Hon. James McCrae (Government House Leader): Madam Speaker, a couple of clarifications arise from certain agreements and arrangements reached and announced yesterday. First off, in the light of all the circumstances of the present flood situation in Manitoba, we talked about votes being deferred and, of course, we were referring to recorded votes. Appropriations can indeed still pass in our Committees of Supply, and I, of course, welcome that as a matter of fact, but the reference yesterday was to the deferral of recorded votes.

Because no one is certain when the worst moments of the flood situation will pass and when honourable members might be more available for service in this House, it is agreed, I believe, that deferral of all recorded votes would be to a time that would be agreed upon through discussions amongst House leaders.

The next item would be--[interjection]Yes, I just dealt with that item. When would votes be deferred to was the question, and the answer is that that time will be discussed and agreed upon by House leaders.

With respect to attendance upon the House, because of the extremely important circumstances which exist all around us, I would suggest that there would not be any suggestion of any notice being taken of a lack of quorum should that happen to arise in any of our committees in the Committee of Supply or in the House. I think that if you checked with honourable members, you might find there is agreement with those clarifications.

Mr. Steve Ashton (Opposition House Leader): Yes, Madam Speaker, there is certainly agreement on that, and I would also suggest that we apply the same principle to a request for recorded votes not requiring the minimum support in committee or the House of either four or two so that a member could request a recorded vote that would then be deferred. I think there might be agreement on that as well.

Mr. McCrae: Although that has not yet been discussed, I think it flows from what I have said, not automatically but should flow from what I said, that there will be moments when or times when the numbers may drop, we hope like the water actually, but that could happen. In those cases, I do not think that the required number of supporters for a recorded vote should be adhered to at that particular time. If anyone out of a fit of fancy wants to have a vote, they may have to pay some price for that later on.

Madam Speaker: If I understand correctly the direction of the two House leaders, first of all, is there leave to defer any recorded deferred votes at a time as set by the House leaders? [agreed]

Then is there leave to waive the quorum rule in Supply, and additionally the opposition House leader asked that the number of people requesting the recorded vote be reduced from two to one.

Mr. McCrae: That is agreed, Madam Speaker, but it applies not only to Supply but committees of the House and the House itself.

Madam Speaker: And it will apply not just only to Supply but committees of the House. Is that agreed? [agreed]

Mr. McCrae: Madam Speaker, I move, seconded by the honourable Minister of Energy and Mines (Mr. Newman), that Madam Speaker do now leave the Chair and the House resolve itself into a committee to consider of the Supply to be granted to Her Majesty.

Motion agreed to, and the House resolved itself into a committee to consider of the Supply to be granted to Her Majesty with the honourable member for Sturgeon Creek (Mr. McAlpine) in the Chair for the Department of Rural Development; and the honourable member for Turtle Mountain (Mr. Tweed) in the Chair for the Department of Agriculture.

Madam Speaker: Because of the unavailability of the Deputy Speaker and the Chair, the Deputy Chair of Committee of Supply, the honourable member for Sturgeon Creek (Mr. McAlpine) will be chairing the committee outside the Chamber; and the honourable member for Turtle Mountain (Mr. Tweed), will be chairing the committee in the Chamber and temporarily.

The Acting Chairperson (Mr. Gerry McAlpine): Good afternoon. Please come to order. This afternoon, with the co-operation of the committee, this section of the Committee of Supply meeting in Room 255 will resume consideration of the Estimates of the Department of Rural Development.

When the committee last sat, it had been considering item 3.(a) on page 115 of the Estimates book. Shall the item pass?

Hon. Leonard Derkach (Minister of Rural Development): Mr. Chairman, I was asked the question regarding the Canada-Ukraine Business Initiative, and I believe when we ended our session yesterday afternoon, I had not completed my response to the question, so I was wondering if I may complete the response.

The Acting Chairperson (Mr. McAlpine): With the indulgence of the committee, is it agreed that the minister will be allowed to finish his response? [agreed]

Mr. Derkach: I think I indicated to the members of the committee yesterday afternoon that the three provinces, Alberta, Saskatchewan and Manitoba, were participating in that Alberta was looking after the energy sector and Saskatchewan was looking after the agriculture sector. Our responsibility was the construction sector, and because we do not have a natural venue to attach our symposium to, it was decided that we would actually create a venue for the construction and construction material sector. To that end, we have now scheduled a symposium in Winnipeg which will be held between the 17th of June and the 21st of June.

At the same time, the members might know that there is also another international show being held in the city which is called Export House, and we will be co-operatively working with Export House to ensure that the two events can blend and can intertwine as much as possible.

The problem, of course, is to convince business people in Ukraine to come to Canada. As the members may know, they are now aggressively pursuing opportunities with countries throughout the world. Canada's participation in Ukraine has not been very significant to date, and that is why the Canada-Ukraine Business Initiative was launched.

In trying to promote the event and to ensure that there is some participation in Manitoba on the construction side, in early November I had the opportunity to visit in Ukraine where we were able to visit with many state agencies and city committees, as well as some private sector people regarding construction in Ukraine. It became very evident to us that there is a desperate need for northern-type construction in Ukraine because although there is a tremendous demand for housing, they do not use any insulation materials and things like triple-pane windows or double-pane windows, for that matter, and there is a need for technology transfer to their type of construction.

We have had some people who have been working in Ukraine to try to encourage participants at this conference. We are hoping that we will get 40 or 50 people or perhaps more in Manitoba during that period of time with whom we will be able to establish some meaningful linkages.

I might also say that while we were there, the private sector did sign a memorandum of understanding for the reconstruction of one of the apartment blocks, and there are just literally thousands of this particular style of apartment block that have zero-insulation, single-pane windows. The structures are literally falling down. They cannot be torn down because they are still inhabited, and because of the shortage of housing, it is felt by the government in Ukraine that they have to be rebuilt. We feel that we have the technology in Canada to be able to do this.

This is more than just reconstruction because it plays into the energy sector, and there will be tremendous savings of energy because at the present time they lose about 60 percent of their energy through the roof, through the windows and through their doors.

It also means that we can probably link Manitoba businesses with Ukraine businesses in doing this massive reconstruction. The one company that we were dealing with had a million and a half square metres of space that they needed to renovate almost immediately. So the task is horrendous in terms of the quantity of work, as well.

So we are hoping that come June we will have some meaningful participation. It is my understanding that the Prime Minister of Ukraine, Mr. Lazarenko, or the deputy prime minister and also the Minister responsible for Economic Development, Mr. Shpek, will be joining the delegates in at least Calgary, and then the delegates will be coming to Manitoba from there.

That is sort of a brief overview of what the CUBI initiative is. We do have a meeting in Calgary on May 7 to finalize the details, and at that time we will also be sending another delegation over to Ukraine to try and do the final paperwork and sign up for the project because, as you know, if they are coming here in June, most of that work has to be done by mid-May. [interjection] No, we are not looking for volunteers right now. But the private sector will be going over to Ukraine in the early part of May to do that.

Mr. Clif Evans (Interlake): I thank the minister for the explanation. The trip to Ukraine in May, is the minister going to be involved in that?

Mr. Derkach: No, I will not, because the House is sitting, and therefore it is impossible for me to get away, but some of the people from the private sector are going. Unfortunately, the flooding in Winnipeg is causing some of our delegates from the private sector to beg out of the trip as well, so it is causing us a bit of concern.

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I spoke to the ambassador in Ukraine about a week ago. He thinks it is absolutely urgent that we go there because, as the member may know, in Ukraine there is still a tendency to deal government to government and not private sector to private sector. So if the private sector goes over alone, there is a reluctance for the people in Ukraine to deal with them directly. They want to deal on a government-to-government basis. So I regret that I will not be able to go, but it just makes it a little difficult when the House is sitting.

(Mr. Peter Dyck, Acting Chairperson, in the Chair)

Mr. Clif Evans: I look forward to the minister providing an update on that and also look forward to the June meetings that are going to be held here. It is unfortunate, of course, that we have to deal with what we are dealing with here in Manitoba right now, to have to put up with and take away from a real delegation to go over there to finalize everything, and I hope that works out. I know that the forum will be successful; I hope it will be successful. So I encourage that, and we encourage the whole process.

The Acting Chairperson (Mr. Dyck): 13.3.(a) Corporate Planning and Business Development (1) Salaries and Employee Benefits $614,600--pass; (2) Other Expenditures $81,200--pass.

3.(b) Small Business and Community Support (1) Salaries and Employee Benefits $189,000.

Mr. Clif Evans: Can the minister enlighten us here with this branch? It is a new part of Rural Development. Can he explain why this part of Rural Development was formed?

Mr. Derkach: Mr. Chair, I would be happy to. The Small Business and Community Support branch was created in June of 1996 to work in partnership with community leaders and small business people in assisting and supporting the grassroots business development through the provision of marketing and information-communication services. The member may know that we did not have a branch of this nature in our department, although it is very common in most departments to have in marketing or communications a small business support branch. So it was for that reason that we created this branch.

This branch has responsibilities to work with small business throughout Manitoba to ensure that their products can get to the markets that they are designed for, that we assist manufacturers, small business people, in the promotion and the marketing of their products and that we basically support them in their marketing efforts.

Specifically, the objectives of this particular branch are to continue promoting the climate of growth in our rural settings to ensure that Manitoba and our small businesses remain a vital and growing part of our province. It is to improve partnerships with the community through co-ordination and co-operation among the various regions and communities of the province through work in round tables and local economic development agencies, environmental groups, our education and research organizations, business, labour and local government.

It is also to inform rural Manitobans of the quality of services available in all areas of the department, so that rural Manitobans can help themselves in terms of being able to launch their businesses, and it is to promote and support the department's role as an advocate of rural needs and a catalyst for the co-ordination of various activities that take place throughout the province.

We also respond to requests of small rural businesses in assisting them in developing market opportunities, and I guess I could use some examples, but I would like to indicate that a few years ago we were approached by a grower of peas who grew a particular kind of pea that was being exported, I think it was to China. The peas were processed in China. They were processed in such a way as to make them into a snack food. They were roasted, then they were flavoured, and then they were shipped back in little packages and were sold in many of our health food stores and our specialty stores for a significant value-added price.

So we were approached to help develop a food product where we could take this pea and process it into a finished product and add different flavours to it. Through our food lab, we were able to do that, and then once we have done that, this particular branch would work with that business to ensure that we could get the product onto the marketing shelves of various stores in our province but, additionally, to export this product to other provinces and to other parts of the world.

I could use another example, and the member may have heard of the individual who launched a business in salsa, and his product, although it is just a fledgling business, was incubated at the Food Development Centre. Now the individual is marketing this product, and this product is finding its way onto the shelves of our Safeway stores and IGA stores and that sort of thing. Our responsibility is to work through this branch with companies like that to promote their product to ensure that they, in fact, can make their way into the marketplace, because that is one of the most difficult parts in trying to get our products either into an export position or onto the shelves of stores in this province and throughout.

We work in other areas as well. If you look at communities, I would like to reference one, and unfortunately that community is experiencing extreme difficulty right now, and that is the community of Emerson where we helped in developing their site project in terms of the historical benefits of it. That is the RCMP site of Fort Dufferin.

So this particular branch works with a community to not only promote but to set out a business plan on how they can promote that particular site and can attract development to restore a site like that and to create that site into not only a historical site but also into a tourism site.

The restoration of that particular site has many ramifications. As a matter of fact, it is seen that perhaps corporations like the Disney Corporation can, in fact, be involved because they own the RCMP logo, and there might be some interest from them.

So we work with communities, with agencies, with outside groups, to try and ensure that we give the best possible benefits of marketing a product, a community, a site in the province of Manitoba.

Mr. Clif Evans: I look at the Activity Identification, two paragraphs: produces the departmental newspaper. I have never seen that. I have not seen that, and I guess Rural Development is getting into--I hope not--the newspaper industry and a radio show. Can the minister explain that?

Mr. Derkach: Yes, I would be happy to. First of all, it is the same publication that there were questions in the House about just prior to the election, I believe, and the issue was the number of times the minister's photograph appeared in this particular newspaper. It is called Rural Developments, and I was proud to be in that newspaper because the department was indeed doing work in it, and as a matter of fact, the opposition critic, I believe, was even in Rural Developments as well. It is a widely distributed quarterly that we send out to, I believe, 15,000 businesses and households throughout the province, mostly businesses, and municipalities. We do it on a quarterly basis.

Basically, the stories in there are the success stories of businesses throughout Manitoba. They may or may not have accessed programs from government. Some of them are independent businesses who have achieved success on their own without any support from government, but it is basically messaging what kinds of things are happening throughout the province, giving hope and incentive to those who have ideas and have dreams to take up the challenge and to create their own success.

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This came out of the Neepawa forum. If you will remember years ago, there was a call for us to message what it was we were doing in government more accurately and more effectively. I think that has happened, particularly with this particular quarterly. It is not just Rural Development stories in the paper. We use stories that are of interest to the social side, the economic side, just some human stories in there which are of interest to readers throughout the province. I will certainly make a point of adding my honourable friend's name to the list to ensure that they, indeed the NDP party, get a copy of this instead of trying to get it in other ways.

Our next edition will focus on the rural youth of our province. Through you, Mr. Chairman, I would be happy to share these copies with the opposition members and certainly add the opposition party to the mailing list. I regret that you have not been added to that list.

In terms of the radio show, you may have heard a couple of the ads lately on the hometown clip. As a matter of fact, it is young Manitobans talking about their hometown. It is all third-party stories. It is not a radio show where I get on and talk about the merits of rural development and the benefits, although I would like to, but this is actually third-party characters, real people who are talking about their communities, their businesses and what they have done in their communities to promote their towns, their communities. The latest news or radio clips are of young people who are in business.

The youngest individuals, I think, are 11 years old who talk about their hometown. As a matter of fact, one is from Winnipeg Beach, I believe. One is from Minnedosa, and then there are some from Flin Flon. The 10 regions of the province are really covered by these. So that is basically what the radio show side of it is. So it is part of the strategy of ensuring that Manitobans know what is going on in their communities and that we message some of the activity that is taking place in the rural part of our province.

Mr. Clif Evans: I must say that this is the first time that I have seen this. I can honestly say that, and checking with my colleague, I do not think we have seen it in our caucus unless it has come there and someone thinks it is such good news that they take it and take it home so nobody else can see it, I am not sure. Maybe they might think that it is just government propaganda, I am not sure, but I would certainly appreciate being on the list with this, and hopefully it will benefit and this branch will benefit. So basically what we have done here is created a branch to assist any company in their marketing strategies or potential marketing strategies for their products, as the minister has said, for either export or for on-shelf sales within the province or within Canada.

He has indicated a few of the dealings that the branch has already had, and I would hope to find out more about this branch as it grows and progresses and find out exactly from the minister just what it is doing and with whom at the time.

Mr. Derkach: Just to add to what I said, Mr. Chairman, I failed to mention that this particular branch is at the present time creating a handbook that is scheduled for release in May to assist rural small business people with a framework for developing a basic marketing plan. This handbook includes a directory of rural Manitoba communications consultants. It also is going to, I guess, give a step-by-step indication or process of how a marketing strategy can be developed. This is just another, I guess, duty that has been assigned to this particular branch.

In addition to that, I might say that this branch has also been involved very heavily with Rural Forum and ensuring that our communications is done properly and effectively for the upcoming forum as well.

Mr. Clif Evans: Mr. Chairman, just looking through the publication here very quickly, I would encourage the minister and the department to perhaps use this more towards the pluses for the communities themselves and what they are doing. I would also want to encourage the minister that in my community, my constituency I have a business feeder machine that has expanded tremendously in the last five years. Articles such as that to tell Manitobans just what is going on in different areas, not just specific areas where it is always hurrahs and good things happening, let us deal with some of the things that in the smaller communities to them is a big deal but maybe not in the scope that some of the other articles are indicating.

Mr. Derkach: Mr. Chair, I would have to say to the member that at every meeting that I speak to, whether it is the chamber, the municipalities, the communities, the conservation districts, I encourage everyone to submit their stories or at least let us know what their success stories are. As a matter of fact, we found one in Oak River I think it was, a manufacturing business that I had no knowledge of, and they certainly were showing us that they started from humble beginnings and had created quite a little enterprise employing about 26 people. I invited them to write to us and tell us about their story or, if they could not, just to at least contact us and we would have somebody go out and talk to them. Each Rural Development's release issue carries with it a block where we invite communities and individuals to tell us their stories. If you look at this particular one on page 2, at the bottom it says: Tell us your story.

We invite, whether it is individuals or companies to come forward. They do not have to tell us the detail. We can get that by contacting them afterwards and getting the details from them, but we try to cover the entire province with the stories that are in there as much as possible. The publication has been very, very well received throughout Manitoba, and I regret that the member did not have a copy.

Mr. Clif Evans: Just about on every page, though, maybe we could see more pictures of our entrepreneurs and our rural people as compared to the number of ministers that we see in this publication. I would encourage that. I know that from time to time the government likes to express its good news, but I would like to rather see--

Mr. Derkach: We will even include the critic.

Mr. Clif Evans: Well, if you include the critic, that might be okay. Like I say, I would sort of like to see more of the rural, of the grassroots. Right now, I will encourage this publication.

Mr. Derkach: Mr. Chairman, it is not often that you will see that many pictures of ministers in a publication. I think this was an exception. From time to time you will when there are stories to be given. For example, if there is a budget, you want to ensure that the budget highlights are included. When there is a new minister in a particular portfolio, we will ensure that we write about the new minister, and I think there is coverage of that.

We are not opposed to putting anyone in the publication, and as I said, I have even seen the critic's picture in one of them. We will try to ensure that he stands in an appropriate spot and gets a picture taken from time to time.

Mr. Clif Evans: I thank the minister for that and the explanation, and if the publication is accepted throughout, then I do not have a problem with it. We will certainly look forward to more.

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Mr. Tim Sale (Crescentwood): In both the paper and apparently on the radio show, advertising is solicited?

Mr. Derkach: No. There is no advertising solicited either in the newspaper or on the news clips, I do not believe.

Mr. Sale: Is there no revenue generated by the paper in terms of advertising?

Mr. Derkach: Not at this time, but that is something that is being explored. We wanted to dedicate the paper as much as possible to putting information about communities and individuals and businesses and as much as possible to limit the amount of advertorial in the newspaper, and, basically, that is the approach we have taken up to now.

Mr. Sale: I just note the ad from Athabasca Airways on page 8 which it would be very hard to understand that as anything other than an ad, if you are looking at it. If it is not an ad, it is sure as heck wonderful free publicity.

Mr. Derkach: I guess that is an anomaly, Mr. Chairman, because I am advised that that was an agreement that was reached as a result of the airway doing some work for us as a department for the Rural Forum, and there was an agreement that we would include an advertisement for them in Rural Developments. But it is not a matter of course.

Mr. Sale: Mr. Chairperson, I think the minister can see and I am sure that other committee members can see the difficulty when we start having agreements to publicize certain businesses as a result of those businesses doing certain things for the government. The potential here for misunderstanding, let us say, on the part of the public as to why certain businesses are being promoted in government publications while others are not is fairly large.

I doubt that the minister would be comfortable saying in this newspaper, the following ad appears as a result of an agreement between the department because the company involved did something for us, so we are doing something for it. I do not think the public would find that a very good explanation, Mr. Chairperson.

Mr. Derkach: That is a fair comment and it is something that we will pay attention to, but this was not for, necessarily, the department. This was done, as the member will see, for Rural Forum rather than just for the department. We do have sponsors for Rural Forum, there is no question about that. This resulted as an agreement, I guess, for Rural Forum, not for the department.

Mr. Sale: Just one other question about Rural Forum. The newspaper highlights the country and western concert quite prominently and it is being put on--at least the corporate sponsor is Paquin, I guess, who is the ticket seller. Is there any subsidy or crossing of funds for that concert, other than the obvious promotional effort here for that headliner or for any part of that paid entertainment?

Mr. Derkach: There is cost promotional advertising that is done, as is evidenced in the paper here, but there is no subsidy to the concert itself by the department.

Mr. Clif Evans: Just one final question on this. So then the cost of the paper and the radio show is funded by the department. There is no sale of advertising whatsoever for the radio portion of this.

Mr. Derkach: That is correct.

The Acting Chairperson (Mr. Dyck): Okay, moving on to 13.3.(b) (1) Salaries and Employee Benefits $189,000--pass; (2) Other Expenditures $58,900--pass.

Resolution 13.3: RESOLVED that there be granted to Her Majesty a sum not exceeding $943,700 for Rural Development, Small Business and Corporate Planning Services, for the fiscal year ending the 31st day of March, 1998.

Then moving on to 13.4. (a) Executive Administration (1) Salaries and Employee Benefits $104,900.

Mr. Clif Evans: Under this branch, who is the department head for this Executive Administration branch?

Mr. Derkach: Mr. Chairman, I will introduce the head of this branch. It is Ms. Marie Elliott who is the ADM for the Local Government Services side of the department. Maybe I should at this time as well introduce our provincial assessor who is Mr. Ken Graham. Mr. Graham has been around for many years and is probably familiar to many of the members. He heads up the Assessment Branch of the department.

Mr. Clif Evans: Can the minister just briefly provide the committee with an overview of the latest assessment that was done?

Mr. Derkach: I would be happy to. I guess in doing reassessment, one has to pay attention to the impact that it has on the property owners of the province to ensure that there is a good understanding of why we do reassessment and what the objectives are and not to mislead individuals to thinking that reassessment is another form of increased taxation. Rather, it has to do with the legislation that was passed regarding market value assessment and the need to reassess on a three-year cycle. However, as the member knows, we did amend the act to extend the cycle by one year. The purpose of reassessment is also to ensure that there is equity among taxpayers so that we do not have a shifting of taxes from one particular class to another and to assure that values of property in this province remain current, or as current as possible, and to try and ensure that taxpayers feel confident that in fact their property values are current, both for marketing and for taxation purposes. So those are what the objectives of assessment are.

In terms of this year's reassessment, I would have to say that, by and large, the process has gone on extremely well and without a lot of glitches. We have undertaken as a department to ensure that our first, I guess, motto is service to our clients, and the entire Assessment branch has really taken this to heart and very seriously.

First of all, we sent out an information piece that would let individuals know what assessment was all about. After we did the assessment, we then had meetings with individual municipalities. I might say that newspaper articles were also used to explain the reassessment cycle.

Then we did a centre spread in Rural Developments to ensure that the message was getting out through that medium as well. A brochure was prepared, and this brochure covered all the elements of reassessment and what it really meant. In addition, on the back of this we also had the times when various meetings could be held in various regions. I think every municipality here is covered, are they not?

Then of course we have had open houses to ensure the public had access to our staff and to municipalities. The open houses were ones where we had the actual assessors present. They were equipped with either laptops or computer systems which would allow them to access information for any individual who wanted to come forward and see how his or her assessment compared to assessments in their neighbouring area.

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Mr. Clif Evans: Well, as yet, I have not had anybody coming to me with any complaint or concern. Does the minister know how many appeals to date there have been with the assessments?

Mr. Derkach: To date, Mr. Chairman, I am advised that about 50 percent of the appeal deadlines have passed, and the appeal rate is exceptionally low, about 1 percent of the tax roll or the assessment roll is under appeal at the present time. So that is very, very low.

Mr. Clif Evans: Yes, it is.

I guess a concern that was presented to me is the slow pace of the reinspection schedule. Has the minister been approached to improve this process?

Mr. Derkach: Absolutely, Mr. Chairman. Although there is concern about the slow pace, I guess it is the southeastern side of the province that needs to be reinspected at this point in time. But, you know, three-quarters of the task is done. I go back to a few years ago when I first came into the department, or a little earlier than that, where reinspections had not happened at least in the city for, what, 15 years or more? So we are certainly trying to do our best to ensure that we are on track.

Municipalities that come to us and ask us to speed this up are told that, well, remember that you pay three-quarters of the cost of this, so do you want us to hire more people? As soon as you tell them that they pay three-quarters of the cost and that if we hire more people they will be liable for that too, they say: Oh, no, no, just work faster. So I think there is sensitivity to ensuring that we do the last quarter as quickly as possible, but these things take time. When you have a reassessment cycle, that takes staff out of the field, if you like, to do the reassessment. So I think they are working as hard as they can, and they really are doing a fairly adequate job as can be seen by the few appeals that we have to date. We are quite pleased with the effectiveness of the reassessment as well.

Mr. Clif Evans: The minister mentions the southeastern area. I only briefly read that, the article that was in the paper, the media, last week or the week before--can you help me out with that--about the hogs. I did not get a chance to fully read that, nor did I get a chance to speak to anybody from the area, but why do they have these concerns?

Mr. Derkach: There are two reasons. One, I would suggest that back in 1992 when we did the reassessment--'91 when we did the reassessment--there may have been an undervalue of barns. Then this year, of course, I think we have seen what has happened in the whole hog industry. That is that there certainly has been a rapid expansion. When you have that, you are going to have, you know, the value of these barns reflected in an assessment.

So basically that is what has happened. We are on market-value assessment, and some of these barns are $4-million barns. I mean, the cost of them is the easiest way to assess them, because that is the market value of that particular barn. I think we moved some way a few years ago when we took the equipment that is in the barn that used to be taxable, I believe, and assessed at a taxable rate, is now exempt from that.

Mr. Clif Evans: So then the minister is saying that just basically the barn itself in the operation is assessed. But then does that not--according to these folks--also create a problem for the value of their property being assessed way up also? If it is a mile away or a mile and a half away, would that not affect the assessment of those farms and land values?

Mr. Derkach: The assessment may go up because you are assessing the actual value of a property, but that does not mean that their taxes will go up. So, yes, if there is a concentration of hog barns in a particular area, the total value of assessment in that municipality will be considerably higher. But it simply reflects the value of those barns or those structures that have come up and, as the member knows--I was reading today that the one plant for Boissevain is about $4 million. I think the Souris one was about the same. So these barns are costing a significant amount, and you cannot go in there and assess them at a million dollars when someone has paid $4 million to construct the barn. So it really reflects the market value of that structure.

Now that does not mean that the taxes are going to go up in that municipality, because that is something that is within the purview of the municipal council to ensure that there is some equity in the taxation.

Mr. Sale: Mr. Chairperson, I do not think the point is any concern about market-value assessment. There are problems with market value assessment, but that is not the issue. I believe the issue was complaints from nearby landowners that their land was being assessed higher simply because they were adjacent to pork industry developments which were causing their lands to be higher in value when, in fact, they were not in the pork business and did not want to be in the pork business and, in fact, likely could not be, given the existing density of the hog barns. That was the concern I was hearing.

Mr. Derkach: Well, Mr. Chairman, the reality is we assess properties based on their market value, and market value is arrived at by sales that occur in that region. So in a region where you have land selling at a thousand or $1,200 an acre in the previous three or four years, it is certainly going to be recorded, and it is on that basis that the assessment will go up. The hog barns that are being assessed are assessed at their value, not at the land's value.

Mr. Sale: But the problem with that, Mr. Chairperson, is that if people who are producing a relatively lower value from their land assets are faced with an increase in their assessment of their land on the basis that nearby land is more valuable because it is being used more intensively for barns, what you are really doing is driving the pattern of land use in a way that may not be in the best interests of the local community or even of the province as a whole, because we do not want every last acre to be converted to that kind of intensive use. The infrastructure of our province and the environment would not stand it.

Mr. Derkach: Mr. Chairman, I am advised that raw agricultural land is valued separate and apart from agricultural land that is used, for example, for hog production, so, therefore, the value of land is based on sales of raw agricultural land, not land that has intensive livestock operations on it because that is usually a smaller piece of land. So if we are talking about agricultural land for crop production, that would be valued on the basis of the sales that occurred in the last three years.

So I think the issue in the newspaper was a little inaccurate in that there was a feeling that the hog barns were driving up the land values when, in fact, it was the history of sales that was really reflecting what the assessment on the land was.

* (1540)

The Acting Chairperson (Mr. Dyck): 13.4.(a) Executive Administration (1) Salaries and Employee Benefits $104,900--pass; (2) Other Expenditures $32,600--pass.

4.(b) Assessment Services (1) Salaries and Employee Benefits $5,515,500--pass; (2) Other Expenditures $1,207,200--pass; (3) Less: Recoverable from Education and Training ($1,680,700).

Mr. Clif Evans: Could the minister explain this line, please?

Mr. Derkach: This is recoverable from Education on the basis that they pay 75 percent of the cost of assessment on their properties, and their monies are paid to General Revenue. We recover this through General Revenue from the Education system. [interjection]

Mr. Chairman, a correction, it is not recovered from General Revenue. It is recovered, I am sorry, from the Department of Education, and they billed it in as part of their Estimates.

Mr. Clif Evans: And that is for 75 percent of what cost?

Mr. Derkach: It is 25 percent of their cost, I am sorry.

Mr. Clif Evans: Of assessment.

Mr. Derkach: Yes, of assessment.

Mr. Clif Evans: So will this line be added at assessment time, or is it going to be continuous? Will the Department of Education and Training be providing cost-sharing of day-to-day assessment, or it is just going to be every four years? If I may just continue, I find it is not in the '96-97 departmental Estimates, but it is here at a figure of 1,679 for '96-97--just an explanation on that.

Mr. Derkach: This is a cost that is levied every year, and as I had indicated before, that it is 75 percent of the cost of assessment, it is not; it is 25 percent that is recovered from the Department of Education, whereas municipalities pay for 75 percent, and this is done on an annual basis.

Mr. Clif Evans: I know I am going back to the '96-97, but it is a force of habit--

Mr. Derkach: '95-96, you mean.

Mr. Clif Evans: No.

Mr. Derkach: Okay, '96-97.

Mr. Clif Evans: To the '96-97 Estimates book. It is not there, yet in the now Estimates book, '97-98, we are showing that under '96-97 it was there. What happened to it between '96-97 and '97-98?

Mr. Derkach: In the past, this used to be a cost that was borne by the Department of Rural Development. To better reflect where the costs really were, this was separated out, and each department or each group, then, has to pay their own costs. It is on that basis that we now reflect that cost in the Estimates of the Department of Education, and we recover it.

Mr. Clif Evans: Maybe it is just accounting practice or whatever, and there are parts in Estimates that this same type of thing is reflected, that when I go back to the '96-97 assessment, something is not there even under the '96-97 line, and then when I look in here, something appears that was not there.

So if you are budgeting in the '96-97 Estimates, you are telling me now for '97-98 that it was there in '96-97 when, in fact, it was not there, at least not on paper.

Mr. Derkach: Mr. Chairman, it was paid by the Department of Rural Development last year, but all we are doing in this particular Estimates book is showing what the cost of that was in 1996-97, although you did not see it there in the line last year. It was not there; it was borne by the Department of Rural Development.

Now we are trying to reflect where the cost is, and therefore this year the Department of Education and Training will be paying that cost for assessment. It just simply reflects where the benefit lies. It is not with Rural Development; it is with Education.

Mr. Clif Evans: Then what, I guess, we should have known last year during Estimates--when we were at this point, the minister should have indicated that that would have been the case. [interjection] Well, you see numbers and you do not see numbers, and to me, if there is a logical explanation to it, fine, but when I see it--you know, if I gave my accountant numbers to do my year-end, and he brought me back my year-end with different numbers, saying, well, that may be something that might happen, I would not like that.

I am just asking why it is in one and not in another, that is all.

Mr. Derkach: Mr. Chairman, in the past, not only this government but previous governments used to pay this cost out of this particular department, and it was never reflected as a--you never took that cost out and showed what it was. It was just a cost that was picked up for all assessment from the department. To reflect where the cost truly is, it has now been taken out and apportioned to the various departments or the entities that have to pay that cost, so it shows where the benefit is.

It is just a simple matter of doing proper accounting practices to show what the true costs are. Although it was not reflected in a separate line last year, we are doing it this year for the first time. All we are trying to do is show you a comparison of what the costs might have been last year, so that you have something to compare it to, although it was just handled out of a pool last year and was paid for by the department.

This year, we are not paying for it anymore. It is being recovered from the Department of Education and Training, and you will see this particular number show up in their Estimates, as well, as a cost.

Mr. Clif Evans: I do not have a problem at all with what the minister is explaining, and I am not jumping on the minister. All I am saying is that I would have liked to have been informed during our Estimates process that when we were here on page 43 of the Estimates book for '96-97, that the minister would have explained that this was coming into play.

That is all I am saying. Someone who does not understand the process would look at this and say, well, basically, okay, then my question would have been did the Department of Rural Development receive $1,679,000 in the year '96-97?

Mr. Derkach: No.

Mr. Clif Evans: Then why is it there? I mean, why put it in?

Mr. Derkach: Mr. Chairman, we could have a blank there.

Mr. Clif Evans: Yes, leave it blank.

Mr. Derkach: We could have a blank there, and that is probably what should have happened. However, for comparison purposes, I guess there was an intent to show what the cost was last year as compared to this year, and that is the only reason it is there.

We just received approval from the Department of Finance to be able to show this and to be able to charge it back in this particular year. That number, if the member wishes he could strike it out, was just done for comparative purposes, so that when you ask the questions next year you will know.

* (1550)

The Acting Chairperson (Mr. Dyck): 4.(b)(3) Less: Recoverable from Education and Training ($1,680,700)--pass.

4.(c) Local Government Support Services (1) Salaries and Employee Benefits $747,800--pass; (2) Other Expenditures $232,400--pass; (3) Transit Grants $1,444,100--pass; (4) Municipal Support Grants $1,045,700--pass; (5) Less: Recoverable from Rural Economic Development Initiatives.

Mr. Clif Evans: Mr. Chair, with all due respect, I would appreciate it if we would slow down a little bit. I have notes, and we are whipping through this like a hot knife through butter, so I would appreciate it. I would like to ask a few questions on 13.4(c)(1) and (2).

The Acting Chairperson (Mr. Dyck): The honourable member for Interlake, please proceed with your questions.

Mr. Clif Evans: Under Local Government Support Services administration, there has been a small change in funding. The transfer line shows under Other Expenditures in '96-97, 44.4. It was a loss. What does that line represent?

(Mr. Gerry McAlpine, Acting Chairperson, in the Chair)

Mr. Derkach: We were asked to find the funding internally for the small business development branch, and it is for that reason that you see a transfer from here to that branch, because it is an internal transfer. As I indicated previously, we had to fund it internally, so we had to reprioritize some of our funding, and that is why you see a transfer here.

Mr. Clif Evans: I also see that the department has dropped it in funding in the last couple of years from a high of 1.1 to this year's expenditure of $980,000. Is there any particular reasoning for the drop? I do not see it in staff; probably in some of the expenditures, of course.

Mr. Derkach: Yes, the cost of The Municipal Act review has been taken out, and for that reason we have a decrease.

Mr. Clif Evans: We do not have a grants line as we did in last year's Estimates. Can the minister just explain why last year's Estimates book had a grants--there was nothing there. There was a drop of $54,000 in grants. This year, there is no line at all of grants.

Mr. Derkach: That was for the Churchill economic development committee which was receiving funding from the department, and that has been phased out. That is why there is a reduction there.

The Acting Chairperson (Mr. McAlpine): Item 13.4.(c)(5) Less: Recoverable from Rural Economic Development Initiatives.

Mr. Clif Evans: I would appreciate that we would just go back to 4.(c)(3) for one very short question and then another question for 4.(c)(4).

The Acting Chairperson (Mr. McAlpine): Is there leave of the committee to revert back? [agreed]

Mr. Clif Evans: On this line, I just want to have the minister--it says: To assist municipal governments with providing public and handi-transit services to its citizens.

I would like to know a little bit more about this branch and how it helps and/or affects our handicapped people in rural Manitoba.

Mr. Derkach: Mr. Chairman, each year we try to support the mobility disadvantaged and senior people of this province with a program that provides handi-van services to these communities. It is not a total grant program because there is an expectation the communities will contribute as well.

In addition to that, communities largely operate these programs on a volunteer basis either through volunteer drivers or board members or in a way in which they can provide these services at the least possible cost. We provide a start-up grant to a community that has made its intentions known that they want to get into the program. The start-up grant is $6,000 which assists the sponsors in the establishment of the new services and also helps to defray some of the start-up costs.

Then when they purchase their handi-van, we supply a grant of a maximum of $10,000, and then if they require another vehicle we could participate in that as well. We provide for 37.5 percent of the gross qualifying operating costs to a maximum of $20,000 a year and to a maximum of $30,000 for operators with more than one vehicle, so basically that is the extent of our participation in that program.

It is a program that there is an extreme amount of demand for right now because more and more mobility disadvantaged and senior citizens are living in our rural communities. They require those services.

This is unlike the urban Handi-Transit program which is supplied in large part through operating grants by the provincial government. We do expect a significant contribution from our rural communities to deliver these programs, and there is a large volunteer component to this program as well.

Mr. Clif Evans: So then the Recoverable, which is on the next page, of $75,000 is used toward the same program. Can the minister explain that, just how that works?

Mr. Derkach: As I said, this was a program that was in great demand in rural Manitoba, and to assist in meeting some of the outstanding demands, we actually transferred $75,000 from REDI to help fund this program.

The Acting Chairperson (Mr. McAlpine): Item 13.4.(c) Local Government Support Services (5) Less: Recoverable from Rural Economic Development Initiatives ($75,000)--pass. 4.(d) Grants to Municipalities in Lieu of Taxes.

Mr. Clif Evans: First of all, recoverable from other appropriations. The minister is indicating in the Estimates, then, the grants in lieu of taxes are being paid for from other departments and through the Department of Rural Development to administer those payments.

Mr. Derkach: Mr. Chairman, the grants to municipalities in lieu of taxes amount to $14.886 million. We recover $14.791 million, which leaves us with a balance of $94,700 to pay. The recoverable grants are basically from three departments: Government Services for $13.099 million, Highways and Transportation for $875,000 and Natural Resources for $987,900.

* (1600)

Mr. Clif Evans: Would this be the line that--the minister is aware, his department is aware of the request by the now R.M. of Armstrong to pay grants in lieu of taxes on some properties within their R.M. During Bill 54, during The Municipal Act committee, the reeve brought it to the minister's attention here in committee. Also at a meeting, one of the rural meetings in Eriksdale a couple of years ago, the minister's staff sat with the R.M., then LGD. Does the minister have an update on it? What is happening with that?

Mr. Derkach: Mr. Chairman, when all of these areas were transferred to the various departments to pay taxes on, Natural Resources were charged with the responsibility of unpatented land, and, I guess, legal advice was that they should not be paying taxes or grants in lieu on unpatented lands. But there is not a large number of parcels in that. As a matter of fact, it is tiny little pieces of land, and I think the total amount is about $8,000. It is land that is really not productive or land that is not really useful or desirable by too many people, and so therefore Natural Resources felt that they should not be paying taxes on it or grants in lieu either. That discussion is ongoing, and I believe that a resolution is being sought as to whether or not there will be grants in lieu paid on that land or not, but the verdict on that is still out. I think there is still ongoing discussion in that regard.

Mr. Clif Evans: Mr. Chair, I guess this was brought to my attention at least four years ago, and I would hope--well, of course, it is not this minister's department--but I would hope that the R.M. is coming to the Minister of Rural Development for assistance with this. I would hope that the minister and his department would try to speed the process up to settle this issue because whether the minister feels that it is, or the department, I am sure, but the R.M. could certainly--and from what I understand they have every right to ask for this money they feel. They have sought legal advice, too. I mean, that money would do well for them if it was given to them like they think it should be. So I would hope that the minister would encourage his colleague the Minister of Natural Resources (Mr. Cummings) to deal with this and settle it, and have the R.M. receive what is coming to them.

Mr. Derkach: I will address that with the minister at my first opportunity after the flood is done.

The Acting Chairperson (Mr. McAlpine): Item 13.4.(d) Grants to Municipalities in Lieu of Taxes (1) Grants $14,886,100--pass; (2) Less: Recoverable from other appropriations ($14,791,400)--pass.

13.4.(e) Information Systems (1) Salaries and Employee Benefits $684,300.

Mr. Clif Evans: Mr. Chair, there have been some changes in funding with this branch. In reading the activity identification, this Information Services branch works in co-ordination with the Assessment branch then. Is that what this branch of Rural Development does?

Mr. Derkach: Mr. Chairman, I would like to indicate that the operating costs of this branch will go up and down depending on whether we are into a reassessment year or not, and as you get into a reassessment year your costs will increase. When the reassessment is done, your costs will decrease. So that is why you will see a variation in costs in this particular branch.

Mr. Clif Evans: The total subappropriation for this branch--again the minister, well, maybe not the minister but the Estimates have done it again, the books have done it again. It has thrown numbers around again that come out of the air and appear and disappear. The '95-96 total subappropriation for this branch was $2,367,000, and, again, we go back and then we see the bottom line in this '97-98 book, it shows at '96-97 with Recoverable from Education and Training, again, shows $1.7 million. Yet, last year's Estimates book showed $2.1 million. If it is the same explanation that the minister has and I can appreciate as he says, that the expenditures of the branch go up and down with assessment years, but then '95-96 was an assessment year.

Mr. Derkach: Mr. Chairman, if, in fact, the member were to strike out those numbers, and I can see where they are causing some confusion for the member, because if you look at the '95-96, it was 2.367; in '96-97, it was 2.183; and if you take those recoverables away, it ends up at 1.771. Therefore, I would ask him to ignore the right-hand column, and the reasons are the same.

Mr. Clif Evans: Will this recoverable now be in?

Mr. Derkach: Yes, it will continue into the future.

Mr. Clif Evans: So, if I might, this branch and the Assessment branch, there is a co-ordination between them, of course. Is there a problem as to why they are totally separate? I mean, can they not be under one umbrella?

Mr. Derkach: Mr. Chairman, we try to show the functions that the ADM has responsibility for, and although the Assessment area reflects a very narrow area, the Information Systems not only serve the assessment function, it also serves other areas of the department. Therefore, it would be unfair to try and reflect those costs in the Assessment costs.

Mr. Clif Evans: So there is more to this branch than just the assessment part.

Mr. Derkach: Oh, yes.

Mr. Clif Evans: Okay, that was my query. Thank you.

* (1610)

The Acting Chairperson (Mr. McAlpine): Item 13.4.(e) Information Systems (1) Salaries and Employee Benefits $684,300--pass; (2) Other Expenditures $1,471,400--pass; (3) Less: Recoverable from Education and Training ($409,700)--pass.

Resolution 13.4: RESOLVED that there be granted to Her Majesty a sum not exceeding $10,415,200 for Rural Development, Local Government Services, for the fiscal year ending the 31st day of March, 1998.

13.5. Rural Economic Development (a) Executive Administration (1) Salaries and Employee Benefits.

Mr. Clif Evans: Under this line, would it be appropriate to talk a little bit about The Sustainable Development Act or would there be a more appropriate line to discuss that?

Mr. Derkach: We should probably have discussed this under The Planning Act, because there is some crossover, but The Sustainable Development Act is actually being brought forward by the Minister of Natural Resources, so it would probably be more appropriate to ask him questions on The Sustainable Development Act, but I will, for that matter, if there are general questions as they relate to planning or a function of that, I would be pleased to answer them.

Mr. Clif Evans: The planning part, is that further on?

Mr. Derkach: No, that is something that we passed yesterday, but I am open to going back and having some questions posed regarding the act if they are appropriate for this department. If not, I will tell the member.

Mr. Clif Evans: I apologize for missing it yesterday. I did not have my information here. As far as The Sustainable Development Act, and we know that it is being revisited, but there are many comments and recommendations and concerns with The Sustainable Development Act, the proposed development act that affects rural Manitobans and affects the Department of Rural Development.

I am curious to know what the minister's reaction was and where he was with the UMM's and MAUM's discussions with him in support of their comments and recommendations as to how The Sustainable Development Act, the one that was presented, white paper was presented, had the concerns. How did the minister react? Were his department's concerns brought to cabinet on behalf of rural Manitobans as far as implementing some of the regulations that would be put in? What did the minister and his department--how did they respond to the discussions?

Mr. Derkach: This has been a fairly long, ongoing process and not only did we discuss it with municipalities, but we also had our Round Table on the Environment and Economy lead some discussions as well, and we knew from the very beginning that UMM had a difficulty with the appeal process for planning and, although The Sustainable Development Act speaks to allowing municipalities to make decisions about development, just as we do with the Municipal Board, we recommended that there be an appeal mechanism to protect both sides, the municipality in some cases, the developer in others, so that there was always a third party that could be appealed to make a decision on development.

That quasi-judicial board or body would have similar functions to the Municipal Board, where they would hear both sides of the argument and hopefully that that mechanism would not have to be used very often. But as the member knows, sometimes, and we have seen this over the recent past, where decisions were made on emotion rather than on fact, and there was a great deal of debate, discussion, petitioning and all kinds of things that occurred as a result. In the end, decisions were taken, sometimes to the benefit of the municipality and sometimes not.

So we thought that through our discussions we would allow for an appeal process to protect both sides. This would be a quasi-judicial body that would act in a similar way that the Municipal Board does now. That is still an outstanding issue. That part of the act is not going to be introduced at this time, because I understand that there are still more discussions that need to be held with affected parties in that regard.

Mr. Clif Evans: I thank the minister for his comments.

I think the minister would be well aware that the issues and concerns of the white paper that was presented before, and people coming to me and even in my areas where now, as you are aware--and my opening comments were that we have to be concerned with the grassroots, the economic development, yet people having the availability to take care of business themselves at the grassroots level, the elected officials. There are processes that are ongoing now where municipalities are revisiting the fact of changing their by-laws within the system--and brought it to my attention and concern that, you know, we are going through this process and then we are not going to be able to do anything with it anyhow, because The Sustainable Development Act is going to be a one-stop shopping centre and the minister is going to decide for us whether we--it was in. Those are the concerns, and that there was no basis of appeal. Those were the issues brought up to my attention.

I am concerned, and I am hoping that the Minister of Rural Development when The Sustainable Development Act comes out will of course share the concerns with me that the people will come to him with, and to myself, vice versa--I will too, if there are--with the changes. There may not be, but this member doubts that. I think there will still be concerns when it comes to Rural Development, and I think we have to make sure that we do not do anything through any other legislation or regulation that will affect what we are striving for and doing for rural Manitobans.

We cannot put a chain or a collar on these people. We cannot babysit them, but we cannot put a collar around them and say: This is the way it is going to be, and this is what you have to have in your community; this is what you have to have in your municipality; this is the way you have to operate--because I feel that could, down the line, put a tremendous strain on a lot of areas and a lot of communities. Under the white paper or The Sustainable Development Act--I mean I know that it would tremendously affect my area when it comes to the bottom line of water and land use, tourism.

So I am just putting on record that I hope that once the new legislation does come out for review that the minister and I and his department--that I would appreciate working with the minister and with UMM and MAUM to address all the concerns that they might have at that time, if that is the case. If it is not the case, then we will certainly work alongside with rural people, rural Manitobans and abide by their wishes, I would hope, and not by the wishes of new legislation.

* (1620)

Mr. Derkach: As I indicated, the reason those two parts of the act are not being contemplated for this session is because we want to ensure that there is opportunity, adequate opportunity, to discuss that part of the legislation, if you like, so that when we move ahead we will have indeed met the concerns that have been expressed by the affected parties and that it will be meaningful legislation when it is introduced and something that municipalities do want to work with. To that extent, I agree that there still needs to be more discussion in that regard.

The Acting Chairperson (Mr. McAlpine): Item 13.5. (a) Executive Administration (1) Salaries and Employee Benefits $104,900--pass; (2) Other Expenditures $30,700--pass.

13.5.(b) Infrastructure Services (1) Salaries and Employee Benefits $1,305,400--pass; (2) Other Expenditures $323,500.

Mr. Clif Evans: The Infrastructure Services and this is the Water Services Board, it is a board that, I guess, just helps out communities deal with problems they have with any type of water, whether it be in their communities or on farmlands. The communities of Fisher Branch and Ashern, with their water problems and with their plans, et cetera, would they have gone through this department or this branch of the department? How much assistance was available to them during the process? Of course, they have gone further now, the plans are in place. I just also ask the minister if there are any other communities that have come to this branch, to this board, from my area or the vicinity for assistance?

Mr. Derkach: Maybe I would like to pause for a minute here before I answer the question and introduce the ADM for the economic development side, Mr. Larry Martin, who is at the table now. In addition, joining us are Mr. Peter Mah, who is well known to the member, who is now the director of the community development area, and Mr. John Melymick, who is the manager director of REDI and the Grow Bonds Program.

With regard to the question, which was the Water Services Board and whether the communities of Ashern have participated, I have to say that I do not have that specific information, but I can commit to get that information for the member.

The Water Services Board works with each community across rural Manitoba. Now the northern communities, which fall under the jurisdiction of the Minister of Northern and Native Affairs and Energy and Mines are under that particular minister's jurisdiction and we do not participate in those communities. However, all other communities, incorporated villages, towns outside the city of Winnipeg for that matter, we do in fact participate through the Water Services Board in extending water services and sewage treatment facilities to those communities.

So to that extent, yes, we have worked with the communities that the member references, but I will get the specific information for that member and it will be in his hands very soon.

Mr. Clif Evans: I do not know whether the minister received an invitation to Arborg's official opening for their treatment plant, which is on Thursday. Would this department, would this branch be a part of, as it says here, and I am not really sure myself, but the 35 water treatment plants that will be operated in an efficient manner. Will this branch and this department be involved in that in Arborg?

Mr. Derkach: Mr. Chair, we have been involved in the establishment of that particular project, and although I would love to be at that opening, as the member knows, I have to be in the House, and so therefore I will not be able to be at the opening. It is part of the PAMWI agreement and PAMWI project which has federal participation, community participation and provincial participation. And, yes, I would dearly love to be there, but because duties of the House demand our presence here, it will be impossible for me to be there at the opening.

Mr. Clif Evans: Mr. Chair, I just received that invitation myself yesterday via fax, and I too am sort of caught in the middle of whether I am going to be able to attend, but I am pleased to see that it is on, that it is going. Well, perhaps we can work out a deal, I do not know. We will have to discuss it later.

The Acting Chairperson (Mr. McAlpine): Item 13.5.(b)(2) Other Expenditures $323,500-pass.

Item 13.5.c) Community Economic Development Services (1) Salaries and Employee Benefits $2,648,300.

Mr. Clif Evans: Mr. Chair, I just noticed through some of the footnotes on staffing that this branch had 59 employees in '95-96, has lost four within that period of time. It says transfer of a position and deletion of one position due to workforce adjustments, but that only accounts for two since 1996-97. Yet again, there are those numbers again; I do not know if the minister wants me to delete that too.

Mr. Derkach: Mr. Chairman, yes, in response to the question, two staff were transferred to the Small Business Development branch that we spoke about earlier, one staff year was transferred to Finance and we had a reduction of one, which is a total of four.

Mr. Clif Evans: Mr. Chairman, just to make another point with these numbers again, and it has happened again. I mean, 59, 59, and yet 57 in this year's Estimate book. I do not think that they are big deals either.

* (1620)

Mr. Derkach: I will send that message back to the Minister of Finance.

Mr. Clif Evans: Please, yes. I would appreciate if you would do that, and that way we would not have to query every time we came to these numbers that obviously are there one minute and not there another minute.

Under the Expected Results section of the Community Economic Development Services branch, applications for departmental economic initiatives under REDI and Grow Bonds will be expedited through regional delivery systems. Is this something new? I did not notice it, unless I missed it, in other explanation.

Mr. Derkach: I do not understand the question.

Mr. Clif Evans: Well, it is under Expected Results.

Mr. Derkach: Yes?

Mr. Clif Evans: The third from the bottom of the page, ". . . through regional delivery systems." Is that a new--

Mr. Derkach: No, Mr. Chairman, sort of the first point of contact for communities is through regional offices throughout the province, and we have nine or 10--we have 11 regional offices in the province, and they are the first point of contact between the department and the community, and these regional offices have been there for as long as I have been in the department.

Mr. Clif Evans: Mr. Chairman, and that is for both the REDI and the Grow Bonds.

Mr. Derkach: Yes.

Mr. Clif Evans: Anything else? Any other incentives?

Mr. Derkach: Well, we have our planning offices in these regions. In addition to that, we have some draftspeople in some of the offices, and, yes, the Community Choices program is run from these offices as well as the Community Works Loan Program, which is our newest one, would also be delivered through these offices as well--so all our programming basically.

The Acting Chairperson (Mr. McAlpine): 13.5. Rural Economic Development (c) Community Economic Development Services (1) Salaries and Employee Benefits $2,648,300--pass; (2) Other Expenditures $695,000--pass; (3) Grants $545,000--pass.

13.5.(d) Food Development Centre $985,000--

Mr. Clif Evans: Mr. Chair, the minister and I--well, I have not had the opportunity as yet to visit this facility.

An Honourable Member: No?

Mr. Clif Evans: No, still not. I think my colleague for Crescentwood probably has. He likes that kind of food, I guess, I do not know. He did not take me along either. He did not tell me he was going.

An Honourable Member: He did not tell you . . . Was there a reason?

Mr. Clif Evans: I do not know, but I would just like to ask--there has been a very, very slight decrease in the funding for this development centre and I wonder, of course, why, and basically what does the minister expect for a future from this branch from the Food Development Centre? What are we looking for in the future with this?

Mr. Derkach: Mr. Chairman, as the member knows, we recently acquired or took responsibility for the Food Development Centre. This was sort of the best kept secret in the food processing industry in the entire province, and if you spoke with people who were in the food processing and the value-added processing business, nobody seemed to have a very good knowledge of what the Food Development Centre did. It was actually called the National Agri-Food Technology Centre and very few people involved in that industry had any knowledge of what was happening there, what the purpose of that particular facility was.

As a matter of fact, when we took it over, there were pieces of equipment there that were extremely outdated and actually the place was in need of substantial upgrade in order to meet accreditation standards as well, I might say, and so a significant number of dollars had to be invested into this facility in order to bring it up to speed.

Mr. Chairman, we created a special operating agency in the food lab, hired a manager and have allowed the food lab to actually operate as an independent special operating agency who can actually go out and respond to needs much more quickly than you could through a department of government. Although they still have a long way to go in terms of having their name out in front of the food processing industry, I would have to say that with the kind of work that has been done by our economic development officer who was stationed at the food lab, by the manager of the food lab, by the people who were actively employed at the food lab, there has been a remarkable turnaround in a very short time.

So I am very high on the food lab. I think it has enormous potential. I just wish that our federal counterparts would understand that this centre could actually perform many of the duties that are now being developed at Southport through the nutrition centre, because I see no sense in having two entities like this in a community, where they could actually be working to complement one another. A lot of the research could be done out of the one facility because we do have space there. Unfortunately, I was unable to convince the federal minister to, in fact, complement the services of the special operating agency by including the nutritional centre, or whatever it is called, in the food lab as well.

Mr. Clif Evans: Mr. Chairman, I will make every effort to visit the organization, hopefully, once we are out of here. Maybe I will ask another one of my colleagues, someone who would want to go with me.

Mr. Derkach: I would certainly invite the opposition critic to in fact take a morning. The food lab would love to host you, because they want to ensure that Manitobans know what they are about. I think it is a very important function for the critic to understand what their function is and to, in fact, come back from there and ask questions about it. Because if there are ways that we can improve it, we do not have the wisdom of Solomon in terms of this industry. But we are certainly trying to learn as quickly as we can. The staff out there are very motivated and eager to do whatever it is they can to promote value-added processing in Manitoba.

As a matter of fact, I might mention that last year at Rural Forum they produced a product from one of our berry farms that was I think enjoyed by everyone. It was a saskatoon juice that they produced right at the forum. They took their equipment to the forum. Actually rural Manitobans were impressed that you could actually move a piece of equipment to a setting like that and produce a product right before their eyes. So there is not a lot of knowledge about what this particular plant can do and how it can help in the whole food processing industry.

Mr. Clif Evans: Mr. Chair, who is the general manager?

Mr. Derkach: Mr. Gerald Offet is the manager who was the former manager of CEDF.

The Acting Chairperson (Mr. McAlpine): Item 13.5.(d) Food Development Centre $985,000--pass.

Resolution 13.5: RESOLVED that there be granted to Her Majesty, a sum not exceeding $6,637,800 for Rural Development, Rural Economic Development, $6,637,800, for the fiscal year ending the 31st day of March, 1998.

Mr. Clif Evans: I am wondering, Mr. Chairman, before we continue if we might take five minutes for just a quick break.

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Mr. Chairperson: Is there leave of the committee to call a recess for five minutes? [agreed]

The committee recessed at 4:40 p.m.

The committee resumed at 4:48 p.m.

(Mr. Peter Dyck, Acting Chairperson, in the Chair)

The Acting Chairperson (Mr. Dyck): I call the meeting back to order, and we will proceed under 13.6(a) Grow Bonds Program (1) Salaries and Employee Benefits.

Mr. Clif Evans: Mr. Chairman, if I might just go back for one question on sustainable development, if the minister will allow that.

I have just one question. Can the minister indicate to us if he is aware whether The Sustainable Development Act will be presented to the House this session?

Mr. Derkach: I do not know that. That is a question that he should ask the Minister of Natural Resources (Mr. Cummings).

Mr. Clif Evans: Well, the minister did indicate that the act was going to be brought back with some changes, indicating to me that it was going to be coming.

Mr. Derkach: I said if The Sustainable Development Act will be introduced in this session, then it will be introduced in all likelihood without the last two parts because those are the two parts that pertain to The Planning Act, and those are the two parts that need some discussion with the municipal corporations. I think the municipalities know that already, that they will be given some time to discuss those issues that they had difficulty with.

Mr. Clif Evans: So, then, is the minister indicating that it is going to come back now, this session, in one part and at another time with another part?

Mr. Derkach: Well, if it is introduced this session, it will come in as The Sustainable Development Act, but I believe in the white paper or the discussion paper there were seven parts to it, and I believe that the difficulty right now or the outstanding issues are with the last two parts of The Sustainable Development Act.

So if it comes in this session, I do not see it coming in with the inclusion of those two last parts. Those two parts may require additional discussion.

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The Acting Chairperson (Mr. Dyck): 13.6.(a) Grow Bonds Program (1) Salaries and Employee Benefits.

Mr. Clif Evans: We have arrived at a section that the minister in his opening remarks indicated how strongly things like Grow Bonds and the REDI program have created jobs, created economic flow, but, of course, we are aware and the minister is aware that there are some difficulties. There have been some difficulties in the last couple of years, and, of course, these difficulties have been increasing in the past year.

But before we get into any of those--and I will just indicate to the minister that my colleague from Crescentwood will be asking some specifics on different Grow Bond issues. I would like to during this time also ask the minister about some of the concerns I have with the Grow Bond in my area and, of course, some of the other Grow Bond issues.

In the past year or so or since the Estimates last, can the minister indicate how many issues have been applied for in the past year?

Mr. Derkach: Mr. Chairman, in an approximate number I would say that there were about a dozen projects that staff from the department are working on or have been involved in. I think there were two or three that were approved in the last year. It depends, but I think there were approximately two or three.

Mr. Clif Evans: Of course, the footnote for increase in staff years, and the minister mentioned this, the Grow Bonds Compliance Officer position, what is this position? What is the mandate of this position?

Mr. Derkach: The primary responsibility of a compliance officer would be to work with the different companies that we have under the Grow Bonds Program; to monitor those companies and to work with the bond corporations that are established for each of the companies; and to ensure that, in fact, the regulations and the legislation is complied with as the companies grow and progress.

Mr. Clif Evans: Last Estimates, when the minister was approached about the Grow Bonds issues that were, I guess, questionable, if my memory serves me correct, he had indicated that up till last year, one had failed totally and that two, I believe, he said were in some difficulty and that the department was dealing with them. Can the minister indicate, if there are, how many more issues are in trouble or having difficulty? Have any others totally failed?

Mr. Derkach: Mr. Chairman, Mass Technologies, as the member knows, was the one that we spoke about last year that had failed, and the company where we had paid out the bond. Since then, Woodstone Foods of Portage la Prairie has failed, and we have paid out the bond in that regard.

In the case of Crocus Foods, although we paid out the bank, we have, through the Manitoba Development Corporation, taken over the company. The company is continuing to operate with the same numbers of jobs, as a matter of fact, an expanded number of jobs, at the plant at this time. The company is operating at, at least, a break-even, if not a profitable situation. So that company, we are confident that we will recoup all of the money that was paid out by the province. In addition to that, the revenues that have accrued to the province as a result of the taxes paid by people working there and so forth. Those are basically the ones where we have paid out the bonds to date.

Now, when the member asks: Are there other companies that are facing difficulty? Yes, there are. There is at least one that we know of that is facing some extreme difficulties. I do not know if there is any hope of it actually surviving, and another one, or two I guess, where we are working with the companies and other partners to restructure and to allow them to continue.

Mr. Clif Evans: Can the minister indicate, the difficulties of these Grow Bond issues that have been incurred by them--and you say difficulties--basically I guess in layman's terms: Why? Why have they come into difficulty? What is the problem? Were they not properly researched? Did they not do their homework before applying for these issues?

Mr. Derkach: I do not want to speak about any particular company, Mr. Chairman, but from the research that we have done on the ones that are in difficulty, there are a variety of reasons why they find themselves in that position. In some cases it is because of marketing. That is one of the common problems that we are finding in these companies. That is why we have endeavoured to put in the marketing branch of our department to help these companies market their products, and to ensure that the markets that they have are ones that are profitable for the company, so that they are not just producing a product and losing money on an annual basis.

Some of our companies, unfortunately, have some serious management problems, and are failing as a result of bad management. Once again, here we have worked with other companies or other partners to try and bring in some expertise management, if you like, to help these companies out of their dilemmas. In some cases it works, and in some cases it does not.

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As the member knows, this is all part of that venture capital program where there is no guarantee. If you go into a venture capital program in any other area other than Rural Development, there is no guarantee on the principal. If you look at the history nationally of venture capital companies, 60 percent of them fail. Out of 10, six will fail; two will barely survive; and two will do well, or will survive. We have 20, in total I guess 22 out of the number that we have had, the three we have paid out, but one is operating. I would say that our statistics are actually two, because the one that is operating under Crocus Foods, for example, is showing tremendous potential.

But, once again, I speak about management and I speak about markets. I think those are two of the key areas that one has to focus on. This is a new program, as I have indicated before. This is a program. If you look at the comparable program in other jurisdictions I think, by and large, this program has not done that badly. But we are learning. I think that we are putting in processes.

The reason we asked for the Auditor to come in in 1994 and look at Woodstone was for the precise reason of knowing whether or not the practices that we had implemented were right, whether we had to make adjustments, and what those adjustments had to be. The Auditor did comment in 1994 about some of the areas of change that we had to undertake, and those were undertaken.

Then we asked for the Auditor again in 1996, and once again the audit was done. The Auditor did bring up some new areas of concern that he wanted us to address, and those were addressed as well. Now, there is no point in pointing fingers at people. The issue is that we had a company here that had, I think, both management and marketing difficulties, and unfortunately it did not survive. I guess the saving grace is that we have a company that looks like it will continue to operate in the Portage area and we will have jobs in that area as well.

But compare that to other venture capital initiatives, and I tell the member that the former administration of his government, of his former government, had a venture capital program as well, and if you compare the results of this venture capital program to that, I think that we have come a long way. I think we have learned, I think we are showing some successes, but let us remember that this is a venture capital program where, I think, there are changes that are occurring on the landscape. If you look at our problem areas, they are in the value-added food processing area. That is one area where there is fairly stiff competition and, when you have big competition in an area like that, it is going to be more difficult to access markets, more difficult to crack new markets.

I think we have had some extreme successes, and I look at the company in the member's own community, in Arborg, who, I would have to say, are finding new market niches for their product. They had to change their product and they have had significant difficulties, but I think with some patience and time and, you know, some patient capital, that company has a future. I think they have some solid markets that will be there for the long term but, as I say, we have to be patient and we have to support that company because there are important jobs in that community and we have to protect them as much as we can. If we find that there is no hope of that or any particular company surviving, we have to make the decision that our first loss is our best loss and then carry on from there.

But by and large, I have to say that the Grow Bonds Program has done its job, it is doing its job. If you look, I mean, we are focusing on the negatives here, but look at the successes, look at the success stories. We have had at least two companies that have gone for their second Grow Bond. We have a third company that might be looking for a second Grow Bond. We have a company now that does not require the Grow Bonds Program anymore. It has now grown to the point where it can go to a financial institution and get its capital requirements rather than to the Grow Bonds Program, and that is exactly what we want to see. We want to see the company growth and we want to have them move on to the regular, traditional lending institutions rather than depending on the government or the community to support them.

If you look at the overall number of programs that we have and our projects that we have under the Grow Bonds Program, I think that we have done extremely well. I do not like losing a dollar, there is no question about that, and if it is unnecessary I do not like losing a penny. However, that happens, regrettably, and it will continue. I mean, we will never be in a position where we can say we have 100 percent success under a venture capital program, but as long as we learn from the ones that fail, we then can advise new projects that come to the scene that these are some of the areas that we have to be careful about to assure them that they will stand some chance of success in the long term.

I have to tell the member also that last year the total gross sales for the Grow Bond companies that we have amounted to $26 million. Now, that is not insignificant in rural Manitoba, and 500 jobs is 500 jobs in rural Manitoba. That is significant too. Do we have problems? Sure there are problems but, overall, I think our successes far outweigh our problems, and we hope that will continue.

Mr. Clif Evans: I want to put on record again--and I have put this on the record, and we have put it on the record--that we support the Grow Bonds Program. There is no doubt about that we support the Grow Bonds Program. We know that it was started in Saskatchewan, I believe. But a question or comment, the minister indicates that some of the difficulties that some of these Grow Bond issues are having has been through lack of marketing--or perhaps not the lack of marketing--maybe so, perhaps the marketing of the product that they were proposing to make.

He talks about management. I talk about that; I can say that, yes, there are successes. I am happy. We are happy that there are successes in there. We are certainly pleased. So obviously those successes had to have been doing something right, had to have had the proper plan in place, had to have the proper marketing strategy in place, the proper management, a product that could be marketable. So when that success story comes and applies for a Grow Bond, okay; then we can appreciate the fact that it is going to be successful because it is there, and it has done its homework.

Not only that, I would say the government of the day and the minister of the day are responsible to make sure that to the best of his availability and--the word misses me, but what I am trying to say is there is a responsibility of somebody. We are talking about quite a few million dollars of investment by rural Manitobans in Grow Bonds. The people have to feel confident that they are going to invest their $1,000, $5,000 or $10,000. People have to feel confident and be made to feel confident from the department and from the government, because that is who is guaranteeing the principal to them. Now, if they are made comfortable and it is not a success, then who is at fault? Is it the company did not do their homework? Is it the government of the day did not do their homework? I do not want to put a blame really on anybody. I really do not. I think that this is too important of a program.

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The minister has indicated he has got $26 million of gross sales, provided 500 jobs, but there are failures. He indicates that there cannot always be 100 percent success. I am not saying that there should be either, or can be. I have been in business myself long enough to know that. But I also know that I am not going to be asking for people's taxpaying dollars, nor am I going to go to the bank and ask for funding to expand my business, to expand a potential of jobs without doing my homework. If I go to the bank, the bank is going to tear me inside out to make sure that my prospectus or my plan is going to work or else they will not invest in me.

So there is somebody that is then responsible for my applying to the bank just as my applying for a Grow Bond issue. My applying to the Grow Bond issue is the government's responsibility then. It is your responsibility, or it is ours as elected people, to make sure that what I put in place for a Grow Bond issue is going to be successful.

So what I am also saying is perhaps we are learning, perhaps we are learning, but when it started out, there were successes that we could fall on. All of a sudden we are having difficulties. We are having difficulties--again, I support what the minister said--but I feel too many difficulties when we are dealing with taxpayers' investment dollars. I also feel that perhaps we are not being up front enough with the whole Grow Bond issue. I want the minister to appreciate, because I have said, the Grow Bonds Program is something that I support. I am glad to see that the community of Arborg has got a Grow Bond issue, but I am worried about it. I hope that Gilbert International does the best that it can to provide the jobs. All I am trying to make a point here is that we have to somehow be able to provide a better guarantee when it comes to the investment of our communities in a business or development that is going to prosper and is going to assist the community in being economically viable as well.

I am disappointed that some of these companies did not have the proper marketing plans before they went ahead with the Grow Bond issue. I am disappointed that the management, as the minister had indicated, in some of the difficult companies that we have, was not satisfactory. They have had to change. The minister's department has gone and done whatever they could to ensure some of the companies can still maintain and stay on their feet. That is well and fine too. I do not want to put a blame, I want an answer or perhaps a suggestion or perhaps come to a common conclusion as what the problems have been and how we are preventing that from occurring again.

Mr. Derkach: The member has said that when we offer a Grow Bond it is our responsibility to ensure that it succeeds. However, I have to point out to the member that this has always been a venture capital program. Normally venture capital programs do not have any sort of guarantee. However, because we try to stimulate economic development in rural Manitoba, we provided the guarantee under the Grow Bonds Program, because the member knows full well that rural Manitoba was depopulating at a progressive rate and that in fact if we had not done anything, today the landscape would look much different than it does at present.

This was not sort of a brainchild of Manitoba. As a matter of fact, the program was not copied but was initiated in our neighbouring jurisdiction. We looked at that program and then modified our program to meet the needs of Manitobans. We knew that there was substantial capital in rural communities that was leaving those communities and being invested in eastern Canada and indeed out of the country. By keeping that capital in our communities it meant that there would be an attachment of the people in that community to a project, that indeed that would be managed by and large by the local Grow Bond corporation and that there would be a need for people to ensure that a project would succeed as much as possible.

By and large that worked, but, as I say, you experience things as a program grows and as it matures. If we look at Saskatchewan, they are abandoning their Grow Bonds Program because of complications and because of administration and because of the large number of failures that they have in Saskatchewan, far, far exceeding anything we have come close to, but I am not criticizing them. I am saying these are venture capital programs and that from time to time they will run into difficulty.

We try to do the best job possible, and for that reason we have had our staff do analysis on projects. We involve the Department of Industry, Trade and Tourism through their financial management branch to do analysis of the program. We involve the Economic Development Board. We involve the Grow Bond review committee, and there is a due diligence process that is gone through.

As a matter of fact, the Federal Business Development Bank has also been used to ensure that an analysis of the project is made by them and a recommendation is made by them in some cases, and besides that, the local municipal corporation has to pass a resolution that says they are supportive of this project in their community.

Now, what more can we do besides that? Well, every corporation has to file a prospectus. They do projections in a prospectus, but projections are projections, and today the Securities Commission is revising their procedures because they realize that projections are just that, and it is difficult to use projections to provide any certainty that indeed those projections are realistic or not, but we try to look at the projections and try to make our best estimates as to whether or not those projections are realistic. But besides using all of these internal people in doing the analysis of a project, we also go outside of the department, outside of government, and we bring in external consultants to take a look at projects and give us their professional opinions as to whether this is a project that has any chance of survival.

So we try to cover all of those hurdles, but as the program grows we are becoming more sophisticated. There is no question about that, and through our experiences we have learned of some of the things that we have to pay attention to, and I might say that the valuable information from the Provincial Auditor has allowed us to adjust our procedures, and for that reason we are bringing in extra people on to staff, into our Grow Bonds office. We are bringing in a compliance officer. We now have a director who has 28 years of experience in the banking field and certainly in the financial field in terms of business, so therefore we have people now who are senior, who do have a lot of experience. I am confident that their assistance in this program will allow this program to succeed and thrive in the future.

That does not say that we do not have problems, and I might say to the members that we exert extreme, I guess, diligence in trying to help a project when, in fact, it faces difficulty. In the case of Woodstone, I do not think anyone would deny that we tried to bring in outside sources of funding as equity partners in the project. We tried to seek out interested parties in the local community and abroad to see if anyone was at all interested in taking on this project and leaving those important jobs in the community, because that is what the bottom line is, is the jobs that are so important to those families.

At the end of the day, we were not successful. However, I am pleased, as I said before, that we do have a company that has now taken over the plant and will at least retain 10 jobs in that community to begin with. I am sure that as they become successful, they will employ even more people. We can go round and round and round on this one. If the member has some constructive advice as to how we can amend procedures, I am happy to listen to him and take that advice under consideration. If we can improve it by implementing some of his advice, we will do that.

Mr. Clif Evans: Prior to my colleague from Crescentwood (Mr. Sale) I would like to deal with this issue too. The comment I have and a question is, the minister had just gone through telling us what they have been doing to make sure that companies are going to be viable. He went through a list. Has that been since the first Provincial Auditor's Report on the Grow Bond issue? Has that been something that they have been doing since '91? Because it seems that if they are doing and have been doing since 1991 the things that he is telling me, I cannot understand then how some of these difficulty Grow Bond issue companies have gone under. Why, if all of this has been done, was there not anybody checking up on the management or checking up on the marketing or whatever?

So what he is telling me, what they have been doing the last year or so with new companies applying, I can honestly say that I feel that is probably very good, but what about since '91? Obviously, the minister said that they have been learning. We have all been learning about this. Why was this not all picked up since 1991? With Woodstone, with the others that have gone under, there had to be something there that was missed.

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Mr. Derkach: The member will know that in 1994 it was at our request that the Auditor was brought in. The reason we brought the Auditor in was to give us an overview of how the implementation of our processes was perceived. Recommendations were made. Then those recommendations were implemented. But I have to say that, regardless of what types of measures you take to do due diligence on any project, this is still a private company. It is not government running it. So, therefore, the department is not responsible for managing that company on a day-to-day basis. As a matter of fact, we have no right to manage that company on a day-to-day basis.

Today if you look at the bankruptcies that are happening around the country where banks are involved, I think if you compare the successes and failures in that atmosphere to these, you will find that we are not doing that badly at all. Overall about 13 percent or less, if you take an overall view of things, of our companies have failed. Now, that is not a bad statistic for a venture capital company.

As the member indicated, we have been learning through the processes that we have put in place, through the Auditor's comments, and we have added staff. We have added, as I said, the experience of a director who has a wealth of experience in that field. We are adding a compliance officer. As I say, we can go around and around on this topic. I think that we have actually done everything humanly possible to try and keep as many of these companies profitable as we can, afloat, and keep those jobs in those communities.

Mr. Sale: Mr. Chairperson, just a couple of comments before some of the more detailed questions I wanted to ask. I think it is important to put on the record that the minister probably was just confusing two audits when he made the comment that in 1994 he brought in the Auditor to look at Woodstone. In 1994 it was to review the overall procedures, I think, and to ask for advice about strengthening the program.

Woodstone was one company but yet at that point was losing money badly, but it had not had even its first-year audited statement under the Grow Bond that was issued. The Woodstone audit of course was '96, and the Woodstone audit did not come about because the department asked the Auditor out of the blue, the Woodstone audit came about because the opposition requested day after day after day in the House that there be an audit and advanced a great deal of information to the Auditor and in raising serious questions about the appropriateness of that company's management. So I think it is important to put on the record that we are glad those audits were done, but the first one was done at the request of the department, the second one was done at the direction of the Minister of Finance in response to many, many questions raised about what was happening in Woodstone.

So with that just, I think, clarification of the history of what actually happened, I wonder if we could start with a positive question. The minister indicated that there are several companies that have gone on to become very effective. Could the minister indicate, of the 22 that I have on a list, specifically which companies have repaid their bonds in full and gone on their way to prosper?

Mr. Derkach: Mr. Chairman, one company has been in existence now for five years, and that is Rimer Alco. Their five-year term came up in March and there was an agreement between the company and the bond corporation to extend that bond for an additional five years. Care Corporation is coming up in July. Their company is working with the bond corporation there at extending the term. I understand that the objective is to extend the term in that bond as well. The other companies have not matured at the five-year at this point in time.

But, Mr. Chairman, I want to also comment on the remarks that were made by the member for Crescentwood regarding the two audits. In 1994, although we requested the audit of the Grow Bonds Program, one of the specifics of that audit was Woodstone. The comments that were made by the Auditor at that time were specifically with regard to Woodstone as well. In 1996, yes, the opposition asked questions and asked that an audit be done. The audit was in fact a joint audit that was requested by myself as Minister of Rural Development. That request was made of the Minister of Finance who then asked that the audit be done.

If the member wants to take credit for it, that is his prerogative. I do say that we were sincere in wanting to get the audit done so that we would get a better understanding of the processes that we needed to improve to ensure that this program continued and was a success. No one wants to see a program fail, and if we can learn something through an audit that will allow us to improve procedures, processes and will allow a company, whether it is one or the group of companies that we have, to be successful, that is the objective in the end. We have no argument with the Auditor. The Auditor has made recommendations, and we intend to fully implement every recommendation that was made by the Auditor.

Mr. Sale: Mr. Chairperson, could the minister tell us whether all of the bondholders in the Rimer Alco situation have renewed or whether the government's guarantee has fallen as a result of partial redemptions? The current guarantee showing on the books I think is $127,900. I would assume that some bondholders indicated a preference to have their capital refunded, and that somehow that capital had to be refunded, whether it was refunded by a direct payment from government or whether Rimer came up with the money and the government guarantee was reduced. Could the minister clarify?

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Mr. Derkach: The government has not had to redeem any of the bonds with Rimer Alco. There were $40,000 of bonds, I guess, where redemption was requested. However, the bond corporation resold those bonds. I think there is a small amount outstanding yet, but the corporation is confident that they can remarket those as well.

Mr. Sale: Mr. Chairperson, I have got correspondence from a couple of different bondholders in regard to the Teulon Care Corporation. The indication there is that the company--well, let me ask the first question first, and then we can go on to this.

Rimer and Care, according to bondholders, neither was current in its interest payments on the bonds outstanding. Is that still the situation, or have they caught up?

Mr. Derkach: Rimer Alco is current with their interest payments. There is an arrangement that has been agreed to between Care and the bondholders in that particular project with regard to a plan to pay the interest over time.

Mr. Sale: At least one of the bondholders who has got a fairly significant interest indicates that there is an intention in principle to do that but was not informed as to what the payment plan would be in regard to Care Corporation. I think it is in arrears now for about--it would be about 20 months, I guess, now in total.

Mr. Derkach: Mr. Chairman, I am advised that as of February 20, all bondholders were advised of the repayment plan and that a letter was sent to all the bondholders. So if some bondholder did not receive that letter, if they let us know, then we could ensure in fact that that letter is sent.

I know that there was a bondholder from I think it was British Columbia, an individual who had moved to British Columbia, who had asked some questions of me when I was on Peter Warren and wanted some information. That information was provided to him almost immediately and I have not heard from that individual since then. So whether this is the same individual or not, I know that there was one bondholder from outside the province who had some questions. Perhaps this is the same one, where I am hoping that if he did not receive his letter, if we are advised, we will get that letter off to him or the corporation will immediately.

Mr. Sale: Mr. Chairperson, I will contact this bondholder and ask whether they have received that information subsequent to their most recent correspondence with me, which was March 31. I would have thought that if the letter went out in February that they would have it by that point. So I will check with them and, if they have not received it, I will bring it to the minister's staff and see if that can be done.

Mr. Derkach: Absolutely.

Mr. Sale: In the case of Ski Asessippi, that is a promised bond but has not yet been issued. Is that correct?

Mr. Derkach: That is correct. Mr. Chairman, for the member's information, that project has been on hold now for about four years. As the member knows, there is kind of a history to that. I believe on March 20 or thereabouts the federal government did sign an agreement with Ski Asessippi to provide their share of the funding for the project. Now, the agreement between the federal government and Ski Asessippi allows us now to be able to enter into an agreement and to establish a bond corporation and to begin the process of raising funds for that project. However, as the member knows also, there is a condition placed on the corporation that they are not allowed to begin any physical work on the site until such time that I think the bird has nested or something of that nature, and I am not sure what the date on construction on that is. I mean, all of those conditions are set out in the environmental licence.

Mr. Sale: Just one further question on Care. Care's most recent statements indicate that it is not servicing any of its debt--those are the statements for the last fiscal year-end, which was July 31, '96--and that their accumulated deficit is about $l.8 million. On the other hand, they are appearing to make their sales targets for the most recent quarter according to information that was provided to shareholders.

It would seem that one of the other problems that many of the companies have, in addition to marketing and, perhaps, questionable management in a couple of cases, is that they tend to be undercapitalized. I mean, one of the problems of venture capital all over the continent is that venture capitalists want to invest as little as possible. On the other hand, if you do not invest enough to see the company over the hump, then companies fail not because they are necessarily bad ideas or badly managed or anything; they simply do not have the depth to be able to survive that ramping up to profitability.

What worries me about a group of our companies that I have looked at is that a number of them are coming up to their fifth year and bondholders are going to have to be persuaded to maintain their positions for another five years, or else the companies are going to face an even greater capital challenge because, unless they go under, they are going to have to find the money to refund the bonds.

The ones of whose financial statements I have seen do not have that money. It is not around, so I am very concerned about that issue. I am concerned about it specifically with CARE, because CARE appears to have no assets, a great, fairly large liability and significant debts that are not being serviced.

Mr. Derkach: The member makes a good observation with regard to undercapitalized companies, and he is right about the fact that venture capital companies do tend to get into difficulty because they are undercapitalized. I guess that is one of the issues that we recognize, and companies that we are working with now, we are trying to ensure that they are properly capitalized so that if they hit a bump in the road, it does not cause a nervousness, either in the bondholders' eyes or in the bankers' eyes or whoever else is funding them.

I would also have to say that we are trying to attract as many equity partners into some of these venture capital programs as we can. In the case of CARE, we have a fairly solid company that has taken an equity position in this particular project, that is backing the project. Although the project still has a long way to go, I think there is--and this is someone who has experience in the field of marketing and management and apparel, so it is not a novice.

(Mr. Gerry McAlpine, Acting Chairperson, in the Chair)

In the case of Gilbert International, for that matter, we have also a new player, if you like, in the whole agri-food processing industry. Once again, I think they are learning as well because it is a new venture for them, but I do think that they have the capability to withstand those hurdles that these companies do come up with.

In terms of the long range, we are watching these companies carefully, and we know that the five years is coming up for several of them and that we are going to have to address the issues as they arise and make some arrangements. We understand that, but in an overall sense these are companies that I think in the long term have a future in this province and should be supported.

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Mr. Sale: Is the partner that is being referred to in the CARE situation MWG Apparel?

Mr. Derkach: Yes, it is.

Mr. Sale: That company has been involved for some time. This is not new. They have been there for quite a while. In terms of this company they are not a new partner. Are they a new investor with substantial new capital coming in? Because they were already owed more than a half a million dollars, plus the Grow Bonds they hold.

Mr. Derkach: No, this company is the one that I was referring to, but they have been involved for some time--that is true.

Mr. Sale: Well, Mr. Chairman, I am sorry, I do not want to be nasty to the minister, but he is talking about somebody new or at least that was the implication of the statement to me, and this person has been involved for some time while the company has been losing big money for some time and increasing its indebtedness to this person's company, MWG Apparel. So I think the minister was trying to suggest that there was some hopeful new presence, and I do not think this counts.

Mr. Derkach: Well, the member may have his opinion on whether it counts or not, but the reality is that when this company started, that individual was not a part of the company, and in restructuring that company, we were able to attract this individual to the company. Now he has been a player, he is owed money--no question about that, but I think he has shown his staying power and his trust in that company or his confidence in the company, and their sales are improving, and yes, they are in debt; there is no question about that. My reason for indicating that there was a player, an equity partner in that company, was to further the point about the need for proper capitalization of a company like that.

Mr. Sale: I would like to talk now briefly about Gilbert. Mr. Chairperson, the Manitoba Pool is the current, essentially the operator of Gilbert. I think my honourable colleague has indicated that its operation--in fact, Manitoba Pool has indicated also to me that its operation is on a sort of--if an order comes in, we crank it up and supply the order, and then we shut her down until we get another order. So the employment is pretty episodic, and much of the time the company is essentially not operating to produce product. Then it gets an order, usually from Safeway, and then produces product for a while again until that order is filled. It was indicated recently to me that serious decisions had to be made about this company in the very near future, and the near future was measured in terms of weeks. Can the minister shed any light in terms of the current plans for this company?

Mr. Derkach: Mr. Chairman, yes, the staff of the department have had several meetings with the management of Manitoba Pool. I have met with the board of Manitoba Pool and the president. I think there is general agreement that this company is producing a product that there is a fairly good market for; however, it is a new product just recently accepted into the marketplace at Safeway, there is no question, but they are also now producing a different product as well that they are doing some testing with that is showing, I am told, impressive promise. In addition to this, they are, I guess, in the final throes of some potentially significant contracts that could certainly enhance the situation as it exists with the company.

We have asked an independent firm to come in and do an analysis of that company for us because decisions have to be made. The member is right about whether Manitoba Pool and whether we, through the Grow Bonds Program and CEDF, will continue in supporting the company for the long term, but those decisions have to be made in the next short while. Additionally, I would have to say that we have had the food lab in the company as well to ensure that there is consistency in the way that the orders are filled, because, as the member knows, in that kind of industry, the margins are not large and there has to be consistency to ensure that in fact you are not throwing away or you are not overfilling or allowing your profit to go out with the product.

So we have taken steps to try and ensure that we cover all of the bases in terms of trying to make the company successful. We will also be working with the company in terms of the marketing and closing some of the, I guess, sales that are out there potentially. But at our last meeting I think there was a level of comfort that once we get the analysis done we would be able to then make further decisions about supporting the company into the future.

Mr. Sale: Mr. Chairperson, I thank the minister for that answer. Is Gilbert current with its interest payments to the investors or not?

Mr. Derkach: No, Mr. Chairman, they are not current. They are two years in arrears with their interest payments and, having said that, I would have to put on record that the community has been very patient with the company. They have supported the company and they have been willing to stand aside and give every opportunity for that company to survive if that is at all possible, and I would just like to extend my congratulations for the community's patience and their willingness to stand aside while the company is restructured and continues to operate.

Mr. Sale: Mr. Chairperson, what did the province have to pay to acquire Crocus from the bank? What was the cost to MDC?

Mr. Derkach: Mr. Chairman, I do not have the exact number, but it is $400,000 plus or minus, you know, a matter of tens of dollars I guess. But that was the price that we paid to take the bank out and give us an ability to operate the company until such time that we can find a buyer for that company.

Mr. Sale: Mr. Chairperson, the minister has indicated that this company is, I think he said, at least breaking even and probably profitable. He indicated previously that this one was a puzzle to everybody, that it seemed to be able to be bankrupt while being profitable, which is a trick, I guess, if you can manage it. Could he shed some light on what happened here?

An Honourable Member: It can be done.

Mr. Sale: Well, I guess it was done in this case.

Mr. Derkach: Mr. Chairman, I do not want to talk about bad management or anything of that nature, but this was a mystery to all of us, because here was a company that was showing a profit in at least three of the previous months, I believe, a break-even or a profit in three of the previous months when they filed, and they were hiring extra staff to try and to get the orders filled, because the orders were coming fast and furious.

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They had a solid customer base that they were supplying, but they needed to inject some equity in the company in order to be able to have the company function properly. I do not know what was in the minds of the individuals who put the company up into bankruptcy. All kinds of scenarios were looked at, and I will not speak about the motives of the individuals who put the company into bankruptcy, but we looked at the financial situation as it related to that company and the product that it was producing and the demand for the product. We could see nothing but an up side for the long term of that company.

Now, those decisions are not arrived at easily. The last thing you want to do is to start buying out the private sector, as a government, buy out the private sector, and start operating companies, but this one showed so much promise that it would have been foolish, foolhardy for us to allow the company to just be disbanded and those jobs taken away when the company was showing so much future.

So we have taken over the company. The strange thing is, now we are being approached by growers and other companies who want this company to process their products. It will mean expansion of employment in that company, which is certainly welcome, but it would make one wonder why the former proprietors did not foresee this.

So we are exploring opportunities now to expand the operations of that company, and I might say that we are now seeing some interest in people who may want to purchase or take over the company once it has stabilized and once our customer base is secure.

Mr. Sale: Mr. Chairperson, were criminal or civil charges investigated against the previous owners in terms of any questionable financial transactions involving the company? Were discussions held with the appropriate authorities provincially?

Mr. Derkach: Mr. Chairman, yes, we did in fact pursue this particular project and did discuss it with legal counsel to see whether or not we had a case that we could pursue. The advice that came back to us was that, no, we did not have a legal case to pursue. For that reason we decided to take the course that we did and acquired the company by taking out the bank.

Mr. Sale: Mr. Chairperson, I want to ask a couple of other just general questions about specific companies, and they may be easily answered and they may not. I am not sure. Operation Fire Fly, which is really quite innovative--as a former pilot myself, the idea of fighting with an old Harvard would be great fun. I would probably scare myself to death but, nevertheless, it sounds like fun. I think the difficulty the company encountered was getting people to come to it. It is hard to market something like that where your market is a lot of miles away, and it seems like the company maybe has to take the planes to the customer rather than bringing the customer to the planes.

Mr. Derkach: The member is right. This one was a very innovative, creative kind of project, but, once again, we did the same analysis on it as we would have done on any other company, and the markets seemed to dictate that there was a chance for survival. This is one where they have expanded their operation now beyond the Souris area. They are marketing in the other western provinces as well, and the winter months, as you know, are not months where we can market that kind of a tourist industry. [interjection] Well, no, but I have looked inside one and the insulation factor is questionable.

So I understand they took their planes to British Columbia and have been working in British Columbia through the winter season and then coming back for the summer season. I am told they have expanded the marketing of their enterprise, and it looks like we have a good summer coming up for Operation Fire Fly, and we are hoping it is a darn good summer.

Mr. Sale: Is Fire Fly up to date with its payments?

Mr. Derkach: Yes, they are.

Mr. Sale: The next one that obviously is an unhappy story is the greenhouse in Waskada. My understanding is that the company is in bankruptcy, and the bond will have to be paid out unless the government takes some kind of equity position or does something else. Even more, I think, sad for everybody is that the family that risked a lot to do this is at risk of losing their farm as well as their business. Can the minister just indicate what the situation there is at present?

Mr. Derkach: I guess every one of these companies has its own story, and I have lived every one of them, I guess, in a sense in knowing what their operations are about and the problems that they have encountered. As the members may recall, I do not know if they had an opportunity to taste and sample some of the product from RCS Greenhouse, but it was some of the best product that you could flavour. As a matter of fact, everywhere you went in rural Manitoba where the tomatoes found their way to the stores, everybody grabbed them up very quickly.

Unfortunately, what happened was I guess a combination of things. It was management, it was marketing technique, and I guess undercapitalization perhaps, but I do not think that was the big problem. I think the bigger problem was the marketing technique and the method that was used for marketing the product.

There are some rules in that food industry about marketing, and I guess as a new fledgling company the proprietors decided that they would alter the marketing rules, and it backfired once the product from gardens started coming in. The sales dropped off and, as the member knows, this is a perishable product, and there were just thousands of pounds of tomato that were ready for market, but there was no market for because of--I think the market was there, but I think the technique of marketing had irritated some of the brokers, and there was a problem in that regard as well. So the company did signal to us that they were in difficulty. We tried to do our darndest to find equity partners, to bring the community in, and for one reason or another, every attempt that we made at trying to keep this company afloat seemed to meet with difficulty.

We have met. I think we had 25 meetings in total to try and save this company. The Mediation Board was called in. They certainly looked at the company and put some restraints in terms of when the company could be closed down, to give it time to restructure and refinance. We worked with the company during that period of time as much as we could. Unfortunately, to date, we have not been able to do that, and my understanding is that the time period has elapsed and the company will be, in fact, going into bankruptcy unless something happens that I am not aware of at this point in time.

The Acting Chairperson (Mr. McAlpine): Order, please. The hour being six o'clock, committee rise.