HANSARD
Printed and Published by Nova Scotia Hansard Reporting Services
Ms. Maureen MacDonald (Chair)
Mr.Chuck Porter (Vice-Chairman)
Mr. Alfred MacLeod
Mr. Keith Bain
Mr. Graham Steele
Mr. David Wilson (Sackville-Cobequid)
Mr. Keith Colwell
Mr. Stephen McNeil
Ms. Diana Whalen
In Attendance:
Ms. Rhonda Neatt
Legislative Committee Clerk
Mr. Jacques Lapointe
Auditor General
Ms. Elaine Morash
Assistant Auditor General
Mr. Gordon Hebb
Chief Legislative Counsel
Department of Health Promotion and Protection
Mr. Duff Montgomerie
Deputy Minister
Ms. Tracey Williams
Senior Director
Ms. Tracey Taweel
Communications Director
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HALIFAX, WEDNESDAY, MARCH 28, 2007
STANDING COMMITTEE ON PUBLIC ACCOUNTS
9:00 A.M.
CHAIR
Ms. Maureen MacDonald
VICE-CHAIRMAN
Mr. Chuck Porter
MADAM CHAIR: I'd like to call the meeting to order please. Today we have before us witnesses from the Department of Health Promotion and Protection to examine information regarding the Commonwealth Games Bid.
At the outset, I would like to say a couple of things. First of all, this is not a public inquiry. There has been some confusion, I think, in perhaps the media or the public because there have been people who have called for a public inquiry, that this in fact is what the Public Accounts Committee is doing, and I think we all would agree that that goes far beyond the scope or the mandate of this committee. This is a Standing Committee of the Legislature and our job, as outlined in the House of Assembly Act, is to scrutinize the Public Accounts of the Province of Nova Scotia and all matters that concern members of this committee and are determined by members of this committee. We're an all-Party Committee of the Legislature with equal representation from the three political Parties in the House of Assembly today.
The second thing I would like to say is that we have an extremely large amount of material which we received quite late yesterday, and for clarity I want to indicate that in these two binders the documents that we've been given have been more or less separated into documents that we have been requested to hold in confidence by the Department of Health Promotion and Protection, and documents that can be released into the public domain.
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Because we received these documents so late yesterday - and that's not to assign blame, we're very pleased to have had the release of these documents to us - we haven't had an opportunity to really go through the normal channels that we would use to determine why information should be kept private, and if it should indeed remain in the private domain and confidential.
So what I'm proposing that we do this morning is take a few minutes and go in camera and hear from the witnesses with respect to the request for confidentiality on documents, that we go in camera and we deal with the request for confidentiality, and that we then come back into the public domain and we proceed accordingly. So that's what I'm proposing.
Mr. Montgomerie.
MR. DUFF MONTGOMERIE: Madam Chair, if I could, we did deliver the documents Monday around 1:00 p.m., and I realize there are a lot of them - as Minister Barnet had indicated, we want to give you everything. There are some intellectual property issues that we're wrestling with and that's what we want to chat with you about in camera, because we're concerned that we might put the property of some architects and others at risk. They're very minor things, quite frankly, but I'd appreciate that. Thank you.
MADAM CHAIR: I recognize that, thank you.
Mr. Colwell.
MR. KEITH COLWELL: Yes, I think we should go in camera to discuss the issues that the staff have brought forward. I'd like to do that in the subcommittee rather than in the whole committee. I would make a motion that we do it that way and convene the subcommittee as quickly as possible after this meeting today to do that, and with staff present, so they can make their arguments why or why not they should be made public. I make that a motion.
MADAM CHAIR: Is there any further discussion on the motion?
Mr. Porter.
MR. CHUCK PORTER: Thank you, Madam Chair. I will agree with the motion. I think it is very, very important that we have an opportunity to go through the material that was provided, there is a lot of it. I know there will be some very good reading there, I am sure, and I know there is a lot of good information to come from all parties, I guess all three that we've invited here, including the Department of Health Promotion and Protection.
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I'm not totally opposed, though - I know we had some discussion earlier - the witnesses are here if we want to move in camera to have a little bit of time, but I agree that the subcommittee probably should review and determine and make a recommendation as to what should stay or maybe not, after we have heard from the Department of Health Promotion and Protection.
MADAM CHAIR: There is a motion on the floor. I'd like to speak to it as well. I have no disagreement with the subcommittee making the decision with respect to the documents we've been asked to withhold, but I would like to have an opportunity to have an in camera discussion with our witnesses about why those particular documents should be held in camera so that the subcommittee knows what it is that we're being asked to withhold and what the rationale for that is from the department.
MR. COLWELL: That was the intent of my motion, to make sure that the staff will be there, as well, to tell us why they think it should be held in confidence and the reasoning behind that, and then we can make a decision after we hear from them, and actually look at the documents. I still believe that it should be in camera, with the subcommittee, to discuss this, as we have done on every other set of documentation we've done in the past.
MADAM CHAIR: Mr. Wilson.
MR. DAVID WILSON (Sackville-Cobequid): Thank you, Madam Chair. I would think that since the staff are here, our committee is here, that we do go in camera, hear from the deputy and, after that, if it warrants a motion, I think it might be more appropriate. Since the committee is here and the staff is here, I don't see why we couldn't go in camera and then come out with a result, as the member's motion wishes, to have the subcommittee look at this further. I think it would be important to hear what the staff have to say.
MADAM CHAIR: Mr. Colwell.
MR. COLWELL: It's not my intention not to hear from the staff this morning, that's not the intention. This motion is only to deal with the confidential documents. I truly want to hear from the staff this morning. I'm going to make another motion when we get to that point regarding that. I think it is important that we hear from them this morning, any statement they want to make or whatever, but that's a separate issue from what I'm talking about. I'm only talking about the documents. Normally, the way we handle them is that the subcommittee reviews them, goes through them with the staff, they're present, make decisions whether or not those should be made available to our committee, and move from there.
I'm a firm believer, as you know, that everything possible should be made public that doesn't harm maybe some independent company, that would hurt them for whatever reason. But that's an argument they can make and go from there, but that's my intent. I think we're
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talking about two or three different things here. My intent is to only look at the documents as quickly as possible, in the subcommittee, with the staff present, then deal with those promptly, and then move them forward from there. That's the intent of this motion, and I want to discuss, after that, what we hear today and what we do today.
MADAM CHAIR: I don't want to prolong this discussion, I'd like to get to the matters in front of us as quickly as possible. I want to remind the member of the difficulty I've had trying to schedule a subcommittee. The idea that we will schedule a subcommittee, bring these members in front of the subcommittee and have the discussion on why documents should not be released at that time, when we have them here today, where they can tell us their perspective on why they shouldn't be released, what we're being asked. We can hear that information and then the three of us who constitute the subcommittee will have that information and it will be easy for us to meet.
But my concern is this, trying to schedule a subcommittee meeting has already been very difficult; scheduling a subcommittee and bringing the staff who are here to that subcommittee will even be worse. So my suggestion - and I will support your motion that the subcommittee makes the decision on what is kept in confidence or not - that we hear from the witnesses, while they're here this morning, about the documents that have been requested to be withheld and the rationale for the withholding of those documents. That's all we need do, is hear from them and not bring them back to a subcommittee meeting.
MR. COLWELL: Perhaps I should have made my second motion first. My intention today, and what I would like to see today, is where we simply did not have enough time to go through this information and we can't ask questions that we probably should be asking, what I'm proposing on the second thing will cure your first problem. What I would like to see, and if the committee members agree, is that we only hear the presentation on this issue from the staff who are present. We ask no questions today, because I don't want to lose the opportunity of all the members who are properly informed asking the questions we should ask - but have the ability to hear their presentation today which can be much longer than maybe they anticipated.
Immediately upon finishing that, the subcommittee can meet this morning and make a decision on these documents and resolve the whole issue today. This is something that's very time-sensitive and I want to move this forward as quickly as possible, but I want to do it in a situation as we normally would handle these documents. That's what I'm proposing. The subcommittee can meet while the staff is here today - we can meet, make this decision and move forward today. I'm not proposing this be delayed at all.
MADAM CHAIR: There is a motion on the floor.
Mr. Wilson.
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MR. DAVID WILSON (Sackville-Cobequid): I understand we have a lot of material - I tried to go through some of it, I know some of the members did and we probably didn't have as much time as we would like, but we do have the time blocked here today. I would assume that most members would have several generalized questions about this issue, it has been in the forefront of the media and in the public for many months now. So I would encourage we take this time to ask questions of the staff - from what the member is indicating, we're definitely going to need to have the deputy and his staff back for another Public Accounts meeting to deal with the information that the subcommittee will deal with. I hope that we can continue with that today, with generalized questions on this issue. I foresee that we will have to call the deputy minister and his staff back again at a future date.
MADAM CHAIR: There's a motion on the floor that is, as I understand it, the subcommittee will meet to make a decision with respect to the confidential information, or the information we've been asked to keep in confidence.
[9:15 a.m]
Would all those in favour of the motion please say Aye. Contrary minded, Nay.
The motion is carried.
MR. COLWELL: Madam Chair, I'd like to make a second motion, again strictly based on the fact we haven't had time to go through this information in detail. I know my colleagues have been working tirelessly to try to get through this, and so has our research staff, but we just haven't been able to get through enough of it to ask the proper questions we need to ask today. Therefore I would make a motion that we hear the witnesses today to whatever length they want to go to, with really no time limit as would typically be the case when they come to this meeting, and next Wednesday we convene the meeting again and we invite the same staff back after we're prepared with questions so we can ask a lot better, more intelligent questions - maybe that's the way to put it - and I make that motion.
MADAM CHAIR: There is a motion on the floor. Is there any further discussion on this motion?
MR. PORTER: We would support that. I think, from discussion, we talked a little bit earlier this morning that perhaps Health Promotion and Protection would be coming back anyway based on the amount of material that we do have to get through. I will support that motion, although it will be a second trip back, perhaps, or it could even be a third trip back, who knows by the time we get through all of the information that we have asked to be provided to this committee on this particular topic.
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MADAM CHAIR: Well, I kind of wish I hadn't stayed up all night reading as you promised me, Mr. Colwell, last week, that you were going to do when we got the information.
Mr. Colwell.
MR. COLWELL: Madam Chair, actually we had staff do that, and some of our members did that, but the point was, we expressed some very serious concerns last meeting about having this information in a timely manner. I know the staff provided it, and the staff of the Committees Office worked very hard to get it to us as quickly as they could. It's not their fault. It was just so much information and, in reality, I know myself and Mr. Porter had expressed severe concerns about not having this information.
What I am worried about, and what we are worried about is making sure we don't miss something that we should be asking a critical question on. If we miss a critical question and miss this opportunity, it's long lost. I would like to see this go forward today. I would like to see us meet on Friday to talk about this, but it's not practical. So I want to be very clear with this. It's not because we want to delay this in any way, but if we are going to do this, we have to do it properly. We have to make sure that we address the issues and the concerns of the citizens out there who are very concerned about the several millions of dollars that have been spent on this and then dropped.
I think this is the biggest fiasco I have ever seen, quite frankly, putting it sort of bluntly. I can tell you, I want to see this information in more detail and I want to make sure that I can come in here, as my colleagues do, and all Parties should want to do, to make sure that this information is out there, the public has it, so they understand what has transpired. When we spend millions of dollars on something like this and we don't see any results from it, when we have so many other things and issues that we have to address, that money could have been spent more effectively. That is where I am coming from and that is why I move this motion today.
MADAM CHAIR: Is there any further discussion on the motion on the floor? The motion is to hear from the witnesses and then adjourn, essentially, and convene the subcommittee at that point. Is there any further discussion?
Mr. Wilson.
MR. DAVID WILSON (Sackville-Cobequid): Madam Chair, so is it my understanding that we will not have an opportunity to pose questions to the deputy minister and his staff?
MADAM CHAIR: If that motion carries, that will be the case, yes.
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MR. DAVID WILSON (Sackville-Cobequid): As I said before, the committee is here and I would expect that most members would have some insight to this event and this process of trying to get the Commonwealth Games. So I won't be supporting that motion.
MADAM CHAIR: Is there any further discussion? Mr. Porter.
MR. PORTER: Madam Chair, just to follow up on Mr. Colwell's point. I understand Mr. Wilson's point as well. However, I do think, again, no blame. Staff did a great job preparing this material, we certainly want this out, but I want to make sure that we are not providing the taxpayer a disservice, that we are doing what is appropriate, and we have the correct information, the most appropriate questions to come forward to gain that information.
MADAM CHAIR: There is a motion on the floor. Is there any further discussion?
Would all those in favour of the motion please say Aye. Contrary minded, Nay.
The motion is carried.
So, at this stage, I guess we will invite the witnesses to make a presentation. I was negligent in using our normal process, where we go around and have introductions from all of the members, which we will do at this stage, from the Auditor General and his staff, and introduction by the witnesses. You are very familiar with this process, I know, and you will have an opportunity to make your comments, your presentation to the committee. So we will do that.
I would like to acknowledge visitors in our gallery, Deputy Mayor Sue Uteck from the City of Halifax has joined us here today. We will start with introductions from Mr. Wilson.
[The committee members and witnesses introduced themselves.]
MADAM CHAIR: Thank you very much for being here today, and good morning. The floor is yours, Mr. Montgomerie.
MR. MONTGOMERIE: If I could, because I'm extremely concerned that people may have an impression that we're really concerned about securing a lot of documents, and we're not. There are only two issues. All the documentation that you have, quite frankly, including minutes to the Cabinet Issues Committee, minutes to deputies' meetings, key board minutes, the business plan, the PricewaterhouseCoopers report, all those items are not a problem. There are two minor things. The architectural drawings, the detailed drawings that are in the binders with the pictures, basically the architects who own those, there's a bit of an issue that we're trying to work out with the help of 2014 Committee and those architects to make sure
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they're comfortable. I suspect they will not be the centre of your discussion today or in the near future. It's a very benign request.
The other one is very simple as well. Sport Canada is the owner of the McMahon report. The McMahon report is in our possession. Sport Canada understands that the Public Accounts Committee has asked for documentation. They have no problem with us sharing that report. Their challenge is, they own the report, and by their own government criteria they cannot release it in the public domain until translation has occurred. So the ADM of Sport Canada has simply asked, as a courtesy, that I've conveyed to the chair, that we discuss that one in camera. The rest is free and open.
Our minister was very clear. We welcome the opportunity to be here. We would have liked to have come a little later, when we had this all sorted out and could give it to you in an organized and planned way that gave you the opportunity to be informed. But I want to make it clear, the province is here, we want to be here. We want to discuss this with you. That information is an example of hours and hours and hours and hours of hard work by a lot of people that resulted in a tough decision, and that's what you want to talk to us about and we truly understand it, but I felt, Madam Chair, I had to make that point. I hope you don't mind.
MADAM CHAIR: I don't at all, that is precisely . . .
MR. MONTGOMERIE: Thank you. So we won't have any questions, is that as I understand it?
MADAM CHAIR: That's right, today.
MR. MONTGOMERIE: Oh, I welcome the questions. It's unfortunate. So we speak to you, and then we leave?
MADAM CHAIR: Yes. You speak to us and then we're going to adjourn into the subcommittee. There may be some additional questions with regard to the documents that you've just made reference to.
MR. MONTGOMERIE: Thank you. Good morning, and we do appreciate the opportunity to be here. We thank you for the opportunity to discuss the 2014 Commonwealth Games bid and our province's involvement. I would like to open this morning's discussion with brief remarks that I hope will provide you with an overview of the process and some key milestones which ultimately led to our decision to withdraw our support from the bid process. I understand you have copies, so you can take these away with you.
In 2005, Premier Hamm and Mayor Kelly made the decision to jointly pursue the right to represent Canada in the international bid process for the 2014 Commonwealth
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Games. At that time, and many times thereafter, both leaders made it clear that the Games would only be pursued if they did not compromise the fiscal position of either jurisdiction. Publicly, the mayor, and now Premier MacDonald, have continually made that point.
The provincial stance on the importance of protecting our fiscal integrity was further supplemented with two other equally important and overarching caveats to our involvement. The Games would have to be "rightsized" for Nova Scotia, for HRM, for Canada, and leave a lasting legacy for the residents of this province, which would include partially addressing the significant infrastructure deficit we do have in this province.
As you would be aware, on December 15, 2005, Commonwealth Games Canada announced that Halifax would be Canada's bid city for the 2014 Commonwealth Games International bid process.
At that time the budget was estimated at $667 million, before inflation - and I know in the discussion of the figures I'm going to ask you to hold on to that term, you're going to hear "before inflation" and "after inflation." Our responsibility to Minister Barnet and to the Cabinet is the total cost of the games; our responsibility is to factor in inflation.
After the inflation was factored in, in the domestic bid, $785 million. In submitting the bid, both the province and HRM felt the financial estimate was achievable. The business case at that time seemed to be strong. We knew there was going to be a lot more work to come and detail to be looked at after we had won the domestic bid.
It is important to note that the very day Halifax 2014 was awarded the Games, they were informed - and I was in the meeting - that the templates and standards for developing the international bid had been changed. The new standards placed the bid development at Olympic-level standards - essentially this meant that the exhaustive process that had been used to evaluate the bid that four cities went through, and that we did win, was now obsolete. Soon after winning the domestic bid, the government partners - HRM, the Province of Nova Scotia, and the Government of Canada - agreed that the bid process would only proceed as a full partnership of all three public funding bodies.
In January 2006, a board was established which included the CEO of 2014, along with the CFO and Commonwealth Games Canada staff assigned to the bid. December - they win it; January - begin to get their house in order; but in late February - had to be in Melbourne and that was the first task of the group. Melbourne, of course, is where the Commonwealth Games were held, past, that summer, and it would give them an opportunity to lobby Commonwealth countries for the 2014 Games, as well as take part in the transfer of knowledge program with the Melbourne organizers.
It's then we began to see what going after an international bid really meant. Two components: One is what I call the electioneering side, the lobbying side; the other is the
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sheer technical weight of preparing the bid document. We began to see how important those two different dynamics were when we got to Melbourne.
For the first part of the Games, Minister Barnet, Dr. Hamm - at the request of Premier MacDonald - and Mayor Kelly, along with Chairman Fred MacGillivray, CEO Scott Logan, and assorted Commonwealth Games Canada board members, worked hard to meet with representatives from the 72 Commonwealth Games countries. In doing that they also hosted a major dinner and reception, had many private meetings, including with the delegation from Nigeria, Ireland, New Zealand and others. Some key issues and themes arose from those meetings.
[9:30 a.m.]
Melbourne had spent lavishly on the 2006 Games. Keeping in mind Melbourne had most of the infrastructure in place - but they were also a rival of Sydney - we soon learned the Sydney Olympics is something that Melbourne wanted to outdo and, for those of us who were there, it would appear that they did. They did spend a lot of money.
Several countries indicated to us that they were concerned about the direction the Commonwealth Games were going. What have always been called "the friendly games", the Commonwealth Games, was now beginning to be seen to be only viable for hosting by a very wealthy few of the Commonwealth countries. That was the first indication that we began to get and understand there was, I would say, a major issue within the Commonwealth around the direction of the Games.
Both Mayor Kelly and Minister Barnet began questioning Commonwealth Games Canada officials, our own bid staff, ourselves, and consultants as to whether or not we could host such a Games - from those discussions came the direction I spoke of a few moments ago, the imperative to ensure that the Games were right-sized. Not only do they have to be fiscally responsible, a sound business plan, they also have to be right-sized for HRM and Nova Scotia, but also for the Commonwealth as a whole.
Upon returning from Melbourne, both the province and HRM focused on ensuring that 2014 had appropriate fiscal and human resources to prepare as detailed a bid budget as possible.
Both HRM and ourselves recognize the huge infrastructure deficit. It's one of the reasons why we got into the bid process. We knew it was really important to give 2014 the capacity to be able to do an in-depth review of the bid piece, particularly around the infrastructure piece, to do really detailed work.
We are a small but dynamic province. We needed to be sure due diligence was done. To that end, the province and the HRM very quickly committed funds to 2014 - $3.5 million
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from the province and $3 million from HRM toward a budget of $14 million to build on the international bid. Both jurisdictions identified full-time leads to work with the 2014 committee to ensure they were receiving full co-operation from both levels of government. For Nova Scotia, Tracey was our person. Tracey reported to me, I reported to Bob Fowler. Tracey's responsibility was to ensure between the 2014 committee and all of our government agencies there was complete collaboration on the one hand but, near the end, as the budget got prepared, due diligence on the other.
Once staff was in place, the potential funding partners - HRM, the provincial government and the federal government - mandated the 2014 bid committee to develop a proposed games budget and including detailed operating, capital and business plans for review and determination by the funding partners of the respective contributions and guarantees. This is important, too. I know a lot of information, and you will hear a lot.
Basically what the funding partners were saying to the 2014 committee, which they clearly understood, go do your work. Go develop a business plan for these games. Keep in mind the business plan has to be fiscally responsible in the context of HRM and the province. Go do that. When you are ready, come to us. When you come to us, we will take that information away, we will do our due diligence as funding partners, we will have a discussion as to whether we think the amount is appropriate, whether we think there should be more money, whether we think there is not enough. That is an important dynamic to remember. That piece was always there, that at the end of the day it was the funding partners that had to review the business plan.
It's important to note that from January 2006 onward, the 2014 bid society, along with government partners and board members, worked tirelessly to develop the most detailed and complete budget ever developed for games of this nature. We cannot say enough for the work that the 2014 committee did. You are seeing some of it today. It is extremely detailed, we strongly feel what really truly it costs to run the 2014 Games, based on the international criteria that they were given.
The time constraint under which the bid committee was working was incredibly contracted and if at the end of the day you were to ask us, or ask me, what was one of the worst things that you had to deal with, that the 2014 committee had to deal with, the funding partners had to deal with - and we began to see it after we left Melbourne - it was the incredibly tight time frame to do all this detailed work. You have heard the phrase, Scotland had a year advantage, and you might go, well, yeah, big deal. This is not to do with Scotland, don't misunderstand me, but basically, they did have a year, so the discussion we are having now, in front of the Public Accounts Committee, let's say hypothetically, I would rather be here defending why we are continuing on, rather than why we are not. Scotland did that a year ago. They did their stuff, got out of the way, they are moving.
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We have until May 9th, the 2014 committee in particular, to lodge the bid. Look at the incredible amount of detail from December 15, 2005, to basically May 9, 2007, they were asked to do. The funding partners were so collaborative that the federal government told us they were holding March 27th as their Cabinet meeting, that we were working toward, with the 2014 committee, at each step, we were trying to work with each other to keep moving the yardsticks. Again, the time constraints were incredibly contracted. Vancouver had two to three years to develop their stuff. Basically, the time crunch served to further intensify an already complex and detailed process.
This period of time was also intense from a federal-provincial relations perspective, in that we spent a great deal of time lobbying and working with our federal colleagues to fully scope out their financial involvement in the project. That took more time than we thought necessary. They were Canada's games. We found the federal government didn't seem at the first to really be able to say to us, this is what we think the money should be. We were sort of looking to them for guidance. They said, do your budget, come to us and make your case. Well, we did that and finally they did make their commitment, but it did take longer than we thought.
A successful conclusion to these negotiations was reached, with the federal government agreeing to contribute up to a maximum of $400 million - including inflation, including essential services, including security - to the Games if Halifax was the successful bidder.
There was a concern at the time that the federal government had capped their contribution prior to receipt of the budget or any form of due diligence. In effect, we said, we asked, where did you get the $400 million cap? Despite these concerns, which were expressed multiple times in various venues at various levels, the federal government went on to publicly announce that contribution in late 2006.
What did come out of those discussions was a reminder from Premier MacDonald to Prime Minister Harper of our goal of fiscal gains that had to meet the fiscal needs of the province to which the Prime Minister referred to the Premier the same view from the Government of Canada. That did give us solace.
The work of the bid committee continued to intensify and on December 21, 2006, the Halifax 2014 executive committee was presented with preliminary figures around the capital budget. At that time, the local funding partners expressed concern regarding the amount of the potential Games budget expenditures and approved potential options for capital budget cuts. The preliminary budget figure discussed at that time was $1.375 billion, without inflation. In other words, in 2007 dollars.
The executive committee met again on January 24th and was provided a copy of the proposed budget. At that meeting, the local funding partners again expressed concern relating
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to the impending funding gap and reiterated our ongoing commitment to fiscal responsibility and a right-sized Games. Keep in mind the reference point.
The reference point - $785 million. Keep in mind the reference point. That's a reference point that my minister, obviously, and our Cabinet would ask us. That's where we felt a comfort level. That's where we signalled our ability to be involved in these Games at a particular level. Keep that as a reference point.
From the outset, the funding partners had agreed to a process for the evaluation of both the capital and operating budgets, which included internal and external expert review. In keeping with the agreed-upon process, on January 29, 2007, upon receipt of the proposed budget information and supporting documentation, each funding partner undertook to contract with an independent expert who began analyzing each major component of the budget.
Back to my earlier comments about the 2014 committee doing their job, developing the business case, presenting it to us - the funding partners - which they did on January 29th. As Scott said, when he presented, and he said it publicly and he was absolutely right, we've done our job, the 2014 committee have done their job, it's now the turn of the funding partners to do theirs.
Our challenge was due diligence. A refrain my staff would hear from me often, "best information drives best decisions." We were absolutely committed that when Cabinet finally had to make a decision, being briefed all along, they had the best information in front of them. I know HRM was the same.
So, with the support of Sport Canada, the three funding partners agreed to divvy up their resources because the time frame was tight. Normally you might hire one consultant to review that budget, do the capital, do the operating, but the time frame was so tight, Sport Canada said - we agreed - we'll do the operations, we'll contract with Mr. McMahon's firm, he'll do the operational. Great. We had a concern, as did HRM, infrastructure deficit, number one, number two we really wanted to truly understand what those facilities would mean, what they would cost and what they would cost to operate and did they meet the legacy requirements?
We contracted, the province, with PricewaterhouseCoopers with full support and involvement from HRM staff which, by the way, was a constant since I've been involved in this, been tremendous co-operation with HRM on this very difficult and complex project.
At the same time, we had planned that we needed probably the most in-depth economic impact analysis around this bid as possible, so ACOA, HRM and the province - and the province's lead was Economic Development - worked tirelessly together to develop a process that would allow an economic impact analysis to take place around the business
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plan. The business plan was submitted January 29th, note the time frame. So here we go, they were ready, Canmac was ready and they began their work. We just got their report Monday. It's in your package and I'll be very direct, Madam Chair, I haven't had a chance to read that one - most of the other ones I have, I haven't had a chance to read that one. (Interruption) HRM was the lead, thank you Tracey.
So HRM had the economic impact, we had the infrastructure and Sport Canada had the operating. Bottom line, we were sharing all the time, the three levels of government. We were talking daily and we were talking daily with Scott and his team.
The gross budget was estimated at approximately $1.36 billion, $1.6 including an inflation estimate, an estimate that both HRM finance officials and ours agreed was a conservative estimate and fair, and I believe Scott and his team agree with that as well. The original budget estimates from the domestic bid were pegged at $667 million - with inflation in, $785 million. December 2005, $785 million; January, 2007, $1.6 billion. The difference between the two figures, a 104 per cent increase.
Revenue assumptions included $400 million as a result of the federal government contribution that was announced in November and an estimated $165 million in other revenue from ticket sales, private sponsorship, et cetera. It is really important to convey to you the flavour of where we felt we were when the business plan was presented at that level. Before we even started talking to the consultants who were beginning their work, the gap was approximately $1 billion that the province and HRM, if things stayed the same, would have to make up - $1 billion. Our first observation would be that this is not a sound business case. So let's go do our due diligence, at first blush let's give it to our officials, which we did, and by the way I cannot emphasize how co-operative and collaborative the 2014 committee has been in this piece. In January our staff, Sport Canada staff, HRM staff, spent three days with the 2014 committee at their request, for an in-depth review of their budget line-by-line. I can't emphasize the co-operation that was there.
[9:45 a.m.]
As preliminary results from the consultant's reports became available it became increasingly clear the funding gap was only one of the critical issues at hand. The reviews also identified fundamental risks, such as uncertain revenue projections - quite frankly, at $165 million, that's not a lot of revenue in a $1.6 billion project. An unprecedented 90 per cent investment of public funding, and insufficient contingency funding, which would have left the province vulnerable in the event of cost over-runs. Essentially the consultants felt the business case to proceed with the Games was weak.
When you go through all the documents you can drill down and find all kinds of details but there are key themes - that are in the summary, by the way Madam Chair, of those two reports that we provided you with. Our own internal affordability analysis indicated that
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our government was in a position to recommend a maximum contribution, including inflation, of $300 million. This proposed contribution, coupled with the contribution of HRM, would have left an unfunded gap in the Games budget of between $450 million and $550 million, plus additional financial risks which had not been completely quantified, including the fact that the province, and this is a key point and typical with all games hosted in Canada: the province and HRM would have been required to cover any cost over-runs; $785 million to $1.6 billion dollar gap, risk analysis saying, the risk in certain areas is high. It means that $1 billion gap will grow. We, with HRM, are responsible for cost overruns. The business case we felt was indeed weak.
Armed with this information, Minister Barnet and Mayor Kelly met twice by phone with their federal colleagues to discuss the situation and clearly articulate the concerns of the local funding partners. Again, the mood of the elected officials was to get to the right answer. Those were very direct discussions. During those meetings the minister expressed great disappointment over the results, but continued to reiterate the need to remain true to the fundamental principles on which the bid had been based. Fiscal responsibility, right-sized, and legacy building. We feel the bid budget did not fully meet any of those criteria.
At a 2014 executive committee meeting on March 7th, the local funding partner representatives reiterated their concerns, as expressed at previous meetings, with the total budget and the resulting funding gap. The representatives indicated their intention to recommend against proceeding with the bid and their desire to develop a joint exit strategy with Halifax 2014 committee.
At the meeting, Halifax 2014 staff produced a summary of additional proposed cuts, approximately $250 million, which were not ratified by the board, and during the meeting, Commonwealth Games Canada requested an extra week to review the proposed budget and reduce it to $1 billion.
The passion of the 2014 committee, particularly when we were headed toward the bad news, was evident. They cared about what they did. They felt strongly about their bid, and they worked hard to save it. Our job, on the other hand, as a funding partner, had to be for us to keep our eye on the ball. And basically, a $1 billion gap, the risks were growing, we would be responsible for any overruns. Ten months for them to get us the best business case, which they presented at $1.6 billion, and I totally agree that in the context of hosting the Commonwealth Games and the criteria that were in front of them for 2014, they were in the ballpark. They were honest with us. They gave us the figure they felt it would take.
We actually wrestled with the funding piece, particularly HRM and ourselves. After the federal government particularly capped theirs, theoretically, should we cap ours? Should we just flat out say, we'll give you X number of dollars, and we went back to the key principle. If we truly want to know what it cost to run the Games, if we truly want to understand the challenges, if we cap their amount, they'll work to that figure. It's just human
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nature. They will work to the figure we give them. They didn't do that, and I compliment Scott and his comments at the press conference. It is what it is, $1.6 billion with inflation in.
To reduce it by 40 per cent within a week, down to $1 billion, I could not, and I've said this publicly, I and others, could not go to my minister, go to our Cabinet, with any confidence that that's a route we should take.
The province felt it was neither appropriate nor prudent to approve this request and provide an additional week to the bid society. It had taken ten months to develop a highly detailed and exhaustive budget. It was simply inconceivable that such due diligence and effort could be simply accomplished in seven short days.
On March 7th, Minister Barnet and I presented the consultant's findings and our options to Cabinet and sought direction. Given that providing the monies required to close the funding gap would have compromised the fiscal position and expose the province to undue financial risk, Cabinet agreed the responsible decision for the taxpayers of Nova Scotia would be to withdraw from the bid process.
The Province of Nova Scotia, together with the Halifax Regional Municipality, jointly announced our intention to withdraw from the bid process on March 8th. I believe it was the right decision, a decision that was not taken lightly, and was made with great thought, care and deliberation. We are a small and dynamic province. We know each other. We work with each other. We're friends. I'm friends and colleagues with many of those in the 2014 committee. This was not an easy decision.
The process we committed to and followed was exhaustive. We demanded and received the best information possible so we could make the best, most appropriate decision for all Nova Scotians.
Madam Chair, thank you for your indulgence. I would like to, knowing that there may not be questions and we may walk away from here, I think I have to characterize the federal discussions a little bit. Basically what Mayor Kelly and Minister Barnet said to the two federal ministers, and by the way the federal ministers were strong supporters of these Games. Minister MacKay had been there the longest. Minister Chong, who we dealt with in the beginning, an incredibly strong supporter of the Games. Minister MacKay used his good offices to help Scott, and others, make contacts with the Commonwealth Games countries. It was a great team effort.
Basically what the mayor and Minister Barnet said is there is no business case. We are not going to ask you for more money because the gap is $500 million and growing and growing. The risk is too high. Keep in mind, HRM and ourselves have other corporate responsibilities with the Government of Canada. Credibility is important. You are going to
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work hard to get the federal government to move their contribution, you have pick your spots. This was not a good spot. The business case wasn't there.
There were two discussions. The second discussion was, well, should we allow the week to happen. The federal ministers were more disposed to that but Minister Barnet and Mayor Kelly, again, reiterated the business case is not there and finally, I can't remember if it was Mayor Kelly or Minister Barnet said, well, okay, let's say the bid changes, the numbers change, will your contribution change? No it won't. I compliment the federal ministers on their directness so then we went forward. Anyway, thank you for your indulgence.
MADAM CHAIR: This is the hardest position I have ever been in, not able to ask any questions because I have a ton. I guess, given the motion that was passed earlier, we will now stand adjourned and we will have an in camera . . .
Mr. Colwell.
MR. COLWELL: Yes, before we do that, we discussed the matter of the report that the committee was going to put forward and I would like to see that move forward before we adjourn.
MADAM CHAIR: The report?
MR. COLWELL: The one that you prepared on behalf of the committee that you forwarded to all of us to review and talk about. I would like to see that move forward now.
MADAM CHAIR: That is a draft.
MR. COLWELL: Yes.
MADAM CHAIR: It has only gone to three members. It has gone to the subcommittee. It hasn't been given to the other members. What are you suggesting we do with it?
MR. COLWELL: We can discuss it in the subcommittee then, if that is the case. That would be great. Thank you.
MADAM CHAIR: At this stage, we stand adjourned and we will give Hansard a few minutes to get themselves reorganized. We will have the public gallery cleared and we will have an in camera session of the subcommittee to deal with the documents that have been requested.
[The committee adjourned at 9:55 a.m.]
