Debates of May 12, 2011 (day 6)
Agreed.
Total department, not previously authorized, $10,000.
Agreed.
Agreed. We’ll move along to page 6, Aboriginal Affairs and Intergovernmental Relations, intergovernmental relations, not previously authorized, $269,000.
Agreed.
Agreed. Total department, not previously authorized, $269,000.
Agreed.
Agreed. Moving along to page 7, Finance, operations expenditures, deputy minister’s office, not previously authorized, negative $6,000.
Agreed.
Budget, treasury and debt management, not previously authorized, $4.2 million.
Agreed.
Ms. Bisaro.
Thank you, Mr. Chair. I note the amount under this particular item is $4.2 million and it is intended for a line of credit for the Taltson Hydro Expansion Project. In total, this supplementary appropriation request is some $11 million and this is a very significant portion of that total amount of money. I am concerned with what we’re being asked to approve here in total.
Yesterday the Minister advised me that we have a cap of 3 percent increase on our operations expenditures in any one year, but the total amount of $11 million affects a 0.8 percent increase to our operations expenditures for this year of 2011-12, which is what we’re discussing here. So if we have a rate of 2.8 percent, which is what was in his statement yesterday, and we add another 0.8, I think it puts us over 3 percent. So I have difficulty with the answer I got yesterday, that we’re managing to stay under our 3 percent increase to our operations expenditures.
The other significant amount of money is the one that we just discussed related to devolution and resource revenue sharing. The other expenses are some in, some out. Overall, by the time we consider lapses in funding from the last fiscal year and some reduction in funding in various areas, we’re advised that it’s only about $5 million that we are actually being asked to approve here, in new funding anyway. But I again have a problem with the $4.2 million in that we’re being asked to approve it as an expenditure here, but then we’re advised, well, it’s already in our fiscal framework so we can credit it back. So it’s kind of not really an expense and I have great difficulty with that.
My question to the Minister is: why we are paying down this line of credit to the Hydro Corporation? Is it an expense? I guess I understand the principle of paying down the line of credit. It’s costing us thousands of dollars, I gather, in interest payments and I’m quite happy to not pay interest to somebody else. So I’d like to know not so much why we’re paying down the line of credit but why is it an expense here and then credited back. So, really, it doesn’t affect the bottom line. I’m having great difficulty with that.
Thank you, Ms. Bisaro. Mr. Kalgutkar.
Thank you, Mr. Chairman. In terms of the why does it affect the fiscal framework, the Hydro Corp debt is included as part of the fiscal framework in our total debt picture. What we’re doing essentially here is moving the debt from the Hydro Corp into the GNWT as a short-term debt.
In terms of why it is an expenditure, I guess there’s really two sets of authorities that the Member has to keep in mind. The first set of authorities is the actual approval of the line of credit, which the authorities there are found in the Hydro Corporation Act. Then the actual payout of the line of credit, which the authorities there are in the Financial Administration Act.
The Financial Administration Act stipulates that when you pay out a line of credit such as this, you need an appropriation, because the payment has to come from the Consolidated Revenue Fund. To make a payment from the Consolidated Revenue Fund, you need an appropriation, and that’s what we’re seeking here.
Thanks to Mr. Kalgutkar. I almost understood that. That was great. However, what I kind of heard was we let somebody else set up a line of credit and borrow the money and then we pay it off, which I understand it’s a Crown corporation, but I have a bit of a problem with that. I would like to clarify, I do believe that when and if this project goes forward and there are revenues to the Taltson project, that the GNWT will be paid back for this money that we are paying out. Is that correct?
Thank you, Ms. Bisaro. Mr. Miltenberger.
Thank you, Mr. Chairman. Just two quick responses. Yes, all the money, the $17 million or so, when the project is complete and starts generating revenue, that money will be reimbursed to us. It’s not just a Crown corporation but it’s our Crown corporation of which we are the one and only shareholder. We are also, for the most part, their banker.
Thanks to the Minister. Yes, we’re a banker for lots of organizations and that’s what gets us into trouble. However, I want to just comment as well. This large expense and along with the others that are being asked for in this supplementary appropriation are putting a fairly big strain, I believe, on our reserve fund, our supplementary reserve, which is about $10 million. If this appropriation goes through, it’s $5.2 million and it will reduce our reserve fund to slightly less than $4.8 million. We’re only two months into this fiscal year. We have 10 months of a fiscal year to go with a contingency of about $4.8 million, which I fear is going to be really problematic.
There is any number of events which could occur. We have a fire season approaching which could be quite catastrophic. Things are very dry. We really don’t know what’s coming up there. Traditionally we do not budget for our fire season for the costs that we actually incur. So we know pretty well there is going to be a supplementary appropriation coming up at some point in time after the fire season for us to pay for the cost of the fire season because it’s not in the budget. We know that’s coming.
We know that Norman Wells has a problem with their conversion, the loss of their gas, and they are probably going to need help with their conversion to some other source of fuel or source of heat. There’s that. We have a bridge which may or may not be costing us more money. That’s still uncertain. There are Members who will say that it’s going to cost us an extra $30 million or $40 million. I’m not one of them, but it is yet to be determined whether or not the bridge is going to cost us more money. Even with just those three items, we have a really small contingency to deal with and I am quite concerned that this early in the fiscal year we have such a small contingency.
I guess I’d like to ask the Minister, if push comes to shove and we end up with three or four different calls for funds that put us over our reserve and it’s $4.8 million and we need $10 million, what happens at that point?
We’ll be working, of course, closely as a government to try to make sure we control our expenditures. If that point occurs, then we will be working, of course, very closely with committee and Members to try to manage and identify what the particular cost pressures are and what steps have to be taken to try to resolve them. One of the reasons we have engaged in this passive restraint process over the last number of months is to try to as well make sure that we have the maximum amount of cushion available over the next year to give us some flexibility should some of these unanticipated or unbudgeted events occur that the Member listed in somewhat gruesome detail.
I didn’t want to be gruesome, but I think it’s better to be realistic than not. So I guess just to try and solidify, clarify in my head, if we end up having to spend $10 million and we only have $4.8 million in our reserve fund, we will borrow to meet the financial or the funding commitments that we have to. Is that correct?
Thank you, Ms. Bisaro. Mr. Kalgutkar.
Thank you, Mr. Chairman. If we do exceed our supplementary reserve from the amount that is left over, all that would mean is that our projected surplus deficits would be lower than what we anticipated in the main estimates. In terms of how much we need to borrow would depend on how much cash we have in the bank at the time.
Sorry, one last question. I thought I heard Mr. Kalgutkar say that our projected surplus deficit would be less. I don’t understand that term.
When we do the main estimates, usually in the summary page there’s a projection of what our surplus deficit amount is going to be, and that is the amount that is the difference between the amount of revenues that we take in versus the projected amount of expenditures that we are projecting to incur. That amount also provides for a $10 million supp reserve. So if future expenditures cause us to exceed that supp reserve, then that amount will be lower than we anticipated.
Thank you, Mr. Kalgutkar. Next on my list is Mr. Bromley.
Thank you, Mr. Chairman. I want to ask a couple of questions on this project, as well. The $4.2 million being proposed here for this payout brings a total, as I understand it, to about $17.4 million for the Taltson project. These, of course, are all public funds that are going towards an unregulated power project with a partner that has no funds to contribute. Although I believe they did bring some modest, or were instrumental in helping the government bring in some federal dollars, modest though they might have been.
Where are we at in terms of paying those dollars back? Is the project still going ahead and would, presumably, the dollars be paid back equivalent to the dollars that were received from the territorial government?
Thank you, Mr. Bromley. Mr. Miltenberger.
Thank you, Mr. Chairman. This project is currently on pause as we look at reconfiguring how best to move forward. A lot of the issues related to the one customer, the payback period, which was very, very accelerated by the standard for this type of project with this type of significant investment, the routing of the transmission line, how do we address some of the other broader, longer-term needs of the Northwest Territories with grid connections and the ability to look at putting whatever surplus power there may be to use in communities, in buildings, other potential ventures.
There’s a number of these things that now that the Power Corporation has a different chair and different management, and as we have listened to the concerns around this table especially about some of those issues, we want to make sure for this type of investment that we’re on the right track. Those things are being considered.
The work that’s been done especially on the generation side is going to stand us in good stead. It’s engineering work, environmental work, all the other necessary environmental approvals were there. We just have to be sure on the business side and on what’s best in our long-term interest as Northerners.
I thank the Minister for those remarks. I think many of us are disappointed that this project did not work out better and are still hopeful that something can be pulled out of the fire. I am concerned with one of the justifications for this sort of ongoing funding. That is that our partner is worthy of this investment essentially because they are contributing to project knowledge about financial structuring such as the P3 public-private partnership model. Now, I would hope that the government would not need to go to a vested partner that has everything to gain and nothing to lose, for advice on how we structure P3 partnership model, particularly given the experience of this government to date. Can I get the Minister’s assurance that that was a typo?
What I can indicate to the Member is that over the last number of months we have been working diligently on a P3 policy for the government. That policy has been to committee. We’ve had extensive feedback. We’ve put more work into it. Now we have what we think is a workable P3 policy which we will be bringing forward that will provide clarity and a clear way forward if we’re going to engage in any type of P3 consideration, how we do it, and who we do it with, and the steps and checks and balances that must be there. Once again based in large part by the feedback from the committees and from the Members.
Just a couple more quick ones and then I want to follow the Minister’s comments up, which I appreciate, by asking for his assurance that he will be referencing the committee reports today and the Auditor General’s comments and principles on P3 partnerships, and making sure that those are well referenced in the model that we finally adopt, and that in fact we will not be going out to private partners and adopting their advice on a model to be followed by this government.
I can assure the Member that the P3 policy, once it’s in place, will be followed by the government. There’s built-in, full engagement of the committees, as well. That policy has been developed based on the things we’ve learned through the last number of projects; the bridge and the Taltson project most recently. We believe we have pulled together a policy that reflects the lessons learned.
I guess I would call on all of the House to ensure that the Auditor General’s guidance is reflected in that policy before it’s approved.
Just my last question here. Given that $17.4 million has been spent and the development costs for the project were estimated to be $20 million, we’re now over 80 percent expended on the budget for developing the project. Although it’s on hold, I understand from the chairman of the Power Corporation that development, or perhaps the Hydro Corporation development, is still proceeding or explorations towards a restructuring and so on. Again, presumably that would engender new costs for essentially a new project. Can we expect that the Minister will be coming forward with another supp on these, and at what point on these projects do we say stop and desist and let’s give up if we’re beating a dead horse, sort of thing?
Again, I’m just sensitive to our financial situation pressing up against our debt limit and so on. Comments from the Minister would be appreciated. Thank you.
I wouldn’t describe this project as a dead horse. There is tremendous value here. There’s power going over the existing dam, there is a capacity to expand. We chose a path and a way forward that focused on unregulated one business partner process that did not come to realization. We know very clearly that there are other things in the long term that we want to consider that we’ve talked about, the grid, looking at putting other buildings on electricity, looking at other potential opportunities, Tamerlane, Avalon. We also know that when we did the work and they looked at the demand, it was based only on the use of electricity and not on the use of hydro for power. There has also been studies done, for example, I believe, in Maine, where they did an estimate if they got off their reliance on renewable resources like petroleum products and they did their own energy provision within their state, they would save $700 million a year and 40-some thousand jobs by having that energy provision in their jurisdiction.
We know that we should control our own source of energy. We also know clearly that the price of gas and oil has gone up. The price is well over $100 again -- It dipped a bit -- and all estimates are that we’re not going to go back to the days of maybe not even double-digit oil anymore. So all these factors make this project more and more attractive, in my mind, in terms of… And that doesn’t even touch on the environmental considerations of greenhouse gases and our own carbon footprint, but managing and controlling our own source of energy. We just have to rethink the best way forward to realize those opportunities. Thank you.
Thank you, Minister Miltenberger. Mr. Ramsay.
Thank you, Mr. Chairman. I’d agree with everything the Minister has just stated about reasons why we should look at hydro expansion in the Northwest Territories. That’s not debatable. What’s debatable in all of this is the government’s involvement, again, with another partner who had no equity, who the government, in fact, had to pay to be our partner. I mean, what kind of partner is a partner that you actually have to pay to show up?
The government got lambasted over the Auditor General’s report on the Deh Cho Bridge. We have got to, at the end of the day, learn some lessons about partnerships, and how we get into partnerships, and what risk we are going to put taxpayers’ dollars at here in the Northwest Territories. This is another example of the government going out and flaunting that responsibility to look after the public purse, because how is the $4.2 million going to come back to the Government of the Northwest Territories?
One point seven five million is what we paid to the partner to be our partner. Again, I’m having trouble understanding why we would have a partner that we’d have to actually pay. Maybe I’ll start with that question to the Minister. Thank you.
Thank you, Mr. Ramsay. Minister Miltenberger.
Thank you, Mr. Chairman. All of the $4.2 million or all of the $17 million, should this project go ahead and start generating revenue, will be reimbursed to the Government of the Northwest Territories. We just had a fairly intense debate here about devolution and relationship with Aboriginal governments and the need to engage with our Aboriginal partners. This is an example of what’s possible. There’s more to equity, in my mind, for ourselves as politicians, than having straight cash. When we’re dealing with the major landowners or what will be major landowners in the area, there’s a benefit to having support. They bring all that to the table, and this is a project that will deal with some of the broader issues that were referenced by my colleague from Tu Nedhe, for example, about the economy and being able to have strong, independent communities and regions. If this goes ahead and we have a successful partnership, it should be a rising tide that raises all boats, not just some. I appreciate the Member’s concern.
We also do have the P3 policy, which will be coming to committee so they can take a look at what the result of all the work that will be, as well, as we go forward, help define future involvement. Thank you.
I thank the Minister for that. I think that’s clearly what Members want to see, is a policy clearly laid out that is going to identify what the rules of engagement are for the Government of the Northwest Territories when it comes to entering into partnerships.
I know the Minister stated money is not everything. That’s right, it isn’t everything, but at the end of the day, what is everything is responsibility and risk. You have to share the risk. In order to be in a partnership, you’ve got to share some of the risk.
With the Deh Cho Bridge project we took on all that risk and now we know how that’s played itself out. We got into a partnership there that we couldn’t get out of and we’re going to be paying the price for the next 35 years for that Deh Cho Bridge project, and in this instance we paid all along. Every time you turned around in the life of the last government, I can remember it was like clockwork, every six or seven months the former Premier would come forward and ask us to approve another loan guarantee for the Deh Cho Bridge Corporation. We’ve also approved loan guarantees in the past for the Taltson expansion.
Again, I think the bottom line for me is somebody, somewhere, has got to protect the public purse from exposure to risk, and we haven’t done that. The Auditor General of Canada has clearly indicated that in her report on the Deh Cho Bridge, and if the Auditor General of Canada came and had a look at our involvement in the Taltson expansion, I’m sure that they would come to the same conclusion that the Government of the Northwest Territories enters into these partnerships and assumes all the risk, and the risk is on the taxpayers here in the Northwest Territories, not on anybody else.
Again, my frustration is with our inability to manage the public purse in a fashion that would benefit a government. We just do not do that. We throw that around. Then when things go sideways or the project gets derailed, who pays the price? It’s the taxpayers in the Northwest Territories. Again, I think somebody has got to be looking out for the residents here in the Northwest Territories, all the residents, and protecting that public purse wherever possible. Thank you.
Once again, I appreciate the Member’s comments and ongoing concern about the public purse and protecting the taxpayer, and that’s the final analysis of the job of this Assembly, of this government and as myself, as the current Finance Minister. Overall, when you factor in all the things we’ve dealt with and the size of the budget and all the issues we’ve dealt with, I think collectively we’ve managed our way through some very difficult times, things that maybe in hindsight we would not do the same way going forward. We’ve adjusted some of our policies to reflect that. But I share the Member’s concern that we have to be fiscally prudent, but not to the point where we don’t want to do anything, but we have to make sure always remembering that these are public dollars. Thank you.
I thank the Minister again for that. In closing, I think we all share that feeling that we’ve got to do things right. We have done a number of things right in the past three and a half years but there are some things, yes, if we could go back in time would we do them again? Not a chance. However, we do have to move forward and I think the key to all of this is the P3 policy and, like I said, what the rules of engagement are going to be as we move forward.
My apologies if I missed this, but has anybody asked the Minister when exactly that policy, I know it’s in draft form now, when are we going to get a policy in place that we can actually work with? Thank you.
In fact, the policy went through Cabinet and FMB today for approval. So it will be on its way to committee for them to look at and see what the fruits of all our collective labours were. Thank you.
Thank you, Minister Miltenberger. We’re on page 7, budget, treasury and debt management, not previously authorized, $4.2 million.
Agreed.
Agreed. Total department, not previously authorized, $4.194 million.
Agreed.
Moving along to page 8, Municipal and Community Affairs, School of Community Government, not previously authorized, negative $1,000.
Agreed.
Agreed. Sport, recreation and youth regional operations, not previously authorized, $1,000.