategies, your objectives, you look at your plans and you do everything in your power. You want the business to be a growing concern. It doesn't matter what business you're in. There are a number of avenues in which you can increase your bottom line: cost efficiencies, volume, depending on the products that you're selling, we just happen to be selling liquor. Also, there are price adjustments - when we say price adjustments, adjustments to your market - merchandising- and marketing-type of programs. We've always done that since I've been in the organization and I'm sure before my time as well.

Any organization that I have worked for or any executive people who have worked on a team at an executive level would go through those processes. When you say that we're forced to do these things, we had a request to go through - and that's the way we looked at it - we presented risks involved with some of those particular items in order to be able to do and to generate a revenue, but our business plan and business process will continue through the organization, as any other corporation would go through. You review all aspects of your business. Our goal, across the years, and will continue to be, is that the pricing element or markup structure is one of those elements that there can be some adjustments to. We prefer to take a look at some other avenues beforehand, cost efficiencies, programs, merchandising, marketing and those particular things, but the pricing factor is always there. The markup structure will always be one of those elements.

MR. STEELE: In the Liquor Control Act, as amended last year, it contains the following sentence, Section 7H(4), "The Governor in Council may make regulations respecting conflict of interest rules governing the President and members of the Board of Directors." Mr. Barker, have those regulations been made, or are they being discussed?

MR. BARKER: Not that I'm aware of, no.

MR. STEELE: I would like to turn to this issue of the specialty stores. As I was reading the material in preparation for today I was struck by one thing, and that is what a good, efficient operation the Liquor Corporation seems to be running. You're doing a very good job. In fact, maybe the best testimony to the good work that's being done by management and employees of the Liquor Corporation is that when the government went out to look at privatization scenarios, they couldn't find a scenario that was better than the status

[Page 31]

quo, except for one that was ever so slightly better in terms of revenue to government. The difference was so slight that it was less than two-tenths of 1 per cent. That could be explained entirely by the assumptions of the model. That was having the 60 agency stores.

The Liquor Corporation is running a good operation. As has been pointed out, when you were ordered to generate $7 million more in net revenue, there wasn't really anywhere to go with efficiencies because you're running a pretty tight ship already, so the only avenue you had was to raise prices. Then we get to this issue of the specialty stores. So let me ask you this, if the Liquor Corporation is running a good, tight, efficient operation, which it appears to be, why can't the Liquor Corporation run the specialty stores?

MR. BARKER: Perhaps I could just give you a perspective on how we look at our marketing role within the Province of Nova Scotia. The NSLC stores carry a product selection that meets the needs of most of the customers, most of the time, of the people who live in the province. On that basis, we carry a range of 2,000 products, and stores are able to choose and select from that list of products that best meet their customers' needs.

Having said that, there are literally thousands of products in the world that we don't carry for a whole variety of reasons. Sometimes it's the amount of product that's available, sometimes it's the price, sometimes it's the restrictions of the particular country it comes from, a whole variety of reasons. One of the elements that the public has, I guess, frequently mentioned to the government is the lack of product selection. That is a target that is ongoing from the standpoint, as I mentioned, that there are many products that we simply can't carry, don't choose to carry or are not able to carry.

One way to get at that was to look at a more entrepreneurial model which said let's have two or three or, in this case, four potentially private wine and specialty stores that, maybe, are able to carry products that we don't carry or choose to carry inside of the NSLC stores.

MR. STEELE: Here's the problem, Mr. Barker, in the study done of the privatization models, particularly of the specialty stores, and this was done by the Liquor Commission - and I know this was done before you came on board - and here is the conclusion of what's going to happen when we do this, "All models result in revenue loss to the Government as sales through the private outlets will primarily be transfer sales from the existing NSLC system . . ."

So, in other words, we set up these specialty stores, and they're not generating new sales, they're taking sales away from existing stores, and doing it in a non-union environment, doing it in an environment where, because you're running such an efficient operation, really the only place for these specialty stores to go is lower wages. It's the only place they're going to find savings. Essentially what we're doing is, again through the back door, contracting out the work of the Liquor Corporation, or work that the Liquor Corporation could do just as

[Page 32]

well as anybody. The Liquor Corporation has already proved it, they can do this stuff, they can sell, they can do this retail business as well or better than any other model the government can come up with.

What we're doing is we're privatizing through the back door and taking the good, well-paid union jobs and turning them into non-union jobs. That's where the profit is, the difference between the union wages and the non-union wages. Let me ask you this question, this study that I quoted from was delivered to the minister in the Spring 2001, now in the Fall 2002, what is the Liquor Corporation's estimate of how much net revenue it will lose as a result of this specialty store project?

MR. BARKER: I will maybe make a couple of comments, and I think Sheila may well have a comment on that as well. One of the things that you had mentioned, or maybe assumed, is that there will be no new sales. One of the things that we assume is that there will be significant new sales, based on the fact that these people will be carrying different products than we carry today.

MR. STEELE: Mr. Barker, let me interrupt you for a second. The commission's own study says that's not the case. I quoted you a line from this saying that the sales will be primarily transfer sales. Has the corporation changed its mind about that?

MR. BARKER: I certainly understand that, but I think there's been a fair bit of learning in the last year, particularly from the agency stores, that the market does expand when you offer different products in different locations. I think the NSLC might take a different position today than it did at that point in time. But having said that, you're absolutely correct. We have tremendous people who have a tremendous amount of skills, particularly product knowledge. I think your comments suggest that these private wine stores may be able to have the same level of knowledge, I'm not sure that's going to happen.

MR. STEELE: What is the corporation's estimate of the loss of net revenue as a result of this speciality store project?

MR. CHAIRMAN: You have 30 seconds left, Mr. Steele, so I would assume it's all yours, you can take as much time as you want, Ms. O'Leary-Jones.

MS. O'LEARY-JONES: As much as I want, give me the microphone for the rest of the day. I promise I won't take up more than that.

I'm just reading through this. I will address a couple of things first. It's primarily transfer sales. In any models that we've ever looked at, different ways of distributing alcohol or liquor sales, there are always transfer sales. There's always going to be transfer sales. In these particular cases, it will be primarily. What we have indicated in our budget and in our forecast is that there would be a small portion of incremental sales, there will be new sales

[Page 33]

generated because there's unlisted product, it's new product, new services, the fact that there's not that many of them that are going to be opened, and that would offset the discount that we would be giving to these private stores, because there will be a discount applied to that, and a small incremental sales.

Have we budgeted a loss? No, we haven't. We do not foresee that there would be a loss. Will there be great profits from it? From the corporation, no, but we have not budgeted a loss. To just reiterate, again, of course, the private stores themselves, because of the style and the criteria under which they're set up, it provides an additional service, an additional convenience, specialty products that the consumer does not have access to today. We believe that will definitely bring incremental sales. We've seen incremental sales in our own particular stores when we brought in particular products as well. Again, as Andy mentioned, we're servicing 100 stores. Customers have a perception that if I bring it in for this store, I have it in all 100 stores. So for these four particular private operators that are going to be operating - or maximum four private operators - we've actually put in incremental sales that will offset the discount rate that's in there as well as a little bit of profit that we're going through.

MR. CHAIRMAN: Thank you, Ms. O'Leary-Jones. It's 9:26 a.m. and the next 13 minutes belongs to the member for Cape Breton West, Mr. MacKinnon.

MR. RUSSELL MACKINNON: I'm a little bit intrigued by this bonus process that seems to be in place. The directive whereby - if I can find it here - Bonus Maximum, "Achieve budgeted net contribution of $160 million.", has that been achieved by the corporation?

MR. BARKER: Our estimate at this point is that it will be achieved, yes.

MR. MACKINNON: Will you exceed it?

MR. BARKER: If we do, it will be very slight.

MR. MACKINNON: I see. So, that would mean senior management would receive a bonus of $20,000. Is that correct?

MR. BARKER: Are you referring to my particular case?

MR. MACKINNON: Well, it may be yours - how many would . . .

MR. BARKER: I believe what you're referring to is my particular case, so yes, that would be the case.

MR. MACKINNON: Are there any other bonus systems in place for other employees within that senior management?

[Page 34]

MR. BARKER: Not in the same way. I was the . .

MR. MACKINNON: What ways are you referring?

MR. BARKER: There are non-monetary bonuses that we may do for staff who achieve objectives.

MR. MACKINNON: Could you explain?

MR. BARKER: We do celebrate successes, for example, at store levels. If stores do hit budgets, if stores make criteria, we may well have a celebration within the store.

MR. MACKINNON: What do you mean, a celebration? Like a birthday cake?

MR. BARKER: A pizza night, perhaps, some type of a staff function, that sort of thing. So there are those types of events that have happened for many years when there is that kind of recognition for targets.

MR. MACKINNON: Just for clarity, because there seems to be some concern here that's been raised. Would you be kind enough to table for members of the committee the salaries of senior management like yourself and other members before the committee?

MR. BARKER: Absolutely.

MR. MACKINNON: And their bonuses and expenses.

MR. BARKER: The salaries are tabled in the annual report and you may have seen them. However, we have a change in the executive, as I have mentioned. We have reduced the executive team by two positions. We currently have five vice-presidents at this point. Salaries range between $86,000 and $90,000 per year. My salary, obviously, we've already talked about. We have eliminated an executive vice-president's salary which at that point was $113,000 a year and we eliminated one vice-president who at that time was making $83,000 per year.

MR. MACKINNON: What about expenses?

MR. BARKER: Expenses from the standpoint of travel, that sort of thing?

MR. MACKINNON: Yes.

MR. BARKER: Travel and those kinds of expenses are done on a basis of receipts and straight expense reimbursement.

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MR. MACKINNON: You will table all that as well?

MR. BARKER: All of that exists, yes.

MR. MACKINNON: My next question is to the Auditor General. With regard to the directive that was received from Minister MacDonald on that $7 million issue, I would ask the Auditor General if he would be kind enough to make an observation on that for members of the committee.

MR. CHAIRMAN: Mr. Salmon.

MR. ROY SALMON: Well, I think the key words in Sections 21 and 22 of the Liquor Control Act are that the corporation is required to submit the business plan for approval, the key words "for approval". I'm not a lawyer, but in my view the minister has the right to go back to the corporation and say, no, I will not approve this business plan, I would ask you to make the following changes. That, to me, is what has happened in order for the minister to grant his approval.

MR. MACKINNON: My next question is to the chairman. When that directive was received from the minister, did the board meet at a later date and approve that as a decision, that directive from the minister?

MR. BARKER: Yes, that's correct.

MR. MACKINNON: It did. How long after that directive, because that directive was issued in February 2002.

MS. O'LEARY-JONES: Immediately. As soon as there was a request that was made and any business process as you're going through the various steps and various stages of approvals or to get commitment at the recommendation stage, it would have been immediate. As soon as the request is put through, yes, we'll take a look at our business plan; we'll go through and look at a number of initiatives, a number of things in our business plan.

[9:30 a.m.]

MR. MACKINNON: How often does the minister interact with the board or is it just during budgetary process?

[Page 36]

MR. BARKER: As far as regular, I'm not aware of any sort of schedule of meetings between the minister and the board. I think discussions do occur between board members,

certainly, the chairman of the board and the minister. (Interruptions) Exactly. But I'm not aware of any scheduled meetings, no.

MR. MACKINNON: Would you table for the committee records of interactions between the minister and the chairman of the board on policy matters, decision-making issues and financial matters respecting the Nova Scotia Power Corporation over the last year?

MR. BARKER: I will request that information. (Interruptions)

MR. MACKINNON: What did I say? Power Corporation. Well, they seem one and the same. I think I did that because of the fact that it seems like somebody is on a power trip here, they're looking for $7 million more.

MR. CHAIRMAN: Nice recovery, Mr. MacKinnon. (Laughter)

MR. MACKINNON: You have to in politics. With regard to an organization called MADD, Mothers Against Drunk Driving, what is the relationship between that organization and the Nova Scotia Liquor Corporation, because in fairness to yourself, before you answer, I recall on a previous date that organization appeared before one of our legislative committees and expressed concerns about the Liquor Corporation not allowing them to do their lobbying for funds within the liquor stores, as they had been allowed to on a previous date to them appearing before the committee. Would you be kind enough to comment on that, and what's the relationship?

MR. BARKER: Mr. Chairman, I suggest Mr. Strickey.

MR. STRICKEY: I'm not sure exactly what incident you are referring to. We currently are associated with MADD. We run a program in our retail stores where various organizations through the course of the year have an opportunity to place what we call cash cans at the cash register, and those are done on a yearly basis. There's a schedule done up and we receive submissions from various organizations to, in fact, allocate those cash cans within our stores. Some will be done provincially, some may be done on a regional basis, depending on the request. I don't have the schedule with me, but we can provide you with a copy. I believe this year that MADD is, in fact, on the cash can schedule and we are providing the MADD ribbons within our stores. So, I believe that is in place, you may be referring to a couple of years ago, because the schedule will change sometimes depending on the submissions of various organizations.

We will support the IWK, the Children's Wish Foundation, and a number of charitable organizations, and MADD I know has been supported in the past, and I believe it is in fact in our store system right now.

[Page 37]

MR. MACKINNON: Have they made any request to be there physically themselves, representatives from their organization?

MR. STRICKEY: Each store has a program set up where on an individual basis, again because our stores are located across the province, they represent a lot of small communities, so each store manages that process themselves. They will have requests from a number of organizations. Our focus is on charitable organizations to maybe have a tag day in front of the store, so that's done on an individual store basis, and it's really managed by the stores themselves in their local areas.

MR. MACKINNON: With all due respect, that's a bit of a cop-out. What's more charitable than saving a person's life, you know, from a drunk driver?

MR. STRICKEY: I am not saying that it isn't a worthwhile cause. Obviously, we recognize it as being a very worthwhile cause, but there are other ones out there, such as the IWK, the Children's Wish Foundation, so I think, in a number of the communities, what the stores will do is balance and they will try to get a representation from a number of various organizations with regard to support at the local level.

MR. MACKINNON: What you are saying is that you leave it up to the stores, you don't have a policy.

MR. STRICKEY: No, what I'm saying is that we run two programs: one is corporate, one with a cash can, and MADD is involved in that one; and then beyond that the stores have an opportunity, locally, to allocate opportunities for various organizations within that area. In some cases it might be the hospital looking to raise money for new equipment, so a lot of that is done in the local area. And we fully support that.

MR. MACKINNON: My next question is with regard to the board of directors. I understand there are three on the board of directors, is that correct?

MR. BARKER: There's actually seven.

MR. MACKINNON: That's been an increase, has it?

MR. BARKER: That's what it's been from the very beginning.

MR. MACKINNON: My colleague has . . .

MR. CHAIRMAN: Mr. Downe, you have three minutes.

[Page 38]

MR. DOWNE: In Bridgewater, we have the Salvation Army set up there on a regular basis, and that's great, organizations like that, and I certainly support the fact that you allow that in the different stores. It's been a benefit to the different organizations, and we've had sport organizations out front selling chocolate bars and so on and so forth. I hope that the corporate philosophy continues along those lines, because they are very beneficial to our locals areas, whether it's MADD or the Salvation Army or another church group or hospitals. I think it sends a good corporate signal that you want to support those initiatives in rural Nova Scotia.

The other point I want to make is that I think the Liquor Commission has done, in many ways, a brilliant job over the years. They've worked hard, they've upgraded. I think the attitude I see in the stores is better, it's more professional all the time. People are more aware of the stock, more aware of what's going on. As a former minister, I know there's a lot of effort made to do that.

I believe the staff deserves to be congratulated periodically for that, because I see them trying to make the effort. They don't want to be privatized, obviously, they want to continue to have a job. They've raised the bar. When you go in you feel like you're a customer, in a store, who's respected and appreciated. They will explain things to you. So I just want to bring that back through you, to them, that they are making an effort and they are trying very hard to provide a high-quality service and professionalism to the public that they deal with. I just wanted to say that.

MR. CHAIRMAN: Your time has not elapsed. Is that your final comment? I would turn the next 13 minutes over to the government caucus, to the member for Kings West.

MR. CAREY: Mr. Chairman, I just have one question and then I will pass to my colleagues. In the Auditor General's Report, there was a one-liner that said spillage. I wonder if you had the amount with you that you could look at. It wasn't out of line, I was told, by the Auditor General. Is spillage breakage, samples, whatever? What is spillage?

MS. O'LEARY-JONES: That could be a number of items. We actually call it shrink. In any retail organization, you're going to have some type of shrink. You have the elements that would be pure breakage, just picking up a product and for whatever the reason, there is breakage, customer breakage for instance, a customer comes in a store and they actually drop a case or knock over a bottle, whatever, so there is that element of it. There are also elements where you would have - I hate to say this - theft, that would be losses associated with theft, and that can either be from your employees or customers as well. That's no different from any other type of retail organization. When you open up to the public, you're going to have that particular area as well.

[Page 39]

We also have such things in there as well, where there's some responsibility when we deal with suppliers, if there's some breakage or quality control, there may be an element in there that we actually take part of the cost, as well as the supplier. There's that element of it as well. It entails everything from the organization as one shrink number. I should probably indicate, at this time, the shrink number, and it is recorded in the Auditor General's Report because we report that on an ongoing basis. We do operate 100 stores. As a retail organization, just for staff and what we've done for the organization, I guess, is to keep those losses down. Our shrink number is something like .04 per cent, .06 per cent of our total sales. In the Retail Council of Canada, if you look at the retail sales in those particular organizations, they can be upwards of 2 per cent to 3 per cent of sales. We've made a very conscious effort to keep those numbers low, as much as possible. You will have customer breakage and you will have breakage of product that will be going through as well.

MR. CHAIRMAN: The member for Colchester-Musquodoboit Valley.

MR. TAYLOR: Mr. Chairman, I would like to ask Mr. Barker a question, kind of a follow-up to the questions I had with Mr. Strickey. It seems to me that whereas the NSLC has approximately 490 full-time employees and nearly as many RPTs and casuals that things aren't adding up, Mr. Barker, as far as I'm concerned and from conversations with the employees. I'm just wondering, are you involved in any undertakings or do you have any plans to look at this situation to see whether or not there needs to be any type of criteria put in place to deal with this and as a follow-up to that question, I wonder, if it's not privileged information, would the Public Accounts Committee be entitled to the number of RPTs, not casuals, the number of RPTs who have been with the NSLC for one year or more? That would be my question.

MR. BARKER: I think, if I may, I would suggest, as Mr. Strickey had mentioned, we do evaluate the process on an ongoing basis, but in terms of specifics I would suggest that maybe I could turn it back over to Mr. Strickey.

MR. TAYLOR: Well, Mr. Chairman, if I might, I wasn't all that satisfied with - I'm not saying that the response wasn't forthright, but I really feel that I didn't hear anything regarding a plan, an undertaking that's in place. It seems to be done on a somewhat, you know, the public perception is that it's being done on an ad hoc basis and, Mr. Barker, I know you're reasonably new to the job and if there's something at work that can be shared with this committee to kind of address what may be an unfairness, I think perhaps it should come from you.

MR. CHAIRMAN: Mr. Barker, there's something about sitting in those seats were you become a quarterback and you hand things off to other members, but the member for Colchester-Musquodoboit Valley has asked you to respond and if you would initially attempt that, then perhaps we might take a hand off to the quarterback but, Mr. Barker, please. (Interruption) The lateral, yes.

[Page 40]

MR. BARKER: Just to give you an idea, I had mentioned earlier that we do look at it on an ongoing basis and that would be absolutely correct and we look at it on a store-by- store level because, of course, a lot of this is based on scheduling and you look at the number of hours that a store is open, you look at the coverage that's required, what part of the day, evenings, nights, weekends, so on and so forth, and out of that emerges a schedule and that schedule will be a full-time component, a part-time component, and usually some seasonality or casual hours that we use to fill them.

So you're absolutely correct that there will always, I think, be a desire to have more and more full-time positions. We look at it from the standpoint of what does the operation require to run effectively and that's from a customer point of view, that's from a financial point of view, and to a large extent it's even from the way the staff runs the store itself point of view. So we have those discussions and we do those reviews basically at an ongoing level. There is no particular window of time when we look at that. We look at that on a regular basis through our field people and through our operations teams.

Now, to your second question, as far as our regular part-time employees who have been there longer than a year, I would say it's virtually 100 per cent.

MR. TAYLOR: How about longer than five years?

MR. BARKER: Very, very high, 95 per cent, 98 per cent, very high as well. We have a large number of very dedicated and very long-service employees.

MR. CHAIRMAN: Mr. Strickey, do you have anything to add?

MR. STRICKEY: No, just to reiterate that when you're looking at the staffing levels, particularly at retail, the largest component would be full-time. RPTs, we currently have approximately 120 RPTs. That number would have dropped in the last five years from probably 250. As I mentioned earlier, there have been full-time positions. The casual component is the component that's plugged in after the full-time and the RPT hours are allocated. We have a number of casuals who may work as few as three hours a week or they may be required on a Friday night. The staffing levels are monitored on an ongoing basis. We bill them full-time, then RPT and then casual.

[9:45 a.m.]

MR. TAYLOR: I'm going to yield to my colleague, the member for Pictou East. It seems rather strange to me that not only do the numbers seem somewhat disproportionate but I don't believe that the store managers - I think it's more the management outside of the NSGEU that actually control, if you will, and there's not really a set parameter in place regarding RPTs and the whole employment scenario. Mr. Barker, perhaps you should just have a closer examination of that. I know the assessments are ongoing.

[Page 41]

MR. CHAIRMAN: We have six minutes remaining in the government's time.

The member for Pictou East has the floor.

MR. JAMES DEWOLFE: Mr. Chairman, colleagues from the NDP, by way of a handout that we already have before us, had indicated that sales levels by the private retail stores tend to erode government revenues. I don't believe that's totally correct. Was the agency store program profitable to the corporation? I guess that essentially is the question.

MR. CHAIRMAN: Is that to Mr. Barker?

MR. DEWOLFE: Yes, to Mr. Barker.

MR. BARKER: As identified in the agency review that was conducted by the Unisys Group which, of course, was an independent evaluator, the NSLC did, in fact, increase their profitability during the agency store test.

MR. DEWOLFE: By some $7 million, wasn't it, the increase in profit that came forward? It wouldn't be just totally from the stores. You did have a revenue increase of $7 million, wasn't that the case?

MR. BARKER: The actual revenue increase from the agency stores would have been very small. It would not be anywhere near the magnitude of $7 million, no.

MR. DEWOLFE: No, but the corporation did appreciate a revenue increase.

MR. BARKER: That is correct.

MR. DEWOLFE: Is the corporation considering expanding the agency store program? By way of summing up today's events, I would just like to touch base on a few of these topics. Are you considering expansion?

MR. BARKER: Just to summarize, as you've asked, the government requested the initial agency store test; and, in fact, the eight agency stores were put in place. Following the nine to 12 months when the stores have been up and running, we have completed, if you will, Phase II of the program, which is an independent evaluation through the Unisys Group. The results of that have just been tabled over the last short while. I think now the next step is to go through the evaluation of some of that data and looking at some of the material that's contained in those findings, recognize that the government will ultimately decide if they wish to have a mandate for us to look at that further.

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MR. DEWOLFE: Mr. Chairman, if I might, I would like to go to Mr. Strickey. Mr. Strickey, when we last talked, I believe you were Vice-President of Store Operations and you were located in Truro. Is that correct?

MR. STRICKEY: I was Vice-President of Store Operations, and I was located in Halifax.

MR. DEWOLFE: You didn't work out of Truro?

MR. STRICKEY: No, I didn't. I was the regional manager for the Pictou County area, at which point I worked out of the New Glasgow store.

MR. DEWOLFE: That's correct. That was your position. We've gone through quite a few area managers since then. We have a new one now in place.

MR. STRICKEY: Yes, that's correct.

MR. DEWOLFE: We seem to have trouble hanging on to them. The sale of liquor in corner stores has increased sales of other merchandise. How many years were you with the corporation?

MR. STRICKEY: Six years now.

MR. DEWOLFE: And before that you were with K-Mart?

MR. STRICKEY: That's correct.

MR. DEWOLFE: So you do have a handle on merchandising through your previous employment with K-Mart. I was just wondering about the sale of other merchandise, as a result of sales at corner stores. What type of increase in sales would you expect to see on other merchandise?

MR. STRICKEY: Are you referring to these agency stores?

MR. DEWOLFE: Yes.

MR. STRICKEY: I think in the report that was completed or the study on the agency stores, each one of the agents indicated that having the availability to sell beverage alcohol

out of their stores increased their sales of general merchandise. That would be, certainly within the retail industry, very typical of the fact that you've now expanded your product assortment, or your product line, you can service a larger group of people within your trading areas, so that would be very consistent with general retailing.

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MR. DEWOLFE: There was some talk of bonuses and so on - just to clear the air, did you receive any bonuses personally, yourself?

MR. STRICKEY: I have not received any bonus.

MR. DEWOLFE: You haven't received any bonuses. I'd like to know, and you may be able to answer this as well, about how many managers - we talked about the pays, we were going to get that information and find out what the salary range is for management, what's the ratio of the permanent employees who are management versus employees? Management and executive, I'm talking store managers up, what's the ratio of managers to employees?

MR. STRICKEY: It would be a low ratio. We can get you that exact number, but it

would be a low ratio.

MR. DEWOLFE: That would be included then in the package that we will receive?

I will yield the last few seconds for summary by our guests.

MR. CHAIRMAN: Thank you, Mr. DeWolfe. Before I ask for our witnesses to give a wrap-up, I remind you that throughout your comments and your answers, you've made a number of commitments for various pieces of information. Our very diligent legal advisor will follow up with me and we will have e-mailed to your office what actually comes out in terms of commitments that you've given us.

Mr. Barker, or any of the witnesses, if you would like to make some wrap-up comments at this stage, the floor is yours.

MS. O'LEARY-JONES: I can start since they seem to want to give me the microphone for some reason. This is my second visit to Public Accounts and whenever I'm being asked questions, I think it's a great opportunity for us to be able to portray some things that the organization has been doing over the years. Also I appreciate the comments that some people have addressed as well, to say what a good job the employees do. Especially the people, you call them in the trenches I guess, they do a great job for their organization. I think everybody does pull together to run an efficient organization, and I do appreciate those comments.

MR. STRICKEY: I also want to say that it's a good opportunity for us, particularly as a senior management group, to articulate why some of the decisions have been made. They're all made from a business standpoint, I do want to iterate that. It is nice to hear the acknowledgement of our retail people. They in fact carry the largest part of this organization, and we believe they do it exceptionally well, so again thank you very much for that acknowledgement.

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MR. BARKER: I'll make it very brief, but just thank you very much for your time this morning. I very much appreciate the opportunity to sit down with you for the last two hours. I think I would echo my two colleagues here - the only reason the NSLC survived and does well, is because of its people and I really appreciate some of the comments that many of you have made this morning, and I know they will as well. So thank you very much for that very positive feedback to us, we certainly do appreciate that.

I would also mention that we're changing, and we continue to change as a retailer, to become more and more of a retail organization, and I appreciate some of the feedback we received this morning on that perspective as well. I can assure you that we'll become more retail-focused as we go forward. So thank you again for your time.

MR. CHAIRMAN: Before I ask for adjournment, if you could just wait for a moment, we have a couple of quick announcements, and then we'll pay our regards. I remind you that next Wednesday we'll again be in this historic Chamber, at which time we will have representatives from Service Nova Scotia and Municipal Relations and the topic is taxation, property assessments and equalization.

I recognize Mr. Dewolfe.

MR. DEWOLFE: If you would allow a couple of minutes for our caucus to put another

agenda item forward for consideration that may be timely, it may be something that we would like to look into early in the new year, if you could allow us that time next week, I would appreciate it.

MR. CHAIRMAN: Agreed.

A motion to adjourn is in order.

MR. MACKINNON: I so move, Mr. Chairman.

MR. CHAIRMAN: We stand adjourned.

[The committee adjourned at 9:55 a.m.]