Assemblée Législative de la Nouvelle-Écosse

Les travaux de la Chambre ont repris le
21 septembre 2017

Public Accounts -- Wed., Nov. 19, 1997

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HALIFAX, WEDNESDAY, NOVEMBER 19, 1997

STANDING COMMITTEE ON PUBLIC ACCOUNTS

9:30 A.M.

CHAIRMAN

Mr. John Leefe

DEPUTY CHAIRMAN

Mrs. Eleanor Norrie

MR. CHAIRMAN: I will call this meeting to order. We have a cast of thousands with us this morning and I am sure by the time I have read through the list of persons who are before us today as witnesses that we will be completely ready to move on with presentations. We are dealing today with public-private partnering and here, as witnesses, from the Public-Private Partnering Task Force are Andrew Hare and Bert Loveless. Andrew is the chairman of that committee. Mr. Loveless is well known to this committee, having served as a witness on previous occasions on other matters.

From the Department of Education and Culture, Doug Nauss, Executive Director of Finance and Operations who, again, is well known to the committee; and a face which is new to the committee with respect to his current responsibilities, Mr. Lloyd Gillis, Deputy Minister. Congratulations on your appointment, Lloyd.

From the Department of Transportation and Public Works: Alan MacRae, Executive Director, Specialized Support Services; Mr. Chris Welner, Director of Public Affairs and Communications; Mr. Don Piercey, Administrative Manager, Highway No. 104 construction.

From the Department of Finance: Bob Moody, again a person who is no stranger to this committee; Mr. Rick McAloney, Executive Director, Investment, Pensions and Treasury Services; and Mr. Sean O'Connor, Controller with the Department of Finance.

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We also have officials from the Auditor General's Office here as well, as we do in each of our open sessions.

Now, we generally commence our sessions by providing an opportunity for an overview and I believe Mr. Hare is going to provide us that (Interruption) Mr. Loveless is going to provide us that opportunity.

MR. BERT LOVELESS: Thank you very much. I must apologize, technology is not going to work from where I am sitting so my partner in crime, here, is going to work this machine down here and I will speak to the presentation. What I want to do is just try to give you a little bit of an overview of public-private partnering. I am going to use the word P3 because we found, doing these presentations, that public-private partnering is problematic to say continuously. So we are going to use P3 as a short description of where we are going.

Just an overview - and I think we might have the slides in the wrong order, but anyway - a public-private partnership is really any situation where the costs, the risks and the rewards are shared between the private sector and the public sector. If we look at what the opportunities are, they range from a variety of services, they can be built and operate similar to Highway No. 104, similar to some of the schools that we have done. They also can be service contracts and I will go through some examples of those kinds of initiatives that have been undertaken and they can go directly to privatization of a government service or government operation. There are some examples of those as well. One of them may be the data centre that was privatized several years ago and really is operated in the private sector. So there are a number of opportunities, a number of varieties.

Just briefly, on some of the benefits. I just want to go over these and maybe reinforce them a little bit because I think this is what this is all about. There is an opportunity to maintain or improve service and infrastructure. I think this is probably one of the most important issues. An example I will talk about a little bit later on is Check In, an operation that is run by Corporate Communications on behalf of our department. They provide 24 hour service for people who want to register. Those kinds of services are very difficult to provide in the public sector and the volumes and scope where they provide other services to other companies in a similar line, they can do that cheaper, more effectively and with a much higher productivity level than we can do. So there is a tremendous opportunity for improved service.

Also, even on the schools, on the refreshing of technology, the refreshing of infrastructure, in many cases the private sector can maintain those kinds of networks, maintain that infrastructure better and more cost-effectively can the public sector can do. There is reduced public sector risk in a lot of these projects where a lot of the risk has been transferred to the private sector, both on cost overruns on time-frames, of meeting completion dates and so on. There is sustainable economic growth and I think this is probably one of the key elements that excites me about public-private partnering and a good example is Check In. We outsource that. They have done an excellent job. They are now delivering that service to the

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B.C. Government, so they have actually transferred that opportunity to B.C. They now have won a contract in Alberta to provide the same kinds of services, a lot of that out of Nova Scotia. So they have actually added to their employment base and have actually been very effective in commercialization and adding to the economic growth and profile and tax base of Nova Scotia.

Competition is promoted and I think this is a good example, that is the public-private partnerships on the schools where consortia have got together and they are competing for those kinds of opportunities. I think it makes the private sector sharper and it makes the public sector sharper. Also, on the service delivery end, Check In's contract will be up and there will be opportunity for other call centre operators to bid on some of that work. As we go through that process, it will be a competitive kind of process. So it does provide opportunities for government to reduce costs, which I think goes right into the next slide which is reduced costs.

Because of the competition, because of the opportunity for the private sector to sort of maximize on volumes, there can be reduced costs in the delivery of services. I think that is one of the key components of this. I think when you look at a project, we must look at the total cost from the beginning of a project to the end of a project and all the economic benefits and what has happened in between. We sometimes have a tendency to get sort of hung up on one or two aspects of a project and I think we have to keep our focus to the total project, the total economic benefit, the total economies to the Province of Nova Scotia, the total benefit to the taxpayers.

There is a better use of public sector resources and this is a challenge. But from where I sit, and I have been involved in this for a number of years now on a number of projects, there is an opportunity to utilize the public sector in a more streamlined, more effective way to deliver the kinds of services. The private sector can deliver a lot of those services better and the public sector should focus on their strengths, focus on what they are good at and not try to be experts on every aspect of what is needed to do the job.

Importantly, and I think very significantly, as there are reduced time-frames, I think the Highway No. 104 is a great example of that where we have a highway which really, if government had to do it, would have been phased. To make it affordable, it would have been done over several years. The highway goes nowhere so in the middle of that highway you basically would have to pay the cost of that to take it to the middle because there are not a lot of places to go, there are not a lot of off-ramps off that highway, and you are sort of stuck in the middle of nowhere. So it is very hard to make that a cost-effective kind of approach doing it over several years. So there is a reduced time-frame and the private sector is very conscious of meeting those time-frames.

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We will go to the next slide, I hope. Ah, here we go. There are risks so I don't want to skirt any of those issues. I think I will talk about some of the potential risks of public-private partnering and one of them is public perception. That is one that takes a while to work on. There is a perception, for example, on the ambulance services where they were in public sector hands; there may be a feeling that the public sector can do a better job than the private sector. They are more humane, more focused, they are the taxpayers. So, I think there is a perception of that and I think the key is that it is our belief that the private sector can deliver essential services, can do it very well and can do a good job. They are based on performance kinds of contracts. But there is a perception out there that some of the things that we do in the public sector should remain in the public sector. So, there is an issue around trying to move the masses to change the culture of the public in that regard.

There are some major human resources issues that have to be dealt with in any of these. I think the key there is open and fair. Really, the issue is trying to manage those transitions, trying to manage those changes, trying to work with the labour unions and work with the people affected to try to make that transition as smooth as possible. I think for the most part government has been very conscious of those kinds of issues and has tried to deal with them in a very humane, practical and pragmatic way.

There is a perceived loss of government control where some of these services now are delivered in the private sector, and there is a feeling that the government cannot exercise the control if they had ownership and total control over those processes. So, that is an issue and a risk that has to be managed.

User fees, I don't think I need to talk more about that, but there is a potential risk on user fees. Someone has to pay for these and if government does not have the resources then there has to be some sort of recovery of the costs in some way, shape or form.

Project financing costs on the deal can be higher in the private sector than in the public sector. The Government of Nova Scotia has a very good borrowing rate. So, that is an issue that has to be managed. I think it is one issue of many. It is not the only issue. It is just one of the costs of a project from day one until 20 years or 30 years in the future. So, it has to be taken into account with the total project costs, the total economic benefits, the total potential, the total transfer of knowledge, and all the other kinds of good issues that come out of that. So, we have to look at a project and not try to focus on one or two individual issues.

Possible project overruns have got to be determined very much upfront, who takes the risk on those. In most cases, it will be the private sector but that is again an issue that has to be resolved and there is the potential risk in cost overruns if a project gets out of control. I think the essential part of that is that it is a lot easier to transfer that risk in the private sector. In many cases, the government sector just keeps adding to the budget to cover those cost overruns. So, I think the private sector is more familiar with trying to deal with those kinds of issues than the public sector.

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Just to give you a little update on where we have been and where we are going on this. I think there will probably be some changes in the process as we review this. There was an officials' committee a number of years ago. A deputy ministers' committee was put together and we had a discussion paper. There were 69 briefs that we received on that. We compiled and, hopefully, it was provided to the committee, an inventory of the P3 projects that are currently underway. So, I think that has been provided.

I want to talk about where we were and this is probably one and one-half years ago. In the original concept there would be a task force formed and that would be a group seconded from the public sector to work on this, people who were experienced in P3. There would be an advisory committee so that would bring in the labour component. The private sector would bring in a group to help government drive this initiative. We are looking at departmental project teams which, for the most part, have been formed and there are a lot of those in operation around government, and there would be an ongoing deputy minister's committee to manage this process. So, that was the original concept. It was approved about one and one-half years ago. It has been a tough issue to deal with and I think everybody knows the controversy around this. So, it has been slow getting off the ground, but I think it is complicated, complex and in many cases breaking new grounds in many areas. So, it has taken a while to get this thing going.

I just want to give you a little bit of the things that are underway now, and these are just a few highlights that I would like to focus on. The whole schools, and I think my comrade, Lloyd, will be speaking very much on this subject so I won't spend a lot of time, but I think the key here is that the issue is trying to provide a better education system for the children of Nova Scotia. I have four of them so I think that is important in my mind, but I think that is the issue. The issue is trying to provide top-notch schools, not square boxes that don't have any personality, schools that the children can be proud of, the teachers can be proud of, and the community can be proud of.

I think if you look at what has happened and if you actually toured some of these new facilities, I think you can appreciate what I am saying. If you look at the old traditional square boxes that people were put in, with no personality, no artistic designs and very cold places, I think that is what we are trying to get to where the private sector can put a personality into the school, can design these in a way that the children and the teachers and people involved in the education system can be proud of those institutions. I think that is the bottom line. The bottom line is how do we get better schools, better institutions for our children. That is what is driving the whole initiative and it is as simple as that, but I will come back to that.

Personal property registration which was just launched. That was a partnership, Atlantic Canada On-line, which will be providing government services in partnership with government. They have taken that on and I think that is just the way to deliver services better through the better use of technology, trying to get closer to people and get technology closer to people and get people involved. So, it is a matter of how we deliver services. It is a major

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project that has revenue benefits as well for the province and opportunities to grow that revenue base in the provision of information services and so on.

Highway No. 104, I won't talk to that. I think there may be some questions on that, but I think that is a great highway. I have not driven it yet. I flew over it once, but I have not driven it. I think as people start to go, and I have talked to people and they are very pleased with the quality of that highway.

Just a few other ones, energy performance contracts which I think is a great one where the private sector has provided capital to basically retrofit heating systems, heating plants in government buildings and, basically, they get paid from the energy savings. So, the government wins and the companies win as well. So, I think those are good kinds of partnerships.

Check In, I have talked about. I think that is an extremely good win. We have actually received I think it is $80,000 now, because we have the intellectual properties to that system. So, we have actually gotten some return back, from CorporaTel Incorporated, of actually marketing that system in other jurisdictions, plus we got a growth in staff and in economic benefits. So, it has been a win-win all the way around.

Correctional institutions is underway now, very early stages, so I will not speak to that, but it is going to be a tough one. There is a public perception there, so it is going to be one that is going to be difficult to deal with.

Emergency health care which is one that has been just launched with Maritime Medical. I would suspect that once this is done Nova Scotia will have probably one of the best emergency health systems in Canada and I think something we can all be proud of. I think the private sector can provide those services, can do a good job, and can respond to the needs of Nova Scotia.

An El Salvador project, which is just a new one and I am not sure if it is officially announced or not, but that is a consortium of several Nova Scotia companies, an Ontario company, Registry of Motor Vehicles, our Consumer Services Department where we are basically exporting technology to El Salvador as a partnership and will share in the rewards of doing so. So, these are the kinds of projects that I think are extremely exciting, that really take Nova Scotia above other provinces, other jurisdictions. I think we are small, we are effective, we are focused, and I think they are extremely important for the province and just great projects.

We did appoint an Executive Director, Mr. Andrew Hare sitting behind me. He was in the department, so we moved him in. I am not sure he is happy about that, but he has been in a little bit of controversy ever since. It will bring some focus to the initiative. We are trying

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to recruit a couple more people. We have had a couple of people part time to assist Andrew in his progress, trying to get this thing forward.

There is a total review of the process underway and once that review is finished, probably within four to six weeks or so, there will be a submission to Priorities and Planning and Cabinet on where we take this initiative, where we are going with it, to ratify the approaches to date and to make sure that everybody is comfortable in the Cabinet and that government is comfortable with where we are going. We mentioned that a number of projects are underway and will be carried out.

There are issues and most of them will be covered in the brief to Cabinet, but I just want to let you know the issues we are trying to deal with. We want to have a discussion on the human resource, how do we manage that process, how do we get the labour unions involved in the process, how do we make sure that we partner with the unions so that everybody can win in this? So, we will be trying to endeavour to do that. I have met with Dave Peters of the union on a number of occasions on this issue and I have been quite upfront and frank with him on what we are trying to get out of it. He has been quite frank with me, as well, so I think it has been a good exchange. There may be legislative requirements, we don't know yet, but we want to look at what the requirements may be from a legislative point of view in some of these initiatives.

We want to try to establish a policy on user fees with respect to these public-private partnering issues and future contracts, so that everybody knows what the policy is and what the restraints are very early in the process. We want to determine the best practices. We have done a lot of projects, so I think we want to look at those projects and find out which are the best, which will work well and which have not, figure out where we have gone wrong and document that. And also establish a strong monitoring process and accountability process. The other big issue is, how do we involve the general public, how do we involve everybody in this process, how do we make sure this is open and everybody understands where we are going and how we are getting there? So, I think that is an issue that we also have to deal with.

That's just a very brief overview on a very complex subject, but I thought it was worthwhile just to bring everyone up-to-date on where we are and what we are trying to do. So, thank you very much.

MR. CHAIRMAN: Thank you. Mr. Gillis, I believe you wanted to make a brief presentation.

MR. LLOYD GILLIS: If I may, I will move to the overhead projector. Mr. Chairman, members of the Public Accounts Committee and colleagues, I am pleased to have a few moments this morning to speak to the P3 initiatives and their impact within the public education sector. Sometimes the debate in the public forum loses sight of why education is involved in this process and the advantages that these initiatives are bringing to the public

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education system, to the children of our province who are the future leaders of our society. In this overview I will try to address, just to refresh your mind as to the projects that are being undertaken through P3, and examine, in a brief manner, what I see to be some of the advantages that are accruing to children, to our province as a result of these initiatives.

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There are currently eight projects that are being managed through the P3 process. The first project is the Sydney junior high school project, students have been in this building since January of this present year. The Porters Lake project is an elementary school which was occupied by students in this school year. The Horton high school project is a project which is in the construction stage; scheduled to be opened in September 1998. The remaining projects of the eight include the Amherst Regional High School, a project which has not been awarded. There has been a competition, the RFP went out and we are approaching the stage where a proponent will be selected. The Hants East middle school is in a construction phase; construction has begun on that project. Hants East Elementary School, Meadowfield Elementary School both have had the contracts awarded but they are at the design stage. The Aspotogan or Blandford Peninsula school is roughly at the same point as the Amherst Regional High School.

Looking at, briefly, some of the educational benefits from the project and I refer to our reactions of this discussion within the media, it is a fact that these topics don't get a great deal of attention. But within these new projects we are not just building to duplicate what we have done in the past in the public education system. It is not only the box that is changing shape, it is what is going on in the box that is changing dramatically. That is the part that is lost to the public view. Within that box today we are encouraging new ways of learning, new ways of thinking. We are encouraging young people to take far greater responsibility for their own learning. We are talking about creating here a membership for a new society in which individuals will be far more involved in giving directions to their own learning, doing their own research, conducting their analyses on assessment of what is best for them, their families and for this province. So we are raising the level of critical thinking skills significantly within this new school that we have designed.

The bricks and mortar are important, they contribute to that, they are creating within that facility flexible options and alternatives for our young students so that the facilities can be molded and changed to create the greatest advantage for them. So from the students' perspective we have created an opportunity for learning to occur in a very different environment from that which we have had within our traditional schools.

Some of the purpose for this, obviously, is related directly to improving the capacity of our youth to deal with information technology. That is only one part but it is an important part. The fact is, in this society today, we have far too few people who are leaving the public education system who are prepared to take their place within industry, within the professional

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ranks of our society and work with ease and use effectively the technology and all the new resources that have become available.

Critical to this process, of course, is the development of our professional working group, our teachers in our schools. Each of these projects had as a part of that an investment in the professional development of teachers. Teachers as a professional group are one of the groups in our society that have had less access to technology and exposure to the information society than any other professional body. Reflect on changes that have occurred around us; all I need to do is reflect on my own personal experience in working within an office and observing how this office has changed over a short period of time. The functions in that office and they are performed today are entirely different from what they were five years ago even. Though teachers have been denied that opportunity, certainly in comparison with other professional groups, their exposure has been far less and we need to expose them to this so that, in fact, they can become leaders within their respective schools but not only that, in their communities become leaders. They are the only professionals who you can say are resident in many and most rural communities in Nova Scotia. In respect to having access to this technology, if they gain it they should have a great impact on the level of sophistication of all of our communities in respect to the utilization of this technology.

Technical supports are part of the design. Teachers are not intended to be the ones who will massage and keep the network running, they will be supported in that and that is part of the requirement of these projects. The software industry has an opportunity in support of teachers' work and in conjunction with teachers to develop and advance the technology through software developments which will be appropriate to our teaching. That is already occurring. We have teachers who are interfacing with the programmers and analysts within the industry right now and working on methodology that can be employed so that they can use the technology more effectively in their teaching. All of this does contribute to the support and delivery of programs and services across our system and is having an impact on curriculum development and the writing of curriculum documents.

Education benefits, just to continue for a moment, I made mention of our lack of employees who have the sophistication to take their rightful place within the industrial opportunities and business and professional opportunities that exist within our society. We learn, almost on a daily basis, of the people in the business community who are making comment about the inability to acquire the skilled labour force they need to support their business intentions and plans. We, in Education, believe that our contribution here is critical and that we need to be investing in our students so that, in fact, this shortage diminishes.

The students of the future who are coming through these schools will become employees who not only understand better how to process the task in front of them as they enter their workplace but also how to contribute in a creative way to the solutions of problems within that workplace, using the resources available to them through technology and the learning process in which they have been engaged.

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MR. CHAIRMAN: Lloyd, have you any idea how much longer you will be? We are 35 minutes into our two hours now. Really, I want to maximize the opportunity for all members to place questions.

MR. LLOYD GILLIS: No more than 10 minutes, Mr. Chairman.

MR. CHAIRMAN: I would prefer five minutes.

MR. JOHN HOLM: If I might, maybe we might want to consider even having a second session, because with the time restraints, it is going to be very difficult.

MR. CHAIRMAN: That is a decision that we can take at the end of the day.

MR. LLOYD GILLIS: Mr. Chairman, this other method Mr. Loveless has already referred to, producing the products more quickly. That is true within the school construction area. These facilities, in fact, as the door opens, have within them the latest technology both in terms of hardware and software. An important feature of the P3 initiative has been that we see these schools becoming hub schools and from those schools will emanate initiatives that will carry them out into the larger districts. Already the schools that have been created within this plan are having that impact; those neighbouring schools being connected to hub schools, taking advantage of even the servers that might be located in that hub school so that they have the same sophistication of application of technology as their neighbours.

We have wide area and local area networks developing as a part of this process. The infrastructure is being put in place. So there are connections developing not only between schools but in some of our jurisdictions within the total school board. The Annapolis Valley board, for example, is totally wired in the sense that they can communicate across that district on all matters of issues through the technology that is available. The Internet is the most sophisticated and most effective computer network that does exist within the province. Educators are becoming the largest user group within government in respect to our use of technology.

Another component is the refresh technology, the investment in not only the installation, at the time of installation of the new equipment when the building is built but maintaining a constant eye on the importance of maintaining that equipment at a level that is current.

Flexible schools, I will mention quickly, that we have schools that are more adaptable to the changing standards and requirements within the public education system. The word cascading is used to describe the impact that this technology will have on the broader school community so that if it is a junior high school there are, obviously, going to be opportunities down the road for that junior high school and its equipment as it is being replaced to be

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distributed throughout the broader community, perhaps into the elementary schools or whatever.

Other partnerships. While my primary focus, I suppose, is on what happens within our student community, the 5 to 21 year olds, we are having the experience already in several parts of the province where the existence of these schools is beginning to have a large impact on how business is being done within the community. Just to cite a couple of examples. We had a junior high project last year where a number of schools were, for the first time, given support in the system for information technology. In our first year's report or first analysis of what occurred in that year one, in Respective Community Connections - I will just read one paragraph, Mr. Chairman, from this report, "Notable projects. . .", which had a community impact ". . . include the Mahone Bay Community Network Society which coordinates computer access for students, teachers and the public under the supervision of a coordinator funded by HRDC. Five schools used the infrastructure for this project to lever Community Access Project (CAP) funds from Industry Canada. These same sites benefited from the support of the very successful Wire Nova Scotia project during the summer of 1996. The school in Windsor has a strong partnership with the local Community Network. The l'Ardoise school in cooperation with the Community Enterprise initiative has attracted revenue of $2840 per month by contracting services to the community. E.B. Chandler School in Amherst has partnered with HRDC to provide adult courses four nights per week. In Liverpool, computer engineers from Bowater Mersey taught courses which introduced Windows and DOS.". This is just to give you a flavour for the expanded opportunity that can flow from these projects, Mr. Chairman, and members of the committee. So I will rest my case.

MR. CHAIRMAN: We will start with Mr. MacLeod.

MRS. ELEANOR NORRIE: Mr. Chairman?

MR. CHAIRMAN: Yes.

MRS. NORRIE: I would like to ask a question on the timing of the questions, given the time itself.

MR. CHAIRMAN: Well, generally we look to each member to take 10 minutes or maybe 12 minutes question and answer. I think at the end of the day we may well want to address whether we want to have some or all of these witnesses back for a second session of this. There is going to be considerable interest in it. There is, of course, always the option of going back to the old formula whereby my recollection is the Official Opposition had, I think, 30 minutes, the Third Party had (Interruption) Sorry, 20, 20 and 10 it was. The Official Opposition had 20 minutes, the Third Party had 10 minutes and the government had 20 minutes and then we do the rotation again.

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MR. ROBERT CARRUTHERS: Mr. Chairman, if I could on that point, we wouldn't be going back to the old system. I don't know why we would today any more than we ever would for the last five years or four years. I would suggest to the Chairman, he take the amount of minutes that are left, divide it among the amount of members and onward and upward.

MR. CHAIRMAN: We have not had a problem to date.

MR. HOLM: I would like to make a request for additional time because I know we can't begin to cover the topic in the time remaining.

MR. CHAIRMAN: All right, Mr. MacLeod. It is 10:17 a.m. I would ask that the questioners be as succinct as possible. We have had some quite long presentations to date and I would ask the witnesses to be very succinct in their responses - wherever they can give a yes or no, to do so.

MR. ALFRED MACLEOD: Mr. Loveless, you mentioned that there were potential benefits, including reduced costs, access to new sources of capital and better use of public sector resources. How can you explain then why a $14 million loan was given to a private sector company and how can you say that that is better use of our resources? How can you say that is better use of the benefits for our province? I mean you gave $14 million to a company to build a school that you had no leases set on and then, I don't understand that. Of course I am just a boy from the country.

MR. LOVELESS: Well, I live in the country as well so I am a boy from the country, backwoods of Newfoundland. Anyway, just to elaborate, the issue is not whether we gave $14 million or we didn't, and I will ask Mr. Moody to talk on that because they have been trying to work out the financing on the school. I think the issue is that we had a project, we had a consortium. They had the money. We were not comfortable with the terms of the agreement. We wanted to make sure everything was above board, everything was done properly. These were the first of their kind in Canada and probably in North America. So we were really trying to achieve, and I think, again, we have to try to focus on the end result here. The end result is, have we got a better school, have we got a better opportunity for the children?

I think we get hung up sometimes on process and I think process is very important and I think we have to work our way through that but the bottom line is that until such time as we could find something, find a financing vehicle that would work, the government was not prepared to contract with that consortium. So we provided interim financing to cover the cost to make sure its suppliers, contractors, people were paid - it is simple as that - with the view that once we found a financing option that was acceptable, it would be moved to the private sector. I would ask Mr. Moody, who has been for the last several months trying to find an appropriate solution to that issue.

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MR. ROBERT MOODY: Mr. MacLeod, I will just add to the comments of Mr. Loveless and I will be brief. I think the bottom line here is that we could have accepted a lease if we hadn't been so strong about making sure we were getting the very best deal for the taxpayer. Let me jump ahead, if I might, to the future. We believe we are in a position now where we have come through and learned together that for future awards in this area, we can take the position that the financing component is finalized and be a part of the award on the day it is done. That is where we believe we are now in terms of what we have learned on how these appropriate contracts and leases and awards can be structured. That is not where we were, sir, two years ago, as Mr. Loveless has mentioned, in terms of a very great learning curve on P3.

What we have been going through, we and the public sector, several departments, and in the private sector, is to ascertain how best to do this and from our perspective in the public sector, taking every possible opportunity to ensure that we get the best deal. We believe that we are very close to that in ensuring the appropriate operating leases in the projects that are underway. I would again like to emphasize where I believe we are today as for future projects, the financing will be able to be put in place on the day it is awarded. In the ideal world, the way it should have been in the past, but, as Mr. Loveless mentioned, we were very clearly breaking new ground here, both in this country and in North America. Thank you.

MR. MACLEOD: The people that I have the privilege to represent don't understand how somebody could get into a contract, develop a building, not have a lease in place and then finance the building and lease that building back from those same individuals and the individuals having that property not paying interest on the money that you gave them. Am I missing something here? Is that not what happened, that this government got into a contract without a lease being signed, without knowing where the financing was coming from and then gave them the money without interest charges and expect people to believe in this province that they got a good deal?

MR. ROBERT MOODY: Mr. MacLeod, the valuation of the project, in terms of value for money, will be able to be done once the lease agreement is signed and put in place. Then we can look at and measure the very significant education/economic benefits that have been outlined in summary form by Mr. Gillis and Mr. Loveless and then look at that in comparison to the actual terms and conditions of the lease. We will be able to do that very soon. We will be able to do that for both current and future projects. At the present time, we don't have the full picture in which to do that but that will be possible and it is my belief, Mr. MacLeod, that these P3 project schools, as well as the others that have been outlined, we will be able to show, definitively over time, that there is good value for the taxpayer.

MR. MACLEOD: Will indeed something be signed before the end of the fiscal year?

[Page 14]

MR. LLOYD GILLIS: As we speak, we are moving toward that objective and materials are being provided to support that action. As Mr. Moody has mentioned, we have been moving cautiously in terms of making sure that the information that is made available to Cabinet, is the best information available and we are moving toward that objective. In respect to the time-frame that you are giving, it is beyond me to suggest that that is possible to meet but I do know that we are moving forward with caution but with haste to have a lease finalized.

MR. MACLEOD: Well, caution with haste, you have been in the schools in Sydney since January. Here we are creeping up to January again. Caution with haste, that sounds more like it is a tortoise pulling a train up a hill. I don't understand how you could let it go this far. You had the building process that took a number of months to complete, now you have been in the school, operating it for almost a year and still you don't have any idea when this is going to be finished. Could you please tell me who is going to foot the bill at the end of the year when this $14 million is there and the balanced budget that we have heard so much about, that the wheels have been falling off all over the place, all of a sudden, who is going to be picking up the tab on this $14 million?

MR. LLOYD GILLIS: It is my personal belief that the matter will be resolved, that that will not be an issue that government will have to address. As I indicated a moment ago, we are moving forward with what I believe to be the appropriate responses to the concerns that have been raised under the evaluation of the P3. We are within a very short time-frame when this matter will be resolved and the resolution will then be made known to the public, I am sure.

MR. MACLEOD: With all due respect, Mr. Gillis, it is my personal belief that it has taken far too long, and with that and $1.25 you can get a cup of coffee at Tim Horton's, but it is not going to put the people of Nova Scotia's minds at ease. I really feel that we have failed, you have failed, this government has failed to do what is right with the taxpayers' dollars and I really still am not satisfied with the answer to the question. Who, indeed, is going to be responsible for the money at the end of this budget term if the leases aren't in place? Where is the responsibility going to go, who is footing the bill for this $14 million, who is paying the interest that is being accumulated on that and where, indeed, is that going to be written up in the budget?

MR. ROBERT MOODY: Mr. Chairman, if I may, I will make a similar response as Mr. Gillis. Again, we have made very significant progress here on all the projects that are in hand. Again, it is my belief that we will be successful in obtaining the appropriate operating lease for the particular school in question and the others that are underway. That will be made public as soon as those decisions are made, as soon as those details are taken, when the details are taken and are known.

[Page 15]

I would like to emphasize once again that, as Mr. Gillis has outlined, we have exceptionally high quality learning centres now with all kinds of benefits that weren't available before and, indeed, it will be possible to measure those benefits against the particular costs of doing this initiative this way, but we don't have all of that today to compare one to the other. Thank you.

MR. MACLEOD: So, you can't give us a time-frame, but you want us to trust you. Is that basically the answer, just trust me?

MR. ROBERT MOODY: I can't give you a time-frame, Mr. MacLeod, because I can't govern when decisions will be taken on a particular day. We are being as frank with you as we can in terms of, as Mr. Gillis and I have both stated, that we believe we have made very significant progress and that decisions will be forthcoming soon. But it wouldn't be appropriate for us to be any more precise than that, with respect, sir.

MR. CHAIRMAN: Perhaps one more question, Mr. MacLeod, and then we will move on to the next questioner.

MR. MACLEOD: My final question to you then, sir, is, what security does the Province of Nova Scotia have in regard to this money that we loaned to this company to build a school that you didn't take a lease out on yet? What security does the province have?

MR. DOUG NAUSS: We hold a title to the property, so the security we have is the physical asset.

MR. CHAIRMAN: You hold a title to the property?

MR. NAUSS: Yes.

MR. MACLEOD: So, really, we have built the school, we have paid for the school and we own the school, so where does this public-private partnership come in and why are we paying somebody for a lease if we already financed it, we built it and we own it? Why are we going to lease from somebody something that we already own?

MR. CHAIRMAN: A quick answer, please.

MR. NAUSS: The whole initiative began as a public-private partnership. We had 18 consortia respond to a request for proposals and those were short-listed to three, and then a finalist was chosen to carry through with the project. We did all of the planning with the consortium involved. They had arrangements in hand for the financing. I think as Mr. Moody said, we weren't satisfied with the terms but, nonetheless, there was still a need for the facility, so the decision was made to proceed with the construction.

[Page 16]

[10:30 a.m.]

MR. MACLEOD: So, we are going to lease something that we already own. Thank you very much.

MR. CHAIRMAN: Mr. Holm.

MR. HOLM: I might add that in your final answers you, of course, are telling us that what you have been calling public-private partnerships are not, because your opening definition was that there was shared risk, and in reality there is no risk for the private sector because the government has already loaned them the money, we already own the buildings. My first question is, are we already making lease payments to our so-called private partner? Are they receiving any lease payments for the buildings that we own, that we financed?

MR. LLOYD GILLIS: No.

MR. HOLM: No money was transferred, great, that is the first bit of good news. The next question. In October 1996, a call for proposals went out, including the Horton school, and it was going to cost $8 million. Seven months later it is now up to almost $26 million. My question, who authorized that increase in cost from $8 million to $26 million?

MR. LLOYD GILLIS: I will comment on the reference to the $7 million. The $7 million was an estimate that was attached to a project when the province proposed to conduct a renovation to the existing facility. The engineers recommended against using the existing facility, claimed that it would not be a good investment to work at that site, so an alternative location was sought and a decision was made to build a new facility. At that time the value attached to the project was $15-whatever million. The project, as has been the case with each of these initiatives, involved a broad number of people in developing that school.

As a result of that, there are enhancements to the facility. In addition to the technology - which includes such enhancements as an area designed for fine arts and the promotion of our art education initiatives within the province, which are now part of our provincial program studies - it also included an opportunity for expanded use of physical education areas. These, along with the costs associated with the technology - one of those being that we have learned that as technology goes into classrooms, the size of the classrooms need to be increased - these factors have all contributed to that change.

MR. HOLM: You haven't come close to answering the question as to who authorized it yet. Was it authorized by Cabinet, was it authorized by the minister? Who authorized the increased cost going from $8 million to $26 million?

MR. LLOYD GILLIS: Mr. Chairman, I will need to respond at a later date to that question. I don't have that answer in front of me.

[Page 17]

MR. HOLM: Well, I would like to have that answer and I would like to have a piece of paper or Order in Council, something that is showing the authorization for that increased cost. Also, we are talking about high-tech schools. Could you tell me, since we are trying to establish centres across the province and we are trying to create opportunities, are all schools in this province going to be provided with a couple of amphitheatres outdoors? Are they all going to be provided with rugby fields, this high-tech school? How much of the cost of that facility is actually related to the educational facility?

MR. LLOYD GILLIS: All of it.

MR. HOLM: Could the deputy minister please tell us, are all of the schools going to have businesses located in them, will they all have computer stores selling IBM computers?

MR. LLOYD GILLIS: Mr. Chairman, the school is being built to meet the standards that we are supporting for public education service today. You wouldn't choose that we build for the past. They are being designed, we believe, to bring the fullest opportunity to the learners in today's society. The standards, by contrast with other existing facilities depending on which ones you choose as your comparator, can be portrayed as being very close to those existing costs. If you take the St. Andrew's School, the last one built in Antigonish which was built under the old process, compare the costs of the Horton facility to that facility, you will find that on a square footage basis and on a per pupil basis, the costs are very comparable. In terms of the capacity within that facility to serve the needs of the student population, they are very much in hand.

MR. HOLM: I would like to see a breakdown of the actual costs, what the costs of the lands are, what the servicing costs are, and a lot of those other kinds of items because we can talk apples and oranges all day long and we can make figures juggle. I didn't get an answer to my question, of course, about whether or not, maybe indirectly there was an answer in that, the new educational standards are going to have commercial outlets like computer stores and so on set up in the mall, because I didn't get an answer to that.

On a previous day, back in March 1996, I had asked a question to Mr. Loveless, then it was about Highway No. 104 and talking about the costs. I had asked about the costs of higher borrowing costs and Mr. Loveless said, "When you give risks to anybody, they are going to want more money and in the particular case of Highway No. 104, the actual financing is more costly and more expensive than what we could do ourselves. But the bottom line is that the decision was made that that risk should be in the private sector and, I would argue that even taking in the additional cost over the long haul of the project, we will probably save money. I think that is the whole premise that this is built on, that there is a risk transfer to the private sector.".

[Page 18]

Well, we know in Highway No. 104 that that risk transfer is going to be costing toll users an extra 3.4 per cent in higher borrowing rates above what the province paid in the last long-term debt. That is going to work out to tens and tens of millions of dollars over the term of that. My question is, was there any cost-benefit analysis that was done, and can you produce it, can you lay it on the table, that shows that the costs of building and financing these schools, with our money of course and then we lease it, that that is going to be more cost-efficient for the taxpayers of this province than being upfront, being honest, and admitting that we own those costs and having it show up on our books? What is being done is nothing more than a shell game to try to hide the debt on the books of a private company and that is not going to fool any bondholder in New York.

MR. LOVELESS: Can I respond to that?

MR. CHAIRMAN: Yes, I think, Mr. Loveless, you have that opportunity since you were quoted.

MR. LOVELESS: Yes, since my name was in that quote.

MR. CHAIRMAN: Do you have a copy of the quotation?

MR. LOVELESS: Yes, it has been provided and I have that. I still stand by what I said then but I want to answer a couple of questions.

First of all, you better ask the question, do you want the school, do you need the school, do you need the highway, do you want those things to happen? Okay, ask that question. If you answer yes to that, then you ask the question, how the hell do we get a highway we can't afford and try to make that happen. So, answer those two question. (Interruption) Hold it, no, no. If you want to . . .

MR. CHAIRMAN: I will decide the order of speaking here, Mr. Loveless, not you. Proceed, please.

MR. LOVELESS: Mr. Chairman, I apologize for that. The bottom . . .

MR. CARRUTHERS: Mr. Chairman, on a point of order. This witness has the floor. The questioner, twice, has interfered with the last two witnesses. I don't think it is this witness who should be admonished, but the members of this committee.

MR. CHAIRMAN: Mr. Loveless.

MR. LOVELESS: Anyway, I guess the point of the matter is, and I was at Transportation when the final deal on the highway was signed, the bottom line was that highway would not have been built, could not have been built, could not have been afforded,

[Page 19]

would never have happened, would not exist today if we had not proceeded. If you added up the costs, and I will turn this over to Al MacRae who was the chief engineer and he can answer this, but I know for a fact, I did see the cost-benefit analysis, if we did that project in the traditional way over several years, piece by piece, mile by mile, paid the interest and all the costs associated with that, sitting idle, while we managed to complete the damn thing, we have saved money, we have a highway, we got it at better costs, the taxpayers of this province are well informed and the users of the highway can pay for it. It's as simple as that. As far as I am concerned, it is good politics. We have tremendous economic benefit in the area from doing that and this is a win/win situation for Nova Scotia, as simple as that.

MR. CHAIRMAN: There are two points that I want to make. First, I would ask everyone to avoid expletives and, secondly, I would remind everyone that remarks are to be addressed through the Chair.

MR. HOLM: First of all, I would like to see, I haven't had anybody address yet, the whole issue about the cost benefit analysis for the school. If that is available, will the members, whoever, whatever department, whatever wing of government has it, will they be provided?

MR. CHAIRMAN: The question is being put to whom, Mr. Holm?

MR. HOLM: To whoever would have conducted such a cost-benefit analysis, whether that be the task force, the Chair, the Department of Education. Do you have such cost benefit analysis?

MR. LLOYD GILLIS: We have and each project has been benchmarked so that, in fact, we can keep a watchful eye to how the costs are comparing with the standards. This is being done by an external body. That analysis is being done in respect to each project.

MR. HOLM: Is being done?

MR. LLOYD GILLIS: Has been and is continuing to be done.

MR. HOLM: One of the advantages of the so-called public-private partnerships, which I have difficulty seeing how they meet that definition, was increased competition. I have to ask the question, how is it that you are going to have increased competition when in the very beginning what you do is you go out and you select a proponent, you put out your proposal, you decide who it is you are going to be having deliver the project, then following that you go out and you negotiate what the costs are going to be and how the arrangement is going to be? That is like my going out to a car dealership and saying, gee, I like the building that you operate out of, I like the colour of the car, I am going to sign on the bottom line and agree to buy it and afterwards, I will work out with you how much it is going to cost me

[Page 20]

and/or what the lease arrangements are going to be. You have to, surely to God in a good business manner, know what your costs are up front. Why wasn't that done?

MR. CHAIRMAN: We will take the answer to this question and then move on to another questioner.

MR. LOVELESS: I was on the evaluation team for the first school, which is the Sydney school and I think that is the one that seems to be bringing the most controversy here. There were actually several consortia involved. It was shortlisted down to two. The costs were benchmarked with both consortia with bench-costs that we had prepared as to what it would cost for us to build the school. The three were compared. The total packages were compared. It was a competitive process, both on technology, and on the capabilities of the consortium and costs. All of those things were added in and benchmarked against what we could do in the private sector. So, it was a very competitive process.

MR. CHAIRMAN: Mrs. Norrie.

MRS. NORRIE: Mr. Chairman, given the fact that we have had a lot of discussion regarding financing, in the briefing we had last week the numbers were given us that the capital school debt in 1993 was, I think, $255 million. I don't know if you have that number in front of you or not. As well, attached to that there was service to that debt of $50 million. When we moved that debt into the overall debt of the province, as the accounting procedures were changed, we then increased the provincial net debt by $217 million, which was about one-third of the net debt to the province at the time. So, in the process of doing that and also in looking at the need for schools in the province, we know that there is a long list of schools that are required in the province, I don't have the total number in front of me, perhaps somebody has that number in front of them, how many schools are needed right now in the province that you can foresee?

MR. NAUSS: I can't tell you at this time the exact number of requirements, but the school capital construction committee has received requests from all school boards across the province. They have made their visitations to school boards and prepared a report for government concerning requirements for new school construction. But the needs are substantial and in every school board.

MR. CHAIRMAN: So, Mrs. Norrie, are you asking for a copy of that report to be made available to the committee?

MRS. NORRIE: No, I think the answer I have received tells us is that there is a great need for school construction.

MR. NAUSS: And a need straight across the province.

[Page 21]

MRS. NORRIE: There is also a need, and it is well documented in the media about the number of sick schools across the province, schools that have been built over the past two decades that maybe were not built as well as they might have been, probably because of the cost of doing that. Not only do we have to have new schools, we also have to repair schools or do some work on that. I don't know if there is any opportunity to find the number of schools that need to be repaired or the cost attached to that. Is that a possibility?

MR. NAUSS: School boards submitted their requirements in basically two categories. One category is new schools and additions and alterations. The other category is major renovations required and, in many cases, that requirement relates to upgrading buildings to try to avoid the difficulty some boards are having with sick schools.

MRS. NORRIE: Moving away from that just briefly, when we go through the public-private partnering process, who owns the school, as the policy has been laid down? Who would own the school once the school is built under this public-private partnering process?

MR. NAUSS: Under public-private partnering, the consortium that builds the school will own the school.

MRS. NORRIE: Then you would work under an operating lease?

MR. NAUSS: There will be operating agreements arranged between the consortium and the school board.

MRS. NORRIE: Can you tell me the advantages of working that way under an operating lease? What are the advantages to government?

MR. LLOYD GILLIS: The big advantage is that we are able to move forward and build schools, Mrs. Norrie, without adding to the accumulated capital debt of the province. It certainly is an important advantage to us. I think Mr. Loveless was raising a very important question some time back. There is this demand, it is clear that it is widespread - I am referring here particularly to schools - and we must move forward. How we do that is the issue, if you are not in a position where you have surplus funds to use for this purpose, which government has not had.

MRS. NORRIE: Just to get back to the public-private partnering concept, when did the Government of Nova Scotia first begin using the concept - you maybe didn't call it P3 - when at some time in the past did we start using the private sector?

MR. ROBERT MOODY: Sorry, Mr. Chairman, I wanted to respond after this question to the former question. I apologize, but if I could just have a moment to respond?

MR. CHAIRMAN: Well, we will leave that to Mrs. Norrie to decide.

[Page 22]

MRS. NORRIE: That's fine, yes.

MR. ROBERT MOODY: In terms of the advantages to the province of P3 and new operating agreements, I just wanted to add, too, a very big benefit in this particular case is the ability for the Province of Nova Scotia to have choices down the road at the end of leases, whether that be for a 15 year period or an 18 year period or a 20 year period. As all members will appreciate, there are tremendous demographic shifts in most of the provinces in Canada, certainly in Nova Scotia; needs change, priorities change. To be able to have such an operating agreement allows the province the ability to literally walk away from a particular project. We have never had that luxury in Nova Scotia before.

Other provinces have recognized this and other provinces have recognized it in different ways. For example, I believe - and my colleagues in Education could correct me - that there is at least one province today building only mobile schools, whereas as the population shifts they actually pick up schools and move them. This is a different way, if you like, of having mobile schools. So the ability to walk away is a very prime example of one of the benefits of all P3 projects in terms of a shift in risk from the public sector to the private sector. So I just wanted to emphasize that point. Thank you, Mr. Chairman.

MRS. NORRIE: I guess to paraphrase that a bit, what you are saying is that if the private sector builds the school, they maybe would have the opportunity then to build the school with an alternative use in mind for down the road if there is no longer a need for the school in the area?

MR. ROBERT MOODY: That is exactly right, Mrs. Norrie. For example, if you take the case of the Sydney school - and I have had the privilege of going through the Sydney school on three different occasions - its architectural and structural design and building techniques are totally different than a traditional school. To be very brief, a traditional is block and cinder, all bodied up. If you go through the Sydney school, it is in fact architecturally built as a shell, so that, I am told, to renovate a small part or indeed all of it can be done without structural changes, without wiring changes, without the plumbing changes. So, to change it either for educational use or to something totally different, expenses can be minimized.

That is the kind of design feature that is built in so, in fact, we get away from a single- use building, in this particular case, to a potential of a multi-use building. So it is something that is built in right from the initial concept. Then that allows the private sector to take risk away from the public sector because they can say, well, in fact, yes, if there is a population shift, if there is a change, then I can use this building for a different use possibly.

The same type of concept will be built into other types of P3 initiatives. That type of thing wouldn't necessarily be limited to the schools. That is one of many ways in which the project can allow a risk shift from the public to the private sector.

[Page 23]

MRS. NORRIE: I think given the fact that we do have a great need for schools in the province, well, we do have schools in the province but they are all in the wrong places and now we are trying to offload those either to the private sector or they are derelict. So I think that using operating leases is one of the biggest advantages of the public-private partnering that I have seen.

I guess back to the other question that I asked regarding the history of public-private partnering with the Government of Nova Scotia, can someone tell me when we first entered into such a concept?

MR. LOVELESS: I have been in government for 25 years and I think partnerships of one type or shape have been going on for years. I think we have probably moved into more infrastructure, more user fees, put more formality around it, but there have been previous partnerships; for example, the data centre, I believe, was privatized under a former government. So I think it has been going on but I think there has been an emphasis on it of late, probably over the last couple of years it has been getting momentum. There are a number of reasons, but the main reason, I think, is there is an opportunity to provide better services, to provide better infrastructure, to make things happen. So I think there has been increased use of it, but it has always been there.

MR. CHAIRMAN: Mr. Carruthers.

MR. CARRUTHERS: Mr. Chairman, I just wanted to continue on on that basis. I think you said that your data base, would this be the Systemhouse project that we are talking about, which basically took over our computer system, is that what you are referencing? Because I am sort of interested in this concept and how it developed. Would we call that a successful operation between the public and the private? Have there been any serious difficulties in that particular partnership?

MR. LOVELESS: I don't work at Technology and Science but I guess I can make a couple of observations and everyone who knows me knows that I am quite frank about my statements. I think it was, I think there was a win on the short term. I think we are a little disappointed, and I am fair to say that, on the economic benefit. We were hoping that the business would grow in the private sector. It is coming up for contract renewal in a year or so and we will probably go out to a competitive process on that. The service delivery, it is my understanding, has been excellent; the private sector has provided excellent service. So I think from that end it has been very successful. But I guess there was a general hope, because MT&T also put their business with the same group at the same time so it was a sort of a three-way partnership, there was a hope that they could get some export business and grow that opportunity into something bigger. So I don't think we are happy on that end of it. We feel that they could have done better but on service delivery and those kinds of things, it has been very successful.

[Page 24]

MR. CARRUTHERS: I think it was outlined that the concept can run almost from the public sector selling control. I would almost compare the sale of the N.S. Power to this partnership except there seems to be very little government involvement anymore. That is always a concern for me. One of the downsides you outlined was loss of government control could be seen as a downside or possible downside and my view on N.S. Power, that was the downside. But there have been other partnerships that have developed. For instance, the liquor warehouse deal, that was sort of a private partnership with government also, a public-private partnership. The Joe Howe Building might be seen as the same.

Now, how can we out there on the street, the average fellow, figure that these types of dangerous situations aren't going to develop, how can we feel comfortable that there have been safeguards built into the process - and I realize you are moving slowly in some ways - but how can I feel comfortable that we are not going to get into one of those situations again? Does anyone have an answer for that or at least a conjecture on it?

MR. ROBERT MOODY: If I understand the question correctly, I can't speak in detail, Mr. Carruthers, to those leases that you mentioned because I wasn't involved in those but I do know, for example, that our Auditor General has raised concerns in past reports about some of the leases on buildings. I think there are a couple of key things that separate this process and makes this something that will work, both for current projects and for future and work in the long-term value for the taxpayer, and I believe one the keys is right up front as Mr. Loveless explained.

Mr. Loveless stated that he was on the evaluation committee for the first school, that it is a public process. It is a recall for proposal, it is a very competitive process. There is benchmarking that is done in terms of costs, for example, cost per square foot, cost per student, things like that. The evaluation team is from different sectors, it is not just, for example, from the Department of Education, the school board would be involved. So it is very much a public process. It goes through a sequence of events and then a partner is chosen.

I mentioned earlier that I believed that in looking ahead, that we are now in a position that we can finalize the financing arrangements for these at the time the award is made. That is the right thing to do. That is where we are today for future projects. Again, when that is done and leases are signed, all that information can be made public. Then at that point we can say, okay, looking ahead, we know the product that we have and the potential of the product, i.e. the school in this case; we have the operating agreement, let's look at terms of value for money and let's look today and let's measure in five years and let's measure in 10 years, because it is not just one day in time, the day the award is made is important but there is also over time. As we have mentioned, the benefit of these P3 projects is not only what it does itself but the economic spinoffs, et cetera.

[Page 25]

I guess just to summarize, Mr. Carruthers, through you, Mr. Chairman, is that these processes had been open and competitive and will remain so and we are putting in place today some improvements in the processes over the lessons we have learned over the past one to two years specifically, because there have been valuable lessons learned and the process will be strengthened.

MR. CARRUTHERS: Of course it is important to me because two of those schools that are on that list . . .

MR. CHAIRMAN: I saw you smile.

MR. CARRUTHERS: . . . are coming to Hants East and are to be built next year and that is important to us because there have been some doubts whether that could have been achieved. So this particular concept is singularly important to me. But something that struck me on the downside, that there was a possible increase in cost, the cost of money I would take it, the cost of borrowing sometimes when the private sector gets involved. If this process were to be followed that you have outlined and I think that is logical that the deal should be struck and then the financing obtained, at least completed, the last step in the financing. It just strikes me that if a lease with government were in place or were undertaken, I just don't see why a competent company, a well established company, or a company with good credit, with a lease from a government agency, like it is not like we are going to go away, why would you not be able to get financing from a lender to the private sector at very similar costs to the government? It might be a bit higher but would there be a significant difference between a very competent private consortium that has a long-term lease with the Government of Nova Scotia in arranging low cost financing? Should there be a big difference?

[11:00 a.m.]

MR. CHAIRMAN: Who is the lucky winner?

MR. RICK MCALONEY: Mr. Chairman, certainly I agree with the concept. If you have a well documented lease with the Province of Nova Scotia, that would certainly be excellent collateral for a private sector company to obtain financing. So that, by itself, should allow them to obtain financing, all things being equal, not significantly higher than the province's incremental cost of borrowing. Of course, there are other factors here. The concept of public-private partnering does imply an attempt to transfer risk to the private sector so there is never a situation where all of the things are equal. So there are other things that may drive the cost higher, other projects that company might be involved in and the general strength of their balance sheet. So I guess the bottom line assumption you can start with is their financing costs will not be lower but they don't necessarily have to be significantly higher.

[Page 26]

MR. CARRUTHERS: Yes, well that is really the feeling that I had. There might be some differential, there is a risk exchanged and that is part of the upside, so there would be a risk exchanged but once the pattern is set and the leases are set, that is great collateral. I would think that there would be nothing better that the banks would love to have as collateral in such a contract. I am glad to see that.

Just one quick touch, do you think that if we look at the sale of N.S. Power, for instance, versus the other extreme that we build a school, and it was outlined by one of the questioners here, my friend in the Progressive Conservative Party, he indicated, well, we own the school, why don't we just keep owning it versus the sale of N.S. Power absolute. I know what the overall concept you made is but is there just a short, sharp answer as to why we just don't go ahead and build these schools ourselves since we are going to, in the instance of the first case, either own it completely like we do in Sydney school or in the other case, sell completely like we did with N.S. Power? Is there a short, concise answer?

MR. LOVELESS: They wouldn't happen.

MR. CARRUTHERS: That sounds good, thank you.

MR. CHAIRMAN: Mrs. O'Connor.

MRS. LILA O'CONNOR: I believe this is one of the first times that we have seen more witnesses than we have members.

MR. CHAIRMAN: Yes, let the record show.

MRS. LILA O'CONNOR: Safety in numbers? I am not sure. (Laughter) Could you explain to me, please, I take it from what has been said, we will not own the schools but we do own Highway No. 104. Why? What is the difference? What is the difference between an operating lease and a capital lease or do we own the schools?

MR. SEAN O'CONNOR: Mr. Chairman, maybe I will try to answer the question.

MR. CHAIRMAN: For the assistance of Hansard, if you could identify yourself.

MR. SEAN O'CONNOR: Yes, it is Mr. O'Connor, controller. Perhaps I will try and answer the question with reference to schools, at least. What we are really buying here is flexibility. At the end of the day, whether we have a 15 year lease or a 20 year lease, the province has the ability to walk away. It is important that the ownership of that asset rest with the other party so that you can, in fact, walk away. That is, in essence, what the school and the operating leases around the school are all about.

[Page 27]

To answer the question on Highway No. 104, I think, Bert, you can probably best respond to that since I wasn't involved at that time.

MR. LOVELESS: Actually, it is owned by a corporation.

MR. ALAN MACRAE: The highway is owned by the Department of Transportation, the department owns the highway. What the corporation has is the right to collect tolls on the highway and they have that right as long as the debt is outstanding and the reason being that the department expropriates the land so we have to have ownership and also we want consistency in the highway system as far as access to it and the Motor Vehicle Act, make sure that all of the Acts and the highway is consistent with the rest of the transportation system.

MRS. LILA O'CONNOR: Thank you. There have been some comments in the paper lately about the secondary speed limit. Could you explain to me how you decide the speed limit on secondary roads?

MR. MACRAE: The speed limit on the existing Highway No. 104, existing Trunk 4 now, which goes down to the Wentworth Valley, has been reduced to an average running speed of 80 kilometres per hour through that zone. The speed zones are set upon what the area's access to the highway is along those sections of road. So there are some sections that are at 70 kilometres per hour because of the driveways out of there. There has been a switch now on the type of traffic that is on the highway. We are going from a highway that had a lot of through traffic which would be travelling at a higher speed, down to one that is more of local traffic. So the running speed of the traffic would be reduced and also we are looking to allow lower speeds through the areas that have the vehicles turning on and off the highway.

MRS. LILA O'CONNOR: So it is consistent with all the other secondary roads across the province. It is not being picked on or anything like that.

MR. MACRAE: The majority of the speed limits there are consistent. You sometimes set a speed limit at a policy level and the majority of the secondary roads are set at 80 kilometres per hour. There is some reduction here in some sections that we probably would put on some other sections but it is to obtain the average running speed of 80 kilometres per hour through the whole length of the highway.

MRS. LILA O'CONNOR: Thank you. I would like to talk about Check In just for a few minutes, if I may. Was that one that the government approached a company to do or did the private sector approach the government and ask to do it?

MR. LOVELESS: In that one there, actually the private sector, I think it was a joint effort, but for the most part the private sector came to the government and said there is an opportunity here and we would like to take advantage of it. It is your system, your technology, can we work a partnership. That is how that got started.

[Page 28]

MRS. LILA O'CONNOR: How long is the contract for?

MR. LOVELESS: I think it was a seven year contract - don't hold me to this - but it was a long-term contract, I think it was seven years, and it runs out, I think, in 1999, somewhere around 1999.

MRS. LILA O'CONNOR: And then it will be open to public tender?

MR. LOVELESS: I won't commit to that. That is a decision somebody has to make but I would assume under normal circumstances, yes, it would be, unless there are some other advantages that can be, there is an option to renew the contract so I think it will be a government decision as well.

MRS. LILA O'CONNOR: But it has been a very successful contract, private partnering?

MR. LOVELESS: Very successful and also a great economic opportunity, an opportunity to export Nova Scotian technology and I think that is what is important.

MRS. LILA O'CONNOR: Thank you very much.

MR. CHAIRMAN: Thank you, Mrs. O'Connor. Mr. Colwell.

MR. KEITH COLWELL: I was very pleased to hear Mr. Gillis, in his presentation, that finally the education system is starting to realize, and I believe they have realized it for a long time, actually, how important it is to improve our training to make people more employable and more productive in the workplace. I think it is a point that really has been overlooked in this whole private partnership arrangement. I will give you an example. In my area, in Porters Lake, some of my constituents attend the Porters Lake School, the new high-tech school, and there has been a rush to buy new houses. The school was supposed to be about two-thirds full, it is actually over capacity right now and it has just opened. So evidently, the people in the community understand the importance of a good education, this new information technology that is coming along.

Could you elaborate a little bit on what type of things the teachers are doing that they wouldn't do in a normal circumstance with the schools to upgrade their training and how they approach the programs?

MR. LLOYD GILLIS: Mr. Colwell, my familiarity with the Sydney school is better than that of Porters Lake so I will use that as an example. Teachers prior to the school opening were involved in professional development activities with the technology supplier and over a period of months were developing their own sophistication, I guess, their own understanding of how the technology could apply to their learning and to their teaching.

[Page 29]

Within the school itself, communication has improved significantly among teachers in respect to the use of the technology on a daily basis just as I guess many of us may have improved our communications through application of e-mail and other facilities that are now available to us, it is happening in that situation.

I asked the principal the question that you are asking me, in fact, and what I did was inquire as to how things have changed? This was a principal who has worked in what would be called a standard school setting. What he believes is happening in his situation is that there is a far greater sharing of learning challenges and teaching challenges within the school; that there is an openness about the teaching challenges that teachers are experiencing; in other words, they are coming back to a staff room and sharing successes and challenges that they have experienced within their teaching. This communication goes beyond after school, in this case with the use of laptops the planning of the schoolday's work may begin in school but then it carries on in the home, so it is affecting that. It is affecting assignment of teaching responsibilities for substitutes. As the work and lesson planning can go at home and be communicated directly to the classroom and the continuity within the instructional program is not lost, as it may be under other circumstances. So we are finding all sorts of advantages that it is bringing to that situation.

MR. COLWELL: Is there a belief that with the new information technology from the school board's standpoint and from the Department of Education's standpoint that it will indeed improve the level of technology that is available to employers as a result of these new schools being put in situ at the present time which otherwise, plain and simply, couldn't be afforded any other way?

MR. LLOYD GILLIS: Yes, there is clear evidence that this is happening already. I referred to work that is happening in and around junior high schools that were equipped a year ago. I was at a workshop with Community Economic Development officers, school principals and technology people in the Strait board back about a month ago, their whole focus was on how they could improve the accessibility, how they could encourage broader community use of the programs that they currently have in place. There are all kinds of policy and practice issues which have to be overcome in achieving that, it is not just sending out the invitation to the community, you have to create full accessibility to that facility in order to accommodate. In other words, you can't say, only come during our working hours. You have to be able to open the facility for the full week including weekends to allow that accessibility. But it is growing and there is good evidence that in many communities there is a network being established and the school is the centre of that network.

MR. COLWELL: Is it also true under the partnership and lease arrangements that the province is working on that the private partner is responsible for upgrading the technology on an ongoing basis, which is an extremely expensive operation if you are not in that business, ensuring that when the students graduate from there that they have been exposed to the most modern technology?

[Page 30]

MR. NAUSS: What we are doing with these P3 schools is building in a technology refreshment fund, so that the technology in the school will remain current over the life of the lease. The decision concerning what technology will be refreshed will be made jointly by our private sector partner, the department and the school board.

MR. COLWELL: At present, and I am just going from personal experience here in my own area, technology in our existing schools is very greatly lacking to say the least and we have been trying to increase that. There is no way possible under the existing system, before the private partnership, that could proceed on a level that it can proceed with the private partnership. Is that an accurate statement?

MR. NAUSS: I would say it is. For example, if we built and delivered a new school via traditional means, we would put as much technology in there as we were able. But the technology became old very quickly and it was difficult to have school boards put money in new schools to keep the technology current because the needs were so great in other schools. In the P3 schools the technology will be refreshed on a regular and systematic basis.

MR. COLWELL: That's good. I was in high-tech manufacturing before I actually got into this job and one of the biggest problems that I had was well trained people. It was impossible to find someone who could even turn the machines on, never mind operate them. We had to call Upper Canada and the U.S. to get expertise and it gets very expensive. So, I am really pleased to see that these new schools are taking place. I think it is just the beginning.

We have to proceed much faster. We are competing in a world market place and with the world market place, if our costs or taxes are too high, or if our labour rates are too high compared to other countries, and we enjoy an excellent standard of living but if we don't introduce technology, then we are going to be lost. There is a misconception in Nova Scotia, and I can tell people that it is wrong because I have seen firsthand that if you ship something to another country, a Third World country or a country such as Mexico, they think that everybody is backward and there is no equipment or anything. Well, I have news for them. They have the same equipment that we have, but they have people who will work for $2.00 a day and they are as highly trained or more highly trained than our people are. So I think it is important that Nova Scotia be a leader in this.

Along those lines, what other initiatives are they looking at long term in this partnership? Is the partnership also looking to develop long-term strategies for improvements in education? That is really the bottom line we have here because we invest in education, a small investment at the beginning, it is very small, as a result of the income tax that people can pay to the province or the learning capability they have or the industry we can attract because of that.

[Page 31]

MR. LLOYD GILLIS: The answer is, yes, we are looking at ways of extending the opportunities that are being made available through the P3 schools to other parts of each board. Those schools become the standard that, I guess, drives the board and the community toward that similar objective elsewhere in the district, so it is resulting in a great deal of effort locally to develop curriculum and to take initiative across the district.

I had the advantage of working for a number of years in the Halifax County school district and we had the advantage that came with a growing population, having new schools constructed. Each new school became the new standard for us in everything that we did in that district. It affected our standards that we imposed on ourselves for maintenance of the building, for cleanliness of the building and it also imposed on us a new standard for learning opportunities for students.

What we are able to do with the P3 initiative is carry that same impetus into a larger part of the province. I think school boards such as the Cape Breton-Victoria School Board, which has now a Sydney school, has had a great deal of pressure placed on it to raise expectations for instruction in junior high education across its district.

Now, some could say, well, that is a bad thing, you've put them in a very awkward position. In fact, I don't believe that at all. I think we have set a new standard, a new goal, a new ideal and now they are working towards it and that is their challenge. As Superintendent Dr. MacNeil would say that to you, this becomes my challenge now to extend this opportunity to others in the most effective way I can do it.

MR. CHAIRMAN: There is time for about one more question.

MR. COLWELL: The last question I would like to ask is a very straightforward one. Without this public-private partnership with the province and the people of Nova Scotia and the private companies, would it be possible for the Department of Education or the province indeed to go ahead with the technological development in these schools, which is so important to employment and the economic growth in Nova Scotia, at the same rate or even at any rate without this public-private partnership?

MR. LLOYD GILLIS: The answer is, no, it would not be possible. Based on my understanding of where government was and where the finances of our province were when we entered this process, I think that this was our answer to moving forward and establishing new schools within our province.

MR. CHAIRMAN: Mr. Huskilson.

MR. CLIFFORD HUSKILSON: Mr. Chairman, I see our time is fast moving on so I will be brief. The first question I have, how many of these P3 projects in the Province of Nova Scotia do we have underway at the present time?

[Page 32]

MR. LLOYD GILLIS: In terms of reference to the schools, we have a total of eight projects that were approved to proceed under the P3 process. Of those eight, there are two that are occupied today, there are two others I believe that are under construction, leaving, therefore, four that are at a planning level at this moment. So, those are the numbers that were approved by government to proceed under P3.

MR. HUSKILSON: Also, there was some discussion about the Check In project. I wonder, Mr. Loveless, if you could just expand more on that, explain more of that?

MR. LOVELESS: Check In is the province's reservation system and also they do inquiries for us and mail-outs, mainly associated with the tourism and travel industries. I think this year actually they did 36,000 reservations through the Check In system and I think they output somewhere in the neighbourhood of about over 120,000 pieces of information to prospective inward travellers. So, that has been very receptive. They have a very good system. It is well-received in the industry, well supported and has worked very well. They have been able to take that because of the fact it is well received in Nova Scotia, it has a good reputation, they have been able to market that in other jurisdictions. So, that is what that is really all about and it has been very successful.

MR. HUSKILSON: Just one more question. You mentioned about the El Salvador project. Could you just touch briefly on that one again?

MR. LOVELESS: I am a little bit familiar with it so I can give you a brief overview. That is several Nova Scotia companies and really it is involved in the delivery of a complete motor vehicle registration system in El Salvador. It includes all the technology on the registration, the licensing, the permitting and also is involved in ticketing and controlling of that. So, I think there is a meter company involved, electrical company from Nova Scotia, there is an Ontario company involved. So, there are several companies and our department and Business and Consumer Services basically formed a partnership to deliver this. So, we are exporting this opportunity to El Salvador and the Nova Scotia Government will be taking an equity position in the consortium to the enhancement of Nova Scotia companies, Nova Scotia technology, and so on. So, it is a fairly exciting project and I think one which really, again, puts the provinces ahead of the rest of the country.

MR. CHAIRMAN: Andy, quickly, please.

MR. ANDREW HARE: I would just like to say, that project is a CIDA project and I just want you to know we are at the bid stage with Business and Consumer Services, companies like Waldale Manufacturing out of Amherst and J.J. MacKay with their parking meters are involved and there is a consulting firm out of Halifax that is involved and others. So it is not a contract we have at this time as a consortium but it is a project that is in the process.

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MR. CHAIRMAN: Thank you, Mr. Hare.

MR. COLWELL: Mr. Chairman, I do have other questions but due to the time, I would like to pass it on to Mr. Hubbard.

MR. CHAIRMAN: Mr. Hubbard.

MR. RICHARD HUBBARD: Mr. Chairman, I really don't have any questions. I think it has all been explained pretty well but I guess I would maybe like to make a comment in that it was alluded to earlier, and maybe I misunderstood but it was about rugby fields and the arts and those sorts of things that are going into the Horton high school. I wanted to put a plug in for those things because I think those are all a part of economic development for any areas that are getting those schools. Being a former parks and recreation director, I understand the importance of those facilities that go along with the school. It is called physical education. That is why the word is called that. I think it is all a part of the educational process. But having said that, again I reiterate, to me it is important that we build those things now because if we are going to be looking at building tracks or rugby fields down the line in those communities 5 or 10 years from now, the cost can only be greater. I think a plan that includes the technology of the school, certainly, that is the main basis of building the schools but all of those other things that go along with it certainly are important to a community.

I know that we are pushing for a track to go with the new Meadowfield School in Yarmouth. There is not a track in Yarmouth at the present time so there is no opportunity to host track meets. Where we have established that we will have a decent sized gym in that school, already that gymnasium, as I understand, could be filled, if it was open tomorrow, could be filled for the rest of the week. So I guess I just wanted to put a plug in that the planning that is going into those schools seems to me to be a community school and have been in operation, as probably many of you know, in Europe for many years. So I would just like to say that we are on track. I believe that the public-private partnering is the right way to go. I am not sure when Yarmouth's Meadowfield School would have happened if this process was not in place. So I just hope that we continue on that track. Thank you.

MR. CHAIRMAN: We have a few minutes left and I have a couple of questions I would like to pose. The question was raised by one committee member at the end of the lease period, who owns the school? Mr. Moody, I believe that you said that the consortia will own the school at the end of the lease period. Correct?

MR. ROBERT MOODY: That is correct.

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MR. CHAIRMAN: Now in response to a question put by Mr. MacLeod, I think Mr. Nauss said that the province's security is the title to the school which is vested in the province. Now I don't see how you can have it both ways. One of the two of you has to be wrong. Who is right, who is wrong?

MR. ROBERT MOODY: I believe both answers are correct. It looks at it from a different time sequence, Mr. Chairman, and I will attempt to explain. Again, if I can come back, the ideal way to proceed in looking forward, I believe in future projects we will be able to do this, is that the financing agreement will be in place, in detail, at the time that the award is made. We have learned what we have to learn on terms of a template. We were breaking new ground both nationally and internationally in doing this. What has happened here is that there was tremendous pressure to get on with these new schools and the financing arrangements, we weren't satisfied that the arrangements that were on the table were in the best interests of the taxpayer at that time. However, we did feel that we could work toward resolution of that. So there could be a risk transfer, that we could get appropriate agreements and that at some appropriate point in time, we would be able to reach an operating lease for the Sydney school and the other schools that are underway. As myself and Mr. Gillis and others have mentioned this morning, we believe that time is very close to doing that.

So, to get back to your specific question, again I think both are true. If we are successful in meeting that operating lease in Sydney, then there will be a transfer of assets and done the appropriate way. But in the meantime, the students in the Sydney area have had full use of that wonderful facility. Every dollar has been accounted for. The dollars have been advanced on land that the province holds title to, so there hasn't been a risk of the asset but with an operating agreement, if that is, at the end of day, what is reached, in effect, there will be a transfer of the asset and that will be part and parcel, as it will be for new projects down the road.

[11:30 a.m.]

MR. CHAIRMAN: So you are suggesting then, at the end of the lease period, that the asset may well be transferred to the province?

MR. ROBERT MOODY: There are various options that are built in . . .

MR. CHAIRMAN: Is that an option?

MR. ROBERT MOODY: That would be one of the options that we would . . .

MR. CHAIRMAN: All right then, if that is an option, then clearly what you are entering into is a capital lease, not an operating lease and if it is a capital lease, then it must be shown as a debt owed by the province. If it is an operating lease, then the debt resides with the private sector.

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MR. ROBERT MOODY: If I may respond.

MR. CHAIRMAN: Yes, please.

MR. ROBERT MOODY: I may ask Mr. O'Connor to add in a bit. The way it would be structured would be in such a way that at the end of the day, the option to purchase on the part of the province would not be a bargain option. In other words, it would not be a capital lease. It would be done in such a way and structured in such a way, up front, on the day it was done, that, in fact, would satisfy the CICA guidelines as an operating lease. This is one of the particular points that is addressed because if you did structure it so that it was a bargain purchase at the end of the day, then in fact it could be a capital lease. So safeguards will be taken and in fact it is this issue, and a lot of other issues, that we want to be sure that we were doing it right to protect the taxpayer, Mr. Chairman, that it was done right so that the province would have options but there wouldn't be that type of risk.

MR. CHAIRMAN: So the province has loaned $14.8 million to the consortia because it was not able to arrange bank financing in the absence of a lease. The province, whenever a lease is arranged, will be paying a lease payment on a timely basis per month, every six months, that doesn't matter right now, and at the end of that period, after having loaned the $14.8 million interest free, having leased the building for perhaps 25 years, the province may then turn around and buy the building that it loaned the $14.8 million interest free for and paid lease payments on over a 25 year period at full market value?

MR. ROBERT MOODY: I will attempt to answer the question. I think your question really is getting around whether or not - from your earlier comments - a lease, if it comes to fruition, would be an operating lease or a capital lease, that is the terminology that you used. In essence, it is a bit of a judgment call as to how it is classified but in accounting literature there are some guidelines that are provided and most of industry and everybody in the world uses these guidelines. Essentially there are three things, and they all talk about risk transfer. If the term of the lease is less than 75 per cent of the economic life of the asset, that is one of the conditions. If the present value lease payments are less than 90 per cent of the fair market value, that is another one of the conditions and so long as there isn't a bargain purchase option.

The existence of an option at the end of the lease which will allow the province to buy the facility doesn't, by itself, mean you haven't had risk transfer. It is only if the price of that option was so low that it was obvious you were going to do it, that you wouldn't have risk transfer. I would suggest that these leases, when they are constructed, won't have bargain purchase options in them because the private sector would not want to negotiate that.

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MR. CHAIRMAN: One last question. We have a minute left for questioning this morning and then we have a couple of committee things we have to clean up after. With respect to the Sydney School, the consortium consists of IBM, MT&T, CBCL and another company. What is the other company, just the name of it?

MR. NAUSS: It is Joneljim Concrete Construction Ltd., IBM, MT&T, Connor Architects and Planners, CBCL. We can supply . . .

MR. CHAIRMAN: That is fine, you have answered that question for me. I don't understand why it is that MT&T and IBM, both of which I am sure have substantial credit ratings at the bank, can't arrange financing for a $14.8 million project in which they are major partners and must come to the taxpayer and ask the taxpayer to provide them with a $14.8 million interest free loan. Now would you please try to explain that to me?

MR. ROBERT MOODY: Mr. Chairman, I believe the issue is different than that one. The issue is not whether they can arrange financing, the issue is the Province of Nova Scotia wishes to ensure that when the lease arrangement is set in place for all these schools that they represent value for money, a good deal for the taxpayer. So it is really the province setting the terms and staying at the table to ensure that we get good value for money and not accepting just any proposal or any lease. As I mentioned, I believe we are very close on that score. So it really is a different issue.

MR. CHAIRMAN: Thank you, Mr. Moody, and I think we have different views as to which answer is correct.

I want to thank all of you for joining with us this morning. Our witnesses are free to leave. I would ask the committee members to wait for a few moments, we do have a couple of matters with which we want to deal.

MR. HOLM: Mr. Chairman, I very much appreciated the witnesses being present but we haven't covered really half of the waterfront yet, and I would like to move that this committee invite the witnesses, not necessarily all of them, but to ask the witnesses to return at a future day and I would even suggest next week or the following week would be most appropriate.

MR. CHAIRMAN: There is a motion on the floor. I would remind members that the House sits on Thursday, that will cause our meeting time to move up to 8:00 o'clock, from 8:00 a.m. until 10:00 a.m. We do have scheduled for next week an in camera briefing session respecting the Department of Health. If it is the committee's will to change the agenda, then the committee, of course, has the full right to do so.

There is a motion on the floor. Any discussion? We don't need a seconder.

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MR. CARRUTHERS: Mr. Chairman, I don't think with the few seconds left it is the time to reschedule our meetings. Let's discuss this issue at the next meeting, which I think we have next week for a briefing session. We are over our time now and while I am not necessarily against having another meeting with these people I just don't think that we should snap to a decision as to when it is going to be. Let's discuss this next week, we will have some more time to do it. Mr. Holm, I am sure, can wait a week to decide this issue of scheduling. It is not that I am opposed to setting it down it is just that this isn't the time, we have only a couple of seconds left.

MR. MACLEOD: Mr. Chairman, for what it is worth, Mr. Holm did say next week or the following week. I believe that the issues that are being discussed here are far too important to be shut down just because the time clock happens to be running out and that indeed we should be discussing it and making sure that these people are invited back so that we can get to the bottom of this issue.

MR. CHAIRMAN: The motion provides for an option of next week or the following week, that is correct. Are you ready for the question?

MR. CARRUTHERS: Would a motion to table be in order, Mr. Chairman?

MR. CHAIRMAN: A motion to table is always in order.

MR. CARRUTHERS: Then I would make the motion to table this motion until next week.

MR. CHAIRMAN: You have heard the motion to table. Would all those in favour of that motion please say Aye. Contrary minded, Nay.

The motion is carried.

Now, we do have one other matter. You will all recall that two weeks ago when Ms. Gordon and others appeared on behalf of the Gaming Commission, a request was made for a variety of material including what is commonly known as the McGhie Report. We this morning received a letter from Ms. Gordon in which she declines to provide that information to the committee. Now, the committee has a choice, it can either simply accept her explanation - as I see it there are three choices and there may be more - it can order that the report be provided to the committee or it may order that the report be provided to committee members in confidence. Now, those are the three options that I see and there may be others. As Chairman I would recommend that we deal with this issue.

MR. HOLM: Mr. Chairman, the commitment was made to provide that when the negotiations have been completed and they have been completed. I would move that we, in fact, order Ms. Gordon to provide the information that she agreed to provide to this

[Page 38]

committee. It makes arguments in her letter about how it is going to be interfering with the competitive nature of the gaming operation. To the best of my knowledge, there is a monopoly in the Province of Nova Scotia. The corporation and the ITT Sheraton are the only permitted operators. The arguments do not hold water and I move that we order her to provide it by next week's meeting.

MR. CHAIRMAN: You have heard the motion. Is there discussion on the motion?

MR. CARRUTHERS: Mr. Chairman, we just got this letter now, I haven't had a chance to really absorb it . . .

MR. CHAIRMAN: I should say it was requested a week ago.

MR. CARRUTHERS: Yes, I am not being critical of us. We were right on there, Mr. Chairman. This letter did arrive on my desk just this morning. I want to compare it to the request. I see in the third paragraph, there is an undertaking that once negotiations are completed, they will make the report public. The whole principle of this committee is to review the accounts and to review things that have taken place. So, I am a little reticent in terms of either voting for or against this motion. It is going to sound a bit like a broken record, but I would like to table this motion until next meeting when we have a chance to absorb the letter and deal with it. That would be my motion.

MR. CHAIRMAN: Mr. Holm, on the motion to table.

MR. HOLM: Mr. Chairman, first of all, I don't think that any of these discussions about either of these two matters should be made at an in camera session. I think that the decisions, when they are referred back, should be made in a public session.

MR. CHAIRMAN: I, in fact, have given much thought to this. We have taken a decision to organize our long-term agenda at in camera meetings which has provided us, I think, a good opportunity to arrange various agendas which have clearly been in the public interests which we serve.

With respect to this matter, this is a matter which was discussed in a public forum. There is a public record of this discussion. The request was made in this public forum. A commitment, some of us would believe, was offered in that public forum and it would be my intention to ensure that what was raised in a public forum would be dealt with in a public forum, and that we would deal with this letter at our next public meeting.

MR. CARRUTHERS: I change my motion to the effect that it be brought forward at the next public meeting.

MR. CHAIRMAN: Are you withdrawing your motion to table?

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MR. CARRUTHERS: No, just to table it at the next public meeting. I don't have any problem with your comments. I agree with them.

MR. HOLM: Just before the vote on that, and I suspect the motion to table will win the day.

MR. CHAIRMAN: I think there would probably be pretty low risk in that bet.

MR. HOLM: Yes, indeed. Just one other question, when you were outlining the options, if Ms. Gordon fails to honour an order given by this committee, do we then have the authority to order that she be brought before the Bar of the House?

MR. CHAIRMAN: I will undertake to discuss with the Clerk of the House what options are available to the committee.

MR. CARRUTHERS: Mr. Chairman, could you perhaps call our vice-chairman and tell her what the answer to that question is?

MR. CHAIRMAN: I always ensure that all members are advised as soon as possible with respect to any information that comes before us. Rest assured that I will continue that practice. There is a motion on the floor. Are you ready for the question?

Would all those in favour of tabling this letter until the next public session please say Aye. Contrary minded, Nay.

The motion is carried.

We stand adjourned.

[The committee adjourned at 11:44 a.m.]