NDVA Committee Meeting

STANDING COMMITTEE ON NATIONAL DEFENCE AND VETERANS AFFAIRS

COMITÉ PERMANENT DE LA DÉFENSE NATIONALE ET DES ANCIENS COMBATTANTS

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, March 19, 1998

• 0906

[Translation]

The Chairman (Mr. Robert Bertrand (Pontiac—Gatineau—Labelle, Lib.)): Good morning, everybody. I would like to welcome you all to this morning's sitting of our committee. We are pleased to welcome Mr. Claude Caron and Mr. Lawrence Birch, from the Treasury Board Secretariat, as well as Mr. Mike Nelson from National Defence.

We usually allow our witnesses 10 to 15 minutes for their presentation, after which we go to question period. If all are agreed on these principles, we will start forthwith.

Mr. Claude Caron (Acting Assistant Secretary, Government Operations Sector, Treasury Board Secretary): Thank you, Mr. Chairman.

Mr. Chairman, members of the committee, thank you for asking me to appear before you today. As I understand the request of the Chair, I am here to discuss present Treasury Board policy as it concerns federal real property.

Mr. Larry Birch, who has just been introduced by the Chair and who is Acting Director of the Treasury Board's Bureau of Real Property Management, is with me today, as is Mr. Michael Nelson, the Chief Executive Officer of the Canadian Forces Housing Agency whom you all know.

In answering you questions, I may at certain points request Larry or Michael to comment as a collaborative effort will most likely afford you the answers that you require given the complexity of the topic at hand.

[English]

In starting my presentation I should first make some distinctions as to how the federal government owns land.

All crown lands in Canada, be they federal or provincial, are owned by Her Majesty. Lands fall under the administration and control of either the federal or provincial crown.

With this distinction in mind, federal crown land is assigned to ministers for administration purposes. Using technical terminology, administration or custody—we also use the word “custody”—of federal real property is assigned to ministers for use by the departments and agencies for which they are responsible.

Administration therefore provides departments and agencies with the beneficial use of land, but not with ownership. In the case of federal crown land, that remains under the administration and control of Her Majesty in right of Canada. I might add that the structure and authorities for administration of land for crown corporations is somewhat different. It varies according to each corporation's legislation.

To continue describing the real property system, it falls under the scope of two acts of Parliament. The first is the Federal Real Property Act, which is a conveyancing act governing the acquisition and disposal, including leasing, of federal real property. The second is the FAA, the Financial Administration Act, which provides the Treasury Board with the authority to set policies as to how federal real property is to be managed, acquired, and disposed of.

• 0910

While not a topic for this discussion, I might add that other acts of Parliament also govern specific-use properties such as national parks and Indian lands.

With those distinctions already made, I should speak to the respective roles of Treasury Board and of custodial departments. Using the Financial Administration Act authority over real property management, Treasury Board determines government-wide policies for use by custodial departments. It is the responsibility of departments to apply these policies in their day-to-day management of real property within their custody.

In determining federal real property policy, Treasury Board has emphasized two fundamental points: first, the federal government should hold real property only for the purposes of delivering federal programs; and second, real property has value, and this must be reflected when departments dispose of federal real property.

Before I speak about these basic policies, I would like to comment on certain technical aspects relating to the disposal of federal real property so that I can set the appropriate context.

[Translation]

From a life-cycle perspective, the Treasury Board requires departments to manage real property to the maximum economic advantage to the Crown. This means that when a particular parcel of real property is no longer required for program purposes, departments should dispose of it.

From a technical viewpoint, the Federal Real Property Act governs the conveyancing of federal real property. This Act permits the full use of provincial law and processes in the conveyancing of federal real property. In essence, the Act permits the use of private sector conveyancing practices. Again from a technical perspective, the Treasury Board is authorized to establish policies governing the disposal of real property, including monetary limits above which departments are required to seek Treasury Board approval prior to actual disposal. These policy authorities are in addition to the more general policy management authorities found within the Financial Administration Act.

When federal real property is no longer required for program purposes, it is normally conveyed in fee simple or, in layman's terms, sold to a third party outside of the federal government. The federal government does not ordinarily wish to retain liabilities for real property that it does not use.

The Federal Real Property Act, however, does permit conveyancing through the use of short or long term leases, easements and so on. These forms of conveyancing, however, are used only in special circumstances where the federal government wishes to maintain a long-term land control or where federal property is expected to be vacant only for a short period of time.

[English]

I have dwelt on disposal processes in detail to illustrate that Treasury Board conveyancing policy and federal legislation is flexible in its application. Federal land can be conveyed in fee simple or leased to private sector firms or to crown corporations. Federal land that is required for program purposes can be sold or leased to the private sector and then leased back to the crown under certain agreed-upon circumstances and conditions. In other words, there is enough flexibility, technically, to accommodate a wide range and variety of conveyances.

• 0915

In disposing of federal real property the Treasury Board has established certain priority rules. Federal real property being offered for sale by federal departments or agencies must first be offered to other federal departments, then to federal crown corporations, and then to provincial and municipal governments, in that order. Only after these parties have expressed no interest can federal real property be sold to other interests.

In selling or acquiring real property, departments and agencies have the choice of undertaking the transaction in-house or of using the technical expertise of the Department of Public Works and Government Services. The Treasury Board has recognized the special expertise of the Department of Public Works and Government Services in that it has provided that department with transaction financial limits in excess of those provided to most other departments. PWGSC, as we usually call the department, can apply these limits when acting for other departments. For your information, we have provided lists of both PWGSC and DND's authorities to the chair.

In certain circumstances, conveyancing or selling of federal real property will attract significantly higher revenues for the crown if property is rezoned or equipped with basic infrastructure such as roads, sewers, etc., before disposal of that property. To take advantage of this sort of situation, departments and agencies can transfer real property intended for sale to Canada Lands Company Ltd., a federal crown corporation. The charter of the Canada Lands Company Ltd. permits it to apply to municipalities for rezoning and to seek private sector financing of infrastructure development. Generally departments, by reason of their mandate, can do neither of these things.

As I mentioned earlier, it is a basic Treasury Board real property policy that departments hold real property only to support government programs. I should point out that holding in itself does not necessarily imply federal ownership. Custodian departments also lease property from third parties to satisfy their program requirements. Decisions as such are made on a case-by-case basis.

The second basic real property policy, which I referred to earlier, is that real property has value and this value must be reflected within a disposal process. As for Treasury Board policy, all disposition of federal real property must be at market value. Treasury Board policy also requires departments to advertise their disposal intentions through a public bidding process.

The principle of market value can be recognized in different ways. Land swaps, which are a form of disposal, are certainly permitted, with caveats that the acquired land serves program purposes and that appraised values are similar. Alternatively, federal involvement in a partnering venture with the private sector using federal real property as the federal government's share of the investment should result in the market value of the real property being fully reflected.

In the case of departments, proceeds from the disposal of real property constitute, for purposes of the Financial Administration Act, public money. As such, it must be deposited to the credit of the Receiver General, as per that act. However, as per Treasury Board policy, on revenues from sale of real property Treasury Board will consider proposals from departments to share in these proceeds where a benefit to the crown's overall financial position can be demonstrated. Following consideration and approval of the department's submission by the Treasury Board, actual access to these funds requires parliamentary approval, usually in the form of a supplementary estimate.

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A variety of arrangements have also been made for the sharing of revenues from the disposition of real property with custodian departments. All of these have involved the sharing of revenues between custodian departments and the centre. The Treasury Board would welcome a proposal from DND for the housing agency to that effect. But the proposal must be supported by a solid business case. The fundamental notion behind this is that real property is not owned by departments, as I said earlier, but rather by Her Majesty in right of Canada, and revenues from its disposition should therefore be applied according to general priorities of the government of the day.

[Translation]

My comments on revenue sharing, of course, lead directly into a principal concern of the Canadian Forces Housing Agency, namely the financing of improvements to CFHA's housing stock. As I understand previous discussions of this committee, several possibilities have been raised, such as the use of Crown land as a security against borrowing.

[English]

The Canadian Forces Housing Association is part of a government department and as such is covered by the same legislative regime. In other words, it is under the same legislative regime and authorities as the Department of National Defence. Under that regime, departments do not have the authority to borrow. That responsibility rests with the Minister of Finance. In addition, consenting to the giving of crown lands to secure a private individual transaction would go contrary to the prohibition against the giving of guarantee without parliamentary authorization and to the prohibition against execution of judgment against crown property.

[Translation]

The establishment of the Canadian Forces Housing Agency was an important first step, in our view, in coming to grips with the problems of the DND housing program. At the time of the creation of the CFHA, the Treasury Board directed the Department of National Defence to return with a comprehensive program proposal. TBS is prepared to work with the Department on a solution.

[English]

In conclusion, I have described the present disposal process of the federal government and within that context the application, the policies, that federal real property must be held only for the purpose that supports existing government programs and that if disposed of it must be done at market value. I have also indicated that the Treasury Board Secretariat is committed to working with the Department of National Defence on creating solutions to the problems of the DND housing program.

I would be happy to take questions from members of the committee.

The Chairman: Thank you very much.

Mr. Proud.

Mr. George Proud (Hillsborough, Lib.): I just have one question and I think you might have gone quite a way to answering it.

You used the term “in layman's terms”, and that is not often used in bureaucratic and military language. In terms of turning this property over to the CFHA, which I think is the result we are all looking for to get the best job done, how far down the road is that? What else do we have to do? They have to make a proposal to Treasury Board, and, providing it is in line with everything that goes along with the Treasury Board guidelines, then an arrangement can be made for these people to take control. Is that what I understand?

Mr. Claude Caron: Correct.

I will answer part of your question and then I will refer to my colleague from DND, Mr. Nelson.

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As I said in my address, we welcome and expect to see, and are somewhat anxious about, a proposal from the Department of National Defence following the direction that was given to the department when the agency was created. The speed at which these changes can be implemented will of course depend on the nature of those changes.

The department needs to define its program requirements. I'm using bureaucratic jargon again, so I apologize, but it should define the need. The work of your committee will be very helpful in doing this and in looking at the options to be able to satisfy that need. I highlighted a number of choices that are available within existing authorities and changes that don't require legislation.

If we can stay within these boundaries, changes can be implemented progressively over time. The amount of time necessary is hard to guess at this point without having a proposal before me, as you can appreciate. If the proposed changes, however, require the government to go back to Parliament for legislation, then the process can be a little bit longer, obviously.

Would Mr. Nelson want to add anything to that?

Mr. Mike C. Nelson (CEO, Canadian Forces Housing Agency, Department of National Defence): I have nothing else, except perhaps I would just agree with Mr. Caron that, as I understand the legislative agenda, any proposal that would require the creation of a different form of government would be in line with other legislative priorities of the government, but that could move us into some problems with the actual ownership of the land.

Let's say this was a crown corporation. It could be one of the different flavours of crowns, such as non-agent, agent—all these different flavours. It could even be one of the service agencies, such as the proposed parks agency and the Revenue Canada agency. But that doesn't mean I can't start immediately looking at refining that $200-million estimate that I talked about on Tuesday. That's the dollar figure that needs to be refined. We could try, on a case-by-case basis, as we're doing out in Edmonton, for example, to find solutions to the worst problems right away. I don't think we can wait five years, two years, or even three years to start giving people some hope that there is indeed a future.

Mr. Claude Caron: Let me add to this, Mr. Chairman. Because of the magnitude of the situation—there are many bases and houses, and the markets are quite different—there is also an inherent complexity in finding a solution. The solution is not going to be very likely a broad-brush, generic solution, as you can appreciate, but as I said, we're anxious to get this process rolling, so to speak.

Mr. George Proud: I would hope that we could find some way to do this in this day and age. The committee is finding out, as we travel across the country.... Mr. Nelson knows the situation with all of the changes and cutbacks we've made over the last number of years. This is part of the result of that.

I would hope that the political masters would look at making changes. God forbid that we'll ever have to go through the whole process of setting up another crown corporation, because the legislative table would probably take us from now until the end of this Parliament to get it through. That, to me, doesn't answer the question.

So I hope we can find some method to go through this. Maybe we have to do it on a piece-by-piece basis, but if we're serious about this, I think we have to take a different type of direction on it.

Thank you.

The Chairman: Mr. Pratt.

Mr. David Pratt (Nepean—Carleton, Lib.): Thank you, Mr. Chair.

Here's one thing that I'm a little perplexed about. When the special operating agency was set up, why didn't it have the power then to make the decisions and conduct the transactions that were necessary to ensure that things started moving right away? There's clearly a crisis in the housing situation with the armed forces right now, and based on what you said this morning, Mr. Caron, I don't sense any urgency to this problem whatsoever.

Mr. Claude Caron: If I may, I'll answer the first part. I will ask my colleague from National Defence to talk about the urgency to some extent.

The reason why the decision was so progressive in terms of giving a temporary status to the organization, with limited powers and the requirement to come back with a detailed proposal, is because it really started from square one. It was an organization, an SOA, that was created. There was a sense at the time that there was a lot of work to be done to investigate the situation, identify the problems, and structure the organization in a way that it would be able to advise government on appropriate solutions.

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I cannot comment on the work that was done internally and how long it has taken the agency. I would ask Mr. Nelson to address that.

Mr. Mike Nelson: The work of the agency for the first two years has literally been starting from ground zero. When I arrived in 1995, before the submission went through, I must say at the time there was was a clear economic impetus. The auditor general's report was the external impetus to reduce the $30-million overexpenditure.

Inside the department, what you have seen by going around I don't believe was known externally. The awareness.... When you take a look at the reports that have come out externally observing the circumstance, you can see the pressures were primarily economic at the time. It's primarily through the work of this committee that for the first time Canadians have been seeing the other side, the side we have been trying to balance.

I'm balancing two masters: the economic exigencies of having to run on a balanced budget, and as well, again for the first time quite publicly, the other side of the equation, the folks who are living in the married quarters. And again there's the economy in places like Esquimalt, where whether you're in the married quarters or not, you have an affordability problem. That's being seen.

I wasn't there at the moment of the big bang in 1994, when it was decided that this agency would be launched—I came on about a year later—but the priorities at the time were perhaps more on the economic side. It's only now, when we're in a position to articulate exactly both sides of the problem, that we can say this isn't just a money problem; it's a people problem.

Mr. Claude Caron: And that waiting period, that transitional status, is essentially the way we establish SOAs normally. Typically we're looking at a year or a year and a half of a transitional period before the SOA gets a permanent status and gets additional flexibilities. So two years, given the complexity, is not unusual.

Mr. David Pratt: Have Treasury Board officials been out to inspect some of the properties in Edmonton, Esquimalt, Valcartier, etc.? Have you been on site to see what our military people are living in?

Mr. Claude Caron: I am going to Esquimalt actually in early April. Some of my analysts as well as my colleagues from Real Property understand and have visited many of the facilities.

Larry, do you want to add something?

Mr. Lawrence R. Birch (Acting Director, Bureau of Real Property Management, Treasury Board Secretariat): Our organization, the Bureau of Real Property, is organized on a regional basis, and our regional analysts have visited a large number of bases over the last several years and have seen the housing.

Mr. David Pratt: But the Treasury Board folks from Ottawa haven't.

Mr. Claude Caron: Oh, yes, they are from Ottawa.

Mr. Lawrence Birch: They're from Ottawa.

Mr. Claude Caron: They're our analysts here in Ottawa.

Mr. David Pratt: Okay.

The decision to move to market rents was presumably part of the Treasury Board policy in connection with setting up the special operating agency.

Mr. Claude Caron: Larry, you have more of the history.

Mr. Lawrence Birch: The short answer is no. There is a Treasury Board policy on housing that is the responsibility of our colleagues in the human resource policy branch. It's part of the compensation policy. That policy about market value predates the setting up of the agency. It has been government policy for a number of years.

But we're really not competent to speak on it with any expertise at all. I understand you're going to be meeting with representatives of that part of the Treasury Board in about a week's time, so we really should refer questions on the details to them.

Mr. David Pratt: One question I have that you might flag for your colleagues in the Treasury Board is how a policy with respect to increases in market rents could be applied in a period of a long pay freeze that was being experienced by members of the military. What we had happen there was grossly unfair. In my view the military people were being made to pay for policies that go back probably many years; let me put it that way. It was in my view, at least, a very unfair way to deal with a problem.

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Mr. Claude Caron: We'll make sure my colleagues are prepared to answer that question, Mr. Chair.

The Chairman: Mr. Price.

Mr. David Price (Compton—Stanstead, PC): I guess my question would be to both Mr. Caron and Mr. Nelson. The relationship with the new ASD contractors and CFHA, and the direct line between the two.... In the case of Goose Bay, to give you an individual example—it will happen in other places—if you start disposing of housing up there, how is it going to affect the local market? How is this set-up going to work on the problems you're going to have there? You're throwing housing onto a market that's already a bad market because people are trying to sell their homes to get out because they don't have any jobs any longer. Have you looked at that at all?

Mr. Mike Nelson: You're absolutely right. There's not only a lot of housing in Goose Bay—we have some 739—there's a lot of excess housing in Goose Bay. Probably before CFHA arrived there were discussions, but from the moment we first moved into Goose Bay and took it over as one of our housing management offices we were in touch with not just the town but the landlords' association, because I know they are concerned with exactly what you just described, that we might just dump a whole bunch of houses on the economy and sink the rates. We told them from the beginning we would not do that. It would be stupid. The housing, as you know, can have a tremendous impact on a local economy.

In our latest discussions with them the tack we're trying to take is perhaps over time to move the excess housing into private hands. If more housing is going to be built in the area, we will be working with the town of Happy Valley, but one way to do it might be to move something like 50 units per year into private hands, so we don't throw things out of balance there. But we will not dump housing at Goose Bay.

Mr. David Price: Your other relationships between the ASD contractor and the housing authority: how will those work?

Mr. Mike Nelson: We have retained not ownership but custody of the housing at the base. The contractor has moved in and is managing the base. CFHA is managing the housing, as we do at all other locations. Because we have so many different customers there, it's not a pure base, like some of the bases you've seen where you have—

Mr. David Price: Where the base commander could have a certain authority over it. Now you have a different situation, so what is the chain of command? How is it going to work?

Mr. Mike Nelson: In CFHA housing the only role the base commanders have, other than being our customer in right of the people who are paying the rent—

Mr. David Price: Number one customer.

Mr. Mike Nelson: Well, the number one customer is actually the people who are paying the rent to us, Defence—

Mr. David Price: That's the way it should be.

Mr. Mike Nelson: It's that kind of relationship. The base commanders at the bases have the broad allocation policy: who should be living in what married quarters, what percentage to what rank; that sort of thing.

At Goose Bay we have leases CFHA has inherited from the department, with civilian organizations, with the foreign military training there, and we will have a relationship with Serco as well. We've already started talking to Serco. If they wish to lease some houses from CFHA at market rent, in accordance with government policy, we'll allow them to do so. It's a good use of the property and to the taxpayers' benefit, while they are there, and it makes the town a bit less uncomfortable that we're going to be dumping the excess ones.

As you know, my minister has announced recently that for the first year or so public servants who were formerly employed by the base and are now employed with Serco will enjoy the same rent-setting conditions as they did before.

• 0940

Mr. David Price: I've been through a situation in buying property from the federal government, as a municipality. The problem that happened in all of this, and the same thing that worries me as I look at what's coming, is the time factor, just as Mr. Proud mentioned, and as David mentioned too.

We bought a ski hill. In the time line, the time when we first showed an interest, we went to tender on it, and we ended up being picked to take it because we were a municipality, we went through several years, in which the infrastructure went downhill. The price was still the same, though.

I've seen this happen in other cases, too, where the government.... In this case, they took over something. It was seized, so they had to manage it and keep it up. But the problem is, is that keeping it up? It was kept up like what's happening to our housing, just at a bare, bare minimum level. In the meantime, the infrastructure is just dying underneath. Whoever takes it over really has a loss in value, and if you go to mortgage it afterwards, how are you going to handle that? What's your value going to be?

Your book value there was one thing, but when you actually sell it, several years have gone by and the value has changed quite a bit. The person who's going to take that mortgage—you have a problem situation there. Would your department be looking at taking the mortgage on this housing yourselves, to...?

Mr. Claude Caron: Maybe I'll ask you to clarify your question a little bit further. You say mortgaging our property to a third party?

Mr. David Price: Yes. Might we be in a situation of mortgaging it to the housing authority? You haven't clearly gotten a line on just where we're going to go with that. But that would be a possibility—through the housing authority temporarily, until they dispose of it, if you don't dispose of it directly, if it was to be disposed of through the housing authority.

Mr. Claude Caron: The housing authority at the moment has these houses. They're under the custody, as I said, of the Department of National Defence. There could be a decision to rationalize, let's say, the stock of houses using some of the options I highlighted—for example, possibly trading some of those or having the private sector take over and rent out. Other countries have done similar things. It depends on the market, really, and on the stability of the environment, as well as on the demand for that housing. It's a matter then of—

Mr. David Price: I guess what I'm looking at is, on your books right now those houses shouldn't have really very much value. So what kind of value are you going to establish when you go to sell them?

I'm sorry, on your books they do have a lot of value, but in actual truth they don't have very much value.

Mr. Claude Caron: Yes. Well, when it's time to sell them, we assess market value based on independent appraisals, and this is how this is established. The federal government uses a cash accounting approach, as you know. We don't have asset values per se on our books for individual items like this. The value would be established at the time of the sale through appraisals.

As far as your introduction on the time factor, it's probably a little bit more complicated to sell a ski hill, I would think, than to sell housing. I know that Public Works and Government Services in the past has undertaken to dispose of housing in the north, I believe in Whitehorse. It was done through a process that appeared, at least to me, to be quite time-compressed. In other words, it didn't take several years, and it was done through some creative means.

Mr. David Price: Ah, creative means. We seem to be lacking in those.

Mr. Lawrence Birch: I'm not aware of the particular case you're referring to.

Mr. David Price: I use it just as a general case.

Mr. Lawrence Birch: But there's absolutely no reason, under current legislation and current policies, that any disposal should take that long, particularly one with a municipality.

In his speech, Claude referred to this priority circulation in which surplus properties are offered first to other federal departments. Municipalities—

Mr. David Price: This isn't an old item. This happened last year. We finally took possession of it, and this is our first year of operation. It took three years to do.

Mr. Lawrence Birch: In any event, under our policies, that priority circulation process, which would bring it to the attention of a municipality, is 120 days. Following that, if a municipality indicates an interest, then the price is negotiated based on appraisals prepared by—

Mr. David Price: But it actually went to tender in this case, even though we had first choice. You did get other prices that were higher, in the tender, but the municipality was given first choice.

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Mr. Lawrence Birch: The system did not work the way it was supposed to there and the way it works in 99% of cases. I really don't understand.

Mr. Claude Caron: We're not familiar with the case.

Mr. David Price: I know, but I'm just using it as an example, because I have heard of others in the same type of situation.

Mr. Claude Caron: But the process can be simple, as Larry says. It goes to a process of offering the properties to other departments, crown corporations, and levels of government for 120 days. After that the property can be put on the market.

Obviously, as per the question raised earlier, we wouldn't want to flood the market, so there's a strategy required to deal with certain aspects of it. It can be done if the developer is interested. There is the possibility of bulk purchase but developers would redevelop and so on. That's one route that would take a certain amount of time. If we're looking at disposing of a few houses, it can be done quite quickly.

I mentioned the case of Public Works and Government Services Canada. It offered the houses to individuals and used more of an auction kind of approach. A process was established that was very time-constrained.

If you're interested, we could come back to the chair with some examples and document this a little.

Mr. David Price: I guess that's all I have for now.

The Chairman: You can come back later, David.

Judi.

Mrs. Judi Longfield (Whitby—Ajax, Lib.): Thank you.

You have to help me out a little. When National Defence decides it needs to acquire more land for whatever reason—to expand a firing range—which budget does it come out of?

Mr. Claude Caron: National Defence.

Mrs. Judi Longfield: Then if we wanted to dispose of it later on, National Defence wouldn't get the proceeds.

Mr. Claude Caron: Not necessarily.

Mrs. Judi Longfield: Does that seem fair to you?

Mr. Claude Caron: If you use the example of a small property, if DND were to acquire a building or a firing range it would be part of its capital program. It would be assumed to have high enough priority to locate resources from the department for that purpose.

There are situations at the moment where DND can retain some of the proceeds of the sale of assets. That provision does not apply to the housing agency right now.

Mrs. Judi Longfield: But it's only some.

Mr. Claude Caron: It can retain 50% of the proceeds of the sale of properties valued at less than $5,000,000. These properties we're referring to were not acquired with money the department has spent this fiscal year.

Mrs. Judi Longfield: I understand that, but you acquire capital. It goes for a period of time and you need it at the time. It comes out of your budget. You plan and in many cases you've had to put off buying other things. I don't understand the mentality.

I know it's our government and we created the policy, but 10 or 20 years down the line, when you have an asset that has grown considerably and needs that are astronomical, you can't take some of the assets that came out of your department to provide for existing needs.

Mr. Claude Caron: I agree with your statement. The government and Treasury Board have policies that allow this to be changed. One example is the Department of Foreign Affairs and its property stocks abroad. The Department of Foreign Affairs came forward—and we suggested the Department of National Defence do the same thing—with a proposal a few years ago seeking authority to move properties around. As you know, we have embassies and staff quarters in different places in the world. The department made a case that sounds very much like your statement here. We've given it full flexibility to sell property A and use the money to pay for property B across the world. This is used in its case to supplement its annual appropriation. As a result of this, you do not have the situation you describe for that organization.

National Defence is not at that stage yet. As I indicated earlier, we're very open to proposals from the department that will allow, to a great extent, consideration of this kind of option.

• 0950

I must point out, though, that in some cases there are limits, and I'll give you an extreme example. If Parks Canada were allowed to sell park land, would it be fair to say that it should automatically retain receipt of this? In extreme cases, you have departments that did not acquire the assets of which they are custodian.

Mrs. Judi Longfield: I'm not talking about that. I'm talking about situations wherein—

Mr. Claude Caron: Between those two extremes.

Mrs. Judi Longfield: —the acquisition of the asset came directly out of the department's budget.

National Defence is not like the parks department. The parks department is not trying to feed, clothe, house, equip, and do all of those wonderful things for people who we're asking to put their lives on the line.

The Department of National Defence has significant assets, assets that everyone agrees are surplus to their needs, assets that on the market.... Out in Esquimalt, for example, they have assets that would almost cover the housing needs across the entire DND stock. What's the incentive for DND or the base commander at Esquimalt to even suggest that those lands are declared surplus if he's not going to see his people receive the benefit they should?

Mr. Claude Caron: As I said, I agree with you and it's just a question of—

Mrs. Judi Longfield: I think that should be one of the first recommendations. I would like to see it coming from National Defence. If they get to the books right away, that has to be the first proposal. I think we can cover a great portion of our needs just with what we've already got, without increasing our budget.

Mr. Claude Caron: If I may, I will give you an idea of what we would be looking for in such a proposal from the Department of National Defence.

Mrs. Judi Longfield: Got your pens, folks?

Some hon. members: Oh, oh!

Mr. Claude Caron: Well, it won't be a guide to disposal; not quite. Essentially, as I said earlier, it is public money, so it has to be treated as such, and I would differentiate between a program requirement to renew a stock of properties and where the money's going to come from. Those are two different things.

But I agree with you that logically this seems to be an easy solution: you sell property, you use it to buy other ones, and then you have kind of a rolling stock that allows you to get something going. That process, as I said, was recognized as valid for the foreign affairs department and its foreign properties, and I hope we can establish a similar process in other places. We do have negotiations with other departments to that effect.

The key principle there is that whatever the money comes from, the expenditure has to be justified. So what we will be looking for from National Defence is a proposal about a plan. Essentially we want a plan about how they propose to renew that stock of property, what criteria will be established, under what circumstances they will look at leasing using the private sector as partners, and under what circumstances they will wish to build houses. This has to be defined. We cannot just say, “Here's the money.”

As I said, we're actually anxious to get into these discussions. The original decision of the SOA was to that effect: “Come back and tell us how you want to manage this.” But we're open to these arrangements, as you suggested, because they do make sense.

Mrs. Judi Longfield: Thank you.

The Chairman: Monsieur Caron, I have just a couple of questions.

Are you in contact with National Defence to discuss these things?

Mr. Claude Caron: Yes, we are.

The Chairman: I'm surprised that nobody from National Defence has jumped on the bandwagon to get negotiations started.

Mr. Claude Caron: I cannot comment on that.

Mike, do you want to?

Mr. Mike Nelson: Over the past couple of years, since the SOA was brought into being, we have been in touch with Treasury Board officials. The SCONDVA process is, I hope, going to put more impetus behind this. The discussions are already under way.

Job 1 for setting up the agency, as I mentioned a little while ago, was to just get a grip on the magnitude of the problem. When we go to Treasury Board.... There was no relationship between the rent and what was spent before. There was no one person in DND you could have in front of you who would say, “I'm accountable. I'm responsible for the whole thing.” But I am, and I can say that.

That didn't exist before, so the very logical questions like “Exactly how much money do you need, Mr. Nelson?” and “How many houses do you need in what location?” couldn't have been articulated by anyone before. I believe we're in a position now to do that.

• 0955

The Chairman: Could we be looking at maybe a two-pronged demand, I would call it, to Treasury Board: one from National Defence regarding lands, as Judi mentioned a while ago, for an artillery range or whatever; and then maybe a second demand from Canadian Forces Housing just for the housing part of the deal?

Mr. Claude Caron: Actually, that's what we'd wish to see, those two issues dealt with separately, because with the housing as a special operating agency, one of the features of that is to put—excuse the example here—a fence around it, so to speak, and it is treated as an entity within the Department of National Defence. We would actually indeed expect a proposal from the agency separate from the proposal we might get from the department for, let's say, the firing ranges or other assets.

The Chairman: I have one last question, because I know there are some other people who want to ask questions. The land that would be transferred for housing, for instance: would DND be controlling it or would Canadian Forces Housing be in charge of it?

Mr. Claude Caron: I'm sorry, which land?

The Chairman: The land that deals strictly with housing. Would that be transferred to DND? If the proposal came from Canadian Forces Housing, would the transfer of the land go to DND or would it go to Canadian Forces Housing?

Mr. Claude Caron: Well, the land is already under the custody of the agency.

The Chairman: I know it's under the custody.

Mr. Claude Caron: I'm sorry. I don't get the question.

Larry?

Mr. Lawrence Birch: If I understand your question correctly, the land is in the custody of the Minister of National Defence, not the department, not the agency. So if the agency had a separate status from the department, it would still be in the custody of the minister, but he can delegate responsibility for that however he sees fit.

The Chairman: I see.

Mr. Claude Caron: But my answer was to the effect that that delegation at the moment is through the agency.

Perhaps you can comment on that, Mike.

Mr. Mike Nelson: The agency is actually responsible.... We are not the custodian of the property. Our Treasury Board decision says we are the operator-maintainer of the housing. So there's a lot of fuzziness within the department. It's an extremely insightful question, because I don't have custody of the property, but I am the manager of the property. So there is fuzziness within the department that needs to be cleared up.

Mr. Claude Caron: So that's a point to be clarified as well in such proposals.

The Chairman: We'd have to shave the fuzziness.

Mrs. Judi Longfield: I have a supplemental on that. If it's the minister who controls and makes the determination, it would have to be the minister then who would make the proposal to Treasury to say that with the disposal of property, be it a firing range or excess housing, the proceeds would be allocated to the ministry and then apportioned to Housing or whatever.

Mr. Claude Caron: That's correct.

Mrs. Judi Longfield: So it wouldn't necessarily be that Housing would ask for that. It would be that the minister would ask that for lands that have been purchased from the DND budget, the disposal then would be allocated to certain areas.

Mr. Claude Caron: Correct, and when I said we'd be anxious to have a proposal, I meant from the Minister of National Defence.

Mrs. Judi Longfield: Okay, so it's not Mr. Nelson's job to put the proposal; it's the minister's.

Thank you.

The Chairman: Monsieur Clouthier.

Mr. Hec Clouthier (Renfrew—Nipissing—Pembroke, Lib.): The disposal process, the priority circulation, leads, in my estimation from personal involvement, to abuse of the system.

If DND or any other department decided that something was surplus property or merchandise, correct me if I'm wrong, but the way the process works at the present time is it would be offered first to other federal departments, then to federal crown corporations, then to the province, then to the municipality, and at the very end of the day, if none of them expressed interest, to the general public, or private John Q. Citizen. It almost amounts to a first right of refusal, so to speak, to these other governmental departments.

Personally speaking, I know of a circumstance where it went through the entire process and a local municipality ended up buying this piece of property, and then they decided they could turn a quick dollar here, so they went out to the so-called real world and put it up for sale, and they actually made a lot of money on the deal.

So I'm a little bit concerned about this, as I call it, first right of refusal: “No, I don't want it”, “No, I don't want it”, “No, I don't want it”, and then it finally gets out to the private world. At the end of the day the municipality bought it, and because they figured they were getting this for basically a song and a dance, they didn't keep it at all. They turned around and sold it and pocketed the money, whereas perhaps the federal government was the big loser. That's one scenario.

• 1000

On the second one, I agree with my colleague, Judi Longfield. Let's go to DND again. DND decides to sell a piece of property, especially land, and gets a substantial amount of money for it. That money then goes into the general revenue fund. I know how you're going to operate it is a real conundrum.

I made a suggestion to one of the base commanders, but he said the money goes back in the general revenue fund. He wondered how it could then be used for defence purposes. It wouldn't be that difficult as an accounting principle, especially with modern-day computer technology, so perhaps Treasury Board should have a running account for each department. Perhaps the money would still go back into the general revenue fund, but then Treasury Board could say what is allocated to that individual department, especially with DND, which is really suffering a shortfall of funding. I believe other departments are, but I know DND is—and I don't say that just because I'm on this committee. It is an important committee, but it's an important ministry also.

So you could actually have a running total in Treasury Board, and if we sold some of DND's property, even if it did go into the general revenue fund, we would at least know basically what has accrued and what's owing to them. In the big picture, then, when we come down the road and say we want $5 million or $10 million or $100 million to upgrade something and are told there's no money there, well, there's the money you made. It would be a simple accounting practice.

My preference would be that the money stays in DND. If not, if it goes to the general revenue fund, though, why couldn't you do something like that?

Mr. Claude Caron: Let me answer the second question, and then I'll ask Larry to answer the first question.

On the second question, this is essentially what I referred to earlier in my address. This is pretty much how we deal with Foreign Affairs' property sales. We keep a tab of the sales they make during the course of the year—actually, it's not so much when they make the sale as it is when they get the money, I should say—and when they receive the actual proceeds from the sales, we account for this. On that basis, we then give them money when they need it to buy the new properties. In the case of Foreign Affairs, it usually covers two fiscal years, because it takes a while from the time you sell until the time you get the cash. It's then used in the following year or during that fiscal year to pay for other properties.

So, absolutely, this is a process we could use. We are using it in other cases.

Now on the first question, Larry....

Mr. Lawrence Birch: Yes, land flips are a concern. All I can say is that even for those buyers on the priority list, sales are supposed to be at market value.

Mr. Hec Clouthier: FMV, I know, but in many instances this is idealistic. It sounds good, but realistically it doesn't work that way.

Mr. Lawrence Birch: Well, we're regularly inundated by requests from municipalities that think we're asking far too much for properties. There's a normal sort of give and take there. I'm not saying the federal government has never made foolish sales or sales at less than market value. Generally speaking, however, this is done through appraisals by accredited appraisers.

With respect to large tracts of land, one simply does not sell large tracts of raw land. That's what the Canada Lands Company is for. I mention that because if you do sell large tracts of raw land, you clearly don't get good value for them. For those circumstances in which there is potential for value-added through taking them at least part of the way through the land use planning process, the Canada Lands Company is used.

Mr. Hec Clouthier: What's your description of large tracts of land? Are they hectares?

Mrs. Judi Longfield: Downsview.

Mr. Lawrence Birch: Yes, Downsview would certainly qualify. We're really talking about urban tracts of a significant size, where there's potential for adding value by taking them part-way through the development process. The Canada Lands Company is used in that case. Esquimalt, which you mentioned earlier, would be a good example. The former Canadian Forces Base Rockcliffe, here in Ottawa, is another.

If I can offer a caution in response to you, Madame, Esquimalt would take years to bring to market in real estate terms, and there's nothing the federal government can do about that. The municipal planning process is quite rightly a careful and serious one that does take a good deal of time. It's estimated that, from the point of view of the decision to initiate a development project on raw land in a municipality, you're talking at least five to seven years.

• 1005

Mrs. Judi Longfield: But I think if you talk to the base commander in Esquimalt...he has already talked to several private developers who are willing to go through that process, who are willing to put up front money just to have the privilege of being able to do it. I don't want us to say, well, it's going to take too long to do it, so we're not going to go looking at it—

Mr. Lawrence Birch: No, I'm not—

Mrs. Judi Longfield: —because clearly, the situation we have now is going to take us 20 years, if we're going at it the way we are now. So seven years would be....

Mr. Lawrence Birch: No, I didn't want anyone to think there are large tracts across the country that could be sold tomorrow to solve this problem.

Mrs. Judi Longfield: Yes, and I have a municipal background, so I do appreciate that municipalities can get pretty picky on zoning and all that kind of thing.

The Chairman: You may ask one small question.

Mr. George Proud: How come Foreign Affairs is permitted to do things and others aren't? Is there a special deal? Are they more innovative?

Mr. Claude Caron: There are many special deals. Many departments have gone through the process of coming forward with a program proposal to manage their real properties, and each time, of course, we look at the specific nature of that challenge, so to speak, or the needs of that particular stock of properties. Some departments are not at that stage yet. I guess I would say that National Defence is not yet at that stage; Foreign Affairs is.

In the case of Foreign Affairs, it was an approval that was given, again, on the condition that it be re-evaluated at the end of this fiscal year—actually, pretty much at the moment—to see the progress. But it was quite a success in this case.

We have other models that perhaps Larry can comment on, where we've approached the problem slightly differently or quite similarly, just to recognize the particular nature of their program requirements.

Mr. Lawrence Birch: There are a variety of arrangements that reflect the individual needs and characteristics of the program in question.

I have two broad comments. One is, there is no program that depends in its entirety on the proceeds from real estate disposals. In every case, we're talking about supplementing a more stable source of funding through an appropriation.

The Foreign Affairs example that Claude has referred to really deals with the effect of what we would call “churn”. They have a certain turnover every year because of changing family sizes and the like, and so, in essence, what they're doing is simply exchanging one property for another. There are other examples, too.

One of the things we've attempted to do with revenue sharing is introduce incentives for departments to do things that are good for the crown and good for themselves—improved real property management. Broadly, that's our objective.

Mr. David Pratt: Getting back to the issue of urgency, I think a lot of us recognize clearly that this is not going to be solved very quickly, but we have what I would describe as—and I think most of the members of the committee would agree—an urgent problem out there with respect to housing. It's a problem that's affecting, I think, the operational capability of the armed forces, because when a soldier who has gone off to Bosnia makes his 10-minute phone call home per week, according, I gather, to Treasury Board regulations, and he hears from his wife that there's water in the basement, that the stove keeps blowing fuses, that the roof is leaking, and that the windows don't close, is his mind going to be on his job? Probably not; he's going to be worried about his kids, who have colds and ear infections. He's not going to be looked after to the point where he can concentrate 100% of his mental energy on the task in front of him.

So the question I would put to you is, how long is it going to take DND to get its proposal over to Treasury Board with respect to the ability to acquire and dispose of property? As I say, this is an urgent situation. We can't wait forever for this to work its way through the system.

As an adjunct to that, would Treasury Board, for instance, be prepared to assign some people to DND to help them pull this proposal together and get it on the fast track?

Mr. Mike Nelson: The urgency, as you know and I won't say it again, is not lost on me. My people live with this every day, as do the members who are living in the housing.

• 1010

Again, I would ask that the committee remember that only 30% is what you've seen in the married quarters. I'm not making the assumption that everyone who is living on the outside is living in wonderful circumstances either. There are quite possibly more cases than you have even seen, because the focus ends up that when you go to a base the houses are there, they are in terrible condition, we go in and we see them.... Some 70% of the people aren't living in those, and I don't think they are all living in wonderful conditions either. I just ask you to continue to bear that in mind.

At least part of the problem could be solved more quickly, I believe, through leasing strategies. One of the things that trouble me when we talk about if CFHA gets all the property then the problems will be solved is that notwithstanding the optimism about the processes and how quickly they can happen, it can take a long time, and you can't necessarily count on the amount of money that is there. I will come back to the question of process in a moment, but I think it's terribly important for us all to remember that if we are going to undertake a program this important, then we should be wary about basing it solely on revenues from a possible income stream of selling federal real estate, which is not always the fastest way to get money into your hands.

I would be looking at solving problems faster in places.... Let's take Edmonton, for example. There is a real estate market that's alive and well in Edmonton. It's a relatively soft market right now. Perhaps leasing strategies to secure a stable quantity of housing relatively close to the base—you can't get that close, as you know, to the north site, but relatively close—would at least get people out of the housing they are in right now and into better housing.

The thing is it's going to cost a bit more money; and that's where the other side of the penny will drop, if you'll forgive the mixed metaphor. Cheap housing is a trap. I've seen this over the last two years. We had some housing in Comox you won't get to see, because the lease is now gone. It was among the worst in Canada, but the rent was about $185 a month. It was awful. We couldn't blast people out of there and into the vacant married quarters on the base, because cheap housing is a trap, and they will move into it.

One of the things I believe we need to do is avoid having this crummy housing, because when you are in that moment of decision, when you get posted to a base and you are going to become operational right away, at least there's a place on the base you can go to quickly, it's cheap, “we'll worry about something else later”. People will get trapped in that housing. I believe many of them are there not because they want to be but because it's a cheap out.

What I need is some ability to provide...and I think leasing is a way that is not a 50-year solution to get people into better housing more quickly. And that kind of authority doesn't require becoming a crown corporation, for example. So maybe we could look at a staging of this thing, so at least in looking at all the housing across Canada and looking at the different housing circumstances—because Halifax is going to be a different market from Edmonton—there are faster ways to move people than just relying on selling property.

Mr. David Pratt: Do you have the ability to lease property right now?

Mr. Mike Nelson: I don't, but the department does.

Mr. David Pratt: This is what I'm getting at in my question, getting the mechanisms in place as quickly as possible to do what has to be done. In some respects, with respect, you still haven't answered my question about how long that is going to take.

Again, let me emphasize that I don't think anybody on the committee would be relying on that as a total solution. I think we have to look at other solutions as well, obviously compensation and perhaps accommodation allowances.

Mr. Mike Nelson: About how long it could take, the step that needs to be taken to look at the housing markets in every one of the 35 sites or so.... We have only a certain number of bases, but we have housing in a number of other sites, so there are about 35. That process takes, from ground zero—we are doing one in Edmonton that's near the close right now, and in Toronto—about six months per site.

• 1015

You can do a lot of these things in lock step, but you don't do them for nothing either. As usual, it's one of these questions of: How fast can you do it? How much money do you want to throw at the answer?

I would say, just looking at the problem right now with my thumb in the air, that it could take from one to two years to fully evaluate every site in Canada and get the right leasing strategies in place.

That doesn't mean we have a crisis everywhere. Some bases, as you have seen, don't need that type of attention right away, which is why we're in Edmonton doing the first one and why we're starting in Esquimalt very shortly. Toronto happens to be because of the Downsview project.

We have started right now on some of these solutions. This summer, we expect to be going to Treasury Board with some kind of proposal on how to handle Edmonton.

Mr. Claude Caron: You also asked about how Treasury Board can assist the secretariat. I'm sure you hear that from everywhere, but we also have limited resources.

As for those limited resources, you certainly are aware that your committee has made everybody even more aware of the urgency. We have provided assistance, and we will provide continuing assistance to resolve the problem.

Mr. David Pratt: Just in terms of the files you have to deal with—I'm sure this is one of many—where does this fit in with your ranking of priorities?

Mr. Claude Caron: The ranking has gone up. I can tell you that.

Mr. David Pratt: In the last hour and a quarter?

Mr. Claude Caron: Well, that's because of the work of the committee. It brought a lot of focus on the urgency and nature of the issue.

We had set up a process two years ago, as I said, and we're anxious to see some progress on this. This is something that will focus the minds. Also, in our case, we're a small organization, so it doesn't take too long to focus our minds, I would say.

There was also a requirement—I'm not trying to stick it to anybody else—obviously for the Department of National Defence to attack the problem and come forward with that proposal we referred to earlier. There may be some temporary, transitional solutions, but we're not necessarily going to say that we're going to sit back and wait for the perfect model before we get involved in this.

We're all interested in the solution. I referred earlier to the compensation component of this issue. You'll be able to discuss and understand this with some of my colleagues at the end of this month.

The Chairman: I have a couple of questions. I'd like to ask a real quick one.

You heard a lot of ideas this morning on how to transfer assets from Treasury Board, or whatever, to DND. Is there a downside to all of this? Is there a downside for DND to accept these assets, in your opinion?

Mr. Claude Caron: As Larry said earlier, it controls all the assets used by the Department of National Defence. We don't have control of that, okay? They have the control; therefore we're not thinking of transferring anything to them.

As for the question of them holding this and then selling it to a private concern, of course, then there is a potential downside. I think some of this was mentioned earlier, such as flooding the market and the way you do it.

There's the possibility that you may have an ongoing need for it, in which case you really shouldn't get rid of it; you should keep it. There are a lot of pluses, as you probably noted. Everywhere around town here, and across the country, the government has gone a long way already to dispose of assets it doesn't need. I think we're getting better at it as we go along.

The first principle, as I indicated earlier, is that departments must not keep things that are not in direct support of their program objectives. This is very serious business. We do try to enforce this as much as possible in the department.

The second principle, which is that things have to be sold at market value, is also a very important principle that we apply everywhere.

The pitfalls are, in a way, in the timing of selling these things and in ensuring we make a correct judgment on the first question: do we have an ongoing need for the program requirement?

The Chairman: David.

Mr. David Price: I guess my question would be more to Mr. Nelson.

Regarding the bases you have, in most bases your infrastructure in place, which is water, sewage, heating in some cases, and streets, is controlled by the base.

Mr. Mike Nelson: There are some bases where there has been a turnover to the municipalities.

• 1020

Mr. David Price: But in the cases where you've turned them over to municipalities, selling out those properties wouldn't be too difficult. In the cases where the bases still control and there isn't really a possibility of the municipality taking over, what could you do? And do you control it as the housing association, housing authority—

Mr. Mike Nelson: Agency.

Mr. David Price: —housing agency right now as far as repairs and maintenance and operation of those systems, or is it the base itself?

Mr. Mike Nelson: No. The base pays for them and we repay the base for the money spent on the municipal infrastructure.

Mr. David Price: So if there's a problem, you have to go to them and you still have a process of—

Mr. Mike Nelson: That's right. At the end of the day, the base still owns the property. Right now, we are the base in all the ways that have been described here. The minister owns the property, but the base has stewardship, custody, of that part of the property. We are the owners and operators of the housing, so when things like Edmonton happen.... In Edmonton, for example, there were over 200 sewer back-ups in 1995, and we're not talking just about brown water in basements, we're talking about serious sewer back-ups.

CFHA is contributing a portion of the money we set aside every year to help the bases with more than just little fixes, to throw the bigger money at the infrastructure, because as we all know, if it's underground, it gets ignored more often.

Mr. David Price: And it's at the stage now where it has to be totally rebuilt.

Mr. Mike Nelson: Yes, but you make an excellent point about what you do if you can't excise the land, because on some of the bases, as you've seen, the married quarters are the base. They're on the base.

Mr. David Price: Or in the middle of the base.

Mr. Mike Nelson: In that kind of situation, if you're lucky enough to have a municipality that has encroached and is not the kind of real estate you have in Esquimalt, where the average house price is well over $200,000, I believe, you could migrate the married quarters “community” into a place that is close to the base. But in a place like Cold Lake you are....

If Mr. Evans were here he could describe this in more detail, but I've been over there and we're very familiar with the Australian situation. In some cases, the Australians have just had to invest in the infrastructure on the base. They refer to these investments as “non-commercialities”, a long word that essentially means “we're never going to make any money doing this”, because if the housing requirements change and I have a whole bunch of leased stuff around the base, then.... At least if I own it, I can sell it into the civilian community. But if I acquire, through whatever means, whatever funding, a whole bunch of housing on the base and part of the base—a large unit—shifts from one part of Canada to another, I'm doomed. There's nothing you can do with that housing then. That's why we have to be so careful to get the requirement right, if you will.

Mr. David Price: Thank you.

The Chairman: John.

Mr. John Richardson (Perth—Middlesex, Lib.): Thank you, Mr. Chairman. I would certainly like to thank the members of the Treasury Board for coming here this morning and addressing us. I'm sorry I had to go out, but it was a need that had to be met.

I would like to follow up on some of the questions that have been put. This committee is seeing the human side of the assessment across the country and it's pretty sad. The only exceptions—where we don't have a lot of quarrelling—are those areas where the housing is of the standard of the community, and that's the kind of standard we should be looking at when we're building housing. That should be the bottom line: what is the standard of the community?

We don't have bases in Westmount or Rosedale, so we're not looking at high-end housing, not even in the upper middle class, but these people are certainly in the salary range of the lower middle and upper middle classes. The officers and senior NCOs certainly have the income to match that, and their rent costs would probably reflect the costs of the community for that middle class type of housing, but certainly at the low end are the privates, corporals, master corporals, and leading seamen, etc. Their salaries are not big, and some of the facilities...we have to meet their needs somehow, and hopefully we will be able to do that in some way through methods other than this.

• 1025

But in terms of the needs assessment for building, I would like to know, as soon as we can, if we have to dispose.... I understand that sometimes with disposal of land assets, some of it goes back to the department from which it was disposed as a percentage, and I don't know the clause. I have heard Mr. Nelson and others in Defence talk about this, and I heard it in other ministries.

I don't know what kind of a share-back there is on that, but if there isn't, and if we were allowed to establish the housing authority with some kind of autonomous decision making on disposal, complying with the existing regulations, whereby the money that he keeps would be ploughed back into infrastructure, in other words, surplus lands turned into immediate needs.... We're going through, concurrently, the biggest change in bases that we have seen since the Second World War. We're going to the big-base concept, concentrating around infrastructure to serve a larger number of people, with quality infrastructure such as family centres and other kinds of centres—recreational, etc.—to give some good-quality facilities on a base of 5,000, 6,000 people, which you would find in a small town.

I want to find a way and I don't know how, but I know there's a willingness to listen in Treasury Board at the moment.

We know there's a distraught group of wives, and families and members of the forces, with the kind of living conditions they get and the price of land, because the houses don't vary out at Esquimalt compared to those in Halifax, although the Halifax ones may be a little lower, but I can't say a lot lower from what I've seen. And yet they get a drop in pay for the posting. The posting is an absolute, real dollars, drop in pay of around $5,000 to $6,000, and that's after-tax money. They can't afford that.

It's a kind of heinous plot against the lower end, because they can't afford that when they move from a $300-a-month house in Halifax—and we're talking about the navy now, because they have only the two big bases. In real dollars it is $500; let's say it was a net $500 up, or a net down. You gain going, but right now we're lowering Halifax to put 50% of the force on the east coast and 50% on the west. It's going to be a little higher on the east coast than the west because of the NATO commitment. But those realities are there and they scream at you, saying, how in hell can that happen?

If I posted you and you got a drop of even $10,000 after-tax money, you're going to hurt. These people are screaming at us, and we're hearing them. We have to settle that. A lot of it is due to the conditions they live in, and also the conditions under which they're posted, because of the varying rent tied to local rent. So they can be up and down across the country.

I'm sure that on this committee we'll give Mr. Nelson and his group all the support we can. If we can get the open-door policy you've shown us today, we hope we can get a good assessment and good business plan together and in your hands as soon as possible. From there we will be following, politically, very closely in the House of Commons.

Can you give us how long it would take to do a good, first-rate, business plan? That's what we'd like to know, because this is a big project. How long do you think, Mr. Nelson?

Mr. Mike Nelson: I would say that the components of a good business plan.... If we're going to assume for a moment that we're going to have what I like to think of as a spectrum of housing solutions at every base, at some places you're going to be owning land and married quarters—the Cold Lakes of the world—and at some places you're going to be leasing and things like this. To come up with the right strategy, to be able to say to Treasury Board.... These are the things—the amount of housing you're going to own, the amount of housing you're going to fix—that will drive the amount of money you're going to need.

• 1030

If we were just a typical project, like a capital acquisition of equipment, and we were just looking at getting pure money to do these things as opposed to property, then the time lines would be different. But seriously, as I said a little while ago, it could be up to a year and a half to two years to come up with the killer business plan that says for every site in Canada, we know exactly what we want to do. Whether that's the business plan that needs to go to the board or whether you need to go with a concept that presents the principles upon which we will operate, that's a different thing.

I would say that by the fall I would be able to tell you, by throwing a fair amount of money at it, what the condition of the houses is and refine that $200 million estimate a lot better. But if I'm going to rely at least in part on proceeds from lands, then as you can imagine, I'm going to have to go to every site in Canada, figure out how many houses are actually needed—how many two-bedroom homes, how many three-bedroom homes, etc.—and then look at the value of the land we have. This is a huge, expensive process.

I know that's a terrible answer. Two years sounds like forever.

An hon. member: Yes, that is a terrible answer. It's disgusting, as a matter of fact.

Mr. Claude Caron: If I could add to this, to some extent it's perhaps a bit unfair to expect Mr. Nelson to answer this question by himself. As you can appreciate, the Housing Agency is part of the Department of National Defence. Some of the flexibilities it will require are within the authority of the department to decide upon.

There's also a need, as I clarified earlier, to engage the minister and to develop a proposal that will satisfy the minister. There's also a requirement for him to get the support of other elements of National Defence, in both the military authorities as well as the civilian. A lot of this is internal to DND, and I cannot comment on the speed of this, but it is a reality that he cannot on his own solve this problem. That's an important point.

The second point I would like to make is that I hope we don't, as I said earlier, wait to cross all the “t”s and dot all the “i”s before we look at a proposal for a framework that would allow the department to proceed and make some progress. That's what I would like to leave you with.

I would also caution, though, that there are constraints. One big constraint is that although it's for the department to assess to what extent it is relevant to the situation, the Department of National Defence, as was mentioned earlier, has a fixed envelope of funding, and that envelope is set by policy by the government. So it would be best if we could find a solution within that envelope, because otherwise it gets even more complicated, as you can appreciate.

So it's a question also for the Department of National Defence, as it is for Treasury Board officials, to assign the proper priorities in support of that activity.

Mr. Mike Nelson: But as to a framework? A framework I can come up with in three months. I have no doubt about that. We've been working on that for two years.

Exactly what you're going to do in every site-specific situation in Canada is just not something we can do. We can't say we need 22,000 houses or 10,000 houses. But as to how you would approach it, I have no trouble at all coming up with that very quickly.

Mrs. Judi Longfield: I think Mr. Nelson answered it.

What I'm looking at is to get to the point where we can cut the same kind of deal that Foreign Affairs has in principle that allows for.... I understand that I'm using the sale of property as a panacea and that's not necessarily the case, but at least we need to know that we can apply the same principles that Foreign Affairs does.

If we can get that going, it gives you the impetus to spend some money to actually make the assessment. I can't imagine that we'd send you out to do that, only to be told at the end of the day that it doesn't matter what kind of plan you have, because you're never going to see the excess funds. If we're going to ask people to do that, if they know it's possible, they can work a lot faster and are willing to spend the dollars that need to be spent.

So we need to develop that framework, cut the deal with Treasury that allows the disposal of assets to be ploughed back into DND, and then give each department the opportunity to put their proposal forward, and the best proposal is the one that's served first.

The Chairman: Mr. Pratt.

Mr. David Pratt: Thank you, Mr. Chair.

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I'm interested in the communications that occur after a meeting like this. When you go back to your office today, for instance, would it be a standard operating procedure for you to draft a little memo to the minister to let him know you were at this committee, these were the concerns expressed, and as president of the Treasury Board he should be aware of these concerns?

Mr. Claude Caron: I will certainly advise the secretary tomorrow morning of the discussion we had, the questions raised today, and the information provided to the committee.

Mr. David Pratt: Would you urge the secretary to provide that information to the minister?

Mr. Claude Caron: It would be at his discretion, but I think it would make sense to make that suggestion.

Mr. David Pratt: Okay. Thank you.

The Chairman: If there are no other questions, I would just like to take this opportunity to thank the witnesses. You have provided a lot of information.

Through the course of the next couple of months I'm sure we'll have some additional questions for you, and I know you will be available for our committee in the future.

Again, thank you very much for coming this morning.

The meeting is adjourned.