Debates of October 20, 2004 (day 24)

So, Mr. Chairman, the answer is we have essentially no recourse. There is no one we can go back to accept that some of us may be involved in the hit that everybody is going to experience or has already experienced because of higher fuel costs, but the volumes and the slippage on this one are really quite remarkable.

Mr. Chairman, I guess we will move on, but I would like to leave a comment and I relate this to a discussion I had with a Yellowknife architect awhile ago. When it comes to putting up a building, there is a bit of a shift or quite a large shift now in terms of the planning and the budgeting for these not to look at what it costs to build and open something, but what it costs to keep that building going over its projected lifespan. This might be something that if it’s not already on the radar screen for our buildings and planners, perhaps we should be looking at it.

Perhaps we have an upside down way of looking at this. Sometimes, Mr. Chairman, in our desire to get something built, we want to get it build as quickly and cheaply as possible. Of course, it always looks good to be able to cut a ribbon, but sometimes we don’t incorporate what is the eventual and overall hit to the taxpayer, which, over the lifespan of a building will be many, many times more than it cost to put up. So I think we oftentimes incur a false economy when we put up perhaps a less expensive building for the sake of getting it up, but we are not very cognizant of what it costs over subsequent years. We always think we will leave that up to somebody else to figure out. I wonder if this is an illustration of not using that philosophy. We are not thinking how much it’s really going to cost us to keep this place going for the next 30 or 50 years, whatever its life design is. Then we would have a more representative, accurate and responsible way of assessing the cost of putting up these buildings. Thank you, Mr. Chairman.

Thank you, Mr. Braden. Mr. Roland.

Thank you, Mr. Chairman. I guess I would say I agree with the member’s comments on lifecycle costs. It’s something that we have started using as a government and will continue to use. I guess as a bit of a background, the project started in its designing and planning back in 1998-99 and initially started out as a P3 project and went to a standard government project. One of the things that could be happening here is back in 1998-99, rates for power and everything else were significantly different. I will just have to state that, as I noted earlier, that we have taken note and we will be looking at dealing with the department in getting more details on the specifics. Thank you.

Agreed.

Thank you, Mr. Roland. Ms. Lee.

Thank you, Mr. Chairman. I am not still clear as to what went wrong with this budgeting process. Was there something discovered in the two years that this has been in operation that something was not built in physically, or was it just a simple case of underestimating the cost of fuel, power and maintenance?

Thank you, Mr. Lee. Mr. Roland.

Thank you, Mr. Chairman. I guess ultimately we’ve come down to the fact that there was an underestimating of the consumption of power and the gas, as well as maintenance required for the facility. The facility did double in size from just over 4,000 square metres to over 8,000 square metres. The new code requirements for air exchange units and air cooling systems add more to the cost of the ongoing daily operation of that.

For example, from 2002-03 to 2003-04 the heating costs increased by over 80 percent. Power consumption has more than doubled from just over one million kilowatts to just over 2.5 million kilowatts. I guess the PY for keeping the place properly maintained, the hours increased significantly, so they had to add another position. Thank you.

Thank you, Mr. Roland. Ms. Lee.

Thank you, Mr. Chairman. If you look at the budget for 2003-04, the budget for the fuel was $320,000, but the actual expenditure was $620,000. That’s $300,000 more. It’s almost 100 percent more than what was budgeted. For power, the budget was $440,000, but the actual rate was $1.018 million. That’s $578,000 more. That’s more than 100 percent of what was originally budgeted. I think maintenance costs are maybe two-thirds of a PY more and one could see that as something that could happen, but for heating fuel and power, we are talking about 100 percent more than was originally thought. This is not an old building. This is a new building. It was architecturally designed, we spent millions of dollars designing it and building it and I don’t think the fuel cost went up by 100 percent in a year. I still don’t understand how that could happen. So in each year now, we have a $919,000 deficit for 2003-04, we have a $925,000 deficit for 2004-05 and we don’t know what’s going to come next year. I think this House has to get a better explanation, given that this is a new building. It’s a state-of-the-art building. If they could not see how much fuel and power the building could consume, you have to begin to wonder what else do they not know about that building that’s going to come back to bite us.

I need a better explanation as to why it was 100 percent or more than what was originally planned. I also need to know if the Minister is now budgeting $1 million more every year for power and utilities.

Thank you, Ms. Lee. Mr. Roland.

Thank you, Mr. Chairman. All I can say again is we will be working to improve how our estimates are formed around the consumption. The growth, as stated by Ms. Lee, has been around the consumption of heating fuel, as well as power. Yes, in fact, almost $1 million has been added to the budget for Health and Social Services to provide for the Inuvik Regional Health and Social Services Board. Thank you.

Thank you, Mr. Roland. Next I have Mr. Ramsay.

Thank you, Mr. Chairman. I guess I will start off with asking the question why a new hospital that was twice the size of the old hospital was using a budget based on 2002-03 actuals of the old hospital. Thank you, Mr. Chairman.

Thank you, Mr. Ramsay. Mr. Roland.

Thank you, Mr. Chairman. Mr. Chairman, the numbers that were provided were using just actual costs in comparison to where the costs are now. So it wasn’t budgeted based on the old hospital, just comparing the 2002-03 year with the actuals for 2003-04 to show the increases that occurred. Thank you.

Thank you, Mr. Roland. Mr. Ramsay.

Thanks, Mr. Chairman. Then where would we find the actual budgeted amounts for that hospital? Thank you, Mr. Chairman.

Thank you, Mr. Ramsay. Mr. Roland.

I’m sorry, Mr. Chairman; if I can have the member repeat his question.

Thank you, Mr. Roland. Mr. Ramsay.

Thank you, Mr. Chairman. I’m just wondering where members might find the actual budget for that new hospital in terms of maintenance, heating fuel and power consumption.

Thank you, Mr. Ramsay. Mr. Roland.

Thank you, Mr. Chairman. I’d have to get more of a breakdown as to when the first full year of operation was in. They’ve just moved into it, so I believe the 2002-03 year was a partial year, 2003-04 was a full year. So it’s hard to do the comparison, but I can get that information for members. Thank you.

Thank you, Mr. Roland. Mr. Ramsay.

Thank you, Mr. Chairman. Thanks, Mr. Minister, for that. Being a new Member, it would be interesting to see what the real numbers are and have those two to compare these to. Just as a comment, Mr. Chairman, I would hope that the same budgeting process isn’t being used for the North Slave Correctional Centre that just was moved into in March and we won’t be faced with a supp sometime next year saying that the heating and the power and the maintenance costs on that are double of what was budgeted. Thank you, Mr. Chairman.

Thank you, Mr. Ramsay. Mr. Roland.

Thank you, Mr. Chairman. I hope I’m not coming forward in the next year with cost overruns in that area for that facility. Thank you.

Thank you, Mr. Roland. Ms. Lee. Oh, I’m sorry; Mr. Hawkins.

Not Miss Lee. I hope that’s not misleading.

---Laughter

Thank you, Mr. Chairman. Mr. Chairman, I’m just going to provide a comment. Recognizing how billings changed in the sense of elements they get more sophisticated. The fact that you have to move so much air, the fact that we’re basically talking about hard costs, fuel and electricity, I mean, things change. So I don’t know what more to say other than the fact that it’s a bit of a surprise. Maybe we should be asking the Minister to provide us the accounting mechanism used, rather than complaining about the fact that the number is wrong. So maybe we should just get clarity on that. As far as accepting the number, I don’t really think we have much of a choice other than accepting it. It’s just a reality. Fuel costs more, power costs more and the fact new buildings have so much stricter codes, which require more energy and more whatnot in order to operate, in other words it’s part of the reality of a new building compared to an old building. I mean, heating…(inaudible)…they are a phenomenon of the future and it’s a reality of the present, so where we have various circulation and whatnot. I mean, some of these buildings didn’t require that stuff. I think it’s just a reality that it’s going to cost more. So I guess the only question I’d have for the Minister is would he provide us something that demonstrates how they came upon this accounting mechanism to demonstrate whatever said number was the heating and supply costs and why we sort of fell short? What was the significant factor change? If it was just the factor that the power bill increased or the oil increased, then that’s simple enough. Thank you.

Thank you, Mr. Hawkins. Mr. Roland.

Thank you, Mr. Chairman. I will get the department to provide that information. We will look back at the estimates that were made and how they made them and provide that to members. Thank you.

Thank you, Mr. Roland. Mr. Hawkins. Thank you. Mr. Zoe.

Mr. Chairman, I guess I have to jump in here now. It is my understanding, Mr. Chairman, I guess the only way the Inuvik authority, in order for them to get extraordinary funding, is to put it under this category as forced growth. If I understand correctly, all these hospital authorities that we have like Stanton, Inuvik, Fort Smith and Hay River I guess aren’t they all block funded, and if they run into a deficit then they have to eat their own deficit. It appears to me that in order for Inuvik to get extraordinary funding and the government put it under this category as forced growth so that they can assist them in their heating and power consumption, am I not correct? Thank you.

Thank you, Mr. Zoe. Mr. Roland.

Thank you, Mr. Chairman. Mr. Chairman, the boards are funded through a formula and an amount given to them on an annual basis and they do have to live within their budget. When they find themselves short, they can go to the department and try and substantiate why in fact they do need more funding, and in this case they have provided the documentation about the growth. The growth is in the actual area that’s being presented in utility costs. I don’t know if the Minister of Health might have more information on that, but that’s what we’ve been provided and going on. Thank you.

Thank you, Mr. Roland. Mr. Zoe.

It will be interesting to see, because if it was, for instance, the Stanton Territorial Hospital getting into a deficit and their formula financing, even though they go to the department they would have a hard time to get extraordinary funding. A few years ago they had to shut down a whole wing just because they didn’t have the money in their budget.

That’s right.

Now with a brand-new addition or a brand-new facility, we’re giving them extraordinary funding for heating and fuel costs for the Inuvik Hospital. I don’t think it’s fair. It doesn’t seem to appear that it’s fair. There is no fairness there because a few years ago this is exactly what happened here in Yellowknife. Thank you.

Good question.

Thank you, Mr. Zoe. Mr. Roland.

Thank you, Mr. Chairman. We have a lot of examples of where, in fact, we have used funds, or the health boards have come back for more funds and we’ve granted that based on substantiations they’d make. But for more details, if we can go to the Minister of Health and Social Services and he might be able to provide more information than I have. Thank you.

Thank you, Mr. Roland. Would the Minister of Health and Social Services like to expand further? Thank you.

Mr. Chairman, the issue of this funding, first let me just say this, that we have just started to see the forced growth pressures of fuel costs and we haven’t even really budgeted for it in any fixed number. But with the price of oil at $55 a barrel, before winter’s end our costs are going to be going up significantly as a government. In the case of the Inuvik facility, it was a new facility, there were estimates in terms of what it was going to cost and we had to prove what the costs were going to be to get funding. Normally funding is not given out on projections. Normally it’s based on what your costs are, especially this forced growth and in this case Inuvik carried the cost and it ran a deficit, but until we could demonstrate what the actual costs are for this new facility and as we heard the discussion for any number of reasons the costs were significantly higher. We’ve dealt with other authorities with deficits as well, where we’ve come back where there’s been a legitimate forced growth that we could demonstrate and prove to FMBS and we’ve got funding. We expect it to live within their budget costs for normal operations, but when there are circumstances that either increase patient use, or things like meningitis outbreaks, TB outbreaks or this kind of demonstrated hard costs, then we can make the case and quantify it. It doesn’t negate the issue of how did we manage to be so far off on the estimates. But that is the process that we’ve followed here. It’s not a special deal for Inuvik, it’s dealing with a legitimate, proven, demonstrated cost. How that cost resulted is clearly a subject of debate, but we have the numbers to show from power and utilities that these costs are the real costs. Thank you.

Thank you, Mr. Miltenberger. Mr. Roland, would you like to add anything else?

Thank you, Mr. Chairman. As the Minister stated, the way the process would work is, number one, the health board would have to go to the department for requests for any increases and substantiate it to them, and then the department would come to FMB for a request in any increase in funding and then substantiate to us. It does go through a couple of levels. But as we’ve heard here today, the concern about how the initial estimates came up, and I’ve committed to providing more detail as to what those estimates were and the basis of how they came up with those. So we will get that and provide that to members. Thank you.

Thank you, Mr. Roland. Mr. Zoe.

Mr. Chairman, I understand how the process works, but as my other colleagues have indicated, it’s the Department of Health that deals with the formula funding for the hospital for Inuvik.

Now, surely your department must have got advice from whoever is building that new section, what the costs are going to be for O and M for a year. I’m not so sure how the formula funding pertaining to power and to heating is calculated. I don’t know if it’s square footage times so much fuel per square foot equals a figure and this is what you get for a year, or…I know normally what they do is they take the square footage and they multiply and they get a number. Obviously, the department has miscalculated and I’m surprised the board itself has not picked up the shortfall that has been calculated for them, saying this is your budget for this year and now after a full year of operation, they have to come back to you because the department, with their calculation and their formula financing, wasn’t up to par.

Now you have to come back to us, you went back to FMBS and asked for that $1.4 million, or now you’re coming here to ask us to approve $1.8 million. There is something wrong. As my colleagues have said, the people that are involved in doing these calculations…I mean, something has to happen. Something went wrong in the system where a figure of this magnitude should not have occurred. The advice that architects or whoever designed this building, in calculating O and M for a full year should have been provided to your department more accurately. It seems to me that this scenario didn’t happen. That’s why we are in this predicament right now.

Right now we have no choice but to approve it, because it’s based on actuals from last year and I’m going to support it. But the point I’m trying to make is that the officials at your department, not your department, Mr. Minister of Finance, but the Department of Health and Social Services that does all the calculation and stuff have to be made aware and put on notice that we are not going to stand for this type of miscalculation in an amount of this magnitude again. Thank you.

Thank you, Mr. Zoe. Mr. Roland.