Agreed.
We will commence with that after a brief break.
---SHORT RECESS
I would like to call Committee of the Whole back to order. The committee has indicated before the break that they would first like to deal with Bill 43, An Act to Amend the Borrowing Authorization Act. Minister Miltenberger.
Thank you, Madam Chair. The purpose of Bill 43, An Act to Amend the Borrowing Authorization Act, is to increase the short-term borrowing limit from $275 million to $300 million.
The amendment is being proposed in order to provide the short-term borrowing authority needed to make a $25 million corporate income repayment on March 31, 2015. The current limit will be exceeded by approximately $12 million once this payment is made. On April 1, 2015, the GNWT will once again be within the current limit making this a short-term cash requirement, however a necessary one. That concludes my opening remarks. Thank you, Madam Chair.
Thank you, Minister Miltenberger. I’ll now ask the chairman of the Standing Committee on Government Operations if he would please provide the response to the bill from the standing committee. Mr. Nadli.
Thank you, Madam Chair. The Standing Committee on Government Operations has been considering Bill 43, An Act to Amend the Borrowing Authorization Act.
Bill 43 was given second reading and referred to the standing committee on February 9, 2015. Bill 43 is a little bill with a potentially big impact. For this reason, the standing committee wanted to ensure the due diligence was exercised during the review. The standing committee provided notice to stakeholders of its intention to hold a public hearing on the bill which took place on Friday, February 20, 2015. While the standing committee did not receive any public input on the bill, a number of questions were asked of the Minister regarding the need for an increase to the GNWT’s short-term borrowing limit.
A motion was carried to report to the Assembly that Bill 43 is ready for consideration by the Committee of the Whole. While this concludes the committee’s opening comments on Bill 43, individual Members may have additional questions or comments as we proceed.
Thank you, Mr. Nadli. At this time I will ask Minister Miltenberger if he would like to bring witnesses into the Chamber.
Yes, Madam Chair.
Thank you, Minister Miltenberger. Does committee agree?
Agreed.
Thank you. I’ll ask the Sergeant-at-Arms to please escort the witnesses to the table.
Minister Miltenberger, for the record of our proceedings today, could you please introduce your witnesses.
Thank you, Madam Chair. I have with me Mike Aumond, deputy minister of finance; and Jamie Koe, the director of the Management Board Secretariat.
Thank you, Minister Miltenberger. I’ll now turn to the committee and ask if anyone has any general comments regarding Bill 43. Mr. Bromley.
Thank you, Madam Chair. What’s the definition of short-term borrowing as opposed to long-term borrowing?
Thank you, Mr. Bromley. Minister Miltenberger.
Thank you, Madam Chair. The short-term borrowing is a borrowing that takes place over the course of one year. Long-term borrowing is borrowing that has a much longer time frame than that.
Thank you, Mr. Miltenberger. Mr. Bromley.
Thank you, Madam Chair. Is there a prevailing interest rate that applies to this or how does that work? Is it different than the long-term borrowing interest rates? What would be the cost these days, for example, of a $275 million, $300 million short-term debt? I assume it would change through the year, but if I can get a rough idea of the amount we’re spending to maintain this borrowing capacity.
Thank you, Mr. Bromley. Mr. Aumond.
Thank you, Madam Chair. We do have a cost or an interest on short-term borrowing and it’s based on what the prevailing Bank of Canada rate is at any particular given time as opposed to longer term borrowing debt, which for the GNWT for purposes now is ranging anywhere from, depending on what the type of the instrument being held, is in the neighbourhood of probably 3 or 4 percent. Short-term debt is a little bit lower than that. As the Minister said, it’s for those types of transactions, typically the debt is amortized a year or less than a year.
Thank you, Mr. Aumond. Mr. Bromley.
Thanks for that information. What sorts of things are eligible for short-term debt? I assume that this is not debt that is self-servicing. It’s debt that we intend to simply pay off with revenues on the 1st of April of each fiscal year. What sorts of things would go into this? What sorts of things would we borrow under this short-term borrowing category?
Thank you, Mr. Bromley. Minister Miltenberger.
Thank you, Madam Chair. Things like the firefighting, it could be infrastructure, it could be any requirements that come up during the course of a year that the government or the Assembly decides expenditures are required. I’ll ask the deputy if he wants to add any other further type of examples.
Thank you, Minister Miltenberger. Mr. Aumond.
Thank you, Madam Chair. Typically the government is in and out of short-term debt. Usually the longer we are into the fiscal year the more short-term debt we are into. As the Minister says, debt is primarily made up of operations and maintenance or programs and service debt, infrastructure. Most of infrastructure, as well, is financed through short-term debt, as well, other than those specific ones which we have financed over the longer term. For example, we know for long-term debt we have our Northwest Territories Power Corporation debt, some debt held by the NWT Housing Corporation and, as well, the Deh Cho Bridge are examples of long-term debt. Most of our infrastructure and, again, just the day-to-day dealings of government around the programs and service debt were financed through short-term debt.
Thank you, Mr. Aumond. Mr. Bromley.
Thank you, Madam Chair. I appreciate this opportunity to learn a little bit more about this. Would it be true to say that this is a body of a potential source of funds for when we start overspending from our regular budget, or are there things that are actually put to this short-term debt regardless of the fact that we already have the dollars in our budget for other things, if you see the difference there?
It could be both.
How do we decide, I guess, and just cut to the chase on the last part of that, how do Members know what we’re choosing to put into short-term debt? Where is the transparency there and how can the public become informed about that during the normal course of events?
Thank you, Mr. Bromley. Mr. Aumond.
Thank you, Madam Chair. As I said earlier, I’ll start off by saying we generally start off the fiscal year in a surplus position, and the issue we’re dealing with here with respect to the $25 million corporate income tax repayment we need to make to the Government of Canada for an overpayment we received three years ago, is really literally like a one hour problem. On April 1st we will get a tranche of money from the Government of Canada with respect to our Territorial Formula Financing Grant, and we’ll be in good stead, but throughout the year, particularly this year is a good example where we’ve had some expenditures that we have not anticipated for such as the forest fire season or the low water. Additional to that, we also, depending on the cash burn rate of the government on a program and service level, may incur some short-term borrowing. As long as the departments have an appropriation from the Assembly for those budgets they can spend that, but it’s not like we pick and choose what goes into short-term debt. Long-term debt is something that we actually make a considered decision upon and it is usually brought forward to the Legislature. But short-term debt is what is undertaken to, sort of, keep the business of government going, much like an operating line of credit is, and like I say, on April 1st at 12:01, we will be back in a surplus position.
Thank you, Mr. Aumond. Mr. Bromley.
Again, that’s great. I’m getting a much better understanding. The last part of that was how is the transparency handled? Is there a website that Members can go to see what is being characterized as short-term borrowing, long-term borrowing that the public could access?
Thank you, Mr. Bromley. Minister Miltenberger.
Thank you, Madam Chair. It would be reflected over time and in the public accounts. There is no daily site available that sort of tracks that kind of day-to-day business of government. We will, as I have pointed out before in the House be coming forward once the Financial Administration Act is reviewed and passed with a borrowing plan that will be brought forward to the floor of the Assembly on an ongoing basis in the future, but at present the main vehicle would be the public accounts. Thank you.
Thank you, Minister Miltenberger. Anything further, Mr. Bromley?
Thank you, Madam Chair. Thanks for the Minister’s response. Yes, that would seem to be the appropriate vehicle. So maybe I’ll just ask the Minister to commit to making sure that there’s come discussion and consideration in the Financial Administration Act, the new version dealing with that renewal to provide that transparency in a practical way, monthly or quarterly or something like that. I’ll leave it at that. Mahsi.
Thank you, Mr. Bromley. Minister Miltenberger.
Thank you, Madam Chair. The borrowing plan, which will be debated and approved in the House, is a key part of the bill that’s currently being reviewed by committee. So that will definitely be there. I’m assuming it will receive the full support of the Legislature. Thank you.
Thank you, Minister Miltenberger. General comments. Next I have Mr. Dolynny.
Thank you, Madam Chair. I’d like to welcome the department here today. As I think you heard from the opening comments, a little bill with some big impacts. I think that probably summarizes it best.
Just for the sake of time and to dig into some of the details regarding why we’re here, we’ve heard from the Minister there were some mitigating circumstances which put economic pressures on the short-term borrowing. One of them was the firefighting expenditure unforeseen in 2014. Has the department done a full cost accounting of this yet? Thank you, Madam Chair.
Thank you, Mr. Dolynny. Minister Miltenberger.
Thank you, Madam Chair. It’s not clear to me the question. Have we done a full cost accounting of the fire season? Have we done a full cost accounting of this proposal? If the Member could elaborate. Thank you.
Thank you. I thought I was clear, but I’ll ask it again. Has the department undertaken a full cost accounting of the 2014 fire suppression season? Thank you
Thank you. We have one of the supplementary appropriation requests before the House has the final supplementary request, which will bring to a close the fire season costs and then we’ve, as well, engaged in a comprehensive review that is still underway in terms of the fire season and its impacts that were discussed yesterday when we were looking at ENR’s budget. One of the key areas being looked at is the administration and finance side. Thank you.
Thank you. So what we’re hearing today from the Minister is that we’re still writing cheques for the 2014 fire season. This full cost accounting still has not been before the House and today we’re being asked to authorize borrowing of something that this committee has not seen a full vetted process and due process on. To that in itself, it seems a bit problematic. We’re supposed to basically accept the fact that this process, which is still not before the House, is going to be done away with after this bill has full assent. Being the fact that this had a huge mitigating circumstance on our short-term borrowing, I find that in itself to be a bit problematic.
Moving on, Inuvik-Tuk highway, this was a project which was deemed to be an accelerated process for this upcoming year, which I would assume put some negative impact on our short-term borrowing. Can I get an update here? What impact has the Inuvik-Tuk highway accelerated program had and what effects has it had for short-term borrowing before the House? Thank you.
Thank you. First, if I just may comment, this full cost accounting, the final supplementary request for the fire season to close the books was reviewed this morning in committee and is in the process to come before the House. So, that work has been done. It was in and out of committee this morning. So it’s not quite accurate to say that the Legislature is being asked to take things on faith or without having seen what the costs are. We have demonstrated that, I think, through the supplementary requests.
In regards to the Tuk-Inuvik highway in terms of the cash and the impact on our short-term borrowing, I’ll ask the deputy to respond, Madam Chair, but I would point out that because we had the foresight as the Legislature to agree to advance this money, it kept the project live. They’ve caught up, they’re on target, on time and on budget to deliver the road, which was the biggest concern and we are in the management and risk management business and we made a choice. In that case in the longer term it’s going to stand us in good stead.
Madam Chair, with your indulgence, I’ll ask the deputy if he could respond further in regards to the specifics of the Tuk-Inuvik highway. Thank you.
Thank you, Minister Miltenberger. Mr. Aumond.
Thank you, Madam Chair. Since the end of October projected to March 31st, the government expects to spend almost $65 million on the Inuvik-Tuk highway. Against that, which we expect to get just over $71 million in revenue from the Government of Canada as we catch up to our previous expenditures earlier on in the years. So no doubt that the $64 million in expenditures incurred some short-term debt, we have revenues to offset that. Thank you.
