MR. CHAIRMAN: Ladies and gentlemen, I would like to, with the indulgence of all my colleagues, bring this meeting to order. This afternoon we are pleased to have Mr. John Whalley with us. John is with the Cape Breton Regional Municipality, Economic Development Officer. Is that the appropriate . . .
MR. JOHN WHALLEY: That is fine, yes.
MR. CHAIRMAN: That is fine. Perhaps we could ask committee members to identify themselves beginning with my colleague from the Eastern Shore.
[The committee members introduced themselves.]
MR. CHAIRMAN: My name is Brooke Taylor and I represent the beautiful Colchester-Musquodoboit Valley. We are also accompanied, as per usual, by Darlene Henry, our very able and capable clerk.
Perhaps, Mr. Whalley, you would like to begin with some opening comments. Then the protocol has been that we will direct some questions your way, if that is okay.
MR. WHALLEY: Thank you very much. I am very pleased to have the opportunity this afternoon to make some comments. I guess I would start by saying by way of explanation, the Cape Breton Regional Municipality, I have been with the municipality probably for a period of four years now. The thrust of our economic development strategy is really based upon a view of what we would call the critical systems that comprise an economy. Our view is essentially that there are probably, depending on how you would categorize them, eight or nine critical systems which essentially provide the foundation for a modern economy in society. These range from human resource development, which would include education and labour mobility; access to capital; access to energy; access to efficient transportation systems; access to efficient communication systems; healthy communities; and most people would talk about community development; a healthy environment; and governance being probably the controlling or key system.
Much of the work that we have been undertaking during the past few years has been trying to sort out the economic circumstances of the municipality in Cape Breton generally, which has experienced a prolonged period of severe unemployment, serious population decline in the order of probably, for the entire Island, something close to Newfoundland's rate which is the loss of probably about 1 per cent of population per year. An ageing population, high rates of dependency on government transfers and declining infrastructure. So essentially, trying to sort through these systems and determine what is required first to achieve some level of stabilization in regional economy; and second to provide a platform for future growth.
In preparing for the session this afternoon, I was interested to read some of the comments that Greg MacLeod made in his presentation and I would probably reiterate many of his comments. I should also mention that the municipality this week will also be submitting a bid or a proposal for some of the assets of Sydney Steel just to let you know that. Some people were under the impression that I was going to make the proposal public before this group today and that was not my intention at all. It was just to really notify you that we are going to submit a proposal on those assets and had recently acquired the Sydney Marine Terminal or the Government Wharf, as it is commonly known, from Transport Canada as well. So that was really an effort and an ongoing effort to try to address some of the transportation issues in the region.
Beyond that brief introduction, I am available for questions, I guess. One of the things that I should mention, probably before question period, one of things that particularly struck me last week, I guess, there was an article in the Chronicle-Herald in which Warren Jessome, who is the Chief Economist for Scotiabank provided an interview and he was asked about Nova Scotia's Campaign for Fairness. His response was essentially that in his view the issue of equalization was going to be resolved because of the potential of Nova Scotia to receive royalties from offshore development which he deemed as being enormous potential. His view was that the principal issue for Nova Scotia, for the Government of Nova Scotia and the
people of Nova Scotia was really a distributional issue. He mentioned the situation particularly in Cape Breton which he termed as being awful.
I believe that characterization is appropriate. I think there have been many efforts and many good efforts to try to attract new activity to Cape Breton but the situation, from an economist's perspective, looking at the unemployment data, looking at the population data and the demographic data, remains very serious. I think to some degree it is a very important issue for the Province of Nova Scotia being that the Cape Breton Regional Municipality really is the second most heavily populated municipality in the province. So that the decline of the municipality and, really I think, the difficult circumstances of probably much of rural Nova Scotia is an important issue for the province.
With those brief comments, I am more than happy to answer any questions.
MR. CHAIRMAN: Thank you, Mr. Whalley.
I should have earlier on welcomed Mr. Howard Epstein. Howard is the newest member to our committee and I am sure he will enrich the committee. We welcome you Howard. Thank you for coming.
MR. HOWARD EPSTEIN: Thank you very much, Mr. Chairman.
MR. CHAIRMAN: Questions for Mr. Whalley. John Holm.
MR. JOHN HOLM: Thank you. We are almost continuing where we had left off when I had met with you earlier about a few of these issues. I don't really know where to begin because, as you correctly point out, it is a whole host of different kinds of infrastructures and needs in order to turn the economy around. Maybe just first of all, since it is topical, it is in the press today and we know that Nova Scotia Power is trying to get an application through the Utility and Review Board that would permit them to provide preferred rates in areas where there is natural gas. We could touch on the whole issue of natural gas in industrial Cape Breton and the fact that it is not available and with the size of the pipeline it doesn't look like it is going to be available. Therefore, if their application were successful, it looks like that would be another nail or another huge hurdle for the municipality to have to overcome because you wouldn't qualify for the reduced rates. So industries or businesses that may wish to locate, and energy is a major factor, they don't have natural gas available to them and they wouldn't qualify for a preferred power rate.
Cape Breton, of course, isn't the only part of the province that would be in that situation. Looking around the room in Shelburne and other parts of this province that also don't have natural gas, might also be disadvantaged, like Bowater or others. I am wondering if you could comment upon what kind of an impact do you think that might have if that is successful?
MR. WHALLEY: This will take a couple of minutes to answer this question, probably. This goes back to 1997 at the Sable gas hearings and the municipality intervened. We raised the issue with the panel at that time that the development of the Sable reserves really had enormous implications for Cape Breton and particularly for industrial Cape Breton. There were three principal streams of impact. There was the lack of any direct benefit. Our region was completely excluded from any direct benefits associated with the project. The second stream was the potential displacement of coal directly or coal via electricity and Nova Scotia vehemently denied that that was even a possibility. The third stream was related to lack of access to natural gas in regions of the province that wouldn't have access to what was becoming really the fuel of choice and would be at a substantial economic disadvantage not only because energy costs would be higher but they would be less attractive to investment coming into the province.
What we have seen through the recent time is the natural gas line that was to serve Cape Breton is a faulty line. It is only an eight inch line, which at full capacity would provide somewhere in the vicinity of 70,000 mm BTUs per day of natural gas. At 50 per cent capacity, it is essentially capable of serving the interests of the Strait region and doesn't allow any opportunity for growth, it certainly wouldn't allow for any significant electrical generation capacity to be added in our region.
Subsequently, last year and again this year, Nova Scotia Power received approval from the Utilities and Review Board to implement what they call the load retention rate, which was for large industrial users of power. Where they have the right now to offer large customers, who are thinking about converting to natural gas, special rates, low rates which would prevent that type of switching from occurring.
Now what we see for residential customers who have access to natural gas, the right is being sought from the Utility and Review Board this week to offer what is called an Energy Solutions Package. One example that Nova Scotia Power makes in its presentation to the Utility and Review Board is a package where they would offer residential customers an incentive package to switch to a special type of water tank and a timer which would allow them to take use of special low power rates at night. They would essentially store hot water. Again, it is providing an incentive to keep people from switching to natural gas.
Our presentation to the Utility and Review Board last year, on the load retention rate, was that it was predatory and discriminatory. We had asked Nova Scotia Power why they would never make that type of special power rate available to industries that were closest to the generating plants, for example, which has never been the case; why they wouldn't make it available to Sydney Steel. If it was truly a load retention rate, why wouldn't they offer that to Sydney Steel, which was in jeopardy of closing at that time?
The board found in favour of NSP and allowed them to proceed with that. So, you don't have access to gas, you don't have access to the 10 per cent discount which was negotiated with the province, and you don't have these preferential electricity rates that are being offered. From a variety of perspectives, the region is disadvantaged. It is not only our region, I think it is other regions of the province that don't have access to natural gas.
This is a critical system energy, it is fundamental to many businesses, and from my perspective it is not an acceptable provincial policy to say that some regions are going to be chosen over other regions, and some consumers are going to have better energy rates than other consumers, because they have no control over whether they have access to natural gas or not. The line that is supposed to serve them is corrupt, and for some reason the National Energy Board isn't enforcing Maritimes & Northeast to address that situation.
MR. HOLM: Just as a follow-up, some of us have difficulty with why the NEB was the one that was regulating that line to Cape Breton in the first place and had some difficulties with the size of the line as it was laid in the first place. It strikes me that Cape Breton may be more disadvantaged than other parts of mainland Nova Scotia that currently don't have natural gas, because in order to correct the problem in Cape Breton you have to lay another pipe across the Strait area, which is extremely expensive. With the limited population, relatively speaking, that gets very expensive, especially if industry and business continue to decline. It is going to be harder to get that problem corrected than it would have been to resolve the problem in the first place.
I guess I would argue that Cape Breton is more disadvantaged than other parts of the province because if the pipe, let's say, coming to the metro area is not going to be or can't handle it going to the southern regions, you can always do some looping. There are far less expensive options which will enable the gas to be gotten to those regions.
On the issue of gas, of course there is a great deal of optimism that there will be major development in the Laurentian Basin area. Of course, that is the area between Cape Breton and Newfoundland so many would have us believe that that is going to be a great saviour for industrial Cape Breton and that the place that the gas will be landing would be in industrial Cape Breton. So there will become a ready supply.
I am not of the opinion that there is any commitment to actually land the gas in Cape Breton but that, actually, it may be diverted around the Island and come back in. The industry may intend to land it down in Goldboro where the other gas comes onshore because it is less expensive to process it.
Have you or has the municipality had any discussions with industry or with government - I guess, particularly with government - and sought or received any kinds of assurances that any gas that is found in that area will be landed in industrial Cape Breton so that the region can, in fact, get some benefits from that?
MR. WHALLEY: Actually, we had, through the preliminary round of discussions with Maritimes & Northeast. There was, actually, a gentleman who worked for Maritimes & Northeast who indicated that with the economics of the situation related to the development of the Laurentian Basin it might well be such that they would link into the existing infrastructure.
MR. HOLM: And by-pass Cape Breton?
MR. WHALLEY: And by-pass Cape Breton. That is a concern, obviously. One of the initiatives that Mayor Morgan has taken recently was to request of the Premier representation on the Energy Council. Currently, there is no representation in Cape Breton.
The second issue related to policy. The federal government and the Government of Nova Scotia had signed an offshore accord agreement in the mid-1980's, which stipulated that Nova Scotians would be the principal beneficiary of the development of our offshore resources. I guess what we were seeking was some sort of a policy commitment that would stipulate that of Nova Scotia's share of the Laurentian Basin, that the benefits would accrue to Cape Breton and that we would be able to put in place specific measures which would enable Cape Breton to receive the benefits. Particularly important is not just access to natural gas, it is the ethane which is the feedstock for the petroleum industry, the petrochemical industry. Right now, the stream of ethane associated with the Sable reserve is not sufficient to develop a world-class petrochemical industry.
Our view has been that if it could be combined with the Laurentian Basin, if the Laurentian Basin can be brought on-stream quickly enough, that that would be particularly important for the province because that is where there is the potential for thousands of jobs, not a few hundred short-term jobs, but thousands of jobs.
That was particularly important to have a policy around that. Even if we were to consider storing some of the ethane from the Sable reserve, it made more sense than exporting that very valuable product in the pipeline, although Mobil would say that it makes a great difference because it changes the heating value. Certainly, Alberta strips the ethane before it exports its natural gas. That is an important policy piece for the province and it is an important policy piece. Our view has been, probably, that the Strait of Canso is the most logical point for petrochemical complex.
MR. HOLM: Can I just follow up, just on the same thing. We touched on a couple of the other things that I was going to get to.
I guess, too, when you talk about world-class, how does one define what is world-class? There are those who would argue that there is enough ethane and other products being sold at fire sale prices that are going up and down the coast in ships, that if it was combined with what is coming from Sable, that there is a possibility even now to develop a petrochemical industry.
I guess the two things that I really want to ask you - and you talked about representation on the Energy Council. It is puzzling that there is nobody from Cape Breton who was appointed to that. I am wondering what success you have had with the representation to ask that somebody from Cape Breton be placed on that council?
Secondly, in terms of the policy - and you are quite correct, as I recall it, too, Nova Scotians were supposed to be the primary benefactors of the development - how have the discussions gone with government to get the principles or policies in place? Have they borne any fruit, in terms of having Cape Breton be a primary benefactor of any development off the Laurentian Basin?
MR. WHALLEY: Not to date, to be quite honest. We submitted the request to the Premier's Office, and it has been approximately two months and we have not heard to date . . .
MR. HOLM: No reply, period?
MR. WHALLEY: Through the mayor's office, we really have not heard to date. It may well be that the government is waiting for the resolution of the boundary dispute before they would proceed with that issue. I am not sure.
MR. HOLM: What about the Energy Council?
MR. WHALLEY: No, we have not received a response on that issue either.
MR. HOLM: Was that request made at the same time?
MR. WHALLEY: The requests went in at the same time.
MR. RONALD CHISHOLM: Excuse me, on a point of order, Mr. Chairman, what Energy Council are we talking about here? Is that the Premier's Energy Council?
MR. WHALLEY: Yes.
MR. RONALD CHISHOLM: Well, for your information, there is somebody from Cape Breton on that council, from Port Hawkesbury.
MR. WHALLEY: I guess I should have clarified - and I am accused of this often, that I speak for Cape Breton - I really meant industrial Cape Breton.
MR. RONALD CHISHOLM: Maybe there is nobody from industrial Cape Breton but there certainly is from Cape Breton.
MR. CHAIRMAN: Thank you, Ron. Would you care to share the name of the person?
MR. RONALD CHISHOLM: Yes, Blaine MacQuarrie, from Port Hawkesbury.
MR. CHAIRMAN: Thank you, for the record. Does that answer your question on that particular issue?
MR. HOLM: It answers partially, yes. There are other issues that I could touch on but I should let somebody else have the floor to ask some questions.
MR. CHAIRMAN: Mr. MacKinnon.
MR. RUSSELL MACKINNON: Mr. Chairman, I would like to follow up on the offshore because, as Mr. Whalley probably well knows, several weeks ago I held an information session with the Petroleum Directorate and representatives from Hunt Oil, Texas. I understood at that particular meeting from the officials at Hunt Oil that it would be far more beneficial for them to bring the gas onshore of Donkin-Morien or, indeed, Glace Bay, than it would be to come up through the existing route because of the close proximity. I am a little perplexed at the observation you made.
MR. WHALLEY: Perhaps I can clarify that. Hunt Oil have two parcels on the eastern side of the island, essentially, out from the mouth of Sydney Harbour. So for those parcels, if they were to discover something in their area, yes, it would. The Laurentian Basin is very much in a region where there is some economic discussion about it probably being cheaper to hook into the existing . . .
MR. MACKINNON: Yes, that brings about a bigger issue, a broader policy issue, in recent observations that have been made by PanCanadian, hinting at the possibility of offshore processing. It would clearly indicate that the benefits to Nova Scotia would be very minimal and, in particular, in Cape Breton, whether that would involve the Laurentian Basin or not.
If there are no policies, guidelines, regulations or anything in effect that would require PanCanadian to process on land, but rather go on the offshore platforms directly and then ship down to the United States, or wherever their market would be, then Nova Scotia would lose quite substantially in terms of employment, in particular, Cape Breton. I think when I say Nova Scotia, I am referring to Cape Breton. I think you know that.
MR. WHALLEY: Yes.
MR. MACKINNON: In particular, we have had major problems with the occupational health and safety aspects under the umbrella of the Canada-Nova Scotia Offshore Petroleum Board, major concerns. As well, a recent major environmental catastrophe, I think, somewhere . . .
MR. WHALLEY: In Brazil.
MR. MACKINNON: I think Nova Scotia should, for the benefit of Cape Breton, if anything, take some action now before PanCanadian or any other corporation or oil drilling company goes into the Laurentian Basin or off the Glace Bay Donkin-Morien coast. My question would be, has the province had any discussion with CBRM officials with the possibility of offshore processing being a reality?
[1:30 p.m.]
MR. WHALLEY: No is the short answer. I think probably, to be quite honest, we haven't been a party that has been involved simply because we did get involved in a legal challenge to the Joint Public Review Panel's report. We challenged the view that there would be no negative impact on Cape Breton and we challenged the view that the panel took, which was a long-term matter for provincial economic development policy. Our view was that it was the weakness in the economic development policy that really jeopardized our position and I think we have some concerns that that is still the case, that there is not a strong linkage between economic development and an energy policy in the province and that there is not a specific policy that says, here is how we are going to maximize the benefits to Nova Scotia.
I think there tends to be an assumption that the royalty benefits are the most substantial and I don't think they are. I think the most substantial benefits are to ensure that Nova Scotians have access to natural gas and for us, that means overcoming a very expensive problem with the undersea pipeline, but it also means taking advantage of the liquids and particularly of ethane. I am not aware of the provincial policy, I don't know if there is a statement. We had asked through the study process, which followed the court action, for some sort of a commitment on energy policy which would recognize the coal reserves and the natural gas reserves and would present a vision of how we would take the greatest possible benefits from all of our energy resources. To date, that has not been forthcoming.
MR. MACKINNON: That is the crux of the issue for Cape Breton as I see it because if offshore processing is allowed, essentially there will be no spin-offs downstream, in terms of the petrochemical industry and all the service industries and so on. It will be like seeing the flag ship fly by with all the goods, the trophies and everything and you are not allowed to access it in any way, shape or form. That is true for the entire province but moreso for
eastern Nova Scotia and in particular, Cape Breton. Perhaps that would be an issue you could raise with your council.
Recently the municipality acquired the Government Wharf and now is proposing to acquire the wharfing facilities from the Sysco assets. Now obviously, money is a problem for CBRM, at least they say it is. I would tend to think as a taxpayer it is. Does CBRM have a business plan for this waterfront development and the land acquisition of the wharf and now the proposal? Does it have a business plan?
MR. WHALLEY: Yes.
MR. MACKINNON: Would you make that business plan available to the committee?
MR. WHALLEY: Yes, I will.
MR. MACKINNON: Two other issues, Mr. Chairman. One is in regard to Sysco and the environmental clean-up. It was recently announced it will be five years before any clean-up because of the full environmental assessment. Has CBRM been involved in any of the discussions? I know there has been interaction between JAG and so on and I followed that just on the periphery but any detailed involvement with CBRM, the province and the federal government on this particular issue, in terms of the full environmental assessment?
MR. WHALLEY: As you know we are party to the Memorandum of Understanding, so we have been intimately involved. This is an area that is kind of at the side of my responsibilities, it is something that I probably should have been more involved in. I would say the new mayor, Mayor Morgan, is taking a far more aggressive approach to this issue. He sees it as an issue that is hurting the community. He wants to resolve and move ahead more quickly on any clean-up that is required. I think he is calling for a meeting within a week or two of the various provincial and federal officials. I think he wants a clear accounting of where responsibility lies, and he wants to move this ahead. I think he sees that there is a lot of money being spent on consultants' fees.
MR. MACKINNON: So what you are saying is the CBRM wasn't aware of the fact that a full environmental assessment would delay the process by five years, CBRM was not aware of that?
MR. WHALLEY: No, my view is internally I think there would be some discussion as to the appropriateness of Mr. Fraser's comments on that, on the timing.
MR. MACKINNON: One final question, Mr. Chairman, if I may. As you know, myself being a Cape Bretoner, I have always been concerned about this misperception of Cape Bretoners. I believe it is a misperception, that is that Cape Bretoners tend to enjoy different forms of social dependency. Now whether that is real or unreal or perceived
wrongly or whatever, because it has been brought to my attention on numerous occasions since I have come to this Legislature, it is a concern. It is a real concern. I don't believe it is justified in many respects, particularly when you see we have some of the best labour stability in the province. The figures show that in terms of labour disruptions, the least amount is in Cape Breton. I could go on and on. My question is, what has CBRM done to help change that misperception? I know it is an unusual challenge and perhaps a perspective that hasn't been . . .
MR. WHALLEY: Factually though it is not a misperception, it is actually accurate. Statistics Canada would produce figures on dependency ratios, and it is basically the ratio of transfers to employment income. In communities, particularly in our region, those ratios often exceed 60 per cent. The provincial average is probably about 10 per cent. The national average is somewhere around 10 per cent. It is not a misperception. This is a function of out-migration. Out-migration in economics is supposed to be a force that moves you closer to equilibrium, instead what it does is it takes the young population, generally the well-educated population who have higher returns, who will move to Halifax and elsewhere and it leaves behind the population who are on a variety of transfer systems. We have an ageing population, so there is more pension income. It is not a misperception.
The economic strategy that we would have is based upon (a) stopping the bleeding, stopping the out-migration; (b) trying to acquire some of the strategic assets, which we think lie in the community and includes the port assets; and (c) investing in those strategic assets and trying to grow the economy. The equalization decision that was announced recently is fundamental for the municipality because it provides some level of stability, that is a transfer from other regions of the province but it is very important for our municipality.
In order to provide a comparable level of municipal service, we need those transfers. If we don't have those transfers, and our tax rates are already extremely high by provincial standards, we can't provide comparable police or fire service or that full range of municipal services. To give an example, on an assessment per capita basis the CBRM is $23,000, the provincial standard is $35,000, and HRM is about $46,000. So it is a 2 to 1 ratio per capita in terms of assessment. That disparity is growing. Our tax base is declining, our population is declining, and both are increasing in this part of the province.
It is a difficult thing to stop decline, particularly the rate of decline that we are seeing. I don't worry as much about myths. What we have to do are tangible things to stop the out-migration of our young population, and to gain control of our strategic assets, and hope that the policies will be in place that we can take advantage of natural resources, including our offshore resources in the future. There is no miracle there and I don't worry as much about the marketing part of saying we are this or we are that. I am more worried about the tangible things we can do to kind of control our own future.
MR. CHAIRMAN: Mr. Taylor.
MR. BROOKE TAYLOR: Mr. Whalley, last month CBRM acquired - as Mr. MacKinnon mentioned - the Government Wharf in Sydney, I guess at a cost of $1.5 million. I am just curious, you seem very good with numbers and very conscious of the economic state of CBRM, what deficit is projected for this fiscal year in CBRM and what debt is the municipality carrying? Is that a fair question?
MR. WHALLEY: Absolutely. The deficit is probably projected at approximately $2.5 million and of course you know that we are not allowed to carry a deficit so we will address that issue. I am not honestly sure about the debt. I know that we are probably at the extreme end of our ability to borrow, but that requires some explanation and the explanation is this. Through the Transport Canada Port Divesture process Sydney, like port communities around Canada, we expressed an interest - Transport Canada provided notification that they were going to divest the Sydney Government Wharf, the Sydney Marine Terminal - and we were the only party to do so; we cooperated with the Industrial Cape Breton Board of Trade to do a port study.
The result basically said that Sydney Harbour has enormous potential but you have four assets: you had the Sydport Industrial Park, which has since been divested to Laurentian Energy Group; you have the Cape Breton Development Corporation International Pier; you have the Sydney Steel site; and you have the Government Wharf. Across the four sites, there was no promotion whatsoever and over two principal sites, the Sydney Steel site and the Devco site, they were restricted to single owners. No private interest was allowed on the Sydney Steel site to move other forms of cargo and no other interests - although the Devco site is a modern bulk handling facility - were allowed to gain access to the site to move other types of cargo.
The port plan was basically to try to put those assets together, to rationalize them, to put them under the management of a port authority, as is the case in Halifax or as is the case in Port Hawkesbury, and manage them and aggressively market them. We didn't negotiate with Transport Canada. We finished the study. Brian Mosher, who is the Regional Director of Transport Canada, came down to Sydney and said, there is no negotiation, it is $1.5 million, take it or leave it, which was unheard of in any other part of the country. There is not a municipality in the country that we know of that paid for its facility. Transport Canada said, this is a profitable facility. Yes it is, if you don't do anything. It is not if you incur debt charges and don't have some marketing capacity to build business.
We were forced into a situation by Transport Canada, for whatever reason, to make a decision and if we hadn't made a decision to purchase that asset we would have lost the whole Port Development Plan, because that was the initial infrastructure that was needed to gain control of our assets. Our view is that it can be, over time, self-sustaining but it is a risk for the municipality, there is no question.
MR. TAYLOR: I think some of us agree that it is most certainly a challenge for CBRM and a risk. I'm not sure of the protocol that is in place, you, as development officer submitted a bid for the Sydney Wharf and related infrastructure.
MR. WHALLEY: The Sysco Wharf?
MR. TAYLOR: Pardon me, yes, the Sysco Wharf. I would think that bid again would be quite substantial. I am just questioning if you could perhaps give us a thumbnail sketch of the protocol that is in place. Was that a recommendation of staff to you and council as a whole or how did that transpire?
MR. WHALLEY: The port development plan was endorsed by council so essentially the acquisition of the Government Wharf was considered in an independent council session. This proposal that was submitted on the Sysco site was done so on my recommendation . . .
MR. TAYLOR: How long after the acquisition of the government wharf was this recommendation by you put to . . .
MR. WHALLEY: It is a three-part process essentially to acquire Sydney Marine Terminals, to acquire Sysco facilities when they became available, and to acquire the International Pier if it becomes available. It is essentially part of a process, so we are submitting a proposal on a specific set of Sysco assets, as per the development plan. If that offer is accepted by Ernst & Young and by the province, that would then go back to council for final approval.
MR. TAYLOR: The provincial-municipal equalization formula and realignment of services between the province and the municipalities has been in the news lately. I guess I would like to know your thoughts on that particular proposal.
MR. WHALLEY: From our perspective there are a number of different ways to calculate an equalization formula. We went through the exercise this fall, in conjunction with the roles and responsibilities exercise of doing some of our own calculations on equalization. The current formula is based upon standard expenditures, it is quite a complicated formula. My preference and my recommendation to the mayor would have been to move to a system which is essentially more like the federal system, where there is an unconditional transfer and it is based not upon expenditures but it is based upon your revenue-generating ability.
Using that alternative model, our calculation was that the total provincial fund should be something in the order of $40 million, $42 million, with CBRM's share something in the order of probably $24 million, given the population. That would mean that the current system is still in a deficit position from our perspective by some $10 million, for us. We are considerably below a standard where we are able to provide comparable municipal services,
and this is why we end up making some very contentious decisions related to policing and other services.
If there is a choice between rationalizing service and raising taxes, I think the mayor and council have made a decision that the tax rates are as high as they reasonably can be in a weak economy, that we don't want to jeopardize what remains of our business sector by increasing rates, that we can't put a greater burden on the citizens of the municipality, and therefore the choice is rationalization of service. We have effectively no recreation department, we have a very limited planning department. In some areas, if you look through the budgets of various municipalities where the ratio between HRM and CBRM should be something in the order of 3 to 1 or 3.5 to 1, in areas like education it is 7 to 8 to 1, in recreation it is 8 to 10 to 1. It is not comparable. We are not providing good municipal service.
Our decision could be to sit back and wait for somebody to come in and help us. I don't think that is going to be the case, so we have to take a more aggressive stand on economic development, which is what we are doing. We are trying to get control of an economic development structure that is not well integrated, that is not accountable in our view. We are trying to get control of strategic assets in the community and say which assets can make a difference for this economy over the long term. This is what we have to do.
I think it has been made very clear to us by both the provincial and federal governments that there is no more assistance coming, that the development fund or the offset fund that we have is in place to attract some level of private sector activity. Our basic infrastructure - particularly the roads and, certainly from a municipal services standard, our water and sewer service in many communities - is substandard. Certainly we are spending many millions of dollars in Glace Bay to try to bring that water system up to a standard. There are a lot of challenges.
MR. TAYLOR: I guess I am not sure, I would have to say that you would be in favour of this equalization proposal based on that answer. I appreciate the fact that you want to get control of assets that potentially could be advantageous to the CBRM but some of us feel that there should be more accountability built in. I am not questioning the decision and the decision process, I believe that due process was employed during these major decisions that CBRM has undertaken, but I am just wondering if you would have any difficulty with performance benchmarks being put in place relative to the equalization fund?
MR. WHALLEY: I guess my response would be if that is the case with the federal system then that should be the case with the provincial system. I think generally the view that is taken in Canada is that the equalization fund is provided and to Nova Scotia it is $1.3 billion this year. I don't know how many strings are attached to that. I think we would be more than happy to accommodate any type of performance measures. I don't think that would be a difficulty. I think we would have some concerns if there was a cap put in place on the
equalization program but equalization is a fundamental principle within Canada and I think it is an important part of helping municipalities in Nova Scotia deal with, in some areas of the province, a declining economy.
MR. TAYLOR: Okay, that is fine for now, Mr. Chairman.
MR. CHAIRMAN: Mr. Brian Boudreau.
MR. BRIAN BOUDREAU: Mr. Chairman, in regard to the Energy Council, do you feel the representative from Port Hawkesbury is adequate representation for industrial Cape Breton?
MR. WHALLEY: I think on . . .
MR. RONALD CHISHOLM: On a point of order, Mr. Chairman, I'm not sure we are here to debate the responsibility of anybody who is on that Energy Council and especially the member from Port Hawkesbury. I personally know that member.
MR. CHAIRMAN: Yes, I will take that as a point of order, Mr. Chisholm. Mr. Boudreau, to discuss the credibility of someone, I think is out of line for this committee. Maybe if you could restructure that question and ask if it is sufficient to have that person may be a better way to approach that.
MR. BOUDREAU: Mr. Chairman, my question was basically if the representative from the Port Hawkesbury area was adequate for the industrial area of Cape Breton. I didn't indicate anybody's name. I am talking about areas here. I am not talking about individuals.
MR. CHAIRMAN: Mr. Boudreau, thank you. I would ask you to ask the question to Mr. Whalley once again, please.
MR. BOUDREAU: Thank you, Mr. Chairman. Do you feel that the Port Hawkesbury representative has or can in the future adequately represent the interests of industrial Cape Breton?
MR. WHALLEY: I think to some extent, probably to a considerable extent, we have competing interests related to the offshore. I think all regions are competing vigorously for benefits and I think our interests are distinct, probably, from those of the Strait Region in this case, yes.
MR. BOUDREAU: You had a chance to read over Father Greg's presentation to the committee just a couple of weeks ago. Are you in agreement with the direction that he would like to see the provincial government go forward in?
MR. WHALLEY: For some things, sure, yes.
MR. BOUDREAU: For instance, enterprise zones. Would you support the creation of enterprise zones?
MR. WHALLEY: I think if there are to be enterprise zones, there has to be a significant difference in the level of incentive that is provided. I think enterprise zones, to have the name enterprise zones is not significant. I think in some regions, particularly, for example, recently in Prince Edward Island, they have introduced pretty significant tax incentives. Looking at Father Greg's responses to the committee, and I know through BCA, I think this year they have somewhere in the order of $1 million or $1.5 million to invest in community projects. The level of investment that is required in our region is massive. It is many times $1 million. To get that type of private sector investment into a community where there is a deteriorating infrastructure and where there is a lack of advantages, I think you need a more substantial incentive than we have probably seen in the province.
I know from talking with representatives of the Finance Department, provincially, that there is some concern with that type of a policy but my view would be the best possible policy would be a policy that would provide an incentive to the private sector to invest in regions of high unemployment. That is certainly allowable under the World Trade Organization rules that that type of a policy could act as an automatic stabilizer, but it has to be a substantial incentive because what you are asking the private sector to do is substantial, if you are asking them to risk money in a high-risk or higher-risk area of the country or the province. I'm generally in favour but it has to be substantial.
MR. BOUDREAU: The other question I have, I read an article just recently. I believe you regard transportation as an important link to economic prosperity.
MR. WHALLEY: Yes.
MR. BOUDREAU: I read an article where you indicated roads. Do you also feel that rail is vital to the Cape Breton economy?
MR. WHALLEY: Yes. I make two points there. That is one of the principal reasons we are putting such effort into the Port Development Plan. We think that the railway in Cape Breton is in some jeopardy. We think one of the ways that we can build traffic for the railway is to build traffic through the Port of Sydney and that is what we are trying to do. I would also say because we don't have a passenger rail service, that highways are the principal mode for most people to travel through Cape Breton. Air travel, for a lot of people, is prohibitively expensive and there is no passenger service. So it comes down to roads in Cape Breton, as in probably a fair bit of Nova Scotia, and the roads are in serious condition, particularly many of the important roads. We don't have the national highway system in Cape Breton. We don't
have a limited access 100-Series Highway that goes from Port Hawkesbury to Sydney. That is work that has been planned for many years and there is not the money to do it.
MR. BOUDREAU: One of the concerns I have always had was that there are, and has been in the past, good-news stories in regard to economic development. I will just indicate Silicon Island as one. The film industry was another until just recently when the tax credits were removed by this present government. Now do you feel that there is not enough marketing or good news coming out of Cape Breton? All I seem to hear up here, particularly in Halifax, is gloom and doom for Cape Breton but in fact there are many agencies and individuals such as yourself and others, who are working very hard in bringing economic prosperity to that particular community.
MR. WHALLEY: I think there are a number of good things happening - and certainly Eileen Lannon Oldford from the Cape Breton Economic Development Authority is here today - and CBC and CBEDC have accomplished, I think, good things, significant things but the fact of the matter is that the region has a declining population. The region still has, in my view, I think it is the third highest unemployment rate in the country, extremely low participation rate at just over 50 per cent, a declining assessment base. The region is in trouble and there is no getting around that. There is no marking job that you can do to cover those facts up. It is a reality and that would probably be our issue.
I think we have to set targets for the region and clearly indicate what we have to do, not only in terms of infrastructure and investment but in terms of a broad variety of policies on transportation and energy, particularly key to start to make a difference in the region. I don't think we have had those targets.
[2:00 p.m.]
We have a lot of the economic development agencies moving apace and doing good projects. The projects put together may be holding the level of employment but the participation rate is very low. You should be getting more people into the labour force and the population is declining and the assessment base is declining. So what we are doing overall isn't sufficient if your goal is to stabilize the economy and provide a platform for growth. I think that is what Father Greg was reflecting in his presentation to you that there are other policy measures, whether it is tax incentives or decentralization or strategic infrastructure investment that are required to stabilize the situation in Cape Breton. If the decision is made that you are going to let the economy continue to fall to some level, then those things aren't done. If the decision is taken that you want to stabilize and grow that economy, there are certain things that absolutely have to be done that are currently not being done. I think this is a fact.
MR. BOUDREAU: Okay but I want to make sure I am clear and I understand what you are indicating. Do you feel that under the present system, adequate initiatives have already been taken with the tools that are being provided or what we really need in Cape Breton is more tools to ensure that we can prosper and move forward in economic development and that under the present trend, what we have now, we are working at capacity with what we have?
MR. WHALLEY: I wouldn't go that far. I would probably agree that there is a requirement for a different set of tools. I would say, though, that I think there are some changes that we can make in our own house that we are trying to make and part of that goes to the economic development structure, I think, which has been cumbersome, in my view. I think there needs to be an integration of that development structure. You currently have ECBC and the growth fund and CBC and the province and community development corporations and the municipality and various voluntary groups and groups like BCA and New Dawn all with independent boards, all with strategies, some of which are related and some of which are not. It makes for, I think, probably a very confusing environment for business and an unnecessarily complicated environment to do economic development. It doesn't have to be that complicated and it shouldn't be that complicated. It should be a very clear line of accountability and responsibility and I think if you did that you would get better use from the resources that you are applying as well.
MR. BOUDREAU: So under the present set-up, really, the municipality is not responsible for economic growth, the province and the federal government are. So really what you are considering then, is you are looking for a say in the economic growth. Are you prepared to pay? The province and the federal government contribute a great deal of money in this. I have some concerns over the amount of money that CBRM can go here. Are you really looking for something here that you can deal with financially? Are you going in over your head or would you suggest - I would suggest, not you, I guess I would suggest - that if we work with the tools that we have now, it is a more inexpensive way for the municipality to proceed?
MR. WHALLEY: I think any municipal government in Canada, except it is kind of a funny situation because it is the wealthier municipalities who are able to do economic development. It is the poor municipalities who don't really have the money to do economic development and therefore you become more dependent upon the province and the federal government.
I think what the mayor is advocating and what I would accept is that his view is that the municipal government should have a great responsibility in planning, in setting the direction for the community and hopefully that would be supported by the provincial and federal governments but that the plan shouldn't be coming from a provincial or federal entity, that plan should come forward from the community and that we should set targets. I think
once we would set targets, the measures required to achieve those targets would become pretty obvious but there would also be a clear provision for accountability.
Right now, I don't think there is good accountability in the economic development system. I work in the field, and I don't understand a lot of things that ECBC and the growth fund are doing and I don't understand - I don't think that most of the people in the community understand - how decisions are made to allocate resources to one project or another and I don't think we ever know what the alternatives were. Well, we invested over here but what was available over here? When Dr. Brown did his plan in 1995, that is probably the last time that we had a plan for at least CBRM or for Cape Breton County. I think that plan had some deficiencies, because I don't think it talked probably sufficiently about the longer-term policies that would be required to support economic growth.
I would say, I guess, the message is that there are many things we have to do ourselves to clean up our structure and make it more accountable and have better integration, but there is also a substantial requirement for stronger economic instruments. If we don't have that, if we don't have those, if we don't have some level of decentralization or some level of substantial tax policy, some investments in highways and in the energy infrastructure that we need, no matter what we do over here, it is not going to stop the decline that is going on.
MR. BOUDREAU: But is the municipality prepared to fund, on a cost-shared basis, with the federal and provincial governments?
MR. WHALLEY: No, we don't have that money. As Mr. Taylor was indicating, our responsibility is the provision of municipal services. In the Port Development Plan, we went outside that framework, because in our view it was absolutely vital. We expected that the federal government, particularly, would help us with that and they didn't but it was our determination that that was a very important long-term issue and that we had to get control of those assets.
MR. BOUDREAU: Thank you, Mr. Chairman.
MR. CHAIRMAN: Mr. Whalley, I would like to introduce to you and also welcome Mr. Downe who is with us this afternoon. Mr. Epstein.
MR. HOWARD EPSTEIN: Mr. Whalley, I wonder if we could go back to the municipal equalization plan for a moment, if you could help us understand a bit about that. Maybe we could start with this. I take it that CBRM is, in fact, now in receipt of equalization payments from the province. Is that right?
MR. WHALLEY: Yes.
MR. EPSTEIN: Can you tell us how much that is per year, what it was last year?
MR. WHALLEY: I believe it is something in the order of $13 million.
MR. EPSTEIN: This is on a total budget of what?
MR. WHALLEY: Of $93 million.
MR. EPSTEIN: In the four years that you have been at CBRM, has it been in receipt of equalization every year from the province?
MR. WHALLEY: Yes, absolutely.
MR. EPSTEIN: It has been about that level or has it varied over time?
MR. WHALLEY: I know it was frozen for a couple of years. What it was in the first couple of years I am not quite sure. I know it was frozen for probably the last couple of years.
MR. EPSTEIN: Do you know for how many years CBRM or its predecessor, say the City of Sydney, would have been in receipt of equalization from the province?
MR. WHALLEY: It is complicated because there are eight predecessor units.
MR. EPSTEIN: Yes, I know.
MR. WHALLEY: A number of them would have been in receipt. I don't know the extent of the payments. I know certainly Glace Bay, for example, was on emergency funding. The County of Cape Breton, I think, was fine, was in very good health. North Sydney, I think, was fine. I think New Waterford probably did and certainly if the mining community still existed as independent entities, they would all be on emergency funding.
MR. EPSTEIN: But for the last four years, about 15 per cent or so of revenues has come by way of equalization. Is that a fair statement?
MR. WHALLEY: Yes, approximately.
MR. EPSTEIN: Can you just kind of give us a quick picture as to how that system works at the moment; that is, how the province actually runs its municipal equalization scheme at the moment?
MR. WHALLEY: I don't know if I even want to try that. I was introduced to this issue probably about three months ago because I was asked to do an issue paper on how we would approach equalization. I looked at the existing formula which was being discussed in
the roles and responsibilities exercise. Essentially, what I was asked to do was put together a set of principles and a different approach. My view was that the current system is based upon a core set of expenditures. My view was that type of approach protected inefficiencies and that it really wasn't consistent with the federal system.
Essentially, what I was advocating in the issue paper that I did for the Chief Administrative Officer was that you - for CBRM, at least - would like to move to a system that was maybe closer to the federal system, based simply upon each unit's revenue-generation capacity. Then the calculation of equalization payments, based upon the disparity in their revenue-generating ability with a standard provincial tax rate, that is, essentially, the calculation that I made.
MR. EPSTEIN: So the figures that you gave us before, the $23,000 per capita compared to the $46,000 per capita, are based on the core expenditures, not on a revenue-generating capacity, or is it?
MR. WHALLEY: No, it doesn't involve either of those. It is, essentially, the total assessment in the municipal units divided by population. If you make that calculation, the provincial average is $35,000. CBRM is $23,000. It is the eighth poorest - on that standard - of the 55 municipalities. HRM is approximately double CBRM's.
MR. EPSTEIN: Okay, all right, I understand. They are different items, then. I take it CBRM is anticipating receiving equalization again this year. You have indicated to us, in no uncertain terms, that you have a declining assessment base. So, clearly, you are going to need equalization again this year, is that right?
MR. WHALLEY: Yes.
MR. EPSTEIN: Presumably into the foreseeable future, isn't that also right?
MR. WHALLEY: Yes, very much so. But I would make one point and it is an important point. For example, if CBRM had been treated in the same way as the municipalities receiving the gas revenue from the assets associated with the gas infrastructure, if CBRM was treated in the same way with respect to Nova Scotia Power, we would stand to receive $5 million above our current level revenue. That is a substantial issue for us. That would make us less dependent upon equalization. Those types of issues are still out there. It is a more complicated formula than simply equalization payments, because there are a number of issues involved in terms of provincial and municipal services and in terms of how revenue across NSP and the gas assets are shared.
MR. EPSTEIN: Yes. I spent some time in municipal government so I remember - I haven't forgotten, by any means - some of the complexities of this. If we could just focus on equalization again for a moment. I take it, it is important to CBRM to receive the
equalization payments. Speaking as someone who represents an urban area, I have to say that there is a lot of willingness to CBRM receiving equalization payments.
What I wonder is, is it at all necessary to CBRM that those payments come from property tax? In the years gone by, surely the payments have come out of general provincial revenues. The $13 million you talked about, for example, came out of general provincial revenues. Is there any magic about it coming out of property tax?
MR. WHALLEY: No, obviously not.
MR. EPSTEIN: Can I ask again, Mr. Chairman, about the Port Development Plan? It is a different topic but the overall picture, as I understand it, Sydport is now in the hands of a private entity, the Laurentian Group?
MR. WHALLEY: Yes.
MR. EPSTEIN: Your hope at CBRM is to acquire at least two of the other three port facilities?
MR. WHALLEY: Yes.
MR. EPSTEIN: In fact, you have acquired one?
MR. WHALLEY: Yes.
MR. EPSTEIN: All right. I think you undertook, through Mr. MacKinnon, to let us have a copy of the business plan and what your hopes are. Can you tell us anything about that though? What I really wonder is, is what the potential is for port activities. I mean, if you do end up as the owner of two or possibly three of the other facilities and you have a private competitor, then the problem is, what actual traffic do you anticipate is going to be able to support the facilities that you will then own?
MR. WHALLEY: Well, to some extent, the private competitor is not really a competitor because the private competitor is really an industrial park with wharves, but clearly focused on offshore development. That is not really the focus of our activity at all. Our activity is specifically related to the Sydney Marine Terminal.
This year, we would expect somewhere in the order of 50,000 cruise ship passengers to visit the Port of Sydney which is substantial. We will have the opportunity this year to impose a head tax on cruise ship passengers, so that is a substantial potential new revenue source. Currently, the Sydney Marine Terminal supports the movement of all Imperial Oil's petroleum products into Cape Breton. That provides a substantial amount of revenue.
I guess our concern has been that for a newly formed port authority, it is going to put a tremendous amount of pressure on them to build activity at that facility, but we are hopeful that we can certainly cover our costs at the very least. We would probably look at revenues in the order of $400,000 annually and costs, probably in the $350,000 range. For the Sysco marine facilities, I think there is enormous potential to move a variety of bulk cargos - coal, gypsum, salt, limestone - but it is a very much different use than has been historical.
During the past decade, the facility has not been used in any one year more than 25 per cent of total available days. That is something that we would intend to change. The facility does have a 45-ton crane which can handle container traffic. So we would be looking at vessels carrying mixed cargo. We are actually quite optimistic that if we were able to acquire the Sysco facilities, that there is considerable business available, yes.
MR EPSTEIN: So the bottom line is that, even taking account of needed capital expenditures, you still expect to break even and maybe make a few dollars?
MR. WHALLEY: We would expect to make more than a few dollars at the Sysco facility if we are successful, and essentially the entire idea with the port authority is to reinvest that money, but obviously there are a number of issues, certainly not the least of which is how NSP, Nova Scotia Power, moves its coal in Cape Breton.
MR. CHAIRMAN: I think, now that we are going to get into the so-called second round, if I could, I would ask members if they could kind of shorten up their questions a little bit. With that, I go to John Holm. (Laughter)
MR. HOLM: Why is it whenever my name comes up it is always in reference to length somehow? (Laughter) A number of the points, I think, that I was going to get back to in the second round have been touched upon.
Just, if I could start off, maybe, this way. Certainly, Cape Breton has seen many come-from-away solutions for many years. A lot of these come-from-away solutions have not really been solutions at all, and they really haven't in the long run resolved the issues. There has been, in the past, the suggestion that industrial Cape Breton and the local community needs to come together and develop their own plan. That is what I hear the Cape Breton Regional Municipality is trying to spearhead and do; in other words, do what everybody has been saying for a long time should be done.
That having been said, when the former government brought about - I was going to say imposed - amalgamations of municipalities, part of the rationale for that was that that would help to spur economic development because it would bring together, under one municipal unit, all of what had been previously competing groups and agencies, and the various municipal units, so that there could be a more coordinated approach to economic
development. In the HRM, there certainly appears to have been some progress made in that regard.
Earlier in your comments, you listed off a whole host of different bodies that are trying to develop different parts of economic development. I wonder if you could just comment on how successful or what is being done to try to coordinate or to rationalize all of those who have good intentions at the local community but to try to bring people together in terms of coming up with a common or united strategy?
MR. WHALLEY: Well, for the first time in my four years in this job we were actually invited to Enterprise Cape Breton Corporation, during the past month and one-half, to participate in discussions on this very issue. The process was, Mr. Rick Beaton, who is the Vice-President of Enterprise Cape Breton Corporation, essentially laid out a matrix which showed the various organizations and the various activities or roles. Essentially, he is proposing, on behalf of the federal government in Cape Breton, that there needs to be a rationalization. I think this was a very good initiative. I think we are looking at it as a very positive sign.
What the municipality had put forward, from our perspective, is that we very much wanted to have the lead role in planning in infrastructure development and evaluation. But the idea was essentially to recognize core competencies that existed within the specific agencies to bring those competencies together, to give people specific responsibility but all under the guidance of a common strategy. That is essentially still in the works, whether it will be achieved remains to be seen but that is what we are trying to achieve.
MR. HOLM: Just to follow up on that. Are you optimistic? Do most of the organizations seem to buy into the concept? I mean, everybody, as you say, they may be focused on one particular thing. They may be extremely competent people, highly motivated, well-principled and intentioned, but if you don't see the larger picture and you don't know what everybody else is working on and finding out ways that you can work together, sometimes you don't have the successes that you might hope to have.
MR. WHALLEY: Yes, I would agree but, realistically, I would say, for example, ECBC's core budget is somewhere in the vicinity of $8 million to $9 million annually. The growth fund, obviously, is an agency that will be in existence for a period of time and its budget is considerable. It is somewhere in the order of $20 million annually. For CBCEDA or for ECBC to substantially change the situation in Cape Breton with a total budget of, you know, maybe $10 million, is completely unrealistic. It bears no relationship to the scope of the problem.
But, yes, I think the development agencies all recognize that there is a need to collaborate more closely, that there is a need for a greater level of accountability at the local level, and that the municipality has both the right and the responsibility to take a stronger role in economic development. I think that is recognized.
MR. HOLM: Okay.
MR. CHAIRMAN: I am going to move to Mr. Downe now, Mr. Holm. I appreciate your cooperation. (Laughter)
MR. DONALD DOWNE: Thanks very much. The issue on the Energy Council - and I am not overly clear on it - but one of the concerns that I have with regard to the PanCanadian development is that the potential for the processing could be offshore and those jobs should be onshore. Whether they are in Guysborough County or they employ Nova Scotians and hopefully more Cape Bretoners, in the infrastructure, from a construction point of view and from a developmental point of view. What has your organization done to impress upon the provincial government that those benefits are important to all Nova Scotia and that the processing facility should be onshore instead of offshore?
MR. WHALLEY: To be quite honest I think he asked that question.
MR. DOWNE: Oh, I'm sorry. Well then, I will let it go. I wasn't aware of that.
My colleague mentioned about the poor image that we have from Cape Breton from an economic development point of view. No matter where you travel in the country, there seems to be this image that is out there. But there is a tremendous amount of economic opportunity and success stories in Cape Breton.
MR. WHALLEY: Yes.
MR. DOWNE: I don't know. It's like under the bushel, you know, you've got to lift up that basket to show the great success stories that are there. We went towards some of the economic options there with the Silicon Island, Precision Manufacturing and things of that nature. World-class, top-of-the-line, self-motivated, self-directed management teams. They are as efficient and productive as anywhere. They can compete anywhere in the world. That is happening in Cape Breton. Great success stories.
That is the image that we need to start portraying in the Province of Nova Scotia and from Cape Breton in my view because that brings in investment. Right now there is a nervousness of investing in Cape Breton. I think we need to help change that with some of the success stories.
You mentioned about working together, and one of the major successes in South Carolina is being able to bring the universities, the provincial and state governments, the economic development wings of those areas to work on an overall strategy. I think what you are talking about is key, that all the different economic development initiatives that are up there, clearly we need an umbrella body to focus on a direct plan with outcome measurements, involving the people, involving the community, involving the businesses that have been successful and ones that need that process.
I would encourage that process. I don't know who the leader would be, but I think provincially there should be some way of finding a leadership role for that development. I am encouraged by my colleague's comments on enterprise zones. Those were meant to give tax initiatives for companies that are prepared to make those investments. I would hope that that would be part of that process because they have shown that they have worked in areas that need that sensitivity of government.
My question to you is, are you the one, if not, who should be showing that leadership and bringing everybody together under one umbrella to focus on how we can attack the chronic serious problems that are facing Cape Breton in a very real and legitimate way?
MR. WHALLEY: My view is that for the regional municipality it is the mayor, and I think the mayor is willing and eager to take on that responsibility and he is trying to do it. Obviously, it relates to a previous question, which is, generally speaking, our municipality lacks the resources to take the leadership role. We can only take the lead to some extent if the province and the federal government are willing to support allowing us to take the greater lead. We can do all the planning we want but there needs to be an agreement that resources will be applied to those areas that we identify as being priorities.
MR. DOWNE: The rail issue is one issue that was brought to our attention repeatedly. If this is a redundant question, just tell me. Rail was brought to our attention as being one of the key areas of opportunity. If you lose the rail, you are going to lose the capability of the competitive position of the companies that are currently there and would basically be a wall for further investment for manufacturing, for example, with the purpose of export. What have you done to secure the concern with regard to rail access for Cape Breton and industrial Cape Breton?
MR. WHALLEY: I know this would be an issue of relevance to Guysborough as well, because this is a very important issue. What I tried to indicate earlier, one of the driving motivators in the port development plan was essentially this very issue, that the railway is currently in jeopardy because of what has happened to both coal and steel. The railway needs new cargos, those new cargos are available if we are successful in the port development plan, and the port development plan can only be successful if there is a railway. We have to act very quickly this year to try and build new volume for the railway. We met with Jan Polley and Mr. Touesnard from the Cape Breton and Central Nova Scotia Railway. They see a lot
of potential, but they are also reflecting the fact that the Cape Breton section of the line is in serious shape right now.
MR. DOWNE: Would you agree that if we lose that rail delivery service in Guysborough County and up in Richmond, Cape Breton, industrial Cape Breton, that that would be one of the biggest underpinnings pulled away from economic self-reliance for that area, if that is taken away, strategically speaking?
[2:30 p.m.]
MR. WHALLEY: I would agree, but the transportation systems in our region are pretty much all undertapped: air is very expensive and it is a monopoly provider; the highways are, in my view, sub-standard, really without a reasonable expectation that there is a lot of money to address the issue; rail is in jeopardy; and the ports are not being used to their potential. Both the Strait and Canso, I think, are being addressed now through the superport corporation, but in our region we haven't had an organization, really, to try to invest in the port and realize the potential that is there.
MR. DOWNE: I understand that, but I am saying the infrastructure issues in industrial Cape Breton are key. You mentioned them all. One of the most strategic ones for economic development in the manufacturing sector undoubtedly has to be rail. You cannot truck all that product in and truck it out and be as competitive as you could be with rail.
MR. WHALLEY: But unfortunately that is what is happening, actually. There is a lot of product that is on the highway, and that is one of the reasons the railway is in jeopardy. To some extent that also goes to policy, there has to be policy related to what activity should be on the rail and what activity should be on the road. That is not there either.
MR. DOWNE: You are saying that the provincial government should regulate what should be on the road and what should be on rail?
MR. WHALLEY: I am saying whoever has responsibility, provincially or federally, to my way of thinking, and I will provide an example: the gypsum mine that opened in Melford, near the Strait. If that product had been on the rail, that would be sufficient to save our railway. Because there is no policy, that product is going to be on the road. You are going to have a truck through Port Hawkesbury every couple of minutes with gypsum. If there is no direction, in my cases the choice is going to be for road versus rail, even though the rail operators tell us they are very competitive. That choice is being made too frequently, in my opinion, because I think the heavy trucks on the highways are having a devastating effect on road budgets.
Without some form of policy that says bulk cargo should be on rail and other cargos can be on the highway, I think we are losing, in many parts of Canada - rural Canada particularly - fundamental infrastructure. Once it is lost, it is much harder, as the people in Guysborough know, if it is not there, it is very hard to put in place. We are trying to save what we have, and that is hard enough. I can't imagine what it is like to actually recognize that you need a railway but not have the money to be able to do it. It is a chicken-and-egg, without the rail you can't advance.
MR. CHAIRMAN: Mr. Whalley, I wonder if we could, on that note, just shift gears a little bit here. You provided, I think, undoubtedly, leadership regarding the purchase of, and I want to go back to the government wharf and your bid on Sysco's marine terminal. I am a little bit concerned. As I understand it, you don't have status or standing or a seat on CBCEDA.
MR. WHALLEY: The municipality certainly does, we would have two seats.
MR. CHAIRMAN: Yes. I just want to be clear, just for my own curiosity, if for nothing else. You are the Economic Development Officer for CBRM, and you are not on . . .
MR. WHALLEY: The CBCEDA board, no.
MR. CHAIRMAN: Has it been discussed at the council level?
MR. WHALLEY: I think that is one of the issues that we are currently addressing. No. Generally the structure has been that we would have two council members on the board of CBCEDA, generally one would be the mayor and until the most recent election, we would have had Mr. Kavanaugh, who is the Chairman of CBCEDA as well as Murray Johnston. More recently we have the mayor and Councillor Claire Detheridge as members of the board.
MR. CHAIRMAN: You say there has been some dialogue about the fact that you are not on there as the director.
MR. WHALLEY: I think there has been some dialogue to that effect, not specifically that I am not on the board, I don't know if that is an appropriate issue, but it would be more that the CBRM should probably have a greater representation on the board.
MR. CHAIRMAN: It seems kind of strange, I guess, just from my perspective. Maybe no one else finds it as such. Perhaps another question, I am not sure if you are the appropriate individual to ask, but from media accounts I realize that there was a recent lawsuit against CBRM regarding the wrongful dismissal of a firefighter. I am just wondering, do you have any indication what the potential costs of that lawsuit are going to be?
MR. WHALLEY: No.
MR. BOUDREAU: Mr. Chairman, on a point of order. In all fairness, is that really a fair question coming from the chairman in regard to economic development?
MR. CHAIRMAN: I guess that would be up to the witness. If he feels he could answer the question, Mr. Boudreau . . .
MR. BOUDREAU: Mr. Chairman, in all fairness, Mr. Whalley is an economic development manager, he is not the CEO or involved in the financial aspect of the municipality. I feel it is a very unfair question.
MR. CHAIRMAN: I will withdraw the question if you have a concern about it.
MR. BOUDREAU: Thank you.
MR. CHAIRMAN: Some people have expressed to me concerns about the whole fire service within the CBRM. I would think that the director of economic development would probably have some information on some of the decisions regarding the structure of CBRM.
MR. BOUDREAU: I can appreciate that, Mr. Chairman. A simple phone call to the fire director at the CBRM, I am sure, will answer any question that you or any of your colleagues may have.
MR. CHAIRMAN: With that, Mr. Boudreau, are there any further questions for Mr. Whalley? I seem to have touched a sensitive nerve there, Mr. Epstein.
MR. EPSTEIN: I don't know what was going on with that one. Mr. Whalley, can I ask you something about JAG? Here is what I am wondering about, the process doesn't seem to be moving along very quickly. I heard you give some comments earlier about what the time estimates were and some of your concerns about this. I guess what I wonder is first, to what extent is there any kind of component in the plans as presently developed that will have any kind of significant economic spin-offs and stimulus for the CBRM area?
MR. WHALLEY: There are probably two schools of thought on that issue. One would be that there are enormous benefits associated with the environmental remediation of the Muggah Creek watershed. My approach would probably be on the other side, that a lot of money could be invested in the site without tangible benefit. I think the issue for the people of our region is to use the scarce resources available to create a sustainable economy and environment.
To me, the Muggah Creek issue has always been more of a technical issue, as opposed to probably a community issue that, I think, there are specific options in terms of how to address the issue. From an economic development perspective it would be important to address it as quickly as possible and I think it has been delayed. I think that certainly has hurt the community and hurt the image of the community and I think it has been extremely unnecessary.
MR. EPSTEIN: How would there be tangible economic benefit?
MR. WHALLEY: If you invest $700 million - and the estimates coming from JAG are somewhere in the order of $700 million - in any effort there will be economic benefit. The question would be . . .
MR. EPSTEIN: I agree with you 100 per cent on that, but that isn't quite what I meant. Let me focus my question a little bit more. It is perfectly obvious to anyone that if levels of government go in and spend a large number of dollars on any kind of project that while that money is being spent, that represents a regional economic investment. What I am concerned about is what kind of longer-term benefit will that represent? This is akin to if the money does no more than pay for the project itself, then you are seeing the equivalent of a kind of a construction shot in the arm that any kind of project gives. What I am wondering about is, what is the opportunity for anything that would be of any kind of lasting benefit in the area?
MR. WHALLEY: I think there are two responses. I think the federal Environment Minister indicated that it wasn't principally an economic development issue, it was an environmental issue, it was an issue of cleaning up a contaminated site because you had to cleanup a contaminated site.
MR. EPSTEIN: Believe me, we all understand that.
MR. WHALLEY: The second approach would be that from people in the community there is an expectation, probably, that as a result of the clean-up process there would be exportable technologies and expertise. I think that is the question because my personal view would be that those technologies and expertise exist, and that there may well not be the type of technology transfer and the ability to export that expertise that perhaps many people are assuming.
MR. EPSTEIN: You are saying you don't see that yet?
MR. WHALLEY: I am saying that I am quite skeptical about this whole issue, yes.
MR. CHAIRMAN: Mr. Epstein, in the interest of time and the spirit of cooperation we will move along to a couple of other members and then we will call this hearing a day. Mr. Boudreau.
MR. BOUDREAU: Mr. Whalley, just briefly because I know the committee now wants to move forward in some direction, I don't know which way. With regard to the CBRM and the many questions I heard that were pointed your way today, the CBRM is approximately six years old, it is going through some difficult growing pains, I guess is the best way to put it, it also inherited a great deal of difficulties from the other municipal units upon amalgamation. Many of the issues you talked about with regard to - for instance, CBCEDA, there are two board members who were appointed by the council of the CBRM. Do you feel in all fairness, under the existing circumstances that the CBRM is working through, that progress is being made in regard to the Cape Breton Regional Municipality and in the mayor, the CAO, the fire service or what have you, the growing pains and difficulties that are an inheritance, that we're beginning to get on another page now and it is time to move forward?
MR. WHALLEY: I wasn't in the employ of one of the predecessor units so I don't know what the situation was like prior to amalgamation. I believe very strongly that amalgamation was very good for the Cape Breton Regional Municipality. I think it has allowed the people in the community to speak with a common voice and set a clear direction. There have been a lot of difficulties moving through that whole process and some of those difficulties remain today. With respect to the management of CBRM, I have every confidence in the management. I have worked in the federal government for four years and I think they are an extremely confident group of people. Specific to Mr. Taylor's question, I think all of the facts on that case were not released publicly. I think, like any other specific, there are many issues that weren't released that are important to make a knowledgeable evaluation of the issues.
I think we are trying to progress as best we can, I think there are real problems associated with a lack of resources. Given the lack of resources I think it is an efficient, capable administration. Unfortunately, we have lost some very key people during the last couple of years because of the difficult environment in which we work, like Gordon MacInnis probably being one of the foremost administrators, has since moved to the University College of Cape Breton, but it is a capable group, I have great confidence in them.
MR. BOUDREAU: Thank you.
MR. CHAIRMAN: Mr. Boudreau, I certainly hope I didn't imply that the concern I had with that wrongful dismissal case was inherited from the other previous municipal units, as per amalgamation. Mr. Holm.
MR. HOLM: I was just wondering if you are able to provide - I don't mean today - a couple of bits of information just to satisfy my curiosity if it is available. I would like to know what the total value of emergency funding provided to the different municipal units in the year prior to their amalgamation was and how that compares to the amount of emergency funding, the $13 million that is provided today? I think there were only a couple that didn't receive emergency funding before, and part of the amalgamation was to have the county equalize with the rest of the municipalities. I would love to see those figures for comparison's sake. The other thing is there have been some service exchanges that have taken place with the province assuming some responsibilities for certain things and the municipality for certain others. If the municipality has a figure on the dollar value that the province assumed and the dollar value that the municipality assumed then it might be interesting to look at those two things and then see.
MR. WHALLEY: There was a very good paper authored by a gentleman out of a university in the United States who actually did his thesis I think on amalgamation in Nova Scotia and he compared the situation in HRM and CBRM and those figures are actually in that paper, those figures are a couple of years old now but I will get the figures for you.
MR. HOLM: I appreciate that. Thank you.
MR. CHAIRMAN: Thank you, Mr. Holm. I guess we have a couple of more members there that would like to ask questions.
MR. RONALD CHISHOLM: Just one question here, the EDS call centre that Sydney has now, what has the impact of that been on industrial Cape Breton?
MR. WHALLEY: Enormous. I guess 700 or 800 jobs now, at a time that it was badly needed. More importantly probably, it has provided - confidence might be too strong a word - but stability and I think for many people a certain degree of optimism. It came at a very fortuitous time and has been most important, no question.
MR. CHAIRMAN: I think the last word as per usual goes to you, Mr. Chipman.
MR. CHIPMAN: I'm not sure Mr. Whalley is the one qualified to answer this question; but, weekly, daily, we read the paper and there is usually one or two issues that come up whether it be the war in the Middle East or whatever and I'm not comparing this to that but JAG, I read about it continuously. We've spent $50 million on apparently an incineration project, another $60 million on studies. We have a situation with the Halifax harbour with a sewer and it is probably equally as important to the citizens of Halifax to have a safe harbour and of course water, not drinking water, but are we ever going to get closure on the Sydney tar ponds? This has been going on for how many years now, five or six years now. I guess it something I read about in the paper and I'm from the western end of the province, I'm not from Cape Breton Island. But it is something I read about and I question,
when is it going to come to fruition, when are we going to have closure on this, are we ever going to have closure?
MR. WHALLEY: I think that is absolutely the intention of the current mayor, that there will be a plan to move forward, there will be closure. Hopefully it will be in our lifetime but I think very definitely it's hurting the people of Cape Breton most importantly and he recognizes that and it's an issue that has to be addressed. I would say in terms of the media attention that it attracts it was evaluated as probably the most contaminated site in Canada so it does attract a lot of attention. Technically the situation can be dressed, it is more to get the community focused on doing that as quickly as possible and moving forward and I think that is a challenge he has undertaken and I think he'll make progress. He sees this as probably his top priority in his term.
MR. CHIPMAN: Just one more comment Mr. Chairman. I spoke to an oilman that worked in the oilfields and he said it's a very simple solution to pump that liquid out of there and remove it, get rid of it in some other form whether its incineration, whatever. That's all I have to say, Mr. Chairman.
MR. CHAIRMAN: Thank you, Mr. Chipman. I would like to thank on behalf of our Economic Development Committee, you, Mr.Whalley, for coming in. You've been very patient and understanding and we found it, I think I can say for everyone, quite helpful and enlightening.
We have some other business committee members, just a couple of items to attend to. First is our next hearing date is scheduled for April 3rd and Darlene is attempting to bring someone in from fisheries as per our agreement. Darlene, would you want to comment on where you are with that on bringing someone in to our next hearing regarding the fisheries, inshore fisheries?
MRS. DARLENE HENRY (Legislative Committee Clerk): I won't have a definite answer from the Dragger Association, I know that the committee wanted to hear from the Dragger Association and Clearwater but, they are not sure if they can make it, so I just need permission to call in some other groups on the chance that these guys can't come in. Just to finish on this issue, I don't know how far you want to go with it.
MR. CHAIRMAN: Well, we have had two hearings regarding the fishery. I think we agreed, some of us somewhat hesitantly, to bring in another witness regarding the fishery and that situation.
Now, the next scheduled hearing after April 3rd is April 17th and we agreed, by committee, to bring in the Ready Mix Association of Nova Scotia. Probably in early May we will have an organizational meeting and we will ask all caucuses to bring in a list and we will discuss our individual priorities and caucus priorities and away we will go.
With that, I would ask for a motion to adjourn.
[The committee adjourned at 2:51 p.m.]
