HALIFAX, WEDNESDAY, NOVEMBER 12, 2003
STANDING COMMITTEE ON PUBLIC ACCOUNTS
9:00 A.M.
CHAIRMAN
Mr. Graham Steele
VICE-CHAIRMAN
Mr. James DeWolfe
MR. CHAIRMAN: I will call the Public Accounts Committee to order. My name is Graham Steele. I am the MLA for Halifax Fairview and the Chairman of the committee. I am very pleased this morning that we have guests from the Department of Transportation and Public Works to deal with the RIM program.
I would like to first start by recognizing Mr. Martin Delaney, Executive Director of Highway Operations, and ask him to introduce the other guests. Mr. Delaney.
MR. MARTIN DELANEY: Good morning. With me today is the Director of Finance for Transportation and Public Works, Greg Penny sitting on my left, and also Bruce Fitzner who is the Director of Highway Operations. We provided some information, which I believe you all have a copy of, which gives a general review of our RIM program and beyond that we are certainly open to any questions that you have.
MR. CHAIRMAN: Thank you, Mr. Delaney. Before I ask you to give an opening statement, if you wish, I would like the members of the committee to introduce themselves, starting at the far end with Mr. Epstein.
[The committee members introduced themselves.]
MR. CHAIRMAN: Mr. Delaney, I would now like to invite you to give an opening statement, if you wish. You can aim for 10 to 12 minutes and at 15 minutes we will turn the floor over to the members for questioning.
1
MR. DELANEY: Good morning. I didn't prepare an opening address as such. We had provided some information with a general summary of what the RIM program is, how it started and the services that it provides. As a general rule, the department sees the RIM program as a very positive program that was developed - I guess we are in the fourth year of the program now - that provides needed funding to provide maintenance to our rural highway system. Generally, those projects carried out through RIM are contracted out. Contracts are broken up by area so we essentially have somewhere in the range of 65 contracts province-wide. They tend to be smaller contracts than our typical construction contracts and tend to attract interest from our normal road builder group but also smaller contractors that are in the local areas in the province, including guard rail installers and erectors, contractors who do crushing and gravelling, and certainly some smaller paving contractors as well.
We certainly see RIM as more of a bridge between the type of maintenance work we can provide with our own forces and our limited maintenance dollars and the type of major reconstruction/repaving that is carried out through our normal capital program. As I said, in our view, it has been a very successful program and perhaps I will just stop there and turn the mic back to the floor for any questions.
MR. CHAIRMAN: Thank you very much, Mr. Delaney. The first 20 minutes belong to the NDP caucus.
The honourable member for Halifax Chebucto.
MR. HOWARD EPSTEIN: Thank you, Mr. Chairman, and thank you very much Mr. Delaney. I certainly took the opportunity to read the materials that you submitted and they were helpful. I think I do have some understanding now of how the RIM program works but there are still a couple of points on which I am perhaps not clear. Can we start with an examination of the dollars? I just heard you use the phrase, our normal capital, for this kind of project and yet in some of the documentation you very clearly make the point that your allocation, as a percentage of the provincial budget, has taken a steep decline from say, I think you identified the early 1980s through to the early 1990s as a typical comparison time and you pointed out that it had gone from 10 per cent of the provincial budget down to about 5 per cent of the provincial budget. The dollars for RIM, which were identified over the four or five years were at about the $10 million level each year. So it's not clear to me just what base it is that RIM is on top of. Is there a competitor? How is it that you are seeing what you called your normal capital? Is there a now a normal base level that you see as being the dollars allocated?
MR. DELANEY: I guess if I could answer that on a couple of fronts. You had mentioned normal capital first.
MR. EPSTEIN: It was your phrase so I picked up on it.
MR. DELANEY: I guess while that wasn't what we are here to discuss today precisely, the budgets for my department, as you said, had generally been in decline from the mid-1980s perhaps into the 1990s. That included the very significant decline in the capital allotment as such to the extent that our capital allotment back around 1999 was somewhere in the vicinity of $50 million. I can get the exact amount. Capital budget since has increased by about $60 million over the last four budget cycles.
MR. EPSTEIN: That's a cumulative number?
MR. DELANEY: That's cumulative, yes, to a figure last year of - again rounding - about $107 million. So it had increased $60 million up to an amount of $107 million. I can't predict what next year will bring but that is where we are now. So the capital funding has started to be reinvested to some extent.
MR. EPSTEIN: So is the picture then at the same time as you are in your department for this program, not for RIM but in the department for your normal work, getting additional dollars, you are still getting the RIM money on top of that. Is that the picture you are offering us?
MR. DELANEY: That is correct, sir.
MR. EPSTEIN: So you are going back toward the level that you had previously been at.
MR. DELANEY: In your document, we also referred to the 10-year needs study which indicated a need of essentially capital dollars of $343 million a year over 10 years. We are not there but we are certainly moving in a positive direction.
MR. EPSTEIN: Thank you, that helps clarify this particular point, but there is also an associated point which has to do with the current revenue and expenditure crunch that the government is going through. Of course it has been publicly stated by the Minister of Finance that they are going to be looking to all government departments to effect savings to try to balance the budget this year. I am wondering what it is that the impact of this is going to be on your branch. Could you tell us, please?
MR. DELANEY: For this fiscal year, per se?
MR. EPSTEIN: Yes, until the end of the 2003-04 fiscal year.
MR. DELANEY: I guess what I can tell you is that we have submitted a couple of different option scenarios, through our deputy, to Treasury and Policy Board for consideration. I don't know that they've been completely adopted yet.
MR. EPSTEIN: The minister, Mr. Russell, said the other day that he expected his department would have to take about $3 million out of its budget. Is the RIM program going to be affected by that?
MR. DELANEY: The RIM program won't be affected by that.
MR. EPSTEIN: Would the RIM program be expected to give up 100 per cent of the $3 million?
MR. DELANEY: The RIM program, essentially, by the time we get into October, is pretty well all committed or spent. It's pretty well all contract work. Typical completion dates would be the end of October. There may be a couple of contracts still working, but the bulk of the pavement patching, for example, or asphalt-spreader patching makes up some 42 per cent of the RIM program. We try to have that all completed by the end of June. Certainly some is beyond that, but, largely, that program is done. Ditching, as well, we try to have completed before the end of September, so that's largely all done. A lot of the gravelling took place earlier in the year. There's probably a couple of contracts now completing gravelling. But generally the project has been completed.
MR. EPSTEIN: That's a very good point, Mr. Delaney. Could you help us understand, potentially, where, inside your department as a whole, there might be savings in the magnitude of $3 million between now and the Spring?
MR. DELANEY: Where we found some money to meet the requirement of the 2.5 per cent rollback was in various factors. One was through care, in terms of replacing vacancies. We have a large staff and we have a normal attrition rate, so we're looking very closely at any vacancy that occurs in determining whether or not we can defer filling it until April, for example. We've looked at some projects that have been funded through our maintenance improvements budgets that we really cancelled for go-ahead for this year, if you will.
MR. EPSTEIN: I'm sorry, could you just tell me what a maintenance improvement project or budget is?
MR. DELANEY: Yes I can. Essentially, it's part of our budget that relates to normally contracted activities but that are below the TCA threshold, if you will. The biggest portion of that budget would be taken up by surface treatments, micro-seal, chip-seal and what have you, some others on minor bridge maintenance, for example, and small paving jobs below the $500,000 threshold.
MR. EPSTEIN: And was there another category that you were thinking about for possible savings? I thought you indicated that there might be as many as three categories. You mentioned staffing and now maintenance improvement.
MR. DELANEY: Essentially our administrative budget, both in the field and in head office - we've looked at any places, we were looking at things like travel, for example, just general consulting and operational costs where we can nip and tuck, here and there, to make up the 2.5 per cent.
MR. EPSTEIN: It sounds like it's going to be hard to find $3 million between now and the Spring.
MR. DELANEY: Any change in funding can be challenging, but we've certainly done it before and we will do it again.
MR. EPSTEIN: Can I ask you something specific about the RIM program? In the 10-year needs document, part of the identified infrastructure deficit had to do with the almost 4,000 bridges that exist as part of the transportation system for our roads in Nova Scotia. Unless I missed it, it doesn't look to me as if bridges are part of RIM. Am I misunderstanding it? Are bridges part of RIM? When I read it, it looked as if all of the money was allocated for the roads portion of the system, strictly taken, the roads portion rather than the bridges.
MR. DELANEY: That's correct. RIM does not cover bridges.
MR. EPSTEIN: Can you tell me why that is? I was a little puzzled because it seemed
clear that the 10-year needs document - which seemed to have done a fairly thorough and, in the result, a very expensive look at what it is that the transportation system needs - clearly identified the bridges as part of what needs maintaining but has been deferred and, to use a harder word, I suppose, neglected over the years. When a supplementary program came along, I would have thought that it might also extend to the bridges. Is there a particular reason why it wasn't included in RIM?
[9:15 a.m.]
MR. DELANEY: My recollection, when RIM was first introduced, it was introduced specifically to deal with road-related deficiencies, with specific reference to asphalt surface, gravel, brush-cutting and ditching. I believe we expanded it slightly to add a category for guardrails in succeeding years. Certainly, we haven't expanded it to include bridges, but we do deal with bridges through other programs. The most notable recent one would be the truss bridge replacement program.
MR. EPSTEIN: Well, we certainly had a number of examples of bridges that have outright collapsed, unfortunately, in different parts of the province. This has occurred, and I find it a little worrying. Can you tell me, is repair work on bridges or replacement work, if it comes to that, done by contract with external contractors by way of tender, or is it done by departmental workers?
MR. DELANEY: It's done by a combination of both. I would say a lot of the timber bridge repair, for example, is done in-house. A good deal of the work on the old steel truss bridges is done in-house by our own crews. The concrete repair work for major bridges tends, largely, to be done by contract.
MR. EPSTEIN: Is there a dividing line between the type of work that's done in-house by the department and its own staff and work that's contracted out?
MR. DELANEY: There are probably various dividing lines, depending on the type of activity we're carrying out. I mentioned, for example, the old steel trusses that we continue to maintain. We have in-house expertise and three steel crews that largely take care of those bridges. Quite frankly, we feel that that expertise resides probably at a higher extent within the department than in the private sector, for dealing with that particular type of bridge. Again on the timber bridges, much of the work on that can be accommodated by our own steel crews.
MR. EPSTEIN: I didn't actually mean my question to be confined only to bridges. I think I meant also with respect to other road work.
MR. DELANEY: Generally it depends more on the extent and the specialty. Essentially, at the end, it comes down to cost and quality. So if by going to the private sector we can carry out a project at a more attractive cost structure than doing it in-house, then we obviously will. I guess the easiest way to explain that is by talking to examples. For example, asphalt work can generally be carried out cheaper by the private sector. They tend to have the asphalt plants, they've got the equipment and what have you to do that. Whereas in the steel bridge work, we can do it ourselves. A lot of the day-to-day work that involves responding to emergencies or dealing with a sign that may have fallen down or whatever, it's probably more cost effective to do that with your own staff than to tender it out.
But there isn't a line that you can really draw, except to examine each activity and determine which activity is more cost effectively carried out in-house or with external resources. This is the type of thing that we've probably done for years.
MR. EPSTEIN: There was one other point I wanted to ask you about. It has to do with the nature of establishing priorities under RIM. My understanding from your material is that the program, as a whole, gets approved by the department, including the minister, in February or March each year, that is the target. Once that occurs then the tendering process takes place. But I'm wondering about how priorities are set and when I read the material, if refers to public input, and it refers to department officials expressing their opinions, and it refers to local elected officials expressing their opinions and these are very general statements. What we are told is that in the end the minister sets the priorities and as we also know, approves the whole program, apparently, at the beginning of the fiscal and construction year. What I haven't seen anywhere is the actual list of priorities. Is that in the material? Have I
missed it? You must have some kinds of lists of priorities, either by county or by area of the province or an overall list. I'm assuming such lists exist, so I will just ask you in a very straightforward fashion whether such lists of priorities do exist for RIM?
MR. DELANEY: I have never seen lists of priorities specifically for RIM, except what is submitted from the various districts for the program. Generally the minister and senior staff more or less approve the percentage of asphalt, for example, so to try to focus the overall program toward asphalt patching versus gravel, versus shoulder what have you. So we set those limits and we ask the districts to submit projects with estimates that will cover up to those amounts of dollars.
When you see the reference to consulting with the public or whatever, we ask our area managers and our operation supervisors as they go through their normal duties to obviously do road inspections to determine what the priorities are. We asked our area managers and district directors to, where possible, meet with municipal councils to hear their input as such. We encourage area managers to talk to their MLAs just to get their input, not specifically on which projects should be on the RIM program but which projects are important in the local area and then the projects are submitted, as such.
To be perfectly honest, when they do come into head office, do I look at each and every project? Absolutely not, there are just too many. This tends to be many, many small roads here and there and so we generally rely on district staff to set the priorities and we ask them to consult as broadly as they can in doing so.
MR. EPSTEIN: When you ask your district staff to offer input into the priority-setting process, does that include both the 200-Series and 300-Series roads? Are they asked to categorize them separately by 200-Series and 300-Series roads?
MR. DELANEY: The RIM program applies to all roads that aren't 100-Series Highways, so yes, they apply to trunks, routes and local roads.
MR. EPSTEIN: But I'm asking do you ask them to classify them as to priority, separately, by 200-Series or 300-Series, for the combined, that's what I'm asking.
MR. DELANEY: For the $10 million RIM program we really rely on the districts to bring forward projects that meet the overall transportation needs in their area best.
MR. EPSTEIN: So it is a combined list, not a separated list?
MR. DELANEY: It's not separated by routes or trunks.
MR. EPSTEIN: What criteria do you ask your district managers to apply, or is it left to their own judgment?
MR. DELANEY: I will pretty well leave that to their own judgment. They certainly know their roads better than I would, or that anyone else would, so we leave the actual selection of candidates to their judgment.
MR. EPSTEIN: Would it be a combination of general deterioration, that is the physical state of the road, plus perhaps a frequency of use?
MR. DELANEY: It may be helpful for me to speak to how we set out capital priorities versus the RIM program. The RIM program obviously catches a lot of areas that
our normal maintenance can't or that our major capital can't. When we do our capital priorities for repaving or for major bridge replacement repair and what have you, then we do a fairly extensive review of the roads in the paving, for example, that you referred to, we ask the districts to submit a list of roads for consideration. We then have our ARAN vehicle to drive over each road and it not only provides photographs but roughness and an assessment of the road surface . . .
MR. EPSTEIN: I'm sorry, what vehicle did you say?
MR. DELANEY: It is an ARAN vehicle.
MR. CHAIRMAN: The time for the NDP caucus has expired. So, Mr. Epstein, I don't want you to extend this unduly but Mr. Delaney did you want to finish your answer or have you finished?
MR. DELANEY: I can finish up very quickly.
MR. CHAIRMAN: Yes, please do.
MR. DELANEY: Essentially, we do a fairly extensive review or a comparison of the various road sections and use that information to develop the capital program. On the RIM program, it tends to be more local, dealing with local issues that have to be taken care of so we generally rely on district staff.
MR. CHAIRMAN: Thank you very much. The next 20 minutes, from 9:27 a.m. belong to the Liberal caucus.
The honourable member for Halifax Clayton Park.
MS. DIANA WHALEN: I would like to ask a couple of questions relating again to the 2.5 per cent rollback that you referred to. I wanted to put it in context, if you could, against your total budget, because I assume when you say the 2.5 per cent, that's out of the Department of Transportation in total? I guess first of all we'll just clarify, with the RIM program, are there any cuts expected to RIM?
MR. DELANEY: None to RIM.
MS. WHALEN: None to RIM, that's what I thought you said. So the total budget, when I'm looking in the material that you've given us, do you consider it, $246.6 million, that's the net.
MR. DELANEY: That's correct.
MS. WHALEN: That would be the figure we would use? I see there is a gross, but we'll go with that. So the 2.5 per cent you were referring to was the $3 million, would it not be more than $3 million if we're looking at 2.5 per cent?
MR. DELANEY: I didn't refer to a specific figure and perhaps I can defer to Greg for the figure.
MS. WHALEN: I heard the $3 million.
MR. CHAIRMAN: Mr. Penny.
MR. GREG PENNY: What happened was, we experienced some storms this year, March 31st and as well as Hurricane Juan, that had a significant impact on our expenditures this year. So we absorbed the cost of those two storms in our budget and then we did take about a $3.5 million in expenditure reductions after we absorbed those two storms.
MS. WHALEN: So just as a result, as a kind of emergency repairs, you had to redirect $3.5 million from your regular plan?
MR. PENNY: We absorbed the financial impact for those two storms, so we did not actually take, I guess, a full 2.5 per cent reduction of our budget from the $246 million because of the impact of those two storms.
MS. WHALEN: So moving forward, right now, because of the shortfall in government funding and the necessity of asking every department to make cutbacks, how much are you looking at cutting back now to adjust for that?
MR. PENNY: Well, the first round, the initial 2 per cent, we took about a $3.5 million reduction. That's in total in the department. Then there was about an additional $1 million in the additional 0.5 per cent we were asked to identify about a week ago.
MS. WHALEN: Can you provide some more detail and I know you talked a bit generally about hiring freezes, but can you talk some about the actual program? Our concern is roads and road safety and road maintenance. Are there impacts on those areas that you can talk about?
MR. PENNY: A lot of the reductions came, as Mr. Delaney said, in administrative, in travel and the delaying in filling of vacancies and there was a certain amount that was deferred, projects under maintenance improvement program, I believe it was about $2.5 million or $2.6 million.
MS. WHALEN: Those were the smaller projects under $500,000?
MR. PENNY: Yes.
MS. WHALEN: Can you tell me, will there be any impact on the capital district transportation authority as a result of the cutbacks?
MR. CHAIRMAN: Mr. Delaney.
MR. DELANEY: I don't anticipate that the cutbacks will have any impact on that issue at all.
MS. WHALEN: How much money is currently allocated for that initiative?
MR. DELANEY: Within our budget, for this year I don't believe there is any money allocated for that initiative.
MS. WHALEN: No dollar value at the moment. So, going back to our rural roads. If you're cutting a fair amount out of the smaller projects, which you referred to as the maintenance improvement budget, those projects, I think, would have a major impact on the 200-Series and 300-Series roads. Am I right in assuming that, because they're smaller projects like patching and minor repairs?
[9:30 a.m.]
MR. DELANEY: Certainly, any reduction has an impact. I can't quantify it beyond that.
MS. WHALEN: Maybe I could ask, what percentage of that maintenance improvement budget is spent on 100-Series Highways or allocated for 100-Series Highways?
MR. DELANEY: None.
MS. WHALEN: None?
MR. DELANEY: Oh, I'm sorry, you're talking about maintenance improvements, I was back on RIM.
MS. WHALEN: RIM is not, I know.
MR. DELANEY: I don't have that percentage here. I could get that for you.
MS. WHALEN: Yes, we would like that, if we could have that tabled when it's available.
MR. DELANEY: Okay.
MS. WHALEN: That would be very useful. Thank you. So going back to that, you can't say how much of that budget is directed specifically to the rural roads, but just to go back to the RIM project itself. There was a promise made in the blue book that the amount would be increased or doubled, I gather over the term of this government. Can you comment on any plans that are in place for budgeting to increase that amount?
MR. DELANEY: Budgeting and the amount of budget we get is primarily a central government or Department of Finance initiative and responsibility. We're certainly looking forward to additional funding but we'll have to wait and see the budget numbers to know what they are.
MS. WHALEN: So there was no discussion as yet as to how that would be allocated?
MR. DELANEY: There certainly have been discussions and we discuss financing and budgets all the time, but I really don't know how it will be rolled in, for example, or over how many years. That's not a decision that our department will take.
MS. WHALEN: Have you in previous years requested more money on this RIM program, given the severity of the needs in the rural areas?
MR. DELANEY: I guess it is fair to say that we've requested more money for all our various funding areas, including capital, RIM or normal operational accounts over the years.
MS. WHALEN: It just strikes me that $10 million is not very much when you're talking about road projects, even patching and gravelling, the types that are covered by this. Yet, can you comment on the increases that you've been feeling and I know in the few years the cost of road work has really escalated but can you comment on the impact that's had on the work you're able to accomplish in a given year?
MR. DELANEY: First of all, relative to RIM, the $10 million certainly won't solve all the problems but it was incremental money, so it was very important to the road system as such. Our experience with prices on RIM is that they've held pretty stable over the first four years and some categories have dropped slightly as contractors became more familiar with the type of work that is being provided. In terms of our overall cost structure either with
our own staff or with our major contracted work, obviously inflation has eroded the dollar's impact over the years.
MS. WHALEN: With the sort of projects we're talking about with RIM, can you tell me what the average price would be on the contracts that are let, just to give us a relative sense of the magnitude of each contract? Perhaps it is in that briefing.
MR. DELANEY: This year we awarded 65 contracts for RIM. There were 18 successful bidders, obviously, a lot more bidders than that but they have been taken by 18 bidders. The average amount of the tenders is for $141,000.
MS. WHALEN: That's actually fairly sizable, $141,000. That's quite a big project I think, is it not?
MR. DELANEY: In terms of the work that we carry out, it's not a really large contract, like on the capital side a big contract would be Highway No. 101, the concrete section would probably be $8.5 million. The Margaree Harbour Bridge was $10 million so . . .
MS. WHALEN: So anything in this category is fairly minor?
MR. DELANEY: It is small, relative to that but still a significant amount of dollars, as such.
MS. WHALEN: Just to talk about the successful bidders that you have had, there are 18 successful bidders that you mentioned. How many of those would be Nova Scotia companies?
MR. DELANEY: I believe they are all Nova Scotia companies.
MS. WHALEN: One of the objectives of RIM, as I understood when it was first established, was to make available contracts to small contractors, maybe local contractors. Of the 18, are some of them very local, small contractors? Can you say? To take the emphasis away from the large contractors that have the bulk of government business.
MR. DELANEY: There certainly are a number of smaller contractors and the types that those would be are local paving contractors that typically don't participate in our road paving program; a couple of guardrail erection companies that would normally work as subcontractors on the major work; and beyond that, some contractors who have crushing ability or some equipment they can provide for ditching. So, there has been a smattering between the regular road contractors and the local contractors who have also picked up some. The smallest contract, by the way, was about $19,000, so they vary up and down.
MS. WHALEN: In terms of that goal, of making work available to the small contractors in Nova Scotia, would you say that the RIM program has been successful?
MR. DELANEY: I would and I'm not sure the goal was so much extra work for a certain class of contractor but to provide an additional competitive situation, if you will, where the local contractors are in a position where they could compete against the big contractors, because they would have a lot of advantages, just due to location and what have you and where they couldn't compete perhaps on a $1.5 million or $2 million job but on $150,000 or $200,000 job, they may very well be able to compete.
MS. WHALEN: So you would categorize it as working in that regard?
MR. DELANEY: Yes.
MS. WHALEN: I will turn the floor over to Russell.
MR. CHAIRMAN: The member for Cape Breton West.
MR. RUSSELL MACKINNON: Mr. Chairman, my first question to Mr. Delaney is, why hasn't the department considered contracting in as much as it contracts out, affording the existing staff an opportunity to tender on some of these projects?
MR. DELANEY: That is certainly not an approach that we have taken to date. I guess your question is, why? For most of this work - bearing in mind that 40 per cent of it is asphalt and a good portion of it is gravel - the department simply doesn't have the equipment and infrastructure to compete in those. In order to do so, we would be into buying asphalt plants or gravel crushers and what have you.
MR. MACKINNON: I won't go too far back into history because we did have an asphalt plant and the province made a rather terrible decision on that under the administration of a previous Tory Government. You indicated a little earlier that all the successful bidders were Nova Scotia firms. Do you still hold true to that?
MR. DELANEY: To the best of my knowledge, that would be correct.
MR. MACKINNON: Is Miller Paving a Nova Scotia firm?
MR. DELANEY: I believe it certainly worked in Nova Scotia for a number of years, it has offices, as well, across Canada.
MR. MACKINNON: But you don't know if it's Nova Scotia based or not and you are awarding contracts to it?
MR. DELANEY: To be perfectly frank, I don't recall that they've done any RIM contracts.
MR. MACKINNON: Maybe I'm mistaken but I have seen quite a few of their trucks floating through my constituency over the past year and they all have New Brunswick license plates.
MR. DELANEY: If I could answer that, Miller certainly does a lot of work for the department under what I call our capital program . . .
MR. MACKINNON: I realize that, I'm talking about RIM projects.
MR. DELANEY: I'm not aware - and Bruce is just flipping through the RIM projects - that they have been successful on any RIM projects to date.
MR. MACKINNON: You may want to review those comments because I can assure you that I have witnessed it myself, in my own constituency. The whole focus of the RIM program was, as I understand, to help mitigate some of the infrastructure problems in rural Nova Scotia, it was to help a lot of the small local contractors that were shut out of contracts because of the larger contractors, such as Dexters and Ocean Paving and what have you, even Miller. Yet it appears that some of these larger firms are still gobbling up the lion's share of the dollars. Am I correct in that assumption?
MR. DELANEY: Certainly some of the established contractors bid RIM and many of them have picked up tenders, there's no question about that. We have checked the list and Miller Paving doesn't show up as a successful contractor on any of our RIM tenders.
MR. MACKINNON: That's for this year.
MR. DELANEY: That's correct.
MR. MACKINNON: Did it last year?
MR. DELANEY: Not that I'm aware of. Let me be clear, I'm not saying that Miller doesn't carry out work for the department. They're probably the primary contractor that provides micro-surfacing on 100-Series Highways and they also provide chip-seal surface treatments. So they certainly carry out a fair amount of work in Nova Scotia. I'm just indicating that under the RIM program, I'm not aware that they've participated in that.
MR. MACKINNON: I may be wrong, but there's one section of road, and I believe Mr. Fitzner would be familiar with the Mira Gut area, near the Mira Gut bridge, they replaced, last year, I would say about 1,400 feet of guardrail, just in that one section alone.
That having been said, I don't want the people of Nova Scotia to think that we're talking about a magically new envelope of money here. What has, in reality, happened is the department has transferred money out of its maintenance budget into the RIM budget, another envelope. It's from one envelope in the department to another. In other words, they're contracting out because they can get better value for dollar. That's essentially the thrust of it, am I correct?
MR. DELANEY: That's not correct, sir.
MR. MACKINNON: So you're saying that you're not getting better value by doing that? Or, there isn't a transfer of money from the maintenance budget over into that envelope?
MR. DELANEY: The statement I made was that the RIM funding was incremental funding, so it was funding over and above our typical operational funding, if you will.
MR. MACKINNON: So you're saying there's no reduction in the maintenance budget within the department because of RIM?
MR. DELANEY: That's correct.
MR. MACKINNON: Some in the southwestern part of the province seem to suggest that they have less of a maintenance budget since the RIM Program commenced in Lunenburg, and I will table this, Mr. Chairman, it's an article in the local paper, a local official within the department has indicated a 30 per cent reduction in budget since 1994. They seem to focus in and around the RIM program. I will table that for Mr. Delaney.
I want to go to the next issue, and that is with regard to the number of claims that have been made against the department for damages to vehicles. It looks like it's predominantly rural Nova Scotia. You're probably familiar with that, the FOIPOP that I received from your department about a month ago. It indicates that the number of claims for damages to vehicles has increased quite substantially, and at one point it has more than doubled in the last five years. I'm curious as to whether in fact the RIM program is, in effect, a patchwork program, itself, to cover up for the fact that the department is not addressing the real needs of rural roads in Nova Scotia? It's not keeping up with the demand for the maintenance and repaving and upgrading of roads that is seriously needed. This is evidence to that effect.
[9:45 a.m.]
MR. DELANEY: I guess I can only comment that first of all, I'm not familiar with the FOIPOP request, so I'm not in a position to speak to that specifically. If you're . . .
MR. MACKINNON: Well, are you aware of the fact that the number of claims against the department has almost doubled in the last five years?
MR. DELANEY: Certainly claims have increased.
MR. MACKINNON: I'm glad to hear you say that because in the House, in Question Period, several weeks ago, the minister indicated that they haven't. So you may want to talk to the minister on that issue.
MR. DELANEY: If I can finish my statement, your other question was whether the RIM program was keeping up or if the state of the highways was being maintained by the RIM program and by other programs the department has. Obviously, if you refer back to the 10-year needs study, it suggests a requirement for $343 million in capital a year. We know the funding that we currently receive, operationally in capital, isn't dealing with all the issues in terms of condition of our roadways.
MR. MACKINNON: The answer is no.
MR. DELANEY: It's certainly moving in a positive direction, but can I say that our roads will improve year after year at this rate of funding, no.
MR. MACKINNON: So the answer is no.
MR. DELANEY: That's correct.
MR. CHAIRMAN: Thank you. That concludes the time for the Liberal caucus. The next 20 minutes belongs to the Conservative caucus.
The member for Pictou East.
MR. JAMES DEWOLFE: Good morning, gentlemen. Mr. Delaney, I believe I would like to follow along from the part of the questioning that my predecessor just left. Mr. MacKinnon sort of indicated that he feels there is a realignment of dollars, when RIM was started, creating a new program from within the box. In some ways that may be true. I would just like to know, from when he was in government, back in 1998-99, how many dollars were in that so-called envelope, and how many dollars are in that envelope this budget year?
MR. DELANEY: Our operational budget, as such, in 1999-2000 was $113 million. In 2003-04, it's essentially $130 million. Those figures include the RIM amount of $10 million. The 2003-04 includes the RIM amount of $10 million.
MR. DEWOLFE: So there's a great deal more money in the envelope, monies were going in each year as we increased the budgets for Transportation and that tells the story. Rural Impact Mitigation was started in recognition of our rural roads being ignored for too long. I live, essentially, in a rural community, a bedroom community. We have far too many roads in my constituency of Pictou East. It's an incredible amount. But at the same token, over the past two fiscal years over $900,000 was spent from RIM in Pictou East. I can tell you that my constituents see quite an improvement in our roads over these last few years since our government took office. How much money is spent on RIM each year, just as a review? I think you mentioned it before, is it $10 million?
MR. DELANEY: That's correct.
MR. DEWOLFE: There is $10 million spent each year across the province. For the most part for this budget year, that money has already been spent?
MR. DELANEY: That's correct.
MR. DEWOLFE: So there is no fear of losing anything that we've gained there?
MR. DELANEY: That's correct.
MR. DEWOLFE: Just, again, with regard to bridges, if there is asphalt going across the bridge and there are holes and there is patching going on, RIM would cover that type of repair over a bridge if it was asphalt?
MR. DELANEY: It could cover that, yes.
MR. DEWOLFE: Not the actual bridge construction. But overall, my opinion is that RIM has been a success story in our province. I believe that we're getting very good value for our dollars. Now, your finance manager, Mr. Penny, probably could verify that by looking at some of the contracts and so on and comparing to the costs for doing in-house work sometimes with the same costs under the RIM. Would it be fair to say that we're getting better value for the money overall with the RIM than doing some of these jobs in-house?
MR. DELANEY: Perhaps if I could speak to that. We do carry out comparisons just to make sure that we are getting value for the dollar as such. Generally speaking, with RIM we're seeing savings at least 20 per cent below what we can provide with our own staff, as such.
MR. DEWOLFE: That's considerable, 20 per cent.
MR. DELANEY: Yes.
MR. DEWOLFE: What criteria are used for allotting the RIM?
MR. DELANEY: For allocating the dollars for RIM, essentially, the allocation is based on inventory. So we take the total number of kilometres of non-100-Series road, if you will, in the province, use the amount of roads in each area manager's area, as such, and we apply a slight traffic factor to it, but then it is simply run through a calculation and the allocation to each area is based on that. So, it's essentially based on inventory with a slight adjustment for traffic.
MR. DEWOLFE: Essentially, a fair process from one area to another.
MR. DELANEY: Absolutely.
MR. DEWOLFE: Based somewhat on traffic.
MR. DELANEY: Largely just on the length of the road. But there is a slight adjustment for traffic volumes.
MR. DEWOLFE: One area that has always been a concern of mine and, quite frankly, I have never received, in my mind, a satisfactory answer for, and I'll back up just a little bit because I want to say, first of all, that we have quite an active truckers association in Pictou County, a vocal group, we hear from them quite often, and rightly so. They do have some concerns and I would too if I was a trucker and my rig was parked in my yard and I was seeing trucks from out of the area working in front of my property, along the highway for instance.
I never received a satisfactory answer as to why we couldn't incorporate some sort of formula, not necessarily the 80/20 but some sort of formula into the RIM work, which would allow for local truckers, through the truckers association to take part to some extent in the work that's being done under RIM at the rate that the contractor pays, to give them that option, if there are trucks available, that a percentage of local trucks could be used at the rate the contractor pays rather than bring in trucks from outside, for instance, Antigonish into Pictou County. Maybe you could answer that.
MR. DELANEY: Certainly to date the RIM program has not been subject to the 80/20 rule, so-called, and so the contractor is free to hire his trucks from wherever he wishes. We hadn't considered changing that for a number of reasons: (1) those contracts tend to be smaller; (2) generally any constraints you put on a contractor relative to where he hires his trucks or whatever have a cost in terms of the contract and we wanted it to be as cost effective as possible; and (3) even with the increase in our capital budget, quite frankly, on our capital projects we're having a good deal of trouble getting enough trucks to meet that need. So, to date, we hadn't seen a requirement or a reason to extend that 80/20 rule to cover
the RIM as well. That certainly is something that could be considered but to this date we haven't considered taking that move.
MR. DEWOLFE: Mr. Delaney, I'm not suggesting that that formula necessarily be the one adopted but I'm just suggesting that if you would undertake to look into the possibility of adopting some sort of a formula that would allow for local truckers to get involved in that. It would ease their minds a great deal, I'm sure in this particular area. Although we've done probably more road work in the past couple of years than we have in quite a few years that has probably generated a fair amount of work for the truckers, they still find themselves out of work and those rigs are pretty expensive to insure and to license and it must be disheartening to have them sitting around while other trucks from out of the area are going by and I can understand their concerns.
Having said that, I would like to move along. I would be remiss if I didn't say a few words about the opening of the Highway No. 104 truck stop. That's, in my mind, a success story for my constituency of Pictou East to have that. The truckers have requested that operation and it is right at the end of Cowan Street where you go into my constituency. It's about a mile from my constituency office, even, but that has been a success story. There are some 40 jobs in that area and I know the tourist associations have been asking for that and the long-haul truckers and the proof is in the pudding, you might say, that the government believes in investing in transportation infrastructure. I don't know how much will be spent on this type of thing in the future but I understand that there is another proposal for up near Springhill for doing such a project, some assistance to get another truck stop started, is that correct?
MR. DELANEY: That is correct, sir.
MR. DEWOLFE: That other area that I just want to touch on is this whole area of the gas tax to road construction and maintenance. Ever since I took this job, back a number of years ago now, we've talked in terms of the motive taxes that are collected in this province and go on to Ottawa, where this is going. I recall during the last campaign that the Liberals promised to dedicate all gas taxes to road construction/maintenance. I believe we do now allocate more money to the Department of Transportation and Public Works budget, I believe, we do now allocate more money than we take in, in tax revenue. Isn't that correct? To start with, how much money is collected each year, by Ottawa, for the so-called motive taxes?
[10:00 a.m.]
MR. DELANEY: Certainly, in the vicinity of $135 million is collected by Ottawa for motive fuel taxes. I believe this year, through our cost-sharing on 100-Series Highways, the province will receive back somewhere in the vicinity of $9.5 million under that program from the federal government.
The provincial gas tax is very . . .
MR. DEWOLFE: So we're getting much less than 10 per cent back, of what we pay in, on our motive taxes from Ottawa?
MR. DELANEY: I'm informed that the motive fuel tax in the province is in the vicinity of $254 million, and our budget this year for what we will spend on highways is about $258 million. That includes our capital and operational accounts.
MR. DEWOLFE: So the $9.5 million is what we get back from Ottawa?
MR. DELANEY: That's correct. The amount fluctuates year by year. It's gone lower than that, and . . .
MR. DEWOLFE: It's only $9.5 million because of the major road work that was taking place.
MR. DELANEY: That's correct.
MR. DEWOLFE: The cost-sharing on that. For instance, what has it been in the past, some of the other years, two years ago?
MR. DELANEY: I would have to get back to you on precise figures on that, but, certainly, as you move between programs, it has been reduced to the vicinity of $3.5 million. For precise figures, I would certainly be prepared to provide them, if you wish.
MR. DEWOLFE: Very interesting, some of these figures. We could ask our Liberal colleagues, maybe they should be spending their time trying to get their federal cousins to act in a more fair manner and provide a little more of that money back here, rather than to be (Interruptions) growling at what we're spending. I think we're doing a pretty good job.
Is Nova Scotia currently enrolled in any joint federal-provincial transportation funding agreement at this time?
MR. DELANEY: We're currently working on a SHIP agreement that was about a $34.5 million agreement to complete the newly-completed section of Highway No. 101 and to work on a section of Highway No. 125, from Balls Creek to Sydney River. That program will continue into the next two fiscal years. We've also had discussions with Ottawa on a strategic infrastructure fund for highways. We're getting pretty close to being in a position to sign an agreement for $60 million, that's $30 million federal and $30 million provincial, on portions of Highway No. 101 and Highway No. 104. There's a further strategic infrastructure fund from Ottawa that's being discussed at the moment, and we're not far enough into the discussion phase on that to give you much more detail at this moment.
MR. DEWOLFE: How does Nova Scotia compare with the other provinces as far as federal-provincial agreements go? I remember years ago we used to always have federal-provincial agreements for resources and federal-provincial agreements for transportation and so on. My concern is it seems that if Mr. Martin takes the reins in Ottawa, there's some thoughts of cutting back on dollars going to provinces from Ottawa, and that's a scary situation as far as I'm concerned for provinces such as Nova Scotia. How do we compare with other provinces?
MR. DELANEY: I certainly can't speak to programs other than road-related programs. On road-related programs, I think historically we've fared reasonably well. Certainly over recent years, we don't appear to have fared as well as our sister province of New Brunswick, for whatever reason. I don't have the figures for across Canada. It varies somewhat from jurisdiction to jurisdiction. New Brunswick, in recent years, is perhaps the biggest anomaly in terms of funding.
MR. DEWOLFE: Do you have any idea of the figures, just off the top of your head, what figures went to that province?
MR. DELANEY: There was a suggestion of a $400 million program to complete the TransCanada through New Brunswick. The length of time the monies will come forward over, I don't have the details for that.
MR. DEWOLFE: I think we have to pressure Ottawa to get a little more of our own money back to this province. Wouldn't you agree? (Interruptions)
Mr. Chairman, I realize my time is up.
MR. CHAIRMAN: That concludes that particular round of questioning. Mr. Delaney, we've been talking this morning about the RIM program among other things. Nobody has actually spelled out what it stands for, and I've seen two different versions of what it stands for. In the department's view, what does RIM stand for?
MR. DELANEY: The initial description that was given to us was Rural Impact Mitigation and that stood for about three years. Over the last year, I believe we've started calling it Road Improvement Money. (Laughter) Everyone seems to recognize that.
MR. CHAIRMAN: The next blocks will be 13 minutes each. I do want to recognize that the member for Dartmouth South-Portland Valley has taken the place formerly occupied by the member for Halifax Chebucto. Of course, the member for Dartmouth South-Portland Valley is a regular member of this committee. The next 13 minutes, from 10:08 a.m., belongs to the NDP caucus. Whom shall I recognize?
The member for Pictou West.
MR. CHARLES PARKER: Good morning, gentlemen, again. I've also heard RIM referred to as the Rural Infrastructure Money, is that another acronym for it? It has quite a few handles, doesn't it?
MR. DELANEY: I haven't heard that one, but it wouldn't surprise me.
MR. PARKER: I guess it's all the same in the end, isn't it? I am going to start off my questioning by saying you gentlemen certainly have a very challenging job trying to run a very large department, 23,000 kilometres of roads, I understand, throughout Nova Scotia and just not enough money to do everything that's required. Our infrastructure, over the years, has been deteriorating rather than improving. That's primarily from just not enough money to make ends meet to do what's necessary. I guess your 10-year plan has outlined what you really need to make it adequate, $3.4 billion over 10 years.
In many ways I guess your job is sort of like a fireman in that you run around trying to put fires out, trying to do what may be the worst roads or the worst projects or the emergency projects or whatever the funding allows, but not really being able to do what you know is truly necessary. As a rural MLA, coming from Pictou County, my job is challenging too. I'm hearing every day from residents who are not very happy about their rural roads and the cost to them for car repairs, ball joints or front-end repairs of some type, tires or rims, and on it goes. Daily, my phone is ringing, from people who are not too happy with the condition of their particular road or the road perhaps leading to their workplace.
We've all heard stories, too, about tourists, that perhaps they're not coming back or decided to cut their vacations short because of our crumbling infrastructure; businesses that are not locating on a certain highway or in a certain area because they feel the infrastructure is not adequate for what they want; emergency vehicles perhaps having difficulty getting to a site, again, because of the roads that they travel on; and on it goes. We hear these stories daily and I'm sure your department is quite familiar with some of the problems. I have heard some people who have actually travelled across the country and are saying, we probably have the worst roads in Nova Scotia of anywhere in this country. I would like to ask you, Mr. Delaney, based on your lack of funding and what you are hearing, how do our roads stack up, particularly our secondary roads, with other provinces in this country?
MR. DELANEY: I don't have a direct comparison or performance indicators that are used nationally to do that comparison. We have certainly heard from tourist groups as well, with issues on the conditions of our roads, but I don't have a direct comparison with other provinces. It is perhaps interesting that the Transportation Association of Canada is considering a project now to do exactly that, to develop consistent performance indicators between provinces, so that when provinces report their road conditions and what have you, we will be able to compare the differences on a country-wide basis. At the moment, there is really no direct basis of comparison.
MR. PARKER: I know personally from travelling in at least the six eastern provinces of Canada, honestly I haven't seen any roads worse than some of the secondary roads here in this province, so I'm going to continue to hear from people with concerns.
One of the concerns that people bring to me is around rural secondary roads that are not well-travelled, not a lot of people live on them, yet they are paved but it has been 30 to 40 years or more since they were paved but they really haven't had much repair. The disadvantage they have is that it has a low volume of traffic but it is still a very poor road. Do you see any way the formula can be adjusted to look at extremely poor roads, even though the traffic volume is low? How can they move up the priority list, I guess, when there are other roads out there that are also poor but have many more people living and travelling on them?
MR. DELANEY: That's a very good question and certainly, we see the primary arterials as being the roads that we have to dedicate the largest amount of our efforts to and that is the 100-Series because that's where most of the traffic flows and then onto the high-volume trunks and routes. Quite frankly, the local roads you talk about do come up short by that analysis. It is very difficult to suggest how a particular road might move up the list unless the funding level increases because, simply put, if we are spending somewhere significantly less than $343 million a year, it is going to take a long time to get back to local roads, even though they are in rather poor condition in sections.
MR. PARKER: Again, it all comes back to funding. In a previous question I heard mentioned a federal contribution where it doesn't seem we are getting anywhere close to our fair share of the gas tax coming back for roads. But it does appear that our neighbouring province somehow, in New Brunswick, is leveraging more money out of the federal government than we are. You mentioned a couple of projects under the SHIP program, and under the Canadian infrastructure fund, I believe, that there is some cost-sharing on those two programs. Is there an aggressive policy within the department to go after the federal government for cost-sharing projects in Nova Scotia?
MR. DELANEY: Certainly, the department, the minister and, I believe, government, have been pursuing cost-sharing arrangements aggressively with Ottawa. Any programs the federal government brings out, they tend to distribute the funding based on population and our population works out somewhere in the range of 3 per cent of the national average. With the last couple of programs that is pretty close to the amount we received, about the amount based on that formula.
[10:15 a.m.]
MR. PARKER: In spite of that, we have a larger population than New Brunswick and yet they are getting much more money out of federal programs than we are. Do they have a more aggressive program? Why is it working for them and not for Nova Scotia?
MR. DELANEY: I don't have the answer to that, sir.
MR. PARKER: Do we need to be more aggressive, I wonder, in our lobbying for infrastructure monies?
MR. DELANEY: I don't know that I can answer that. The better question might be what is the most effective method of lobbying the federal government or encouraging them to participate in cost-shared programs? Certainly, that is an issue we have worked on fairly diligently over the years and we are not the only province that aren't completely satisfied with the funding arrangement with the federal government. I suppose that is not surprising but when you ask is it because of some particular item that we are or aren't doing, if I knew that then we would attempt to correct it and move in a different direction. We do put our case forward and do have lots of roads on the national highway system that require attention and would look forward to federal cost-sharing in. But we have lots of roads that are not on the national highway system that we would like federal funding for. Having said that, we put our case forward and we have participated in funding programs but could we use more? We could always use more.
MR. PARKER: I want to change topics here and go back to the RIM program. Is the RIM program always tendered or not?
MR. DELANEY: It is virtually always tendered, unless we get a tender that comes in that for some reason isn't judged to be cost effective, then we would throw something like that out. So we have done a couple of small projects in house but the vast majority of the work is tendered.
MR. PARKER: So on occasion the department or at the local level, a department engineer in the county, can they determine who does the work with or without tender?
MR. DELANEY: The area manager certainly has some discretion in terms of what is tendered or what isn't tendered. Generally speaking, and we review every year the price structure and as I said, the price structure for most of the items that are carried out through RIM, we simply know from past experience that we can't be competitive in those markets.
MR. PARKER: But you are saying on occasions the area manager can award a contract to a private operator without tender?
MR. DELANEY: Absolutely not. All RIM work is tendered but if we received a tender that, for whatever reason, there wasn't enough competition in the area and the tender came in above what we figured it should cost and above what we may be able to do it ourselves, then we are not required to award the tender. We can just defer awarding the tender and carry out the work with our own . . .
MR. PARKER: Is the lowest tender always taken?
MR. DELANEY: The lowest qualified tender is always taken and that is similar to all our procurement, as such.
MR. PARKER: And you have an inspection system to monitor your contractors and make sure they are doing the work in a reasonable fashion?
MR. DELANEY: Yes, we do.
MR. PARKER: I know I haven't much time left but I did see in the newspaper perhaps a month back, a tender or contract, I believe it was for six highway graders with operators. Is that a department policy, that you are not only tendering for equipment but you are tendering for the manpower to go with it?
MR. DELANEY: Largely for our winter operations, but somewhat for summer as well, we do occasionally tender the service to the private sector. I believe, currently we have about 35 private machines, graders, loaders, trucks or whatever, on contract for this upcoming winter season, for example. To put it in perspective, our overall mobile fleet is between 800 and 900 vehicles, and our winter fleet, as such, is around 400 vehicles. So about 35 of those would be private contractors.
MR. CHAIRMAN: That brings to a close the time available to the NDP caucus. The next 13 minutes belongs to the Liberal caucus. Whom shall I recognize?
The Leader of the Liberal Party.
MR. DANIEL GRAHAM: Thank you, first, for coming here today and sharing with us the information you have. I would like to begin with some notes of clarification, perhaps, in relation to the questions that Mr. DeWolfe was asking near the end of his questioning. You indicated that there was $254 million that was collected in motive taxes and that there is a figure of $258 million that was allocated for a particular amount. Could you tell us specifically what that amount was for?
MR. DELANEY: I can perhaps give you the breakdown that I've had on that. For this fiscal year, 2003-04, the allocation for highway operations, for operations in other words, for maintenance, our regular field maintenance, is $130 million - I'm rounding here - for
maintenance improvements, it's $16 million, $15.8 million; capital is $112 million. Those added together is $258 million.
MR. GRAHAM: With that capital amount, that would include 100-Series Highways, twinning and that sort of thing.
MR. DELANEY: That's correct. Repaving bridges, constructing new highways, essentially most surface-sealing for example - no, I'm sorry, let me back up here - the largest part would be our repaving budget. Then the others would be for bridges, such as the Margaree Harbour Bridge or the Seal Island Bridge. The major construction projects, Highway No. 101 for example, would be included in that, any bridge work above the TCA limits and what have you. It all adds up to $112 million.
MR. GRAHAM: You mentioned bridges. You will recall that a year or so ago there was some question about a priority being put in place for bridges in this province, a priority list. It was revealed, I think, that there wasn't a centralized list of priorities for bridge construction and maintenance. Has one been assembled in the last 12 months?
MR. DELANEY: What we have done is establish a list for our truss bridge program. We published the first two years of that program. So that's for our truss bridges. For our other bridges, there isn't a specific list as such. Each district promotes certain priorities within its district. It might help to indicate to you, as well, that we're just in the process of bringing a bridge management system on-line. We've acquired a bridge management system.
We certainly have in the range of 4,000 bridges, and we inspect them on a regular basis. It's an enormous amount of information to organize in a fashion that you can pull information out of it easily at a central level, obviously the district bridge engineer can access the information quite easily. But this overall bridge management system which we have recently acquired and will be populating will give us a much better tool, if you will, to manage the bridge program, to prioritize the needs and to deal with our bridge program into the future.
MR. GRAHAM: I want to talk about the budget figures that had been spoken of a little earlier. First, some of these questions may be answered by Mr. Penny, I'm not sure. You had indicated, I believe, there was a 2 per cent reduction that was mandated, presumably in this past Fall, that amounted to an amount of $3.5 million or so, and then last week you received a request for another 0.5 per cent, amounting to a total of $1 million, for a total of 2.5 per cent and $4.5 million worth of cuts to this year's budget. I'm wondering, first, that is 2.5 per cent of what total figure?
MR. DELANEY: If I can answer relative to the highway portion, and if you understand our budget includes issues that aren't strictly highways, government services and the Public Works side, the 2.5 per cent that my sector, if you will, had to accommodate
primarily were taken, as I mentioned before, from some administrative cuts, in addition to that, the maintenance improvement budget that I had spoken about earlier. As we work our way through the year, I have a budget of $15.7 million for maintenance improvements, and call a number of contracts on that, we obviously have to balance to zero at the end of the year. So as we get into the Fall of the year, if there's any flow in that, as such, we tend to designate it to projects that can be carried out quickly in October, such as gravel or whatever. This year, because we got into the cuts, we essentially took some of the cuts in some of the maintenance improvement money that we may have otherwise put into projects late in the year.
MR. GRAHAM: My question was, 2.5 per cent of what?
MR. DELANEY: Perhaps Greg could answer that. I believe it's our total budget as such.
MR. CHAIRMAN: Mr. Penny.
MR. PENNY: Our total operating budget is $246 million. Now, as I mentioned earlier, we had to had to absorb the impact of two storms this year. I guess, as a straight mathematical exercise, we did not reach a reduction of 2.5 per cent of $246 million, since we absorbed the cost of two storms. So the 2.5 per cent of $246 million is probably roughly about $6 million. We did not identify $6 million in savings, because we had some other pressures to deal with.
MR. GRAHAM: So the total amount - I'm just wondering why you wouldn't call it some smaller percentage as opposed to 2.5 per cent?
MR. PENNY: That was the exercise we were asked to go through. Every department was asked to look at various scenarios. The scenarios were 2 per cent and 0.5 per cent.
MR. GRAHAM: You've told Treasury and Policy Board you can't meet that 2.5 per cent request?
MR. PENNY: They realize that, because of the impact of those two storms.
MR. GRAHAM: Now the 2.5 per cent is now stretched over a six-month period, roughly half of a fiscal year. Is that correct?
MR. PENNY: Yes.
MR. GRAHAM: That's really the equivalent of a 5 per cent cut, if you annualize it over the fiscal year.
MR. PENNY: Yes, that's correct.
MR. GRAHAM: We were told about a 1 per cent figure and not about these 2.5 per cent figures when the cuts were originally announced in September. Can you tell us whether or not this request for the 2 per cent, the original, happened in September?
MR. PENNY: Actually sometime in September we were asked to look at scenarios of 1 per cent and 2 per cent. We presented two expenditure-reduction scenarios to Treasury and Policy Board based on 1 per cent and 2 per cent.
MR. GRAHAM: So, effectively, you would agree that a 2.5 per cent cut in total would be the equivalent of, the effect or the pain over the six-month period, a 5 per cent cut, because you need to find it in places over a shorter period of time.
[10:30 a.m.]
MR. PENNY: Yes, I guess that's an accurate statement.
MR. GRAHAM: I want to be clear on where that is found. I know that we spoke about administrative cuts, maintenance improvements cuts as well, and you also spoke, I believe, about deferred projects, perhaps worth $2.5 million. Is that correct?
MR. PENNY: That was part of the maintenance improvements.
MR. GRAHAM: Would this include things like guardrails, the deferred projects?
MR. PENNY: I believe Mr. Delaney probably has a better idea of the actual projects that were deferred or didn't go forward.
MR. DELANEY: I don't have the specific list of projects that had been budgeted for that we were able to find some savings on. One of them that was mentioned, for example, that would have been funded out of my maintenance improvements was the second rest area. We've been informed by the proponent that it's unlikely he's going to be able to complete that this year, so we didn't cut the money as such but that was a saving. We've had money funded for other projects and as the estimates are fine tuned, as the year went through, we simply found some savings in projects like that. I don't have a particular list as such.
MR. GRAHAM: But one has been prepared?
MR. DELANEY: Yes.
MR. GRAHAM: Can you table that for us?
MR. DELANEY: Yes, I can.
MR. GRAHAM: Can you give us a list of the other things, even a general sense of the kinds of things that will have to be deferred? I know you spoke about the maintenance program largely being about surface treatment and micro-sealing. Are there actual paving projects or guardrails that would have been put up, for example, that will not be going ahead as a result of this amount?
MR. DELANEY: There's no specific projects that we've cut as such. A large portion of my budget was already allocated - I'm going to say my budget - the highway budget was already allocated to the districts. We haven't taken back any money from the districts, relating to projects. What we've asked the districts to do was to absorb a 2.5 per cent reduction in their administrative structure, as opposed to projects as such. That's being done.
MR. GRAHAM: With respect to that, you've absorbed it administratively, that means that you've put in place freezes on hiring. I understand you to say that there's been nobody who has been laid off.
MR. DELANEY: No one has been laid off as a result of any cuts.
MR. GRAHAM: How much were the costs associated with Hurricane Juan and March 31st? Maybe I will ask it in a different way. The March 31st allocation that you have, was it budgeted in last year when it occurred or in this future year as the Minister of Natural Resources suggested it was not going to be? The Minister of Natural Resources, I believe, suggested that it was going to be allocated for last year and not this year, when he was questioned on this and whether or not it threw the budget out of balance. Was this allocated for this year, 2003-04, and how much was it?
MR. DELANEY: I will defer to Mr. Penny.
MR. PENNY: The various components of that March 31st storm, a lot of the expenditure on that storm fell under the Disaster Financial Assistance Program with the federal government. Parts of that damage incurred was residential and municipal related. We did some accounting research in the proper accounting treatment for that, and it was determined, because those payments were to parties outside of government, they were basically third-party payments, that the liability belonged in the old fiscal year. There was damage incurred to our provincial infrastructure, Transportation and Public Works, which was determined a current year, 2003-04, expenditure.
MR. GRAHAM: How much?
MR. CHAIRMAN: The time for the Liberal caucus has expired. Have you concluded your answer, Mr. Penny?
MR. PENNY: The provincial share, after federal recoveries, was estimated at about $3 million for the March 31st storm.
MR. CHAIRMAN: The next 13-minute block, starting at 10:35 a.m., belongs to the Conservative caucus.
The member for Chester-St. Margaret's.
MR. JOHN CHATAWAY: We very much appreciate the opportunity to talk about the RIM program. There are 52 ridings in Nova Scotia and many people represent rural or suburban areas of the province. Certainly, inevitably, since I entered provincial politics, before that even, as a municipal councillor, people complained about the condition of their roads. I will not relate all the ways that the people would solve it, but basically some were very dramatic.
I would just like to get some facts and figures. The federal motive fuel tax, in the last five years, how much has gone to Ottawa and how much has Ottawa given to the provincial government to do road work?
MR. DELANEY: To go back for a five-year period, we would have to go to our records and check that and provide the information. We certainly can do that, but I don't have it with me today.
MR. CHATAWAY: First, I would very much appreciate that fact and figure, how much was collected by Nova Scotia and how much was paid back for our roads? Last year was what?
MR. DELANEY: Last year about $135 million was collected, and again we can check the numbers to get them precise for you, and we will be prepared to do that.
MR. CHATAWAY: Well, to the closest million.
MR. DELANEY: We've collected back from the federal government something in the range of $10 million this year, in terms of the SHIP program.
MR. CHATAWAY: So basically $135 million left the province and $10 million came back, right?
MR. DELANEY: That's correct.
MR. CHATAWAY: And it's all collected from motive fuel tax. I understand, maybe you could correct me if I'm wrong, from a litre of gas, 10 cents goes to the federal people, 13 cents comes to the province, and the rest goes to the producer or whatever. Is that about right?
MR. DELANEY: That's certainly close to being correct, but I can't verify precise amounts here because I just don't have that information.
MR. CHATAWAY: Everybody should know that. Everybody who drives appreciates yes, we should take the money and put it into road improvements. I think most people are understanding that that's the case. A second question, and I know my friend has a question for you as well. I have the honour of representing Chester-St. Margaret's. There's a bridge in New Ross called the Pratt Bridge. It's been under repair for over six months. This is a very interesting thing because, of course, many people don't know how much salmon goes up in the Gold River, and all that stuff. Basically, if you could outline the procedures the department has to go through with the two federal departments, having to be informed and give permission to do repairs to our Nova Scotia bridges. It's a Navigable Waters Protection Act, as there's many salmon up in the Gold River, and there's the Department of Fisheries and Oceans.
I think many people are very frustrated. They say, my goodness, salmon, the Department of Fisheries and Oceans should certainly worry about the salmon in the ocean and not about the salmon up in New Ross and area, and in navigable waters. This is a new bridge - no, it's not a new bridge - it's been repaired about three times. The Navigable Waters Protection Act has existed since about 1882. Has the department had any changes in the procedure, when somebody has to make an application, that's fine, but has the federal government changed the procedure of reporting now? I would just like your comment about the procedure. The federal government - yes, it's been a law since 1882 - now all of a sudden they want a lot more information for whatever reason and has the change been good and has it improved, things like that.
MR. DELANEY: First of all, when we either build a new bridge or carry out major repairs to a bridge, we are required to go through a permitting process, that includes a permit from the Nova Scotia Department of Environment and includes approval from the federal Department of Fisheries an Oceans and two sections within that: Navigable Waters and Habitat Protection Branch. I guess starting last year and continuing into this year we seem to have had a bit more difficulty working our way through the regulatory process and I think some of that is related to perhaps the resources at all levels in that and some of it is related to more emphasis being put on certain permits. The Pratt Bridge, for example, certainly was an example that took us some period of time to work our way through the regulatory process to get approval to complete it.
MR. CHATAWAY: Have the changes in procedure been an improvement, has it repaired your speed of service or has it slowed down the level of service?
MR. DELANEY: There is no doubt our ability to react to bridge replacements or indeed, building new highways or whatever, have been constrained by an increasing regulatory burden, both at the provincial and federal level.
MR. CHAIRMAN: The member for Waverley-Fall River-Beaver Bank.
MR. GARY HINES: Mr. Chairman, I thank the gentlemen for coming in today. In light of the fact that we are all looking for cost savings in all government departments, yours being no exception, as pointed out this morning, in the delivery of highway services in general, there seems to be technological advancements that we have all benefited from, something as simple as the planning process, which has been indicated this morning, has allowed projects to go on and in the statement here, in the paper, that was tabled, indicates there are cost-savings doing those kinds of things. Having represented in council an area that has cost-sharing between the municipality and the province within HRM, we have run into issues such as salting and pre-wetting on our highways and we are always accused at the provincial level of delivering a lower standard, in terms of winter road maintenance, than HRM. With the federal government coming on board and assisting in declaring salt a toxic substance, obviously the province has cut back and recognized those standards to this point that we are allowed to use. Do you see cost savings coming from the salt requirements that are coming? Will there be further cost savings or will those things that take the place of salt for winter ice control cost us more money?
MR. DELANEY: We have been fairly active over the last three or four years in anticipating where the federal and provincial governments were moving toward in terms of controlling salt use. While the federal government hasn't declared salt a toxic substance, they have moved to the point of developing codes of practice and what have you that essentially do not require but certainly encourages all municipal units and all transportation authorities to use salt in a cost-effective way. We have already started pre-wetting and have put computerized controls on all our salt trucks. I see this as, in theory, anything you do to reduce salt use potentially saves money. In practice, it's probably just a better use of the resource and potentially can give us a more proactive approach to winter maintenance. Some of the issues that we have done, for example, by introducing RWIS stations, Road Weather Information System stations and pre-wetting, should allow us to have our crews on the road before the storm, rather than after the storm. It means that we perhaps apply salt earlier in the storm and apply it at reduced levels throughout the storm. Salt generally runs up, I suppose overall, perhaps 20 per cent of our cost for winter. So minor reductions in salt probably aren't going to have a large effect on our budget as such but certainly have an effect on how our salting impacts adjacent wells and what have you.
[10:45 a.m.]
MR. HINES: If I might go to another topic, earlier it was suggested that Miller Contracting might have done some of the RIM programs and perhaps they didn't qualify under the standards. Just in my knowledge of Miller Paving and somewhat of the RIM program and the requirements, I believe that it states that the company must be a Canadian company for one year in order to qualify for RIM programs as well as other DOT programs. They also must be signed up with the Department of Labour and the Construction Safety Association and be in good standing with workers' compensation and all of those things that are in our province as well as other provinces.
So the suggestion that Miller Paving might not be eligible for these programs perhaps is not true but that being said, they do hire local and they do use local material and so on. I just was . . .
MR. RUSSELL MACKINNON: On a point of order, Mr. Chairman, quite clearly that point that was made by the member just speaking is totally erroneous and that point was never made.
MR. CHAIRMAN: That is not a point of order and I am sure the members can check the transcript to see what was or was not said.
The honourable member for Waverley-Fall River-Beaver Bank.
MR. HINES: Okay, further to my question and where I was going with this, it is indicated in the information that I have and having been part of a bidding process for RIM programs in my past experience, there is a savings of 20 per cent to 25 per cent when local companies do the business out of the hands of the department. That 20 per cent to 25 per cent saving would indicate to me that perhaps privatization might be the way to go but is it the intent of the province to at one point go to privatization in terms of cost savings of 20 per cent to 25 per cent being the driver or what is the future for the Department of Transportation and Public Works to do in house?
MR. DELANEY: The department is not looking at wholesale privatization of its operations. Certainly on any individual projects we look for value for money in terms of the projects and RIM has indeed shown a savings. The contracting out of some winter equipment has also shown a savings but it is not our intent to privatize the work of the department, if that is your question.
MR. HINES: Thank you.
MR. CHAIRMAN: Thank you, Mr. Delaney. That brings to a close the question and answer portion of this meeting. Mr. Delaney, at this time I would invite you, if you wish, to give a closing statement of up to five minutes.
MR. DELANEY: I certainly won't require five minutes but I think it is perhaps reasonable that I say a few words about the RIM program. We, within the department, certainly see it as a valuable program for a number of reasons. One is that it was indeed incremental funding and funding that was badly needed by the road system. Two, I think we feel that the mechanism that we have chosen for delivering the program and that is to tender the projects in relatively small bites have led to a competitive environment so the local contractors can compete against the big contractors and the winners at the end of the day are the taxpayers because we get a good price and good value for money.
Certainly the program, like any program, has some detractors but generally I think the public appreciate the fact that the additional dollars can be seen in real improvements to our roads system. I just might want to clarify and perhaps I missed the point on a question earlier, from Mr. MacKinnon, relative to additional monies being allocated from the maintenance budget for RIM. I told him that didn't happen and it doesn't. What I expect he may be referring to and it may help, in terms of clarification of the question, certainly in some areas when we let RIM contracts they become virtual standing offers so that we have a rate per ton of asphalt, for example, of $65 per ton and so much money allotted to that under the RIM program. It may very well be that in the particular area, the area manager looks at that and says, gosh if I put a little bit of my money in, I can get some paving done at a really good price as well. So he may allocate some of his regular maintenance money, if you will, to be done under the RIM program because it is a cost-effective way to do it. Certainly, that has happened, I suspect, in various areas around the province, that some maintenance funding has been used to purchase a product on those standing offers, as such.
In overall summary, we see the program as maturing now after four years of operation. We see it as providing a good quality product at a very competitive price and we look forward to continuing the program in the years to come. Thank you.
MR. CHAIRMAN: Mr. Delaney, I would like to thank you and our other guests for appearing today. I would like to remind you that you have made certain commitments today about producing further information. The clerk of committees will be in touch with you very shortly with a written list of your commitments.
I would like to note for the record that two weeks ago when the Department of Health made certain commitments, they followed through on them within a matter of days, for which I would like to thank them. Certainly, that sets a good standard for other witnesses and we will look forward to receiving that information which can be submitted to the committee members through the clerk of committees.
As is customary in this committee, I would now like to call a short recess of no more than three minutes to allow our guests to retire, so they don't need to be troubled with committee business, which will last for only a few minutes.
[10:53 a.m. The committee recessed.]
[10:55 a.m. The committee reconvened.]
MR. CHAIRMAN: I would like to call the meeting back to order. Thank you very much. There's a couple of very brief items of business. The first one is that next week's meeting with the Emergency Measures Organization, principally related to the province's preparedness for Hurricane Juan and lessons to be learned from it - obviously of very great interest - the time has been changed so that it now will be starting at 9:00 a.m. instead of 8:00 a.m., which is what had been previously indicated. That session will be next week from 9:00 a.m. until 11:00 a.m. with the Emergency Measures Organization.
A report of your Subcommittee on Agenda and Procedures has been circulated. This deals with a number of procedural matters as well as the committee's agenda right to the end of the month of January. It's my understanding that there has been a request that consideration of this report be deferred until next week, in order that the committee's report can be compared to the transcript. I certainly have no difficulty with that all.
Although, because of the timing, this report must be dealt with at next week's meeting. The way that I conceive of it, the subcommittee is having the in-depth and detailed discussion but is not making decisions about agenda and procedures. It is only this committee as a whole that actually makes decisions. That's why we have this in the form of recommendations by the subcommittee, which must, at some point, be considered and approved by the full committee.
Now when I say considered, I don't mean that, by any stretch of the imagination, the full committee is going to repeat the debate that is held in the subcommittee, only that if there are further points or questions or clarifications needed, that can be done. The subcommittee is held in public session, it's on the record, there is a transcript, and any member who is not on the subcommittee, if they would like to see the discussion, I would encourage them to review the transcript.
The following points of clarification or addition will be made to the report before it's submitted next week. First of all, the numbering - no doubt the members have noticed the numbering is off, which reflects the Chair's lack of facility with the outline numbering function in word processing software. The last three items, obviously, should be 8, 9 and 10, and not 10, 11 and 12.
Item No.7 b. - the subcommittee agreed that the Deputy Minister of Finance would be invited to be a witness for three hours instead of the usual two. Item No.10 - we have been informed by the Deputy Minister of Health that he is available to address this committee on November 26th, if the Public Accounts have not in fact been published by that date. It is the recommendation of the subcommittee that the Deputy Minister of Health be invited to continue the discussion of district health authority budgets and, for the information of this committee, he is available on that day.
That is an item that we've only recently learned and was not discussed by the subcommittee. So very briefly, I would invite discussion of whether, in fact, knowing that the Deputy Minister of Health is available on November 26th, whether it's the committee's preference to invite him instead of the Auditor General, regardless of whether the Public Accounts have been published or not. Which of those two items is your priority? Anyone?
Mr. Graham.
MR. GRAHAM: I'm just wondering, Mr. Chairman, what that might do to our scheduling? Would you phase-shift everything back by one week?
MR. CHAIRMAN: I don't anticipate - so what we could do is either not hear from the Auditor General on the Public Accounts or schedule another meeting, so that in one week we would have two meetings. I think that would be my suggestion, rather than bumping everything back by a week.
MR. GRAHAM: Our preference would be to target having the Auditor General in at the scheduled time.
MR. CHAIRMAN: We will take that as our priority, but on the understanding that if the Public Accounts have not been published, the deputy minister is available. Mr. DeWolfe, do you have any comment on that point?
MR. DEWOLFE: I would agree with that.
MR. CHAIRMAN: Finally, No.12, which deals with hearing from the Canadian Institute of Chartered Accountants on Generally Accepted Accounting Principles in the public sector. A note should be added there that this would be in exactly the same format as we had with the CCAF. This is more in the nature of what I would think of as an education session for the members. It's not a formal meeting of the committee, and would be held in the committee office. So with those additions, this report is deferred until next week.
Are there any other items of business?
The member for Dartmouth South-Portland Valley.
MS. MARILYN MORE: I just wanted some clarification. How much notice could we expect in terms of the publication of the Public Accounts? A week? Will we know a week before?
MR. CHAIRMAN: Now are you referring to the Public Accounts or the Annual Report of the Auditor General?
MS. MORE: Sorry, the annual report.
MR. CHAIRMAN: Mr. Salmon, could you address that point, please? How much notice will this committee have of the publication date of your annual report for 2003?
MR. ROY SALMON: We really are in the hands of the printer but I would suggest we could give you a week's notice.
MR. CHAIRMAN: Thank you very much. Does that answer your question?
MS. MORE: Yes.
MR. CHAIRMAN: Are there any other items of business that require the consideration of the full committee before we adjourn? If not, a motion for adjournment.
A question from the member for Chester-St. Margaret's.
MR. CHATAWAY: Item No. 12, would the Generally Accepted Accounting Principles is drawn up by various accountants across federally, internationally, provincially. Are they going to be represented to us at that time? I just don't know why the former Minister of Finance would bring in accounting principles and things like this. I don't think he was a chartered accountant, was he?
MR. CHAIRMAN: No, as he frequently refers to himself, he's a turkey farmer. (Interruptions) Chicken farmer. It's a good question but there is a good answer. The CICA Public Sector Accounting Board is the body that sets Generally Accepted Accounting Principles in Canada for the public sector and that's why they would be invited. It so happens that Mr. Downe is a member, a lay member, that is a non-accountant member of that board and so would have some insight into the functioning of the board as well as, of course, having some insight into this committee and the way it does its work. That's why he would be invited because he is, as a matter of fact, a member of the board that sets the standards for the public sector in all of Canada.
MR. PARKER: Move to adjourn.
MR. CHAIRMAN: We have a motion to adjourn. Would all those in favour of the motion please say Aye. Contrary minded, Nay.
This meeting of the Public Accounts Committee is adjourned.
[The committee adjourned at 11:04 a.m.]
