HALIFAX, TUESDAY, MARCH 9, 2004
STANDING COMMITTEE ON ECONOMIC DEVELOPMENT
9:00 A.M.
CHAIRMAN
Mr. Russell MacKinnon
MR. CHAIRMAN: I will call today's meeting of the Economic Development Committee of the Legislature to order. Starting off, I would ask each member to introduce themselves, starting on my immediate left.
[The committee members introduced themselves.]
MR. CHAIRMAN: I'm Russell MacKinnon, your Chairman for today. I would ask our guests to introduce themselves once I acknowledge the intent of the meeting. We have representatives from the Cape Breton Regional Municipality here with us today. Perhaps I will ask our guests to introduce themselves.
MAYOR JOHN MORGAN: Mr. Chairman, my name is John Morgan. I'm Mayor of the Cape Breton Regional Municipality.
MR. JERRY RYAN: I'm Jerry Ryan. I'm the Chief Administrative Officer.
MR. JOHN WHALLEY: John Whalley. I'm the Economic Development Manager for the municipality.
MR. MORGAN: Off microphone we have a number of our staff here as well. We have Doug Foster who the Director of Planning with the Cape Breton Regional Municipality. We have Jim MacLeod who is the Deputy Mayor of Cape Breton Regional Municipality and Deputy Mayor MacLeod also chaired the governance study which is the subject of the meeting that we have here today. We have our Municipal Clerk, Bernie White, as well.
1
MR. CHAIRMAN: Thank you, Your Worship, and I would also like to acknowledge to members of the committee, His Worship Mayor Morgan is also chairman of the provincial body.
MR. MORGAN: The Union of Nova Scotia Municipalities. I do want to clarify I am here, obviously, just . . .
MR. CHAIRMAN: I realize that but we also like to recognize your stature in the process.
I would ask, before we start, that anyone having cell phones, if they would make sure they turn them off so we won't be interrupted during the course of the meeting. This is a very important meeting.
How the process works is generally our guests will be allowed 15 minutes or so to make opening remarks and then we open up the forum to questions and answers. So, Your Worship, the floor is yours.
MR. MORGAN: Thank you, Mr. Chairman. My intention today, at least initially, is to allow our staff to make a brief presentation. I do want, at least at the outset, though, to thank you for the invitation to address what at CBRM we think are some of the most important issues facing our region today and we really appreciate the focus and the attention that this committee has given to this issue. I do want to thank the members of your committee as well for attending to hear our presentation.
As I said earlier, we have John Whalley, who is the Manager of Economic Development. He is going to be presenting a power point presentation on the issues that the committee has invited us to address. CAO, Mr. Ryan, is here as well as Deputy Mayor MacLeod to address issues with respect to governance study and other issues, also Mr. Foster and Mr. White are prepared to answer questions at the end as well. So with that, I'm going to invite Mr. Whalley to provide some comments.
MR. WHALLEY: Thank you very much. The presentation, in total, should take something in the order of 20 minutes but I will go through fairly quickly so there is lots of time for questions.
To start, the context for the discussion, basically, was set out pretty well in the recent Speech from the Throne. An excerpt from the Speech basically states that the 21st Century economy promises opportunity for all parts of Canada. The objective of the government - federal government, at least - is to ensure that every region of the country has the opportunity to move forward socially and economically on a rising tide of progress.
The legal framework for the discussion today is really set out in Section 36 of the Constitution of Canada. There are two components to Section 36. Section 36(2) deals with the equalization system, federally, and it essentially states, "Parliament and the government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation." That's very important language.
The first part of Section 36 deals with the commitment of the Government of Canada and the provincial governments to promote equal opportunities for the well-being of Canadians and to furthering economic development by reducing disparity and opportunity. With respect to Section 36(2) and the equalization system in Canada, we've taken a quote from a speech that was made by Premier John Hamm in October 2000. He basically set out the fact that equalization is not a bare-handed grab to the haves by the have-nots, it is the constitutional embodiment of equality. In the absence of a true equalization program, citizens of this country will be treated neither equally nor fairly, depending on where they choose to live.
Why is an equalization program in Canada necessary? This graph essentially sets out the disparities in income which exist across the country, at least based upon 2001 census data. As you can see, the average household income at that time in Canada was slightly above $58,000 - $58,360. The average household income in Nova Scotia was $48,457. In P.E.I. it was a very comparable figure. In HRM, the average household income is very close to the national average and in CBRM, by way of comparison, at that point had an average household income of $39,900. So significant disparities in income across the country.
The provincial perspective on equalization transfers has been set out on many occasions. Essentially the federal and provincial governments across the country are committed to the language in Section 36(2). As recently as this past October, the current Finance Minister of Nova Scotia, the Honourable Peter Christie, met with federal officials in Ottawa to impress upon them the need to adequately fund the equalization program, ensuring the same quality of services to all Canadians.
The federal transfer system essentially brings receiving provinces, and there are currently eight receiving provinces, or provinces that receive equalization transfers in Canada. These provinces are raised to 96.4 per cent of the national average fiscal capacity, which currently is something in the order of $5,800 per person in each province. Despite being raised to this standard in a recent document entitled Strengthening the Equalization Program which was signed by all provinces, the provinces and territories have agreed that the equalization program is becoming more and more inadequate in its ability to achieve this constitutional commitment that is set out in Section 36(2).
Some people have argued that the federal system has no application to municipalities in Canada. Well, in fact, property tax revenues are one of the tax bases that are included in the calculation of equalization transfers annually. This particular graph essentially shows the impact of the federal equalization program. The fiscal standard, again, the national fiscal standard is slightly above $5,800 per person, which is the black line. The red line shows the various provinces prior to the equalization program. In a province like Nova Scotia, for example, prior to equalization, Nova Scotia would be at approximately $4,500 per person in terms of its fiscal capacity. Nova Scotia is brought up, then, to the black line, to the $5,809 per person. It is important to note that at this time there are only two provinces in the country that don't receive equalization transfers - Ontario and Alberta.
How does the federal system compare to the equalization program for municipalities within Nova Scotia? The current equalization program for municipalities in this province does not establish a fiscal standard. The formula that is used is based upon a group of standard expenditures. Therefore, it is not revenue-based, it is based upon standard expenditures that cover only a portion of total expenditures through municipalities. In our case, the standard expenditures covered represent less than 50 per cent of our total expenditures and many expenditure categories are completely excluded. In fact, if you remember the constitutional commitments that are set out both in Section 36(2) and Section 36(1), although the commitments exist, there is no objective measure and no ongoing evaluation of where the public services in Nova Scotia, including those delivered by municipalities, are indeed achieving a comparable level of public service for a comparable tax burden in all regions.
How do we know, therefore, that the constitutional commitments of Section 36 are being satisfied? The simple answer is we do not know.
The situation across municipalities in the province is set out in this particular chart. The average for regions and towns in Nova Scotia in 2001, based upon expenditures per dwelling unit, was $2,482 in expenditures per dwelling unit. That was what the average municipal unit in Nova Scotia spent in that year, the towns and regions. As you can see, we've taken a select group of the different communities or the different municipal units in that year and we've done a comparison. A number of the units, as you can see, are significantly above the average - Bridgewater, above $3,000 per dwelling unit; Kentville, above $3,200; HRM, above $3,000. By comparison, the Cape Breton Regional Municipality is actually approximately $500 per dwelling unit below the average for municipal units at that time.
One of the interesting features of the municipal equalization program currently in Nova Scotia is, despite the fact that a number of these units are actually above the provincial average in terms of their fiscal capacity or in terms of their ability to provide municipal services for a reasonable tax burden, a number of these units that are above the average
actually receive an operating grant or a transfer from the provincial government in support of their activities.
This next chart essentially sets out the same information, but instead of doing it on a per dwelling unit basis, it's done on a per capita basis to make it somewhat comparable to the federal measure. It essentially shows you that prior to equalization in Nova Scotia, the Cape Breton Regional Municipality, for example, would be at approximately $573 per capita. Subsequent to equalization, the equalization transfer, which in our own case last year was something in the order of $15.6 million, the municipality is brought up to $716 per capita, which is still well below, almost $200 below, the average for municipal units in the province.
We're also asked, on many occasions, what's the situation in rural municipalities? We've been doing a number of presentations to some of the different municipal units in Cape Breton. This particular chart just sets out a comparison of those units, in comparison to the average for rural municipalities in the province. As you can see, Richmond County, for example, is significantly above the average for rural municipalities in the province; Victoria is very comparable to the rural average; and Inverness is somewhat below the average, which is $1,306, in 2001.
What does the annual shortfall mean for our own municipality? To bring our unit up to the standard for municipal regions and towns in Nova Scotia, we would require an additional $20 million in revenue annually. This annual deficiency represents 21 per cent of our annual operating budget, which is more than the annual budget of our police department and our recreation department combined. So it's a significant deficiency, obviously.
If we're compared to other municipal units in Nova Scotia, we simply are not able to provide a comparable level of municipal services for a comparable tax burden, and currently our residential tax rates are 11 per cent higher than the average for towns and regions in the province, and our commercial rates are approximately 21 per cent higher.
The case of Nova Scotia Power - I see Mr. Doig has joined us, so he will be interested. Nova Scotia Power plays a role in this revenue deficiency that CBRM experiences annually. Our need for equalization revenue would be significantly reduced if the region received property tax revenue being generated in the region, particularly by Nova Scotia Power. Nova Scotia Power, to our knowledge, is a significant exemption or exception from the way commercial enterprises are treated in the province. Most commercial enterprises in Nova Scotia pay property tax revenue directly to municipal units. In the case of Nova Scotia Power, property tax revenue is collected by the provincial government and then it's distributed across municipal units.
MR. MORGAN: John, if I could just interrupt you on that point before you continue, often the representation is made that if the Nova Scotia Power situation is corrected that it would result in an increase in power bills across the province. CBRM's primary concern with
respect to Nova Scotia Power is that that utility, that private enterprise is dealt with in a manner different from other private enterprises, other utilities in the province. For example, the gas utility which everybody paid for, in terms of the development, only a small number of municipal units that host the gas properties receive the benefit. That's the principal concern we have. There's argument that perhaps the total grant ought to be higher, but the principal concern is simply that it's distributed in a way that does not treat CBRM in a manner similar to other municipal units.
[9:15 a.m.]
MR. WHALLEY: Currently Nova Scotia Power is paying approximately $31.5 million, $31.6 million annually in property taxes. CBRM's direct revenue from Nova Scotia Power is in the order of $1.9 million to $2 million annually, even though we currently have something in the order of 28 per cent to 29 per cent of the total assessed property value of Nova Scotia Power. If we received tax revenue on the basis of our share of the assessment base, we would receive approximately $9 million annually. So the annual shortfall from this one source of property tax revenue is approximately $7 million each year.
The position of the province, to some of the facts that we've set forward, has been one where they really have not challenged the specific figures, whether related to Nova Scotia Power or the equalization system generally. Their response is probably best set out in a letter that was received by Mayor Morgan on October 8th of last year, in which Premier Hamm indicated that the province is not in the financial position to be able to provide additional funding for the equalization grant, therefore, any changes in the approach to Nova Scotia Power taxation or the equalization program must come from current funding levels.
This obviously led us to the obvious question, are the required financial resources necessary to enhance the equalization program for the Cape Breton Regional Municipality and other municipalities in the Province of Nova Scotia available? In correspondence last year from the former Deputy Prime Minister, John Manley, the federal government essentially set out that they believe that Nova Scotia was receiving sufficient equalization transfers each and every year to be able to ensure that all citizens in all regions of the province received a comparable level of public services for a comparable tax burden.
Furthermore, in the recent governance study which was prepared by Dr. Locke and Dr. Tomblin, there's an estimate that the province receives something in the order of $315 million annually in equalization payments from the federal government, based upon the weakness of the Cape Breton economy. Municipal expenditures in Cape Breton account for approximately 12 per cent of the provincial and municipal expenditures in Cape Breton annually. The provincial average is something in the order of 13 per cent.
A reasonable share of the annual federal equalization transfer, based upon our share of service provision responsibility, therefore, would be something in the order of $38 million annually. We currently receive, along with the other municipal units in Cape Breton, something in the order of $17 million in equalization transfer payments from the provincial government each and every year. This leaves a balance outstanding of some $21 million.
The options for our municipal unit with respect to municipal financing, there are essentially three broad options. We can continue discussions with the provincial government on this matter, which have been ongoing since 1995; we can ignore the matter, and if this issue is not addressed, the options for the CBRM really become, at this time and in future years, that we would have to reduce services, which we believe are already considerably below a reasonable standard, or we would have to increases taxes, and we believe tax rates and the tax burden are already above a reasonable standard. The third option, therefore, would be that the CBRM can review the possibility of initiating legal action against the Government of Nova Scotia, and that is what we have done.
The legal issues in this case. First of all, is the constitutional commitment, as set out in Section 36(2), merely a political commitment or is it actually a legal commitment? Secondly, the federal equalization transfers are provided to all provinces, including Nova Scotia, unconditionally. Perhaps some would argue, therefore, Nova Scotia could spend this money as they see fit. There is, however, the commitment that's implicit in Section 36(2), with respect to the reason why the equalization transfers are being made. Third, the argument can be made that Nova Scotia lacks sufficient funds to satisfy the commitment in Section 36(2). Finally, Nova Scotia may actually be underspending in the area of municipal services, but overspending in other areas of public service in Cape Breton.
In the opinion that was provided to the Cape Breton Regional Municipality recently by Mr. Neil Finkelstein of the firm Blake, Cassels in Toronto - Mr. Finkelstein is one of the leading experts, we believe, in constitutional law in Canada - he essentially said that Cape Breton, in his opinion, has a strong claim for a declaration that the Government of Nova Scotia has breached its commitment under Section 36(2) of the Constitution Act. Section 36 of the Constitution Act, 1982 requires the province to use equalization payments, for purposes of providing all of its citizens with reasonably comparable level of public services and Nova Scotia has not done so. This then gives way to some of our broader concerns.
We know, as a result of correspondence this past year from the Minister responsible for the Public Service in Nova Scotia, that despite having 16.2 per cent, approximately, of the total population of the Province of Nova Scotia, our region, Cape Breton Island as a whole, has approximately 10 per cent of the provincial Civil Service and 11 per cent of the total provincial payroll. Does this type of disparity carry over into other areas of provincial responsibility in Cape Breton?
Our starting point, therefore, was to determine the total potential annual revenue for Cape Breton, based not only upon known source revenue, but also federal transfers being made annually, and compare that figure to the actual level of expenditure by program area being made by the provincial government on Cape Breton Island. This leads into the governance study.
Again, the responsibilities of both the provincial and federal governments, with respect to economic development and why they're engaged in economic development, is really set out in Section 36.1 of the Constitution Act. In that section it's stated that the Government of Canada and the provincial governments agree on the importance of (a) promoting equal opportunities for the well-being of Canadians; (b) furthering economic development to reduce disparity and opportunities; and (c) providing essential public services of reasonable quality to all Canadians.
Why was the study undertaken? It was really commissioned to review the relationship between governance options, including resources, structures and policies, and economic development on the Island. A key feature of the analysis was the preparation of a budget for Cape Breton Island, which was the first time - in our experience at least - that anybody has really undertaken to do this.
The estimated total revenue generated in Cape Breton annually, based upon the estimate in the governance study, is approximately $929 million. The review at this point considered only provincial and not federal activity on Cape Breton Island. We hope at some point at a later day, to conduct a review of federal activities on the Island, as well.
The study was prepared by Dr. Wade Locke. Dr. Locke is a noted, very well-known economist in Atlantic Canada, a resident at Memorial University currently. Dr. Stephen Tomblin, also at Memorial University, is well known in terms of his work on public policy, particularly in health care in Canada most recently. The selection of these individuals to conduct this study was very intentional. We wanted people who were not in Cape Breton, who would not have a bias, who would be objective and independent and provide a thorough analysis of their view, at least, of what was happening in Cape Breton.
The main findings of this study, and there are some eight or so main findings. First of all, Cape Breton, in their view, is not sustainable under the current governance arrangement. Based upon a financial analysis Cape Breton can be self-sustaining and the Island is not, in their estimation at least, based upon their figures, is not being subsidized by the rest of the province.
Economic and population health indicators for Cape Breton Island indicate that there is an economic and societal crisis - and that wording is very intentional - being experienced across the Island. Cape Breton does not have control of the resources, fiscal instruments, structures or decision-making autonomy necessary to deal effectively with the economic
crisis being experienced on the Island. There is a very close link, in the opinion of the authors, between economic and environmental factors in individual and community health. I think many of you would know that many of the health indicators in Cape Breton are among the worst in the country.
Good governance is a prerequisite for economic development, in their opinion. Good governance requires vision, capacity and autonomy. Renewing Cape Breton will require contesting old mind-sets, developing learning-based systems of governance that are more interactive, open, and we would emphasize these last two points - transparence and evidence based. Finally, reformed governance structure is the start of what the authors consider to be a long journey to economic sustainability for Cape Breton.
Getting back to the language they have used in their analysis, does the situation in Cape Breton really constitute a crisis? The term "crisis" was selected and it has really two components, it implies a serious or decisive state of things but it essentially means that there's a need to act to avoid a significant, and in our case, negative outcome. The second component is that crisis implies an ability to act.
The experts that were consulted believe that Cape Breton's decline is very serious and if unchecked, will result in a greatly diminished society and economy. However - and this is of equal importance, if not greater importance - in their estimation a decline is not inevitable and there are things to be done to improve the situation significantly. We're often asked by people, what do you really mean, what are you talking about in terms of a crisis in regional economy. I think many expect a collapse of the regions before you would deem the situation a crisis. Well, in fact, this is an attempt to graphically present what a crisis in a regional economy actually looks like and it's done using population figures.
The red segment of the line shows actual population changes from the period of 1976 through 2001, so declining population of the Island from 170,866 people to currently a level - based upon the last census - of 147,454 persons. The second segment of the line, the blue section, is based upon a private sector population forecast that was prepared by John Heseltine, of the Terrain Group in Halifax, again, an independent and external analyst, if you will. Based upon Mr. Heseltine's analysis, the population of Cape Breton during the period from 2001 to 2021, will decline from 147,454 persons to 105,158, a decline in excess of 42,000 persons over that period, which is a relatively brief period, 20 years.
During that time - and this is what we try to convey to people - the impact will be in all areas of public service and basically in all components of the private sector. There will be closure of schools; losses of programs; reduction in the number of political representatives, which we've seen; closures of hospitals; loss of railway; closures of flight service stations; and loss of airport service. It is inevitable, there's a thousand different things that will be the result of population decline. Some people have argued that this is a situation that's only occurring within the Cape Breton Regional Municipality and not impacting the
other regions of the Island, or the other municipal units of the Island and that's clearly not true. The next few slides will show the impact in the other counties of Cape Breton.
In Inverness County from the period 1976 through to 2001, a significant population decline in relative terms. In Richmond County the same thing, Victoria County the same thing. During the period, the population of Cape Breton County declined by 14.7 per cent, Inverness County by 8.4 per cent, Richmond County by 17.9 per cent, and Victoria County by 5.4 per cent. During the period, Cape Breton shared the total provincial population decline from 20.6 per cent to 16.2 per cent. Based upon Statistics Canada's population forecast and also by the work of Mr. Heseltine, this decline will continue, if not accelerate, presumably, at least, unless significant changes are made.
Again, we're referring to the private forecast that was conducted most recently by John Heseltine. Based upon his forecast during the period of 2001 to 2021 CBRM's population will decline by more than 30 per cent, which is a loss of more than 33,000 people. The population of Victoria County will decline by more than 2,000 persons, or 25 per cent, Richmond County's population will decline by approximately 27 per cent, and Inverness County by approximately 21 per cent. This is obviously relevant for the province in a bigger context, it not only represents the collapse of a region but a significant portion of these people - particularly the people who are migrating out of the region - are not staying within Nova Scotia, they're leaving the province. So, in the broader context, Nova Scotia's population as a whole is actually declining, and you have 13 of 18 counties whose populations are declining. It's not unique to Cape Breton, it's just very extreme in Cape Breton.
Individual losses occur over time. There's no time limit on a regional crisis, except that at some point there is no longer an ability to act, to prevent this dramatic decline, and that constitutes the end of the crisis period. Obviously, the determination that a situation in an economy or a society constitutes a crisis is very subjective and it's based upon the evaluation of available information. In this case, experts have gathered evidence, evaluated that evidence and provided an independent opinion that there is a crisis in Cape Breton.
[9:30 a.m.]
We also recognize, and we've been criticized in our region, but we do recognize that some people even during a period of regional crisis and significant population decline, some people can and will do very well and, therefore, there will never be unanimous agreement regarding this evaluation.
What's the provincial position with respect to Cape Breton? It's essentially set out in the Economic Development Strategy which is entitled, Opportunities for Prosperity. The province, in that document, indicates that they believe that the situation in the CBRM is fundamentally different in size and scope from the challenges that other regions and
communities have faced. The statement in the report continues, the Cape Breton " . . . growth fund must evolve, with Cape Breton's input, as a development model in which governments take on a new role of facilitating and supporting communities to solve their own challenges."
However, we're aware of evidence I believe that was perhaps provided in this forum that Nova Scotia Business Inc., for example, of the $35 million or $36 million that they've invested during the past two years in the Province of Nova Scotia, have actually allocated something in the order of less $120,000 to a total of two projects in Cape Breton Island during that period of time, which is an investment of their total resource allocation of some 0.3 per cent.
For those who believe that the growth fund will be the stimulus that Cape Breton needs to change what's happening, the growth fund allocation in Cape Breton on an annual basis for approximately four to five years will be something in the order of $20 million to $30 million. Just in comparison to total provincial and municipal expenditures in Cape Breton annually, which is approximately $1 billion, the growth fund represents 2 per cent to 3 per cent of that total allocation and that excludes all private sector activity and it excludes the total impact of the federal government. So the growth fund, in this context, is a fairly weak instrument.
This graph shows employment change in Cape Breton. It's interesting to note that from the period 1996 to 2001, while employment on the Island actually increased by some 4,000 persons, to 55,000 employed, the population on the Island actually declined by almost 11,000 persons. From 2001, employment on the Island has actually declined somewhat and the current level, as of January 2004 is 48,600. Cape Breton currently has the second lowest employment rate in the entire country.
Does Cape Breton have the ability to act to solve our own challenges as essentially set out in the Opportunities for Prosperity document? The government's study again estimates that total provincial revenues in Cape Breton, including federal transfers, are approximately $929 million each year. In the course of conducting the study, the municipality requested detailed information regarding both revenues and program expenditures in Cape Breton by the province. This information, to date, has not been provided, however, we are aware that Minister Clarke is going to provide some information on Friday of this week and the Premier in his speech last week indicated total expenditures in the CBRM of some $761 million and total revenue, based upon the provincial estimates, of $688 million.
Is a comparison to another jurisdiction appropriate? We believe it is. Prince Edward Island is an island economy with a smaller but a similar population, similar geography. P.E.I. currently has a growing population, has a population strategy which commits to growing population in all regions, has significantly higher levels of personal income and higher levels of average household income and much higher levels of employment. The estimates provided in the study suggests that under the best circumstances, program expenditures, annually, in
P.E.I. exceed those in Cape Breton by some $80 million. P.E.I., if you look at some of the line items in their budget, Prince Edward Island appears to spend more than $62 million each year on economic and community development and tourism promotion. The Province of Nova Scotia does not have a full-time employee from the Tourism Department in Cape Breton, there may be half a dozen employees in Economic Development on the Island and our share of the total allocation is nowhere near $62 million in these areas.
Current employment comparisons. Cape Breton Island currently has a level of employment of 48,600. Prince Edward Island, by comparisons, has 65,500 persons employed. A difference of some 35 per cent. An enormous disparity.
Other elements of regional capacity, if you look at university funding, UPEI's funding annually exceeds UCCB's by approximately $20 million. The University of Moncton is twice as large, approximately, as UCCB and receives almost five times the provincial and federal funding. The data that we have gathered from Maritime universities indicates significant disparity if you compare UCCB in terms of operating expenditures per student. Other elements of comparison - innovation funding in Cape Breton was $11 million through the federal Atlantic Innovation Fund over a two-year period, and P.E.I., from this one fund, was $43 million, again, on a smaller population base.
The federal government, based upon ACOA data, has invested $100 million in innovation projects in P.E.I. during the past two years; the investment in Cape Breton is really a fraction of that.
MR. CHAIRMAN: Mr. Whalley, we're now up to 35 minutes, and I was just wondering if you might be able to wrap up. Then you could perhaps embody the rest of what you don't get in in your opening remarks in the question-and-answer segment, if that's okay.
MR. WHALLEY: The upshot is basically that there are several different experts who have weighted in on this issue and provided independent opinion, and they've deemed the situation either in crisis or urgent or very serious. The provincial government has responded through Mr. Fage and indicated that while they thought the economy was robust, they wanted to pursue the issue in a working group. We've essentially set out a working group, which would have two components, a component that would deal with municipal financing and then a second component that would deal with economic development that would include all levels of government and community partners. Thank you very much.
MR. CHAIRMAN: We will open up the forum to some questions. We will start off with the member for Pictou West, Mr. Parker.
MR. CHARLES PARKER: God bless Cape Breton Island. It certainly has some problems these days, doesn't it, although it's certainly recognized as one of the most beautiful islands in the world. I was reading the comments of the Premier, last week when
he visited Sydney. He indicated that right now your equalization problem is considered an accountant's issue or an issue to be straightened out by accountants at various levels. Maybe he indicated that to minimize your concerns, I don't know. What level of service do you feel you're not able to provide? What have you had to cut because of your underfunding?
MR. MORGAN: That's a significant issue, but it's important not to lose focus of what, at the end of the day, is the substantive issue. I just want to read a quote from the governance study with respect to Cape Breton. It says, "If nothing is done the long-term viability of Cape Breton is in question. In other words, Cape Breton, being a region of a province, does not have the kind of resources or fiscal instruments available to it to deal with its economic problems as would a separate provincial entity . . . Cape Breton is not sustainable . . ." and this is the important section, ". . . as a meaningful economic entity under the current governance arrangement."
One other study which was done in terms of population of Cape Breton says that the population of CBRM and the three Cape Breton Counties will continue to fall steadily to 2021, the overall result will be a severe depopulation with Island population declining to roughly two-thirds of its current level by 2021. This is not an accounting issue. The statistical information with respect to the circumstances of Cape Breton Island is absolutely overwhelming. What we're faced with is a situation in which every expert, every independent expert, who has looked at the situation has arrived at similar conclusions with respect to projecting grave consequences for Cape Breton Island.
No conflicting expert evidence has been put forth. The only other approach has been a political one to suggest that there's an accounting contest. There's no accounting contest. In fact, the Premier has been asked for documentation for well over a year now, and has refused to produce the documentation. I've served FOIPOPs on every deputy minister of the provincial government, and none of them have produced any documentation either. Nobody has produced anything to even create an accounting issue. They won't give us the information, but the information we do have, we have the relevant information, which indicates a circumstance of crisis in Cape Breton Island. If the provincial government doesn't act, the crisis, the decline will continue and it will have grave consequences for the residents of Cape Breton Island.
MR. PARKER: Thank you for clarifying that. No question, though, your Island is in a crisis and is facing a crisis as we move forward, partly or mainly because there's just not enough jobs, there's not enough employment to keep people at home, employed, happily, in their own community. Certainly over the years lots of dollars have been poured into the economy and into local businesses, and that's been one model of economic development, you create jobs by giving dollars to businesses to create jobs. I guess the opposite of that, maybe, is not giving any money and just letting people pull themselves up by their bootstraps or else move out of the community, whichever. I'm just wondering, do you feel there are any other
models of economic development out there, besides those two, that might work for Cape Breton?
MR. MORGAN: First of all, let me challenge your presumption that money has been provided over and above what is provided to the province in the form of equalization transfers. One conclusion that comes quite clearly out of the governance study is that there is no funding provided, by the province at least, to Cape Breton over and above what comes from the federal government or is raised in Cape Breton Island. Although there have been some transfers historically, they're certainly not from the provincial government in any net way. The provincial government benefits greatly from the very poor economic circumstances of Cape Breton Island.
Are there other models? Yes, there are important things that have to be done. A tax incentive system is an absolute necessity. The concentration of government offices in just one region of this province has had disastrous impacts on Cape Breton. We have a level of government concentration in the Province of Nova Scotia that's really unprecedented in the country. If you look at other provinces across the country, Ontario, New Brunswick, Prince Edward Island, decentralization of federal and provincial government jobs is one of the principal mechanisms that are used in order to stabilize local economies facing the circumstances such as Cape Breton faces.
The other thing that is absolutely fundamental, not sufficient but absolutely fundamental, is to fix that municipal equalization system. Every form of economic development in modern economic development analysis today says that the principal mechanism of rebuilding economies is to make your community an attractive place to live to attract the people who create jobs, to attract corporations. You have to build a liveable community.
Right now what is happening, by provincial government policy with respect to the equalization system for municipalities, is we are slowly being starved - the municipal government is slowly being starved of the very resources it needs to build the economy and to retain the population there. So those are some of the key things that have to happen, I would say, in order to rebuild the economy.
MR. CHAIRMAN: The honourable member for Halifax Chebucto.
MR. HOWARD EPSTEIN: Your Worship, you make a very strong case on behalf of your municipality and, really, on behalf of the whole of Cape Breton Island. As I understand the situation, if it was a question of looking for possibilities for significant increases in dollar resources for CBRM and for the whole of Cape Breton Island, particularly for CBRM, there really seems to be only two immediate possibilities. One would be changing the distribution formula for the property taxes paid by Nova Scotia Power, and the
other would be a change in the municipal equalization formula. They seem to represent the two most easily-achievable and realistic possibilities for you.
So I'm wondering if there's any indication from the province that they are prepared to move on this. You've said that you're talking with them, you've said that there's ongoing discussions, are they putting anything on the table with respect to the two items identified, or with respect to any other items?
[9:45 a.m.]
MR. MORGAN: Absolutely no indication whatsoever from the government that they intend to correct the situation. Importantly, a significant portion of the deal with respect to Nova Scotia Power expires this fiscal year. Also, importantly, the provincial government entered into a two-year agreement with respect to the equalization system which, again, expires this budget year. The system is opened up as of this budget year.
What is required in order to resolve this is for the provincial government to simply accept the premise that all regions of this province, all municipal units of the province, ought to be treated equally, ought to be treated in a fair and equitable manner. A simple commitment to that principle will lead to a series of changes that will result, at least in terms of a municipal government, in adequate funding of the municipal government which will give us an opportunity to build that livable community in Cape Breton.
What we need, really, is a commitment to the principle that there will be a fair and equitable system in the Province of Nova Scotia. That commitment will make the current system with respect to municipal financing impossible to continue. The system makes absolutely no sense. What we do is we use a funding system that is geared toward assisting starving municipal units and we give the funding to everybody, irrespective of the need. We give funding to some of the richest municipal units in the province, we give municipal grants, even though their expenditures are significantly above the average expenditures in the province. There's no logic to the system and it is slowly starving the municipality.
MR. EPSTEIN: I think that's pretty clear. Of lesser economic significance, but still important, would be the possibility of moving some provincial government offices, therefore, of course, the associated jobs. The other would be some stimulus through a provincial-level agency, like Nova Scotia Business Inc. As I understand from your presentation, there doesn't seem to be any indication that the province is prepared to put either of those on the table, or to move on either of those, is that correct?
MR. MORGAN: That's exactly right. The contribution toward Cape Breton Island, the 0.3 per cent . . .
MR. EPSTEIN: That's 0.3 per cent from NSBI.
MR. MORGAN: . . . and if I could just narrowly focus on my own municipality, the percentage is 0.0, so nothing whatsoever is contributed to the Cape Breton Regional Municipality. When the province says that's it's principal vehicle for facilitating economic development in Cape Breton, and they invest nothing whatsoever in my regional municipality, it's certainly an indication of a grave concern, I think, that we have for the expenditures.
MR. EPSTEIN: Your Worship, in one area of my background, which is the environmental area, we frequently would enter into - as environmentalists - talks with entities like the forest industry. There was a phenomenon that emerged that we saw, it was called "talk and log" in which the forest companies were prepared to talk to the environmental groups but wouldn't stop their practices in the meantime. It seems to me you're faced with that, the provincial government is talking to you but they're continuing to essentially clear-cut your part of the province, in terms of economic clear-cutting. It seems to me that if you want to get their attention, you should just go right ahead and sue them.
MR. MORGAN: I see some smiles from some of the government representatives about that issue. We lose approximately 1,200 people off Cape Breton Island every year of families that are separated, people moving all over the province, and they're not smiling, they're not smiling as their families are broken up, it's of grave concern to them.
MR. WILLIAM DOOKS: Mr. Chairman, on a point of order. I believe the Mayor is making reference to me smiling at that remark. I want to clarify that there was definitely no smile, but a reaction to the surprised words, so I would like to clarify that.
MR. MORGAN: Thank you.
MR. CHAIRMAN: Order, please.
MR. DOOKS: I would like to clarify that because he's going to continue on that and I just wanted to make that clear.
MR. CHAIRMAN: There is no point of order.
MR. MORGAN: Every citizen of this province has a right to fair and equitable treatment. There's a right to have access to comparable services at comparable tax rates. It's a fundamental principle of the Canadian Constitution. The other provinces of this country do not cut off Nova Scotia because it is experiencing economic problems and that's the issue with respect to the legal issue. The Province of Nova Scotia has an obligation to ensure comparable services are available at comparable tax rates. If that doesn't happen - the Premier himself has said, Nova Scotia can't be competitive unless that section of the Constitution is complied with. The fact is, Cape Breton Island can't be competitive either unless that section of the Constitution is complied with. That's what the legal issue is about,
it is about taking what is a provincial path that guarantees long-term economic decline for our region and giving the region a chance, at least, a hope, provided the Constitution is complied with.
MR. EPSTEIN: Is your budget about $80 million a year?
MR. MORGAN: Just under $100 million, $96 million roughly.
MR. CHAIRMAN: Thank you, Mr. Epstein. Just before I recognize the member for Glace Bay, I believe all stakeholders are aware of the fact that a change in the tax structure vis-à-vis Nova Scotia Power, came about in the 1991-92 fiscal year when they privatized. Prior to that, everything was in line, so I wanted to be fair to our additional guests here in the audience that it's not an attempt to beat up on Nova Scotia Power. I think His Worship has made that point.
MR. MORGAN: It's an important point, certainly there were concerns in the past with respect to the level of grants. It's an issue of distribution and fairness and (Interruptions)
MR. CHAIRMAN: It's a legislative issue. Mr. Wilson.
MR. DAVID WILSON (Glace Bay): Up until the governance study I thought that Cape Breton versus Nova Scotia was just a myth but it's a reality, I guess, a reality that we deal with on a regular basis as provincial representatives as well, coming from Cape Breton Island and representing Cape Breton Island.
I want to give you the opportunity to clarify a few things for this committee and for anybody else who wishes to listen. I'm sure you've had your critics back home of your governance study and your lawsuit against this province. I have had it said to me, is the Cape Breton Regional Municipality fearmongoring here by stating that this is a crisis? Is that going to stop people from setting up industries in Cape Breton? Is that going to hurt Cape Breton because it's been labeled as a crisis, the money could be better spent when you talk about lawsuits and paying lawyers and so on. I'm sure you've heard all of the criticisms to date.
I would like you to tell this committee and I would like you to tell anyone else who's listening, just exactly what is behind this and to clarify, I think, that this is not an effort by the Cape Breton Regional Municipality to separate from Nova Scotia, nor is it an effort to kill a private company like Nova Scotia Power by taking money away from it, but all it is is a case - and it's a phrase that's used so often that people don't listen to it anymore - of Cape Breton trying to get its fair share, in this case the Cape Breton Regional Municipality, trying not to get what it doesn't deserve but exactly what it deserves, from a provincial government that is not willing to sit down and negotiate with you right now.
What scares me the most, Mr. Mayor, I will be quite honest with you, coming from a community - your community by the way - that is a perfect example of what's happening back home. We are losing people, we are losing schools, we are losing everything that we've had in the past. While this is going on, while the discussions are not taking place, while the province is stalling you by not giving figures, by not being honest and forthright with you, it continues to happen, so nothing is being done about it.
Having had my say on that - and I've about a hundred other things I would love to ask you and love to say but we don't have time in this committee - let me give you the opportunity to defend what has been done so far and to tell this committee why this is not a case of Cape Breton out there whining about what should or should not be theirs but simply asking for what is right.
MR. CHAIRMAN: Your Worship, just before you answer, I assume on the presumption of what Mr. Wilson was saying that there was a lawsuit in progress. That's simply not the case at this juncture, correct? We need to know because we have certain rules that we have to abide by in the Legislature in terms of when matters are pending before the courts.
MR. MORGAN: There have been no pleadings filed at this stage.
MR. CHAIRMAN: Okay.
MR. MORGAN: Council has given instruction to administrative staff to take whatever steps are necessary to ensure that Section 36 of the Constitution is complied with. In effect, our staff has been directed to do whatever is necessary to ensure the Constitution is complied with, which is what you would expect your provincial government to do anyway.
I would suggest that it ought not be necessary for the staff to take that step of filing a lawsuit because we are simply asking the provincial government to comply with the basic law of the land, to ensure comparable services are delivered to citizens at comparable tax rates. That means fixing the equalization system. It's important to note that in the context of a minority government, the government, alone, can't do that. One Party can't do that, they cannot maintain an unfair system. So, I would suggest that there is at least some opportunity for a political solution for the problem.
MR. CHAIRMAN: The question is, there is no matter before courts presently?
MR. MORGAN: No, not at this stage.
MR. CHAIRMAN: Okay, you can proceed to answer Mr. Wilson.
MR. MORGAN: With respect to the question about what's Cape Breton seeking? We are seeking nothing more than - I would say, at the heart of this, we're seeking two things, we are seeking compliance with the fundamental law of the land in terms of ensuring that the citizens of the Cape Breton Regional Municipality have access to comparable services, at comparable tax rates. That's a principle that doesn't just go to Cape Breton, it goes to all citizens of the province.
Secondly, in terms of what we're asking for, it is really a commitment from the provincial government to a fair and equitable system for municipal equalization and a fair and equitable system with respect to funding of municipal units in the province, I say, is the best way to describe it. But, secondly, we're asking the members of the provincial government to tell the truth with respect to the circumstances of Cape Breton, as well, to acknowledge the problem.
Let me just quote some of the comments that have been made by various members. Firstly, federal government ministers. One past federal government minister described Cape Breton - and keeping in mind that at the stage all these comments were made, Cape Breton had lost 30,000 people, over 10,000 people per decade, over three decades - one federal minister made a statement calling it the Cape Breton tiger; another current federal minister says - after having known the results of the governance study, saying that Cape Breton is not sustainable as a meaningful economic entity and knowing the population information, as well, predicting a further loss of 30,000 people, the current federal minister says, that Cape Breton is an example for other regions of the country. It may very well be an example but it's an example of what happens when the federal government and the provincial government refuse to tell the truth about what is happening in a local community and refuse to implement an effective system to deal with the challenges. Our Premier called the economy in Cape Breton robust at the same time knowing what the prospects were with respect to population.
What we're asking is for the provincial government to acknowledge the truth of the circumstance in Cape Breton, to commit to a fair and equitable system for funding municipalities across the province and to commit to implement a strategy to deal with the economic threats facing Cape Breton Island. Those are the things that we're asking.
[10:00 a.m.]
MR. DAVID WILSON (Glace Bay): One more question, Mr. Chairman, then I'll pass it along to other members. Mr. Mayor, if the Premier of this province woke up tomorrow and suddenly saw the light, which I doubt, and decided to give $21 million to your regional municipality, that doesn't cure all of the problems that you're experiencing there, that doesn't do anything for it except give you what you're entitled to. When you talk about things like NSBI, which has been a dismal failure, as far as Cape Breton is concerned; when you talk about growth fund, which, provincially, the contribution is $2 million a year over six years into that fund, that's not much of a contribution for a province to make towards the economy
of Cape Breton and what has happened as far as this province is concerned, that money will not fix all of the problems, nor if Nova Scotia Power started paying its fair share. So where do you see, and where does your committee and your regional council see as some of the solutions as being, in the long term?
MR. MORGAN: Certainly, it's a multi-step process in terms of correcting the circumstance on Cape Breton Island. I would day, first and foremost, those basic principles to commit to a fair and equitable system for municipal financing; secondly, to acknowledge, for everybody to tell the truth about the Cape Breton economy and a commitment, I would say, in this budget year, to correct the municipal financing element of it; but to commit to dealing with the economic problems facing Cape Breton Island.
There are mechanisms that can be dealt with but the very first step is to acknowledge that there is a problem. The denial of the problem is a kiss of death for Cape Breton Island because it means the status quo continues. Dr. Donald Savoie described what happens with respect to the status quo. Dr. Donald Savoie is the conceptual father of ACOA, one of the leading - the leading, I would say - economic development economists in the entire country, and he described the Cape Breton economy as a 747 jet heading straight down. He says, you can either continue on that course or you can act on it but you have to act soon because very shortly the result will be inevitable.
So what we need is for the provincial government to correct the equalization system, to implement a fair system that complies with the Constitution. To tell the truth about the Cape Breton economy and to commit to dealing with it in the future. There are a variety of steps that can be taken, some of which I've referenced earlier with respect to taxation, policy, infrastructure, investment, decentralization. There are steps that can deal with it but the provincial government will not deal with it unless they first take the step of telling the truth about the Cape Breton economy, telling the truth to the citizens of Cape Breton, telling the truth to their fellow MLAs and telling the truth to the federal government, as well, so that they can also be encouraged to assist with the situation.
MR. CHAIRMAN: The member for Pictou East.
MR. JAMES DEWOLFE: Mr. Chairman, I have a document being circulated that indicates some facts and figures that our source, the Cape Breton Retail Sales Financial Post Survey of Markets and Statistics Canada. Now, the honourable member for Pictou West painted a very bleak picture of Cape Breton, indeed. I have to say that every district has their unique problems, but what I want to investigate is this, is the Cape Breton Regional Municipality really in a crisis situation?
Now, as indicated in slide one, that I passed out, or plate one, retail sales have been on a long-term upward trend in Cape Breton. Sales in 2002 were reported higher than any other year for which data is available. In fact, retail sales in Cape Breton have grown from
$0.918 billion in 1993 to $1.4 billion in 2002. This is an increase of 55.6 per cent. Improved consumer confidence goes hand in hand with increased spending.
In chart 2 from Statistics Canada, available data points to an increase in income per wage earner from 1991 to 2001, and shows a steady increase in wages. The economic dependency ratio is calculated as the number of dollars in transfer payments per $100 in income and I will refer you to chart 3. Available data points to a declining economic dependency ratio since 1995. While employment income has risen by $264 million from 1995 to 2001, transfer payments have fallen by only $116 million.
Gentlemen, in spite of the employment losses resulting from the closure of Devco and Sysco, Cape Breton Island increased its employment from 47,200 jobs in 1993 to 52,700 in 2003. That's a net increase of 5,500 jobs, or 11.7 per cent. You see that in Statistics Canada chart marked A-4. In 2003, the annual employment rate was 16.2 per cent. While an unacceptable high, it is still much lower than the rate 10 years ago in 1993, and I will refer you to chart A-5. So you can see it goes from 25.3 per cent in 1993, to 22.7 per cent in 1996, to 16.2 per cent in 2003. So things are not quite as bleak as the honourable member seems to indicate, according to these statistics. I'm just wondering if you have a few comments from that?
MR. MORGAN: I think I do but I'm going to ask our Economic Development Manager to make a few comments first.
MR. CHAIRMAN: Mr. Whalley.
MR. WHALLEY: I think the underlying issue first and foremost for an economist is, is the economy of Cape Breton able to sustain its population, and clearly it's not; that's point number one. The level of net out-migration from Cape Breton during the past five years has been five times the level of any other region in this province; so that's point number one. Point number two, the employment rate in Cape Breton is the second lowest in the country. To bring Cape Breton up to the average for just the other regions in Nova Scotia would require an increase in employment of some 16,000 persons.
All of these figures that you provided, you have to put Cape Breton in a context of what's happening provincially and nationally. Yes even in a declining economy, you could have growing retail sales, you could even have growing employment. The problem is the underlying fact is that Cape Breton is not able to sustain its population base, and that's a dynamic framework. As people leave it reduces the labour force and we've seen an unprecedented reduction in both working-age population and the labour force in Cape Breton unlike any other region that we're familiar with, certainly in Nova Scotia and probably in most regions of the country.
Forget all of that and assume you have no confidence in John Whalley or in any of the employees of CBRM. The fundamental fact is that any of the analysts that we've asked about this, either in private or who have come out publicly - and you have some of the leading experts in Atlantic Canada who have come out now publicly and have put their names on a report, so that means something. It's not just that the CBRM has paid them, they've put their name on a report to say they believe in what they're saying which is that the CBRM and Cape Breton Island are experiencing an economic and societal crisis.
You have Donald Savoie, who has deemed the situation to be urgent, he's made the comparison to the 747, so any of the objective people whom we have asked to give their independent opinion, have agreed with the term "crisis" and they've gone through all of the indicators. You have selected some and there are a lot of indicators, both economic and social but that's the way that we look at it. We look at it from the perspective of, what are the independent analysts telling us and is the economy of Cape Breton Island able to sustain its population base, because if it's not, all of these figures are moot because they're going to change, inevitably. If you are losing some 1,000 to 1,200 people per year, and they're not coming back, a lot of these figures are (Interruptions)
MR. DEWOLFE: You can play with statistics and make them indicate whatever you want them to indicate but I still like to give credit where credit is due. I think you deserve a lot of credit in Cape Breton.
MR. MORGAN: Let's understand the basic issue though. The basic issue is the fact that today there are 5,000 fewer people in Cape Breton working than there were this time last year. The basic issue is the fact that year after year 1,200 people on a net basis migrate out of Cape Breton Island. You have provided some very limited statistics, some of which are now almost three years old, I might add, but you haven't provided the fundamental statistics and the fundamental statistics, with respect to population and total number of employed, really tell the tale of the circumstance.
I don't argue that there haven't been some successes in Cape Breton, there certainly have been, but anecdotal statistics, or anecdotal success stories are not a substitute for macro-economic statistical analysis of the circumstances and that's what the economists have done. Dr. Savoie has never been retained by anybody from Cape Breton to deal with the situation. He has simply analyzed it on a voluntary basis and offered his comments. There has been no expert in economics that has refuted any of these circumstances. All we have is simply political argument describing us as the Cape Breton tiger but there have been no economists who have put their name to saying things are good in Cape Breton, or that we have, in fact, turned the corner.
MR. DEWOLFE: I just want to say, look, Mr. Mayor, the workforce is migrating from other areas, including Pictou County, you know, the numbers are going down. But I still say the Cape Breton Regional Municipality deserves a lot of credit. Anyone who has visited
that area half a dozen years ago and goes down today, they see a completely different situation. As I said, I like to give credit where credit is due and I think you deserve a lot of credit down there. In fact, the last several years the Island has faced a number of challenges but the fact is Cape Breton's economy is diversifying and moving forward.
Since 1998, like the tel-service industry, like we have in Pictou County, has increased employment levels by over 3,500. You were saying I'm talking about antiquated information but, in fact, in 2003, an economic impact analysis determined that the industry has become an important economic driver in your area accounting for $66.7 million. The arts and culture sector, the Celtic Colours alone has generated $5 million into your economy. The cruise ship industry, I think you're talking in terms of 60 ships landing in Cape Breton, 55 of them docking in Sydney. That's generating a lot of income for the Cape Breton Regional Municipality and I think a lot of credit is deserved in that. I understand you going with a wish list and so on and I don't blame you for doing so.
MR. MORGAN: No, we don't have a wish list. Our wish list is just for the Province of Nova Scotia to comply with the Constitution, sir.
MR. DEWOLFE: Given the situation you started with down there, I think you're doing very well. (Interruptions)
MR. CHAIRMAN: Order, please. (Interruptions)
MR. MORGAN: Mr. Ryan wanted to respond as well.
MR. CHAIRMAN: Mr. Ryan.
MR. JERRY RYAN: What we actually asked for - and obviously, we get into, if you're in a political forum you're going to be in a political debate and that's obviously what's happening - from the Premier was simply to take a personal interest, that we believe from the experts that we have brought in so far, that we can prove that there's a serious crisis. The most rapid decline in any region within Canada with a population of over 100,000 people is happening in Cape Breton. That alone should dictate that there is some interest.
All we have asked for was a forum where municipal leaders, the provincial government and the federal government would take in the expertise of such as Donald Savoie, to help everyone understand what is happening in the economy in Cape Breton and indeed, what's happening across Nova Scotia in various regions, and then to have a dialogue on what is the appropriate role for government in these regions. Yes, particularly Cape Breton, because Cape Breton, as I've said, has the fastest decline of any urban region within Canada with a population over 100,000.
[10:15 a.m.]
With that expertise, we believe it will take some of the political debate out of the issue and get us focused on what's happening and what's an appropriate solution, what's government's role in that solution. Ironically, the federal government has commissioned Dr. Savoie to do that very thing in terms of the federal government in looking at what's the proper federal role, discussing with federal civil servants, the very expert that we're suggesting should help. He did actually accompany us on a visit, at his own expense, to Premier Hamm when he was first elected, asking the very same thing at that time. However, we have not been successful in getting that type of process started.
MR. CHAIRMAN: The honourable member for Kings North.
MR. MARK PARENT: Thank you very much for your presentation. We, at least I, saw parts of it when our caucus was down visiting in North Sydney. We heard parts of it at that time, but it's good to see it all put together in a comprehensive package. It gives a greater understanding of the challenges that you're facing. I do have some questions and a few comments, though. A very quick question, in terms of the governance study, the contention is that you need $20 million extra in equalization payments to be treated fairly. I find that hard to put side by side with the governance study that claims that if Cape Breton was a separate province that it would be financially stronger. The two don't seem to logically correlate with each other. It would seem to be then that the implication is that Cape Breton is subsidizing the rest of Nova Scotia to the tune of about $20 million. Can you help me get a handle on that, because those two just don't logically fit in my mind?
MR. WHALLEY: First of all, the governance study had nothing to do with municipal financing, it really is just looking at provincial activity in Cape Breton and includes an analysis of own-source revenue in Cape Breton plus federal transfers. That's the important component. If you look at federal transfers as they are in Prince Edward Island, federal transfers in Nova Scotia represent something in the order of 38 per cent of Nova Scotia's total revenue, annually. There would be a very significant part of Cape Breton's total provincial activity, total revenue associated with Cape Breton annually.
The issue for us is that what we've never been able to know is whether the federal transfers that are coming into Nova Scotia, how that funding is being allocated. We don't know that. With respect to the Cape Breton Regional Municipality and our financing, no question, our municipal tax base is insufficient to support a level of municipal services that would be comparable to other municipalities in Nova Scotia. So we need a transfer. Some jurisdictions, I believe, some of the territories, provide a direct share of the federal transfer to some of their larger municipalities. That's not done in Nova Scotia. We have an operating grant system. Again, it's not based upon an evaluation of the fiscal capacity of the municipality. For each municipal unit, they take a list of standard expenditures and
determine, on that relatively narrow list, how much money each municipal unit needs to supplement its own source revenue. So the two don't necessarily go hand in hand.
The Island of Cape Breton can be sustainable with federal transfers. The governance study is not saying it's sustainable on its own-source revenue, it's basically saying that own- source revenue combined with federal transfers would allow Cape Breton to be a self-sustaining unit without any subsidy provided by the rest of the residents of the Province of Nova Scotia.
MR. MORGAN: The fundamental inconsistency, I would suggest, though, is the fact that you misunderstand the funding sources for the Province of Nova Scotia. The Province of Nova Scotia, itself, is heavily subsidized by other provinces within the country. I guess you're probably well aware of that. So the question is, what is generating that stream of income into our province? What we would suggest is, disproportionately, because of the very poor economic circumstances in Cape Breton, Cape Breton is generating a significant portion of that revenue stream.
The intention of that revenue stream, it's important to comply with that constitutional commitment in Section 36 to ensure that comparable services are delivered at comparable tax rates to all residents of the country. So the funding is coming in for the very purpose of ensuring comparable service levels, but the funding is not coming from the province, it is arriving at the province. Certainly they are laudable things, perhaps most of the expenditures. But unless you have a true system of equalization, unless you're delivering comparable services to all of your citizens, you're not complying with the Constitution.
So, is Cape Breton, like the rest of Nova Scotia, subsidized by federal transfers? The answer to that question is yes. If the question is, is Cape Breton subsidized by mainland Nova Scotia, the answer is unequivocally no.
MR. PARENT: I think you put your finger on what I see as the main problem here, besides the population out-migration, which is happening in areas across Canada, which I want to come to next, but in terms of the federal transfers, currently, I understand, Cape Breton receives 50 per cent of the equalization money that comes into Nova Scotia.
MR. MORGAN: No. No, that's not so.
MR. PARENT: That's not true?
MR. MORGAN: No. The argument has (Interruptions)
MR. WHALLEY: You mean the municipal equalization.
MR. PARENT: The problem that you point to in terms of services is also endemic in my area, in the area that I represent. Many times comparisons are made in Kings County to the level of services; for example, in hospitals compared to Cape Breton. For example, there's 77 surgical beds in hospitals in CBRM; there's only 40 in the Valley Regional. The comparison is made there. I'm wondering, instead of region being pitted against region, and I've had to stand up in my area and say I accept these statistics, that comparatively speaking to our population we are under-serviced, but the goal is not to take money then from Cape Breton. I've had to say that and have been very unpopular. Perhaps the whole issue, which the Premier has raised several times, is we're not getting sufficient equalization payments federally. That's really where the target is.
MR. MORGAN: I wore one of the buttons that said, fair is fair, with respect to the provincial campaign. I agree with the provincial position with respect to equalization. When the Premier goes to Ottawa and says the Province of Nova Scotia can't be competitive without a fully-funded, fair equalization system, he's right. I think he's exactly right on that point. The problem is that he comes back to Halifax, and he does the opposite of what he says when he's in Ottawa. We're simply saying that principle applies. He's right when he says it in Ottawa, that you need a fully-funded equalization system; he's right when he says that it's part of the basic fabric of Canadian society. Where we disagree is he comes back to this province and he doesn't do what he urges the federal government to do when he is in Ottawa.
With respect to your point about the various communities, this is a circumstance in which there are objective criteria established with respect to how to implement an equalization system. There are objective criteria. First of all there's the potential - the federal system is very objective and would apply to your region of the province as well. But also, with respect to the current municipal equalization system, there's a very objective system to analyze what the expenses are that a normal, average municipal unit would have in the province and what the revenue streams are within the province. That's statistical information that the Department of Municipal Affairs has.
So there are objective criteria to deal with equalization, a situation that would deal with your county and all the counties within the province, to ensure that their character is recognized, in terms of whether they're rural or urban or small towns. Those objective criteria are there to deal with your region and CBRM. The difficulty is that the province is not saying we accept this principle. They certainly accept it in Ottawa, but I guess the difficulty is within the provincial government; the principle also has to be accepted and understood as one of the most fundamental pieces of the financing issue and the budgetary issue in the province.
MR. PARENT: I have two more questions, but I'm going to be cut off. (Interruptions) Can I come back a little later?
MR. CHAIRMAN: Yes, you are. You're right on target on that one. You're into almost 15 minutes.
The honourable member for Victoria-The Lakes.
MR. GERALD SAMPSON: Welcome, CBRM delegates. I would like to begin by making a few statements about Cape Breton Island, known as Nova Scotia's Masterpiece, to me it has become Nova Scotia's embarrassment. I say that simply because with 12 years on the municipal level and a short time now on the provincial level, basically nothing has changed. We have roads down there that are absolutely atrocious and when I talk about the Cape Breton area, I include all the rural areas, because the rural areas seem to be - we're members of the Legislature of Nova Scotia, I'm not a member of the Legislature of Cape Breton, so we're all Nova Scotia Legislature members and we should look at the whole province and it seems like the rural areas are at the whim and the wish of the large urban areas to quite a degree. I look at the ferry rates, ferries are part of the highway system and down there you have people who have to pay $5 to go across something that if you were young enough, you could probably jump across, to go back and forth to town and whatnot. So the roads are atrocious and it's embarrassing when we have rural services and hospitals, as was already alluded to and things like that.
I just want to point out one thing. There's an attitude about Cape Breton that I disagree with, sitting on numerous committees over the past 13 years. One very smart, well-dressed young bureaucrat said to me over a discussion, oh, don't worry, Gerald, we will continue to carry you guys in Cape Breton, and the boy meant it. He was in a position of authority and he actually meant that. That to me was very embarrassing, that somebody would say that, because the guy truly believed what he said. So, that's just a kind of a general stroke of the brush that everybody in Cape Breton is a whiner or whatever. But there is a problem and we have to solve it.
Another thing I would like to bring forward is the Devco docks down there, there are 90 acres of lay-down area, so 60 acres were issued to an American company to put their coal there. A consortium of business people got together, submitted a plan to the province to develop the other 30 acres, guess what happened? The document issuing the 60 acres was cancelled and a new document was issued for 90 acres, therefore, effectively, ever, ever, killing any business development on that other 30 acres. How can you compete with that? You're being destroyed from within and without. I mean it's pretty hard to compete.
So, given that, I'm going to refer to Nova Scotia Power because that was another topic that I was heavily involved in. Mr. Mayor, when you say that 28 per cent of Nova Scotia Power is located in CBRM, are you including the power plant from Wreck Cove?
MR. MORGAN: No.
MR. GERALD SAMPSON: Therefore, if you were to add Wreck Cove into the mix, because your study does talk about all of Cape Breton Island . . .
MR. JIM MACLEOD: No, it's a $160 million asset . . .
MR. MORGAN: My understanding is that Wreck Cove is not properly assessed as well as dramatically under . . .
MR. GERALD SAMPSON: That's what I'm going to allude to. Wreck Cove, which we did a tour of - the Union of Nova Scotia Municipalities - last Spring, is assessed, and the province does the assessing, at $850,000. It was built in the 1970s for in the vicinity of $170 million plus, that was back in the days when things were cost-plus and you drive into that facility, it's a steel door in the middle of a mountain. When you go through that door, you enter a world of Star Wars. It's just phenomenal. The part that upsets me the most is the fact that Mother Nature provides the fuel for Wreck Cove, there is no more buying of oil or coal or anything. They have Cheticamp Lake, which is 32 miles from the site, and everything in between is all connected with dams and lakes and tunnels and every bit of snow and every bit of rain that we get upset about that's falling and making us wet when we go to and from work, is being collected and used when it's required to generate the power there. So, if I owned property in CBRM, and I own it in Victoria County, and I own it in Halifax proper, then I'm going to get three tax bills from three areas. So why are our taxes from Nova Scotia Power going to the province and allowing somebody else to divvy them up? Why aren't they assessed and given to the province? That's my problem.
So, what is it that you as a council are planning to do to resolve this situation here? Nova Scotia Power Incorporated, there is almost little or no percentage of the funding going down there, it seems like nobody would like to invest in that, so what do you see as a solution? You're moving ahead supposedly suing the province, to me what that's doing is, if nothing else, going to create numerous opportunities for you to resolve the issue before you get to court, because there is kind of a target date there that you've decided to do something, so it's creating a bit of a target and it should create numerous opportunities for you to go forward to try to resolve this long before you get to that point.
[10:30 a.m.]
So, what is it that you, as a council, as you've heard before, if you got the $21 million or whatever like that, what does the future hold for Cape Breton, with or without that $21 million? If you don't get it, what can you do to develop Cape Breton to a point rather than saying, okay, Mr. Province come on board and help us, let's stand alone or we're going to do a, b and c, what have you lined up to move the Island forward?
MR. MORGAN: The municipal element of it is a necessary part of the process of rebuilding Cape Breton Island. You're correct, it's not just CBRM or Cape Breton County, you have that dramatic loss of population in Inverness, Victoria and Richmond Counties as well. Some of those other municipal units - Richmond County in particular - don't have the municipal financing issue so much, but the municipal financing element is a necessary correction; it's not sufficient, however. It is necessary to correct that because you have to develop that livable community, the vibrant urban core that's been described in terms of just developing downtown Sydney and developing the community in such a way that people want to stay on Cape Breton Island. But that's only one piece of the puzzle.
The other pieces of the puzzle lie principally with the provincial government and federal government. Study after study on Cape Breton Island has arrived at the same conclusions as to how you deal with the economic circumstances there. The principles that are adopted are tax incentive systems, they are significant decentralization of provincial and federal government jobs, they are investment in infrastructure - John can name a few more, I'm sure, and Jerry - but the point is that study after study, the same recommendations come out. The difficulty is that to the extent that the issues fall within the mandate of the province and the federal government, which the main solutions do, they are not implemented and they certainly won't be implemented until the senior levels of government recognize that there is a problem.
MR. CHAIRMAN: Is that okay, Mr. Sampson?
The member for Sackville-Cobequid.
MR. DAVID WILSON (Sackville-Cobequid): Mr. Chairman, the honourable member for Pictou East seems very defensive and I think it is with good reason, based on the government's record with Cape Breton. So I would like to reassure the guests that the members of our caucus appreciate your efforts here today and hopefully things can change in the future.
So I would like to ask you, since we're leading up to a provincial budget . . .
MR. DEWOLFE: On a point of order, Mr. Chairman. I just want to remind the member that on record I said that they were doing a fine job and that I give credit where credit was due. I think they deserve a great deal of credit and that is in Hansard. (Interruptions)
MR. CHAIRMAN: Order, please.
It may be a good point but it is not a point of order.
The honourable member for Sackville-Cobequid.
MR. DAVID WILSON (Sackville-Cobequid): As I was saying, leading up to a provincial budget, what does CBRM need to see in this budget coming forward? What do you need to see to help with the situation?
MR. MORGAN: First of all, often we jump to dollars before principles, and I would say we need the provincial government to adopt a basic principle that it will fund municipal units in this province fairly and equitably. That's the position that's been put forth by CBRM, but that's a position that's been put forth by the organization that represents all municipal units in this province as well.
Implement a consistent set of principles and ensure that municipal units in the province are funded fairly and equitably. That means you have one set of rules for Cape Breton and the same set of rules for everywhere else in the province.
There are a number of practical outcomes that fall out of that. Firstly, you correct the Nova Scotia Power situation, you don't implement a system that, in effect, impoverishes the very poorest areas of your province to fund a responsibility that's a provincial government responsibility. We've heard the reference that 50 per cent of the equalization grant goes to Cape Breton; they often leave out the fact that Cape Breton's funding from Nova Scotia Power is used to fund that system. So they take our money out to fund the system to give back to Cape Breton, and then they claim credit for giving the money back.
We need to fix that Nova Scotia Power situation, first and foremost. Secondly, we have to correct the equalization system. Your officials at Service Nova Scotia and Municipal Relations understand that not all of the costs associated with the tremendously complex formula with respect to the equalization system, but one basic thing that the officials - and I can name them, Nathan Gorall and others - at Service Nova Scotia and Municipal Relations understand that the system doesn't fairly describe the costs that municipal units incur. So what you need, and we need, is for Service Nova Scotia and Municipal Relations to update the equalization system, using current costs that municipal units are incurring, and then fully fund the system so that the province comes into compliance with the Constitution.
What I would say is that this is not an issue of absolute dollars, this is an issue of compliance with the law of the land. To me, there is one of two mechanisms by which that can happen. It can happen politically and it should happen politically, but it has to happen because it's the law of the land, that's what I would say.
MR. CHAIRMAN: The honourable member for Eastern Shore.
MR. DOOKS: Mr. Chairman, understanding that this is a very sensitive issue, I have just a few questions. You gentlemen here today are representatives of one municipal unit in Cape Breton, and we often hear you, in your comments, as you speak of Cape Breton, Cape Breton and one would think that maybe you go outside of your municipal unit. We know we
have other municipalities, Inverness, Victoria County, the Town of Port Hawkesbury. Have you been in dialogue with the wardens and mayors of those municipalities, asking them if they feel if they're comfortable with the disbursement of funds from the province to their municipal units?
MR. MORGAN: We have had recent discussions with them. I'm not aware of any municipal unit objecting to the principles that we've put forth. For example, Nova Scotia Power, none of the municipal units on Cape Breton Island have disagreed on that. With respect to a fully-funded equalization system, again, that's a principle that's supported not only in Cape Breton but by all of the municipal units in the province. So that's consistent.
There was some disagreement with respect to the decision to undertake the governance study, and that may be what you're referring to, but not in terms of the equalization . . .
MR. DOOKS: I will be a little bit more specific. Have you asked Mayor Billy Joe MacLean if he intends to join with the Cape Breton Regional Municipality in an action against the province? When I say dialogue, it's nice to chat with somebody at the Tim Hortons, but have you had actual sit-down dialogue and/or correspondence from one municipality to the other? It's just a question. Here's the question, are the other municipal units happy or not happy with the disbursement of funds from the provincial level of government to their municipal units, in writing? Have you had dialogue with them, correspondence with them? You must have asked the question.
MR. RYAN: We've had a delegation, just recently. Yesterday, for example, we were at Port Hood, Inverness County. We made our presentation there before their council. We did Richmond last night. We were scheduled yesterday afternoon for Port Hawkesbury, but indeed the mayor was out of town and they had a quorum problem.
MR. DOOKS: And what was the general consensus?
MR. RYAN: And we also met with Victoria a few weeks ago. The general consensus is I don't think anybody denies the fact that they believe the information is truthful, they believe that economic experts should assist the political debate that goes on in terms of what's the solution. They understand, they're Islanders as well and they understand that with this level of rapid decline - they believe Dr. Donald Savoie when he says that we're not sustainable at the present course. They believe the two economists from the University of Newfoundland, when it says that given this level of decline, you're not sustainable. Something has to happen.
All that has to happen is a focus similar to Summerside, a focus on a community that has a strategy, that doesn't just have a list of projects, that has a focus in terms of a comprehensive strategy. That's what we are trying to have developed, and that's a provincial responsibility.
MR. DOOKS: I was just trying to get a feel of how the other municipal units partnership with you in this . . .
MR. RYAN: Well, we did our initial and they're actually going to deal with it, all three are dealing with it on their agendas, and we will make a decision on it. So we will see what happens. (Interruptions)
MR. MORGAN: If I can deal with your specific question on the legal issue, the very nature of a municipal unit being forced to deal with this issue means that you have to have a dramatic imbalance between your ability to deliver services and what your residents expect and what, indeed, the Province of Nova Scotia expects. There is no other municipal unit in this province, I don't think there's any municipal unit in the country, that is challenged in the same way the CBRM is, in terms of economics and in terms of this unfair funding circumstance.
MR. DOOKS: There would be parts of municipalities that would be experiencing the same difficulties.
MR. MORGAN: The same difficulties, no question . . .
MR. DOOKS: We recognize that. Okay, let's go back a little bit further . . .
MR. MORGAN: But the question is, are they sufficient to be able to cause them to take these steps and would they be able to?
MR. DOOKS: Well, it's a bit of a different scenario because a part of a municipal unit would be different than a whole municipal unit. Anyway, let's go back to amalgamation. We know that the Cape Breton Regional Municipality is made up of a number of former municipal units. How has that affected the big picture? Would you say that amalgamation was a good thing for the area, or would you say that it was a bad thing? What are your comments on that?
MR. MORGAN: I'm sure your chairman would have some strong opinions on this issue as well, but let me attempt it. First, I see both good and bad. First of all, it's good in the sense that we now have a capacity to deal with the principal issues affecting the CBRM in a way that as individual municipal units they may not have been able to do. From a fiscal position - Mr. Ryan and myself may disagree on this to some extent - I see some significant negative consequences, fiscally, in terms of labour costs, there was a highest common
denominator effect that significantly increased labour costs, a number of grants that were formerly provided were eliminated, there were a number of other structural changes that I know worked negatively for the CBRM. But in terms of from a planning perspective and an advocacy perspective, I would say it's been positive.
MR. DOOKS: Okay, thank you very much. Time is running out. Just going back, we're going to go back to the legal action. I make reference to the Cape Breton Post because I wouldn't want to take reference from my notes because it could be seen as being biased. From a reporter at the Cape Breton Post, it's certainly your intent that if this is not resolved in a short manner that you are going to take legal action. I can pass this to you. It says here, I see us formally initiating an action some time. You even set out a time frame, April, so on and so forth. Then you even talked about, that it would probably go from the Supreme Court up to the federal courts, et cetera.
The point is this, how much money would it cost for a legal court action of this magnitude to go to the Supreme Court of Canada, when, clearly, it's stated in the Chronicle-Herald, on March 3rd, from the Canadian Press, that Premier John Hamm promised Tuesday to produce the numbers that will provide the Cape Breton Regional Municipality is getting its share of the provincial transfer payments? Also, Minister Clarke tells us on March 1st in the Cape Breton Post that he is going to prove to you that Cape Breton is not getting short-changed.
So, two quick questions - and I'm trying to make this, because I only have one. Bottom line, is what the Premier said in the Chronicle-Herald and what your minister has said in the Post not good enough for you and secondly, before you answer that, give me the cost of what your - I guess - idea of the legal costs would be to take this to the highest courts in the land and who would suffer or who would benefit by a court action?
[10:45 a.m.]
MR. MORGAN: Sir, five months ago the Premier of this province was provided with a document that told him that a significant region of his province was not sustainable as a meaningful economic entity, Cape Breton would cease to exist as we know it today, and he undertook to analyze the study and respond and he has not responded, yet. There has been no response, no undertaking to . . .
MR. DOOKS: Did you put a time line in your letter, Mayor?
MR. CHAIRMAN: Order, please.
MR. MORGAN: No, I didn't put a time line but I have sent now at least four correspondence so far; perhaps you can, in your caucus, ask him to respond with respect to his position on the governance study. But the point is, he has information and you have
information indicating that Cape Breton is not going to survive as a meaningful economic entity. You also have information indicating there is going to be a population implosion on Cape Breton Island if you don't do something about it. We can't simply sit by, the costs of doing nothing are incalculable. We have to do something because the entire future of the region is at stake.
As to your question, if the provincial government does not act will I? The answer is yes.
MR. DOOKS: But the figure, the amount.
MR. CHAIRMAN: Order.
MR. MORGAN: It costs the Cape Breton Regional Municipality around $20 million each year that we don't act and in terms of the cost associated with the entire region since the provincial government, including the deputy ministers, haven't complied with the FOIPOP application that has been served upon them . . .
MR. CHAIRMAN: Order.
MR. MORGAN: . . .we have no ability to know what the total cost is, it's probably much higher.
MR. CHAIRMAN: Order. Actually, I believe the question the honourable member asked was how much would the litigation cost?
MR. MORGAN: We don't know the total amount of that, it depends; there is a possibility at any stage in the process that it could be resolved, including prior to initiating an action.
MR. CHAIRMAN: Everyone has had an opportunity to ask at least one series of questions. We only have about 12 minutes left, we have time for a couple of short snappers. There are three members so far who've indicated they wanted to speak: Mr. DeWolfe, Mr. Parent and Mr. Sampson.
So we will start with Mr. DeWolfe, one short snapper.
MR. DEWOLFE: Mr. Chairman, earlier in the meeting, MLA Sampson said that CBI is no longer Nova Scotia's masterpiece but rather Nova Scotia's embarrassment. I would suggest that maybe he should look within, indeed, it was his Party that adopted the policies to depopulate rural Nova Scotia. (Interruption) So I would like to table for the benefit of the member across the way, a document dated October 25, 1993 and it's to then Honourable Sandy Jolly from Deputy Minister Crumm and it discusses many of the desirable changes,
key elements in municipal reform, changes in order to make this step financially possible. (Interruption)
Mr. Chairman, I would like to have the luxury of having the honourable member for Glace Bay consider giving me the opportunity to speak.
I'll read one of the items that says, "More efficient government by reducing the artificial distinctions between towns/cities and rural municipalities, reducing the incentive to build outside cities and towns (which imposes long-term servicing costs)." I would like to table that document.
MR. CHAIRMAN: So noted. Would that happen to be Mr. Cramm, not Crumm.
Mr. Parent.
MR. PARENT: I'm allowed only one question, so I will key on what I think is a major issue and that is population out-migration, which is happening to many areas across Nova Scotia, happening to the Atlantic Provinces as a whole.
MR. MORGAN: All of rural Canada.
MR. PARENT: Yes, in fact, when you look at the western world in comparison with the two-thirds country and an aging population, what are you trying to do in order to increase the population. I'm thinking of the Provincial Nominee Program, immigration is perhaps one solution, are there some options you have been working on in terms of that?
MR. MORGAN: First of all, understand what your own provincial government documents say about depopulation and Cape Breton Island. The statement is made in your own documents that the circumstance in Cape Breton Island is different. It's distinct in size and scope to all of the other regions, it is a unique circumstance. When you're talking about depopulation in Nova Scotia and throughout Canada, you're talking about principally rural areas; that's not to say that there is not an answer to that as well, there is a mechanism to reverse that. But Cape Breton Island, the Cape Breton Regional Municipality is a unique situation of an essentially urban area losing population and it is not happening in other counties. We are the only county of counties with populations greater than 100,000 - we are losing population faster than any other county in the country. So there's something unique in size and scope.
In terms of what we're doing to deal with it, we are attempting to address the fundamental issues which are, firstly, to tell the truth to our population about the demographic and economic circumstance, to tell the truth to this committee and the provincial Legislature, and to ask that this provincial government take the steps that are necessary to deal with it. I've outlined some of those earlier today but it's important to
understand that the fiscal and jurisdictional capacity to deal with those problems does not lie with the Cape Breton Regional Municipality. We can barely afford to deliver clean drinking water to our residents. The fiscal and jurisdictional capacity is in the provincial government. You can choose to do nothing, but what I would suggest is that I would urge you to recognize the problem, as a very first step, and to commit, at least in the long term, to deal with it.
MR. CHAIRMAN: The member for Victoria-The Lakes, one short snapper.
MR. GERALD SAMPSON: Mr. Chairman, I coined the phrase that there is a systematic dismantling of Cape Breton and the province is one of the perpetrators. I take issue with Mr. DeWolfe saying about the past, I can't deal or change the past, I can only deal with the present and plan for the future. In defence of CBRM, I must read just a short thing here and it's dated February 20, 2004, to Mr. Deputy Minister Daniel Graham.
Dear Mr. Graham, I'm attaching a Form 1 application, which is self-explanatory. For ease of reference, I am also attaching correspondence dated January 2nd, February 20th and October 23rd, 2003, and January 21, 2004, which outlines our previous attempts to obtain the information and Minister Christie's response dated November 30, 2003. I'm looking forward to receiving the requested data.
MR. CHAIRMAN: Question.
MR. GERALD SAMPSON: I mean we all want to save trees, and I'm glad that I got all these copies, but it shows the frustration of Cape Breton and all I hear is flowery, wonderful talk about governments being open and transparent and we must dialogue.
MR. CHAIRMAN: Question.
MR. GERALD SAMPSON: Mr. Chairman, my question is, that this is the crux of the problem that the Island itself is being negatively imaged and so if it's down there, forget about it. Just try driving across the causeway and you enter another world. I use that just to support the fact that that's why these gentlemen are here today; there is an attitude, as I've said in my opening remarks, about Cape Breton and this is one of the things that proves it.
MR. MORGAN: It was largely a rhetorical question, but certainly, just briefly in response, there is an extent to which some political players take advantage of those animosities across jurisdictions. That's unfortunate but this to me is not a Cape Breton versus the rest of the province situation. The provincial government benefits from a circumstance in which all of the regions of the provincial government are strong and the principles that we are endorsing apply not just to the Cape Breton Regional Municipality, they apply to Yarmouth and they apply to the South Shore and they apply to Guysborough County as well.
The things that you do to resolve the problem in Cape Breton also assist other areas of this province as well.
What we have to do, I would suggest, is build on the things that unify the province, that bring people together. It's important that provincial politicians not play upon any animosities that may be there, not play upon the worst instincts of our citizens, and try to take advantage, if there is animosity by some toward Cape Breton. It's important that no MLAs try to take advantage of those feelings and you try to build upon those things that unify the province.
MR. CHAIRMAN: Thank you. With the committee's permission could I ask one short snapper, just for general information. Then the member for Glace Bay has indicated he would like to put a motion on the floor.
Perhaps I could get a little more detail from Mr. Whalley afterwards, but I'm a little perplexed as to why the CBRM now has its own development department when it's a one-third funding partner to the Cape Breton Economic Development Authority. That regional body was set up in concert with the design of regional government. It's almost like the CBRM is now competing against itself or the other two levels of government. I'm just wondering why there isn't symmetry there?
MR. RYAN: I wouldn't say it's competing at all, it's a very different focus. We put one-third funding into our economic development and there is a role that they play within our community and they play that role quite well. They don't have the capability, strategically, to implement a strategic strategy aimed at economic recovery.
Just as the mayor outlined, what the strategy would unfold, when you're talking tax incentives, when you're talking decentralization decisions, when you're talking strategic infrastructure investment, that's not going to come out of that agency, it's going to require a very concerted effort by the governments themselves. What we have is not an economic development department, we have a one-person economic development manager, very similar to - well we have one manager of technology. It's to bring the awareness into our organization and into our director group and senior management group, and indeed council itself, to try to understand what's happening in our community, and also to try to drive this agenda publicly and to try to push governments for a solution.
MR. MORGAN: If I could add to that, in terms of the agency that is there, CBCEDA is doing some great work. They are limited though in that the funding circumstance that you described, to the extent that there are policy changes that have to happen at the provincial and federal levels, as there are in Cape Breton, it's very difficult for them to make those arguments simply because they're dependent on the funding from the . . .
MR. CHAIRMAN: On the Cape Breton Economic Growth Fund, does the CBRM participate as an active partner in the expenditure of that?
MR. MORGAN: No, we're not a funder of that organization.
MR. CHAIRMAN: I didn't ask you if you were a funder, do you participate in the expenditure, do you participate with the federal and provincial governments on how to realize economic success in Cape Breton?
MR. MORGAN: We may have some limited participation but principally, the decisions are made on a political basis and no, we're not given any significant role.
MR. CHAIRMAN: So the CBRM is opted out.
MR. MORGAN: I wouldn't say opted out, I would say in practical terms, what an official said to me very early on is that if I co-operate I can be there when the plums are announced and that is, in effect, what you have from that program. If you look at the size of the Cape Breton economy, it's a multi-billion dollar economy and you have a very marginal amount of funding that's provided to that. So you have a very effective political machine because they can make announcements and some of them appear significant, but when you look at the size of the Cape Breton economy, really you have to take other macro-economic steps in order to correct the situation. When I'm offered the choice of either being there when the plums are announced or advocating on behalf of the people, the citizens, I choose the latter.
MR. RYAN: I think one other point is that all the undertakings - and that's our difficulty from a staff point of view, participation has to be done confidentially; we can't come out of the room and convey, even to our own council, the information as to why decisions are made or why certain decisions weren't made. We refuse to participate under those types of circumstances.
MR. MORGAN: Provincial legislation, itself, doesn't allow council to have the private meetings in some of those circumstances, so it doesn't fit well.
MR. CHAIRMAN: The honourable member for Glace Bay.
MR. DAVID WILSON (Glace Bay): Mr. Chairman, I know we're running out of time so I will just get right to the motion. I am making a motion that the Standing Committee on Economic Development show its support for the Cape Breton Regional Municipality and their campaign for fairness, by asking the Premier and his two Cabinet representatives from Cape Breton, and any other appropriate officials, to immediately begin serious negotiations with Cape Breton Regional Municipality officials aimed at resolving the inequity in funding to CBRM from the provincial government.
[11:00 a.m.]
MR. CHAIRMAN: Do we have a seconder? The member for Halifax Chebucto.
MR. EPSTEIN: I second the motion.
MR. CHAIRMAN: Anyone on the question?
MR. PARENT: I find this premise difficult to accept. I have no problem with a major part of the motion, but at the tail end, that there's serious financial imbalance, no one has proved that at this stage. The request that's come from our guests is that we get the objective data out there, that it's not yet there, and that we need to have that. I think if the motion was changed at the tail end, I could support such a motion, but as it is, it is making an assumption which no one here, around this table, has made, at least our guests haven't made that. So I think it needs to be changed.
MR. MORGAN: To clarify, we've certainly indicated very clearly that the situation is unfair and inequitable, and, simply with respect to the municipal element of it, that the region is $20 million below where we would have to be in order to deliver comparable services at comparable tax rates to bring the province in compliance with the Constitution, Section 36. I'm not sure what conclusions the committee may arrive at, but in terms of your guests, we've certainly . . .
MR. CHAIRMAN: Order, order. Actually only the members on the committee will be able to participate in the debate.
MR. DAVID WILSON (Glace Bay): Mr. Chairman, I would certainly be . . .
MR. CHAIRMAN: The member for Halifax Chebucto.
MR. EPSTEIN: I was just going to say that if the mover was prepared to amend his motion, fine; otherwise, why don't we just vote on it.
MR. DAVID WILSON (Glace Bay): I would be willing to replace inequity with unfair situation, if that's what the member is perhaps aiming at, but then again the other member has a good point. I think I will leave it stand as it is.
MR. CHAIRMAN: Bear in mind the motion, we can pass the motion here, it's not binding on the government. It's a different situation if we were inviting the Premier and the minister or whoever, representatives of the government, before the committee, that's a different situation. The motion does have a certain degree of weighted value.
MR. DAVID WILSON (Glace Bay): Mr. Chairman, just one last point . . .
MR. CHAIRMAN: No. Only to close debate.
MR. DAVID WILSON (Glace Bay): Simply that I think what the motion is aimed at is showing our support, which is exactly what the CBRM officials are here looking for today.
MR. CHAIRMAN: Would all those in favour of the motion please say Aye.
MR. DOOKS: I certainly would like to support your motion, but I also have difficulty with a possible unfairness being shown. We're not sure at this particular time if that indeed is true, and we certainly would like to get to the bottom of it. I think it's an excellent motion to encourage the municipality and the province to work together and to continue with dialogue and to have open discussion, but I would not be able to show my support if we're alluding to (Interruptions) Yes, prejudging. The good member represents his people well, Glace Bay. I would ask for him to amend that motion to have full support of this committee. It would mean removing politics from it and for the . . .
MR. CHAIRMAN: Order. The point is made, and I think it's been made several times. The honourable member has obviously indicated he's not prepared to amend his motion.
Would all those in favour of the motion please say Aye. Contrary minded, Nay.
The motion is carried.
Quickly, we're a little over time. I think the points are all well taken. We would like to thank our guests for appearing. I hope you feel you've had an opportunity . . .
MR. MORGAN: Thank you, Mr. Chairman, and I thank the members of your committee as well for their patience.
MR. CHAIRMAN: Quickly, members, the date of our next meeting is April 13th at 9:00 a.m. We have one of two possible witnesses: Transport Canada, our clerk, Darlene, is communicating with them about the possibility of them appearing; or representatives from the Strait area, the municipal representatives that are involved in this natural gas proposal, for the distribution of natural gas, and she is communicating with them as well. Failing that, there are some others in the hopper that we have, but not formally approved. So if it's the wish of the committee, we can just leave it for her discretion.
It is agreed.
The meeting is adjourned.
[The committee adjourned at 11:05 a.m.]