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HALIFAX, MONDAY, MAY 9, 2005

SUBCOMMITTEE OF THE WHOLE HOUSE ON SUPPLY

12:59 P.M.

CHAIRMAN

Mr. Mark Parent

MR. CHAIRMAN: I will call this meeting to order. We'll start at 12:59 p.m. and the Liberal caucus has 10 minutes left of questioning.

[1:00 p.m.]

HON. PETER CHRISTIE: Mr. Chairman, with your indulgence, I have some material here that . . .

MR. CHAIRMAN: Those have to be tabled?

MR. CHRISTIE: . . . I undertook to gather for the committee and I would like to present it to the committee.

MR. CHAIRMAN: Could you give it to the Page and we will get copies.

MR. CHRISTIE: Mr. Chairman, the first question that I was asked was to look at the invitation to tender by the Gaming Corporation on the study in Windsor we referred to. I will table that, along with the engagement letter for Omnifacts Bristol and nuclear strategy core properties. We did have some discussion last week regarding time studies on VLT utilization. We indicated we didn't have data on everything but just for clarity's sake, I will table that for the committee to review. This is referred to as the lottery terminal time study, there is some detail in there as to . . .

MR. CHAIRMAN: How many pages is that, Mr. Minister?

351

[Page 352]

MR. CHRISTIE: That would be somewhere in the vicinity of 80 pages.

MR. CHAIRMAN: Do both caucuses want copies of that? I don't think we should make copies for everyone of 80 pages.

MR. CHRISTIE: Mr. Chairman, if you don't want . . .

MR. JERRY PYE: Mr. Chairman, if I could interject. I would make certain that each member who is on the committee or the critic for that particular area, receive a copy of that particular study.

MR. CHAIRMAN: Make copies for each committee member of each of those and three copies of the large one, one for each critic.

MR. CHRISTIE: I also had a question regarding some other options that the government had looked at. There are a couple of options listed, I will table that for the committee.

MR. CHAIRMAN: Thank you. With that having been said, it is now time for the Liberal caucus and as I said, you have 10 minutes.

The honourable member for Halifax Citadel.

MR. DANIEL GRAHAM: The member for Cape Breton West has just asked me a few questions. The material that has been tabled may be of interest to review before we conclude our questioning. I know that the member for Cape Breton West had some questions that he wanted to ask. Perhaps if I were to take the 10 minutes that I have remaining for me, the member for Cape Breton West could ask his questions and then we could roll around again when it's our cycle?

MR. CHAIRMAN: Yes, that would be fine, because after the Third Party I would traditionally go with the Independent member if he was here. So he has one hour, 28 minutes in total and he has used up 30 minutes, so he can go a full hour if he wants. I will go to the Independent member after your comments.

MR. GRAHAM: Thank you, Mr. Minister, for your time again today. I'm wondering if we could turn to a subject that we touched on on the last day. It relates to the issue of bill acceptors. We touched on the issue of bill acceptors just the other day and the Gaming Corporation provided a technical briefing on Friday morning. It contained a costing of various options and I'm wondering, can you confirm that costing was done on other options, not just the one that you had tabled?

[Page 353]

MR. CHRISTIE: Moments ago I tabled a paper containing bill acceptors and some costing on that. I'm wondering is the member asking me if there's something other than that or has he not had an opportunity to look at that yet?

MR. GRAHAM: I obviously haven't had a chance to look at that and this will give me an opportunity to presumably do some examination. Which document is that contained in?

MR. CHRISTIE: It was contained in a summary sheet. I believe the question that I had been asked was, were there other options looked at by the Gaming Corporation, and I tabled this particular piece of paper, Estimated Finance Costs. Number one is removing bill acceptors and number two is banning VLTs, and that's what I just tabled moments ago. If you'd like that copy I am happy to provide it.

MR. GRAHAM: Sure. If I could just have a moment. Maybe I'll get back to this line of questioning a little later. With respect to the strategy as it presently holds, I understand the shut-off time of 12:00 midnight has been imposed. I'm wondering whether or not for certain establishments or certain circumstances, are there exceptions to the 12:00 midnight rule?

MR. CHRISTIE: That answer I'll have to give in two parts. The First Nations, the answer to that is they will not be required to comply with that because of the contracts. Other than First Nations, the answer is they will all be required to comply with that.

MR. GRAHAM: All locations are required to comply by the same terms. I'd like to talk about the growth in revenue that has happened over the last say, six years or so. How much has VLT revenue grown since 1999?

MR. CHRISTIE: I'll look up those figures for you. I will provide you with the top line revenue and I have figures going back to 2001-02, the figures for prior years we will obtain those for you. The video lottery gross revenue for 2001-02 was $161.7 million, our forecast for 2004-05 was $200.2 million, and our budget for this year was $180.1 million.

MR. GRAHAM: If you could just go through the years, back to 2001-02 if you don't mind and just take us through each year: 2001-02 revenue estimates of $161 million, if we would round it off.

MR. CHRISTIE: Okay, 2002-03, $182.1 million; 2003-04, $182.9 million; 2004-05, $200.2 million; and 2005-06, $180.1 million.

MR. GRAHAM: We don't have a sense of what they were in 2000-01?

MR. CHRISTIE: In terms of the different years and the particular rates of increase, and the reasons, we don't have that here but we're happy to get that information for you.

[Page 354]

MR. GRAHAM: Is it fair to say that the revenue line, with respect to VLTs has grown steadily since 1999?

MR. CHRISTIE: Yes, that's fair to say, with the exception of 2002-03 and 2003-04, the numbers we gave you were fairly consistent, so it wouldn't be fair to say it in those years.

MR. GRAHAM: To what have you attributed the increased revenue?

MR. CHRISTIE: I guess it would fall under a variety of reasons. The first would be the increased number of machines, the second would be the general economic circumstances, and one of the other factors, obviously, would be new games. I think you will recall the Gaming Corporation indicated a year and a half ago, or two years ago, some of the games were becoming stale-dated and people were looking for something new in that area, so they refreshed some of the games that were on the system.

MR. GRAHAM: You don't accept that speeding up the machines may have contributed to this?

MR. CHRISTIE: No, I think the bigger factor that the Gaming Corporation was looking at was that people were getting used to the games, so they were refreshing them. You asked me the predominant factors and I gave you what we considered to be the predominant factors in this.

MR. GRAHAM: Why were the games refreshed?

MR. CHRISTIE: It's similar to anybody revitalizing their product. The games have been there, people were getting used to those games and they were looking for new games for interest sake.

MR. GRAHAM: It was intended to make them more attractive?

MR. CHRISTIE: It was intended to speak to the people using VLTs, to provide a different experience and provide a variety or mixture for them.

MR. GRAHAM: It would also have been designed to make them more attractive and interesting?

MR. CHRISTIE: Obviously, as you refresh your product, there is a bit more interest, people see something different from what they have seen from the time before. The consequences of that is that people see a little bit of a different product, if you will, when they're there.

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MR. GRAHAM: The difference between what you have described, Mr. Minister, and what I'm suggesting is that you seem unwilling to admit that there was a design to grow VLT revenues. Is that what I'm hearing?

MR. CHRISTIE: I'm suggesting to you that the Gaming Corporation was operating as a business does, they were refreshing their machines, their machines were older, they couldn't be technically supported, so they were putting new machines in. They were putting different games in those so that people using the machines and people who don't use the machines would see somewhat of a different product when they came.

You're suggesting that they weren't being good stewards of their assets and their mandate by doing that and I don't accept that, no. I accept the fact that they were providing good equipment, they were providing better equipment, and they were providing better games for them.

MR. CHAIRMAN: Thank you, the time allotted for the Liberal caucus has finished. I'll turn now to the Independent member.

The honourable member for Cape Breton West.

MR. RUSSELL MACKINNON: Mr. Chairman, there are three points I would like to raise, one follow-up regarding VLTs and the relationship between the province and the federal government on this particular issue, as it related to Native communities in the province.

My understanding is that issue surrounding Native communities is more or less the responsibility of the federal government, more so than the provincial government. The proliferation of VLTs, for the most part, has been within the Native communities in the province. My question to the minister is, what is the relationship that the province has with the federal government in negotiating agreements with representatives from the Native communities?

MR. CHRISTIE: To get you the most definitive and concise answer to that I would have to refer you to the Office of Aboriginal Affairs. As the member knows, the Office of Aboriginal Affairs is charged with the responsibility of negotiating between the First Nations Bands and the province, in terms of the contracts. They also have to comply with the federal legislation, they have to tie in with the federal government, and, indeed, negotiate those with them. So the federal government plays a part in this.

[1:15 p.m.]

The direct responsibility of the Office of Aboriginal Affairs, in terms of what the agreements allow First Nations to do to expand their machines, is clearly contracts they

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develop. But your assumption that the proliferation and the growth of machines has been First Nations is correct, that's where the machines have grown. In terms of Aboriginal Affairs working with them on a variety of issues and this being one, and tying that in with the federal government is correct too. So I think for a more definitive answer I would have to refer you to the Office of Aboriginal Affairs for that item.

MR. MACKINNON: I'm to understand that no agreement in a Native community would take place unless the federal government gave its approval?

MR. CHRISTIE: They certainly would be players. I think in terms of technicalities, in terms of the number of machines and other types of offsets that the Office of Aboriginal Affairs would have, they would certainly arrive at different parts of the contract. The overarching agreements on all of this is with the Department of Indian Affairs, so they would have a responsibility and it would have to comply with their mandates and their overall objectives.

MR. MACKINNON: I guess I want to make it as clear as I can, the province would negotiate an agreement, for example, in my constituency's case, Eskasoni, representatives from Eskasoni, First Nations. The terms of the agreement would have to be in accordance with the ground rules laid out by the federal government?

MR. CHRISTIE: That's correct.

MR. MACKINNON: Once that agreement is struck, is there any ratification or further review by the federal authority?

MR. CHRISTIE: That's what I am not completely clear about. I will undertake to get that answer for you but I don't sit in on those negotiations. If your question is, anything that's a First Nations agreement with the province, does it require federal government sign-off or agreement, I will undertake to get the Office of Aboriginal Affairs to provide you with that answer.

MR. MACKINNON: Okay. I raise that point specifically because within the community of Eskasoni there is concern by some community leaders that the proliferation of VLTs is one of the leading causes or contributing factors to the high rate of diabetes in the community. Now that sounds a little odd when you first hear it, but it's because of the fact there is a diversion of family dollars towards VLTs as opposed to providing proper nutrition and I was quite surprised at that. I understand the numbers are quite high, particularly with school-aged children. My question to the minister - and it may be in relation to another government department - has that issue been raised with your department and if so, what action is being taken?

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MR. CHRISTIE: That issue has been raised, not specifically with the Department of Finance, but it has been raised with the Department of Aboriginal Affairs and indeed, the Office of Health Promotion. You will recall as part of the strategy, it has within it that there would be discussions with First Nations to look at that whole issue. I think as the Office of Health Promotion, in the plan that they have advanced, indicated that we were going to look at the issue of treatment and prevention. That, in their view, talked about everybody in Nova Scotia, so people of First Nations would be able to be part of that, they would be able to access those programs.

At the same time while that was happening, the Office of Aboriginal Affairs has been speaking with the First Nations in terms of some of those issues and, indeed, you've heard some of the Chiefs of the First Nations indicate they want to advance those discussions because of the issues of addiction or the increase in the number of VLTs, and be able to resolve some of those problems.

MR. MACKINNON: My next question is with regard to this proliferation of VLTs. As clearly stated as possible, what is the federal government's position on the proliferation of VLTs within Native communities of this province?

MR. CHRISTIE: I would have to do some research on that. I haven't just sat at the federal government table where they've indicated their desire to stop VLTs or continue going. As I say, that's part of that indication of the Office of Health Promotion that I will undertake to get the answer to that for you.

MR. MACKINNON: My next issue is with regard to the number of pension plans that come in under the purview of the Department of Finance. How many pension plans altogether is your department responsible for?

MR. CHRISTIE: There are five.

MR. MACKINNON: Are any of those operating with an unfunded liability?

MR. CHRISTIE: All of them are at this point.

MR. MACKINNON: To what extent, are we talking 60 per cent funded, 50 per cent, what? I could take it on notice, perhaps provide a list of them and . . .

MR. CHRISTIE: I'd be happy to provide you a list. The two larger ones, for example, are in the 82 per cent and 84 per cent funded range, so the deficiency is somewhere between 16 per cent and 18 per cent. The MLAs, the Sysco pension, the judges' pension, we will get that information, I don't have it right here, but they're clearly smaller pension funds.

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MR. MACKINNON: Because I know reading the annual report for community colleges last year, I think their pension fund was unfunded to the tune of somewhere in the vicinity of 60 per cent and 64 per cent maybe, and I was a little surprised at that, it's a very small line item in their annual report.

The other thing is with regard to the investment portfolio. This is an issue we spoke on last year, and the investment managers. I believe at that point the minister indicated that approximately 80 per cent of all the monies that were being invested or managed by financial managers from the Province of Ontario, and a very small percentage from the Province of Nova Scotia. I'm just wondering, has there been any change in that?

MR. CHRISTIE: The numbers you quoted, 30 per cent internal investment is approximately the number. The remainder would be external investors in the range of those people we spoke about last year.

MR. MACKINNON: I'm a little curious as to whether that's a reflection on the limitation of the financial management companies within the Province of Nova Scotia, to be able to handle such large sums of money, or are there other reasons why we don't seem to be providing as much opportunity for the local financial managers?

MR. CHRISTIE: When I indicated 30 per cent was internal, I mean to the Department of Finance stock. The other external managers, some of those would have locations and offices in this area. As you will be aware, the pension fund has made some directional changes where we have done a small bit of investing in real estate, which would be through here.

MR. MACKINNON: What real estate is that that the province is investing in?

MR. CHRISTIE: The funds, through the pension management authority, have been looking at some real estate and that has been some condominium development in Toronto and one here in Halifax. It is approximately 3 per cent of the total, and based on estimates from the pension board, we have quite a range of asset mix, and I can provide these to you if the member is interested in the range of asset mix. In terms of real estate, it is 2.48 per cent of the total and the pension board decided they wanted to move in that direction.

I think in terms of investments in Nova Scotia, the fund carries provincial bonds, it carries Aliant and Emera, and it carries some real estate of about $17 million, so we do have some investment in this area. Investing in real estate has been a change in the last year and a half, that's something the board has looked at. I can read these for the member or I can provide copies of that, whichever is your preference. That gives you a list of the managers, what their mandate is to manage, the size of the mandate that they have and how long they have been in that portfolio doing those things. We will certainly get you copies.

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MR. MACKINNON: What's our average rate of return on our investments?

MR. CHRISTIE: We have been targeting to do - I'll give you figures over a one year, a three year and a five year, or perhaps to 10 years if you're interested. If we take the teachers plan, the rate of return over 10 years has been 10.32 per cent; the Public Service plan is 10.29 per cent; at the same time for that 10 years, the benchmark we were expecting from managers and expecting from investment was 9.2 per cent so we've exceeded the benchmark. Now if you come down to a one-year range, the teachers' pension plan last year - and I'm using figures to the end of December 2004 - was 8.98 per cent; the Public Service was 8.90 per cent; and our benchmark was 9.23 per cent, so we weren't quite on our benchmark.

Over the three years, we've been ahead of the benchmark and over five years, we've been ahead of the benchmark, but the 10 year, as I indicated to the member for Dartmouth North the other day, our investment terms are generally viewed in the longer term and how you're doing in the longer term. That particular one, as I indicated, the benchmark for 10 years was 9.2 per cent and we achieved over 10.5 per cent in the bigger funds.

MR. MACKINNON: They were the three points I wanted to raise, Mr. Chairman.

MR. CHRISTIE: Does the member wish to have copies of those?

MR. MACKINNON: Sure.

MR. CHRISTIE: Mr. Chairman, I'll ask for two copies to be made of these, one for the member and one for yourself.

MR. CHAIRMAN: Thank you. Does the Progressive Conservative caucus have any questions? No. We will now turn to the New Democratic Party.

The honourable member for Dartmouth North.

MR. JERRY PYE: Mr. Chairman, I want to say to you and to the Minister of Finance, thank you and we have concluded the questions for the Finance budget.

MR. CHAIRMAN: Thank you. We will now turn to the Liberal caucus and you have up to an hour.

The honourable member for Halifax Citadel.

MR. GRAHAM: Mr. Chairman, I'd like to ask questions on gaming. I'd like to begin with the document that has just been tabled before the committee, and I want to make sure that I understand this, fully.

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On Friday of this week we had tabled before us estimates that weren't provided in the technical briefing when the announcement of the government was made, I don't believe, this is the Financial Impact of Gaming Strategy Related Changes. Today we have been provided with an estimate of financial costs and two scenarios that have been set out with respect to those. My first question is, when were these documents prepared?

MR. CHRISTIE: Let me just make sure I understand your question. When was that piece of paper consolidated together?

MR. GRAHAM: When was this document pulled together, yes.

MR. CHRISTIE: You asked for a summary of scenarios other than what was laid out here. You asked for those on Friday. From the pieces of information and research, the information that the Gaming Corporation has, we put those together to provide you with the information that you asked for. That was done in the last few days.

MR. GRAHAM: So this document that we have before us was just prepared in the last few days?

MR. CHRISTIE: That was prepared as per your question on Friday.

MR. GRAHAM: Okay. One would have thought that there would have been a costing done with respect to these and that there would have been a central document that already summarized the impact of these particular scenarios.

MR. CHRISTIE: As I indicated to you on Friday, there was a lot of work done. I provided some of the information today of the work, research and analysis, there were a number of things. I also indicated to you on Friday that after some of these issues were looked at, the decision was taken to move in the direction of those scenarios you received on Friday, so those were developed, those were built into the model as we moved on. Specifically, your question was, was there any other issue that had been reviewed and looked at and the answer we gave you was, those items that were listed were some that were looked at. It was decided not to proceed with those and so in response to your question we put that piece of paper together to indicate a couple of areas that had been looked at, some work had been done, not advanced on, and we provided you with that document in response to your question.

[1:30 p.m.]

MR. GRAHAM: So this was recently prepared as a document. I want to start with the first one, I want to make sure that I understand it correctly. Is this document saying that by removing bill acceptors, it would cost government an additional $16 million?

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MR. CHRISTIE: I don't have that in front of me but I'm told that is correct.

MR. GRAHAM: You have been told by your addictions experts that the removal of bill acceptors would improve the health of Nova Scotians and now it appears that we have solid proof that, in fact, that is the case?

MR. CHRISTIE: No, that isn't what that piece of paper says. That piece of paper says that removing bill acceptors would reduce by $16 million, that's what the piece of paper we gave you says.

MR. GRAHAM: Here's the problem I'm having, Mr. Minister, with the greatest respect, is that you and your government don't appear to draw any correlation between the amount of revenue from VLTs and the level of addictions. Am I hearing from you that you don't accept the premise that as your revenues go up, addictions to Nova Scotians also go up?

MR. CHRISTIE: No, that's not correct. What the government indicated in the strategy was we knew revenues were increasing, we knew there were areas of addiction and we address it in a number of areas, and we brought a strategy. What we have said to you, on a number of occasions, is we have provided costing, those four areas that we chose to move on the Gaming Strategy, along with, I might add, the additional monies in Health Promotion to deal with the three areas of concern: the treatment, the prevention and the analysis. I'm saying to you we made some choices and the choices we made are to move on those. Does it cost the government money? Of course it does, and the details of that are laid out on the piece of paper we provided to you on Friday.

MR. GRAHAM: Simple question, Mr. Minister, simple proposition. Increased revenue equates to increased addictions on VLTs?

MR. CHRISTIE: I hear you saying that, I'm not saying that.

MR. GRAHAM: You don't agree with that?

MR. CHRISTIE: I'm saying I agree with the fact that by making some changes, people will have less opportunity to play, there will be a reduction in revenue, but I have nothing that indicates to me that one of these particular alternatives over another is going to change the number of addictions or change the amount of people who are at risk. I don't have that data.

MR. GRAHAM: So why would you even bother doing it? Why would you even bother reducing your annual revenues by $40 million if it wasn't intended to help people?

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MR. CHRISTIE: What we wanted to do was respond to the input that came to us from the Gaming Strategy. The input from the Gaming Strategy indicated that people wanted to see the government starting to reduce its reliance on gambling revenue.

MR. GRAHAM: Because it would reduce addictions.

MR. CHRISTIE: Because of a variety of reasons, because whether it's addictions, whether it's people who can't afford the money to do these different things, because generally we weren't going to expand VLTs. So as I indicated to you on Friday, we analyzed that information and came to the conclusion of those four items and we moved in that direction. Let me reiterate again, the strategy we moved in is not simply a rate reduction in terms of VLTs, it's in terms of treatment, it's in terms of the . . .

MR. GRAHAM: We know the treatment side.

MR. CHRISTIE: Sure you do and I know it too and I just reiterated, so I want to make that point associated with this.

MR. GRAHAM: But what I'm hearing from you, after just taking $40 million out of your budget and bragging, I recall, that the proof is in the pudding about whether or not we're trying to help people. That is generally what you were saying when you announced your strategy, if you want proof that we're serious about helping Nova Scotians, here's the bottom line, we're taking $40 million out of our revenue and that's going to help Nova Scotians.

MR. CHRISTIE: That's exactly what we said, yes.

MR. GRAHAM: Why didn't you take an extra $16 million out and help even more Nova Scotians?

MR. CHRISTIE: Why did we only not do anything? The answer is because we had listened to people, we had gone through the strategy and we moved on those areas which we felt would have a significant amount of impact, in terms of time, for example, in terms of the speed of play, in terms of a number of those things. We moved in some of those areas, yes, it took money from government revenues and we knew that, but that was consistent with what I just said a few minutes ago. It was consistent with the fact that we weren't going to continue to grow revenues, we were going to start to indicate that our reliance on revenues was starting to reduce and it was consistent with that and that's why we took the decisions that we did.

MR. GRAHAM: Of the approximate 7,500 problem VLT gamblers in Nova Scotia,

how many of those families do you expect to help as a result of this strategy that you put forward?

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MR. CHRISTIE: One of the reasons that we have evaluation and research for this is so we can determine that. You, or I, nobody can tell us that at this point in time. So when we're finished doing the evaluation and analysis, then we will know how many people this is helping or what the reaction is. You are fully aware of the Office of Health Promotion and the Department of Health are concerned with that and they're looking at that issue, they're looking at it in terms of healthy people, they're looking at it in terms of active children and so on, so they're very interested in seeing how the strategy is working to help people. That is why, when we get to the evaluation and analysis stage, that will be determined.

MR. GRAHAM: In relation to the earlier part of your answer, are you suggesting that it's possible that your strategy may not help anyone and that's a variable that you have out there?

MR. CHRISTIE: No, I didn't suggest that. Your question was how many of the 15,000 families will you help. My answer was I don't know that. I know it will help some, whether it's half, whether it's a quarter, I will know that after the evaluation is done.

MR. GRAHAM: Bill acceptors have nothing whatsoever to do with an underground grey industry, do they?

MR. CHRISTIE: No, bill acceptors are a feature of the machines.

MR. GRAHAM: The option was available to your government to reduce revenue by $16 million and thereby help Nova Scotians and you chose not to.

MR. CHRISTIE: The bill acceptors aren't on our list, that's correct.

MR. GRAHAM: That's not what I was saying. You chose not to do it when you knew that it would have helped Nova Scotians to the tune of $16 million worth of help.

MR. CHRISTIE: Are you suggesting that the other things that we did aren't going to be beneficial to Nova Scotians? I don't accept that submission if that's what you're saying.

MR. GRAHAM: Well, you know I'm not suggesting that.

MR. CHRISTIE: Well, you've asked me about the bill acceptors. The bill acceptors are not here, we chose four particular items which we believe will have an impact on Nova Scotians and we laid that out in our strategy. You're asking me why we didn't do five other things in the strategy and it's because we chose to do those four and we looked at those four and are moving on those.

MR. GRAHAM: Of the options that were available to you, this would have been the second most significant item available to you, correct?

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MR. CHRISTIE: I believe the figure, the $16 million, yes, that's right.

MR. GRAHAM: The highest is the removal of 800 VLTs which you estimate to have an annual benefit of $24 million. The next biggest number is $16 million that would have come from the removal of bill acceptors.

MR. CHRISTIE: Yes, the costing shows $16 million there.

MR. GRAHAM: And we've heard nothing. What we've heard from your government, Mr. Minister, is that you've gone as far as you can go, otherwise there's going to be this grey industry, but you never told us that you could have gone further and have had no impact whatsoever on the question of this grey industry.

MR. CHRISTIE: What we did tell you was the items that we were going to move on and we were going to do. We told you we were going to take out 800 machines, and whether that has some impact on grey machines, our research and evidence will show us.

MR. GRAHAM: Are you expecting it might have some impact on grey machines?

MR. CHRISTIE: It's very possible.

MR. GRAHAM: In what way?

MR. CHRISTIE: Well, it's possible in the areas that we are reducing down. The other area, of course, and I've indicated to you on numerous occasions, other than on First Nations, there will be no more machines that will be allocated. We have indicated that to people, and that's something that people will have to learn to live with.

MR. GRAHAM: Just to be clear, Mr. Minister, there's no connection between the bill acceptors question and the grey machines question?

MR. CHRISTIE: No. The bill acceptors are on machines now, they are located there and so they're not going to be a factor.

MR. GRAHAM: Mr. Minister, I now see your estimated direct costs. On Friday, you told us that there were eight active options and that banning the machines was not one of those eight active options, that's what you said last week. Today we see that you have your estimates with respect to banning VLTs before us. Now, this was prepared over the weekend, I see, and you say that government revenue would have dropped by $140 million, is that correct?

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MR. CHRISTIE: That's absolutely correct, the numbers are in front of you as to the VLTs, what the anticipated revenues are this year and if the VLTs were all gone, that revenue wouldn't be there, that's correct.

MR. GRAHAM: Am I correct that you don't compensate one little bit for the fact that money would otherwise be saved in social services, would be invested in other spending on groceries and that sort of thing?

MR. CHRISTIE: What you asked us for was what we were looking at in terms of impact and cost and that's what I provided for you, in terms of what would happen. We were talking last week about what the options were and I indicated to you the options were going from doing nothing, to removing all of the machines, and we talked about a number of the options. We didn't provide a costing on that list of doing nothing because I felt it was quite evident from the numbers what that would be.

MR. GRAHAM: Well, here's what I'm going to suggest, Mr. Minister, what you've provided us is completely superficial if it has, as the government lost revenue, $140 million.

MR. CHRISTIE: Well, it might be superficial but we responded to your question and that's what we were providing information for. You asked us to provide some information and we undertook to do that. If you don't find that information useful, that's your prerogative, but you asked us to provide that information.

MR. GRAHAM: Mr. Minister, back to the original question that I asked, $140 million isn't the loss to your bottom line because you have 15,000 families who are being hurt by it, some of whom have declared bankruptcy, have become unemployed, are on social assistance, are receiving additional help as a result of this. You would agree with me that that $140 million is not an accurate number?

MR. CHRISTIE: I would agree with you that that's the number if there was no VLT revenues coming in. You're asking me to speak in terms of what a socio-economic study might show when we do it in the future and we'll have to wait and see on that study and what the impacts are.

MR. GRAHAM: You were quite prepared a couple of years ago to talk to Nova Scotians about the benefit of a $140 million reduction earlier, do you remember that?

MR. CHRISTIE: You will have to give me - what $140 million?

MR. GRAHAM: Just prior to the last election your government promised a 10 per cent tax cut which would cause $140 million to go into the Nova Scotia economy that was otherwise not going to be going on groceries and other things that might potentially spur the economy. Don't you think this $140 million might have gone into those types of things?

[Page 366]

Don't you think there might have been some economic benefit that would have spun back to government?

[1:45 p.m.]

MR. CHRISTIE: There are a whole variety of things that could have happened and probably will happen, which is clearly why part of the strategy, as we move forward, is to do an impact study, to do a socio-economic study, to move and do a prevalence study so that you have the data. You have particular pieces of information there that you say prove to you this or prove to you that and that's fine. However, we've indicated that we're going to do these studies and reviews, and that's when we will look at what the next steps might be, or how the whole strategy is providing, what the strategy is doing for Nova Scotians, and where it might go from there.

MR. GRAHAM: Let's just put it as simply as possible, the $140 million - in fact, it's a greater amount because the investment by these people into these machines before you get the retailer commissions is greater than $140 million - could have become an economic incentive for Nova Scotians who otherwise would have put the money into the machines and you didn't cost out that part of this equation?

MR. CHRISTIE: What we did do was look at a strategy that would be of value to Nova Scotians, we were responding to the study that was going on with the Gaming Strategy and we responded to those areas where we saw there was an advantage, in terms of reductions of machines, and we were responding to what people indicated to the strategy. I will say again, what we also indicated is that we were going to do a socio-economic study, a prevalence study to determine what the cause and effect of these items were as we move forward, and that's what I have indicated we are doing.

MR. GRAHAM: Mr. Minister, the document that you provide today doesn't account for the number of people who, for example, will no longer go on social assistance, does it?

MR. CHRISTIE: That particular document you have, no, that doesn't talk to that.

MR. GRAHAM: It doesn't account for people who otherwise might not be going through the justice system, or who might be losing their job, does it?

MR. CHRISTIE: No, we haven't done a socio-economic study and that will be coming in the future and that will analyze a lot of those items that you're referring to, and that's the purpose of doing it. We will get some reaction, we will be able to see what the cause and effect of these changes are, and that's why we indicated we were going to do it.

MR. GRAHAM: Mr. Minister, do you believe that there would be a decline in that $140 million amount? Do you think that that $140 million amount is, in fact, a lower number

[Page 367]

as a result of tax money that comes back into government, that's the (a) part, and the (b) part is whether or not there is an additional economic incentive that's created?

MR. CHRISTIE: The $140 million that you're showing there would be the revenue that comes off. Do I think that it would stimulate the economy? It very well could stimulate the economy. Do I think that the growth in the casinos now is going to be part of stimulating the economy? It's very possible that it will. I can't take a direct cause and say, if that money was diverted somewhere else would it stimulate the economy, I have no research to indicate to me that is the case.

MR. GRAHAM: Well, you're obviously not having conversations with your deputy minister if that's the case because, Mr. Minister, I provided your deputy minister with research that suggests just that. Were you made aware of that?

MR. CHRISTIE: I have seen fair volumes of research. I have been made aware that there's some research indicating one, some research indicating another. I have been made aware that there is conflicting research, which leads us back to why we are going to do our socio-economic study and prevalence study, so that we can determine what is the snapshot of pictures at this time.

MR. GRAHAM: Mr. Minister, just a moment ago you said to this committee that you didn't see any research that supports the notion that this could be an economic drain. Now, do I hear you correctly in suggesting that you are aware of research that suggests that it's an economic drain?

MR. CHRISTIE: I'm aware that there is a study, as you indicated. I'm aware that it isn't Nova Scotia. I'm aware that it provides a particular point of view, and I'm aware of other studies that show something that's not consistent with that, it doesn't draw all the same conclusions. That is why, in my view and in the government's view, we will do studies after we put these forward, we will do a prevalence study and a socio-economic study to show us what's happening here, in Nova Scotia, and provide a sense of direction to us as to the data to make decisions on.

MR. GRAHAM: You said just a moment ago that you know there are other studies that suggest a different view with respect to the economic impact of this, can you provide this committee with those other studies?

MR. CHRISTIE: I would be happy to provide the committee with the studies that are available to us, they are quite numerous, but we're happy to provide them. There are studies providing a whole variety of things and a lot of them cross over different lines as to prevalence of addiction, there are studies as to economic spinoff, there are a lot of studies. If it is the committee's request, we'll provide a number of those studies to this committee.

[Page 368]

MR. GRAHAM: Specifically, you had mentioned that you have seen studies that show a potential positive economic impact.

MR. CHRISTIE: As I indicated, there are a variety of studies and I'm happy to provide this committee with a variety of the studies so they can draw their own conclusions. I guess I'm simply saying to you, I don't draw all the same conclusions that you do from studies. I'm not going to be the one who says, I conclude that this study tells me this, therefore when somebody is looking for an economic impact or impact of numbers of addiction, I'm not going to draw that conclusion and specifically say it's only these three studies that are predominant. I'm happy to provide all the studies to the committee and they can draw their own conclusions.

MR. GRAHAM: You are aware, I hope, with the assertion that was made by GPI Atlantic, with respect to the economic impact of this?

MR. CHRISTIE: That's one of the studies I'm referring to, I'm happy to provide it, that will be part of the stack of studies we provide to this committee.

MR. GRAHAM: I guess I'm just curious, Mr. Minister. Let me quote from the GPI Atlantic study and this is, in fact, one that is relevant to us here in Nova Scotia. "The GPI study cites evidence that the government's estimate of gambling profits may be illusory, because it does not account for the higher health care, justice, social service, productivity loss, and other costs generated by problem gambling. Deducting these costs would dramatically reduce the government's apparent take from gambling. Explicitly counting and recognizing these costs, says GPI Atlantic, could help reduce the apparent allure of gambling profits and strengthen efforts to reduce problem gambling." Do you agree with that assessment?

MR. CHRISTIE: I agree that's why that assertion is there and that assumption might be correct, I'm indicating to you that's why we are going to do a socio-economic study, to get our own database, to determine whether that particular position is correct or other positions are correct. What I have said - and I'll say again - that's why we're going to do a socio-economic study to determine those things and a prevalence study after this is introduced, after this is in effect, to determine the cause and effect of what this strategy is doing for us.

MR. GRAHAM: You are aware that some of the studies suggest that there is an overall negative economic impact that comes from this type of activity?

MR. CHRISTIE: Am I aware of what that study says? I have had a chance . . .

MR. GRAHAM: Not this study, sorry.

[Page 369]

MR. CHRISTIE: I've had a chance to look at a number of studies and as I said, I am not going to sit here and say, I believe this study and not that study. I will provide the committee with all of the studies and because there are a variety of studies and a variety of different views, that is what leads us to doing our own socio-economic impact study and our own prevalence study, that's why we draw that conclusion.

MR. GRAHAM: Well, I guess it really gets back to this figure of $140 million. You were able to calculate out - in the document that you tabled to us today - the number of lost jobs at the Atlantic Lottery Corporation, but you weren't able to calculate how many people might go off social assistance, or being prevented from going on social assistance. You calculated that amount out to $13 million, you speak about salaries, benefits, you speak about retailer employment loss costing about $2 million, increased cost of enforcement you have estimated at about $4 million, but you provide none of the estimates that are front and centre with respect to the Nova Scotia questions that have already been raised. Surely you would agree that that $140 million, and the related amount here, are completely superficial numbers?

MR. CHRISTIE: I don't believe they are superficial numbers. I think the question you asked was what other issues have you studied and we've responded to that. We responded with the fact of whether you remove all VLTs and some of the impacts. There are a lot of interrelationships between problem gambling, health, and proper diets and that's not an arguable issue, we all understand that. That is clearly why we have indicated we are going to do the socio-economic impact study to determine. It's not determining where the status is, the determination we need to do is after this program has been implemented and we can then get some data that shows what the impact has been of the strategy and how it's reacting, the cause and effect of the strategy. That is what we are referring to and that is why I say, until we do the evaluation we have that.

I can sit here and make assumptions and speculate, but at some point in time we need to get that data so that we have a more finite issue and we can talk about where we go in the future, as opposed to drawing an assumption or not an assumption and working on something indefinite.

MR. GRAHAM: It is possible then, in these scenarios, that that $140 million could turn out to be all illusory?

MR. CHRISTIE: If we had eliminated all the machines it's not only possible, it's very probable.

MR. GRAHAM: That the $140 million is illusory, in other words that saying that it's a net loss is a mistake? In fact, when you calculate the full cost of this in you may end up with a positive line, instead of a $140 million negative line?

[Page 370]

MR. CHRISTIE: You're drawing on some data that I don't have available. You're drawing on data that says, there will be offset costs in Community Services and Health. Until we do the socio-economic study, I can't draw the conclusion that you're drawing.

MR. GRAHAM: I'm not drawing conclusions, I'm just raising possibilities. You are prepared to go to the wild possibility that there's no change and saying, we don't know until we do our studies. I'm suggesting that given what you've said, a natural and logical conclusion is that, in fact, there could be a very substantial cost associated with the social costs, and the economic investment costs, and the net benefit to government. Potentially, after you do this study that you speak so much about, it may turn out that we're better off, that the Government of Nova Scotia is better off with its bottom line as a result of this. Surely you would agree that that's a possibility?

MR. CHRISTIE: I suspect anything is a possibility but without hard data you're saying, let's sit here and draw some assumptions and do some what-ifs and maybes. I'm simply saying to you, until we get the studies done, we can continue to do that for a long period of time, but I don't think that takes us to any solid conclusions.

MR. GRAHAM: Let me turn to a subject from last week, it perhaps relates to a related subject. There was comment last week, and I'm not sure whether it came out of a scrum, or whether it came out of discussions in here, about a new central VLT system to track information. I'm wondering, would you be able to tell us what that is all about?

MR. CHRISTIE: What we indicated to you last week, in terms of equipment, I believe we indicated to you that Atlantic Lottery Corporation, in conjunction with its partners in the four provinces, would be looking at acquiring new equipment to replace equipment that was a decade old. One of the abilities it would have, when the new equipment came in, is it would be able to give utilization rights, it would be able to provide a series, some data that is presently not provided as a direct spinoff, and it would provide some of that additional data. At the time we were talking about the question, can you determine how much a particular machine is used and at what hours of the day, et cetera? In response to that, the indication was the new systems brought forward in the future would have capabilities and would have the ability to determine a lot of those particular things that yourself and the honourable member for Dartmouth North were asking me about.

MR. GRAHAM: Is this a centralized piece of equipment or how does it tie in to the machines? Are you looking at buying new machines? Can you give us a sense of what that is all about?

MR. CHRISTIE: It will be a central system and the machines will be tied into it, yes.

MR. GRAHAM: Are they new machines that you're talking about?

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[2:00 p.m.]

MR. CHRISTIE: No, as you look at the strategy there will be a number of things that will physically have to be done to the machines. Obviously, one of them is removing the stop button, the second is putting a chip in, which will slow the speed of the machines down. When and if this is all completed, those features will be changed. If the decision is taken to move forward and completely implement that new computer system, it will be a centralized system and the machines will send data to the database at ALC and they will be able to determine that information that we were speaking of last week.

MR. GRAHAM: What's the name of the system?

MR. CHRISTIE: GTech.

MR. GRAHAM: Are they doing this in other jurisdictions currently?

MR. CHRISTIE: Yes.

MR. GRAHAM: Where is GTech out of?

MR. CHRISTIE: They are an international company, Alberta is one of the areas their equipment is involved in at the present time.

MR. GRAHAM: They are headquartered out of Alberta?

MR. CHRISTIE: I believe it is Rhode Island but the Gaming Corporation will confirm that for you.

MR. GRAHAM: Was this a tendered item?

MR. CHRISTIE: Yes.

MR. GRAHAM: This is sort of a central intelligence computer, it sounds like, that does a better job of tracking what's happening out there with computers across the Atlantic Provinces?

MR. CHRISTIE: I would use the words more up to date and more efficient and more able to provide the continuation of services that computer systems are required to use.

MR. GRAHAM: On the subject of - and I know that the member for Cape Breton West has raised this earlier. I had raised something related to this subject in correspondence with Ms. Mullally - contracts with the Aboriginal communities. We have sent correspondence to the Gaming Corporation to get a copy of the contracts with the Aboriginal

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communities and they said no, I'm sorry, you need to deal with Aboriginal Affairs. Aboriginal Affairs said a flat no, you're not going to get a copy of those. This past Wednesday, Darce Fardy, the review officer for Freedom of Information, appeared before the Public Accounts Committee and rather unequivocally said that a document like that should be disclosed.

You are welcome to review the Hansard of what Mr. Fardy has said. You're welcome to receive a copy of what we have received from Aboriginal Affairs. In light of what Mr. Fardy has said and the fact that these documents are in your possession, are you prepared to simply provide those to us, if you read Hansard and see the same interpretation in this that we see?

MR. CHRISTIE: I have concluded that the Office of Health Promotion, under your scenario, has made a response to you.

MR. GRAHAM: Aboriginal Affairs.

MR. CHRISTIE: Sorry, the Office of Aboriginal Affairs has made a response to you and I will have to ask them about the response. It is not my role or responsibility to sit here and make decisions for the Office of Aboriginal Affairs, nor do I intend to do that.

MR. GRAHAM: I'm not asking you in relation to their affairs, I'm asking you about contracts that are in your possession that the review officer, Darce Fardy, said can and should be released if they were requested.

MR. CHRISTIE: And I've indicated to you the Office of Aboriginal Affairs has the lead on it and I will indicate your discussion to Minister Baker at the Office of Aboriginal Affairs, but it's not my intent nor my role to undertake and make decisions for them.

MR. GRAHAM: I would like to turn to the subject of the amount of money wagered. The figures that I have been given for 2003-04, suggest that with respect to VLTs - correct me if I'm wrong - an amount of $763 million. Could you tell me whether or not that figure is correct? This is the amount wagered. Could you tell us please whether or not that amount is expected to rise and by how much in 2004-05?

MR. CHRISTIE: We're just checking that number but your specific question was if that was the number in 2003-04, what was the number in 2004-05?

MR. GRAHAM: Yes, take your time.

MR. CHRISTIE: My indications are we will ask ALC to get that number for you. We'll make a note of that. Your specific question was, how much across Nova Scotia was put in VLTs in the year 2004-05 before payouts?

[Page 373]

MR. GRAHAM: Right. Now, I'm looking at the document that you filed with us today and I'm trying to find where in this document there is any caution that would have been signalled about creating addictions for people who might participate in this study. This is the invitation to bid.

MR. CHRISTIE: Your question is . . .

MR. GRAHAM: Is there anywhere in this document, any precautionary notes, about whether or not somebody may be harmed?

MR. CHRISTIE: The document as you can see it, part of the strategy and the development in terms of the vendors going out to market and going out to do that would be part of the discussion, but in that document it specifically talked about the types of things they had to do and asked them for the specifics of how they were going to do it, it was a tendered document, not zeroing in on a particular firm.

MR. GRAHAM: So in the groceries for gambling contracts that you have with Omnifacts, I have not yet been able to find a single mention about health concerns, in terms of involving people and creating incentives. Is there anything in any of the documents that you have with Omnifacts Bristol, or any other party associated with that that signals you were aware that there may be a health concern associated with putting people before these machines?

MR. CHRISTIE: We have no documents that indicate that, it has been part of the discussion in terms of the implementation. The documents were to - as you see in front of you - undertake to get analytical results as to people's reaction, to get their comment and get them into the focus groups. So we were getting responses back as to how those things reacted. Obviously, the overall thrust of the Gaming Strategy is to move in the area of treatment, prevention and analyzing and this is providing us with some additional information. We have talked on a number of occasions about whether the Gaming Strategy will have any impact. The only way we will know that is by doing research and analysis, in terms of this issue and in terms of other issues. It's all built in as part of the strategy of how we're going to analyze this and indeed, the results that we're going to get back from these.

MR. GRAHAM: I'd like to go to the question of the ban, which you indicated on Friday was not a matter of one of your eight active considerations. I told you, I provided through this committee's opportunity, an indication that in the phone calls that I've made with the integrated task force out in British Columbia, they estimated 200 to 300 machines across British Columbia, that through three sources in Ontario, we have an estimate that the problem ranges somewhere between the low-hundred to the high-hundred to low-thousand kind of range, substantially and dramatically different than yours. I've indicated the impact in South Dakota, of the reduction of these machines. I've asked you whether or not you were

[Page 374]

aware of other jurisdictions, and we ended up, at one point, in South Carolina. There was an indication of a continuing problem in South Carolina.

At one point I referenced the work of Professor Quinn. You had corrected me, with respect to your understanding of what Professor Quinn had said. Could you be clearer about that, please?

MR. CHRISTIE: I don't recall the references that you're talking about. We certainly talked about a number of jurisdictions. We've talked about police enforcement and a variety of different things. Indeed, we talked about Dr. Quinn. We indicated that people from the Gaming Corporation had spoken to Dr. Quinn on a variety of issues. Specifically, if there's a particular piece of information or something you're looking for, you'll have to be a little more specific than that.

MR. GRAHAM: Okay. I want to be absolutely clear, and you are welcome to go back and review the tapes of what was said this past week. This, from my perspective, is a very important issue, because the Premier's granddaddy myth, from my perspective, is that this couldn't be done, that it's not possible to ban these without having an underground industry. I've given you an indication of what we have found, that's different from that. I've invited you to determine whether or not, through your views of other jurisdictions, you are prepared to fund an independent study.

What you've said is that you would be open to that idea, but you certainly weren't committing, at all, the government's intention to do an independent study of what goes on in other jurisdictions. I've made reference to your own gambling addictions expert, who says that he doesn't believe that the Premier is getting good information when it comes to this issue of an underground industry.

Then, on Friday of this week, before this committee, you indicated, when I was citing concerns about South Carolina, you said that Dr. Frank Quinn's view of things was not the same as the view of things that I was putting before this committee. Do you recall that?

MR. CHRISTIE: We're just trying to determine which particular view it was that you put forward, that there was a number of machines in a warehouse, or whether it was the number of grey machines, which particular piece of information was it that you were referring to Dr. Quinn.

MR. GRAHAM: The central assertion that Dr. Quinn and Professor Bridwell made was that there was a marked decline in addictions and problem gambling across South Carolina after the machines were removed. Around that discussion, you had said that your interpretation of what Dr. Quinn said was not consistent with what we are putting forward.

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MR. CHRISTIE: We indicated at the time that Dr. Quinn had indicated, and other people in South Carolina, that there was a series of issues. Yes, that's what we indicated.

MR. GRAHAM: A series of issues was not the disagreement that you laid before this committee last week.

MR. CHRISTIE: Yes, it was. We've been talking about a whole series of jurisdictions, we've been talking about whether we agree on the number of grey machines in a particular jurisdiction, we've talked about whether we agree on this particular person and their assumptions, we've talked about a whole variety of things.

MR. GRAHAM: Just to be clear, what then were you disagreeing with me about with respect to Dr. Quinn?

MR. CHRISTIE: What we were talking about, about Dr. Quinn, is you had spoken with Dr. Quinn, and people from the Gaming Corporation had spoken to Dr. Quinn and had spoken to other people. The issue that we were talking about was whether grey machines would appear or grey machines wouldn't appear, I'm not arguing the fact that you spoke to Dr. Quinn. What we're indicating and what I was attempting to indicate to you is that there is a variety of opinions, there's a variety of different results.

At the end of the day, and we can talk about whether it's Vancouver, we can talk about South Carolina, we can talk about a number of those things, but at the end of the day, you have to draw conclusions and put in effect different principles and different effects. The Premier has been clear on the fact that the information that he and government have, for a variety of reasons, whether it's Dr. Quinn and a variety of different places, the information seems to conflict.

[2:15 p.m.]

Now that leaves us with the particular challenge and the particular responsibility of looking at that information and making a determination as to which way we go, which leads us, again, back to the fact that we have to analyze the data and we have to review what's happening here, what's happening after the impact of this.

MR. GRAHAM: With the greatest respect, Mr. Minister, it was a simple question. The simple question is what did you indicate you were in disagreement with me about when I was making my assertions about Dr. Quinn? It's a simple question. I know all the background, I know the surrounding - what was the disagreement? What do you understand to be the disagreement?

[Page 376]

MR. CHRISTIE: I'll have to review the tapes, because you're asking me to go back and remember what we talked about, Dr. Quinn, I'll be happy to review the tapes. I don't recall saying to you on anything that we disagreed on a variety of things and disagreed on that, but we can go forward and review that.

MR. GRAHAM: Mr. Minister, I'm providing to you a letter dated today. It's signed by Dr. Quinn. There is this broad question about whether or not there has been manipulation of information around a variety of issues. I don't want to go into the details of those. (Interruptions)

MR. JERRY PYE: There are documents floating across the table here. I think that we are entitled to a copy.

MR. GRAHAM: I've provided a copy (Interruptions)

MR. CHAIRMAN: Could you get a Page. Thank you.

MR. GRAHAM: Now, this is my best recollection from last week, from Friday, where I was making assertions about the success in South Carolina, and the response back at that time was that, the understanding that I was putting forward of South Carolina, the interpretation that you have is not the same from Dr. Quinn. Now we have Dr. Quinn, who is prepared to speak and he has provided a letter that is before this committee.

He says - I won't go through all the fine details - the number of gamblers anonymous groups in South Carolina dropped from 32 to eight in the first six months. Were you aware that those were his findings?

MR. CHRISTIE: I'm reading this letter for the first time. I have not reviewed this. No, I haven't read this over.

MR. GRAHAM: You were never advised of that?

MR. CHRISTIE: Your question was, was I advised that Dr. Quinn was doing research in South Carolina?

MR. GRAHAM: No. You were never advised of that particular data?

MR. CHRISTIE: I don't recall if I've seen that particular piece of data. I have seen a lot of data and a lot of research, not that particular one, but we'll certainly put this in with all the different research and data that's available, to have a look at it.

MR. GRAHAM: Are you suggesting that Dr. Quinn may not be a particularly reliable person on this question?

[Page 377]

MR. CHRISTIE: Absolutely not.

MR. GRAHAM: I would suggest to you that he's considered an international expert in this area.

MR. CHRISTIE: I take your word for it.

MR. GRAHAM: Would you agree that . . .

MR. CHRISTIE: I think Dr. Quinn is somebody who has done some research. He has some extensive research on that. Whether he's the world's leading expert or he's one of them, I can't draw that conclusion.

MR. GRAHAM: The second part of his first assertion is that the actual average number of people in each group, each Gamblers Anonymous group also declined. Not only did the number drop to 25 per cent, but the number of people in the groups declined, and he goes on to say that the state started a government-operated lottery, but the impact on pathology seemed minuscule compared to the damage the machines were doing.

To the central point, No. 5 on Page 1 of the document that you have before you: Although it is reported that roughly 100 illegal machines are confiscated each month, these machines seem to have little impact on overall gambling pathology in the state. So what his research has shown is that the underground market doesn't appear to be alive and well, as your government has purported.

MR. CHRISTIE: I'm reading what you've said, and that is the conclusion, that this happens all over. What I would have to say to you is that having received this, we'll review it over as part of our overall analysis and see, as we draw conclusions.

MR. GRAHAM: He also indicates, again in No. 5: Many people feel that if the government in South Carolina made a concerted effort to confiscate the illegal machines, their numbers would shrink to nothing. Are you aware that those are the views that Dr. Quinn holds?

MR. CHRISTIE: I'm reading them here in the document you gave me, so obviously those are the conclusions he holds.

MR. GRAHAM: And are those the conclusions that are shared by your department and by the Gaming Corporation?

MR. CHRISTIE: These are one of a variety of conclusions that are provided to the department and the Gaming Corporation, and will be reviewed. But we also know, from law

[Page 378]

enforcement officials in South Carolina, that the numbers seem to disagree somewhat with what I'm reading here, that there's somewhere in the range of 1,000 illegal VLTs confiscated each year. It's not consistent with the number I see here. If you're asking me if that's Dr. Quinn's view, I accept it as his view. Whether it's the view of everybody in South Carolina, I can't speak to that.

MR. GRAHAM: He speaks about the minuscule problem compared to before. Minuscule is a pretty significant word. Mr. Minister, when I compare the number 38,000 and the number 1,000, it seems minuscule by comparison. Let me move on, I've made my point, I think, with respect to this, and I make this point specifically because the assertion was made that what I had been saying about what Dr. Quinn's interpretation was isn't shared by you. It's clear what Dr. Quinn thinks, I would suggest right now.

MR. CHRISTIE: On May 9^th, his views were certainly in this letter.

MR. GRAHAM: Pretty clear. He also indicates, and this is something that we haven't seen before - I'm on Page 2, No. 1: The gamblers have not turned to alternate legal or illegal forms of gambling. This may ultimately demonstrate that addiction to video poker is non-transferable. Are you aware that he said that, that he held that belief?

MR. CHRISTIE: No, until I read it here now, we're not aware of that. I'm reading it now.

MR. GRAHAM: How hard did your government look to find the information from places like South Carolina, South Carolina specifically?

MR. CHRISTIE: They did some research. They were doing some research. We indicated they had spoken with Dr. Quinn. He also indicates in the line above - I'm reading: Although my research is currently incomplete, those are my initial findings. So he's also suggesting that further research is required.

MR. GRAHAM: That wasn't my question. My question was, how hard did your government look to determine how things went? He says that they went from being the worst state to essentially the best state. How hard did you seek out the full information about what happened in South Carolina?

MR. CHRISTIE: I indicated to you they had spoken to Dr. Quinn and law enforcement people, along with a variety of other jurisdictions. So they had done research not only in South Carolina but in a number of jurisdictions. If your question is did people go to South Carolina to do this, no, it was done by research and it was done by contacting people.

MR. GRAHAM: People didn't go to South Carolina?

[Page 379]

MR. CHRISTIE: I'll check with them to see, but the issue was to gather information from a variety of jurisdictions. I am corrected - the chief administrative officer did go to South Carolina and met with people.

MR. GRAHAM: You indicated that you weren't aware of Dr. Quinn's findings with respect to this. Can we confirm whether or not she met with Dr. Quinn?

MR. CHRISTIE: The answer is yes, she met with Dr. Quinn, and the indication at the time was that illegal gambling expansion - there were 1,000 illegal VLTs in the system. That's the information she had from Dr. Quinn at the time.

MR. GRAHAM: Would you agree, Mr. Minister, that the picture that's being painted in this letter, global picture of what the situation is in South Carolina, is a pretty positive one for those who are looking to ban VLTs?

MR. CHRISTIE: I don't argue. I certainly accept that this letter came to you and I presume this is what Dr. Quinn thinks. I accept that. What I have indicated to you is that all other people in South Carolina don't have that same view. That was some of the research that people from the Gaming Corporation found when they were down there. Dr. Quinn shared his views, he indicated that there were 1,000 illegal VLTs. His position now, I'm just reading his position as he outlined, but some people in law enforcement had a different point of view.

So your question was did we specifically take Dr. Quinn as the only person we researched in North Carolina, and the answer is no.

MR. GRAHAM: Just to be clear, the 1,000, the figures are not different, I would suggest, with respect to Dr. Quinn and the law enforcement people. It is that this government, your government, seems to suggest that 1,000 VLTs is a significant number. It's obviously not. It's not a significant number. It appears to a be a minuscule problem by comparison. Correct?

MR. CHRISTIE: No, I don't draw that conclusion. I think 1,000 is less than 3,800, but I . . .

MR. GRAHAM: It's 38,000.

MR. CHRISTIE: I don't draw the conclusion that that's a minuscule number and not significant. That's a piece of information. It's a piece of information that goes in the mix. So I don't treat that as a non-significant piece of information.

MR. GRAHAM: I guess my next line of questioning - I know Ms. Mallally has just left, but my understanding is that Ms. Mallally went to South Carolina after the Gaming

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Strategy was in place. I'm wondering, Mr. Minister, why would she go after you've prepared your go-forward project?

MR. CHRISTIE: I would think it would be perfectly logical to continue to do evaluation and research, and continue to evaluate what we're doing. From day one that we talked about the Gaming Strategy, we've indicated we wanted to do evaluation, we wanted to do research to be able to draw conclusions to see what was happening in other jurisdictions and to see what the impact of the strategy was on Nova Scotia in this area. I would suspect that people will be continuing to look at other jurisdictions, to draw out their views, to draw out views of what's happening in this province as we move toward the prevalent study and the socio-economic study. I would presume that we would be doing a significant amount of that. I suggest to you that we need to do that to do the analysis and to do the research and to do the evaluation that is necessary. It strikes me as a logical conclusion, to move in that direction.

MR. CHAIRMAN: Thank you very much. We'll now move to the NDP caucus. You indicated no further questions, so I shall move to the Progressive Conservative caucus. (Interruptions) I shall move back to the Liberal caucus.

MR. GRAHAM: Here's the question that comes to mind, Mr. Minister. The Premier is saying that it doesn't work because of an unregulated underground industry. You've got the CEO of the Gaming Corporation, who appears to have gone down to South Carolina after you had prepared your document, not before to find out the best information in advance, but afterwards goes down there. The issue of South Carolina comes up last week, we don't find out that, in fact, when Dr. Quinn's name is mentioned, we don't have a clear sense of what's going on.

[2:30 p.m.]

Now we know that the CEO of the Gaming Corporation has gone down personally and has met with Dr. Quinn and others, and it comes back to the question of whether or not you'd be prepared to actively support an independent study on the question of whether or not this is doable, not the CEO or anyone else from the Gaming Corporation, but an independent group doing this. Surely that would provide us with the best information.

MR. CHRISTIE: Your question is, are we going to fund an independent study of people who are going to go and look at other jurisdictions? I indicated to you on Friday, and I'll re-indicate that to you, that I view that as part of the evaluation of this process, the evaluation of the impact of what the Gaming Strategy is going to do. It brings in all of those different areas, and I see that as coming together as part of the full evaluation of this plan, not an independent, separate issue, not a separate issue of whether the 800 machines is having an impact, not the issue of what the other jurisdictions are doing, but bringing it all together as one evaluation and moving in that direction.

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MR. GRAHAM: I appreciate that it could be one part of a larger part, but that component, I'm suggesting, should be an independent component, that you should have an independent process that does that evaluation. Are you prepared to agree to have that independent process go forward? What is there to hide?

MR. CHRISTIE: There's nothing to hide, that's why we've laid the strategy out. There's nothing hidden in the strategy. The strategy is laid before you. It shows you - we've laid out the estimates of what we see as the financial impact, we've laid out the timelines, we've laid out the different aspects of the strategy, and we've also indicated that we're going to do the evaluation. Obviously, as we move to the evaluation stage, that will all be open for public view and for evaluation. I suggest to you there's nothing to hide. It's on the table here, and that evaluation, when complete, will bring all of those factors into play.

MR. GRAHAM: On payouts from the VLTs - let me switch to a different subject - can you confirm whether or not the payouts for the VLTs in Nova Scotia are as high as they are in other jurisdictions?

MR. CHRISTIE: I'm advised they're as high as other jurisdictions, yes.

MR. GRAHAM: As in the average, or the same as others?

MR. CHRISTIE: I'm advised the average is as high.

MR. GRAHAM: Can you provide us with documentation that supports that?

MR. CHRISTIE: We will make a note to provide you with that document. Your question is, what are the payouts for each of the provinces, or where in particular?

MR. GRAHAM: And how do we compare . . .

MR. CHRISTIE: So it was provinces that we're talking about?

MR. GRAHAM: Provinces, yes. Can you provide us with that information?

MR. CHRISTIE: We've made a note and that will be provided to you.

MR. GRAHAM: Before we leave it, I just have a few more questions, Mr. Chairman. On the groceries-for-gambling issue down in Windsor, there are a number of people who might have only - it's possible that there is someone who has only used these machines once or twice before, they now have received $50 worth of coupons from Sobeys or the Superstore, and in order to get another $50, they need to continue to play and report back in, as part of this study.

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We know the data that suggests that 20 per cent of the people who play more than twice in a month are at risk of developing a problem before these VLTs. In light of that and the fact that there is for some people this enormous - not enormous - there is a significant incentive for an additional $50. Have you given second thought at all to the idea of pulling that plan, because it fails to protect people in simply going with a study that doesn't create that incentive, and perhaps people can walk away from these machines instead?

MR. CHRISTIE: What you said is that they get $50 to play the machines, but you didn't mention the fact that they're part of the focus groups and they're part of other aspects of that study. We indicated to you we would be talking with the company doing the study to voice the concern that you had and to get a better sense that they're taking those initiatives and those thoughts into mind as they move forward; that's what we said last week, and we will carry out doing that.

MR. GRAHAM: I'll just take a moment, Mr. Chairman. I want to make sure that we didn't have any of those dangling pieces of paper lying around. I don't see any. I just want to say that I know it has been a long series of questions from me on this subject, and I appreciate the time that the minister has taken, and his staff, for this. It's obvious that we don't agree on everything. We don't agree on most things, it appears, when it comes to VLTs, but he has been here for long hours answering the questions, and I want him to know, certainly on my behalf and on behalf of our caucus, we appreciate your time.

MR. CHAIRMAN: The NDP have indicated they're through. Mr. Minister, if you wish, you can make closing remarks.

MR. CHRISTIE: Mr. Chairman, in closing, I just want to indicate to the committee that I believe we had an interesting exchange of information. As the member just indicated, we, perhaps, don't agree on all things, but I trust that we had an interesting exchange of information. I do trust that the committee people feel they have a better insight into the budget and some of the documents that we brought forward.

I do, Mr. Chairman, want to thank people from the Gaming Corporation and indeed from the department for their effort in this whole effort, in terms of getting the budget ready, in terms of getting all of the papers put together, the Budget Speech, the documents on the budget, and getting that ready to bring to the House. It's no small job to get all of those things brought together, and all the departments coordinated, all the things readied and brought, in total, to the House.

I do want to offer my thanks to the staff for all of that, and indicate that although the best opportunities for time to provide information is in the committee, various times like this, that hopefully members will feel free to contact us if there are particular pieces of information they're looking for, because we want to be as available to MLAs and the public as possible. Having said all of that, I would like to move the resolutions for estimates.

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MR. CHAIRMAN: Shall Resolution E7 stand?

Resolution E7 stands.

Resolution E8 - Resolved, that a sum not exceeding $1,017,065,000 be granted to the Lieutenant Governor to defray expenses in respect of Debt Servicing Costs, Department of Finance, pursuant to the Estimate.

Resolution E16 - Resolved, that a sum not exceeding $8,050,000 be granted to the Lieutenant Governor to defray expenses in respect of Government Contributions to Benefit Plans, pursuant to the Estimate.

Resolution E33 - Resolved, that a sum not exceeding $83,615,000 be granted to the Lieutenant Governor to defray expenses in respect of the Restructuring Costs, pursuant to the Estimate.

Resolution E34 - Resolved, that a sum not exceeding $24,379,000 be granted to the Lieutenant Governor to defray expenses in respect of the Pension Valuation Adjustment, pursuant to the Estimate.

Resolution E35 - Resolved, that a sum not exceeding $280,000,000 be granted to the Lieutenant Governor to defray expenses in respect of Capital Purchase Requirements, pursuant to the Estimate.

Resolution E36 - Resolved, that a sum not exceeding $91,272,000 be granted to the Lieutenant Governor to defray expenses in respect of Sinking Fund Instalments and Serial Retirements, pursuant to the Estimate.

Resolution E38 - Resolved, that the business plan of the Halifax-Dartmouth Bridge Commission be approved.

Resolution E39 - Resolved, that the business plan of the Nova Scotia Gaming Corporation be approved.

Resolution E42 - Resolved, that the business plan of Rockingham Terminal Inc. be approved.

MR. CHAIRMAN: Shall the resolutions carry?

The resolutions are carried.

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We shall take a very short break, and we'll be back with Economic Development.

[2:41 p.m. The subcommittee recessed.]

[2:48 p.m. The subcommittee reconvened.]

MR. CHAIRMAN: It is now 2:48 p.m. which means we had a seven minute break, which means we will finish at 5:06 p.m. We will start with the opening remarks for the Department of Economic Development.

Resolution E24 - Resolved, that a sum not exceeding $45,273,000 be granted to the Lieutenant Governor to defray expenses in respect of the Office of Economic Development, pursuant to the Estimate.

MR. CHAIRMAN: The honourable Minister of Economic Development.

HON. ERNEST FAGE: Mr. Chairman, before I begin, I would like to introduce staff with me here. To my left is Paul Taylor, the Deputy Minister of OED; to my right is Joyce McDonald; as well, Kevin Elliott with our department. Behind me, seated, are a number of officials from a number of the Crown Corporations and other agencies such as EMO that I'm responsible for. Craig MacLaughlan is here, the director, as well as Mike Myette and several other officials from other agencies and Crown Corporations.

So, again, thank you, Mr. Chairman, and I would like to begin the debate on the estimates of OED and the related other agencies I'm responsible for. I'd like to begin with the Department of Economic Development. Firstly, our main responsibility is to create the conditions to stimulate and sustain a thriving economy throughout the Province of Nova Scotia. We work with other agencies of governments, business and communities around the Province of Nova Scotia. Together, we work to improve the climate for business and help build regional capacity for economic development.

Another lead responsibility of the Office of Economic Development is to make optimum use of technology and information management so as to enhance the effectiveness of the public sector. Our mandate also includes primary responsibility for managing the contracting of goods and services, as well as construction for government use.

I would like to take a moment now to point out a range of the noteworthy initiatives at the Department of Economic Development. The first deals with our ability to assess small business, Mr. Chairman. From one end of the Province of Nova Scotia to the other, small-business operators told us that getting capital is their number one problem. Access to capital, as we all know, is critical to the health and sustainability of our business community here in Nova Scotia. Our government has taken to heart the advice from many small business organizations. They have told us that businesses in all areas of the province need capital on

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a timely basis. We are taking action to get seed money into the hands of small business, because small business makes up more than 90 per cent of the business community in Nova Scotia and about one-third of our workforce.

Small business is absolutely vital to our economy, and that is why we have partnered with the Nova Scotia Co-operative Council and Credit Union Atlantic to create the Credit Union Small Business Loan Guarantee Program. To date, the provincial guarantee has enabled loans of almost $8 million to be issued to over 115 businesses. This has resulted in more than 200 new jobs, and more than 500 jobs have been maintained at the same time. Demand for this program is enormous and still growing. We are looking at other ways to expand the effectiveness of this program.

We are also very active in promoting Community Economic Development Investment Funds commonly known as CEDIFs. A total of 26 funds have been created since 1999-2000, with more than $13 million in capital made available to small business in the province. This year alone, eight CEDIFs successfully closed offerings, which resulted in more than $3 million in capital being made available. These funds provide a made in Nova Scotia solution that keeps critical investment dollars right here at home to benefit our communities and our citizens. As many as 10 new funds will launch this year and we expect the capital raise will well exceed last year's figure. I believe this is a real testament to the interest and potential these funds offer for growth at the community level here in Nova Scotia.

Our planned $2.5 million investment in the province's brand initiative will help tell our story to the world as well. This strategic alignment of business partnerships and marketing initiatives will tell a wider audience about the opportunities here in Nova Scotia. Brand will allow us to attract more immigrants, more investors, more expatriates and certainly more tourists. The end goal is new business, new growth and a stronger economy for the Province of Nova Scotia.

My office also supports 14 regional development authorities around the province and, for the past 11 years, Economic Development has provided $100,000 annually to each of these RDAs. We support the RDAs because they support Nova Scotia's entrepreneurial culture and because they lead economic development at the local level. The Department of Community Services also provides $25,000 in funding to each one of these agencies as well. The partnership with the RDAs involves all three levels of government and the community at large.

The partnership is unique in Canada. It works because smart business decisions are made by those who know their areas the best. We know from experience that RDAs help grow local economies in rural Nova Scotia and strengthen the entire economy of Nova Scotia. Therefore, the Office of Economic Development is proposing to invest an additional $25,000 per RDA in fiscal 2005-06. This will bring the total investment in RDAs by the Office of Economic Development to $1.75 million annually.

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With the support of the Department of Community Services, the total provincial investment in RDAs will be now $2.1 million. This investment will reach an additional $4.2 million from other levels of government, resulting in $6.3 million invested in our regional development authorities and the communities they serve across this province. The extra funding this year will help RDAs with their normal inflationary pressures as well as with their new role in encouraging immigration into the communities they represent.

The Office of Economic Development is also doing its part to extend broadband access to more and more Nova Scotia communities. Honourable members may not realize it but Nova Scotia is among the leaders in the country in high-speed, broadband connections.

My office continues to support projects that extend advance fibre optic services to all Nova Scotians, and we are supporting network expansions to more and more rural communities under this program. We do this through our funding partnership with Industry Canada's Broadband for Rural and Northern Development Pilot Program, or the BRAN program, as it is commonly known, which includes the participation of our local telecommunication suppliers here in the province. To date, the Province of Nova Scotia has contributed a total of $450,000 to seven broadband projects across the province. These projects involve dozens of communities from the southwest shore, through to the north shore and on into Cape Breton.

We are helping to bring new services to communities that weren't serviced before, Mr. Chairman, by introducing the connections needed to receive them. The new broadband connections are paving the way for these communities to receive expanded business, health or educational services, or a combination of all three.

I want to take this opportunity, as well, to thank all our partners and, particularly, Industry Canada, our community leaders, municipalities and regional development authorities. Their initiatives produce the joint effort that has allowed us to achieve a high level of community connectiveness. We urge our partners to keep working with us whenever and wherever they can. That way, we can ensure that every corner of this province is served by broadband the way it should be to make a truly effective information highway and make high-speed broadband part of the economic infrastructure of this entire province.

Nova Scotia has also worked hard with Industry Canada and other communities to build one of the strongest and most effective networks of CAP sites across the country. CAP sites help develop communities. They provide high-speed Internet access to individuals and businesses in all areas of this great province. Our 300 CAP sites are warm and welcoming places for Nova Scotians, especially our young people, to learn, improve skills, pursue personal and career development services, as well, to look for employment opportunities or even plan a vacation. Our support for the CAP and BRAN programs, as well as our support for community-owned and operated fibre optic networks, enables even the most rural communities to take full advantage of global market opportunities.

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I want to focus for a few moments now on our efforts to assist the Cape Breton communities. We continue to support economic growth in Cape Breton through a variety of channels. Spending for OED and NSBI for 2004-05 stands at approximately $22 million. We have invested in Federal Gypsum, Techlink, DynaGen, PharmEng, EDS, and Stora, just to name a few of these projects, as well as supporting many others.

These investments are a blend of the old and the new, Mr. Chairman. Through our investments in Cape Breton, established companies continue to provide meaningful employment and high-paying jobs, while new companies continue to locate there as well. This fiscal year, we are pleased to provide an additional $1.5 million investment to the effort to keep the Cape Breton & Central Nova Scotia Railway in operation. Added to the $500,000 already budgeted for the railway, the new money means a $2 million investment in the future of this important railway. We understand the importance of the railway; however, we also understand that a long-term business plan that makes sense for the Island is also needed. Business needs continuity and assurances that the line will be operational years into the future.

Province-wide, our efforts are translating into more businesses and more people working, Mr. Chairman. For example, in 1999, there were 49,000 companies here in Nova Scotia. By 2000, that number had grown to more than 54,000 companies. In fact, we are seeing growth in every region of the province, rural as well as urban. Naturally, this translates to even more Nova Scotians working today than at any point in our history. If we look at employment numbers, in March 1999, the number here in Nova Scotia was 383,000, and by March of this year, there were 428,000 people working here in the province. Once again, the growth is evident in every region of the province. Not only are employment numbers up, but participation rates are also. We still have work to do, though, but our progress has been significant.

I believe our growth strategy is working, Mr. Chairman. In the coming fiscal year, the Office of Economic Development will continue to create the conditions for economic growth. We will do so in co-operation with other departments, agencies, Crown Corporations, business organizations and development groups across the province. As an example, we will continue to deliver the supplier development program. Businesses have asked for something like this for quite some time. Now, more and more of them are using the program and they are asking for us to expand the program. The program helps Nova Scotia companies understand how to participate in the procurement process. Specifically, it shows them how to be a supplier of goods and services the government uses every year. This means more business opportunities for Nova Scotia companies, amounting to about $1 billion a year.

So far, the Supplier Development Program is having a real impact across the province. It works through reverse trade shows, a directory of contracts and an electronic notification system to interested companies across the province. Through the notification

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system, potential suppliers are alerted automatically and on-line to upcoming opportunities to bid on a tender.

Today, I would also like to highlight our significant investment in research and development in Nova Scotia. Research and development and innovation are closely tied to economic growth and prosperity. This fiscal year, we, the Department of Economic Development, will contribute $5 million to the Nova Scotia Research and Innovation Trust Fund. R&D investments are important to our scientists, our researchers, our economy and, ultimately, to every resident of Nova Scotia. These investments generate innovative new ideas and technologies in all parts of our economy, from hospitals to supply businesses.

[3:00 p.m.]

Over the last five years, our investments in NSRIT have amounted to more than $28 million. These investments have leveraged and brought more than $60 million into Nova Scotia from national grounding councils and the private sector. OED will also work in partnership with our agencies and Crown Corporations, like Nova Scotia Business Inc., to attract new business to help companies already in operation to expand. Of course, these actions must be based on a business case. The fundamentals must be present. We are the stewards of public funds and we will use them wisely.

I can report some important successes on the part of NSBI over the last three and a half years, Mr. Chairman. Dollar for dollar, these deals will generate a return on investment of $40 million to the Province of Nova Scotia and create or maintain jobs for more than 11,000 Nova Scotians. Firms like CGI, Crossley, Keane, PharmEng, all these enterprises have brought high-paying jobs to different parts of the province. They have brought these jobs to our rural and urban areas. All these companies were attracted by a flexible and common-sense package of incentives and payroll rebates provided by OED and NSBI working in co-operation, working in tandem. Government has a variety of tools at its disposal to help grow our economy. We will guarantee you the right tool at the right time is used to generate the best investment and good jobs for Nova Scotians.

Governments also continue to grow our economy through the Nova Scotia Film Development Corporation. We have extended the timeline of the film tax credit to 10 years and increased its value. We have added a frequent-user discount for filmmakers and increased the size of the corporation's budget. Each of these steps contribute to the growth of the Nova Scotia film, television and news media industries.

Mr. Chairman, InNOVAcorp is another agency under our jurisdiction that supports economic growth in the province. InNOVAcorp supports Nova Scotia's commitment to maximize the impact of innovation. InNOVAcorp helps promising Nova Scotian companies exhilarate the commercialization of their technologies and research, and increase competitiveness in our export market at the same time. InNOVAcorp does all this through

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a high-performance incubation model. This is an approach that integrates incubation facilities, mentoring and venture investment.

Another OED agency is the Waterfront Development Corporation. It is responsible for the coordination and planning of the waterfronts of Bedford, Dartmouth and Halifax. The corporation maintains a special focus on marketing and promotion that is designed to encourage the public to use these areas year-round. The priorities for 2005-06 are varied. They include the acquisition, management and development of waterfront properties in the three listed communities above. The corporation will also market and promote the waterfronts as centres of year-round activity and interests for all Nova Scotians, as well as a major tourism draw.

The Trade Centre Limited is another agency responsible to OED. It also creates economic benefits for the province, bringing people together at Halifax venues. The Trade Centre Limited is striving to make Halifax the best events destination in North America, and I have every confidence they will continue to succeed in their endeavours.

I also have the pleasure of overseeing the Emergency Measures Organization, which is responsible for promptly coordinating the province's response to emergencies. We have certainly seen our share of emergencies in the past several years, unfortunately, but I'm very proud of the way the organization and, indeed, all Nova Scotians have responded to some very serious circumstances. We have faced the results of extreme wind, rain, snow and hurricanes hitting us often and hard in the recent past, and we have done very well with the help, coordination and supervision of the EMO.

I'm also the Minister responsible for the Nova Scotia Liquor Corporation, which is competing in a very rapidly changing marketplace, Mr. Chairman. Their customers are changing, so the corporation needs to change, as well, to fit the needs of the marketplace and the demands of the consumer. The Nova Scotia Liquor Corporation is competing for a share of discretionary income, so it needs to provide excellent product selection, convenience and retail service. To date, the results of the corporation's work had been excellent. They continue to grow their net income and provide excellent service to Nova Scotians with an increased return to the taxpayers of Nova Scotia so those funds can be used for other vital services required by the citizens of Nova Scotia.

Last in speaking order but certainly not in terms of importance, I am the Minister of Communications Nova Scotia. This is the government's full service communication agency. We call it CNS for short. CNS is a highly-professional agency that provides a comprehensive range of communication services to the province. These services benefit government as a whole, also the public through the distribution of timely and accurate information.

While I have touched only briefly on the areas under my responsibility, I would like to take this opportunity to thank staff in each of these organizations, Mr. Chairman. I want

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to acknowledge those who are here today, as I have previously, and all staff members for the hard work and dedication for the past year. I want them to know their efforts contribute each and every day to the very high quality of life we are fortunate to enjoy here as citizens of Nova Scotia. Thank you.

MR. CHAIRMAN: Thank you very much. We shall now turn to the NDP caucus.

The honourable member for Halifax Atlantic.

MS. MICHELE RAYMOND: Thank you, Mr. Minister, for that explanation of all the many things that the Department of Economic Development and its various related arms are doing in Nova Scotia today, and because you are covering so many areas, I hope you will excuse me if my questions are a little bit various themselves.

I guess one of the things that struck me, of course, is that you are making some efforts to focus on rural economic development as well, through the community economic development model, and you said that you will be, as of this year, giving $125,000 a year to each of the 14 RDAs. Is there any sort of consistent expectation from those RDAs? Is there any particular infrastructure that you expect to be provided through those, and can you tell me anything about the sorts of reporting requirements that there are or aren't?

MR. FAGE: As we all know, the RDAs have been in existence for approximately 10 years here in Nova Scotia. The RDAs provide a crucial, vital link in community economic development and particularly in rural communities. The agencies' funding model was one where approximately $100,000 for the last number of years has been their operating commitment from OED. They do receive funds from the local municipalities they represent - it's a three-way partnership - as well as the federal government.

MS. RAYMOND: That's in addition to the $125,000 you provide?

MR. FAGE: In addition. The numbers we are talking are the provincial portion.

MS. RAYMOND: Right, good, just checking.

MR. FAGE: I think the key role, though, when you look at the success of the RDAs has been levering those funds to support community economic development associations, groups, organizations in the general area as well as individual business support in their dealings with everything from a business to a management plan to an operational plan for new business. They would supply that type of support and help those businesses to contact agencies such as NSBI or ACOA, CEDIF, the local investment funds, to help finance the growth and operation of those new businesses.

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MS. RAYMOND: So is that the primary role of the provincial dollars, then, to provide liaison and linking services or, as I say, is there any particular kind of infrastructure that you expect, that the province expects, to see in any of the RDAs?

MR. FAGE: I think that's a really good question. What we require of the RDAs for the operating funds each year is to file a business plan for their upcoming year. The department staff then would assess that business plan. Obviously, there are a number of criteria that our department would want to see in that, everything from the responsibilities and roles in dealing with businesses as a procedure and function to their objectives on policy on growth. That would all be part of that business plan. Once that is submitted and we approve it, we would sign it off and then our funds would flow for the year.

MS. RAYMOND: Have you had any difficulties - they are always justified, the funding has always flowed and always been seen as justified and flowing and so on, and it is expected that it will continue to.

MR. FAGE: Certainly, in my tenure here, we've had a good working relationship with all the regional development authorities and, last year, each regional development authority put forward their business plans. They were signed off, and there was nothing brought to my attention through the year that they did not fulfill the objectives of their plan.

MS. RAYMOND: Okay, great. I think another thing that is probably related, I suspect it's related anyway, is that I notice that there is funding here to several of the harbour authorities. Again, can you tell me a little bit about what is going on, I see at Cribbons Point - sorry, that's the only one that stuck out in my mind. The harbour authorities, at this point, are community-owned entities. Is that correct? Is there any funding going to private partners in the harbour authorities?

MR. FAGE: We would have to know the individual harbour authority. My understanding, there are the federal harbour authorities, the devolution would be . . .

MS. RAYMOND: Community groups.

[3:15 p.m.]

MR. FAGE: . . . a harbour authority that would maintain that wharf. There are several community, provincial wharves that are across the province as well, so they would fall in a slightly different category. Then there is strictly commercial, or as you said, business partnership, private wharves would be the three kinds in Nova Scotia. To give you a clear answer, I was just wondering if you could give me the page in the Estimates Book.

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MS. RAYMOND: Okay, hold on. Let's see, it's the Supplement to the Public Accounts. I can only tell you it's in Grants and Contributions, and my eyes are bad enough that I can't read exactly where they were without them being highlighted.

MR. FAGE: If we just had the page number we could be on the same page with you.

MS. RAYMOND: Page 131, I think. Again, I guess the real question is, there is no particular requirement that these be either fully community groups or not. Is that correct? You may be funding any of a variety of structures of harbour authorities at this point.

MR. FAGE: Yes. What would happen is a harbour authority or a community group would come forward to OED with a proposal for upgrade, repair or critical infrastructure they needed. We would consider that under our Strategic Investment Fund, and if it was approved, then it would be funded.

MS. RAYMOND: As I said, there's a whole series of things, just little bits and pieces. At the moment, I know that transportation of goods and outlets for sale is obviously a significant part of stabilizing any portion of the rural economy particularly, although it can be in the larger cities as well. One of the concerns that comes up quite frequently, particularly in Cape Breton, as you know, is around the railway. I'm wondering what role the office is taking at this point in discussions around retaining, moving freight lines, particularly. This is an issue at Cape Breton; it's also an issue closer into Halifax as well. What initiative is the OED taking at this point?

MR. FAGE: In regard to the Cape Breton & Central Nova Scotia Railway, we have assigned a person to deal with them directly from OED and they are in constant discussion with possible suppliers of freight to that rail line as well as other related organizations, i.e. CN, that would possibly supply freight, or passenger service in the case of VIA Rail, which they supplied last year. That particular individual and support staff are in constant contact with the Central Nova Scotia management people, exploring opportunities for increased rail freight or rolling cars in the future, obviously working on the business plan.

Part of what is in the budget today highlights the need for continuity and more than one year's funding. We are proposing a five-year commitment to them, which then transfers to, if you are a company looking at using that as the mode to move your products or goods and services to market, you want to know that if you are going with the railway, it's going to be there more than one year before you sign a contract. Those have been some of the impediments because of the short-term nature of the discussions the last several years. That's why we've moved to a longer time frame but we've worked with suppliers, possible shippers, the railway and any other related agency.

MS. RAYMOND: Are you dealing with Transport Canada at all around the freight strategy in the Port of Halifax?

[Page 393]

MR. FAGE: What I was referring to previously was all Cape Breton rail. In regard to the CN main line here in Halifax and the port authority, or the freight here, certainly the port authority are involved in those discussions and certainly the smart initiative involves a whole host of players, carriers and people involved in that.

MS. RAYMOND: Are you in discussions with Transport Canada yourself? Do you have a direct link with Transport Canada around that kind of thing?

MR. FAGE: No. Our concern is growing the economy. TPW would be the agency that would have the direct discussion with Transport Canada.

MS. RAYMOND: Although, I would certainly argue that it's difficult to grow the economy without the transportation.

MR. FAGE: Absolutely and I think certainly a view of this subject that is very vital to our economy, availability of rolling stock rail cars from CN is an issue that we all need to work on, especially for the Port of Halifax.

MS. RAYMOND: Especially here in Nova Scotia. I guess I'm probably running out of time here. One other question that I had and I have not been looking all the way through, so perhaps I may be asking a question which has been answered. You deal with bond issues to some degree. Is that correct or is that purely Finance?

MR. FAGE: Finance.

MS. RAYMOND: That's purely Finance. Okay, so I won't ask you that question. I'm sorry.

One other question that I had and I'm afraid I do not have the page number in front of me but it's around loan guarantee of Nova Scotia, I think it's 3005790 Nova Scotia Limited to the Nova Scotia Offshore Petroleum Board. How does that one work?

MR. FAGE: What was the number?

MS. RAYMOND: I think it's 3005790 but I'm going to have to look that up but it's the only one. It's a significant loan guarantee to Nova Scotia Offshore Petroleum Board.

MR. FAGE: I'll confer if we can find it.

MS. RAYMOND: Okay. I'm sorry. I should maybe come back to you with that question, because I don't have the page in front of me either. Another question I do have, though . . .

[Page 394]

MR. FAGE: If you can identify the entry . . .

MS. RAYMOND: I'll get back to you with that one.

MR. FAGE: Is the number 3005790?

MS. RAYMOND: Yes, I believe it is.

MR. FAGE: And it's $149,712.84?

MS. RAYMOND: Yes.

MR. FAGE: That is a lease for the facility and buildings and office rental in Sydney, Nova Scotia.

MS. RAYMOND: That's in the accounts, this one?

MR. FAGE: Yes.

MS. RAYMOND: Okay.

MR. FAGE: And that's the office space rental of OED in Sydney.

MS. RAYMOND: Okay, great. That was almost the last. There was one other and I should know this but, again, I'm sorry. The Council of Atlantic Premiers "Trust Fund" is $130,000. What sort of contribution is that?

MR. FAGE: Do you have a number or reference?

MS. RAYMOND: Page 131 in the Supplement to the Public Accounts.

MR. FAGE: I was just conferring to make sure we had the right information for you. It's the Council of Atlantic Premiers "Trust Fund", $130,643.95?

MS. RAYMOND: Yes, that looks like it.

MR. FAGE: Those are payments to ID for external secondments of employees. We recover those salaries. Within government, if we had a project on, and this one relates to what was formerly the CAP projects, we would recover those funds, our department would. So those would be the salaries for the individuals working on that project.

MS. RAYMOND: So you are paying it into that trust fund? These are grants and contributions. So those are salaries for CAP site employees?

[Page 395]

MR. FAGE: Yes.

MS. RAYMOND: Okay. That was going to be my last question, actually, about CAP sites. Is there any plan for sustainable funding for CAP sites and for manning CAP sites?

MR. FAGE: At this point, several months ago the federal minister was here, I guess about six weeks ago. The funding arrangement that we were negotiating at that point was for the 2004-05 year to meet our commitments. We signed that agreement off at that time and the CAP funding in our estimates this year is a stable amount reflective of what is required to fund our commitment to CAP. So the funding is stable . . .

MS. RAYMOND: You are saying CAP sites, right, when you say that?

MR. FAGE: Yes.

MS. RAYMOND: Okay, so it's stable funding for one year.

MR. FAGE: All budgets are one year.

MS. RAYMOND: Yes, stable funding for one year, but the agreement is a one-year agreement.

MR. FAGE: Yes, with the federal government. Obviously we are in discussions with Industry Canada on a future agreement plus the private partners involved.

MS. RAYMOND: Okay, because I would say that is certainly one of the most important elements that you can put into place in terms of infrastructure for many of these communities that you are serving with RDAs and so on. I'll be glad to see that.

MR. FAGE: I totally agree with you. I certainly view CAP sites, as well as the broader high-speed, broadband initiative as one of the most crucial pieces to our economic future. That allows us the connectivity to do business as a basic piece of infrastructure in every community in Nova Scotia. I appreciate your acknowledgement. I agree completely.

MS. RAYMOND: I'm going to turn the rest of my time over to my colleague, if I may.

MR. CHAIRMAN: The honourable member for Pictou West.

MR. CHARLES PARKER: Good afternoon, Mr. Minister. Welcome to you and your staff. I come from the North Shore, as you know, similar to yourself in the riding of Pictou West and certainly not far from your neck of the woods in Cumberland North. In fact, I think

[Page 396]

our ridings almost touch at some point across Cape John to Malagash Point, in that general area, so we are almost like neighbours.

MR. FAGE: We are neighbours.

MR. PARKER: I would say. I have a few questions in particular from my riding that I want to ask you about. As you may be familiar with Pictou County, and Pictou West in particular, we have a number of large industries, including Michelin Tire, Neenah Paper, as it's now called, and also Greenbrier is located in the Pictou Centre riding. A lot of the employees certainly live in my area.

So I'm going to maybe first of all ask about Greenbrier in that recently they went through a process. They sold off their forge and a company from Texas purchased the plant there and kept the people employed. I'm just wondering, what was your department's role in facilitating that sale? I can remember asking you about it during Question Period last year. It was iffy. We weren't sure if it was going to happen or not but thankfully, finally, it did come together. So I was just wondering, what was the Department of Economic Development's role in facilitating the sale of the forge there at Trenton Works?

[3:30 p.m.]

MR. FAGE: As you have rightly reviewed, certainly Greenbrier was the situation where a number of the employees' jobs were at risk and the Office of Economic Development and staff certainly were critical in the discussions of the transfer of that physical asset and coming to an arrangement that was suitable to both private interests involved there. The outcome of an $8.8 million loan guarantee provided by OED was the signing of the deal that allowed the forge to continue to operate under new ownership and certainly we were pleased to play our role in achieving that agreement so the employment levels were maintained, plus a critical piece of the infrastructure, which is the forge itself, remains here in Nova Scotia in operation.

MR. PARKER: So it's an $8.8 million loan guarantee fully payable back by the new owners. Was there any grant money or was it strictly a loan, or loan guarantee, I should say?

MR. FAGE: Yes, my understanding is it is a loan guarantee.

MR. PARKER: I'm going to move on to another important industry in my constituency and I've asked you in the past about this, Mr. Minister, and that's the Pictou Shipyard. I was all set to ask you the question in Question Period but there you weren't, so I'm going to ask you about it now. Pictou Shipyard has been going for many decades, a very important component to my constituency. Over the years it has built a number of vessels. In fact, you may have seen the program over the weekend, The Boys from Pictou. It was aired about Pictou's contribution to the war and it was on Saturday night and it was on again, I

[Page 397]

think, sometime last week. It showed that a number of vessels were built there just as fast as they could construct them and then since then there have been a lot of other vessels built, including The Confederation ferry that plies the Strait between P.E.I. and Nova Scotia at this time.

More recently, the bulk of the work has been offshore components. I think the most recent project was for the White Rose project off Newfoundland. However, right at this time, there are no contracts, there is nothing happening at the Pictou Shipyard. It's unfortunate. It's just very flat at the moment. So I guess my first question in that regard is, what is the Department of Economic Development doing to try to get things back together and get some contracts, perhaps assist the owners there to get some work?

MR. FAGE: As we've talked earlier on a number of occasions in regard to the Pictou Shipyard and it certainly is unfortunate at this point there is no major work or work of any kind, really, going on at Pictou. My understanding was that there was some small repair work earlier on buoys and those situations, on channel markers going into the water for the opening of the fishing and shipping season. I've had staff contact the operators of the shipyard. They inform us that they're in discussions with possible clients who would supply work but at this point they have no contracts signed and they're going to keep us posted.

MR. PARKER: Well, I've been talking with some of the workers there and with their President of Local 4702, United Steelworkers, and they are very concerned. They haven't had any work since last August for some of the employees and they are skilled employees. They are welders and fitters, they are tradespeople, but their EI is running out and the danger is that a lot of these skilled people are going to have to leave our province to go elsewhere to find employment, to Alberta or Ontario or wherever, and that would be a darn shame because they are skilled people and it's really an urgent situation. I'm just wondering, Mr. Minister, do you see it as an urgent situation?

MR. FAGE: No question. Myself, personally, as minister responsible, any time an industry is idle is of concern to the province and certainly to the people of Nova Scotia and to the community involved. I know the federal MP has been working very hard and I know local councillors have been working diligently, inquiring if there is opportunity for contracts of every kind, but the reality at this point is the operators, as you well know, under any lease agreement and any business plan would be the ones who would acquire the work. Certainly we're urging them to scour any opportunity that is out there and we all know they own a number of shipyards, or lease them, and urge them to consider the Pictou Shipyard as a good spot to do business.

MR. PARKER: I'm asking you, I guess I'm just trying to figure out the actual ownership of the Pictou Shipyard. For many years it was owned by Ferguson Industries and it was owned by other families and then I know the government owned it for a time. I understand government still owns the marine railway or the marine slip and they own the dry

[Page 398]

dock and other aspects of it there. That's my understanding. But then it was leased or sold to Mr. Halef. He owns it or leases it, I'm not sure what the arrangement is and in turn, now, Irving Oil has leased it from him or from government. Could you just give us clarification on the ownership and who owns what?

MR. FAGE: My understanding, a firm named BMI, BANC Metal Industries, are the owners of the shipyard. The province has an interest in the rail and the haul-out or the dry dock portion, if I'm using the proper terminology - I apologize. The owner certainly is Mr. Halef and it is my understanding that Irving has the shipyard leased and are continually looking for work for the yard.

MR. PARKER: Okay, so it's owned by BMI, or Mr. Halef is the owner of that business, yet government also owns the marine railway and the dry dock and perhaps some other components there so it's sort of joint ownership but it's being leased, everything, to Irving Oil. Do I have it correct?

MR. FAGE: My understanding is BMI owns the Pictou Shipyard. The province owns two assets in proximity there, the rail haul-out and that portion there. Irving Oil has leased all those assets and has a lease on it that expires in December 2005, I believe. I mean, obviously, if you are leasing something and paying costs to protect your investment, you want to get work in there as well. I don't see any reason that they are not working hard to find projects or contracts.

MR. PARKER: So just to sum it up then, I guess, regardless of the ownership or the leasehold, the bottom line is there is still no work for whoever owns it or is leasing it. I assume, then, your department is working with the leaseholder and the owner and wherever to help them find contracts so that our men can get back to work.

MR. FAGE: Certainly we're there to work with the lessee on projects and initiatives that would certainly benefit Pictou Shipyard and certainly, like yourself, as the local representative, who, I am sure, is in contact with Irving Oil, urging them to find opportunities or contracts, we are there as well.

MR. PARKER: Thank you, Mr. Minister. Those were really the two questions I wanted to ask you about. I have some other colleagues who want to share our time so I'm going to turn it back to the chairman.

MR. CHAIRMAN: The honourable member for Halifax Atlantic.

MS. RAYMOND: Mr. Chairman, I'm sorry, I was carrying someone else's books and not my own when I was asking you that question earlier. The question that I had, and I hope you can explain it to me, it's actually in the Consolidated Financial Statements. It's Schedule 8 and it is Direct Guarantees. There is a promissory note, apparently, and it's from 3052155

[Page 399]

Nova Scotia Ltd. to the Canada-Nova Scotia Offshore Petroleum Board. It's in the amount of $17.5 million, all of it utilized, was authorized and utilized. I do see below, as well, that there would appear to be a payment of $9.1 million. Could you give me the mechanics of this? Consolidated Financial Statements. It's a loan guarantee, a promissory note, and . . .

MR. FAGE: Could you supply us with the document you're reading that from? What's the actual document, if you could give me the title?

MS. RAYMOND: Consolidated Financial Statements. (Interruptions)

MR. FAGE: That particular notation, I believe would be best directed at the Department of Energy when they're up for estimates. It's not an entry carried by our department.

MS. RAYMOND: You wouldn't carry that, okay. Thank you very much. I'll give the rest of my time to my colleague.

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

MR. GORDON GOSSE: Good afternoon, Mr. Minister. My question is concerning the Nova Scotia Liquor Corporation. In the Crown Corporation Business Plans 2005-06, Page 180, I'm just looking at the forecast for 2004-05 at $170 million, and then the estimate for 2005-06 increased to $177 million. I wonder, is that an attainable goal by the corporation.

MR. FAGE: The estimate for net return this year is $177 million and change. We've asked the NSLC. We confirmed with their board and their management. They feel that's an achievable number with their new retail model, and given a reasonable tourism season that they will make that net gain for the province.

MR. GOSSE: I'm just wondering, how do they base the fact on a reasonable tourism season? The last two seasons were down here in the Province of Nova Scotia. We're forecasting there's going to be growth in the tourism industry this Summer?

MR. FAGE: There are always variables in every forecast, every budget, and the weather does change, and sometimes hockey players go on strike. A whole group of variables can occur. The number, we feel, is reflective of trying to strike a balance between all those of what may or may not happen. It's a 4 per cent increase in net profits. Two ways that they will be achieving that is control of expenditures and obviously increased sales or increased net profit on those sales. We felt that was a reasonable expectation in growth in net revenues, 4.2 per cent.

MR. GOSSE: I'm just wondering, are the pay-for-performance bonuses going to be tied into these goals set out in this budget?

[Page 400]

MR. FAGE: The pay-for-performance bonuses, I think it's important to keep in mind that the CEO in these cases would do the evaluation of senior management, the CEOs would be evaluated by the board, obviously. There are criteria that the board has established for guidelines for those pay-for-performance bonuses. Certainly, I know in discussion with the board, that achieving the financial target would only be one of a number of factors that would influence that.

MR. GOSSE: I'm also looking in the same book, on Page 177, and when I looked at it it says under Strategic Goals, creating and harnessing cultural change, promote cultural change. I'm just wondering what that means. That's on Page 174, Strategic Goals. It has six of them listed.

MR. FAGE: The majority of them refer to strategic goals. Culture is supplying the best selection of products in a user-friendly retail environment. The cultural change is dealing with that presentation and the service provided to our customers by management and staff.

MR. GOSSE: I'm wondering also, on Page 175, "Introduce a new technology-based shelf-management system." I'm wondering if that's based on the announcement last week of the 79 managers. Are they going to be included in the pay-for-performance bonuses? I'm wondering if their knowledge of the IT sector will be included.

MR. FAGE: The reference there, my understanding, is dealing with the use of technology and research, how product is displayed on shelving and what is the best presentation to satisfy the customer's needs. That's what those references would refer to there.

MR. GOSSE: I thought it might have been tying in all the stores across the province, on an IT sector, so that they'd all have access to that. I'm just wondering, are all the managers going to be involved in taking an IT course or any kind of courses to upgrade them to the knowledge of the new system and to help them better with the product?

MR. FAGE: No and that's part of the enhancement assessment that's already in place now. That access is there.

[3:45 p.m.]

MR. GOSSE: It says - I saw it in here on Page 179 - to "Continue to ensure the responsible sale of beverage alcohol in NSLC's retail outlets, including the Check 25 ID program." I'm just wondering, is the Nova Scotia Liquor Corporation going to start recording the number of fake identification cards that are confiscated every month by agency stores and keep a record of those cards that are confiscated?

MR. FAGE: I'm assuming the question is dealing with agency stores?

[Page 401]

MR. GOSSE: Whatever it falls under - yes, agency stores, I guess, and also the Nova Scotia Liquor Corporation, their own stores. The Check 25 ID program, wherever that's run, whether it's agency stores or the corporation stores.

MR. FAGE: I was just receiving some clarification, sorry for the pause. I wasn't sure of the detail on the Check 25 ID program in what happens to those fake identification cards when they're confiscated. Apparently they are returned to the Department of Service Nova Scotia and Municipal Relations. Currently we're not keeping a running total on how many are returned, but I'm comfortable that we could probably retrieve that information from the Department of Service Nova Scotia and Municipal Relations for you.

MR. GOSSE: My concern is that I'd like to have a clear picture of the underage drinking in the Province of Nova Scotia, and by recording the number of identifications that are taken at the stores, it would give us a better picture of what's going on in the province.

MR. FAGE: I'll ask management at the NSLC if that's possible and what type of system we could come up with to work on that.

MR. GOSSE: Also, are there going to be any increases in liquor sales this year?

MR. FAGE: That is a good question. Some people who invest in stock markets and other forums wish they knew those answers, exactly, as well, honourable member. Certainly we're projecting an increase in net profits. One of those components that is weighed in there is growth in overall liquor sales.

MR. GOSSE: My next question, I'm wondering if the NSLC has ever done a cost - well, the trend now is moving the Nova Scotia Liquor Corporation to agency stores, box store outlets, outside the area of downtown, small-town Nova Scotia. I'm just wondering, has the agency ever done a cost or an economic impact on moving those stores out of the main streets into those areas?

MR. FAGE: My understanding, and I think you have to use the terminology very carefully, an agency store would be the half-dozen-odd stores that currently would be located in private businesses now, that's what, in public terminology, is referred to as an agency store. I think what you're asking is if there's a cost analysis done when an RFP is done to move a Nova Scotia Liquor Corporation store from one site location to another in a community - is that what you're asking?

MR. GOSSE: Yes, that's right. I know what I mean by the private agency stores. I think we have one in Marion Bridge in Cape Breton. But the regular . . .

MR. FAGE: I think there's an important thing to note, when the NSLC, under its management as a corporation, one of the things that is extremely helpful and provides returns

[Page 402]

to the taxpayers of Nova Scotia is tendering your premises' locations. The majority of sites in Nova Scotia, obviously, are not owned by the NSLC, rent is paid on some of these by a private or corporate facility to house it there.

One of the policies adopted by the Crown Corporation since its inception, four or five years ago, is to RFP or tender wherever possible, when a site comes up for renewal in a given community. What it has enabled is anyone in that community, if that RFP is called, can tender their location. That has been very beneficial to lowering the costs on rentals to the Crown Corporation, which in turn increases net profits to the taxpayers, which pays for schools, doctors and hospitals, and roads and maintenance, all those types of things, because the larger the net profit of the NSLC, the more money going to other government services. That being said, the RFP or tendering, most of the time they tend to end up with the larger grocery chains. To give you an idea of that success, in some cases that will reduce the rental cost anywhere from 60 per cent to 90 per cent of previous totals, which is a very good deal for the taxpayers of Nova Scotia.

MR. GOSSE: I do know what the sales and profit is for the Province of Nova Scotia and what they do with schools, health care and education, but I'm just wondering, there has never been anything costed on the economic impact of removing the Nova Scotia Liquor Corporation stores out of small-town Nova Scotia, so it wouldn't be able to tell us if it would hurt the downtown core economically because they're moving outside to another quarter. There has never been anything done by the corporation to kind of study, or anything done about the impact of that?

MR. FAGE: I'm not aware of liquor stores moving out of a community in Nova Scotia. When an RFP is done, it may switch from one location in the community to another, but I'm not aware of one ever moving out of the community. No economic analysis, that I'm aware of, is done when the RFP is called.

MR. GOSSE: Okay, when the RFP is called, and maybe I'll put it this way, and it's moved two miles from the downtown core of a small Nova Scotia town, has there ever been any economic impact on moving them off the main streets?

MR. FAGE: I would contend it's a pretty large community if it moved two miles from the downtown core - we're talking large communities, if we're talking two miles. I'm not aware of any, other than the CBRM or HRM where the community would have a width of over two miles. An RFP is done within the geographic area of that community. Business owners or private people are invited to tender on a location anywhere within the community. I'm not aware they would move them outside.

MR. GOSSE: What I mean by outside, in CBRM we do have communities like Louisbourg, which is 25 kilometres from downtown. I'll give you an example, Liverpool moving the liquor store off the main street in Liverpool to its current location, which is being

[Page 403]

built now, I think in the Atlantic Superstore. So there's never been any economic impact on those?

MR. FAGE: To my knowledge, no. The reason, obviously, for the RFP is to get the best deal for the taxpayer and secondly, to make the greatest convenience and ease for the consumer. Certainly, when there are other shopping venues, lots of parking, more display area, a friendly retail environment where you can put in a cold beer section, every community they've been relocated in, the net profit has gone up. I'm told the customer satisfaction of the users of those stores improves as well - the customers are more satisfied in those communities - and the service they receive once the move occurs. The consumers are pretty honest and fair. They're like taxpayers. They're the same people.

MR. GOSSE: In today's society I guess it's one-stop shopping. That's what they're all looking for, picking up groceries and their spirits on the way home from work. I'm just wondering about the hurting of the downtown small areas in Nova Scotia.

MR. FAGE: Honourable member, I would certainly give the NSLC and their staff full credit. If there are changes, they tend to work with the municipal government and the local business community to explore other options to support the downtown. If the community is large enough, for example second stores or other venues that can help the community alleviate their concern and accomplish both goals at the same time, they certainly work very hard at trying to make that accommodation work for everybody.

MR. GOSSE: I'm just going to go back to my roots in Cape Breton with 15 per cent unemployment. I think the unemployment rate right now is about 16.9 per cent. I asked the question in the Legislature, last week, on the bonuses for executives of $96,000. I guess I put it in the way of selling beer. I'm just wondering, did you, as the minister, know about these bonuses?

MR. FAGE: Certainly, once I was advised of them, bonuses, as minister responsible to ensure that the guidelines are in place so they can be awarded. I think it's key to point out and acknowledge, to compete with the private sector, bonuses do two things: it helps to level that playing field, to acquire top-notch people to manage and operate the corporation. Secondly, I think bonuses are key in allowing people who work hard and take up the challenge of improving sales, meeting their targets, whatever the guidelines are, and some will be decreased expenditures, they receive some benefit for that effort as well.

[4:00 p.m.]

MR. GOSSE: That brings me back to your earlier comments about dollars being spent on health care and education. These dollars being spent on bonuses - that's less money for those important things. I'm going back to Cape Breton and the unemployment rate and all those things. It's questions that are asked of me when I'm home in Cape Breton.

[Page 404]

MR. FAGE: I think it's always important when you strive to have top-notch management institute new governance in marketing techniques that people work very hard and go above and beyond to achieve those numbers. I think one number that is quite startling for the NSLC since 2001, since they were formed, net profits have increased by 22.4 per cent. That's not achieved lightly. I think it's important to reward people with the management capability to do the retail and the governance, and all those things involved to achieve that.

If the management had not been quite as strong, maybe that percentage would be much less. The $96,000 that was paid out in bonuses, maybe only half of that net profit increase would have been achieved, so the province and the communities would not have gained near as much, or been losers instead of that type of gain, and that's part of rewarding people who perform.

MR. GOSSE: Okay. Mr. Chairman, I just wanted to check to see how much time I have left.

MR. CHAIRMAN: You have eight minutes left.

MR. GOSSE: I probably have another question, but I will hand it over to my colleague. Thank you, Mr. Minister.

MR. CHAIRMAN: The honourable member for Hants East.

MR. JOHN MACDONELL: That's eight minutes for the NDP caucus?

MR. CHAIRMAN: For the NDP caucus, yes.

MR. MACDONELL: I won't get into any long speeches, Mr. Minister. Thank you very much, and I want to thank your staff for an opportunity to ask questions. I will get right to the chase here. I want to ask about disaster relief, or lack thereof.

A constituent of mine actually applied for relief for harvesting his woodlot and was turned down. I think the thing that may have surprised him was that his neighbour with the abutting woodlot was also turned down. Eventually his neighbour, I think, got $9,000 compensation or whatever. I think he started to pursue this a little too late. Actually, I didn't realize there was a deadline. I called and didn't get anybody on February 25^th, but I didn't leave a message; by February 28^th I found the program was ended. So I'm just curious, were all the funds the province had set aside or planned to spend on this disaster relief used up? I wasn't aware there was an end to the program.

In my case, I applied, but I didn't even have my wood harvested. Actually my brother was a contractor so it's still piled up on my roadway, so I would never have come in under the limit either. It wasn't a particularly big issue for me because I had such a small piece of

[Page 405]

land, only about three or four acres. In my constituent's case it is a concern because if his neighbour got $9,000, I think he should have had more opportunity to pursue this. Can you help me out with this?

MR. FAGE: I think it's important to point out, under the federal DFA program, which we're a signatory to, after Hurricane Juan, with the extensive damage in the resources sector, the province made a strategic decision to do a program on its own, because, clearly, the guidelines set under the federal DFA would not help any of these affected individuals and the resource sector. We came up with a program as a province and, as a department, took it before government and it was approved. It dealt with funding for the fishing industry, the affected area of the farming industry, and the forestry industry.

With the expanded DFFA, which is the provincial program we're talking about, with the forestry sector, there was an application form which we made every effort to get out there promptly, plus we had people from the Department of Service Nova Scotia and Municipal Relations dealing with it at different centres. Clearly on the application form there was a deadline in bold print that you had to have your application in by a given date. We tried our best to make sure that it was there.

The dollars were intended to help support to salvage that wood, for example, the harvesting cost. As you well know, being in that zone, different woodlots were affected differently. The storm's negative pressure pulled some of them down like a swirl of grass; other ones it jumped a kilometre and there was not a lot of damage. One of the things that proved very beneficial was that digital photography of the area happened to have been overflown the year before and then you could come up with a settlement on support on salvage costs.

The work went ahead and my understanding was that the Nova Scotia Forest Products Association administers the problem on behalf of woodlot owners and the industry, so it was very fair. Once you were approved, when could you get a harvester or contractor to come and do your wood once the wood was off - because payments would not be made for salvage it if wasn't salvaged. So that has been the general process. In Mr. MacLellan's case, I'm not familiar with the individual case and I certainly don't mind going through it and reviewing it with you on his behalf, later, or whatever you would like.

MR. MACDONELL: I'll take you up on that, I appreciate that. I will get some more information over the next day or so to give to you. I appreciated that very much and I think he would appreciate it. It was the whole question of the end of the program, I think, that I wasn't aware of, he wasn't aware of, and I even got a package and don't remember seeing it in writing anywhere on that.

I want to move to another gentleman in my constituency, up in the Minasville area, on the Minas Basin, Foggy Hollow Farm, and it's Richard Thompson. This Fall we had

[Page 406]

another windstorm, and I think the shore area, what I call the Hants North area, escaped Hurricane Juan for the most part, they didn't really receive much damage. We had the wind storm with 155-kilometre-an-hour winds which were in the range for what Hurricane Juan was. Mr. Thompson has a greenhouse operation and lost three of four greenhouses, yet there was no program for him. Have you looked at doing something for these people? I know some of the people who had damage from Hurricane Juan, like Mr. Whidden over in Fort Ellis, his silo was re-damaged and some other farmers in my area, so it looked like, basically, hurricane-force winds hitting a second time but there seemed to be nothing on the radar screen for helping these people.

MR. FAGE: I think there are three things we always have to remember, even with the federal DFA program. The first one is that it's non-insurable. I'm not aware of Mr. Thompson's situation, but several of the others had their insurance in place and the work is proceeding on repairing from that wind storm, and their insurance is making the payments or fixing the damage.

I guess the first thing would be to find out if whatever losses occurred were insurable losses. If they're insurable losses, then they wouldn't be covered under any program, whether it was federal or provincial. The expanded DFA program was a limited program for Hurricane Juan. The federal DFA does not, so to speak, activate or kick in unless there's over $1 million worth of damage to begin the process. So under those amounts, individual cases, there would be no standing policy in this province, or nationally with the federal government, that would be involved in those. That's the nature of DFA.

MR. CHAIRMAN: The time for the NDP caucus is finished. We'll now move to the Liberal caucus.

The honourable member for Cape Breton South.

MR. MANNING MACDONALD: Mr. Chairman, at this point I don't think I'll be sharing my time with anybody, but somebody may come in and want to get involved. Certainly, I want to start off by saying that I listened to your opening statement, Mr. Minister, and also some of the comments and answers in the past hour. Off the top, I must say that I have a real problem with the confusing mission statements of the Office of Economic Development and NSBI.

To set the stage for what I'm about to embark upon, the road I want to go down, can you enlighten me about the two roles, and what is the fundamental difference between the Office of Economic Development and NSBI?

MR. FAGE: I think that's a really important fundamental question the honourable member has asked. First of all, I think it's important to note that in this province, the business community, for a number of years, has been requesting an agency that they would have more

[Page 407]

input into. For example, the business people in Nova Scotia would form the board of directors of Nova Scotia Business Inc.; they have the business expertise, they know about investments, they see the challenges of coming up with dollars to finance expansions or new businesses or to sometimes refinance when things aren't going as well.

So the creation of Nova Scotia Business Inc. was certainly along those lines, and an effort to ensure that business people were administering loans and payroll rebates, support programs to existing or possible future businesses on a timely basis, as well as being the prime agency for recruitment of businesses from outside of Nova Scotia to encourage, entice and look at opportunities to get them to locate in this province because of the positive business growth and climate.

OED wants those responsibilities of the growth of the external sector especially, that was given to NSBI; they hired their staff, set up their network, and moved forward. OED's role is there to deal with businesses in Nova Scotia, as well. The two agencies would consult on a very regular basis, and OED, through the Industrial Expansion Fund, has the ability to rebate or grant or loan to businesses whether they're indigenous or ones that might be locating here. I think the significance of what's going on in Nova Scotia and the success is the coordinating and the partnership of both the department and NSBI.

There's quite a number of examples in Nova Scotia where the programs that OED can offer and the programs that NSBI can offer we would partnership on. If you look at Crossley Carpets, it's a really good example, in Truro, and certainly one can pretty well disclose the company was comfortable with us talking about it. Here you have a company that had three plants in North America. We became aware, as well as NSBI, that they were looking at consolidating in one location. It wasn't in Nova Scotia. We worked with them to put a business plan together that involved capital expansion support from OED and payroll rebate from NSBI. The result, instead of a plant that would close in Nova Scotia, is a plant with over 250 more employees, and a total workforce, when this is complete, that will be over 500.

I think the citizens of Truro and the citizens of Nova Scotia see that as the kind of co-operation they want, and the kind of success we need in Nova Scotia. The basic tenet is there are many agencies promoting the economic health, growth and expansion of this province. They overlap sometimes in their jurisdiction but they all have the same goal, to provide the best place to live, work and raise a family right here in Nova Scotia.

[4:15 p.m.]

MR. MANNING MACDONALD: Mr. Minister, I'm still not clear about the difference between NSBI and the Office of Economic Development because, apparently, you're still giving out grants and loans, as well as NSBI. So now we have two agencies under the same roof giving out grants and loans to businesses.

[Page 408]

I want to go back to 1999 for a moment, when the Premier was in Opposition and when he was on the verge of taking government, he made a statement to Nova Scotians that there would be no more loans and grants given out to businesses in Nova Scotia, that there was going to be a new way of doing business in Nova Scotia. Gone are the days when businesses could go to government and access loans, the private sector will legitimately take over that role, and we will provide an Office of Economic Development that will do some research and will set the stage for the private sector to be able to grow the economy of Nova Scotia without direct government subsidies.

Well, Mr. Minister, I have difficulty with what the Premier said then, because nothing has changed since then. I guess the one change is that when we were in government, prior to 1999, we thought it was a good idea to grow the economy by providing incentives to business. As a matter of fact, the payroll rebate system you talk about was born in the previous government. We didn't make any apologies for that, we didn't think we had to make apologies to Nova Scotians for that because, for the most part, it seemed to work.

What has changed? We have NSBI now. Ne had the BDC before that which was more responsible to the taxpayers. Now we have NSBI. While your department may be shrinking a little bit - and I'm going to get into that in a moment - regarding NSBI, my feeling is that when you talked earlier about that you are growing the economy in Nova Scotia, particularly in areas like Cape Breton, and my good friend, the member for Cape Breton Nova, mentioned the unemployment rate down there is still in excess of 15 per cent. I also go to the fact that we have an Economic Development Office in Sydney now that has one person in it sitting there waiting to retire, and a secretary with no ability to deal with anybody on the ground in Cape Breton in terms of small entrepreneurs, small companies wanting to access government funding or wanting to at least present a plan to somebody on the ground down there so that somebody will look at it.

NSBI is not there, and the Economic Development Office has been reduced to a one-person operation. I go back, Mr. Minister, to the Film Development Corporation that was set up in Cape Breton through the Department of Economic Development. It was a very good economic boost to the economy there, at the time, employing 200, 300 people at any one time in the film industry and the stage productions. Efforts by the Department of Economic Development to raise the tax credits at the time, in Cape Breton - we were moving in that direction and then the government changed. What happened when the government changed? The film tax credit was backed up to, the current government said, a level playing field.

Well, when you level the playing field with economic development in Cape Breton with Halifax, you don't level the playing field, what you do is you enhance one at the expense of the other. In areas of high unemployment, in rural Nova Scotia and in Cape Breton, there has to be additional incentives. After the film industry was destroyed in Cape Breton by the current government, which paid no attention to the pleas for an increased tax

[Page 409]

credit or the pleas for a heads-up down in Cape Breton, once it was closed, it was turned into a warehouse, all the workers left the Island and went to work somewhere else.

Lo and behold, now, when it's destroyed in Cape Breton, the government is coming up with an enhanced tax credit system. It makes you wonder how much this current Economic Development Department is even thinking about Cape Breton. I want to say, too, Mr. Minister, that along with the office being decimated in Cape Breton, there's absolutely no chance for anybody to access anybody on the ground down in Cape Breton.

Now, NSBI talks about having operatives in various parts of the province. I believe they have one in Cape Breton, and I believe it's in Inverness. I'm not sure, it's either in Victoria County or Inverness. Well, you might as well come to Halifax, if the person with NSBI is located in Inverness or in Victoria County, I forget which, but it's certainly not in industrial Cape Breton. I want to refer again to what the Premier said, emphatically, when he took office, that there'll be no more grants and loans given to business in Nova Scotia. There's going to be a new way of doing business.

Well, I suggest to you, Mr. Minister, that you're doing exactly the same kind of business as the last government did. There's no innovation that I can see here in the way business is being done in this province, except to continue to build on what was done before, with one exception. Now we have a bureaucracy that's coming to light here in Nova Scotia, a burgeoning bureaucracy that has - and I'll refer now to NSBI - an operating budget of $8.9 million to manage an investment fund of $19 million. In other words, the operation of that NSBI is almost 50 per cent of what they're allowed to spend in Nova Scotia, in terms of developing the loans and grants.

People have asked me, why does it take such a huge operation like NSBI to operate a payroll tax rebate system in this province, or to encourage industry to come in here when they only have strategic investment funds of $19.412 million? I have a great deal of respect, Mr. Minister, for some of the people in your department, including your current deputy minister and people who came before him, particularly Bob MacKay and some other people who were in that department who I worked with.

For the life of me, I can't understand why this government will pay the CEO of NSBI more money than you would pay a deputy minister in this province, number one. I have no problem with the credentials of Steve Lund, none whatsoever. He's a very capable guy, but so are your people working in government. To manage a fund of $19 million, when in New Brunswick the same kind of money that's available up there for economic development is triple what's available here in Nova Scotia.

I suggest that nothing has changed in this department, that it's doing business the same way it was always done for the past decade or more, but what's different is that now we have two agencies in the same department doing the same thing.

[Page 410]

Now the Office of Economic Development, Mr. Minister, was supposed to be out of the business altogether, involved with research. I've heard and I've seen and I've watched announcements made by the Office of Economic Development, giving out funds or grants or loans. I wonder why. Was it because it didn't fit the glove of NSBI, or that NSBI had recommended against it and the government felt it might be advantageous for one reason or another to go ahead with it anyway? There have been examples of that, many examples of that.

I question the structure here, and I question exactly what really has changed. You mentioned Crossley Karastan, and I'm very familiar with that company, Crossley Carpets, because we dealt with that company when we were in government. Maybe what I'll do is I'll wind up this section by simply talking about - the involvement you say that the Department of Economic Development has in Cape Breton, and I'm going back to Cape Breton for a moment, because I'm getting kind of tired of the stickhandling that this government is doing on the Cape Breton railway, the section of the line between St. Peter's and Sydney.

We've been dancing around this issue for a couple of years now, when the Minister of Energy, the member for Cape Breton North, has said repeatedly that the government had a plan for that railway. You've said it in the House, Mr. Minister, that there has been a plan for that railway. Nova Scotians, particularly the business people on the end of that line haven't seen any plan for a railway, and it's two years now. There have been three hearings cancelled, three hearings from the URB from this company wanting to get out of its responsibilities to operate the section of the line that's paying what they consider to be inadequate profit for them.

So we found in the budget this year - and I'm going to ask a specific question here and have you respond to that - where the government is putting $1.5 million into the railway after they said that the business plan would have to be stand-alone, on it's own, that the government wouldn't get involved, while at the same time we said in the Opposition - and I can't speak for the NDP but I can speak for the Liberal Party - that that railway has to be maintained between St. Peter's and Sydney no matter what the cost. It's a piece of infrastructure, it's the same situation if you have bad roads and you need to get goods from point A to point B, you fix the roads. Well, if you have to get goods over a rail bed from Sydney to connect with its line on the mainland, you fix the railway. If you can't fix the railway, you take an equity position in that railway to ensure that that railway is going to be there well into the future. Mr. Minister, I haven't seen any business plan on this yet. Hopefully one will be coming.

Now there's some confusion here, and I want you to clear this up if you can. It has been said that the government is now into the railway for $2 million, the railway still says that that's not enough, they're still going to the URB - well, they've cancelled this one in favour of getting a deal. The interesting part is that $2 million is into the railway this year with no plan. The railway has said we don't have a plan yet. So the government has forked

[Page 411]

out over $2 million, and there has been no plan. Those aren't my words, those are the words of the railway, which is saying there is no plan. So the other interesting thing that we learned, and I want you to maybe clarify this, we understand that it's going to be $2 million a year up until 2009. So that's like $10 million. Is there no plan accompanying that either, or are we buying a railway for $10 million? You might want to answer that.

MR. FAGE: Honourable member, before I move on to the railway, there's just a couple of things I'd like to clarify. First of all, obviously OED, as you've noted, has offices in Sydney, but I think there must be some misconception with NSBI. My understanding is that they have a person in Sydney and a person in Port Hawkesbury as their complement on the region, plus we support the RDAs.

MR. MANNING MACDONALD: Could the minister tell me who the person is in Sydney?

MR. FAGE: The individual's name is Tara Milburn, in Sydney.

MR. MANNING MACDONALD: Where is she located?

MR. FAGE: I'll have to get you the location of the office.

MR. MANNING MACDONALD: She has to be the quietest employee I've ever seen if she's located in Sydney.

MR. FAGE: I think that clearly there's a misunderstanding or a misconception on NSBI's dollars to administrate. The honourable member seems to be confused between $19 million and the actual amount of $200 million, the portfolio that NSBI administers, which is two times bigger than what's administered in New Brunswick. I think that's key, because . . .

[4:30 p.m.]

MR. MANNING MACDONALD: That's not what's in here.

MR. FAGE: . . . people want to know that the actual portfolio, Mr. Chairman, is over $200 million. The other thing that I think is important to realize, and I tried to point it out earlier, is that NSBI and OED have different mechanisms which they can use jointly to help companies locate here in Nova Scotia, or companies to stabilize or expand here in Nova Scotia. Certainly key to some of that, for the Office of Economic Development, is the Industrial Expansion Fund, which you noted was loans that can be issued to companies across this province. Especially effective is where capital or equipment is needed up-front to get the business going.

[Page 412]

NSBI, through their payroll rebate - I certainly want to acknowledge, as the honourable member said, the payroll rebate began before this administration, and it is a good economic tool and one that is effective in dealing with service or labour-intensive type situations. We've tried to take a holistic approach here in Nova Scotia, especially with economic development. We have NSBI, we have OED, but we have another dozen agencies that, at least provincially and federally, play quickly in there, from ACOA, ECBC, the Growth Fund, we have the Fisheries Loan Board, the Ag Loan Board, we have the Film Development Corp., we have InNOVAcorp, we will have a person, shortly, in Sydney, as well.

All those that I've just listed, a few of the provincial ones, are key in partnership with our RDAs and with our venture capitalists and investment funds in creating the climate where you can take an excellent idea, which creates a good service and a product, Mr. Chairman, get the right management team and business plan around that idea, find the dollars for that idea, and then get a marketing strategy that works. There's a whole host of organizations, OED does its best to work with and lead when it's appropriate, to create that climate for every community in Nova Scotia. It takes everybody working together, and let's not forget the business community and workers here in Nova Scotia, the last two key ingredients in success stories.

I think the railway, as we've always said, has to have a business plan that has some longevity to it and that will work into the future. So what we're really discussing here, Mr. Chairman, is a transitioning of the railway, so that it has an opportunity in the future to remain that critical commerce link for the Island of Cape Breton. As the honourable member pointed out, yes, we've appropriated more money in this year's budget, $1.5 million more, to go toward that plan. There was $500,000 already in the base of the budget, so that's a total of $2 million. That $2 million is money that will help transition once a proper agreement is in place with the railway. Up to $2 million can be there for the next five years to transition that particular railway into a long-term plan.

Two things key in why it should be five years, you're not going to attract traffic to that line unless the customer knows it's going to be there more than one year. Secondly, five years allows a time frame for more cargo and opportunities that would lead to more cargo to develop in Cape Breton, and vice versa for more rail traffic to move into Cape Breton. That's why those dollars are in the budget.

Certainly, the former deputy, who knows the file very well, Mr. MacKay, is on contract with the department, working with Cape Breton Rail to come to that agreement that ensures that the infrastructure is protected as best as possible when the maintenance is done, and that rail traffic has an opportunity to increase on that line, and that critical piece of infrastructure, as the honourable member has rightly pointed out, is preserved for Cape Breton and the future.

[Page 413]

MR. MANNING MACDONALD: Mr. Minister, just to clarify something, are we talking $2 million or $10 million?

MR. FAGE: We're talking, in this year's budget, $2 million . . .

MR. MANNING MACDONALD: No, next five years.

MR. FAGE: . . . that's a possible $10 million over five years.

MR. MANNING MACDONALD: It's $10 million over five years. Okay. And you still don't have a plan?

MR. FAGE: Right now we are in discussions. We've hired the former deputy minister to conclude that arrangement.

MR. MANNING MACDONALD: But the money came first.

MR. FAGE: What we're able to say, because it needs to be allocated in the budget, is that up to $2 million could be committed in the next year.

MR. MANNING MACDONALD: With all due respect, Mr. Minister, I think there's a lot of politics going on here with this railway in Cape Breton. This has been talked about prior to the last election and it's probably going to be talked about as we move into the next provincial election. It's all about the member for Cape Breton North and it's all about his promises for a business plan. You're telling me today there's $10 million on the table and there's no plan; in other words, the money came first before the plan?

MR. FAGE: No, absolutely that's not what I'm conveying to you.

MR. MANNING MACDONALD: Well, where's the plan?

MR. FAGE: What I'm saying to you is we have allocated $2 million, total, in the next budget. Up to $2 million that can be used for the maintenance and operation of the Cape Breton Railway. We are in discussions, and when the agreement is formalized, those are the limits within the plan, and we've disclosed that to Nova Scotians, so there won't be any politics in it.

MR. MANNING MACDONALD: Are they jamming you?

MR. FAGE: I don't understand the context of the question.

MR. MANNING MACDONALD: Are they holding out, are they just putting the gun to your head on this? If that's the case, I think a case can be made that - that railway has to

[Page 414]

stay there. If you can't solve this problem with $10 million for this company, then I suspect that maybe we should be taking that railway over.

MR. FAGE: My understanding of the discussions is that they're going well, and we hope to conclude the agreement. Those are the upper limits that we would be . . .

MR. MANNING MACDONALD: The $10 million. (Interruptions) For five years.

MR. FAGE: Five years - the agreement.

MR. MANNING MACDONALD: Let me go back, Mr. Minister, about the deals that you've been doing on this so-called $200 million. I can only go by what I see in the budget here, and I don't see $200 million anywhere here. I see investment funds available from the government, I see a loan valuation allowance, I see a capital allocation of $20 million. It wasn't me who said we weren't going to have any more government largesse when it comes to business in this province, it was your Premier who said that, that you guys were going to do business differently.

I suggest, and I say to you, Mr. Minister, that nothing has changed here, except that your bureaucracy has grown. You now have NSBI starting to get bigger and hiring account executives and all of this stuff with very little money. As far as I'm concerned they're dealing with empty pockets and trying to attract huge business interests to Nova Scotia that would create many new jobs. You don't need a big bureaucracy to bring somebody in here on a payroll tax system. That's all set up, all you need is a clerk and a pen to do that. If a company comes in and they decide to locate here, you tell them what the incentives are going to be, they tell you how many jobs, and you go from there.

All I'm saying is, where's this big innovation with this big bureaucracy that we're building here in NSBI? I've yet to see it, I've yet to see any huge increase in economic activity as a result of what they've done. They're very much patterned after the private sector, and I've said it to you before, Mr. Minister, in the House, that this NSBI, this adjunct to your department, which is bigger than your department now, is not responsible to the taxpayers directly.

I think you can talk about the value of this NSBI and I can say there are great people there, and I agree with that, but they're not the private sector, they're responsible to the public in this province and as such have a responsibility, I think, to be open and transparent about all their dealings, dealings, by the way, that your current government and your Premier said wouldn't have to happen in this province in the future.

Now we have not one but two agencies of the same department giving out government largesse. I'm not saying there's anything wrong with it, but we didn't apologize for it, we didn't try to say things were going to be different, we thought it was a good idea

[Page 415]

to have a payroll tax rebate system, and we still do. I congratulate the current government for keeping that going. We're in a very competitive world here, when we try to attract business to our small province. We need these kinds of incentives. But to say on the one hand you're not going to do, then do it out of the public scrutiny, I don't think that's appropriate.

I want to bring this up, and then I'll invite you to reply to this. I can recall a few months ago there were two business announcements made with NSBI and the government in Cape Breton. One was a pharmaceutical plant in the Northside Industrial Park. You couldn't get enough ministers there. There were two or three ministers there and there were all kinds of government officials, and it was a big deal. On the same day, down the road, a $2 million equity investment was made in another company. When the picture came in the paper, there wasn't one government representative there, not one minister. It's like they all wanted to give the equity, but they wanted to duck the public involvement with it. Of course I'm talking about Techlink, the other one done on the same day.

On the one hand, a big celebration, all kinds of government ministers, I believe you were there yourself, Mr. Minister, and if you weren't, certainly Cecil Clarke was and a there were a couple of other ministers, I forget who. But anyway, two hours later, down the road, who was left there passing out a cheque to Techlink but Steve Lund and a couple of executives from NSBI, not one politician there. That, in itself, is telling.

I want to know, Mr. Minister, why did the government consider it necessary to take a $2 million equity position in a company that was involved in the gambling industry in Nova Scotia for many years and indeed is involved with the crack cocaine of gambling in Nova Scotia, VLTs? The same VLTs that your Premier has said are cancerous in this province, that have to be taken out of this province, and he's putting the wheels in motion to do just that by removing 800 of them over the next little while.

Now that's your Premier saying that, but yet your department gives $2 million to a firm to develop what they call smart cards, or to develop an easier way for people to gamble responsibly. Now, that didn't start out like that, that started out as a business opportunity to put gaming machines in hotel rooms, and when that didn't work, they went into the smart card stuff. It's interesting that all the machines - and I stand to be corrected here, and if I should be corrected, you should tell me - that these smart cards are retrofitted to Techlink's own machines. I'll come to my reason for saying that in a second.

I want to know who contacted who here, and whether or not you can tell me, was the initiative to go to an equity position in a gambling operation in Nova Scotia? Who by the way operates on-line gambling operations as well, including Keno, which is another very addictive one that people play over the Internet, and exports gambling machines outside the province, and has a number of private sector investors in the company? I want to know why the government felt it necessary to invest in a company that could legitimately make it on its own? This company has some very smart people working for it, they're good entrepreneurs,

[Page 416]

they've exported their product in the past. This same company was involved with the grey machines prior to the machines becoming legal in Nova Scotia. They were the subject of some investigations, and I believe some income tax convictions at the time, back in the early 1990s. This company was well known to Nova Scotia.

I'd like to know, Mr. Minister, who made the initial contact, was it Techlink to government, or was it government to Techlink? Was this sole-sourced, or was there competition for smart cards? Who thought up the idea of smart cards? Are the smart cards retrofitted to Techlink's machines? If they are, what you'd then be telling me is that if you go ahead with this project into the future that you can only use Techlink's machines. It's cold comfort to somebody who can now gamble responsibly. They'll still lose everything, but at least they'll know why they're losing it, because they'll have a card and a thing that'll tell them why they're losing it.

I just want to know, why was the government so anxious to get involved with $2 million of public money? Maybe you can take it from there, because I'd be very interested to know.

[4:45 p.m.]

MR. FAGE: Mr. Chairman, the loan guarantee or funds were not disbursed by OED or the government. The funds were NSBI funds.

MR. MANNING MACDONALD: Well, that's government.

MR. FAGE: And secondly, as the honourable member pointed out previously, it wasn't part of government, so I'm just agreeing with him. My understanding is they did not invest in the company, they invested in a responsible gaming device, that's where the investment was made. NSBI invested in the product, not the company.

MR. MANNING MACDONALD: Oh, Mr. Minister. Who owns the product? That has to be the silliest, asinine answer I've ever heard to anything in my life. And you say that NSBI is not government, that NSBI made this loan and not you guys? You're the minister responsible for NSBI. And to say it didn't go to the company, it went to the technology - John Xidos owns the company and it went to him, he was in the picture, but no ministers were in that picture.

I just want to know, was this sole-sourced? Who made the initial contact? And why does the government feel it's necessary to put $2 million at risk - taxpayers' money? Because as soon as this smart card is found out to be what it is, somebody will get around that and they'll start finding a way to beat that. That technology will then be redundant, and the government will be out $2 million. I'll guarantee you that's what's going to happen here in

[Page 417]

the next few years. I want to know - to say that NSBI is not government, and you didn't give it to them, they did, you're the minister responsible.

MR. FAGE: Again, I'm just trying to clarify what you asked. As would be the normal procedure, NSBI was the lending agency that was dealing with Techlink. Obviously an expenditure of that size comes forward to government, and that was approved. The shareholder of NSBI is the Province of Nova Scotia. The Government of Nova Scotia is the Party of the day, so I was trying to keep the politics out of it. The reality, as I stated, the product and the technology are what the investment was made in, not the company, and that product and technology is a responsible gaming device.

MR. MANNING MACDONALD: Mr. Minister, why would you invest in technology that your Premier has said is cancerous and should be removed from the province? Why would the government get involved in this?

MR. FAGE: The Premier and the government initially were in favour of developing responsible gaming avenues. This particular technology or product is solely related to responsible gaming.

MR. MANNING MACDONALD: Well, there are a number of people who would say that the government should not be involved in subsidizing any gambling operation in Nova Scotia, directly, particularly VLTs because of their addictive nature, but also because of the fact that it would appear that the government has - now that they're investing in it and now that they've set the stage for a pilot project down in Windsor, they're giving out groceries to people who will try the smart cards.

There is another company that's being hired, I believe it's Compass, to do a market study down there to give people groceries to use the smart card, and if they use and like it, they can come back and get more groceries. I don't understand why the government would sanction this kind of stuff, but I further don't understand why the government feels it necessary to get involved. You haven't answered the question why it is necessary to get involved with a $2 million investment.

This company, Mr. Minister, can make money on the international market and they can make money in Nova Scotia without any government investment. They have investors, some of them very close to your government in terms of their political persuasion - you mentioned politics before - some of their board of directors, one in particular is a very heavy supporter of your Party. I still can't understand why this government would get involved with a $2 million equity position in a gambling operation when there was absolutely no need of it.

MR. FAGE: Again, all I can tell you are the facts, not speculation. NSBI proposed the loan guarantee for $2 million and it was for the technology and product of responsible

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gambling. Certainly, programs dealing with responsible gaming on the other side, the Minister of Health Promotion, would be more prepared, I'm sure, to discuss the role of their programs. But this is Economic Development estimates, and I can give you the facts of the business case that came forward.

MR. MANNING MACDONALD: The facts are an agency, NSBI - you're the minister responsible for that - has taken an equity position. I hear now a loan guarantee being forwarded. What we saw, read, and are led to believe is that the government has actually taken an equity position or an ownership position in this company. In the crack cocaine of gaming in this province, or gambling in this province - they keep calling it "gaming" but it's nothing more than gambling and in the case of VLTs it's a very addictive form of gambling - I still don't see why the province saw it necessary to step out in front on this issue and get involved directly.

Most of the deals being done by NSBI I agree with - if not pretty well all of them - except this one, and I don't understand why the government felt it necessary to get involved in this one because this company would survive and manufacture its so-called smart cards, or whatever, on their own, but they got a little help - and by the way they got some help from the federal government as well. I'm not only saying the provincial government is involved here, the federal government was involved some time ago, and I believe this company is up over $6 million in government funding now.

At the same time the Premier must be wondering if anyone believes him anymore on what he says on gambling, because on one hand he says they have to go and on the other hand his own government is an owner in it and having pilot projects in the Valley to promote this so-called smart card. You and I both know that that's not going to work because people will find a way around that and if he has a sole-source for his machines that only operate with a smart card, then you'll see the grey machines come back anyway. If people don't want to use the smart card, they'll go to the grey machines. So it's a bad investment for the government and I just wonder why you guys did it, Mr. Minister.

MR. FAGE: Again, all I can do is give you the facts of the situation. I apologize that I used the term "loan guarantee", it is an equity position . . .

MR. MANNING MACDONALD: That's right, which is an ownership position.

MR. FAGE: . . . which NSBI has taken, but it's for the technology and product of responsible gaming - it's not a loan to the company.

MR. MANNING MACDONALD: Mr. Minister, we have some difference of opinion on this because when it comes to VLTs there's no responsible gaming. This is what we're saying, this is what our Party says, that the Government of Nova Scotia should not be aiding and abetting the proliferation of these machines in this province, or the smart cards, or

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whatever you want to call them. It's just another way for this company to grow its own business with the help of government.

Good luck to them, I think they have really masterminded this, they have answers for everything. They're coming out that it is technology for humanity, that is how they market it right now, and that's cold comfort to somebody who is losing their house, or stealing to keep that habit going - and now they have the help of the government to keep their habit going, now they are going to be able to gamble more responsibly. They will still lose everything, but at least they'll know that with the help of the government they have gambled responsibly - that is cold comfort.

I'm going to tell you, there are a number of people out there who are going to be new addicts because now you're giving them incentives to go play the smart card machines. You're giving them incentives like groceries and that kind of thing. Come in and get the smart card and you can get some free groceries while you're doing it - after you lose $500 in the machine you can still get $50 worth of free groceries. All I'm saying, again, Mr. Minister, is I just can't believe that your government would get involved in this - and if I might use the term "you fell for it" as far as I'm concerned, and I will someday have the opportunity to say I told you so on this one. And I have said enough on that.

MR. FAGE: All I can do is move to the realm of facts and reiterate the fact of the matter that NSBI provided an equity position on technology development for a responsible gaming device. I think most Nova Scotians want to see responsible gaming as the goal of this province and how they're dealing with that subject.

MR. MANNING MACDONALD: Mr. Minister, if I might, most Nova Scotians want to see the VLTs gone in this province - and the sooner the better. Having said that I don't know how much time I have left . . .

MR. CHAIRMAN: You have 10 minutes.

MR. MANNING MACDONALD: . . . and I want to go back to the situation in Cape Breton with Economic Development, NSBI, and Enterprise Cape Breton. There seems to be some confusion about your statements regarding the great job being done in Cape Breton by your department and the facts. The facts are that you guys have been piggybacking on Enterprise Cape Breton for a few years now on every announcement that has been made.

The fact of the matter is that the economy in Cape Breton is being driven by the federal government, not the provincial government. The provincial government is using, reusing, and overusing that $3 million a year for a five-year project in Cape Breton and as a result of that, getting to hold the scissors on virtually every announcement and opening that has been made in Cape Breton. You guys are getting off pretty cheap in Cape Breton, Mr. Minister, in terms of investing money. I know that because there are things that have

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disappeared in Cape Breton and I mentioned that one of them was the sound stage earlier - there was no reason for that to disappear when it did, but it did. Now, lo and behold, the government has seen fit to bring back a tax credit and enhance a tax credit that will probably come up to the national average, at 40 per cent, if it is not already exceeded by other provinces.

My difficulty is that every time we see an announcement we see a minister, with a smile two-yards wide, down there on a federal government announcement that has minimal provincial involvement in it, yet the province is taking credit, for what I don't know because the unemployment rate is still 15 per cent. But I go back to the fact that you mentioned there is an NSBI officer in Sydney now, but we're not sure where she is headquartered. We know that there's only one person left in the Economic Development office in Sydney who has no authority anymore to advance loans, as far as I know, to anybody, like it was in the past.

I do know there is a person over on the northern side of Cape Breton who is with NSBI. I have yet to meet anybody from NSBI in Cape Breton who has rung me up, as the Economic Development Critic, and said to me that they'd like to introduce themselves, or they have some interesting proposals they'd like to talk to me about. I don't know if that person has talked to any other MLA in Cape Breton. I just wonder, Mr. Minister, whether or not there is any attempt by your government to do anything about solving the economic woes of industrial Cape Breton. I go back to the fact that your government closed the steel plant - there's no question about that - I believe there were 800 people working in that steel plant when you guys came in and put the axe to it for political reasons, and now you are spending tens of thousands of dollars down there disposing of the assets.

The other day we found out where Zoom - who you guys hired - bought the assets from Sydney Steel, on the steelmaking, for $4 million and sold it to Iran for $25 million; that you're paying $16 million in stevedore costs down there; that you put $20 million in the budget this year to make the deal look good and show a profit at Sydney Steel this year, when in fact the government lost $20 million down there this year; and you have every kind of political connection going, with Ernst & Young you have people who ran for you down there, and lost, working on the demolition on Sydney Steel.

[5:00 p.m.]

My God, Mr. Minister, you're spending more money on the demolition and getting rid of the equipment than you would have spent if you had kept 800 steelworkers working in Sydney. That would have been a good economic development initiative. But that didn't work, and if there is any justice in this world the two people who were the proponents of that steel plant are both gone from the political scene - so there was some justice there after all, and of course you know who I'm talking about.

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I want to say, Mr. Minister, that this government had the opportunity to leave the steelmaking equipment intact in Cape Breton, and because the steel market is turning around and a private sector interest may have wanted to come in - not for one moment am I suggesting that government go back into it, heaven forbid - the private sector could have taken the opportunity now to deal with your government in operating a rail mill in Cape Breton because of the world steel prices. That opportunity is no longer available because you guys "fire-saled" the assets to make sure there would never be a rail operation in Cape Breton in the future.

I say shame on you for doing that, because if you were really concerned about the economy of Cape Breton you would have held that steelmaking equipment there until some private sector interest, or if you wanted to send Stephen Lund and those guys out to find a steelmaker who wanted to operate a rail mill in Cape Breton, the equipment would have been there, state-of-the-art, standard equipment on the site. But what did you guys do? You made sure it wasn't going to happen in Cape Breton because now it is going to Iran - and heaven knows what they're going to do with it, but you "fire-saled" the equipment to make sure that that part of the economy wouldn't be strengthened in the future.

I say there wasn't much thought given to that action because you spent $20 million down there, the equipment is gone, there are huge stevedore costs that are still out there, there are three or four companies making a fortune off the unfortunate situation surrounding Sydney Steel and I say to you, Mr. Minister, somebody dropped the ball, they should have left that steelmaking equipment in Cape Breton and went out to pursue somebody in the private sector to operate a steel mill there.

Mr. Chairman, am I out of time yet?

MR. CHAIRMAN: You have four more minutes.

MR. MANNING MACDONALD: Mr. Minister, I may be back tomorrow and pursue this matter about the economy of Cape Breton a little bit, because when you sit there and say you strengthened the economy of Cape Breton when there is 15 per cent unemployment, when there's absolutely nothing but a minimal involvement of the provincial sector in Cape Breton - and the people there know that. The people in my area know that the payroll tax system was not developed by this government, it was developed by the previous government; they know about the federal-provincial partnership on the money that was the Cape Breton Growth Fund; they know that those monies are largely federal monies that are on the Island, that the province has piggybacked very successfully on those monies and, like I said, got a seat at the table and a hand on the scissors for every announcement down there - for a minimal amount of money.

It was great illusion on the path of the provincial government over the past two years, except that it's not going to pay off for you in that section of the province, and I think you

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fellows probably know that by now. I suggest to you that there are initiatives that could be undertaken down there if the government wanted to do it. If the government wanted to really get involved, move part of the operation of NSBI down there - NSBI doesn't need to be here in Halifax, the Halifax economy can grow. The private sector, thank you very much, are doing very well here in Halifax. Maybe we should strengthen the Economic Development office again in Cape Breton, like it was - I believe there were eight people there at one time, and it was a very successful operation in my opinion.

Mr. Chairman, thank you, that will be it for me for this round.

MR. CHAIRMAN: You will have four minutes left when we start tomorrow.

MR. MANNING MACDONALD: You told me that four minutes ago.

MR. CHAIRMAN: In your full hour. We've reached the end of four hours today but, for your hour, you have four minutes if you'd like.

We stand adjourned and will meet tomorrow after Question Period.

[The subcommittee rose at 5:04 p.m.]