Thank you, Mr. Ramsay. Mr. Bromley.
Yep, 18th Assembly. No more questions.
Thank you, Mr. Bromley. Committee, we’re on Industry, Tourism and Investment, operations expenditures, minerals and petroleum resources, not previously authorized, $400,000.
Agreed.
Total department, not previously authorized, $400,000.
Agreed.
Committee, we’re on Environment and Natural Resources, operations expenditures, forest management, special warrants, $47.411 million. Mr. Bromley.
Thank you, Mr. Chair. This is the second of several very costly events. We’ve still to deal with the third one, the Mackenzie River water levels and what that’s costing us. But this is the third event that is completely consistent and in line with the impacts and consequences of climate change. In the space of a few minutes here we’ve been discussing now $67,411 million. Sorry, it’s a little bit more than that. Twenty million, it’s actually more than $20 million. These are very serious numbers that we’ll be looking at today and in the future.
When we talk about a reduced cushion of $92 million in our borrowing limit and we are dealing with unexpected expenditures of 40, 20, 50 and 20, that’s something like $160 million or something like that and we are just over halfway through the year. We know we could be up against it here.
The perspective is, I think, times are changing. When we look at our fiscal strategy over the seven years that I have been a politician, having to bump up and continually request an increase in our borrowing limit and so on, this is of some concern. I don’t see us yet reacting with the insights that this is in fact a changed world and so that’s of even greater concern.
One question I have on this, and this is a reality. We needed to spend these monies so I’m not arguing with that, and I do appreciate all the work that our fighters did on the forest fire front. I guess I have two questions. Is this the end of it for our fire budget this year or can we expect more expenditures to be discussed? Secondly, no operation this size is done without any hitches, and I believe there were some hitches that need to be reviewed and discussed so lessons can be learned. When can we expect that review to be done in a thorough way and reported to the House? Mahsi.
Thank you, Mr. Bromley. Mr. Miltenberger.
Thank you, Mr. Chairman. The final accounting is not done. We do have now a final number and we’ve provided the preliminary base numbers to committee, but there will be a requirement to come back for an additional $3.9 million in the winter session.
The annual comprehensive review and debriefing of the fire season that we’ve just finished is being done. We anticipate early in the new year being able to share that in detail with committee and the Legislature. Thank you.
Thank you, Mr. Miltenberger. Committee, we’re on page 8, Environment and Natural Resources, operations expenditures, forest management, special warrants, $47.411 million. Mr. Yakeleya.
Mr. Chair, the fire season certainly was terrible down here on the south end of the Territories. Knowing the conditions, knowing that we might have had a bad fire season, knowing the conditions and the dryness, is there any other area that has similar conditions down here? People are saying that it’s so dry down in the south part of the Northwest Territories, it’s prime condition for a fire. If the fire does go, it is so dry it will take off really fast and it’s something that we were expecting. Given this and in follow-up to Mr. Bromley’s questions on the review and looking at all of the good things and all the worst of the fire season and given that we have no water – there are many factors – were these conditions for the perfect storm of fire season?
We had it here. We know the amount of money that we spent, and I’m very happy to hear that the Minister is going to involve the committee at some time through the review of asking questions or presenting the review to us on the fire in the south part of the Territories. Was this the season of all seasons of a perfect storm of fires that it was, as they say, waiting to be lit? We’re experiencing low water in the Mackenzie River this fall. There are a number of factors that come into play in this fire season. Thank you.
Thank you, Mr. Yakeleya. Minister Miltenberger.
Thank you, Mr. Chairman. The Member’s question is consistent. What he’s asking is consistent with the concerns being raised by Mr. Bromley about extreme fire events, not just fire events but extreme weather events, changing rain patterns. If you look, it’s hard not to see it wherever you look in the news. If it’s here, if it’s California, if it’s down in Brazil, it’s down in Africa, all over the world, if it’s not flooding there’s enormous long-term drought and unpredictability. To the issue of…(inaudible)…where they used to be able to predict whether within a fairly set range is gone for the most part.
This is the worst fire season we’ve ever had. We hope it remains on the record as the worst fire season we’ve ever known and that next season and those after will hopefully moderate, but we know now how extreme it can be. We have a bar that’s set and we now know what it could mean if we have a summer again like we just did. We’ll be having the discussions about how do we cope, the same as those areas are coping where there’s enormous fires or tidal surges that cost hundreds of billions of dollars in damage around the world and are tied again back to the weather and the climate change. Thank you.
Thank you, Mr. Miltenberger. Mr. Yakeleya.
No, thank you, Mr. Chair. Thank you.
Committee, we’re on forest management, special warrants, $47.411 million. Agreed?
Agreed.
Wildlife, not previously authorized, negative $43,000.
Agreed.
Water resources, not previously authorized, negative $240,000.
Agreed.
Total department, special warrants, $47.411 million.
Agreed.
Total department, not previously authorized, negative $283,000.
Agreed.
Committee, we’ll move on to Department of Lands, operations expenditures, planning and coordination, not previously authorized, $23,000.
Agreed.
Total department, not previously authorized, $23,000.
Agreed.
Does committee agree that we’ve concluded consideration of Tabled Document 155-17(5), Supplementary Estimates (Operations Expenditures), No. 2, 2014-2015?
Agreed.
Ms. Bisaro.
Thank you, Mr. Chair. I move that consideration of Tabled Document 155-17(5), Supplementary Estimates (Operations Expenditures), No. 2, 2014-2015, be now concluded and that Tabled Document 155-17(5) be reported and recommended as ready for further consideration in formal session through the form of an appropriation bill. Thank you, Mr. Chair.
Thank you, Ms. Bisaro. Committee, the motion is on the floor. The motion is being distributed. The motion is in order and is not debatable. Motion is carried.
---Carried
Tabled Document 155-17(5) will be reported and recommended as ready for consideration in formal session through the form of an appropriation bill. Thank you, committee.
Committee, we will move on to the next tabled document, which is Tabled Document 154-17(5), Supplementary Estimates (Infrastructure Expenditures), No. 4, 2014-2015. Does the Minister have opening comments?
Thank you, Mr. Chair. I am here to present Supplementary Estimates (Infrastructure Expenditures), No. 4, 2014-2015. This document provides for an increase of $48.928 million to the capital budget.
The most significant items in this supplementary estimates are:
$40 million for the Department of Transportation to respond to revised cash flows required to accommodate the accelerated construction schedule of the Inuvik to Tuktoyaktuk Highway Project;
$2.9 million for the Department of Environment and Natural Resources, $2.6 million for the Department of Industry, Tourism and Investment, and $1.4 million for the Department of Public Works and Services to recognize the tangible capital assets that were transferred to the GNWT upon devolution implementation;
$700,000 for the Department of Transportation to replace the existing lighting system at the Norman Wells Airport; and
$330,000 for renovation upgrades at Chief Julius, Mangilaluk and Colville Lake schools to accommodate Junior Kindergarten.
I am prepared to review the details of the supplementary estimates document. Thank you.
Thank you, Minister. Does the Minister have witnesses to bring into the House? Does committee agree?
Agreed.
Sergeant-at-Arms, please escort the witnesses into the Chamber.
Minister Miltenberger, could you introduce your witnesses, please.
Thank you, Mr. Chairman. We have at the witness table Mr. Russ Neudorf, deputy minister of Transportation; Michael Aumond, deputy minister of Finance; Olin Lovely, the director of Management Board Secretariat.
Thank you, Minister Miltenberger. Committee, we’ll begin with opening comments. First on the list I have Mr. Dolynny.
Thank you, Mr. Chair. I’d again like to welcome the Minister and department here today regarding the supplementary appropriations of infrastructure before us. Really there is one line entry that I’d like to do some general comments on, which probably is the bulk of the appropriation for us for $40 million, which is the adjustment in cash flow for the Inuvik-Tuk highway.
As mentioned in the Minister’s opening comments, they’re to accommodate an accelerated construction schedule. This has also been discussed a couple times here in this sitting, so I don’t want to get into the details. We’ve heard some of them already before on the floor of the House, but I do want to say, first and foremost, that I supported this project. I believe this is an important piece of infrastructure for the Northwest Territories. I believe it’s a vital link between north and south and I just want to make that clear. I believe what we’re embarking on is something good for our overall transportation system and to the people of the Beau-Del.
So I want to really emphasize that my concern here today is not really about the project management that might come up in discussions with other Members here, I believe that’s not the area of concern. The area of concern that I think Members have, as I have discussed many times here, is our financial position as a government and the fact that we have gotten very close to our debt wall or wall of worry, I like to remind folks. The fact is that we are now accelerating this project at lightning speed and things are moving pretty fast again and we’ve got some pressing values, as the Minister likes to remind us.
I’m concerned, like many, that by pushing this project forward in the speed that we’re doing, the cash flow to this government is going to be compromised. There’s going to be a hampering, if you will, that other projects could be affected as a result of this accelerated process. Let me remind people who are following in on this that we’re not just talking about a $40 million accelerated appropriation in this appropriation, we’re also talking that has yet to be discussed, but it is tabled, that we have another $20 million on the Inuvik-Tuk highway, as well, in the capital estimates. So really, in essence what we’re saying is we’re accelerating this project by virtue of over $60 million in this fiscal year, which means that when you’ve got tight cash flow the question is, can we afford it, and I think that’s an important question.
It’s a question that I believe that we need to hear the soothing words of Cabinet, we need to hear the soothing words of the Finance Minister or a designate, can we afford this accelerated cash flow making sure nothing under any queue or the order of government in terms of where we’re spending our money next is, or will be, affected. I think it’s an important question. This ship has sailed. I don’t want to put any kibosh… I don’t want to put any concern that I’m going to vote no to this. I will be supporting this appropriation, but I need to understand the money. I need to understand the cash flow because I think that’s the element that is missing here. I will have a question in a second here with respect to the negotiated contract itself in terms of how we formulate it because of the concern of this cash flow.
With that, I think it’s important, I’ll just maybe talk about that now, is that it appears by design, the way we have this contract for the construction of this road, that the contractor has no restrictions in terms of accelerating the program. We have no restrictions on the contract to put any failsafes on this accelerated speed and we have no restrictions on cash flow or time. So what worries me, and I’m not sure if this is precedent, and if it was a smaller project I probably wouldn’t be as concerned because of the smaller value of cash, but we are talking literally by virtue of one of the largest projects we have on our books. We’re talking an appropriation which is quite large here and I’m concerned that the way we designed our contract, a contractor could accelerate their project and the taxpayer is literally obliged to follow in using monies that may not have necessarily been earmarked for that fiscal year, which could put a hampering on cash flow.
So again, just to summarize, I’m not concerned about the project management issue here. If the contractor is ambitious and has proven the ability to build this highway quicker than agreed upon, that’s good news. I’m supportive of that. I mean, I’m assuming we’ve got people on the ground, we’ve got the people in place as project managers to make sure that that will be successful. The question I have here is the affordability of an accelerated cash program and the debt wall that we’ve just heard earlier, the fact that we are inching to that $275 million benchmark in our short-term borrowing. The fact that we’ve neared and will be surpassing that $100 million cushion in our long-term borrowing, this definitely will have an impact on our cash management and our debt borrowing capacity for the remainder of the life of the 17th Assembly.
I think the Minister and the Finance department have heard me speak about this before. This is nothing new to their ears. Maybe if we can get clarification on impacts of this accelerated cash flow on the borrowing and whether or not it will affect other projects.
The third element in this comment is, you know, is this the standard process for doing negotiated contracts where the contractor nor us, as the project manager, have any controls or restrictions on either cash flow or time constraints for the job completion?
So if I can get some clarification in those three areas, it would definitely shed a lot of light and even make my support even that much more enthusiastic. But again, I will support the appropriation, but I definitely need to hear that clarity moving forward. Thank you.
Thank you, Mr. Dolynny. Minister Miltenberger.
Thank you, Mr. Chairman. We have built this project into our fiscal framework. We’ve built the $40 million into the current fiscal framework and we can manage our way through this. There is a four-year contract. The first three years are where the bulk of the work is done. Embankment construction is the key piece. The first year got off to a slower start than was anticipated just because of the logistics of bringing in many, many millions of dollars of brand new equipment and getting the manpower up and running, the systems working and everybody doing business. It’s accelerated only insofar as it is trying to catch up for the work that he didn’t get done the last building season because of the slow start-up. So the intent is still to comply with the schedules that are in the contract, which are the checks and balances that Mr. Dolynny was worried may not exist.
Three years and the concern is with that three-year schedule to get most of the embankment work done. The need is to make sure that the resources are there to be drawn down to allow that work to happen, and that if in fact the resources weren’t there and the contractor wasn’t able to do the work because there wasn’t resources to keep him at the work, that at the end of the day there could be significant costs, $30 million to $40 million of costs because of that contractor having to down tools and stop the project.
The cash flow is there. I will ask the deputy to speak to some of the numbers. I would point out that the numbers we were talking about in the last Assembly about where our short-term borrowing is at $260 million at the end of this fiscal year includes all the charges tied to this, but I will ask the deputy to provide a bit more detail. Thank you.
Thank you, Mr. Miltenberger. Deputy Minister Aumond.
Thank you, Mr. Chair. As the Minister stated and when we were talking about the O and M supp, he said that the fiscal framework and our numbers that we have around borrowing contemplated all these issues, and I mentioned cash in and cash out.
With respect to the Inuvik-Tuk highway specifically, if you look at the $40 million that’s proposed to be advanced along with the about $24 million in expenditures that they are planning on taking with the remainder of the fiscal year with the money that they already have in the budget, that money would be offset by just over $71 million in revenue from the Government of Canada for its share of the project. In total, when you look at what is contemplated between the O and M supp and the capital supp in addition to the other costs that I talked about, they come forward in the February/March budget session in terms of a supplementary appropriation, for a net impact of about $45 million in additional debt over that period of time from October 14th, when we are at $225 million, and at the end of March 31st. Thank you.
Thank you, Deputy Minister. Next on my list I have Mr. Bromley.
Thank you, Mr. Chair. I want to focus in, as well, on the rather extraordinary request for an additional $40 million this fiscal year, tens of millions of dollars the following fiscal year to be brought forward in our capital budget. We have already heard about unexpected expenditures of $50 million and $20 million. That’s $70 million. Possibly it’s more than that in our operating supp here today. Now we are pushing this $210 million, $230 million in unexpected expenditures at this moment in time and with the schedule proposed.
I ask myself two questions. The first is: Is this a prudent decision to make, given what we know about unexpected expenditures already this year and the new world of climate change with the consequences that we are realizing? Number two, does this request need to be this large, or are there options later in the year to adjust the budget based on actual performances up to that time starting with an examination of is this prudent? I have serious cash flow concerns based on the information provided by the Minister. We have already heard, just a few minutes ago, that our $100 million cushion will be disappearing this fiscal year. In fact, projections are very possible that that cushion could be down to below $10 million for the 18th Assembly and especially if we have further unexpected expenditures or continue on this course.
We have already heard that the unexpected expenditures will reduce our borrowing limit, as I mentioned, $70 million so far in the operational supp, and we are only seven months into the year, so who knows what to expect, and again, we know that Mackenzie River difficulties with water level will have unexpected costs with that.
Our supplementary reserve, which is intended for these sorts of things, will be overspent by hundreds of percent. Again, this reflects on how well we are managing our budgets: hundreds of percent beyond what we have designated as our supplementary reserve. What has been the performance to date? Is this an extremely high-performance company that’s doing this work? The goal was 30 kilometres last winter. Only nine kilometres were completed so that we could not even recover the first federal loonie that we were promised to collect for every 10 kilometres that we completed. Not a sterling performance, albeit there’s all kinds of reservations on that. This was a start-up project and so on. There was a lot of training to be done and so on.
What else would I consider on whether this was prudent or not? We’ve learned that after only one season of freshet, or spring melt, the Department of Fisheries and Oceans and others have identified six serious environmental concerns that had to be remedied through redesign and mitigation work. That’s one season of melt in this extremely tough arctic environment where roads have rarely, if ever, been built like this before.
Finally, there is still no complete design for the critical 10 kilometres and the middle of this road or towards the northern end where the road, in fact, crosses the remnant Wisconsin ice glacier of long ago which, we’ve realized through research in the recent year or two, lies just beneath the surface and is presenting incredible challenges to our engineers.
Also, many subcontractors for this huge project exist and they’ve made commitments that are not consistent with an expedited schedule here. That is something that perhaps through one way or another could be dealt with. I don’t know, but I would think we’d want to. We’ve tried to push hard to include northern content, so I would think we’d want to try and deal with that.
Finally, there were 325 employees during the first year. The proposal is for 600 employees this coming winter. Now, talk about a training challenge. This project was justified, really, on the basis of economic activity for a depressed region of the NWT. I suspect those 600 employees, a lot of them will be coming from the south. How well does that serve the reasons for this project?
In conclusion, I would say it is imprudent at this time to be letting out such an advanced schedule of expenditures.
My second question, and that’s a clear conclusion based on lots of evidence and reasoning, the second one, does it need to be this large? It certainly doesn’t. This is a premature request. I’ve already mentioned we’re not in the best fiscal situation to be doing these sorts of things. I’ve already mentioned the record of performance to date, but there is a window of opportunity for all of that to change or go even more severely in that direction. To me, it would seem prudent to wait until we next gather in early February, 4th of February, at which time we could approve additional expenditures for this project.
The season starts in November and goes through April. That’s what? Seven or eight months – November, December, January, February, March, April – so there’s plenty of time. Surely they would have the dollars to get them started and well into the winter. If they need another $10 million or $15 million, that is what the request should be to get them to that point in time. This, to me, would be a prudent approach. Then we could easily deal with a request based on actual evidence. What a concept.
Does it need to be this large? No, it doesn’t. Is it prudent? No, it’s not. I know that the Minister is aware that the unexpected expenditures could go up dramatically in the next several months as well. I’ll leave it at that, Mr. Chair. Thank you.
Thank you, Mr. Bromley. Minister Miltenberger.
