The Nova Scotia Legislature

The House adjourned:
October 26, 2017.

HANSARD

NOVA SCOTIA HOUSE OF ASSEMBLY

COMMITTEE

ON

ECONOMIC DEVELOPMENT

Tuesday, October 5, 2004

COMMITTEE ROOM 1

Small Business Loans Program

Printed and Published by Nova Scotia Hansard Reporting Services

ECONOMIC DEVELOPMENT COMMITTEE

Mr. Russell MacKinnon (Chairman)

Mr. Brooke Taylor

Mr. William Dooks

Mr. Mark Parent

Mr. Howard Epstein

Mr. Charles Parker

Mr. David Wilson (Sackville-Cobequid)

Mr. Wayne Gaudet

Mr. Harold Theriault

[Mr. Brooke Taylor was replaced by Mr. Ronald Chisholm.]

[Mr. William Dooks was replaced by Mr. John Chataway.]

IN ATTENDANCE:

Mrs. Darlene Henry

Legislative Committee Clerk

WITNESSES

Small Business Loans Program

Office of Economic Development

Mr. Jeff MacCallum, Corporate Strategist

Mr. Neal Conrad, Director of Rural Development

Credit Union Central of Nova Scotia

Mr. Bernie O'Neil, CEO

Nova Scotia Co-operative Council

Ms. Diane Kelderman, CEO

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HALIFAX, TUESDAY, OCTOBER 5, 2004

STANDING COMMITTEE ON ECONOMIC DEVELOPMENT

9:00 A.M.

CHAIRMAN

Mr. Russell MacKinnon

MR. CHAIRMAN: Good morning, ladies and gentlemen. Welcome to today's committee meeting of Economic Development. My name is Russell MacKinnon, MLA for Cape Breton West. I'll be your chairman. Today we have on our agenda the Small Business Loans Program. With us, we have representatives from the Office of Economic Development, Mr. Jeff MacCallum, Corporate Strategist, Mr. Neal Conrad, Director of Rural Development, Mr. Bernie O'Neil from the Credit Union Central of Nova Scotia, and Ms. Diane Kelderman, CEO of the Nova Scotia Co-operative Council.

Starting off, I would ask each member of the committee to introduce themselves. Of course, we'll start with our clerk.

MRS. DARLENE HENRY (Legislative Committee Clerk): Darlene Henry, Committees Office.

[The committee members introduced themselves.]

MR. CHAIRMAN: I'll ask our witnesses to introduce themselves. Protocol is we generally have some opening remarks of 15 or 20 minutes maximum. Then we'll open up the floor to questions, would that be okay? Terrific.

MR. JEFF MACCALLUM: My name is Jeff MacCallum. I'm a corporate strategist with the Office of Economic Development.

MR. BERNIE O'NEIL: My name is Bernie O'Neil, President and CEO of Credit Union Central.

MR. MIKE WARK: My name is Mike Wark, President and CEO of Valley Credit Union.

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MR. NEAL CONRAD: Neal Conrad, Director of Community and Rural Development, Office of Economic Development.

MS. DIANE KELDERMAN: Good morning, Diane Kelderman, CEO of the Nova Scotia Co-operative Council.

MR. MACCALLUM: I believe Bernie is going to give some opening remarks, and then we'll get into a presentation which myself and Diane Kelderman will do.

MR. O'NEIL: Mr. Chairman, members of the committee, first of all it is a pleasure to be here to discuss this loan program with you this morning. From our perspective, this has been an excellent program for Nova Scotians and indeed for the credit union system. I will give you a brief overview of the credit union system to give you some sense of what we are.

The credit union system in Nova Scotia serves about 169,000 Nova Scotians who are members of our credit unions. We have a network of 37 credit unions but within that network there are 145 points of contact in our province made up of 84 locations, because many of our credit unions, after some consolidation, have a number of branches. We have 61 automated banking machines or teller machines spread throughout this province.

Our growth over the past number of years has been, on average, 7, 8, 9 per cent per year and our assets in this province are about $1.3 billion. In 34 of our communities in Nova Scotia, we are the only full-service financial institution, and that is likely to increase in the near future.

In 2003, credit unions returned in excess of $1 million to Nova Scotians in the form of patronage rebates based on the business they do with our credit unions. We employ some 800 Nova Scotians in our system and our salaries and wages in 2003 were in excess of $24 million; about $0.5 million was invested in staff and director training. We believe in investing in our communities, and credit unions are locally owned, managed and staffed, with a primary responsibility to the local community. In this way, we feel we are more responsive to the needs of the communities and indeed our decisions are made locally, based on local circumstances.

We're proud to say that we were a major sponsor of the Canadian Cancer Society's Relay for Life, which raised over $880,000 in 2004, we have donated about $350,000 to community development projects and charities, and we were a major sponsor of the recent Acadian Congress in Nova Scotia. We also provide scholarships to community colleges and the Collège de l'Acadie in Nova Scotia, and we have a significant number of school programs. We also injected over $3 million into local economies last year through the renovation, construction and technology purchases in our various credit unions, and that trend is certainly continuing in 2004.

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Canada has the world's largest per capita membership in the credit union movement with over 10 million members, or about a third of our population

In conclusion, I can assure you we are very dedicated to and committed to our local communities and indeed to maintaining a presence in both rural Nova Scotia and urban Nova Scotia. I look forward to your questions and our discussion.

MR. MACCALLUM: Thank you, Bernie. I'm going to start an overview of the program. The program began as a partnership between three parties. There was the Nova Scotia Co-operative Council, which is the sector organization for credit unions and co-operatives in the province; Credit Union Central of Nova Scotia, which is the central body that works with the local credit unions across the province to administer the credit union system; and then the Office of Economic Development. The province, through the Office of Economic Development, had worked with the co-op sector through the Co-op Council for the last number of years around co-op development and the credit union partnership seemed like a logical step to look for some assistance.

Essentially a quick overview of the program, the program has enabled $8 million in loans over three years. That's done through a guarantee through the province. It's a 75 per cent guarantee. So the province is guaranteeing $6 million of the $8 million in loans. The other 25 per cent of the risk, or the $2 million worth of value in the loans, that risk is borne by the credit unions. The maximum size of a loan that can be covered is $150,000 and so the maximum guarantee the province would issue on a loan of that size would be $112,500. It was initially established as a three-year pilot with $6 million in guarantees over the three years and it's available to small businesses in most sectors. There are very few exclusions, one being, I believe, taverns and nightclubs and other businesses of a questionable ethical nature.

Generally speaking in terms of the provincial objectives for the program, we were looking to ensure there was a reasonable access to capital for small business and address some gas and financial services. Consistently, surveys done by the Canadian Federation of Independent Business, as well as some other studies, had indicated there was still a bit of a need in terms of servicing for small business financing. One area that seemed to come up fairly repeatedly was the area around working or flexible capital for businesses in certain sectors. So service and retail businesses needed some assistance around that.

The other issue that we were looking to address was to bring local knowledge and expertise to bear on the loans. There was a sense with some of the other financial institutions that some of the decision-making had been centralized outside a local area and this was able to bring that local decision-making to the credit unions which were based in the communities and owned by community members. Finally, we're looking to help to build the capacity of the credit unions. As Bernie mentioned, there are several branches across our province, they

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vary in size, and we were looking to ensure that they were able to do business lending throughout their network.

In terms of the credit union objectives, I think they were generally looking to increase their commercial lending capacity. They had been in this area for awhile, but were looking to expand. They wanted to broaden their reach of commercial services in the rural areas and provide services to specific target groups. As well, they were looking to raise the profile of credit unions. Obviously, they've become more aware through this program which has been a positive benefit and from their perspective, they were looking to increase credit union membership.

Generally speaking, in the loan process, essentially what happens is a person interested in a business loan and looking for financing will approach the credit union. The credit union will take a look at the loan. They'll do their normal credit adjudication, evaluate the business plan, and they may look at it and decide that the loan application is going to be turned down just on its own merits or declined at that stage. So it might be that even with the guarantee, the risk is too high so the credit unions will not be looking at the loan. If they feel it's something that's worth doing, but the risk is a little higher than they would normally tolerate, then they would look for a guarantee and they would make an application to a regional lending committee.

That regional lending committee, there's one in each of the main regions, is made up of two credit union reps who would be members from credit unions in that region, not from the credit union making the loan. There was one rep for the Office of Economic Development, which in this case is the regional manager from Neal's division with the Community and Rural Development Division, and they would take a look at the application and approve the loan guarantee to the credit union or decline it. Now, this committee isn't in place to do the credit adjudication. The key with this program is relying on the credit unions' expertise and their business analysis. This group just takes a look at the loan to evaluate whether or not it meets the terms and conditions and parameters of the program and generally takes a look at it to see what is reasonable and this is. So that's essentially how the process works.

[9:15 a.m.]

Activity to date, as of September 1st, there have been 66 loans done which equals total financing of a little over $5 million in loans. Of that, the province has provided guarantees of a little over $3 million. The total number of jobs attached to those loans is 283. How we come up with that number is when the loan application is made at the credit union, they're asked to fill out a survey to say how many jobs this loan will create or support, and that's the number we're utilizing for now. To date, the average size of the loan has been about $76,000 and they've been for a variety of purposes - whether it's working capital, securing lines of credit, or term loans.

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In terms of the regional breakdown, in Cape Breton we've done about $650,000 or 8 loans; Northern Region, which encompasses Colchester, Cumberland, Antigonish, Guysborough and Pictou, we've done $1.1 million or 26 loans; the Central Region, which encompasses Halifax, as well as East Hants, has done $2 million in loans or 27 separate loans; and the Southwest-Valley has done $1.1 million or 5 loans.

In terms of the highlights, as we said, we've created 283 jobs. The credit union risk share in the loans to date is 41 per cent. Essentially, how we come about with that is when a business approaches the credit union they may be looking for $300,000 in loans, but the guarantee can only apply up to $150,000. In a number of cases, the credit unions have taken on the additional loans and the additional risk. When you look at the total package of loans coming to the credit union from that business, they're actually taking a higher percentage of risk than the guarantee. To date there have been no arrears or defaults, and the program has been operational now for approximately 14 months.

I'll now turn it over to Diane Kelderman.

MS. DIANE KELDERMAN: Good morning, folks. Needless to say, from the co-operative and credit union perspective, we're pretty excited about this program. We're pretty excited about the results we've had to date with the amount of activity and take-up that we're seeing on the program and how the program has evolved.

At the end of our first year, which was essentially the end of June, the province decided they would do a formal evaluation of the first year's activities. A consultant was hired - Collins Management Consulting - to actually conduct a third party, independent evaluation of our program. We predicted the evaluation would be very positive and lo and behold, it was. That wasn't a real surprise to us, but we were delighted to have a third party, independent review.

Essentially what the evaluation discovered was that the take-up on the program far exceeded our expectations, and I think exceeded the provincial expectations as well. Clearly the program is addressing a significant access to capital need in this province. We are financing a variety of sectors and industries that would likely not have access to capital from other sources. Clients have indicated that they're very pleased with the program overall. The consultant was in touch with I believe about 35 of the - at that time - some 60 clients who had received financing and they had indicated they were quite pleased with the credit union; in fact they had no intention of going back to any other finance institution after their loan with the credit union was complete. So we were pretty pleased to hear that kind of feedback.

All of the recommendations that have come out of the evaluation really were tweaking recommendations - there was nothing in a broad way that was wrong or needed to be fixed, but there was some tweaking that was recommended, and we're in the process of addressing those recommendations right now.

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The first recommendation from the report, obviously, is that we continue with the program. We were very delighted to hear that because it's certainly our intention as well.

Investigate barriers to participation - whether it's barriers by local small credit unions in some rural areas who may not be participating at the moment; as well as barriers to some specific target groups - whether it be women or young people, persons with disabilities, those kinds of things.

There was a suggestion that we determine and look at whether or not there is an overlap with our program with other programs. It's our perspective that there is not an overlap. Clearly, the take-up and the opportunity and the need has indicated that folks are not finding financing in other places, so it would indicate that it is not overlapping. There was a recommendation to increase stakeholder awareness of the program, whether it be other government agencies, development agencies, associations and other stakeholders in the community. Recommendation to work with disadvantaged groups, again, persons with disabilities, young entrepreneurs, and to constantly improve baseline data management so that we are able to track and account for what is happening in the program.

So those were the six key recommendations coming out of the Collins report. Our response to that report, we are already in the process of responding. We are working with our smaller credit unions, particularly in more isolated rural areas. We are working with them to determine what kinds of enhancements we need to make to make sure that all credit unions are participating in the program. We are developing a collaborative network between the larger and the smaller credit unions to make sure that every single community has access to the program, whether or not their local credit union has commercial expertise or is participating. The program is certainly being discussed at all levels of the credit union sector.

We have a mentoring program, which is being scaled up and implemented and quite often, a credit union will make it a requirement of the loan that the client have a mentor if it is deemed that the client is weak in management or weak in financial capacity, those kinds of things. That is turning out to be a significant piece of this program.

We are in the process of having a finance matrix developed which looks at how this program fits with other finance programs that are available across the province, whether they are provincial, federal or the private sector financing. We actually received a draft report of that matrix last evening, so that will be available shortly.

We are obviously marketing and promoting the strategy and this program to specific target groups and, again, the three focus areas of our strategy will be young entrepreneurs, persons with disabilities, and women. The recommendation from the report that we increase stakeholder awareness, quite frankly, we are concerned about that. We're concerned about the broad marketing of this program. We have an $8 million program as a pilot initiative, we're almost up to $6 million in loans already, without much marketing. If we broadly get

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this out there, we are going to far exceed any expectations or our capacity to respond. So any marketing promotion that we do is very strategic. Obviously, we are going to be working with some of our business clients to profile them and what they are doing not only to enhance the program, but to add another level of benefit to the business client themselves.

Some of the provincial issues that have arisen as a result of our 15 month activities so far, obviously, the uptake on the program has been very high and has probably exceeded everybody's expectation. Clearly, the demand can and we predict will outstrip the funding that's available for the three-year pilot. If you look at where we are versus the total contribution we have available, which is $8 million. We obviously have to look at how do we manage growth while meeting needs and controlling costs of the program. So those are some of the issues that the province has raised and is struggling with.

From a credit union perspective, some of the issues we are facing, future needs, we see no indication that the need is going to decrease, in fact, it will likely increase. The need for access to capital is going to be a continued important part of how we do business, and an important program available for small businesses across Nova Scotia.

We need to ensure that we can grow and expand this program without having any disruption in service; regardless of what is happening politically, we can't have a stop in the program while we negotiate where we are going and then try and get it back on track. So somehow we need to be talking now, which we are obviously doing. We need to engage our smaller credit unions to make sure that everybody is participating and that they have the support to participate as they need. We need to move this beyond a pilot phase. We had agreed that three years was a pilot. We are 15 months into it, and with the results and the take-up and the activity, very quickly we are moving beyond a pilot and into a standing commercial program within the credit union sector.

So why the success? Well we could stay here for the next three hours and tell you about why this is successful and why the credit unions are so great and they're unique and they're the only ones that you really should be partnering with on such an initiative but, in short order, we're successful because credit unions are owned and managed by Nova Scotians, you and I and the business people whom we're financing own the finance institution. They're not owned by shareholders in Montreal or Toronto or New York.

We have a very strong and committed relationship with our business clients, resulting in overall loan losses within the credit union sector of less than 2 per cent. Clients are more than a number, they have a real strong relationship with us, and the account managers at the credit unions go far beyond disbursing a loan - they are mentors and advisors and friends and all sorts of others things. Credit union profits obviously stay in Nova Scotia for the benefit of the people in our communities, the profits are not sent somewhere else. And this program, in addition to financing, has a strong technical assistance and mentoring component and we

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believe if you take technical assistance, mentoring, and money, and put it together you have pretty much an unbeatable scenario out there in terms of business support.

So, in conclusion, we believe - and I think the report has indicated - that the program is well run, well used, and well liked by the broad business community. The program is clearly achieving and exceeding the goals that we had put in the proposal in the first place and we're now at the stage where we need to be talking about future options for growth, moving beyond a pilot stage, making sure there's no disruption in service and looking at what the needs are in the future. And within the credit union system we're already talking about moving this program from an $8 million pilot program to a $25 million stand-alone commercial program, so you'll probably hear more from us on that and be hearing that number bantered around as we go forward, and we're certainly working with Neal and his colleagues to look at assessing the options and how we bring those options forward to the province.

So that, ladies and gentlemen, is a very quick summary of the program and who we are and what we've done to date. We were remiss in starting and not allowing the Chairman of our Investment Fund, Mike Wark to speak - we've set this program up so that it's owned and administered within the credit union system, yet it's outside of the system so that we can do what needs to be done from a developmental lending perspective. So we've actually set up an investment fund co-operative that manages this program, and that investment fund co-operative is owned by the co-operative and credit union sector and the province has a seat on the board. Mike Wark is the President of our Investment Fund Co-operative, so I'll ask Mike if he has anything he'd like to add.

MR. WARK: Just a couple of things. The majority of the programs have certainly gone over and the credit unions are very pleased with it. Working day to day we're seeing the benefits in our areas. I think one of the numbers not missing, and probably something we should be keeping track of, are the loans that we do outside the program but are generated as a result of the program being there and may be simply a case of qualifying under another lending program, be it provincial or federal, or just finding other ways of being able to put the loan together for the member or the potential member, which as I say are not included in these numbers, but over time this program will generate interest and I think there are opportunities that credit unions will be able to assist small business where they're struggling now with some of our competition and, again, that number won't be there, but it's going to be an important one.

As Diane mentioned we do have a board of directors and we've basically taken a representative from each of the regional committees - it was alluded to earlier - who volunteered the first year and then were elected at our first annual meeting earlier this year, and these people obviously are volunteers from the credit union sector, and the day-to-day management, of course, is under Diane and Bernie, who are with us today, and the whole

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group is certainly committed to making this program go forward in partnering with the province. Thank you.

MR. CHAIRMAN: Okay, thank you very kindly for your informative presentation. I'll open up the floor to questions. The first on my list is the member for Kings North.

MR. MARK PARENT: Thank you, and apologies that I'm late. Thank you for the presentation. This is just an exciting program for me, something that I am sure all the MLAs have been agitating for since small businesses really haven't been taken care of as well as they should be with some of our programs on the provincial level with Economic Development, and those of us who are MLAs agitating for that, I'm sure, would all agree with that.

[9:30 a.m.]

So, we're delighted to see something happening, delighted with the role of the credit union. I was at a speech that Ralph Nader gave yesterday, and he was talking about the good things that Canada exported to the United States. The first thing he mentioned was credit unions. I, myself, have been a part of a credit union for years and years. I'm delighted with your role. When the Bank of Nova Scotia pulled out of Canning leaving this large community without a bank, it was the credit union that stepped in and has a viable branch there. I'm sure other MLAs would have other stories. I can't go on more about how pleased I am.

Afterwards, Mr. Chairman, if it's okay, I would like to bring a motion forward that we take to the Minister of Economic Development about this program asking for its expansion. The one question I do have, though, and we all come with our regional hats on here, and I notice there's only five loans, the dollar figure was comparable with other areas but the amount of loans in the Valley-Southwest area was the lowest, in terms of loans, and I was wondering if there's some sort of explanation for that. Clearly there were less loans but bigger dollars. Is it not as well advertised there? Is there any sort of understanding you can give me on why there are only five loans?

MS. KELDERMAN: I can make a stab at that. I think there's two things happening. One ties into what Mike alluded to in his comments, and that is some of the clients coming forward to the credit union are coming forward under the program but are in fact being approved without the guarantee. So, you wouldn't see those numbers here.

MR. PARENT: These are just the guaranteed . . .

MS. KELDERMAN: These are the loans that have been approved under the guarantee program. So there's probably been another half-dozen in your area that would have been approved, but when they went through the due diligence process at the credit union,

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they actually qualified without the guarantee. I think that speaks volumes as well, to the fact that the credit unions are not using this program to put everything through. If they can do it without a guarantee, they're actually doing it. I think some of that's happening in your area.

I can also tell you that we have three applications being assessed at the moment, under the program, in your area. So maybe it's just taking some time for the word to get out and for some activity to happen.

MR. PARENT: In terms of that - one last comment and then I'll finish - the mentoring part of the program, I assumed it was happening but I myself didn't know too much about that. Sometimes with these small businesses, I've had quite a few I've pushed toward the program and have taken it up. Others have said, well, the last thing we need to do is get further in debt, what we need is really some expertise in how to move beyond the level we're at now. That expertise, which we do have through Acadia, through the small business there, I direct them that way, but that expertise, as well as the financial money, is being offered by this program? I wasn't aware of that part of it.

MS. KELDERMAN: We have a mentoring database of mostly retired, but not all retired, executives and professionals, both within the Credit Union Co-operative sector and the general business community, who are on our list and have agreed they'd like to be part of the mentoring program. So, when a credit union or a client decides they'd like to have a mentor, we simply do an assessment and then do a match. We also have something in our mentoring program which is unique, I think, right across the country, and that is we have a legal mentoring agreement that the client and the mentor sign, and we also have an insurance program that protects the mentors.

MR. PARENT: Have you evaluated the mentoring part of the program?

MS. KELDERMAN: We haven't evaluated it in this first evaluation, because it was really midway through the year when it got up and going. The next evaluation would certainly include that component.

MR. PARENT: I would like to bring a motion at the end, or do you want me to bring it now, Mr. Chairman? I'll bring it at the end.

MR. CHAIRMAN: At the end, and I'll make sure that you're recognized, in proper protocol.

The honourable member for Halifax Chebucto.

MR. HOWARD EPSTEIN: Mr. Chairman, actually, I just remembered, of course, that the member for Chester-St. Margaret's had to leave at 10:15 a.m. Is he on the list?

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MR. CHAIRMAN: He is. He's actually just behind you.

MR. EPSTEIN: I will yield to him in light of the fact that he has to go earlier.

MR. JOHN CHATAWAY: I very much appreciate your kindness. Thank you.

MR. CHAIRMAN: More co-operation.

MR. CHATAWAY: Exactly. Make that a media release, and all that stuff, that's good. Basically, one of the things I wanted more information about, and I know the member for Kings North has asked, is about the mentoring program. The mentor program, of course, is now basically the typical mentor, per se, who will help out in business. They are basically a business person that has most likely retired. They don't assume any - the insurance is very wise to encourage more people to do that. Depending on what the business is, on an average, how often would they meet with the principals of a business?

MS. KELDERMAN: Four hours per month, about an hour a week. That's what it's averaging out to so far.

MR. CHATAWAY: Oh, I see.

MS. KELDERMAN: And it's not all site visits. It could be telephone consultations, it could be a site visit, questions back and forth on an e-mail, but it's averaging out about four hours a month.

MR. CHATAWAY: I think that's very, very wise. I'm sure many people going into business need encouragement. The best thing is to have somebody saying, yes, you're praising them, but they wouldn't do that and whatever going ahead with the expertise. What in the world did they do before that? I think this whole program that you've all explained so well is very important, but my goodness, mentors and stuff like this, you institutionalized this per se. What did they do before that?

MR. O'NEIL: Unfortunately, a good number of them failed. The mentoring program, as you were saying, is not to be underestimated. Upon embarking on this program, statistics available to us indicated that many businesses fail in the first year or 18 months. One of the main reasons they fail is the lack of expertise within the business to recognize areas of problems or challenges within the business. It can be as simple as not being financed appropriately between a line of credit and a term loan. We made that a very important part of our program because most people entering business are concentrating on getting the business going and that's where their emphasis is. It's not always on taking care of the business, if you will, and paying attention to those details. That's where mentoring comes in. We made it a very important part.

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In fact, we encourage our lenders to look at it very seriously and not to hesitate to make it a condition of granting the loan. We feel it's providing that value added to the small business and providing them with the kind of expertise they perhaps would not always seek out on their own.

MR. CHATAWAY: You certainly should be complimented for realizing the need and fulfilling the need. It's very good that people are offering to do that, to help out other businesses because of experience.

Just one further thing if I may. How do I say this? You found that this program has been the third party, the third party comes in and appraised it and as Diane said, yes, we figured it would and somebody has proven it because you've had enough experience and that's very, very wise. But, obviously, whoever the people were who thought this program should come down and started it up should be complimented too.

What percentage of all these small business loans do you have because obviously there was a need in Nova Scotia. What percentage of loans do you feel that this program has versus other ways of small businesses to get financial assistance and all that stuff?

MS. KELDERMAN: Maybe Bernie can speak to percentages, but I can tell you that the 66 loans we've done under this program would not have been done otherwise.

MR. O'NEIL: The part I can possibly add - I can't give you a specific percentage - I can tell you that credit unions in general, in fact, right across the country, are increasing their participation in what is defined as small business loans, which are generally under $0.5 million. I can also tell you that, nationally - a little known fact and it's our own fault - we are the second-largest small business lender in the country. Nationally, we had some $18 billion out in small business loans across this country, which is second only to the Royal Bank, and second only by $1 billion. So, we're a very close second.

The balance sheets of our credit unions indicate that business lending is probably the largest area of growth in our loan portfolios and has been for a couple of years, and is an ever-increasing proportion of our loan portfolios. We've put more effort towards training our lenders in that area, because we see that continuing to increase as banks are not terribly interested in the small business area.

MR. CHATAWAY: That's very good information. Mr. Chairman, thank you very much. I can be here until 10:30 a.m., so thank you very much.

MR. CHAIRMAN: Maybe there will even be time for a second round.

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The member for Halifax Chebucto.

MR. EPSTEIN: Thank you all very much for the presentation. It was extremely informative and it's very useful information, I think, for all of us in our constituencies. I wanted to start by saying how supportive I am of this kind of initiative and the particular program that you've outlined for us today. I wanted to emphasize that, because I want to poke at you a little bit, too, if I could. I want you to know that I think this is a very good thing that's being done.

Let me just start, if I could, with Mr. MacCallum. Do I understand that $6 million is the limit that the province would be at risk at any one time, in total, or is that $6 million per year? Is it cumulative or an absolute limit?

MR. MACCALLUM: It's an absolute. It's $6 million over three years, in guarantees. Once they're utilized, they're extinguished. They're not revolving.

MR. EPSTEIN: If, in fact, the loans have been $8 million in the first 14 months, that would be it. Is that right?

MR. MACCALLUM: Yes.

MR. EPSTEIN: Because the $6 million of the guarantee would have been used up, and unless there were repayments of loans over the next year or two, that would be it?

MR. MACCALLUM: That's correct. Actually, it was originally set up with an annual limit, as well, of $2 million per year.

MR. EPSTEIN: So, presumably, that hasn't been the case.

MR. MACCALLUM: No, it was amended in the Spring to allow for an addition to the schedule. It went $3 million, $2 million and $1 million. Because the uptake in the program had been so high, it needed to be amended to allow for the additional loans to be done prior to the renewal date, which is June 30th.

MR. EPSTEIN: I think there was some mention, not by you but perhaps by Mr. O'Neil, of the desire to put this on an extended basis to look towards the future and possibly, if not make this a permanent program, then certainly to extend it beyond the three years. I'm wondering about the status of that. Can you just let me know when an evaluation of the program is likely to go, presumably to the Office of Economic Development, so that a decision can be made, after the two-year mark, perhaps, or can you let us know when?

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MR. MACCALLUM: Like I said, the initial evaluation by a third party was done. Right now, we're having some discussions internally and, as well, will be with the credit unions to take a look and evaluate what the options might be in a go-forward basis around expanding the program. In terms of expanding it, there's a variety of different options that might be able to be undertaken. As we frame that up and continue to monitor the program, that will be going up, obviously, towards the minister and then be considered along with the other priorities. So, probably some time, I would expect, this Winter, I would say, there should be some sort of report.

MR. EPSTEIN: There's been one evaluation done so far?

MR. MACCALLUM: Yes, this was a third-party evaluation. It was done by the consultant, Collins Management. They took a look at the program, and that's actually a requirement under the program, that annually there is an evaluation done. Maybe I should use another term, actually what we're doing is working to identify the options and alternatives, in terms of managing growth going forward. It's not really part of an evaluation, like a formal evaluation, as much as it is looking at the options for managing the growth and expanding the program, from a staff level working with the credit union sector.

[9:45 a.m.]

MR. EPSTEIN: Meaning, you feel fairly confident that this is a good idea, that it ought to be continued?

MR. CONRAD: Yes, we have begun discussions already internally as a result of the first evaluation that's been completed. It is our clear expectation that we will be making recommendations to the Minister of Economic Development within the next four months as to what we see the future of the program being. Clearly it would be from a staff point of view

and based on the results of the evaluation that we move the program beyond a pilot phase, that we are currently committed to, and into some longer-term arrangements. We've already made adjustments to the original agreement, in both - not to the total value of the guarantee, but to the outlay of that guarantee. So we have been making adjustments as warranted, and within the framework that's been approved. Our objective is to have recommendations to our minister within the next four months.

MR. EPSTEIN: Going forward on an expanded basis would mean, I take it first that it would no longer be designated a pilot program, but would be seen as something more of an ongoing program. Is that correct?

MR. CONRAD: Yes, that is correct.

MR. EPSTEIN: And the second aspect, would that include expanding the total value of the provincial guarantee?

[Page 17]

MR. CONRAD: Yes it would. I believe at this point that it would have to.

MR. EPSTEIN: Is there thought about what number of dollars you might . . .

MR. CONRAD: No, not at this point, there have been internal discussions, and Diane clearly mentioned a figure of a $25 million pool. But no, we are not at that point yet.

MR. EPSTEIN: That would be a significant increase, of course, in the number of dollars, which makes me wonder, I guess, about the potential, not just potential for take-up in the marketplace, which I'm sure would be substantial, but how this fits into loans or other forms of capital out there to be accessed by small business. I think the term you used, this government was niche and fit. Was that your phrase?

So this in fact is another point I wanted some information about. In order to design this program in the first place, there must have been a feeling that there was a failure of some kind in the existing capital sources in the marketplace. I'm wondering if I can hear a bit more from you about this, about what you saw as inadequacies. We've had a little bit of information from you about the banks, although it has not been very explicit. What I haven't heard is about either other government programs or about venture capital sources that might be available to small businesses. It seems to me that it must be that when you're thinking about your niche and fit, that it must have been that you found that there were problems with those other sources. Could I hear from any of you who were involved in developing this program and must have considered this about that? We'll just start with that.

MS. KELDERMAN: I can certainly start. The other hat that we wear in my organization is development. So we actually work hands-on with business clients trying to start business, or with community groups trying to start co-operatives, those kinds of things. Doing the development was the easy piece. Getting them to the point of accessing financing was a very difficult piece. We had all of our own clients that we were working with which were demonstrating that there was a need here.

We also had the research from our credit unions across the province saying they were getting loan applications from business clients that they would love to do, but just didn't fit the traditional lending criteria that they're required to use because of their regulators and auditors and whatnot. For those of us who work in the finance field, we know that the levels of financing available from traditional sources like venture capital funds, they're just not in this game.

If you want funding from any of the traditional venture capitalists, you'd better be asking for a minimum of a million dollars. That's the game they are in. We have a lot of research at our disposal that had clearly indicated a need within this particular niche market, which was the $10,000 to $200,000 range.

[Page 18]

MR. EPSTEIN: There are two things that arise here. One is the size of the loan. If venture capitalists are interested only in a million dollars or more, then, of course, they are beyond what I think you were saying before was small business. So is it the case that venture capitalists in Nova Scotia are not expressing any interest in small business that is below the $500,000?

MS. KELDERMAN: That is indeed the case.

MR. EPSTEIN: And is there any information about what venture capitalists are out there, that is do any of you have lists of entities that would call themselves venture capitalist funders?

MS. KELDERMAN: Yes.

MR. EPSTEIN: You do?

MS. KELDERMAN: We do.

MR. EPSTEIN: Could you provide that?

MS. KELDERMAN: Sure.

MR. EPSTEIN: That would be very useful and one of the reasons I ask is that one of the things I find occasionally arises in terms of questions that we're asked as MLAs is, of course, about access to capital and people often put it in terms of venture capitalists. So it would be good to have that information.

The other part of what you raise has to do with risk. So I assume that what you're talking about is risk and maybe Mr. O'Neil, this might be for you, do I take it that, of course, with the government guarantee in place, it's less risky for you as a lender and is it the case that those who are coming under this program would have been rejected by the credit union system on the basis of risk?

MR. O'NEIL: Generally, yes, would be the answer to that question. In assessing an application, there may be not enough security in the minds to grant it under conventional lending criteria. There's no track record, obviously, so you're sometimes assessing an idea and a business case on a go-forward basis. The appetite for risk varies, of course, so that in the overall assessment, it just doesn't meet all the criteria under which a credit union would normally grant a loan. So the guarantee gives that additional comfort and security as well in order to move forward with the application.

[Page 19]

Another component of the guarantee was that we wanted to be able to make loans at what we considered reasonable interest rates for start-up business because Venture Capital often is looking for a return of 18 per cent, 20 per cent, 25 per cent, 30 per cent, and we have capped our maximum rate at bank prime plus 7 per cent. Which in today's environment is a maximum of somewhere around 11 per cent or 12 per cent, which I think would be considered very competitive in the marketplace, and I emphasize that's the maximum. Many of these loans are going out at less than that. So it takes some of the burden off the small business as well.

So your question, the answer is yes on the risk side, that it gives that comfort that's needed to be able to approve the loan, but also I would emphasize the fact that in the almost 15 months of the program, and knock on wood, there are no arrears yet on these loans. Although some credit unions have told us that follow-up is necessary in some cases and we probably wouldn't expect write-offs quite so early, but I think it indicates that the program is being handled in a very responsible way. The fact that credit unions are taking 40 per cent of the risk also indicates a good assessment of the program. They're extremely conscious of only using the program when it's absolutely necessary and, as has already been mentioned, some clients who come in to apply under the program are granted loans outside of the program because they do meet the risk profile that is acceptable.

MR. EPSTEIN: Thank you. The Chairman tells me my time is up and maybe I can be put on the list for the second round?

MR. CHAIRMAN: Yes, I've done that already in anticipation of your enthusiasm. I try to limit the questions to 10 minutes although you've been fortunate enough to get 13 minutes this time, Mr. Epstein. So I will recognize the member for Pictou West.

MR. CHARLES PARKER: Thank you, Mr. Chairman, and I, too, add my compliments to this program. It's great. It's good. I've heard good things about it from others. My first question is around, as was mentioned earlier, we, as MLAs get a lot of people coming into our offices - I've lost my job, I want to start a business, I'm interested in, who do I contact, or how do I get money - that kind of thing. Do you have any information or pamphlets or material that we can actually pass out to people about your program? I don't think I've seen that at my office, now maybe the others have it, I don't know, is that something you have been doing, or can do? Okay, I would certainly be interested in getting any literature that I can pass along to somebody because, weekly, it seems we're getting people coming in just wanting advice on how to start a business or what's available, that type of thing. I guess one of the more common things it has been difficult to raise money for is in the retail sector as you're probably aware, people want to start a store or whatever, is that an area that you have been addressing? Is that an area that you can lend money on?

MS. KELDERMAN: It has not been excluded from our program, so, yes, we would assess those kinds of business plans and, in fact, we have financed some retail operations.

[Page 20]

MR. PARKER: So, like a start up and new business.

MS. KELDERMAN: Or growth and expansion.

MR. PARKER: Or to buy out an existing business?

MS. KELDERMAN: Yes, if it's a good business case, it would be assessed favourably.

MR. PARKER: As always, you need a good business plan to go by.

MS. KELDERMAN: Yes.

MR. PARKER: What about a franchise? Is that something that's considered or not? If somebody wanted to buy or start up a new business that included a franchise?

MR. MACCALLUM: Actually, one of the things in the program that was set up when we were doing some research in the background was that part of the problem for some of the areas is that a lot programs tended to focus on a particular sector, whether it be manufacturing or exported IT. So this one was kept quite open with very few restrictions. So retail and service are included in that.

MR. PARKER: Can you give us any real examples of businesses that are out there? You don't have to give me the particular name of the business, but you're into retail, wholesale, manufacturing, service, the whole gamut, I guess, is it?

MS. KELDERMAN: Agriculture, manufacturing, export, daycare, service-based security, technology, farm and feed centre, café, a retail clothing outlet here in your riding. Just a wide, wide variety.

MR. PARKER: Okay, so you're pretty open to a good business plan?

MR. CONRAD: It is and that really is one of the objectives. One of the areas we were very concerned with one of the shortcomings that we had identified, when we did our analysis with more traditional lending, was that a decision was often made outside of the community in which the business exists. Increasingly so. Also, a tendency by some of the larger commercial operations to choose sectors that they wish to invest in and that really isn't how the economy of this province works. It actually places the lender in the position of choosing the winners and by default, the losers, when they identify a sector that they want to deal with.

In the consultations that we did around the province in the Summer of 2002, we met with businesses and we talked about impediments to growth. One of the messages that came

[Page 21]

through loud and clear was that rural businesses, in particular, felt that they were at a substantial disadvantage because of what they saw as an arbitrary decision to choose a sector upon which a regular commercial lender would invest in. When this program was being crafted, we intentionally wanted it to be as flexible as it could be and also reflect the makeup of the provincial economy. In our economy, of course, the growth of the service in retail sector is substantial and that also fits into the growth of the tourism sector as well. So we wanted a very flexible tool, yet, I think that's what we actually have.

MR. PARKER: Okay, I come from the North Shore from Pictou County and in New Glasgow we have the credit union there. Is that one of the credit unions that administers this particular program or is it done elsewhere?

MS. KELDERMAN: New Glasgow is participating through a relationship between Community Credit Union out of Truro and Bergengren Credit Unions out of Antigonish, but clients in New Glasgow are serviced.

MR. PARKER: Through the three of them, is it?

MS. KELDERMAN: Yes.

MR. PARKER: So, their initial contact is the New Glasgow Credit Union, is it?

MS. KELDERMAN: That's right.

MR. CONRAD: The entire province is serviced through this program although not every credit union is participating - in many cases, or in several cases, it is through a referral from the local credit union. The first point of contact always is the local credit union, but there is no part of the province that is not covered.

[10:00 a.m.]

MR. PARKER: The area that I represent is the Town of Pictou, along the North Shore up to River John and I guess even Tatamagouche is further up the shore in a different riding, and those folks, if they wanted to look at this program, would have to go either to Truro or to New Glasgow - there's actually no branch in any of that area I mentioned. It's a little farther away for them, but it's . . .

MS. KELDERMAN: There's a Bergengren presence in River John now, as you know.

MR. PARKER: That's right.

[Page 22]

MS. KELDERMAN: But, an actual branch, New Glasgow or Amherst or Truro would be the points of contact - and, in fact, we have financed a couple of clients in your area.

MR. PARKER: Okay. You mentioned River John, the ATM there. I suppose it's too early for an update on that, is it? It's only been a couple of months, I believe, since it was established.

MR. O'NEIL: It's a bit early for a real meaningful update.

MR. PARKER: Any possibility to look at further services to that community? They lost their bank, as you know, the Bank of Nova Scotia, and it's a real loss to our community there. I'll let you address that if that's a possibility.

MR. O'NEIL: At the time of the branch closure, it was looked at as to its viability for a credit union branch. Based on the assessment of that business case, the business just would not support the establishment of a branch at that time. I think the fact that Bergengren has gone into the area and established an ATM demonstrates that they are interested in further pursuing that, but I don't want to say there's a real possibility of a branch because that would not be fair or appropriate. I think Bergengren will assess it based on the business conditions that evolve and what kind of support they get even at the ATM level. I think it does demonstrate they are interested in that area of the province.

MR. PARKER: Okay, so it's still a possibility, perhaps down the road at some point?

MR. O'NEIL: It's a possibility, yes.

MR. PARKER: Okay. I guess that would be all of my questions for the moment. I'll pass to somebody else.

MR. CHAIRMAN: Okay then, we'll move to the member for Sackville-Cobequid.

MR. DAVID WILSON (Sackville-Cobequid): Thank you for your presentation. I think it's great to see the credit union involved in this program, since most small businesses are run by people living in that community where they want to establish that. It's great that the credit union has the link with the ownership of their members.

I have just a few questions. Hopefully you can give me some percentages, roughly, of the loans that you have approved so far. In today's market it's very hard for a new business to start up and be viable and successful, especially with the competition going on. Out of the 66 loans, what percentage of those are you aware of that are start-up companies, that are new companies?

[Page 23]

MS. KELDERMAN: It's 56 per cent.

[Page 24]

MR. DAVID WILSON (Sackville-Cobequid): That puts a great risk on the credit union and on the government with their 75 per cent guarantee of those loans. I have been in touch with some people who have accessed the loans - is it true that when they go to the credit union to apply for these loans, is it under a term loan, that they have to access funds for this, is that the only avenue for them, or is it opened up to a line of credit for new businesses?

MR. WARK: We can do lines of credit or term loans; either type is available under this program. There's not restricted to just term.

MR. DAVID WILSON (Sackville-Cobequid): Then government does guarantee the 75 per cent on the term loans and lines of credit?

MR. MACCALLUM: Yes, if they're approved to the credit union regional lending committee, then the guarantee applies.

MR. DAVID WILSON (Sackville-Cobequid): You stated that there was a third party evaluation done. Was that on the program itself, evaluating the credit union and how they disburse their funds?

MR. MACCALLUM: Yes, Collins Management Consulting completed an evaluation, which was just finalized in September, looking at the program generally from the position of its objectives and the credit union's. It interviewed, as Diane mentioned, many of the clients, as well as the account managers in the credit unions involved and gave a report.

MR. DAVID WILSON (Sackville-Cobequid): With the interview of the clients, was it just pertaining to the process of going through the program, or did they evaluate the business that they went to the credit union with, was there an evaluation done, and I know the credit union on a yearly basis, I believe, you go over the business plans with your members, but as the government being, you know, a guarantor of 75 per cent, does the Office of Economic Development look at the businesses that the credit union has given loans to and evaluate how they're doing in the marketplace?

MR. MACCALLUM: Essentially through the process, the credit unions are evaluating the business plan and Economic Development has a representative on each of the regional lending committees. So they're involved at that level in terms of taking a look at it. I think in terms of the bigger picture of the program overall, it's still fairly early in the program, but as we get out a few years and we're able to track a little better the success rate of the businesses going forward, that will give us a bit more information on that side of things, but truly what the office was looking to do was partner with the credit unions and use their expertise around the credit adjudication and business case analysis. We didn't have the staff or the resources, obviously, to service the whole province from that perspective. So in that sense, it's truly a partnership in that we're relying on the expertise of the credit unions

[Page 25]

to a certain extent and then managing in terms of meeting the terms and conditions of the program.

MR. DAVID WILSON (Sackville-Cobequid): So is this going to be an ongoing evaluation? Are you looking in another year's time to do another evaluation?

MR. MACCALLUM: Yes, it's actually built into the agreement, I think, that on an annual basis it's evaluated.

MR. DAVID WILSON (Sackville-Cobequid): Just some questions on the mentoring program that you mentioned. I think it's very important, especially with start-up businesses, to be able to offer that assistance if they need it. Through the Office of Economic Development, do you provide the credit union with additional resources to help with that process of mentoring or allowing mentoring?

MR. CONRAD: Yes, we do. In addition to the guarantee that we provide through the program, we do provide additional resources to the co-op council to allow the mentoring program and support around that program to continue to exist.

MR. DAVID WILSON (Sackville-Cobequid): Also with, hopefully the growth seen with the program, it seems to be very popular. I think there's an important need to get out into the rural communities to, hopefully, entice some new businesses in rural communities. A few questions on the assistance or the help from Economic Development. In the situation where you may see a smaller credit union trying to get involved with the program, are there maybe funds available to the credit union to either upgrade their staffing level if they're in a community where their staff level might not be able to handle providing this program? Is there anything available for the smaller credit unions to hopefully get into the small communities which usually tend to have a credit union in them? Is there any program that the credit union can access to maybe increase the delivery of this program?

MR. CONRAD: No, there is not, but I think that when we get into the discussions about further engagement of the credit union system in the program, for example, why are some credit unions participating and some not, you know, I'm sure that there could possibly be some discussions around some of that sort of stuff, but the current situation is that, no, we do not have any other specific assistance directly available to assist the expansion of the network.

MR. DAVID WILSON (Sackville-Cobequid): I believe that the credit union themselves initiate the process of taking the loan application and then it goes on to the committee which is represented by, I believe, credit unions and Economic Development. How quick is that process? Is it a fast process? Is it a weekly, monthly process, that these loans are evaluated?

[Page 26]

MR. MACCALLUM: Each of these committees meet as required and maybe we'll ask Diane if you can speak to how quickly they're turning them around, but as they get an application from the credit union and it's faxed or e-mailed to the committee, they deal with it as required.

MS. KELDERMAN: On average it's about four days by the time the client comes in, makes the application, it gets to the committee, and it's signed off. We really do business differently.

MR. MACCALLUM: Oh, definitely.

MR. DAVID WILSON (Sackville-Cobequid): And with that committee, do you find that there have been loans that have gone to the committee where the committee has decided that this is probably not . . .

MS. KELDERMAN: We've had four declines from the committee. They really do their job in terms of assessing whether the application is reasonable, whether it makes sense under the parameters of the program. So we've actually had four official declines from the regional committees which indicates to us they're doing their job.

MR. DAVID WILSON (Sackville-Cobequid): Thank you very much for those answers.

MR. CHAIRMAN: I recognize the member for Digby-Annapolis.

MR. HAROLD THERIAULT: Good morning. My name is Harold Theriault. I'm sorry I was late, too. I'm the member for Digby-Annapolis. I've been a business person all my life, small business, and we know that small business has grown this country and will continue to grow and, hopefully, it will help this province grow. I believe this is a great thing. God knows the mess we're in financially in this province. If we don't grow ourselves out of it, then we have only one other way, and that is to cut. So we better keep looking at the growth. I believe we're going in the right direction.

I've had a few people in my office, too, looking for ways, looking for help to start up a business or expand. I did have a few of these pamphlets that someone on the street of Halifax gave me, I believe, half a dozen of them, and I haven't seen any since. Is there any promotion to this or is there any commercial advertisement being done, because people out there really don't know what's going on here.

MS. KELDERMAN: Well, early on, we certainly had a huge marketing and advertising campaign. We've admittedly slowed that down, because the take-up has been so great and we feared running out of money. We do have a full communications package, we have a brochure on the program. We have information that's at every credit union,

[Page 27]

information that's at our partner organizations like the regional development associations and whatnot. I do believe that we sent out a fairly large package to each of the caucus offices, and brochures were distributed down to the MLAs. I would certainly be happy to send each of you here today an individual package of information.

MR. MACCALLUM: The brochures are also available through the regional offices of Economic Development, information on the programs. Each of the regional offices around the province has the information on the program.

MR. THERIAULT: Yes, that would be great if we could get some more of that. We know small business is growth and we can make it grow. Small business has done it for 400 years here. Do you see this going well beyond $25 million, let's say into the hundreds of millions as long as the government will stand behind it? I mean, we have to stand behind small business. So if we have got to go into hundreds of millions of dollars to do so, can you see that in the future?

MS. KELDERMAN: Biasly, of course, we can see it, but I think if you look at the fact that we've done $5 million in activity in a mere 14 months, if we do that every 14 months it won't take us long to get there. So we're pretty enthusiastic about rural Nova Scotia and about the opportunities.

MR. THERIAULT: Do you work with any other groups, like Growth Opportunities, ACOA? Do you work hand in hand with those groups?

MS. KELDERMAN: Yes, we do, and we also refer clients. We work with NSBI, for example, where a client may go to NSBI and what they need is more fitted to our program, or vice versa, or it may be a client who's looking for funding from us, but what they really need are some marketing dollars which might fit in an ACOA program. So we do certainly collaborate and refer to partner organizations.

MR. O'NEIL: Just one comment on the amount of small business. As has been mentioned, the activity of credit unions in the small business arena is not limited to this program. At this point, we have well in excess of $100 million out to small businesses across this province and this program is a component of that. So you can see that even before this program that there is a commitment to small business, and the small business is growing even over and above this program.

MR. THERIAULT: How much of that $100 million is at risk?

[10:15 a.m.]

MR. O'NEIL: I suppose I could say a good part of it is at risk because not every loan is 100 per cent secured. We place a lot of value in the person and the people running the

[Page 28]

business. We, of course, try to secure it as best we can. If I were to give you a number it would be just off the top of my head and probably not accurate, but a fair portion of that would be at risk because very seldom when an enterprise has to be wound up, is there not some loss associated with that?

MR. THERIAULT: But, that's part of life.

MR. O'NEIL: It is. That's part of doing business.

MR. THERIAULT: It always will be.

MR. O'NEIL: That's a cost of business.

MR. THERIAULT: That's right. So we have to go on with this and push on and the province really needs to be behind this and we'll grow. Thank you, very much.

MR. CHAIRMAN: Okay, The honourable member for Guysborough-Sheet Harbour.

MR. RONALD CHISHOLM: Thank you very much for your presentation this morning. It was great, very informative and I think it's a great program that we have going, but I can tell you that the credit union has been in the business of loaning small business money for a long time. I can recall, I think I was 14-years old, living in the small community of Heatherton, back in 1962, a small credit union in Heatherton where I borrowed about $175 to buy a power saw so I could cut pulpwood over the Summer, so they had been in the business. I guess my father had to co-sign and all that sort of thing for me. I could barely carry the power saw it was so big, but by the end of the Summer, I can tell you, I could carry the power saw, and I've been a credit union member ever since. I've belong to the Bergengren Credit Union in Antigonish.

I guess the smaller credit unions that you talked about - I know the MacDonald Credit Union in Mosers River is a small one - probably do not take part in this program, so would people from that area be referred to the Heritage Credit Union in Dartmouth, or I think there's a Heritage in Sheet Harbour as well, but small credit unions like that, could they become involved in this program?

MS. KELDERMAN: We have many small credit unions who are currently involved, but some credit unions have decided that they don't have the commercial lending expertise themselves, or they don't believe that the opportunity for take-up in their community is great, so they've decided to partner with a neighbouring credit union, whether it be Bergengren or Heritage or whatnot.

[Page 29]

MR. CHISHOLM: I know over the last year there's been some problems with the MacDonald one. They've had some community meetings and that sort of thing that I've attended. I've had some different meetings with them to try to solve some of the problems that they do have. For the benefit of my colleague, the member for Pictou West, on these services that he may be getting in River John, and hopefully may be getting, I recall back a few years, Mulgrave, when the banking institution that was there left that community. The credit union has moved in there. They were in a small building, but just here a couple of weeks ago they had a grand opening of the new credit union, that's part of the new infrastructure that's on the wharf down there and is doing very well in that community. So, there is opportunity to grow and hopefully River John will see the benefit of that as well.

Anyway, thank you very much for your presentation. It's a good program and certainly I'm sure has the great support of the government and the Office of Economic Development and I look forward to it expanding.

MR. CHAIRMAN: The honourable member for Cape Breton West.

MR. RUSSELL MACKINNON: Mr. Chairman, just a few short snappers. My first is for the Department of Economic Development. What amount of dollars do you use when you are issuing loans? What would generally be the figure that you would allow for in the creation of a new job? I know the federal department Employment Canada, they set out a set figure, that sort of thing. What figure does the Department of Economic Development use? Is it $50,000, $75,000, $100,000?

MR. CONRAD: I don't know that we have a figure that we would use currently that would fit that criteria. Certainly, in the Community and Rural Development Branch, we don't have a figure that we would use that would be . . .

MR. MACKINNON: What does Nova Scotia Business Inc. use?

MR. CONRAD: I do not know. I can get that information for you if they have such a figure and I will endeavour to do that.

MR. MACKINNON: Yes, if you could do that.

MR. CONRAD: I'll do that, yes.

MR. MACKINNON: The Nova Scotia Business Inc., I'm beginning to understand that they have different interest rates for different regions of the province. I'm led to believe that the further away you go from Metro, the higher the interest rate for companies and individuals who want to borrow money, is that correct?

MR. CONRAD: I really couldn't speak to that.

[Page 30]

MR. MACKINNON: Is there anyone in your department who can?

MR. CONRAD: I'm certain I can get that information for you, but I think the best answer is direct it to NSBI directly. I'm not aware of a specific fluctuating rate based on geography.

MR. MACKINNON: Are you aware of any specific circumstances on that particular issue?

MR. CONRAD: No, but I'm assuming there would be variations in rate depending on risk and types of business and what have you. Those are questions that, as the provincial lender, can best be answered by NSBI.

MR. MACKINNON: I asked that because I heard the reference to rural economic development here and I assume the rate the credit union is offering - I believe the word "prime" plus 7 per cent, that's universal across the province?

MR. O'NEIL: That's the maximum rate across the province, that's correct.

MR. MACKINNON: Does that vary? Is it a similar type situation of interest as I've raised with the previous speaker, that the more concentrated the area, the better the chance of a better rate?

MR. O'NEIL: I would say no to that. Each credit union does its own assessment of the loan application and determines its own rate, so the credit union in Antigonish is not in any way influenced by a rate that may be charged by a credit union in Halifax.

MR. MACKINNON: I know the province has budgeted $6 million-plus for this program over 3 years - 3, 2, and 1 - at the end of the day does the province make any money if there are no write-offs? Is the province making any money?

MR. CONRAD: There is a fee that is in fact charged that we recover - I think it's about 1 per cent of the loan, but that really is intended to cover any incremental costs that we provide to the credit union to administer this program. In the first 15 months or so of the program, the province received slightly less than $20,000 returned to it through that 1 per cent fee.

MR. MACKINNON: So at this point it's not even a cost recovery in terms of the amount of staff and resources that the department is putting in?

MR. CONRAD: No, it's not.

[Page 31]

MR. MACKINNON: That's actually a kind of hidden, increased cost that's not even measured.

MR. MACCALLUM: It's actually a guarantee fee which is required by the Department of Finance for all guarantees issued by the province, so it's 1 per cent of the outstanding balance of the guarantees.

MR. MACKINNON: No, I understand that, but what I'm saying is if the province is giving the 75 per cent loan guarantee, why wouldn't they get 75 per cent of the revenues generated?

MR. MACCALLUM: I think in terms of the objectives for the program . . .

MR. MACKINNON: I know, it's a bit of an oxymoron there - I caught the attention of the credit union officials.

MR. O'NEIL: Sure. It's the credit union that's advancing the funds.

MR. MACKINNON: Yes, okay. I raised that because I believe Ms. Kelderman indicated the loans that were issued were the ones that normally would not be approved; obviously they wouldn't qualify through the traditional banking institutions. So the credit union is now approving based on these special criteria and support systems from the Department of Economic Development, correct?

MR. O'NEIL: That's correct, but you have to appreciate that it's the credit union's funds that are being advanced - I don't think Mike would be very happy as CEO of a credit union to advance the funds and pass on 75 per cent of the revenues.

MR. MACKINNON: No, but 1 per cent seems a little skimpish from a taxpayers' point of view.

MR. O'NEIL: There are some who complain about that.

MR. MACKINNON: First of all, I want to tell you I have been a member of the credit union for the last 38 years. My first power saw, I borrowed money from the credit union -

they didn't have anti-vibrators then, I just shook to death, when power saws first came in. It did some damage to both myself and the member for . . .

MR. CHAIRMAN: It must be a rite of passage in Nova Scotia.

MR. MACKINNON: That's why we're in politics today. You made reference to Collins Management Consulting. Who paid for Collins Management Consulting, was it the Department of Economic Development?

[Page 32]

MR. CONRAD: Yes, it was.

MR. MACKINNON: How much was that?

MR. CONRAD: Approximately $15,000.

MR. MACKINNON: There's also in the province here, particularly in the Dartmouth area and the Preston area, you may have heard of the Black Business Initiative. They've been trying to get up and running using tax credits and opportunities through the Department of Economic Development, the Department of Finance and so on. It's been quite a struggle for them and it seems to me that what this program offers is something that would be quite generic and helpful in stimulating economic development in that area. Has there been any discussion? I know there is one credit union in the Dartmouth area, correct?

MR. O'NEIL: Yes, there's actually two.

MR. MACKINNON: I guess my question is directed more towards the Department of Economic Development - what has been done to assist there? I'm not so sure the other initiative that was undertaken there a couple of years ago really panned out to the extent that they wanted it to.

MR. CONRAD: There's nothing that would preclude any business in any part of the province from accessing this program. Referrals from the Black Business Initiative would certainly be welcome with the criteria of the program. BBI, in fact, does have the ability to make some loans of their own under certain circumstances and they've also been dealing with the access to capital, I think, through the establishment of a community economic development investment fund which would also provide some of the smaller - it's really venture capital, but it is of the small side - as a blind pool that would be available to the Black business community throughout the entire province for small investments.

MR. MACKINNON: I notice the point was made with regard to collaborating with Nova Scotia Business Inc. and I think it's good to see all the different stakeholders in it. I notice the total number of dollars that were loaned to the Cape Breton region - $3.1 million, I believe. About $680,000 was loaned out to the Cape Breton region creating approximately eight jobs. If I look over on the other side of the chart, I see Nova Scotia Business Inc. and of all the monies that they loaned out, they only loaned 0.2 per cent to businesses on Cape Breton Island. I found that very concerning. Is it a case of Nova Scotia Business Inc. only taking the sure bets in Cape Breton and downloading the high risk to the credit unions through this program?

MR. CONRAD: I don't know if that would be the case at all. My understanding is that NSBI has chosen some very specific sectors that they wish to invest in and I guess the question really is, do those sectors exist on Cape Breton Island? But I think you also need to

[Page 33]

realize that on Cape Breton Island there are other financial institutions, like Enterprise Cape Breton Corporation, that aren't available to the same magnitude on the mainland. My assumption is that a lot of the opportunity that's available down there is being taken up by ECBC and other organizations down there.

MR. MACKINNON: With all due respect, that's a cop-out. That was the same argument that was used by Industrial Estates Limited back during the days of Premier Robert Stanfield. It's always easier to say, let somebody else look after the problem, but in an area of high unemployment, and more specifically in rural Nova Scotia, the population of the communities in rural Nova Scotia are depleting, particularly in coastal communities. We were quite pleased to see just recently in the Coastal Discovery Centre the credit union take up space there and expand to a certain extent in the Main-à-Dieu area. It was quite refreshing.

[10:30 a.m.]

But it's not just in Cape Breton. It's in northern Nova Scotia, you know, it's down in Digby-Annapolis. It's all these outlying regions where you look at the figures, I mean these communities are dying. Out of all these different counties, 18 different counties, you look at at least 15 of them that are suffering because of that and it's quite refreshing, and I do appreciate the point about credit unions having community buy-in and they are, you know, institutions of the people of the province and that's good, but this collaborative effort, how can you use it to expand and capitalize on this opportunity?

MR. CONRAD: I want to be clear that the assumptions that I've made in response to the NSBI question are merely assumptions on my part. I don't speak for NSBI and those are merely recounting points that have been made to me on those particular questions.

MR. CHAIRMAN: With the concurrence of the committee, rather than play musical chairs up here, if we could allow Mr. MacKinnon to use just a little bit on the second round and then he'll take the Chair back, is that okay with the committee? He has finished his first round of 10 minutes. Is the committee fine with that rather than play musical chairs? Okay, if you could go on to round two.

MR. MACKINNON: Thank you, Mr. Chairman, I will be brief. I'm going back to the province again. You're not at a cost-recovery scenario yet although when you create jobs, you create revenue through personal income tax and, you know, goods and services, when people purchase and so on, but has the department identified at what point there's going to be a cost recovery for the department in terms of the administration of this program? I mean we have a government that has reshaped the Department of Economic Development because they want everything on a cost-recovery basis. So, I guess, at what point do you see that happening or do you see just the expansion of this program being a generator in a way that will satisfy the bigger picture?

[Page 34]

MR. MACCALLUM: At this stage, I don't think in terms of cost recovery, that was the original objective of the program and that's certainly something that at some point might be considered. But at this early stage in the program and looking at the original objectives which were to ensure reasonable access to credit, to build the capacity within the credit unions, and make financing available to various sectors in small business, that wasn't factored in, but at some point in the future that might be.

[10:33 a.m. Mr. Russell MacKinnon resumed the Chair.]

MR. CHAIRMAN: The honourable member for Halifax Chebucto.

MR. EPSTEIN: When we had left off our discussion before, I had turned to the question of risk and I think I might have heard a bit of an answer to my next point which was how the loans have been performing. Did I actually hear you say that everyone is up to date, all the payments are there, there have been no defaults, and that's the experience after 14 months?

MR. O'NEIL: That's correct, yes.

MR. EPSTEIN: Great. Well, good, congratulations. Now, is that surprising or how would that compare to your normal run of loans outside of this program after 14 months?

MR. O'NEIL: I think I would have expected some arrears when you get into this type of lending and I'm pleasantly pleased that there are none, but any time you go into a new venture, particularly one of this nature where you're getting into riskier loans, you do anticipate that there may be some arrears. So we are quite pleased with that and I would have expected some.

MR. EPSTEIN: Me too, but I guess we'll continue to monitor it to see what happens over time. One of the things I was curious about was the notion of where it is that the future of this program will be. Ms. Kelderman, I think you talked about targeting young people and persons with disabilities and women as groups in society that might be particularly benefited by this program. Did I hear you correctly on that?

MS. KELDERMAN: That's correct.

MR. EPSTEIN: And I wondered about that list. What I wondered was whether there might not be other groups in society that might also be targeted. Presumably when you developed that list, you must have considered other possibilities. So let me ask particularly about groups that are economically marginal in Nova Scotia and I have in mind some parts of the Aboriginal community here. I have in mind, as well, the Black community and I'm wondering as well about new immigrants to Nova Scotia.

[Page 35]

So I would be interested in hearing comments from you, or anyone else who was involved in the thinking about the future of the program, about how you might assess the potential for developing more business successes among the groups that I've named. Let me just flush this out a little bit because to take, say, the Black community, there's a large concentration amongst the Black population in North End Halifax. My colleague, Maureen MacDonald, represents Halifax Needham and I, myself, have had a long history of association with that area in one capacity or another, and one of the things that's striking about that area is, first, it's quite poor and, second, of course, that the financial institutions have abandoned it over the last decade.

I can't think really of a bank that survives in the Agricola Street-Gottingen Street area. I'm aware of closures by the Bank of Montreal, the Bank of Nova Scotia, and the Royal Bank there, and I don't think there's a credit union in there, I can't think of one just offhand. There's a branch on Young Street, of course, but that's not quite the same thing as being in the community. That's gone hand in hand with the absence of a grocery store of any size in that community. So, you know, it's problematic and infrastructure is lost. So that's an example, I guess. So, again, my question really is, can you help us understand your thinking about marginalized economic groups, the ones that I've named?

MS. KELDERMAN: Well, we would hope that those particular groups would know about the program, I'm thinking of aboriginal clients, or folks from the Black community, or the immigrant population, that they would be aware of and would come forward with ideas as well. They can certainly be a part of our future strategy in terms of how we market the program.

MR. EPSTEIN: I don't think you wouldn't loan to them . . .

MS. KELDERMAN: No.

MR. EPSTEIN: . . . but the problem is targeting them?

MS. KELDERMAN: Yes, and we specifically picked women, young entrepreneurs, and persons with disabilities because they had been identified in other research as having been at a particular disadvantage because they didn't have umbrella groups like BBI, or like Ulnooweg Development on the aboriginal side, that were doing specific things targeted to them. So that's really why we said in the first round of this that we're going to pay particular attention to some of those groups but, you know, as we go forward, we would want to make sure that the program is absolutely open and inclusive. However, we don't want to compete with or overlap what's already being offered by other specific agencies like BBI or some of those programs.

[Page 36]

MR. CHAIRMAN: The honourable member for Pictou West.

MR. CHARLES PARKER: Mr. Chairman, I just had a couple follow-up questions, I guess specifics on the lending process. You mentioned your interest rate, the maximum was prime plus 7 per cent, what would be your average interest rate?

MS. KELDERMAN: On loans done?

MR. PARKER: On loans.

MS. KELDERMAN: It would be 8 per cent or 9 per cent.

MR. PARKER: So that's prime plus 3 per cent, 4 per cent?

MS. KELDERMAN: Yes, 3 per cent, 4 per cent.

MR. PARKER: Okay, so it varies certainly according to the amount of risk?

MS. KELDERMAN: Yes.

MR. PARKER: What would you require from an individual as far as collateral? Do you have a certain percentage you try to work towards. What do they have to put up in cash or other items?

MR. WARK: There's not a hard-set answer on that to say in every case that this is the amount you will be looking for. Typically, you would look at the collateral being the assets being purchased. If someone was purchasing a vehicle for delivery purposes, then you would take a lien on that. What we're seeing where this program really fits, with this guarantee is allowing us to do it where some of these people are starting these businesses and don't have the capital or the cash to go into them. So, typically, even under other federal government programs where we would finance a vehicle, we would be looking at 20 per cent or 25 per cent in equity from the purchaser. This guarantee provides that replacement if we're all convinced it's a sound business deal and the original business plan would substantiate or support that, and I think that's why you're also seeing the loan guarantees at less than 50 per cent in part of the whole package.

MR. PARKER: Do you ever do like a 100 per cent loan to an individual, if you feel they're really solid, really sound?

MR. WARK: Yes, absolutely, we've done it prior to this program, but this program just enhances that even more.

[Page 37]

MR. PARKER: Okay, one further question. Somewhere along the line you mentioned technical assistance as part of your loan package, like you have a mentoring program to lend money and you also provide technical assistance - what would that be, what does that include?

MS. KELDERMAN: It may be a client will walk into a credit union and have their idea on one sheet of paper, and the credit union says, it sounds like a good idea, they know the client, they know the character, but they'll say we really need that in the form of a business plan and we need to see your financials, we need to have a sense of your marketing so the credit union will refer them to us to help them put the plan together.

MR. PARKER: Okay. Thank you.

MR. CHAIRMAN: The member for Kings North.

MR. PARENT: I'm just following up on what my colleague, Junior, was mentioning - and also Charlie was mentioning - about the brochures. What I'd find very helpful - not only having the brochures on this program, but perhaps, Jeff and Neal, you could take this back to the department - I'd find it very helpful to have on one sheet what various opportunities there are both federally and provincially, if that's possible, and a small business plan with a line that defines its mandate - there's NSBI, there's ACOA, there's the Hants-Kings Business Development Corporation which I assume has this.

A lot of people come in and ask, where they can access capital, where can they access help with their business. It would be nice if there was something that was very simple, but had all the different programs on it on one sheet to help us as MLAs. I've mentioned that to the minister before but I haven't seen anything, but that would be very helpful for us as MLAs, with contact numbers, to at least get the person going in the right direction - and I assume other MLAs would find that helpful as well from the comments around the table.

That's my only comment and then I'm willing to make my motion if it's time?

MR. CHAIRMAN: The member for Sackville-Cobequid on a short snip or two.

MR. DAVID WILSON (Sackville-Cobequid): No question, maybe just a comment. I think the government can learn a lesson from this program, and I especially want to emphasize how great the credit union has been with evaluating which businesses we should be lending money to. You can just look at the results with the creation or support of nearly 300 jobs in the province and, as of now, no loans have gone unpaid or are at default. I think the province has had a bad track record with trying to promote business in our province, especially with multinational companies coming in and setting up in rural communities, and it just shows that we need to infuse money into this program, into small businesses.

[Page 38]

So, I just want to ensure that Mr. MacCallum and Mr. Conrad emphasize to the minister, and the whole department, that this a program that I think we need to expand on and really increase what the government is involved in creating the opportunity for small businesses, because most of the people I'm sure, if not all of them, are Nova Scotians who are going here to apply for these programs - or live in and have roots in the community - so they're more apt to stay here and really try and make these businesses work. So if I can ensure that you echo that throughout your department that would be great. Thank you.

MR. CHAIRMAN: The member for Halifax Chebucto has time for short snapper - I know he's short.

MR. EPSTEIN: Okay, I'll try and get this in very quickly. I want to tell you it has to do with credit unions. I want to tell you that I do business with the credit unions. I run my MLA account through the credit union, that's for running my office. I probably run, I don't know, $40,000 to $50,000 through that account every year. Every couple of years when there are elections, I run up a line of credit with the credit unions, then pay it off. (Laughter)

I do a lot of business with the credit unions, but you know what? I don't have my personal account with the credit union, and I want to tell you that the reason I don't is that in my experience dealing with the credit unions over the years, compared to the banks, I get better interest rates at the banks and I get a slightly wider range of services. So, first I want you to be aware of that, so however much I think what you do is wonderful, I think you have a ways to go. I hope you mention this to our good friend Jamie Baillie when he comes on-board and get him to work on anything that still needs doing. I would like to do business with the credit unions and I would like to do business with credit unions for exactly the reasons that you indicated, that is, they're owned by the people who in fact do business with them.

[10:45 a.m.]

There's a huge local component, which I think is a very good idea and I think it's good for the Nova Scotia economy and so on, but I sometimes have trouble making a distinction between what sets aside the credit unions from the other regular banking institutions, although I recognize that the local component is very important, it seems to me, as well, that you are linked nationally to other credit unions that exist elsewhere in Canada and I'm wondering about the extent of those linkages because if those linkages are extensive, then you're very much like the banks, in the sense that money that comes in from depositors in one part of the country can be shifted to work elsewhere. If that's not the case, I guess, I'd like to hear from it and I know this may end up being a longer answer then we may have time for and if it turns out that there isn't a short answer, then I'd be happy to hear it in writing.

MR. O'NEIL: I think I should have the opportunity to have as long an answer as the question. In any event, I don't know the last time you checked at credit unions to compare them to banks. Myself, I've gone through a fair bit of life and I've dealt with nothing other

[Page 39]

than credit unions and have not had the need to go anywhere other than credit unions. I think if you do a more up-to-date check, you may find that some of your comments aren't as valid as they once were.

With reference to the national system, we are linked nationally, that is correct, because there are certain things we must do nationally in order to provide services to our members. There are no examples and there's no mechanism that deposits from one area of the country, go to other areas to meet needs in other parts of Canada. The money invested in credit unions in Nova Scotia, stays in Nova Scotia and is used in Nova Scotia. In fact, I think it's fair to say that as a smaller province that's part of a national network of credit unions, we get tremendous financial and service advantages from that because our share of national programs is quite small, so we benefit from that relationship.

MR. CHAIRMAN: Well, thank you, very kindly. I think everybody has had an opportunity to participate and just in recognizing the member for Kings North, I wanted to kind of bring closure on that last question that I had with regard to the loan guarantees. Accounting is a wonderful thing. Say it's booked on the province that $6 million out of $8 million, so the taxpayers are on the hook for that if things falter and so 75 per cent of the loan is paid by the taxpayer if there is falter. So, it's booked, you loan the money but the taxpayers guarantee it. So I guess that's the point I wanted to make, 1 per cent out of about 10 per cent doesn't seem to add up to me, but anyway.

I recognize the member for Kings North.

MR. MARK PARENT: Mr. Chairman, probably this motion is unnecessary since it sounds like the province is planning on doing this anyway, the department, and the wording can be - I'm quite open to changing wording - but I'd like as a committee to go on record so I move that the Standing Committee on Economic Development go on record as enthusiastically supporting the pilot Small Business Loan Program and ask the Minister of Economic Development to convert this to a permanent program, provide the funds necessary for it's sustainability and growth. I'm quite willing for any wording changes, but I think it's important we go on record for that to strengthen . . .

MR. DAVID WILSON (Sackville-Cobequid): I second that.

MR. CHAIRMAN: Would all those in favour of the motion please say, Aye. Contrary minded, Nay.

The motion is carried.

Do you have a closing remark? Two minutes are left. The problem for us is that we have to be in the House for 11:00 a.m. The House opens at 11:00 a.m. and then we have a little business after we finish with you folks. Do you have a closing remark?

[Page 40]

MR. CONRAD: Thank you very much, for the opportunity to come before you today and explain to you, with some insight what we think. We're very happy with the relationship that we've established with the credit union and our efforts to expand service in rural Nova Scotia, and thank you for your interest.

MR. CHAIRMAN: Thank you, you have been very accommodating and informative on all the information provided.

Members of the committee, just to wrap up, for the next meeting day, November 9th, we have agricultural concerns, witnesses, representatives from Avon Foods and the Nova Scotia Federation of Agriculture, if that's okay. We also have committee business, the review of the witness list. I'm not so sure if we have enough time now to perhaps look into the future. Everybody has that attachment there, some of the issues. I'm open for your thoughts on that. If members would like to look at what we referred to as the unapproved witness list - any suggestions? Howard.

MR. EPSTEIN: I would like to suggest this. One of the things that has emerged just recently at the Public Accounts Committee, of course, is that it set up a subcommittee made up of one representative of each of the three caucuses in order to work through some procedural items like priorities for calling of witnesses. Given that we're 10 minutes away from the start of the House and that we don't meet again for a few weeks, I was going to suggest either that you invite all members of the committee to communicate with you by e-mail about the priorities list, or strike a subcommittee to discuss it. Given that we've got equality of Party representation on the committee at this moment, given the minority government, one from each caucus would probably be just fine and, of course, they would come with the authority to speak for their caucuses, and I'm sure they could work out the priorities for witnesses with no problem.

MR. CHAIRMAN: The problem with that, we had a little glitch the last time on the Aliant issue and I fully respect that . . .

MR. EPSTEIN: Well, that happens.

MR. CHAIRMAN: . . . it was rather unique, but still. Maybe what we'll do is send an e-mail around to everyone and then perhaps one representative from each caucus contact Darlene with let's say two or three of your major priorities and then we'll have it for the next meeting and then we'll ratify it from there.

MR. EPSTEIN: Well, I guess my suggestion was meant to try to work out a priorities list before our next meeting so that the Committee's Office could then be working to line up the witnesses.

MR. PARENT: Do we only have the one item, Mr. Chairman, just Avon Foods?

[Page 41]

MR. CHAIRMAN: Well, that's for the next one.

MR. PARENT: That's the only thing we have listed.

MR. CHAIRMAN: That's the last one that's approved.

MR. PARENT: All right, but we better get working on something.

MR. EPSTEIN: That was my point.

MR. PARKER: We can make suggestions here now, I guess . . .

MR. CHAIRMAN: Okay, does anyone have any suggestions?

MR. THERIAULT: I would like to see some rural development associations here, personally, it doesn't matter where from.

MR. CHAIRMAN: What about the Western Valley Development Authority, I don't know who put that in.

MR. PARENT: They're particularly good, I think.

MR. PARKER: It would be good to hear from them.

MR. PARENT: They received significant federal funding for expansion of high-speed Internet, too, I think.

MR. EPSTEIN: Was that Julia Cooper's.

MR. THERIAULT: Janet Larkman.

MR. EPSTEIN: Oh, it's Janet Larkman, sorry, yes, right.

MR. CHAIRMAN: There's an interesting one there as well. Stanfield Textile Mills they've gone through some restructuring on the impact of free trade, how they are coping.

MR. PARKER: I think anything to do with tourism, too, would be very good. I see you have the 2003 Nova Scotia tourism figures.

MR. CHAIRMAN: Okay, can we have a motion for a couple different ones.

MR. PARKER: Those are my suggestions.

[Page 42]

MR. PARENT: I want Nova Scotia Power.

MR. PARKER: We've heard from them before.

MR. CHAIRMAN: What about the Atlantic Provinces Trucking Association?

MR. PARENT: I tell you my colleague would love you for that one.

MR. CHAIRMAN: Okay, do you want to put it in a motion?

MR. PARENT: Sure, yes, I will make that as a motion.

MR. CHAIRMAN: Would all those in favour of the Atlantic Provinces Trucking Association? Nobody in favour? Would all those in favour please say Aye. Contrary minded, Nay.

The motion is carried.

MR. PARKER: As I mentioned, I guess I'll make a motion that we also try to get, I'm not sure if it's the Nova Scotia Tourism Association, or if it's a government department, or both, but something to do with tourism, getting an update on that.

MR. CHAIRMAN: The Department of Tourism, Culture and Heritage.

MR. PARENT: The are bringing forth a new plan in in terms of targeting larger areas for tourism, so it would be an appropriate time.

MR. CHAIRMAN: Yes, okay, do you want to make a motion on that then?

MR. PARKER: I will make a motion that we invite government or the industry group from tourism to appear before us.

MR. CHAIRMAN: Would all those in favour of the motion please say Aye. Contrary minded, Nay.

[The motion is carried.]

MR. CHAIRMAN: What about the Red Tape Reduction Task Force? It has been out there for four years, in all fairness.

MR. EPSTEIN: It did report; it did report.

MR. CHAIRMAN: It did?

[Page 43]

MR. EPSTEIN: The document came round I think last week.

MR. PARKER: Just recently, yes.

MR. EPSTEIN: Look in your out basket.

MR. CHAIRMAN: Okay.

MR. THERIAULT: I would like to make a motion that we put Western Valley Developments in here. (Interruptions)

MR. RONALD CHISHOLM: I was just going to say, Mr. Chairman, there's a provincial body of RDAs that's in place now.

MR. CHAIRMAN: We could include them as well if you wish.

MR. CHISHOLM: If you wanted to get the whole provincial perspective in RDAs, they would be the guys. I'm just an alternate here today.

MR. PARENT: No, no, and I think that's valid to get the larger picture as well.

MR. CHAIRMAN: We could look at the possibility of inviting them as well.

MR. PARKER: They have a number here to chose from, or try to get on for future dates.

MR. CHAIRMAN: Well, there are three right there.

MR. THERIAULT: Yes, three, that will hold us.

MR. CHAIRMAN: Do you want to pick one more, just in case? What about the Securities Commission? No, too heavy?

Offshore/Onshore Technologies Association?

MR. PARENT: I was wondering about the business parks.

MR. THERIAULT: You've got agriculture next . . .

MR. PARENT: Have we covered the business parks?

MR. CHAIRMAN: No, we really haven't. Do you want to put a motion there, Mark?

[Page 44]

MR. PARENT: I know Bill Langille has a lot of concerns about the business parks.

MR. PARKER: HRM or in general?

MR. PARENT: All of them in general.

MR. PARKER: I see HRM is on there.

MR. PARENT: Yes, I meant the business parks in general. I know Bill Langille has great concerns about the one in his area.

MR. EPSTEIN: Where is there one in his area?

MR. PARENT: Debert.

MR. EPSTEIN: Oh, yes, right.

MR. CHAIRMAN: Okay, do you want to put a motion on that?

MR. PARENT: I so move.

MR. CHAIRMAN: Would all those in favour of the motion please say Aye. Contrary minded, Nay.

The motion is carried.

Okay, the other issue is the Aliant issue, and at the outset I want to make sure that any member, particularly yourself, Mark, and Brooke, and I've spoken to Brooke, if there's any miscommunication, I will certainly accept some responsibility.

MR. PARENT: No, no.

MR. CHAIRMAN: And it's a breakdown, I think, given the circumstances at that time, and Howard will certainly confirm that when the issue came up it was a question of timing and there was a sense of urgency and we felt that we were speaking and it was clearly indicated - and Howard, you can confirm or refute what I say - that there we were speaking on behalf of all three caucuses. I did attempt to contact Junior - and Junior can speak on that issue later - and Wayne and myself have a clear understanding, because we're long-standing colleagues, that any time I'm not here he speaks on my behalf and what he decides, we generally agree, unless it's the end of the Earth, and vice versa, and that has always been the protocol, but because of that breakdown in communication I believe everybody did receive the memo afterwards to make sure that those glitches don't happen again. As well, I think it was easy for us to do it at that time simply because we did it on other committees.

[Page 45]

MR. PARENT: Sure, and if I can speak, Mr. Chairman, I didn't mean to be critical because I realize that things break quickly and timing is important, and I don't want to hamper the committee in terms of it. So I appreciate the resolution and the memo. We want to, I think, make sure all committee members are informed and yet have flexibility to respond to timely issues.

MR. CHAIRMAN: Sure.

MR. PARENT: And so that was my only concern.

MR. CHAIRMAN: I appreciate that.

MR. EPSTEIN: I want to add that I also had the impression that day that there was unanimity around the committee table on behalf of all caucuses, but I think that episode, or that part of it is closed. I do think, however, that there's an outstanding issue about our jurisdiction to bring witnesses in on this topic, and I don't think we should accept the letters that we received.

Now, clearly the issue has passed as a topic for discussion in front of this committee, and there's really no point in going ahead with it, but in terms of jurisdiction over federal entities, I think we do have to poke at this a little bit and I would like to flag this as a topic for discussion at some future time.

MR. CHAIRMAN: And that bill before the House, too, will help a bit.

MR. EPSTEIN: Is there a bill before the House about this?

MR. CHAIRMAN: The House of Assembly Act.

MR. EPSTEIN: Oh, yes, yes, indeed. Yes, that's right, there is and I will have to have a look at that, I heard about it, but I just wanted to ask that we discuss this at some future occasion although it's not pressing right now.

[11:00 a.m.]

MR. PARENT: I agree very much. The issue is over, but I think I would have been far happier if the person had written back and said we do not think that it would be helpful at this stage, but to decline, I think, in some sense this is a slap in the face . . .

MR. CHAIRMAN: And they knew we weren't going to be discussing what was happening at the negotiating table.

MR. PARENT: . . . and I don't think that's acceptable.

[Page 46]

MR. CHAIRMAN: Okay, maybe after the next meeting, after the next set of witnesses, we'll set probably 10 minutes aside to have a little more fruitful discussion.

MR. PARENT: Agreed.

MR. CHAIRMAN: So moved.

[The committee adjourned at 11:01 a.m.]