Thank you, Madam Chair. My questions are somewhat in line with the Member for Hay River North. The recent population statistics showed that we increased by a whopping two people lately and we’re still trying to find where those two people are. Given the fact that population is relatively flat and taxation is based on a per capita increase in the area we see here, where is the department getting their calculations or their crystal ball, so to speak, that we’re going to be seeing an influx of people? Our statistics show, like I said, an increase of just two people in the last census.
Thank you, Mr. Dolynny. Minister Miltenberger.
Thank you, Madam Chair. When I indicated that it looks like things from an economic point of view are improving, one of the assumptions in that is, for example, if you look at the Sahtu, there’s a huge amount of activity. If that oil play in fact advances past the exploration stage, I believe we will see an increase in population. As the other diamond mine goes on stream, there’s potential there as well. We have six, seven, eight, as the Premier and the Minister of ITI have laid out, significant projects on the drawing board in the pipeline for development, all of which would not be able to be totally staffed using northern forces. So we’ll bring people here. So there are those opportunities. Thank you.
I share the optimism of the Cabinet in terms of population growth. I guess we’ll see when the dust settles.
The line entry called investment pool cost recoveries, we’re seeing a significant drop from the main estimates of 2011-12. Can we get some explanation as to why we’re seeing such a recovery and what exactly does that definition entail? Thank you, Madam Chair.
This line is tied to the winding down of the Opportunities Fund. Thank you.
Speaking about the Opportunities Fund, we know that that fund has wound down. This fund had an opportunity of people borrowing against it, or I guess we had the ability to borrow with it, to the tune of about 1.45 percent. With the increase in the borrowing limit, this increased our ability to borrow for large infrastructure. Can the Minister allude to what was the total value in terms of dollars available us with this Opportunities Fund when it was in our control? I’ll ask that first question, Madam Chair.
Thank you, Mr. Dolynny. Mr. Kalgutkar.
Thank you, Madam Chair. At its peak, the Opportunities Fund balance was around 120 or 125 million dollars. Now that we’ve divested our interest in it and paid that fund back to Canada, the remaining balance is around $7 million. Thank you.
I’ve heard various numbers. I’ve heard as high as $135 million, but I’ll take the word of Mr. Kalgutkar. What was the percentage? What was our interest rate, if you will, with the $125 million at our disposal, Madam Chair?
Thank you, Mr. Dolynny. Minister Miltenberger.
Thank you, Madam Chair. I’d have to ask the Member to clarify the interest rate that we would lend to ourselves, that we’d lend to other people or other businesses?
How much would the GNWT charge for having this money at our disposal when we were lending it out to organizations?
We made one loan of any significant size and that was to Discovery. That interest rate was part of a broader package of negotiations that included the movement of headquarters positions and those types of things. The interest rate was in the range of about 10 percent.
I think we’re going down the wrong rabbit hole. I’m not looking at what we were lending this money out to a proponent that was wanting to borrow against that fund. We as a government had access to money from the federal government. The federal government would charge this government a fee, a percentage, for the use of this $125 million. Madam Chair, what was that percentage?
I apologize if I seem like I’m being obtuse or a little slow here. We get the money and we pay 1.4 percent.
I heard 1.4 or 5 percent. If I’m wrong, please correct me at the next opportunity to the Minister. Where I’m going with this point, Madam Chair, is we had at our disposal opportunity money at 1.45 percent, but the government went out and increased our debt limit or our borrowing limit up to $800 million, which obviously is required, but we dissolved this amount of ability to borrow at 1.45 percent and I believe now, Madam Chair, if we can get confirmation, we’re now paying almost three times that interest rate for the very same money that we had at a third of that. Can we get some clarification if that is indeed the math that I’m using here, that we lost opportunity at 1.45 percent to pay three times more to borrow that same amount of money back?
Thank you. The Member is correct. At the benefit of being able to borrow money at a very low rate now, we no longer have the Opportunities Fund, we no longer have that benefit.
Thank you. I appreciate the Minister clarifying that. It’s a bit disheartening knowing that we had $125 million at our disposal to do good work and now we’ve had to collapse this Opportunities Fund to a higher borrowing limit and paying three times the interest rate. It baffles my mind that that was a great deal. Anyone who is out there listening or anyone in this Chamber now, their ears have perked up. This has put us in a real precarious situation in terms of costing the taxpayers a lot more money. Can the Minister maybe indicate really in this arrangement where was the value added to the taxpayers in terms of getting a larger amount of money, but we’re paying a heck of a lot more interest rate on that money now, Madam Chair?
Thank you. The discussion with the federal government, they made it clear to us that they were not going to cover off the Opportunities Fund under the borrowing limit. We had an arrangement prior to that, it was satisfactory and worked fine, that the Auditor General said was fine and the federal government, Finance Canada said in their opinion they disagreed and this would become part of our borrowing limit. We are not in a position to do that, so we made the decision, we were negotiating an increase to our borrowing limit. It wasn’t going to be bumped up enough to accommodate the Opportunities Fund. So in the overall long-term cost benefit, we rolled up the Opportunities Fund and went with going with the borrowing limit. Thank you.
Thank you. I do appreciate the Minister giving a very detailed approach and finally sharing some of these numbers in its gross format to show the people of the Northwest Territories what’s happening with the interest rates, what’s happening with the borrowing limit. No question, but more of an observation.
Thank you, Mr. Dolynny. I’ll take that as a comment. The Minister agrees. Mr. Bromley.
Thank you, Madam Chair. Just following up on my colleague for a sec, were there conditions on how that money could be used, the Opportunities Fund money could be used or any restrictions that the federal government put on that money? Thank you.
Thank you, Mr. Bromley. Minister Miltenberger.
Thank you, Madam Chair. There were fairly broad conditions, but it mainly had to be tied to economic development activities. Thank you.
Thank you. My understanding, is it public what the amount of return was on the money that was lent out and is it possible to report whatever our return was minus that 1.4 percent?
Thank you, Madam Chair. The loan was public. It was very topical and extensively covered in the newspaper. The loan was repaid in full early and I indicated what the interest rate was. I don’t know. I’ll ask Mr. Kalgutkar. I don’t think we have that detail. So we don’t have that detail on that particular loan here. It’s been wrapped up and paid off for some time, but that information is available and I agree to provide it to committee if that’s their wish. Thank you.
I would appreciate receiving that and how it was calculated in terms of the numbers.
Now, just looking at corporate income tax, I know last year it was reported, I think by this Minister, that it was almost a record year for diamond exports. I believe it was in the order of 2.1 to 2.3 billion dollars and obviously our corporate income tax is quite low. Is that because those dollars will be reflected in this fiscal year in terms of corporate tax? Thank you.
Thank you. There are a couple of things and I’ll ask Mr. Kalgutkar if he wants to add further. Corporations can reach back three years when they do their filings for corporate income tax and make adjustments and do whatever is in their benefit in terms of how they file and where and what amounts and what’s in their filing. As Mr. Aumond indicated, we as well are just concluding the repayment of a large overpayment that we received a number of years ago that we paid back over three years. Thank you.
Minister Miltenberger, do I need to go to Mr. Kalgutkar?
Madam Chair, it may sound more authoritative if Mr. Kalgutkar says it.
Thank you, Mr. Minister. I wasn’t sure where I was going. Mr. Kalgutkar.
Sorry, Madam Chair, can you repeat the question? I didn’t hear it.
Mr. Bromley, could you rephrase your question? Thank you.
Actually, I’m happy to just accept the Minister’s. I had forgotten some of those things, and he reminded of some of those things. So I think that’s fine. I’m happy to move on.
Thank you, Mr. Bromley. Mr. Hawkins.
Thank you, Madam Chair. I just want to follow up quickly regarding the matter Member Dolynny had brought out. I’m just trying to understand perhaps the context of the bill of goods that we were sold by taking this particular option of returning the $135 million, or $134 million, it doesn’t really matter. Potatoes, potatoes at this particular case because it’s all gone. But what was the bill of goods sold to us, that this was in our benefit that we had money that cost us a 1.45 interest rate versus now we’re using a market rate of 3.5. I mean, there must have been some reasoning why turning it back was better for the territorial government. Thank you.
Thank you, Mr. Hawkins. Minister Miltenberger.
Thank you, Madam Chair. There was a debate about where the Opportunities Fund would be accounted for, under our borrowing limit or not. That was an issue that was ongoing. At the same time we initiated the requests initially as a territory and then with all the other two territories and got the Minister of Finance to agree to a review of the territorial borrowing limits of all three territories. Our particular circumstances were such that the Opportunities Fund that we have, Yukon – and I don’t think Nunavut had it – was being perceived by the federal government in their opinion should have been under our borrowing limit, which would have clearly exceeded that ability in that level. So as we had the discussion, they indicated in their negotiations with us that they would not be increasing the borrowing limit to accommodate the additional $125 million. So it would be we had a choice, and the choice was wrap up the Opportunities Fund and deal strictly with the negotiations for the borrowing limit, recognizing that, yes, there was a cost, as Mr. Dolynny indicated from Range Lake, that we lost access to lend ourselves money at a very cheap rate. The longer-term benefit was, as we move down the road to devolution and as we move down the road to having to deal with these fiscal constraints that we’ve been dealing with now, that the borrowing limit will give us more flexibility in dealing with the infrastructure issues and some of the other anticipated expenses that we didn’t currently have prior to the borrowing limit being increased.
I appreciate the answer. A couple of things, though, that popped out of that. The Minister pointed out a debate that was ongoing and you kept referring to a discussion, we had a discussion. I wouldn’t mind knowing who the debate was with and who the ongoing discussion was with. I’m not sure my memory serves me correct and I, of course, look for guidance from the Minister if I’m wrong, but I’m pretty sure that this wasn’t brought to Regular Members as a particular option. What I’m going to do is bundle this with one other question. Where is the debate, with whom was it going on, was there or is there reasoning why there was no discussion, and I guess if the discussion was only with the feds and Cabinet, were they not offering a corresponding deduction? In other words, their existing borrowing limit minus the $135 million. Were they negotiating or was it a term of dictating, where they just said give us the $135 million and we’ll do the other?
When I say “we” the government, it was done through the very capable people in Finance negotiating with Finance Canada. It went through all the due processes with Cabinet and FMB. There were, and I recollect sitting at a number of briefings with committee about the borrowing limit, about what was underway, how things were going, what we were looking at. We’ve also had a number of briefings on the Opportunities Fund and I’m sure we could fill shoeboxes with paper of all that work that was done. That was the deal. The bottom line was the federal government was not prepared to offer us an offset in our borrowing limit to allow us to include the Opportunities Fund.
What actually has worked to our advantage, in this particular case, for turning back the Opportunities Fund? I thought it was actually working quite well as a vehicle for lending money at a rate of 10 percent. I’m not going to question the context or phraseology of our good Finance folks, but I’m just wondering where the political discussion or the emphasis on the investment vehicle. At 10 percent return I thought that would be considered a good one. Maybe if the Minister could help me understand that particular thing, because it seemed to be an excellent vehicle for making cash for this government.
If my memory serves me correct, as well on another point, I think we’re in the range of about $8.22 million left over from that fund we got to keep. It seems as if it could generate money. Any thoughts from the Minister on that particular problem?
The number that was used is there was $7 million residual in that fund that we kept in accrued interest and such and we’re putting into the planning process is slated towards economic issues. This is talking about history that can be changed. The harsh reality for me was we hadn’t lent this money out. We were lending it to ourselves. We had $125 million in the bank that, according to how the federal government did their accounting, was considered a debt. So for most people if you think you have $125 million cash, they had given it to us through their Immigrant Investor Fund. It was cash in the bank.
We weren’t lending it out after the Discovery loan because of the debate over where it was going to be accounted for and would we have to roll it up. We had to deal with that reality that even though it didn’t make sense and, yes, we had a stack of applications that the Minister of ITI had, of potential business ventures that we would have gotten a good return on our dollar for, in the broad scheme of things, the choice was we had to turn it back because we weren’t going to get that bump up in our borrowing limit to allow for that and our bigger goal was the deal with the issue of the borrowing limit because of all the other pressures we had, due to the stopping of the stimulus money and the using of all our free capital to make sure that we took full advantage of the stimulus program that was happening in the last three years of the last Assembly.
I guess my last question, and I’ll say with respect, of course, that I recognize the Minister’s last response. I mean, we really are talking about that kind of horse that’s since been gone for years as if it mattered on today’s debate. It’s well out of the barn, down the pasture, not even worth talking about. I appreciate that point.
I guess my last question in this particular regard, I suspect the Minister will answer it fine, but I suspect my last question will really be built around, was part of this a trade-off so we could get the extra access capital so we could get potential to use that as the Inuvik-Tuk highway? As our contribution? I mean, I’m just trying to get a sense of, don’t take shell game as a negative context, that’s not what I mean by it, but was there a bit of a shell by trading one for another and did we trade this Opportunities Fund over for the extra limit so it could be targeted at that particular initiative? Again, noting our percentage that we’re required according to the agreement, I’m just trying to get a sense, was that part of the structured reason why we did this.
When the federal government put $150 million on the table towards the Tuk-Inuvik highway, we indicated to them that we were in no position, with their existing financial arrangements and borrowing limit, to even be able to contemplate partaking in that project in addition to all the other cost pressures we had. Was it a factor in the discussion when we talked about the borrowing limit? Absolutely. We’ve laid out all the conditions, all the checks and balances that have since arisen and been committed to in this House through myself, through the Minister of ITI, through the Premier, but yes, that was a factor in that discussion.
I figured the Minister was going to answer yes in some capacity, so I’m fine with his answer.
Thank you, Mr. Hawkins. Page 5-9, Finance, department summary, information item, revenue summary.
Agreed.
Page 5-10, Finance, department summary, information item, active position summary.
Agreed.
Page 5-13, Finance, activity summary, deputy minister’s office, operations expenditure summary, $85.991 million.
