EVIDENCE

[Recorded by Electronic Apparatus]

Friday, October 4, 1996

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[English]

The Chairman: Okay, let us begin. This is Friday, so it must be Thunder Bay.

Welcome to the witnesses from the Thunder Bay Harbour Commission.

Mr. Comuzzi (Thunder Bay - Nipigon): Could I introduce you to the gentlemen who are representing the Thunder Bay Harbour Commission?

The Chairman: Mr. Comuzzi is always extremely eager. Yes, Mr. Comuzzi.

Mr. Comuzzi: Thank you, Mr. Chairman.

Mr. Inglis has been a member of the harbour commission for about a year now and has just recently been elected chairman. Dennis Johnson is the chief executive officer of the harbour commission, and he plays the dual role of also being the harbour master. Paul Kennedy is the director of marketing for the Port of Thunder Bay.

I noticed too, Mr. Chairman, that we have no representation from the Reform Party. Have they indicated that they're going to attend?

The Chairman: I've had no indication whatever.

Mr. Comuzzi: That's unfortunate.

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The Chairman: Shall we begin?

Mr. Inglis, if you could confine your remarks to about ten minutes to give us a chance for some questions....

Mr. Tom Inglis (Chairman, Thunder Bay Harbour Commission): Thank you, Mr. Chairman. First, I'd like to welcome the committee to Thunder Bay. Maybe it's a little cooler than what you're used to on your trip in the west.

We did have snow here Monday, but we don't have any for you today, so I think we'll be all right.

The Chairman: It's tropical today.

Mr. Inglis: If you come out in the morning, you still have to scrape the windows.

The national marine policy, which was developed in part as a result of an earlier series of hearings by this committee, set out to ensure affordable, effective and safe marine transportation services, while encouraging fair competition applied consistently across the marine transportation system. These objectives were to be protected within an environment of increased port commercialization.

Bill C-44 introduced to the spectrum the notion of isolating the government from any exposure to or liability for the debts and other obligations of Canada's ports.

The Thunder Bay Harbour Commission is not convinced that, in its current format, Bill C-44 will move a new Thunder Bay port authority in that direction.

This submission will address areas where provisions of Bill C-44 raise the risk of significant increases in operating costs and thus cause subsequent deterioration of port competitiveness. It will illuminate the cumulative effect of potential cost increases imposed by this Bill C-44 and other recent and pending cost increases in the marine sector.

Your own committee researchers are in possession of a recently completed study on the competitiveness of the seaway and this port in the context of the Canadian grain movement. This work details very clearly how precarious Thunder Bay's status is when the eastern movement through the seaway is compared to other transportation corridors, particularly through the United States.

This reference to your researchers already being in possession of this study is made because you should know that the port's concerns are based on solid research and do not involve any competitive bogeyman created for the purpose of this hearing.

This commission's position is that the 1964 Harbour Commissions Act created the best model of port management available in Canada, and that your May 1995 committee report recognized the strength of the harbour commission model.

As currently drafted, Bill C-44 does not in any way strengthen Thunder Bay's competitive position.

This presentation will deal with the following areas of Bill C-44, which should be changed or expanded upon so as not to detract from this port's competitive position: part I, Canada port authorities; part III, seaway; and part VII, amendments to the Pilotage Act.

In addition, a final category of comments will be introduced on the cumulative effect of Bill C-44 and other marine sectors, rationalization and commercialization.

The act must declare that ports are federal agencies and eliminate all questions regarding the municipal taxation of port infrastructure. These are suggestions that the Federation of Canadian Municipalities may advocate for full municipal taxation of port authority assets, including such items as berths and breakwaters, which up to now have never been taxed or have been the subject of grants in lieu of.

Bill C-44 must be amended to recognize that either full municipal taxation or the grants-in-lieu-of-tax provisions of existing legislation will place an untenable burden on ports that have been exempt from municipal taxation in the past.

No harbour commission has ever paid taxes, and none is in the position to be able to assume grants in lieu by virtue of existing tariffs and rate provisions. Harbour commission tenants are lessees, and they do pay full municipal taxes.

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Bill C-44 must establish provisions for exemption from grants-in-lieu provisions established in this and other legislation.

A provision should be made for the negotiation of a fee between port and municipality in cases such as Thunder Bay where taxes have never been paid and the port and the municipality can work towards a mutually acceptable agreement. Such an arrangement already exists in relation to the Fraser River Harbour Commission.

The committee should know that this commission's rival port authority in Duluth, Minnesota pays no municipal taxes, and that the city and state government actually remit to the port authorities a portion of the taxes they collect from private facilities in the port. Incidentally, these are taxed at a much lower rate of municipal taxation than similar facilities in Thunder Bay.

This commission acknowledges the economic impact study being prepared by the Hickling Corporation for the Ministry of Fisheries and Oceans. This study indicates that the consultants are coming to the opinion that municipal taxes are unlikely to lead to incremental increases in marine tariffs.

This opinion is absolutely flawed, and is totally against the advice that the commission, as well as other ports, have offered on this subject.

This commission would like to go on public record as stating that the effect of municipal taxation will lead to exactly the opposite result, and that the application of full municipal taxation to common users, sheds, berths, breakwaters and other port infrastructures, will almost certainly destroy most, if not all, of the members of the Canadian port community.

Each of you should know that the survival of Canada's major ports as CPAs depends on your committee not reaching the same illogical conclusion.

The Thunder Bay Harbour Commission recommends that CPA ports be given federal agency status.

Secondly, it recommends that CPA ports be required to negotiate a fee for service arranged with their host municipality.

The Chairman: Mr. Inglis, if I might just break in at this point, I note that your report is some 13 pages long. At our current rate, we will use up all the time available.

I'm wondering whether it would be possible for you just to review the various recommendations and go right to the heart of the issues.

Mr. Inglis: All right.

The Chairman: Members are aware of the number of issues that have come up, and I'm certain you will get some very informed questioning.

Mr. Inglis: Mr. Chairman, may I read the conclusion and the recommendations?

The Chairman: Absolutely.

Mr. Inglis: I'm sorry that it is a little long, but we felt.... You'll have the opportunity to read the whole thing.

The Chairman: It's a very important issue, and I don't mean to minimize that at all. I just know there are members here who have questions specifically.

We're here specifically because this is the front end of the seaway, and we're very concerned about some of the impacts of the bill. I know there are questions that members would like to get to with you.

Mr. Inglis: Okay. Under our conclusions, the committee must understand the notion of cumulative effects in the intensity, compatibility and environment in which Thunder Bay finds itself.

In the last five years this port has faced increased competition from the Canadian west coast ports; long-haul rail movements from the prairies to the St. Lawrence and Canadian east coast ports; and long-haul rail movements of western grain and potash to a variety of U.S. destinations, including the U.S. ports of Duluth, Minnesota for bulk grain, Pensacola, Florida for bag grain, and Texas City, Texas for potash.

The effective stipend, a particular franchise fee based on gross revenues, and the potential for full municipal taxation, combined with the local impacts arising from the changes in delivery of or cost recovery for coast guard services could render Thunder Bay non-competitive.

Thunder Bay must be competitive to survive, and Thunder Bay's survival is critical to the survival of the entire seaway system, which is a cohesive, seamless transportation route where back-haul cargoes flow from east to west, which is interdependent and totally integrated with front-haul cargoes flowing from west to east.

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Thunder Bay is in a unique local situation, particularly with respect to costs such as break-wall repairs, ice management and the provision of winter and summer aids to navigation. This must be recognized as part of a total environment that also involves the framework set out in Bill C-44.

Much of this recognition can be done by Parliament acting on the recommendations referred to herein, and also by providing for flexibility in regard to the negotiation of the letters patent of the new port authority. As mentioned before, these should be sensitive to local needs and resources.

We have a number of recommendations set out below.

CPA ports should be given federal agency status.

CPA ports should be required to negotiate a fee-for-services arrangement with their host municipality.

Paragraph 6(1)(h) of Bill C-44 should be amended so that the stipend be calculated according to net income, as is typical for Canadian corporations.

The dividend payable pursuant to paragraph 6(1)(h) should be negotiable in light of changing circumstances, and never be a restrictive factor on the long-term viability or competitiveness of the port.

Clause 8 of Bill C-44 should be amended to clearly specify that a harbour commission being continued as a CPA shall retain its financial reserves for use in maintaining and developing harbour infrastructure, so as to ensure the ongoing viability and competitiveness of the port.

Clauses 3 and 12 of Bill C-44 should be redrafted to provide flexibility in the creation of boards consisting of between five and nine members, depending on local circumstances.

Subclause 24(2) of Bill C-44 should be amended to allow much more diversity in the scope of operations of CPAs.

Paragraph 3(1)(a) of the Harbour Commissions Act spoke of harbour commissions being effective instruments of support for the achievement of Canadian international trade objectives and national and regional economic and social objectives. An amendment based on this standard would allow the new CPA more freedom of operations.

Subclause 24(7) of Bill C-44 should be deleted or amended to allow a CPA to incorporate a subsidiary, provided such incorporation was compatible with the letters patent, with or without the additional requirements involving ministerial approval for such incorporation.

We recommend that in part III binational management of the seaway be aggressively pursued, and that steps to achieve such bilateral management be implemented post-haste.

Part VII of Bill C-44 should be amended to incorporate the sweeping redesign of pilotage contemplated by the May 1995 standing committee report.

Gentlemen, that's our report. Thank you very much.

The Chairman: Thank you very much, Mr. Inglis.

Mr. Comuzzi.

Mr. Comuzzi: Thank you, Mr. Chairman.

Mr. Inglis, do you want to expand on ``Capacity and Powers'' under section E? We've heard a lot of representations of....

Let me back up a bit. Does the Thunder Bay Harbour Commission intend to apply for Canadian port status?

Mr. Inglis: Yes, we do.

Mr. Comuzzi: Have you implemented that process yet?

Mr. Inglis: It hasn't gone in, but it's being done at the present time.

Mr. Comuzzi: Your board of directors is satisfied that you can meet the threshold requirements of financial stability and cost-effectiveness by applying for that status?

Mr. Inglis: We are.

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Mr. Comuzzi: Does that contemplate the fact that you may be faced with expenses additional to those you have today, with respect to some form of grant in lieu of taxes, some form of negotiation with the municipality with respect to services?

Mr. Inglis: We think that if we retain the reserves that we have now, in the short run we'll be all right, depending on what those costs turn out to be. We would be viable in the short term.

Mr. Comuzzi: Do you have something to add, Mr. Johnson?

Mr. Dennis Johnson (Chief Executive Officer and Harbour Master, Thunder Bay Harbour Commission): The only thing that might be fatal to the enterprise, Mr. Comuzzi, would be the impact of full municipal taxation, the extension of that taxation to bursts in break-walls.

Mr. Comuzzi: So it's very important that the first recommendation, that it be given federal agency status, really be consistent with your plan to be financially sustainable.

Without federal agency status, you're in some jeopardy. Is that correct?

Mr. Johnson: Very much so.

Mr. Comuzzi: So you've analysed that and you've decided to apply for the status?

Mr. Inglis: That's correct.

Mr. Comuzzi: Let me go to the question I started with, on ``Capacity and Powers''. Do you want to expand on that?

By way of background, we've heard a lot of evidence to date that many of the ports are involved in other ventures that perhaps are quasi-maritime-related: real estate development, that type of thing.

Mr. Inglis: Well, Mr. Comuzzi, we do have several tenants there. We have a trucking firm, gas and oil people, steel people, and we have Purolator there. These people all pay full municipal taxes, and also pay rent to us. This allows us to make sure that the port charges we charge the marine section don't go up.

So we feel that it is compatible at the present time, and we're hoping -

Mr. Comuzzi: You wouldn't want to see any change -

Mr. Inglis: No. We'd like to see that we -

Mr. Comuzzi: - in the present methodology by which....

Mr. Johnson: All our tenants are involved in either the transportation or distribution of goods, and we would certainly intend to keep that focus.

We have no intention of getting into commercial development, high-rises or condominiums - anything like that. But we would certainly think that a trucking company, as an example, would be compatible with the harbour commission.

Mr. Comuzzi: Let's go to pilotage now; it's one of your recommendations.

The pilotage issue is different on the Great Lakes than it is on the east coast or the west coast. When we did the initial report a year ago, I think Stan's committee made some recommendations with respect to the Laurentian Pilotage Authority, and those haven't really been adopted.

We've been hearing some representation that we should really adopt the recommendations in the standing committee report with respect to pilotage.

Do you have any further comments on that?

Mr. Paul S. Kennedy (Director of Marketing and Communications, Thunder Bay Harbour Commission): I can speak to that one a bit.

We have generally accepted the position of the Canadian Shipowners Federation that pilots are required on international ships throughout the course of a Great Lakes transit. We have some problems with the mandatory imposition of pilots on Canadian shipowners. For years we have worked with the shipowners, and we have to take the shipowners at their word when they say they have qualified captains and they have a brand-new wave of top-of-the-line technology that really renders the use of pilots on Canadian-flag vessels redundant.

That's where we need the competitive advantage to be pursued in our own Canadian-flag vessels. These are the guys that are under a lot of pressure.

For example, in the movement of grain from Thunder Bay to the St. Lawrence and iron ore back, if they're putting a regimen in place at their own expense - technology, satellites, GPS, all that, all these things that are coming along - we have to get to a point in this bill where the bill itself mandates that the pilots can come off Canadian-flag vessels, not a commitment in the bill to look at the issue again in 1998. We need this competitive boost right now.

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Mr. Comuzzi: My final question, Mr. Chairman.

As you know, there's a debate going on now in Transport and in the House of Commons with respect to the operation of the Great Lakes/St. Lawrence Seaway. One thing we know for a fact is that the seaway will not operate the way it has operated in the past. The debate comes between what is commonly referred to as a ``user group'', made up of Cargill, I think, and Louis Dreyfus Corporation, representing the grain industry, Upper Lakes Shipping, the shipping industry, and Dofasco, representing the steel industry, with maybe a couple of other people, who want to take over and operate exclusively on the seaway.

One of the recommendations already made in their submissions is that they would increase tolls. As you know, the other side of the debate is that we have to streamline the operation of the Great Lakes/St. Lawrence system, to be more competitive than we are today, by reducing substantially.

I guess, Mr. Chairman, a report will be tabled on the other argument, on moving to a not-for-profit binational company that will operate the seaway and have representation from both the United States, in the St. Lawrence Seaway Development Corporation, and the St. Lawrence Seaway Authority in Canada.

Having weighed those two options, you've recommended the move to a binational panel rather than exclusively the user group. The question is, if the Great Lakes/St. Lawrence system is turned over exclusively to a group of users - exclusively to users, without any public policy input - how do you see that impacting on all ports from the Great Lakes/St. Lawrence system in terms of your jurisdiction?

Second, do you see a substantial cost saving by going to a binational panel?

Mr. Inglis: To answer the second one first, Mr. Comuzzi, we have stated in our report - and you will see it in there - that we support the binational aspect as being definitely much superior to any other forum we've seen that's available. We commend you and Congressmen Oberstar for spearheading this. We hope it will go ahead in a hurry.

With regard to the first part of your question, I'd like Paul Kennedy to comment on that.

Mr. Kennedy: We know that the user group is out there and that the government is negotiating with them. We've taken the position that there's a superior alternative, and that this is what has to be pursued. I think we're saying in here that it should be pursued through the legislation here, Bill C-44, to make it happen, not initiate a start of discussions on the subject. That way, while the user group...or risks therein of dominance by people who have a vested interest is eliminated. It's just the best way to handle it.

Mr. Comuzzi: Thank you.

The Chairman: Thank you, Mr. Comuzzi. Mr. Dubé.

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[Translation]

Mr. Dubé (Lévis): Good morning! I am from Quebec, from the city of Lévis actually. You mentioned that you did have some concerns about the future given the competition, etc. In order for me to evaluate all this, can you tell me what has been the trend for your harbour in those last five years? Has activity decreased and if so, at what rate? What is your situation now compared to what it was five years ago?

[English]

Mr. Kennedy: In essence, we are noticing that in everything we do, our situation competitively is becoming more intense. It doesn't matter whether it's a product such as coal moving to the United States, potash moving to the United States, agricultural products moving to Europe or even Canadian domestic movements of grain to flour mills, for example, in eastern Canada - the increased competition at every step is what we've been facing the last five years. Year after year the competition from other modes, other routes, tends to be just nipping at our heels more and more. So over the last few years that has really been the order of the day for us here.

[Translation]

Mr. Dubé: Do you have a deficit?

[English]

Mr. Johnson: That's improved dramatically over the last couple of years because of things we've done internally. We've made a much more conscious effort to serve the pulp and paper industries of northwestern Ontario, and that has had an impact on our bottom line.

[Translation]

Mr. Dubé: You worry about the impact of new taxes, and municipal taxes in particular, on things that used to be exempt. Do you have any figures to show what this would mean for you?

[English]

Mr. Johnson: Yes. In Thunder Bay's case, municipal taxes on Keefer terminal without the land and our sheds would be about $575,000 per annum. If the grants-in-lieu legislation was changed so that things presently exempt, such as rail yards and berths, were subject to taxes, we'd be looking at another $370,000 of taxes annually on our berth and about $260,000 on our rail yard.

[Translation]

Mr. Dubé: You are along the lakehead. Commodities arrive at the harbour by train and by truck and are then shipped east. Some shipments also come through the seaway. What is the percentage of inbound and outbound cargo? Is it 50-50?

[English]

Mr. Kennedy: We are substantially an export port. Our real business here is getting produce from western Canada, whether it's fertilizer, coal or particularly grain, and shipping it outbound to Canadian and world markets. A very small component of our traffic is inbound from overseas or from domestic. We bring in some petroleum, we bring in some aggregates for the construction industry, but we are an export port.

[Translation]

Mr. Dubé: What is the percentage of imports? Is it 10% or 25%?

[English]

Mr. Kennedy: It's 10% or less.

Mr. Dubé: Merci

The Chairman: Thank you, Mr. Dubé.

I have a 30-second question from Mr. Keyes - or maybe 1 minute and 30 seconds.

Mr. Keyes (Hamilton West): Gentlemen, thank you for your report. You can always count on the Port of Thunder Bay to supply us with a really thorough examination of any bill we bring forward from Transport. Of course, Joe Comuzzi, our colleague, is a member in the area doing thorough questioning, not leaving much except maybe a correction.

On page 2, I just wanted you to know that in the middle of your federal agency status.... By the way, I'm glad to hear about your position on federal agency status. It has to be said that no harbour commission has ever paid taxes, and none is in a position, by virtue of the existing tariff or rate provisions, to assume grants in lieu.

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That's not entirely correct. We've had representation from both the Fraser Harbour Commission and the Hamilton Harbour Commission that they are prepared to make their contribution to the municipality in the form of grants in lieu. I think they'd prefer to pay fee for service from the municipality instead of grants in lieu, but they are prepared to go so far as grants in lieu if given federal agency status exemption and all the stuff that flows from that.

Mr. Johnson: Could I reply to that, Mr. Keyes?

First of all, our remarks were intended as a reference to the present regime. Harbour commissions certainly aren't in the grants-in-lieu situation. We don't have a problem with the grants-in-lieu provision per se.

Our real concern, though, is this. Under the present grants-in-lieu regime, certain things, such as berths and rail yards, are exempt. I've heard rumours that the FCN, the Federation of Canadian Municipalities, would like to destroy that exemption. If that exemption were lost and our taxes ended up being close to $1 million, that would make Thunder Bay's existence very precarious.

Mr. Keyes: Thank you very much.

The Chairman: Thank you, Mr. Keyes, and thank you, sir. I appreciate the time you've put into this.

Mr. Inglis: Thank you very much for hearing us.

The Chairman: From the Buchanan Group of Companies we have Mr. Russ York.

Mr. Comuzzi.

Mr. Comuzzi: Mr. York represents the Buchanan Group of Companies. He's the chief financial officer.

By way of background, the Buchanan companies operate eight sawmills in northwestern Ontario, and they produce approximately 54% of all softwood produced in the province of Ontario. Their main market is export to the United States; 96% of their production is to the United States. We hope that will continue when the quotas come down at the end of the month.

In addition to that, they supply fibre to all of the pulp and paper companies in northwestern Ontario. They've reduced the cost of collecting fibre and made all of the paper mills fairly viable. They are northwestern Ontario's single largest private employer. Mr. York is their chief financial officer.

The Chairman: Go ahead.

Mr. Russ York (Vice-President, Finance, Buchanan Group of Companies): I won't read verbatim the brief I've provided you.

Our group is a classic case of how a cost-efficient transportation system affects an industry. Approximately ten years ago, the American railways deregulated. Our traditional market was in the midwest of the United States, and they trunked up into B.C. in the west and were able to take over our market.

At that time we developed a tug-barge system that moved wood from our Thunder Bay mills down to the Windsor-Detroit corridor. Hooking up with the U.S. railways, we were able to access the eastern seaboard. Ironically, our biggest customer in that area is MacMillan Bloedel, which is the biggest lumber producer in B.C. So the efficiency of a cost-efficient delivery system is very important, because in our business, the lumber is sold FOB customer whether it's Atlanta or Jacksonville, Florida.

We have used the lakes to transport to the U.S. market, but in the past we've also exported out of the Keefer terminal to the United Kingdom and the Middle East. With the quota system currently coming into our American market, we are again looking at that export market offshore.

The efficiency of this tug-barge system is very important to our viability. About four years ago we were able to go from two shifts to three shifts and create about 400 jobs. That's a result of a cost-efficient system that expanded our market area.

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So our costs for delivery are approximately 10% to 20% of the price of lumber.

I want to highlight that as a youth in Thunder Bay, having seen the harbour full of ships and active elevators or docks in the shipyards.... Our company had the honour of purchasing the last ship at the shipyards for a ferry to go into one of the inland lakes, again, as a cost-efficient delivery system to reduce our transportation costs.

We feel that we need to be an internationally recognized port. We have, fortunately, a natural waterway that goes to the heart of Canada. I've seen it decline, and I think it's at the point where we need the federal government's help to regain our port status.

If you go down to our sister city in Duluth, it's expanded. I've seen Thunder Bay decline. We certainly think it needs the assistance.

We're at the end of the waterway. Many millions have been spent over the years to rebuild and maintain that port.

Coming from a financial background, obviously the costs of the harbour commission are important to us. If we do export in the future, the taxation of the port facilities is quite important. We are faced, in our industry, with a downloading of costs. The provincial government is asking us to pay more and more of the regeneration and the management of our forests, and we see what's happening federally with the government wanting to defray the cost of ice-breaking. It's something like the province asking us to pay the cost of snow removal in the winter.

There's a limit to what industry can afford. For example, there is the concept that the government wants the gross income percentage to be paid. There's a municipal tax that has to be paid, a stipend that has to be paid.

I think in all these areas, in terms of the use of the land, the port has excellent facilities. We've looked at them. Is it possible to expand into remanufacturing in other areas? We see that as a viable source of revenue and a good connection to utilize the port.

In the city of Thunder Bay we believe, given the small community we have, we don't need a big, elaborate board and that five board members should do.

Our other concern is the domination of the major users at the end of the day, as we look downstream, and the possibility of exporting to the U.K. and the Middle East. We do have a disadvantage, because most of that market is serviced by the Maritimes and Quebec, and, as you know, the distance from Montreal to Thunder Bay is about the same distance as Montreal to those markets. So we do have an additional cost.

We're concerned that there may be competitive advantages or disadvantages that should be looked at on the basis that the management's there, that the seaway should be utilized for all users for the benefit of Canada. In our case, we operate on government lands with a renewable resource and we do export. Those are the kinds of natural resource industries that have strengthened and benefited Canada over the years.

Our concern is the costs. Again, we have demonstrated that in order to have an efficient delivery system that enables us to get our products to market, the seaway has to become cost-competitive. We've seen what happened with the railways. That's one of the reasons we've been able to ship as well, because the Canadian railways have deregulated in some respects and have become cost-efficient. The seaway is also part of our delivery system, which we'd like to see maintained in the future.

Those are my comments.

The Chairman: Thank you, Mr. York.

Before I turn to questions, let me just quote from the last page of your submission:

Your committee cannot ``put the blinders'' on and conduct its review of the future of the marine industry on the Lakes as touched on by C-44 without meaningful recognition of the cascading effect of all impending new charges. Costs which may not appear large individually, when added to one another in an incremental fashion, are a recipe for the rapid loss of traffic.

I think that is a sentiment this committee shares.

Mr. Comuzzi.

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Mr. Comuzzi: Thank you, Mr. Chairman. I'll yield to my colleague, Mr. Jordan.

Mr. Jordan (Leeds - Grenville): Your concern is pretty much the same as the group that was here before you: what we're doing here is likely to raise the costs all along the line and make you less competitive in the business. It seems to hinge on, if I'm hearing you correctly, the likelihood that municipal taxation would be a big factor in the cost of port operations.

Wouldn't the municipality be the first to be concerned if they thought what they were doing to your port was making it less competitive? Wouldn't they be the first to say, ``If we do that, Thunder Bay won't be as attractive a place from which to ship, the costs are too high, and people will therefore start to use the competition''? Wouldn't the municipality be concerned about that if they thought the action they were taking was making you less competitive?

Mr. York: If you look at the number of elevators that have been decommissioned.... What I hear from the elevator companies, and it's only in the public domain, is that it's the high cost of taxation. Yet I haven't seen where the municipality has come out with a plan to reduce the cost of taxation of grain elevators. I think the municipality, like all governments today, is faced with downsizing and the passing down of costs. They would see this as a method of increasing the revenue that has been lost by those elevators.

In our case, our two mills are located on the waterfront, and we do pay high taxation ourselves. Earlier, in the 1920s and 1930s, being on the waterfront was probably an advantage. Today it is probably a disadvantage. The taxation of waterfront property is still quite high relative to other parts of the city.

Mr. Jordan: But if the municipality saw that the action they were taking was putting you at a disadvantage, wouldn't they be willing to discuss that and arrive at a deal, with current management focused on the reality of the commercialization of it? They would have no obligation. They'd just have to go ahead and assess you high, apply a high mill rate to you and put you out of business. I don't think that is likely to happen, but I suppose there's always a concern.

Mr. York: I think the City of Thunder Bay is probably the end. The federal government has downloaded costs on the province, the province has downloaded costs, and I guess it all stops at the municipal level. Where are they going to raise revenues?

I've tried to say that in the end it's all being pushed onto companies, whether it's medical costs or different fees that we've been paid. Everything is being pushed onto the companies, and their ability to pay is decreasing. We have the potential of losing cost-efficient industries because everybody is pushing the costs onto somebody else's pocket.

Mr. Jordan: But if it's put equally on your competition, whether it be the railroads or whoever, wouldn't that balance things out?

Mr. York: The railways are complaining that they're taxed improperly, and they'll show us an example of a port authority that doesn't pay its fair share. That's been one of the cries we've heard from the railways, that compared to the Americans the taxation of the diesel fuel and the property is entirely different at a competitive level.

So I think all these things are used against the municipality for taking a long-term view, having a vision, and not taxing a port authority properly because its gets pressure from other transportation users, who indicate that this is inefficient, not fair, and that we should all pay our fair share.

Mr. Jordan: I agree with your reference to the seaway, and the previous speaker's too. The reference to the seaway was in keeping with what this group would suggest. I think the importance of the Thunder Bay area for the viable continuance of the seaway is vital. Without this there wouldn't be as much need for the seaway as we've known it.

That's all I have, Mr. Chairman. Thank you.

The Chairman: Mr. Dubé.

[Translation]

Mr. Dubé: Are you able to quantify those costs?

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[English]

Mr. York: Right now we're not exactly sure what the total outlay of the increased costs are. It is just another burden amongst the other burdens when you add up all the individual costs - separately they don't seem like much, but when we see all the other areas of government taxation adding to individual costs, in quantum it's quite substantial. We're probably looking at 3% to 5%, with all these various costs that are being downloaded.

[Translation]

Mr. Dubé: I notice in your brief, and you did mention it in your presentation, that you would like the number of directors brought down to five. On the face of it, I find that number to be a bit low compared to 11, as it is proposed in the Bill. Can you comment?

[English]

Mr. York: We are a private company. Our management group probably has five people, and we oversee approximately 3,500 people. We think the smaller the group, the more effective the style of management. The number of board members sometimes can be a hindrance. I don't think big is always better.

We have a team concept. When you have a cohesive team of people...the more personnel you add, you lose that cohesiveness.

[Translation]

Mr. Dubé: Do you yourself sit on the harbour commission?

[English]

Mr. York: No.

[Translation]

Mr. Dubé: Would you like to sit on it?

[English]

The Chairman: Would you like to be represented on the harbour commission board, or the new port authority?

Mr. York: No, I'm not here to look for a part-time job.

The Chairman: I think inherent in Antoine's question is the question of user representation and input to the new port authority. I'm assuming that's something you would be...maybe I should assume nothing. Do you think that's useful?

Mr. York: I think the various user groups are important, but how far do you go and how broad a sector do you make it? I think as long as there's industry representation, and the individual represents industry...we usually tend to have the same slant, whether it's cost or efficiency, but I don't think you need everybody from the pulp and paper sector or the sawmill sector to be properly represented.

We belong to an Ontario association, and I think you saw in the quota battle, or in the countervail battle previously, Ontario industry, the provinces, and the federal government working together. Those were probably small, cohesive groups.

The Chairman: Thank you very much.

Next we have Mr. Robert Paterson and Mr. Alexander Paterson from Paterson and Sons Limited.

Mr. Comuzzi: There's one Paterson missing. He's in New York or there would be a triumvirate here. The Paterson group operates the Paterson steamship lines and owns a series of elevators throughout the west. They process their grain and move bulk product.

I think it's fair to say, and I would remind Alexander or Robert to confirm, that they are in the shipping industry on the Great Lakes and are the only independent Canadian company still operating. That's really quite important inasmuch as all the other shipping companies have amalgamated into Upper Lakes Shipping Inc.

.0900

I'll close off by saying that they fly Canadian flags and employ Canadian people.

Mr. Robert Paterson (Chief Executive Officer, Marine Division, N.M. Paterson and Sons Limited): Thank you.

I'd like to welcome you all back to Thunder Bay and open my comments by saying that I'd like to welcome those who haven't been here before, but the committee looks quite familiar to me. As one of the few independent operators left on the lakes, we're happy to be back here a year and a half later to present to you again.

My presentation deals with essentially the three areas: port, seaway, and pilotage. It's no surprise to you. I will not, as the others have, go through the complete report, but I would just like to start out by saying that I think remarks that Minister Anderson made to you last Thursday are key to what this whole exercise is about. Without going through his comment in its entirety, I think he really touched on the issue you've already acknowledged this morning to be the key to the future viability of the seaway, which is achieving efficiencies, reducing costs, and making the system more competitive.

This system is a vast system, as you are aware, stretching from the head of the lakes to the Atlantic Ocean. It's a competitive system that requires, among other things, efficient ports, an effectively managed seaway authority, elective pilotage services with commercially based pilotage fees, and rational user fees for services. Of course, I'm referring to coast guard charges.

I believe Stan Keyes and his committee recognized this. It was reflected in their recommendations of about a year ago, and I certainly hope it is reflected in your committee's report, Mr. Chairman, which you have already acknowledged.

The minister is counting on this committee to come back with solid recommendations based on input from significant stakeholders and other concerned groups. I'm confident that the minister wants to make every effort to avoid any unintended effects that would undermine the seaway's ability to remain competitive. To be sure, all sections of this legislation must be able to contribute to the success of the seaway.

No one section of the act can be allowed to run contrary to the spirit and the intent of the legislation. Generally speaking, I think the bill in many ways is consistent with the SCOT report, but there are some areas that definitely need attention. Of course, that's what it's all about today.

With respect to part I, the Canadian port authorities, I highlight that as well as the other things the harbour commission has pointed out, we're concerned about the restrictions on borrowing whereby they cannot mortgage or hypothecate any of the...essentially we're into the assets. It's really based on gross revenues. It seems to me that if taxes are paid and stipends are paid off the top of the gross revenues, it would put pressure on revenues, if that's the only base for borrowing, and could conceivably drive costs up.

I think this is contrary to what the minister has said, that this legislation will make it easier for ports to operate according to business principles. If you have nothing to borrow against, it's pretty difficult to move forward.

As I say, other parts of this bill have been commented on by the harbour commission, and we are pretty well in agreement with everything they have said and with their concerns.

I do make one final point with respect to this part of the bill. We feel that the consultative process in deciding to become a CPA is not really provided for within the bill, that perhaps all the stakeholders should be part of the process, in that perhaps the user of the port and the harbour commission should decide together whether CPA status is in fact the route to go. It seems to be fraught with pitfalls, but it may be the only choice at the end of the day. However, we would like to think there is a proper transition process that leads the users of the port to the decision that this is the way to go. We wanted to bring that to your attention.

.0905

With respect to the seaway, the commercialization of the seaway by entering into an agreement with a not-for-profit corporation is a welcome development, which should ensure the efficient and competitive operation of this important national asset. The provision for the removal of the responsibility for non-marine related assets, such as bridges, is a welcome aspect of this part of the bill and one that was long overdue.

It appears that the same borrowing restrictions apply as mentioned with the ports, but at this time I'm not aware of the arrangements that have been discussed between the user group and the federal government in this regard. It seems to me, though, from what I read in the bill, that there are some problems that could in essence put pressure on tolls, which I think is not in the interest of competition and reduced costs. I think the corporation will succeed by cutting costs wherever possible, thus holding down fees. It is worth noting that the seaway is totally dependent on high traffic and cargo volumes, which are very sensitive to the overall system being priced accordingly.

With respect to pilotage, it should come as no surprise that our greatest disappointment with Bill C-44 is the degree to which it falls short of the SCOT recommendations and Minister Young's addresses with respect to the reform of pilotage services in Canada, particularly in the Laurentian region - and I've just recalled here, for your quick reference, the recommendations made in that report.

In 1995 Minister Doug Young stated that the pilotage services must be modernized, that the status quo is not an option. The minister also stated that the national marine policy would bring commercial discipline and business principles to the management of pilotage services.

Bill C-44 has not achieved either of these goals. As a matter of fact, it looks as though the status quo has been preserved.

In my presentation to the SCOT committee in February 1995, I pointed out that between the period 1987 and 1994, the tariff for pilotage in the Laurentian region had increased 37% and the actual remuneration paid to pilots in the same period had risen 43%.

In comparison, for a 24-hour period on one of my ships, in this case the motor vessel Paterson, total crew wages, including overtime, are $6,000. It's $6,000 a day for the total crew. The pilotage charged from Montreal to Les Escoumins for an 18-hour trip is $4,500. Calculated on a 24-hour basis, it comes out to $6,000. So the charge for two pilots through two districts is equal to my entire crew cost for the same period.

Put another way, a captain costs approximately $500 per day, benefits included, which shows how grossly overpriced pilotage is when it is more than 10 times the wages of a ship's master.

I looked at those numbers again yesterday. I can tell you they are accurate numbers.

Additionally, the remuneration packages for pilots make it difficult for me to retain highly trained staff. It has a collateral effect on the wages that I pay. In the last two years I've lost four people - young, upcoming, qualified captains - to Great Lakes and Laurentian pilotage.

Surely this committee can understand the frustration the shipowners have for this kind of situation. There is nothing commercial about this kind of arrangement, and clearly it does not make the seaway more competitive.

The bill has dealt with tariff setting and a review process in a positive manner. In Bill C-44 the Canadian Transportation Agency's final decision on proposed tariffs is binding and has removed the power of the GIC to vary or overturn decisions, which has been done in the past to the detriment of the users.

The minister has asked this committee to investigate the wisdom of including an alternative dispute resolution mechanism in the bill. By way of example, we have seen the final offer selection process recently used in negotiations between the corporation and the authority in district 1, as embodied in the contractual arrangement between the two entities. The arbitrator decided in favour of the authority, much to the dismay of the pilots. Subsequently, the corporation stated that the final offer selection process would be omitted from their next contract.

The ADR, which is the alternative dispute mechanism, must be enshrined and not left as a negotiable item. I wholeheartedly endorse the alternative dispute resolution mechanism being included in Bill C-44.

.0910

The minister has asked you to look very carefully at the process by which pilotage certificates are awarded to masters and mates. The minister has stated that the present process in some regions is too onerous. The fact is the only region that presents a problem is the Laurentian region.

The Great Lakes region grants exemptions to domestic operators in all waters between Thunder Bay and Montreal. In other words, a ship and a master that leave Thunder Bay are the same ship and master that arrive in Montreal or in Quebec City.

The minister has asked if any further legislative amendments are required to create a consistent national policy on exemptions for domestic users. Clearly, the answer is yes. There is no reason why exemptions should not be granted in the Laurentian region, given that this is already the case in other regions. A clear national policy is badly needed in this regard.

The new clause 53 of the bill that refers to a consultation process to be completed by December 1998 between the authority and users regarding several topics, including the pilot certification process for masters and mates, is distressing to the shipping industry. As experience has shown, after years of studies, consultation, and even task forces, no decision has been reached.

The users, quite frankly, have no confidence that this will change with the process being suggested here. We need action now. To review the pilotage section, I'm asking that the alternative dispute resolution mechanism be included in the bill and not be left as a contractual bargaining item. The certification process for masters and mates on domestic ships in the Laurentian region should also be made consistent with that of other regions in Canada.

By way of quick conclusion, the theme here is efficiencies, reduced costs and competitiveness. In view of all that's taken place since I was here a year and a half ago, we're very concerned.

By way of coast guard charges, we have seen an increased cost of approximately $5 million on this system with one swipe of the pen, based on an arbitrary $20 million amount that was arrived at. The amount I'm billed for this is three times my divisional margin rate last year. It is a massive number. It's based on GRT, and the way it is right now, it's almost impossible to pass this on to users. That is the increased cost. I don't see any efficiency or reduced cost there.

Briefly, our other concern is the issue of rail hopper cars being sold to the railway companies. You should familiarize yourselves, if you haven't done so already, with the Halifax grain elevator ruling by the CTA that brings to light a lot of concerns we have with respect to the utilization of those cars and the costs of those cars to the railroads.

We feel there is a tremendous threat to this port and to the eastern movement of grain. A per diem of $17 for rail cartage to Thunder Bay doesn't quite cut it. Even if you have millions of dollars invested and you sell those rail cars to the railroads at $400 million with a 20- to 30-year life expectancy, it reduces that $17 per day to about $4. So there is tremendous concern there, on top of the fact that they have maintenance costs built into the base rate that the farmer pays.

This requires a lot of attention. I'm not going to dwell on it today. My point is that there's a lot of pressure on this system to make it competitive. All we're seeing so far, as I see it, are our increased costs, or our inability in the case of pilotage to deal with costs. Thank you very much.

The Chairman: Thank you, Mr. Paterson.

Mr. Comuzzi.

Mr. Comuzzi: Robert, let's start on that last point, on the coast guard. It was a unilateral decision, I suspect, that wasn't given a great deal of thought, and it has unfairly affected very many people in the shipping industry in this country.

I'm not telling you anything you don't know, but we imposed a cost, without consultation with the shippers and without asking the commercial users of the system what services they wanted and they didn't want, what services they required and they didn't require. Mr. Chairman, this committee really has to make some recommendations with a review of how the coast guard user fee system was implemented. It's most unfair to all the shippers on the Great Lakes.

The Chairman: We'll have to go over to Fisheries and Oceans....

.0915

Mr. R. Paterson: I understand where it lies.

Of course, Hickling and Booz-Allen are doing a study, and we have our own consultants watching their consultants. We're trying to do the most efficient job we can. But at the end of the day, I don't believe anything concrete will be determined. It could be shown that companies have been going out of business for years and that this is not necessarily the final nail in somebody's coffin.

I don't put a lot of faith in the outcome of such a study, because I think it could be interpreted many different ways. In the spirit of what we're trying to do here, I think we're going in the wrong direction.

Mr. Comuzzi: Let me turn to pilotage. Do you still agree with what our recommendations were at the time? They are not implemented in the bill, and I hope we can convince all the members of the committee to include them in this bill.

I'm talking exclusively now of the river pilots. One recommendation is that your masters or any other ship's masters who travel that route on a consistent basis be entitled to apply for their licence as pilots, so that pilots are not necessary on the ship, unless the owner or someone else asks for the service.

A voice: The certificate.

Mr. Comuzzi: Yes. That still meets with your....

Mr. R. Paterson: Granted, there is certainly a provision in the bill for that sort of thing to take place, but given the way that process has evolved over time, it hasn't been very effective.

We are working on that, of course, as we speak. It's difficult to know what syllabus should be in place, what sort of simulator training should be there, if in fact we don't know what we're going to be allowed to do at the end of the day.

We had a recent example of two identical people taking the test with equal abilities, equal skills and equal time at sea, and one failed and one passed. I don't think there's any logic to that.

We have the Ferbec example, which you're probably aware of. It has an $800,000 pilotage bill a year. They make 50 trips in the St. Lawrence River. When the pilot gets on that ship on trip 45, does he do any more than what the captain does? There has to be some flexibility there.

There is an inconsistency in the policy, and I've been through all this before with the committee. If I can take my ship from here to Thunder Bay, from here to Montreal, what is the difference below Montreal? Granted, the captain probably needs a pilot when he gets to Montreal because he's exhausted from the previous portion of the trip - and maybe that part could be managed differently down the road. But when he gets to Quebec City we feel there is no reason why that person's competence has to come into question.

We agree with your points in the original recommendations with respect to a repeal of the bill...and the secretariat desk and those items. There may even be a simpler way to do it than that, but the fact is we need pilots because we have a lot of foreign ships coming in.

We have a situation, though, where shipping federations play back and forth against the CSA. Where they can't stand an interruption, we get waivers and can continue to operate. So there's pressure on the government to settle from the foreign interests that drive our costs up. It's an untenable situation that has to be dealt with in the spirit of this bill.

Mr. Comuzzi: And soon.

Mr. R. Paterson: Yes, that's the concern - not two years from now.

Mr. Comuzzi: As I'm certainly aware - and I'm not telling you any school tales - our recommendation wasn't followed, mainly because the lobbyists took over.

Mr. R. Paterson: I understand it's a tough political issue.

Mr. Comuzzi: There was a strong lobbying group with respect to the pilots. I think this committee really has to take issue with this. We have to reassert our position with respect to the recommendations we made with the pilots in general. The parliamentary secretary can't speak to that matter, but I'm sure down deep he agrees.

Mr. Keyes: Deep enough to support an amendment?

Mr. Comuzzi: Let me just ask one final question. This is the last kick at the cat on this Marine Act. We're going to have to live with what we do for the next 15 or 20 years. We have to be so cautious that we don't make a mistake.

The Canadian ports thing was a serious mistake that hampered shipping and port operations in this country. Do you see anything in this act that we should be extremely cautious about, that we should maybe think about again?

.0920

Mr. R. Paterson: How long do I have for the answer?

I think the old adage that ``You don't fix what ain't broke''.... Maybe there wasn't anything too terribly wrong with the Harbour Commissions Act, certainly as it affects Thunder Bay. In trying to fix things that seem to work pretty well, we start to tinker with a lot of things that maybe don't need tinkering with, and then we don't tinker with things such as pilotage, for instance, which needs some attention. This act moved very quickly to deal with the user concept for the seaway, and it hasn't done the same, it appears, on the port side or on the pilotage side. So I think there is certainly movement in some areas.

It's such a complex issue we're all dealing with here. There are so many different forces at play, with so many different economic situations in the whole system, including western Canada. If you just go back to what Stan Keyes and his committee was doing a year and a half ago, to me it all seemed to emanate from the repeal of the Crow rate and the WGTA, that we had to look at this whole system and give everybody a chance of removing the real costs.

As far as the railroads are concerned - and I'm not a railroad-basher - even though the subsidy was taken, the rate remained the same, so the revenue remained the same, if I understand it correctly, and the farmer moves to those higher rates. Well, you have to look at his different directions and modes of transportation.

This bill is attempting to make sure he has an equity in any of those directions in which the Great Lakes system plays a role, and I'm afraid we're getting too fancy and are not really going to be able to see clearly right through the whole issue and what are the effects of all this.

That may be a little vague, but I'm really concerned that there are just so many issues, we really can't fix them all with one bill - unless we're really prepared to understand the whole system and all the dynamics of it. I don't know if that's possible in this period of time. I just think it's a very complex transportation system that's evolved over 100 years, and we have to be very careful.

The Chairman: Thank you, Mr. Paterson.

Mr. Dubé.

[Translation]

Mr. Dubé: Mr. Chairman, before asking my question, I want to say that listening to Mr. Comuzzi, I feel that there is no need for any member of the opposition here this morning. There seems to be enough opposition within the government party. I'm only joking because I recognize that Mr. Comuzzi has the right to represent appropriately the people from his riding and his area.

As far as I'm concerned, coming from a different area, I have examined your brief and I intend to read it again. In fact, I would like to know a bit more, not on the amendments you are suggesting to Bill C-44, but rather on your company.

Mr. Comuzzi has told us that you owned mostly Canadian boats, that is boats made in Canada. Can you tell us where they are built? Which company builds them?

[English]

Mr. R. Paterson: Our company has been in existence since 1908 in Thunder Bay. We are a grain company and a Great Lakes marine operating company. We have built ships in that time at MIL Davie, which is Dominion Bridge now. We have built ships in Collingwood and in Port Arthur. We have built ships in a shipyard here in Thunder Bay and in the U.K. prior to the First World War. But predominantly we have built ships in Collingwood and Thunder Bay at the MIL Davie shipyards. The last commercial ship built on the Great Lakes, in 1985 in Collingwood, was built by our company and called MV Paterson, which is the example I used here.

We currently own seven ships on the lakes. If you look at the Upper Lakes/Algoma entity of Seaway Bulk Carriers, we are the second-largest domestic carrier on the Great Lakes. We run only five of those seven ships, and have done so since 1991. We are involved in the long-haul trade as strictly a bulker operator. We do not operate self-unloaders. Our main business is long-haul grain from Thunder Bay to the St. Lawrence primarily for export, although we do haul domestic grain, and we return with iron ore to the U.S. steel mills into Lake Michigan.

.0925

[Translation]

Mr. Dubé: Mr. Chairman, when I heard Mr. Paterson mention MIL Davie, I started warming to him because MIL Davie happens to be in my riding of Lévis.

Can you tell me what is the tonnage of your grain ships sailing to foreign countries. There is of course the maximum tonnage allowed in the seaway, if you use it. What is the tonnage of your ships?

[English]

Mr. R. Paterson: For the most part, our biggest customer is the Canadian Wheat Board, and we haul primarily durum wheat for export to world markets. We also carry some other domestic wheats into the mid-Great Lakes and to Montreal for milling in Montreal. Our ships are obviously restricted, by the draft of the seaway, to 26.5 feet. The Paterson that was built in Collingwood can in fact carry about 29,000 metric tonnes of grain per trip, which is in some cases 4,000 tonnes greater than the traditional lakers.

The idea there is that with the fixed lock size, we have increased that, through a design of a ship, by 4,000 tonnes without ever increasing the size of the lock.

I digress a bit, but I think that answers your question. Most of our grain is for world export, in position to Baie Comeau, Port Cartier, Quebec City and Montreal, but not Three Rivers or Sorel as much.

[Translation]

Mr. Dubé: Thank you very much and good luck!

[English]

The Chairman: Thank you, Mr. Dubé.

Thank you, Messrs Paterson.

Mr. R. Paterson: Thank you very much for this opportunity.

Can I make one quick point about the tonnage of the vessels? The Paterson carries enough wheat to make about 60 million loaves of bread.

The Chairman: Are those large loaves or small loaves?

Mr. R. Paterson: That's more than three trainloads.

The Chairman: Thank you very much.

Mr. Comuzzi, can you please introduce our next presenters.

Mr. Comuzzi: Thank you, Mr. Chairman.

Our next presenters are from the Thunder Bay Chamber of Commerce. Mr. Gary Woodbeck is the past chair of the chamber. The present chair is Mr. Smith, who is unable to be with us today. I know all directors - and we've been directors - like to think of themselves as being pretty important, but the strength of the chamber is in the person sitting next to Mr. Woodbeck, Rebecca Johnson, who does a marvellous job.

Ms Rebecca Johnson (President, Thunder Bay Chamber of Commerce): Thank you very much, Mr. Chairman. I appreciate that.

On behalf of the Thunder Bay Chamber of Commerce, we appreciate the opportunity to come to speak before you this morning. As noted by Mr. Comuzzi, I am president of the Chamber of Commerce, and with me is the past chair of the board, Gary Woodbeck. We are pleased to be here to have this opportunity to address the committee on behalf of the business community.

The Thunder Bay Chamber of Commerce represents some 950 member organizations and over 1,400 voting representatives. Membership includes a broad cross-section of port-related industries. The general focus of our chamber during 1996 is on municipal issues. Bill C-44, of course, although not a direct municipal issue, is still one of great importance to our membership and to business in our region of northwestern Ontario. We realize the impact on all facets of our province, and the impact on our business community, through the passage of Bill C-44.

Frequently we are called upon to appear before committee hearings such as this to offer comments on government initiatives. In fact, we spoke to your committee in March 1995 as it sought public input at the beginning of the process that led to the tabling of this legislation before you today.

.0930

We do not sit before you professing to be experts in the field of maritime policy. As a member of the Canadian Chamber of Commerce, we are supportive of the Canadian Chamber's general advocacy of downsizing federal government departments and the privatization of government services where practical.

We appear here today because of the vital importance of the port of Thunder Bay to the economic well-being of this community. Economic activity attributable to the port varies annually as tonnage handled fluctuates but generally ranges between $500 million to $700 million.

The job impact is close to 2,000 direct jobs with up to 1,500 additional jobs created by indirect and spin-off activity. As well, we note that thriving waterfront industries contribute in the range of $17 million to the local tax base.

Thunder Bay would be hard-pressed to provide municipal services to our members and education to our children if the tax contribution of this sector of our economy was reduced.

The Chamber of Commerce has been involved in several initiatives seeking to enhance the competitive position of the port of Thunder Bay. We realize that the seaway is under intense competitive pressure from other coasts and other modes. The Thunder Bay Chamber of Commerce has been a tireless advocate of lower government-imposed costs, less government involvement and more competitive service in all aspects of port and seaway activities.

The Thunder Bay Chamber of Commerce has very little issue with Bill C-44 and our moving in these directions.

When the chamber appeared in March 1995, we had called for the immediate commercialization of the St. Lawrence Seaway. We applaud the government's steps in this direction. We also agree that the seaway, if it is to be run by the private sector, continue to be regarded as a national asset, not just for commercial navigation but also for flood control, power generation, and the care and control of the world's greatest reservoir of fresh water.

The chamber believes that actions in this regard can best be undertaken by a binational management approach to the seaway.

With regard to the creation of a Canadian port authority, the Chamber of Commerce believes that Thunder Bay should have been recognized as a port vital to Canada and accorded CPA status at the outset.

Having said this, we appreciate that the legislation provides the opportunity for a port such as Thunder Bay to apply for and be granted CPA status. The chamber understands that Thunder Bay's Harbour Commission has applied to be a CPA. We fully encourage and support this action.

We agree with the appointment of user-nominated directors to the CPA board. The Thunder Bay Chamber of Commerce has the privilege of appointing two directors to the board of the fledgling Thunder Bay International Airport Authority.

While Bill C-44 does not contemplate that an organization like the chamber will appoint to CPA boards, we are confident that the process being suggested in Bill C-44 will result in significant user representation. A national call for this type of representation has been the goal of the chamber for some time.

The most disappointing issue not addressed adequately in Bill C-44 is pilotage. When we appeared in March 1995, we addressed pilotage costs, particularly for domestic flag carriers moving grain from Thunder Bay to the St. Lawrence River. Our view of Bill C-44 is that while it encourages pilots to lower their costs of service it does not provide for the removal of pilots from Canadian-flag operations quickly enough. The pilotage system is out of balance.

It is unreasonable that the pilotage authorities, by virtue of federal legislation monopoly empowerment, should be able to employ pilots at a cost of $160,000 per pilot, per year in the Laurentian pilotage region. It seems unconscionable that a monopoly service provider should be able to extract from a Canadian shipowner fees of up to $5,000 a day for services the shipowner does not need. This is apart from the fact that the monopoly service provider has been permitted by law to define and institutionalize what shipowners need.

The competitive pressures on Thunder Bay mandate immediate cost reduction. The Thunder Bay Chamber of Commerce suggests that the legislation be amended to provide for an exemption for Canadian-flag vessels with experienced captains operating in the St. Lawrence River.

The Thunder Bay Chamber of Commerce thanks the Standing Committee on Transport for recognizing Thunder Bay as an important transportation centre, a centre profoundly dependent on national maritime policy.

The Thunder Bay Chamber of Commerce once again extends its thanks to the members of the standing committee for coming here to Thunder Bay. We leave you with our general comments, gentlemen, and look forward to providing input to you beyond our formal brief.

.0935

Mr. Chairman, that's the end of our formal presentation. We will be pleased to answer any questions you provide to us.

The Vice-Chairman (Mr. Comuzzi): Thank you.

Mr. Woodbeck, do you want to make any comment before we go to the questioning?

Mr. Woodbeck: No, that's fine.

The Vice-Chairman (Mr. Comuzzi): Thank you, Ms Johnson.

Do you want to go ahead, Jim?

Mr. Jordan: I'm going to congratulate you on a nice crisp report. I suspect maybe you've had some dialogue with the Paterson boys on the pilotage thing, but that's only speculation.

Ms Johnson: That's correct.

Mr. Jordan: I for one agree with you. I think the committee will be making note; I hope they will and I hope they will revisit the issue. It seems to me that we're trying to make it so that you can make your port more competitive, and if that's such an ulcer on the system then I think we should address it again. I don't know how far it's going to move, but I know the intent initially was to look at it and address it seriously, and it would appear to me as if we haven't. We've tinkered a little bit, but not much else.

You suggest here that the municipal taxation might become a big aspect in relation to total taxation generated. The difficulty I see there is, remembering that the concept here is to make marine transportation competitive.... I know it would be simple to say that's their business; we'll just apply this assessment value and this mill rate to that industry. I see some risks there. Personally, I think you'd want to be very careful if you said, come on, marine industry, you have to pay your share of municipal taxation, too.

You have other sources of revenue. You could up the mill rate throughout the whole city by a half a mill or so and it would generate, I'm sure, the same amount of revenue. If you're going to question whether the marine industry has to remain competitive or not, I think you would have to be very careful how much you want to generate from a municipal tax point of view or you might put them out of business - almost.

I'm not suggesting they should get along with nothing, but I think there are some risks there. If you think they could carry a high assessed value on the thing, you run the risk of making it tough for them to make a dollar.

Mr. Gary Woodbeck (Past President, Thunder Bay Chamber of Commerce): As far as the taxation is concerned, what we were talking about in our presentation was the taxation for the elevator system in Thunder Bay. We're not tax experts.

I think when the mayor is here a little later he'll go into more detail.

The feeling we have right now on most of the elevators is that they're taxed on a higher type of formula than other types of businesses in Thunder Bay. In the past, elevators have shut down, because between most of them they pay up to $1.5 million a year. I believe their tax is based on the value of the replacement property. One of those elevators we know could be worth $100 million, $200 million.

With the throughput they're getting today, it's not fair to say that the building is worth that much, especially now when we know the couple that have shut down were sold for $1.

Mr. Jordan: Then you're suggesting they're already taxed -

Mr. Woodbeck: We believe the formula is incorrect the way they're being taxed. We're suggesting everybody pay a fair tax base, and maybe right now the formula on elevators especially isn't a fair formula.

Mr. Jordan: It's too high.

Mr. Woodbeck: Yes.

Mr. Jordan: That's all I have. Thank you.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Jordan.

Mr. Dubé.

[Translation]

Mr. Dubé: If I understand you correctly, you agree with the position of the other groups who appeared earlier. I will ask a more general question.

.0940

Being with the Chamber of commerce, you do have a comprehensive view of the whole region. Can you tell me how important is the port compared to all the other economic activities? Is it vital to the area? If the port were to... Never mind, it won't happen anyway. I just want to have an idea of how important the port of Thunder Bay is for the economy in your area.

[English]

Mr. Woodbeck: As we mentioned before, in the tax situation the elevators pay up to $17 million of our tax base for education and so on. It's been estimated that for every tonne of cargo that comes into Thunder Bay, a spin-off of $50 goes to the community. We can range anywhere from 8 million to 16 million tonnes of different cargo, so the spin-off effect of $50 affects all the other companies that deal in the grain system.

Ms Johnson: I would just add the fact that Thunder Bay has been recognized as a port since its inception, basically. It goes back to fur trade days when there was this cross-section of fur traders versus the people coming in from the east. It also plays an important role in relation to tourism because of the designation that Thunder Bay is a port. The economic impact of that is significant.

It also goes beyond Thunder Bay to the region itself. Because of that tourism component, we are looking at Thunder Bay plus part of the rest of that significant area in relation to the port. I don't know that I can give you a dollar factor on that, but it's quite significant. There's a domino effect, of course, beyond that. So it's quite significant.

[Translation]

Mr. Dubé: Compared to the other ports on the Great Lakes, you're telling me that it is the most important because it sits at the end of the seaway, in the most westernly area. Do you know how significant your port is in relation to the others on the Great Lakes?

[English]

Mr. Woodbeck: All the grain that comes through Thunder Bay is then distributed to maybe six or eight different ports in the St. Lawrence. We do feed a lot of the mills in southern Ontario from Thunder Bay. So, yes, a lot of people are dependent on us.

What comes out of Thunder Bay isn't the majority that goes through the system, but it sure is one of the higher-priced cargoes. Wheat is right now about $300 a tonne. Most of the other commodities, other than finished products, that are going through the seaway are lower-priced commodities. So, yes, what's coming through here is the higher-end type of cargo.

Mr. Dubé: Thank you.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Dubé.

Mr. Keyes, do you have a question?

Mr. Keyes: No, Mr. Chairman.

The Vice-Chairman (Mr. Comuzzi): Would you like to talk about your position on the pilotage issue, which we heard about this morning? Let's hear it now.

Mr. Keyes: I'm here to listen, Mr. Chairman. It's pretty clear where the users are coming from.

Thanks for your report.

The Vice-Chairman (Mr. Comuzzi): I have a couple of questions, if I may.

In terms of what's happening insofar as our forestry industry is concerned - and we draw from all areas, from Kenora as far as Marathon - have you ever thought of perhaps renaming the port from the Port of Thunder Bay to the Port of Northwestern Ontario? Has that ever given you...to give us more scope, more representation?

Does that make any sense, sir? I know as the Chamber of Commerce, you're pretty -

Ms Johnson: There's no question, Mr. Chairman, that Thunder Bay is considered a regional hub. As a business community, we are working to make that more so than we've ever done before.

At the same time, Thunder Bay as a port - and this is just a personal opinion - is certainly something we've never really gone out to seek input on from our membership. This is a whole new idea. I don't believe it's been discussed before, or at least not that I'm aware of.

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I would put the question back to you, that you would have to really look at Thunder Bay, which is already designated as a port. To change means you'd have to do a total education. I don't know that it would be ``Port of Northwestern Ontario''. I guess I would have to have some really good rationale to rename it that. I think it should really be designated as the community it stands in. If I look at other areas, they're really based on the community in which the port is the significant port. I know Rossport has a port. It's more of a tourism marine area. I can't see that wanting to be part of a northwestern port.

I'm just rambling, but I'm trying to come to some grips with it. I guess it's something that could be thought about, but I don't see the positive side to it at this point.

The Vice-Chairman (Mr. Comuzzi): Okay.

You mentioned in your report that you agree with the binational panel to reduce the cost of the seaway. Do you want to expand on that?

Mr. Woodbeck: The seaway, I believe, or the system of locks, is 29% owned by the Americans. So it would only be a natural phenomenon to have both countries involved in all the decision-making in the future - and hopefully taking some responsibility for it also.

The Vice-Chairman (Mr. Comuzzi): You don't see any problems with sovereignty on that.

Mr. Woodbeck: No. When we talk about the system being privatized, we still have to realize that it is a Canadian waterway for the betterment of all Canadians, not just the shippers or the shipowners or whoever's moving commodity. This is a Canadian asset that, even if it's commercialized, still has to be recognized as a Canadian asset.

The Vice-Chairman (Mr. Comuzzi): Okay.

Thank you very much, Rebecca and Mr. Woodbeck, for your time and for an excellent report. It will be read and considered, especially your recommendations in terms of pilotage.

Ms Johnson: Thank you.

The Vice-Chairman (Mr. Comuzzi): The next presenter will be from Selkirk Terminals, Captain Gordon Turner.

Welcome, Captain Turner.

Captain Gordon Turner (President, Selkirk Terminals): I'd like to introduce John Kemp, the port manager for Selkirk Terminals. I'm pleased to say that he has come along to give me some moral support, anyway.

The Vice-Chairman (Mr. Comuzzi): You look like the kind who needs a little moral support.

Capt Turner: Gentlemen, thank you for allowing us the opportunity to share our comments and concerns with respect to the proposed legislation of Bill C-44. Selkirk Terminals has operated as a general cargo stevedore and terminal operator at Keefer terminal, administered by the Thunder Bay Harbour Commission, for about 30 years. For the past 10 years we have been a subsidiary of Logistec Corporation, a publicly traded company that provides marine services to companies in global trade.

Mr. Chairman, I understand that at the end of October Logistec will be making a presentation to the SCOT committee.

The Vice-Chairman (Mr. Comuzzi): In Ottawa?

Capt Turner: Yes.

Over the past five years, Keefer terminal has handled, on an annual basis, 40,000 to 70,000 tonnes of bagged agricultural products, project cargoes and the occasional forest products shipment. Agricultural products shipments tend to be very seasonal and sporadic, dependent upon the quality and quantity of harvests and the international market. Large space requirements of up to 140,000 square feet are frequently required at short notice for periods of up to 16 weeks during the shipping season.

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Selkirk has a union contract with General Cargo Union, Local 1867 of the ILA, and in 1995 our payroll, including fringes and insurance, etc., exceeded $1.5 million. Selkirk's operation at the Keefer terminal is the major source of employment for Local 1867.

Selkirk has a significant investment in equipment, resources and the training of an efficient safety-conscious labour force. We also maintain a fully staffed, year-round office at Thunder Bay to serve the port's clients.

We support the government's initiative in introducing Bill C-44, which we believe will help modernize our port system, and our comments today will be strictly restricted to the port's policy sector.

The facilities at Keefer terminal are unique in Canadian international trade in their ability to handle the products that I have previously mentioned by supplying floor area and rail infrastructure in the relatively short timeframes required. The port is also well suited for shipping to underdeveloped areas such as Africa and the Caribbean, where sales are made in terms of ocean freight and transit times. Together with a dedicated labour force we have been able to be competitive with other Canadian ports. However, we have already seen diversions of cargo to American ports on the Gulf of Mexico.

If Keefer terminal was subject to full municipal taxation, the owner, presumably the new CPA, would no longer be able to supply space to us at today's rates. If we have to pay full municipal taxes on the space on an annual basis, I can assure the committee that the movement and the employment it provides would cease. An additional tax burden, which would even add a minimum of $1 a tonne to a shipper's costs, could render this port non-competitive.

We have worked hand in hand with the ILA to ensure that we remain competitive. This has involved concessions on both our parts, and I see no way to make up for the increment of increased costs that taxes would create.

Port facilities at Keefer terminal dedicated to marine cargo handling must be regarded as a necessity to maritime commerce and a community asset. The transient nature and low volume of material handling opportunities, always of low-volume commodities, will not allow an operator such as ourselves to bear municipal taxation.

I therefore respectfully request that this committee include in its recommendations a revision to Bill C-44 to confirm the status of CPAs as federal agencies and specifically exempt CPAs from standard forms of municipal taxation.

Our next comment concerns the role of CPAs in respect of the role played by private enterprise. As the largest stevedore and terminal operator, we, like the port, seek to maximize the volumes handled. Our long-term commitment to the port is evidenced by the volume of our investments.

Since we understand the government's position is that whatever can be done by private enterprise should be done by private enterprise, we recommend that in order to encourage this philosophy, article 24 be amended to clearly specify the powers of a port authority and indicate that a port authority may not engage in any activity that would see it compete with its users, that is, the stevedores or terminal operators. This would give users confidence in the system and further encourage private enterprise.

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We would like to comment on the concerns...the board composition for CPAs more specifically, the size of various CPA boards, and the nominating procedures.

First, we feel strongly that the number of board members should be kept small. We would encourage a cap at nine, as opposed to a minimum of nine to a maximum of eleven.

As is happening to the port customer base, there are fewer in number but they are bigger in stake and power. This is happening to corporate boards across Canada, where fewer board members are being selected but each having increased powers and responsibility. A smaller board, but comprised of directors who have the ability to devote more time to understanding and directing the activities to ensure the port meets the needs of its customers within its mandate, is more useful than a large number of directors who contribute little to its mission.

Secondly, in terms of composition, we understand the input from the three tiers of government, the federal, provincial and municipal. We're also glad to see a requirement for transportation or business experience. The fact that candidates cannot be public servants is also seen positively; however, appointments made as per paragraph 12(1)(e) should be qualified further. Paragraph 12(1)(e) reads as follows:

(e) the Governor in Council appoints the remaining individuals nominated by the Minister in consultation with the users.

We have three recommendations that will enhance the value of this statement in meeting the overall policy objectives.

To minimize the political aspect, we believe that those nominated should come from specific recommendations from the users. To achieve this, users must have a mechanism to include one or more names on a list from which the remaining candidates should be selected.

Users should not be banned from board membership. By this we recommend removing paragraph 14(e), which excludes users from participating on CPA boards. This will ensure that users have a say directly and will not require going through their lawyers or other neutral parties that do not have experience in the port's activities.

The issue of conflicts of interest can be overcome professionally as long as these are on the table and this is the desire of the users.

A different category of users, and limited board terms per user and per type of user, could also be incorporated in the nomination process.

It seems important at this point to make more precise the definition of user. A user should be defined as a company that has paid either port dues, throughputs, rent or wharfage directly or indirectly to the specific port authority within a given timeframe, say for the last two years.

Mr. Chairman and committee members, thank you for inviting us to share our comments on Bill C-44.

The Vice-Chairman (Mr. Comuzzi): Thank you, Captain Turner.

Captain Kemp, do you want to add to the submission or just take questions?

Mr. Dubé.

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[Translation]

Mr. Dubé: Good morning! Here is my first comment. If you hadn't come right out and said that you do support Bill C-44, I would have thought that you opposed it, given the number of amendments you are requesting. I admire your diplomacy.

It seems that your presentation is based on the premise that Thunder Bay's harbour will be given federal agency status by the federal government. In my opinion, this should not be taken for granted. If it didn't happen, the whole public side of the operations would disappear through privatization. It would be different from the present situation, but all port users would have to pay more.

In this context, I fail to understand how you can come out and say from the outset that you support the Bill. Could you elaborate on your position? And in the same vein, what are positive aspects of Bill C-44 that make you want to support it in spite of the cost increases?

[English]

Capt Turner: I think the bill is good, mainly because it is going to modernize and streamline the entire port structure across Canada. I think my main concern is that naturally, as an organization that works very closely with the Thunder Bay Harbour Commission, I tend to reflect their concerns relative to municipal taxes and additional costs that will make us non-competitive with ports like Duluth and American ports in the Gulf of Mexico.

The other suggestions I had could be considered cosmetic, but we still feel very strongly that as a user we would like representation on the board of directors. That doesn't mean to say we are against the concept of Bill C-44, which we think was very necessary. It's just that it needed amendments and those were the two main amendments, really, that we felt quite strongly about.

[Translation]

Mr. Dubé: You insist that the Bill will modernize... If the federal government withdraws from this sector while increasing costs, do you think that the new CPA will be able to modernize its equipment?

[English]

Capt Turner: I think at the present time the Port of Montreal is in a position where the port authority itself already has the facilities in position. That is why I was suggesting that private enterprise, given sufficient incentive, will then be able to bring in whatever equipment is necessary to facilitate the movement of cargoes. I think that once Ottawa is removed from what is now Ports Canada.... That is why I'm in favour of the CPA, which to me makes the whole system evolve. In effect, it gives each port more responsibility for its own future.

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[Translation]

Mr. Dubé: I wish you good luck. Thank you.

[English]

Mr. Keyes: Thank you, gentlemen, for your presentation. I've read through it. I especially welcome and thank you for your support of an amendment to this bill that would support the idea of including federal agency status for the CPA.

I do have some problem, though, with page 5 of your presentation, specifically where you recommend that users should not be banned from the board. There are some three questions I have on that, which perhaps you might be able to answer for me.

While on the surface it seems like common sense to put a user of a particular port on a board because of the business sense that this individual would bring to a board.... Here are the three questions I have on that particular matter.

How would you resolve the potential problem of giving advantage to one user over the next? I just hearken back to my own port in Hamilton, or even Thunder Bay, where you have a multitude of users on a particular harbour or port. You're not going to want a board that's made up of users, because then your board numbers 28. In Hamilton it would be 36, which is just unruly. So selections have to be made.

Of course, if one user, say from a steel company like Stelco, is appointed to the board, and the other user, Dofasco, is excluded from the board, then you can see the potential problem of just mere information that one particular steel company might have over another steel company vis-à-vis tariffs, fees and the competitive edge that might result because of that opportunity there. I wonder how you would address those three issues.

Capt Turner: What is a user? Is it the carrier, shipper or the handler? There are several definitions of who is a user of a port. Is it the labour, which is what the Chamber of Commerce seems to feel?

Everybody benefits from the use of the port. The major point is that, since everybody benefits, there should be some representation on the board.

Mr. Keyes: But you see the potential conflict there.

Capt Turner: Yes, I can see that.

Mr. Keyes: There's either a huge board on which everybody sits, or you limit it to a certain amount of users, who then have an advantage or may even dominate, to the detriment of other users on the board.

Capt Turner: Yes. All I can say is that I do know that in other ports.... For example, along the road in Duluth, there is the Duluth Superior Marine Association, which is three to four competitors who act as an association. They appear to be very efficient in their union negotiations or whatever decision they take.

Down on the east coast there's another group called the MEA, the Marine Employers Association.

Mr. Keyes: I remind you that associations, as groups, are permitted to have a nomination put on the list of recommendations from the port to the minister.

Capt Turner: Yes.

Mr. Keyes: So associations are clear. I agree with you 100%.

Capt Turner: Yes.

Mr. Keyes: If there's an association of members at a particular port, and they put forward a name to be put on the list to be supplied to the minister, that name is eligible.

Capt Turner: Yes.

Mr. Keyes: It could be a potential conflict or problem putting specific users -

Capt Turner: Yes.

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Mr. Keyes: You say that is a problem. We've heard from others that they don't want people without business experience, etc., put on the board. But the fact remains there, too, that a user can always elect to have a retired CEO of the company put on the list in order to be submitted to the minister for consideration as well. So you're still getting that business sense. You're still getting experience that would be valuable to a board.

Capt Turner: I think our feeling is that a retired CEO is still liable to have a conflict. As for the fact that he is retired now, but wasn't retired last year, is that going to change his attitude or philosophy?

Mr. Keyes: There is no fiduciary or direct link any more to the company. Therefore, that individual in most cases....

For example, I know an ex-representative in Hamilton from one steel company who is going to be more open-minded and more aware of the needs of the steel industry as a whole rather than as a link to an individual company within the port.

But that's just for your consideration. That's an explanation as to why we've chosen to go that route so far. This is barring any better explanation of how we can put a user on without this conflict. But I thank you for your contribution.

Mr. Jordan: Would you expect that your local would be considered a user?

Capt Turner: Yes, they certainly have a user's interest in the success of the port.

Mr. Jordan: I suppose we are all interested to that degree.

It says here that a user should be defined as a company that has paid either port dues, rent or wharfage directly or indirectly. Would you still see somebody from your local as meeting those criteria?

Capt Turner: Basically, he may be a member of the local, but he's my employee. He's an employee of Selkirk.

Mr. Jordan: As far as the numbers, though, I don't suppose you could ever agree on whether it should be nine, five, or twelve.

Capt Turner: No.

Mr. Jordan: You have to start somewhere.

Capt Turner: I think our point was that the larger the group, the more cumbersome it becomes.

Mr. Jordan: I think we generally agree with that. We heard it from other groups here this morning that you lose something when the numbers exceed a certain level. I think that's valid in any operation.

I haven't anything further.

The Vice-Chairman (Mr. Comuzzi): Thank you very much, Captain Turner, for appearing before us this morning. Your submission will be taken into account by the committee. You'll get a copy of the draft of our recommendations to the minister.

Capt Turner: Good. Thank you, sir.

The Vice-Chairman (Mr. Comuzzi): Gentlemen, I'd like to introduce you to the Mayor of Thunder Bay, who will have some very interesting things to say to us this morning.

Welcome, Your Worship. Thank you for coming.

Let me say to the members of the committee that we're very proud of our mayor. If his thoughts don't seem to be entirely focused on transportation issues, that's because there's another meeting in the hotel that is going to define the future of health care in northwestern Ontario. That's on in about half an hour. For those of you in Ontario, Stan and Jim, and you guys from Ottawa, Thunder Bay is the first place where the health committee has made its recommendations. I think Sudbury is next. They're in Ottawa now, so beware.

Mr. Jordan: Is it a very big issue here in Thunder Bay?

The Vice-Chairman (Mr. Comuzzi): It's very serious.

Mr. David Hamilton (Mayor of Thunder Bay): Good morning, Mr. Chairman. Bonjour. Buòn giorno.

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I'm David Hamilton, Mayor of Thunder Bay. I would like to welcome the committee to our city. I wish you well in your deliberations.

I'm aware that a number of large municipalities that dominate the Federation of Canadian Municipalities have weighed this legislation heavily. I'm here as the Mayor of Thunder Bay, and I'm not as concerned with the policy positions of national bodies as with the maintenance and growth of the Port of Thunder Bay and the benefits it provides to this community and the region.

To set the stage, it is imperative that the committee recognize the importance of the port to our community and region. Port-related activities provide 2,000 direct jobs in this community and up to 1,500 more indirect jobs. As such, this ranks port activities, along with the forest products industry, the government sector, such as health and education, and tourism as the most significant contributors to the local economy. I need to tell you that this bill cannot be structured so as to cause any deterioration in the port's competitive position.

The competitiveness of the port is not an issue that is new to civic administration. We have, as a standing committee of council, an organization known as the Thunder Bay task force on port survival. Although originally formulated as a committee of users with city participation, it was adopted as a standing civic committee due to the extreme importance of the port to this region.

This group - I know several individual members of it have spoken to you today - has done a credible job of bringing to council and myself a recognition of the competitive position of the seaway and the Port of Thunder Bay.

Notwithstanding the fact that the task force started in Thunder Bay, it is very important to note that all northern Ontario communities are represented on the task force in the Northern Ontario Associated Chambers of Commerce.

Thunder Bay is a regional centre in many areas: health care - we hope so after this morning - education and services in transportation. The port's activities service not just our city, but all of northwestern Ontario, as well as four western Canadian provinces. This only makes the continuance of our port as a Canadian port authority more crucial.

Specifically, I want to talk to the committee about the taxation of port facilities. Thunder Bay has, over the years, been a huge beneficiary of taxes levied on the port facilities, particularly grain terminals. We have built a full service community with taxes at levels that made sense in the glory days of the grain movement through Thunder Bay until, I would say, 1982, I believe, when we almost shipped 20 million tonnes of grain.

That was a few years ago. It was arguably a fact that, from the tax assessor's viewpoint, port facilities were seen as a cash cow. On average, about $1 million in taxation per grain terminal accrues to the City of Thunder Bay.

Since the late 1980s, we have, however, seen a major deterioration in the competitive position of port industries. We have had five major grain elevator closures. It currently appears that tax arrears and demolition bills will be the city's responsibility at the end of this rationalization.

We are not interested in taxing port facilities and lands around Keefer terminal out of existence once a Canadian port authority is established in Thunder Bay. As mayor, I'm not prepared to take the potential cash cow approach to port facilities, which might be the desire of some larger municipalities.

The new CPA in Thunder Bay should be given federal status. Included in this status should be a provision to negotiate with our community some sort of fee for service, if the port's bottom line could in fact sustain such a payment. I do not feel, based on my understanding of work to date on port competitiveness, that paying taxes should be a priority. Creating opportunity and employment are what's important to us.

The opportunity does not exist to pass additional operating costs, as a result of taxes, to port users. I would use the following example knowing that I can invoke another form of discussion. Currently, the airport, which is under negotiation, contributes $350,000 a year, known as grants in lieu of taxation under federal legislation. If we followed the formula, our projections would see the Port of Thunder Bay paying $570,000 a year in grants in lieu of taxation to the City of Thunder Bay.

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To put it basically, we could use the $500,000. Who couldn't? But to me it would be wrong for us to demand that. The port at present - just for the homework - pays nothing to the City of Thunder Bay on those direct facilities I mentioned in those comparisons.

We can get into that with questions, Mr. Chairman. I add it so that the numbers and the dollars are on the line.

Accordingly, I suggest that the legislation be amended to confer federal agency status on CPAs, but I would add caution to that as well.

If the facilities, such as universities, that fall under grants in lieu of taxes are provincial, they do not pay the educational component - essentially they get 50% off - but if they invoke full status as a federal agency, it's almost the same as paying taxes. I want to make that point very clear. I spent a lot of time yesterday getting the homework....

Following the same line of logic, I do not feel that any payment to the Crown in return for the transfer of the control of assets to the CPA should be based on gross revenue. Port users will simply see this as another form of tax and will, where possible, avoid Thunder Bay in favour of competitive corridors. The CPA may well be in a position, after the legitimate expenses of running the port, such as maintenance, provision of services, and reasonable administration, to offer a return dividend to the Crown. This should be negotiated in light of local circumstances that reflect all the known parameters around which the CPA will be operating.

Accordingly, in the best interests of a viable CPA, I request that the committee recommend that any payment to the Crown, if available given local circumstances, be negotiated based on net revenue. If there's money to be made, let's share it. After all, you control some of the assets and you are a shareholder, because you're going to continue to hold the land.

The next area I would like to comment on is the issue of port governance. I am aware that the legislation calls for the establishment of a government structure utilizing up to nine or eleven board members. The Thunder Bay Harbour Commission has five board members. Speaking from experience, I question the need to expand any board of five commissioners. Our council in Thunder Bay has twelve. I think it can be reduced, but we'll debate that in another forum.

The City of Thunder Bay is favoured with the ability to make two of these appointments. That's two out of five. This arrangement has permitted the development of an excellent working relationship between the harbour commission and the City of Thunder Bay. I emphasize ``excellent''. The tensions that I've heard about in other municipalities do not exist in this community. This relationship extends beyond the single committee to extend port competitiveness. In fact, we work with the port on land development, zoning, community economic development, and civic promotions.

I understand that the governance model proposed by Bill C-44 will allow for user representation, and I favour this approach. It will allow for only one municipal appointment and one federal appointment. I accept this approach, particularly since the majority of the board will be made up of user nominees. In the interests of establishing the smallest, most workable board possible, it may be worthwhile to examine the need for a provincial presence.

I therefore recommend that a CPA governance model that provides some flexibility in both user content and overall numbers of directors be implemented, provided user nominees continue to be in the majority. I cannot imagine that the city will not be able to work with and establish a long-term relationship with any group of user nominees.

The Port of Thunder Bay needs to be able to increase its viability through full employment of all its assets. I see the land base around Keefer terminal as a community asset, notwithstanding the fact that it will continue to be federally owned land under the administration of the new port authority.

I see clause 24 of the bill as being far too restrictive in terms of the permitted scope of CPA operation. The Port of Thunder Bay, often working in conjunction with Development Thunder Bay, our municipal development agency, is continually seeking other transportation sector industries as tenants for the Harbour Park area. The port's success to date in placing tenants has put valuable tax dollars into city coffers as the land is put to use. As well, revenue from non-marine development lowers the cost of using the port to the marine sector, where competitive pressure is extremely acute. Those businesses pay full business taxation. I therefore request that restrictions on land use be limited to halting non-commercial facilities, such as condominium developments, amusement parks, and casinos, which would see the port put out of use for the citizens of our area and for the citizens of our country.

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In conclusion, there are two other areas where I would like to make a comment. First, we respect the seaway and we need to make it more cost-effective. When I speak of the seaway, I speak of a piece of geography on water between Thunder Bay and Halifax. I am sure others will tell you how the City of Thunder Bay, through the task force I referred to earlier, has established that the competitive position of the seaway is very marginal compared to other North American corridors.

We need the most efficient operational model available and we need it now. It's not enough for this legislation to enable the minister to pursue a more cost-effective seaway. We have to do it and do it soon. It is not reasonable to me that the government, through one ministry, Transport, is espousing a more competitive seaway via national cooperation and commercialization while another ministry, Fisheries and Oceans, is hobbling the seaway through the application of a marine services fee. This cannot continue if Bill C-44 is true to its stated objective of ensuring a competitive seaway enduring as part of a national transportation infrastructure system.

My last comment will be on pilotage. I cannot attempt to discuss the politics, history and nuances of the pilotage industry. However, I will reiterate one very quick anecdote. I am a member of the Great Lakes mayors conference, and in Montreal we - from Thunder Bay - tabled a bill to examine the need for pilots on the seaway. Our host mayor not only did not allow it on the floor, but he ensured it wasn't to be put into the record. I became suspicious as to why.

I do know, however, that when a shipowner tells me his vessel captain has detailed knowledge of local waters and that his ship has been electronically equipped, both of which conditions render pilots redundant, that it is time to get pilots off Canadian-flag vessels. Pilots add approximately 20¢ a tonne to the cost of moving grain in the St. Lawrence in Canadian-flag vessels. Competitively, we don't have 20¢ per tonne to give.

To give that figure some relevance, the grain trades are done on approximately as much of a margin as one-quarter cent a bushel, or 9¢ a tonne. Therefore, 20¢ a tonne sounds innocent until you see it brought to life with that comparison. I am told by some in the industry that pilotage fees are in the neighbourhood of around $10 million a year on top of costs in the entire system.

We need a resolution of the redundancy of pilots on Canadian-flag vessels as part of Bill C-44. We need more than a weak commitment to review the matter by December 1998, I assume after the next federal election. We want a decision on this now.

I will drive home the point by saying that in Thunder Bay, $700 million was taken out by the federal government under the Western Grain Transportation Act, and we largely agreed with that position because we knew the subsidy could not sustain itself. It was not a market condition; it was taxpayer money shipping grain. We largely accepted that situation and have lived with the consequences, and we are rebuilding our port to be more competitive without that $700-million handout from the federal government, which none of us, as taxpayers, could afford. Therefore, we see the upper end of the St. Lawrence River not being in a special position to do likewise, and I think it is time to put this pilotage issue to rest and clear off another cost on the seaway that's not needed.

There is one last point that isn't in the brief. Churchill has been the nemesis of the City of Thunder Bay. I don't know who's from Manitoba, but I may find out after saying that. If the Government of Manitoba, which is negotiating with the federal government, wishes to purchase it and the Manitoba taxpayers wish to put money into the redevelopment of Churchill, we do not stand in their way and wish them well. But Churchill should receive no more federal money. It is uncompetitive. It takes margin away from this port, which is competitive.

As far as federal money and tax dollars going into that port are concerned, I think we've seen enough. We hope the provincial government buys it and invests in it. We will compete fairly and openly, but we don't want to see federal money poured into that port any more.

Thank you.

The Vice-Chairman (Mr. Comuzzi): At the bottom of your brief there are the three T's - transportation, tourism and trade. Do you want to talk about that while you're here?

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Mr. Hamilton: I just put those in for comparatives, Mr. Chairman.

The Vice-Chairman (Mr. Comuzzi): I'll just comment, because Mr. Tellier, the president of CNR, made the statement yesterday that CN is no longer going to operate the rail lines to Churchill; they are going to abandon them. He's offered them to any group of investors or whatever in order to continue the operation, but CN will no longer.... Is that a fair assessment of what he said?

Mr. Keyes: That's his intention.

The Vice-Chairman (Mr. Comuzzi): That's his intention as of this time. He hasn't talked to Mr. Axworthy.

Mr. Hamilton: CN is now a private company. I applaud this personally and also as a mayor of the city because CN is now talking to us in ways we never thought possible. I applaud the federal government's move. It has been long overdue, and we say congratulations. Now that they are a private business, they will operate as a private business and they will go where they can make money. If it's to Churchill, fine; if it's not, that's their decision. If it's here, we want to help them make money.

The Vice-Chairman (Mr. Comuzzi): I'm going to ask Mr. Keyes.... I'm sure Mr. Alcock has something to say, and I'll ask him next.

Mr. Keyes.

Mr. Keyes: Thank you, Mayor Hamilton, for your report to the committee and your unbiased views on Churchill.

Mr. Chairman, I thank this mayor for having the guts, the chutzpah, the intestinal fortitude to be able to recognize, in the face of FCM's perception - because we have not heard from them yet - of a tax grab during our legislative process...to stand up to them and really say it as it is; that is, to recognize the huge potential of wealth that a port generates for its community, the huge potential for job creation that a port generates for its community. To turn around and even suggest an additional tax grab - that's the perception we're hearing - would be abominable, in my opinion.

The Vice-Chairman (Mr. Comuzzi): Let's get to your question.

Mr. Keyes: Lots of times we go after witnesses, Mr. Chairman, and it's not often I can speak to support a witness in standing up to the group as a whole. I think he needed congratulations in that particular area because he recognizes the deterioration of a port's competitive position if those taxes start becoming unwieldy.

It's lost - and I say this for the benefit of some who may not know - in the equation when municipalities do receive considerable sums of money from the tenants who lease the properties from the port. The municipalities receive considerable sums of money from the private property owners who pay municipal taxes on the lands that they lease from the ports.

I looked at my notes on Thunder Bay. They received $451,000 in 1995 for municipal taxes from tenants and $13 million in municipal taxes from private properties out of the Port of Thunder Bay. For this mayor to stand up and say we're doing just fine and we'll encourage the growth is terrific.

On the governance issue and on the matter of five board members versus nine or eleven, I think this committee is seriously looking at even maybe going as low as seven, but that's for further discussion and more input from witnesses. I wonder about five, Mr. Mayor, because in a community where five might be healthy, because you have your provincial, municipal and federal appointments, you have only two remaining names from a list of users the minister can appoint. I wonder if it would lessen the opportunity for community-based input on the board. For the users, of whom there are of course many, those two slots would be filled very quickly, so it doesn't open it up for, say, a regional development committee rep on the board or a remedial action committee rep on the board, people I think a community would be very interested in having on a board that runs a port that is part of a greater community.

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Mr. Hamilton: I tend to favour - and I've been in public life municipally eleven years - smaller boards and less of them, and I think we're seeing that reality now. I think the taxpayers want to know who's in charge and they want to be able to deal with them, whether they're a board or agency, or whatever they are.

Somewhere between five and eleven or twelve is an array that I'm sure would be acceptable, and I agree that you may want to add one or two. But when I saw the numbers...it just occurred to me that it's about the size of my council. I've had some experience there and I think those numbers can be brought down. That's why I threw that comparative in, that I would hate to see a board so large that, again, it would be impossible to find who is really in charge and who voted for what. We're looking at community accountability, and to me the more the worse.

Mr. Keyes: Conversely, too small would be maybe to the detriment as well....

Mr. Hamilton: I'm sure that, in the middle of that array, you can find an acceptable level. I just felt that the stated number, as intended in the legislation, between nine and eleven, is a little high.

Mr. Keyes: Thank you, Mayor. Congratulations.

Mr. Hamilton: Thank you.

The Vice-Chairman (Mr. Comuzzi): Just as an aside before you leave the questioning, would you like to comment on the mayor's position on pilots?

Mr. Keyes: On pilotage?

I'm a good listener, Mr. Chairman, I'll continue to hear the witnesses as they come.

The Vice-Chairman (Mr. Comuzzi): Following your philosophy, it's obvious that you would agree with combining the local airport authority and the local harbour commission into one agency.

Mr. Hamilton: That's another novel approach, and I'd say yes right away. That could easily be handled. Again, I think all these agencies and organizations, with all their inherent expenses.... The diffusion and confusion in the community has to end. If you advocate that and we can operate it on that basis, I would say yes. Both are in the transportation industry. I'm sure the synergy would be a help, not a hindrance.

The Vice-Chairman (Mr. Comuzzi): I agree with you.

Mr. Dubé.

[Translation]

Mr. Dubé: I will not go into a debate on the port of Churchill. Coming from Quebec, I have my own opinion about this. I'd rather discuss competition with the U.S. harbours, because there are indeed some around the Great Lakes, aren't there? Have you examined this issue? Do you think that Bill C-44 would help in improving relations between the port of Thunder Bay and those U.S. harbours around the Great Lakes?

[English]

Mr. Hamilton: Thank you. Merci.

I wish I could give you the answers to those very valuable questions, but rather than attempt to I'll say that I cannot. However, the nearest competing port is the City of Duluth in Minnesota and the twin port of Superior, Wisconsin. We work with them. They're at the nose, so to speak, of the Lake Superior head, but they also compete with us.

That question should be indulged and explored by others more knowledgeable. So rather than sidestep it, I will simply say that I don't have the information. But you should have it as a committee, and I'm sure that somebody in our port can get that detail for you.

The other area that should be looked at very carefully is the Mississippi River basin and how it operates. It competes with the St. Lawrence system. There are some areas where they tend to operate more efficiently. Any of us who have been there have seen the barges going up and down that river with grain; it's not that uncommon. So there's a competitive factor in the American ports.

In Thunder Bay, our first competitor and our first ally, really both, are Superior and Duluth, and, as well, the Mississippi system is a direct competitor. I would rather others who are knowledgeable in the area answer that and indulge the committee, rather than my attempting a question that I admit not having the answers to.

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I think you've raised some excellent points.

[Translation]

Mr. Dubé: I have a last question that is more general. I think that the mayor will be able to give me an answer.

This is only the second time I have been to Thunder Bay. Of course, it is hard to learn everything in one day. I asked that question to the Chamber of Commerce before you arrived. I would appreciate hearing your point of view.

First of all, what is the population here?

[English]

Mr. Hamilton: It's 115,000.

[Translation]

Mr. Dubé: Ok. I would like to know what would happen if the port were to close down. What would be the impact of such a move? It would help me appreciate the present significance of the port.

[English]

Mr. Hamilton: First of all, beyond direct jobs and all the economic things that can be put on a blackboard with chalk, we would lose a reason to exist.

There has to be a bit of soul in anything we do in public life. This port existed because of transportation. It was the hub of the fur trade, the centre of the rendezvous.

I'm not going to try to wax eloquent and speak about the days of the voyageur, but it's important we realize the reason why this port exists. It was a transfer port. It was always a transportation hub of North America.

When you lose your reason to exist, you can do other things. You can attract other industries - and we have - but I think you start to become less of a community. There's an historic reason why we are here, and that should never be forgotten. Beyond that, you would look at thousands of jobs and a waterfront decimated in a very visible, tangible way.

There's an abandoned, half torn down elevator, once the world's largest grain elevator, lying idle, producing no wealth, no taxes, nothing. To me, it is a monument to the destruction of our community should our port fail. Yes, it's only one elevator and, yes, others are doing well, and our capacity is smaller. With that concentrated capacity we hope to survive with some changes here as well.

Hopefully, Monsieur Comuzzi can show you Pool 6. If you look at it, it will accomplish more for you to understand how important this port is and what it could mean to us to lose it than having me talk for another hour.

[Translation]

Mr. Dubé: One last thing. Given the significance you feel the port has, even if the municipal taxes were maintained in Bill C-44 and in spite of the expenses the city would incur to do a few things, you would be ready to give the money from municipal taxes back to the port of Thunder Bay?

You don't have to answer now.

[English]

Mr. Hamilton: It's an interesting point. I am not an accountant, but I can read financial statements. The money is not there.

I sit on this FCM committee by conference call, and I can see where they were going. So I welcome the chance to talk to you one on one.

This is not the time to go to an organization that we have lived without receiving revenue from and try to make the port solve all our problems, because we'll get nothing and we'll kill it. Five or ten years from now, if it's making a lot of money, maybe we will want to talk again.

Mr. Dubé: Merci.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Dubé. Perhaps I can answer the question you put to the mayor in my own terms of what the port means to Thunder Bay.

It's part of our heritage. It's part of our culture. The port and Thunder Bay, and all that is involved with it, is as important to northwestern Ontario as the culture issue is to the Province of Quebec. Does that put it into some kind of perspective?

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Mr. Hamilton: Monsieur Dubé, I was in Quebec City for the Great Lakes mayors conference. We took a tour of the city and the port. We saw the beautiful shipyard. It was a lovely place, but nothing was going on.

I talked to some of the people on the ships. They explained to me that family members who have all worked there are out of work right now.

So when there's no work here, 1,000 miles away there's no work in Quebec. We need those jobs. That, to me, is a very tangible reality of how interdependent we are in Canada on the seaway and how we need to look hard at costs to make it work.

The Vice-Chairman (Mr. Comuzzi): Last question.

[Translation]

Mr. Dubé: I will not mention the present Liberal government that is usually the target of criticisms, but rather the former PC government. While the order in council on the port of Quebec City had helped make a surplus, the PC government dipped twice in it, taking away $30 million it put in its fund. Given the fact that the government could help itself to that money, the local board members lost all incentive to do a good job. And now, Bill C-44 says that the government will not be able to do this anymore, but it won't be funding the ports either.

Being the member for the riding of Lévis, across from Quebec City where you saw this shipyard, when I heard someone from a boat company say this morning that his boats were built right here in Canada... I understand that there will be a Bill on shipping in Canada; I will comment when it is considered. If the boats using the seaway had to be built in Canada, Lévis, MIL Davie and the other shipbuilders would be very happy. In that sense, we would be ready to cooperate with the ports on the Great Lakes. It would be very interesting. Thank you.

[English]

The Vice-Chairman (Mr. Comuzzi): Mr. Alcock.

Mr. Alcock (Winnipeg South): Thank you, Mr. Chairman. I don't have anything to say other than to express how profoundly disappointed I am when one community in this country attacks another. I find it very difficult to understand. But I will take your remarks back to Manitoba, and they will certainly influence my thinking on this matter. Thank you.

The Vice-Chairman (Mr. Comuzzi): Mayor, I thank you very much for being here. It was an excellent report. You shared the municipal position on the deliberations this committee will have to make with respect not only to the Port of Thunder Bay but also with respect to all the ports involved in the Great Lakes/St. Lawrence system.

Mr. Hamilton: Thank you, Mr. Chairman. I hope you have a chance to show the committee Pool 6.

The Vice-Chairman (Mr. Comuzzi): I will. If the harbour commission will let us, we're going to take a drive through their property on the way to the airport.

Mr. Hamilton: Thank you.

The Chairman: For the information of the audience, we are running ahead of schedule and our presenter for 11 a.m. hasn't arrived yet. We will take a ten-minute break.

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The Chairman: Let's reconvene.

Mr. Comuzzi: I would like to introduce Mr. Daniher to the committee. Mr. Daniher is executive vice-president of the grain division of the Transportation Communications Union. He is also president of the Lakehead Port Council.

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On top of that - if members of the committee are not aware - we've had a period of stability in the labour market in the Port of Thunder Bay that I think is the envy of all ports in Canada. I failed to mention that when the people from Selkirk were here, but I would include them in that statement.

Mr. Daniher, through his association with the Port Council, has almost made a commitment that if the grain comes to Thunder Bay, it's not going to get stopped in Thunder Bay. I really would like members of the committee to know that it's due to his efforts that we have such a period of stability on our waterfront. In the main, it's exclusively with the position Mr. Daniher has taken, sometimes to his own detriment, that the stability of the Port of Thunder Bay is as it is and that it works so efficiently.

Mr. Herb Daniher (President, Lakehead Port Council): Thank you, Joe.

On behalf of the Transportation Communications Union, affiliated with the United Steelworkers of America and the Lakehead Port Council, I take this opportunity to welcome the committee to Thunder Bay, the heartland of Canada, the head of the Great Lakes/St. Lawrence Seaway system, and home of Canada's largest grain port, proven to be one of the world's finest and most efficient grain-handling centres.

The Transportation Communications Union represents 15,000 members across Canada who move people, freight and ideas from coast to coast and beyond. The union's mission is to work together to achieve our common objectives - to provide security, dignity and a decent standard of living for ourselves, our families and our communities.

The TCU grain division represents a cross-section of transportation industries in Thunder Bay reliant on port activity, which includes 700 grain handlers employed at ten terminals by six companies; 100 rail workers employed at CP; 100 trucking employees employed at several firms; and 75 grain-processing workers employed at -

The Chairman: Mr. Daniher, slow down just a tad. The translators need to follow along with you.

Mr. Daniher: Okay. This is just the introduction. I basically lifted this introduction page from another presentation I had made. When I was reviewing it, I was going to amend it, but I thought it was relevant today to really highlight what's happened with our representation since the last time we made a presentation.

Currently, the grain handlers left working at the port are 400, and we have a membership of 500. We've lost another 200 members. In effect, there are no longer ten terminals operating in the city of Thunder Bay. There are eight grain terminals operating in the city of Thunder Bay. We've seen two closures since the last presentation.

The number of rail workers has probably been halved, and they're in further restructuring here at the port as far as the CP ``non-ops''. In effect, we're going to see probably another 20 positions lost out of the city of Thunder Bay. The ADM plant closed August 16, so we no longer represent the members there.

I didn't change the introduction notes here on purpose. They emphasize what's happening in this community and the impact a bill such as C-44 could have on our community and the transportation network for Canada.

I'm also here on behalf of the Lakehead Port Council. The Lakehead Port Council represents the following members: the SIU; United Steelworkers; longshoremen locals; a variety of TCU locals; Canada Transport employees; iron workers; boiler makers; labourers; the Canadian Merchant Service Guild; the eastern branch of the UFCW; Teamsters; UTU; and the Public Service Alliance of Canada. We have a total membership of about 3,000 who are employed either directly or indirectly in port activities.

I just note for the record that Don McKinnon was also going to join us from the Port Council, but since we've started early, we're proceeding here without him.

In terms of CPA status, the objective of the Canadian government's Bill C-44 is to make the system of Canadian ports competitive, efficient and commercially oriented, providing for the establishment of port authorities, where appropriate, and the commercialization of the St. Lawrence Seaway, along with amending the Pilotage Act.

Our perspective, observations and recommendations are based on the impact on our membership - our constituents - whom our organizations represent in and around the city of Thunder Bay.

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First and foremost, the assessment of the net impact on jobs for the region has to be reviewed against the implementation of Bill C-44. This equation is capsulized within the framework of the Canadian transportation infrastructure.

Quite simply, does Bill C-44 allow Canada and the Port of Thunder Bay to compete in a global environment and meet the needs of the current and future customers?

There is no question that it is imperative that the Port of Thunder Bay be designated as a Canadian port authority. Without this designation the port will suffer irreparable harm and will be destined to become no more than a marina for pleasure craft.

Throughout history the Port of Thunder Bay has been, and remains, a viable world-class port with state-of-the-art facilities, equipment and labour force. This infrastructure, teamed with the highly skilled and versatile workforce, allows us to keep our competitive edge and maintain current markets while securing access to new and evolving markets.

It is our belief that the marketplace and the deregulated transportation sectors are sensitive to even the slightest change. A change in stature for the Port of Thunder Bay will affect the view our current customers and the global community have of Thunder Bay, and Canada as a whole.

A customer may choose an alternative route through one of the many transportation corridors in which the port competes for business on a daily basis.

The Port of Thunder Bay has a reputation for dealing with adversity and has overcome the loss of Canada's largest grain customer, Russia; survived the world agricultural trade wars; adapted to diversification of agricultural commodities; and continued to fight against what appears to be the inherent bias against Canada's eastern waterway to the Atlantic Ocean.

To carry on the fight into the future and to maintain the jobs, infrastructure and tax revenues to the federal, provincial and municipal governments will require that Thunder Bay be designated as one of Canada's port authorities.

Let me turn to tax status. As with any form of deregulation, the impacts are dramatic. Changing the current taxation status of common-use infrastructure could add additional taxes to what the port industries are claiming to be an already overburdened tax system.

The competitive marketplace is such that even a few pennies per tonne could divert tonnage along an alternate route. The impact of additional taxation would force the closure or consolidation of operations in the port and create significant job losses. For example, the last two elevator closures - due partly to the level of taxation - have eliminated over 100 jobs for local grain-handlers. The ILA membership working at Keefer terminal would find themselves permanently unemployed should that facility be taxed at the normal municipal rate.

I would suggest this whole tax question...when you start dealing with what would amount to additional taxation on the users regarding break-walls and all these other costs associated with maintenance of the port.... It's said, for example, that if they were to tax the current holdings of the harbour commission, it would amount to somewhere in the neighbourhood of $600,000.

It's quite evident - and I think it's been stated here today - that if the taxation question gets implemented on a replacement-value-type basis, in effect it's going to shut down certain parts of the port. There's no doubt about it. I would suggest that if the common-use infrastructure is also taxed, we're going to see more of what we already have for a number of case studies in this port.

I would suggest that the current elevators.... We had two closures within the last 12 months. In effect, part of the reason those facilities closed - and significantly, it was stated by the companies - was in fact due to the municipal taxation. In effect, the taxes Manitoba Pool paid the City of Thunder Bay were more than the return on investment for their handling of that particular facility.

In actual fact, one of the problems with the elevator system currently - we know there are market shifts, and what not - is that they're taxed on a replacement value versus an actual value. These two terminals that were just closed in fact were sold for $1 each. In effect, you could purchase the whole waterfront for a $20 bill.

They've asked you to take a tour of Pool 6. That was another facility that was sold for $1.

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I would suggest to you that this infrastructure only has any value if in fact it can handle volumes of grain in an efficient and cost-effective manner and has a return on investment to its stakeholders. It's imperative. Actually, this waterfront is worth a total of $20 if the taxation question is such that it forces further closures.

In 1984 we had 2,000 members just in the grain sector who were union represented. Now we're down to 500, and out of that only 400 work. I can tell you horror story after horror story, and I've been in front of this committee before and shared that type of information with you.

In effect, the tax question is a big part of what has to be dealt with in the review of this Bill C-44. Perhaps some would argue that those shipments out of Keefer are receiving some form of subsidy. Our organization will respond by stating that the development of the port and the benefit to the city through jobs far outweigh a short-term gain of taxation against such a property. The act should ensure that the issue of taxation does not become a killer of jobs, and we've stressed that point in this presentation.

With respect to the structure of the port authority, labour has been recognized at the port as one of the most critical components of its success. Without the skilled workforce and the cooperation of the unions, the work would not get done. The board of directors for the new CPA should encompass equal representation for labour along with user nominees - and I stress equal representation.

In the Thunder Bay Harbour Commission, representatives from the Port Council have applied to city council and local politicians to be appointed to the commission. Unfortunately, more often than not the political appointments are based on patronage rather than ability or fair representation of port constituents.

Further, the board's mandate should include adding or maintaining the value of port industries and the jobs at the port.

The role of the CPA should not create an extra burden on users who are taxed by the tonne and have no say in the type or level of service being offered. Adding value will ensure the competitiveness of the port as a whole.

The seaway is required to compete against many other transportation corridors. Recent studies indicate that throughout North America, rail is becoming very cost-competitive with seaway movements. Lowering cost to maintain a competitive edge is critical in competing in today's environment.

Pending changes to the operation of the seaway should provide the vehicle to continue to improve the service to customers while lowering costs. The success should continue to be measured and monitored to ensure continued improvement. These changes should be implemented with the least amount of disruption to the current workforces.

Appropriate early retirement, severance packages, retraining opportunities and normal adjustment measures should be applied to any groups of employees affected by Bill C-44. This would include the impacts against the pilots, who I am sure have taken exception to the government proposals.

In conclusion, the world is changing, and not a day passes without some significant change in the economic environment. This week, for example, we had the issue of rail car shortages for the city of Thunder Bay.

In effect, this port can handle 4,000 cars a week. For some reason there are not enough cars in the system to handle the crop, and in fact our information is that there are sales that can be handled through this port at the level of 4,000. In effect, we're being serviced with the level of 3,000 cars per week. In effect, that's not allowing us to meet our customers' needs. It's giving us a black eye because we're not going to be able to deliver this grain in a time-sensitive manner. It's just one of many things that start to impact against us and need to be dealt with by the government of the day.

The union's mission is to work together to achieve our common objectives to provide security, dignity and a decent standard of living for ourselves, our families and our communities. Government legislation, such as Bill C-44, should also ensure that such legislation promotes growth, maintains jobs and a decent standard of living.

The port council would request the committee to take into consideration the comments outlined in the report to ensure Thunder Bay is granted Canadian port authority status, which hopefully will ensure a competitive and prosperous future for the community and its working men and women employed directly or indirectly at the port.

That concludes my submission.

The Chairman: Thank you, Mr. Daniher.

Mr. Comuzzi.

Mr. Comuzzi: Thank you, Mr. Chairman.

I want to talk about the grain car shortage and how it affects the overall ability of the port to operate, but I'll come to that in a moment.

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Mr. Daniher, there's a proposal before this committee - and there are actually two schools of thought - that the seaway should be turned over exclusively to a group of users. Those users are Cargill; Louis Dreyfus, whom I don't think has a presence on the bay; Dofasco, as a shipper and a steel company; and Upper Lakes Shipping.

If that was to happen, my question would be how that affects the sovereignty of the harbour commission or the new port authority and, secondly, how it would affect the Port of Thunder Bay when the seaway on which we rely is turned over to the exclusive group of five or six large entrepreneurs.

Mr. Daniher: I think the school of thought in today's society - and there's some debate on it - is that private industry can do a much better job. In effect, you have stakeholders in the process who are going to be impacted by decisions that are made, although it would be some type of an arm's length relationship. I think it's a proven fact that they should be able to do it more cost-competitively, more effectively - probably right-sizing the requirements for staff, getting away from any bureaucracy and I guess government interference or meddling. In effect, let the marketplace govern. I think this is going to be a step towards that.

I know you worked, along with United States counterparts, in trying to achieve this sort of a dual-type situation regarding administration. I think you should continue with that.

As far as how that will impact on the port, I think the seaway itself has an independent nature. The port is at the head of the Great Lakes. But I think the CPA is a distinct and separate topic. The seaway itself has to continue to become more competitive and to lower costs, as we stated in the brief, a few pennies a tonne.

I know that in examples where we have boat companies contacting us, we open up our collective agreement and provide the flexibility necessary. They have advised us that their margins are very small. They're competing against direct rail movement to the States. In effect, if they have to sit with their boat idle here for a number of hours to finish loading in the morning because there's no shift at 12 a.m. to 8 a.m., for example, we'll provide the flexibility to allow them to continue to load so that the boat can get out and get another turn.

It's no different from rail cars. If you unload them on Saturday, in effect every 13 or 14 days you're actually creating a whole other cycle for that infrastructure that's already sitting there.

There are efficiencies to be gained, cost-competitiveness and low margins - they require those types of things. That's really where we're headed in the future.

Mr. Comuzzi: My next question is on grain cars. I thought you might want to explain to the committee the efficiencies in grain cars and how we can maximize more of the juice through our system than what we're experiencing.

Mr. Daniher: One thing is that volumes have always been a generator of jobs, so more rail cars equals jobs. Currently, as we stated to the press, if there were another 1,000 cars put into the system, that would put people back to work. This would probably equate to about 2,500 cars adding to the system, because you have cars coming, cars going out, empties foreloading, cars that are loaded in transit, and then you have the cars that are actually at the port being unloaded.

For example, there are people with 20 years' seniority who haven't worked a day in the last 18 months. Having that additional rail car supply become available would put those long-term workers back to work.

There are efficiencies to be gained. The turnaround time for Thunder Bay, for example, is very competitive. We always claim that it's shorter, and I think it's proven that the turnaround time here from Thunder Bay back out west is quicker.

I think the priority that has been placed on that movement currently, such as prioritizing movements to the States, where you can turn the car in 14 days from Thunder Bay out west and return..... In effect, you're sending cars down there for 30-, 40-, 50-day cycle times.

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The other thing we take offence to is that the west coast has a 12-month cycle. If you try to push and maximize your handlings out there, you're going to end up with congestion. Here we have a short timeframe - about 12 weeks until the harbour freezes up, basically. The priority should be making the sales from the east coast and maximizing the use of those cars, and then overall maximizing the efficiency of the whole fleet. The west coast can pick up the slack because they run on a 12-month basis.

I think it goes again to the statement we made in the brief. We feel there are some inherent biases going out from some of the decision-makers in the core allocation policy group. If the grain stays on the rail and doesn't have to get offloaded and cleaned and put onto the seaway, that's a competitor. I think some of these decisions being made are to the benefit of the stakeholders themselves. The rail isn't going to get any money if the grains are being moved by boat.

One thing to the railway's credit, as I understand it, is that over the last couple of days they have added some extra cars to the system. So much for the headline in the paper that said ``Ho hum, another grain shortage''. It may be ho hum to the person who wrote that, but it's not ho hum to the people who need the grain to have jobs in this port. There are thousands of jobs depending on the grain movement in this port and there are thousands of jobs depending on the Port of Thunder Bay as a whole.

The Chairman: Thank you, Mr. Daniher.

Mr. Comuzzi: I have just one last question, Mr. Chairman, and it's very important.

Through the period of downsizing of all the elevators, pools, UGG and cargo within the last four or five years, it caused tremendous long-term lay-offs in your organization and in your union. Now we see the business returning, but we don't see the same degree of people being hired. You can verify this or not, but I'm told that the people who are involved in the grain industry are working long hours with a great deal of overtime. They're making fairly substantial wages. How do you see us correcting that situation? The whole purpose is to create jobs. Are we paying too much overtime? Is there something we can do in this thing?

Mr. Daniher: I think the number one priority at least for the companies is maximizing the return for the stakeholders. When you see companies like Saskatchewan Wheat Pool and the grain growers going public...they have a responsibility to the stakeholders. I think we see the General Motors era, where you continue to maximize your profits and outsource and downsize and reorganize at the cost of workers.

The other issue, of course, is overtime, although it's not such a critical issue this year as it has been in the past. I think the government of the day has tabled discussion papers regarding limiting overtime to 100 hours per year, and these types of restrictions. I think currently it's 416 hours, because they have averaging permits in our industry. It allows the company to continue to work overtime rather than call people back to work.

I think we've done some things in the collective agreement to try to address that. We've put language in the collective agreement regarding implementation of job strategies. We've yet to have any success at any type of implementation of these things.

I think overall the government has to lead the way and really recognize that overtime required during some periods can certainly be used to the advantage of the employer to cause a net decline in the number of jobs that may be available, and the port is a prime example.

Put the second shift on. If you actually work out the cost, it's probably the same, or even a little less expensive, because you're paying the straight-time wage instead of time and a half and double time for those hours worked.

I think we have to take some responsibility and lead the way, but I think the government along with the companies should recognize that they have a responsibility to the community and their long-term workers and the union, and realign themselves to the realities of heading into the next millennium. We should really all work in unison and try to resolve that very critical issue, which sees people with 20 years' seniority basically on welfare.

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The Chairman: Thank you, Mr. Daniher.

Mr. Dubé.

[Translation]

Mr. Dubé: I am looking at the name of your organization and I see that a Mr. Boyce is the national president. So you seem to be a division, the grain division of a union representing many other employees. Is that so?

[English]

Mr. Daniher: That's correct.

[Translation]

Mr. Dubé: Since you are a member of a larger union, you must know whether wages here are the same as in other ports where the employees belong to the same union. Are they?

[English]

Mr. Daniher: I would suggest that the wage component for Thunder Bay, for example, and the grain industry have competitive rates, based on the region and the industries. I would suggest that the rates here are some $4 or $5 less than what they are on the west coast. I think we're certainly in a position to compete here.

As for transportation sectors, I would suggest that, other than the trucking industry, which is very competitive currently, as we're a seasonal industry here, you have to really average out what somebody might make versus somebody who works for maybe $1 or $2 or $3 less an hour in another transportation sector. For example, the numbers we used back in 1993 were that an average grain handler would work six months and basically earn $20,000. Those numbers have been somewhat escalated because of the downsizing and the emphasis on overtime, but in effect we're in a position to compete against other transportation modes, and I think that's important.

[Translation]

Mr. Dubé: You say that in the Thunder Bay area, you had a membership of 2,000 employees in the years 1983 and 1984. You are now down to 500 and only 400 of those are actually working. You must have struck an adjustment committee. What happened to all those former workers? Did a number of them leave to work in other harbours?

[English]

Mr. Daniher: Some of them aren't working; some of them are on the system, especially the older workers or workers who might be disabled. A number of workers have been assimilated into the wood industry, with the sawmills and what not. A lot of them have gone back to school and have retrained and have taken jobs within the community in secondary industries and are just sort of surviving.

As for transferable skills, the skills they had at the port, for example, at least in the grain industry, would be more transferable to the west coast. But there's not much opportunity for employment, and certainly the cost of living is probably much higher compared to Thunder Bay.

With respect to the trades in general that are represented on the Port Council.... Of course, overall the economy is somewhat slow. The trades have a difficult time finding work and they're impacted the same way, although they're more of a hiring-hall scenario. Those individuals would end up in a situation where there would be less work on the waterfront as well, because of the downsizing and reorganization and technological changes.

[Translation]

Mr. Dubé: I don't have any more questions. I will end on this comment, however. I want to say to you that as a former member of the Standing committee on human resources development, as is our chairman, Mr. Alcock, I personnally have a lot of compassion for those workers who must be laid off because there is no work. We, the members from the Bloc québécois and the official opposition, have always tried to help the workers by pointing to the fact that there is more to it than economic development; there is also employment that we must worry about. Stakeholders and companies must be fully aware, as you have indicated, that streamlining and downsizing do not always result in savings if the laid-off employees end up on unemployment insurance or welfare. Thank you very much.

[English]

The Chairman: Thank you, Mr. Daniher.

.1135

Mr. Daniher: Thank you.

The Chairman: Would Mr. Shawn Campbell please come forward.

Mr. Comuzzi, perhaps you would introduce Mr. Campbell.

Mr. Comuzzi: Members of the committee, historically there was a paper-producing company in Thunder Bay by the name of Thunder Bay Mill - it was part of the Abitibi group - which closed several years ago. It remained idle until Mr. Steve Hashion and Mr. Campbell, who's going to be our presenter today, decided that this paper company could be reactivated with some new ideas, some research, and a different thrust. They were successful in converting the paper mill, which had been closed, to a packaging plant.

The plant now produces corrugated paper, but the interesting factor is that it uses no fibre. Its raw material is recycled product, such as cardboard, which they bring in from all over the mid-west of the United States. They truck it into Thunder Bay, where it's stored in one of the terminals at the harbour and then trucked to the plant that has been converted.

I understand that the plant is very successful. The six-month period of trying things out has been shortened. The plant is doing very well, and I think it's to the credit of our presenter that we have this new industry in Thunder Bay.

The Chairman: Thank you. Let's hope -

Mr. Comuzzi: You're trying to cut me off.

The Chairman: Mr. Campbell.

Mr. Shawn Campbell (Vice-President, Comptroller, Thunder Bay Packaging): Thank you, Mr. Chairman. I will be making it very brief. I apologize to the note-takers; I don't have any written brief for the group here.

As Mr. Comuzzi said, Thunder Bay Packaging is a relatively new member of Thunder Bay. We produce a product called corrugating medium. As Joe stated, our raw material is 100% OCC, which is used corrugated material.

We produce in the neighbourhood of 110,000 tonnes a year and consume approximately 130,000 tonnes of OCC. In addition to our current facility, we're also looking at the possibility of putting in a sorting station, which would consume in the neighbourhood of another 200,000 tonnes.

In the paper products business, particularly in Thunder Bay, one of our most significant costs is freight, both in and out, because of our location. I would have to tell the group here that we currently ship by a combination of truck and rail, and it becomes a matter of economics. Anything that would contribute to the efficiency of our current port, the seaway system, and the cost-effectiveness of it, would be looked upon positively from our standpoint.

We've examined the possibility of using marine cargo handling. At this point it's not financially viable, but we definitely want to look at it in the future. Some of our sources of raw material are Chicago, Toledo, and Toronto, which are all accessible by water. We have our own facility here, a wharf and a slip, where we can dock small tramp boats that would be plying the Great Lakes. We're going to be looking at that down the road as a viable option both for in-bound and out-bound material.

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In a nutshell, what I would put to the group here is that if in the process of examining both the way the seaway and the ports are managed, if there's an opportunity for increased efficiency, if there's an opportunity to reduce red tape and allow the local ports the flexibility of coordinating ship movements, but at the same time allowing them the flexibility to get into related businesses - and an example would be our sorting facility, which we're looking at - if we had access to all three modes of transportation it would be to our advantage. Right now, we are limited to rail and truck.

That's really all I have to say this morning. I promised to keep it brief, as I said, for the minute-takers. I would entertain any questions or anything we can give you. It's going to be very short.

The Chairman: Thank you, Mr. Campbell. It is a fact that the presentation was shorter than the introduction.

[Translation]

Mr. Dubé, do you have any questions?

Mr. Dubé: I will let the Liberal member go ahead because I missed the beginning of this presentation. It was so short that I can't come up with a question right now.

[English]

The Chairman: Mr. Comuzzi.

Mr. Comuzzi: I'm afraid to speak, Mr. Chairman.

The Chairman: You should be.

Mr. Comuzzi: I forgot to mention, Mr. Campbell, that you're a division of -

Mr. Campbell: We're a division of St. Laurent Paperboard, which is headquartered in Montreal.

Mr. Comuzzi: I think in regard to your facility what you're looking at - and this ties right in with the scope of what we've heard in other areas - is that we shouldn't be exclusively maritime. We should be considering allied but complementary services in the marine division. I think this is exactly the thrust of what Thunder Bay Packaging wants.

Mr. Campbell: Yes.

Mr. Comuzzi: If you could pick up the recycled material from Chicago, Milwaukee, Green Bay, Duluth, Superior, and maybe Toronto and Hamilton, and ship it into Thunder Bay, if there was a place available to store that material in a port-related facility, a processing plant in that facility at the port...and then have it brought over to your mill, that would be the ideal situation - providing the economies were there - for Thunder Bay Packaging, would it not?

Mr. Campbell: Yes, it would actually be the ideal situation for this new facility we're looking at. We did explore those options at one point. We require a facility somewhere between 50,000 and 100,000 square feet in order to process what they call mixed waste, which you can buy very economically. That in turn has to be sorted into its major components, which is newsprint, corrugating material, and fine papers. We would supply not only our own facility here in Thunder Bay, but we have an option to also supply other pulp and paper facilities in northwestern Ontario.

The Chairman: How wide a catchment area does that recycled paper come from? How far are you shipping it from?

Mr. Campbell: If you drew a semicircle around Thunder Bay, terminating in Regina to the west and Toronto to the east, and possibly 750 to 900 miles south, that is our primary area.

The Chairman: Obviously, it's economical for you to ship it that far away.

Mr. Campbell: Yes, it is. As a matter of fact, right now, because of the situation with the market, we are shipping products as far west as California. In addition, we are exporting a good amount of our product at this point because the North American market is very soft.

.1145

Mr. Comuzzi: You're rather under the gun to make a decision on this in the foreseeable future.

Mr. Campbell: Yes. The faster this legislation gets put in place, the faster you can arrive at...and the new ports council can make the decision as to what direction they should be headed.

Mr. Comuzzi: That's correct.

I don't know, Mr. Chairman, but I have the impression that the consensus so far in these hearings - and we still have to hear from Halifax, Quebec and Montreal - is that this particular section will be changed.

The Chairman: You are making reference specifically to the powers and capacities issue. I think this is a very helpful argument in that area. Absolutely.

Mr. Comuzzi: I'd like an expression from the other members of the committee if they feel, as I do, that this section should be changed.

Mr. Keyes: We'll have an opportunity to do that at another time.

Mr. Jordan: You're hoping the results of this new legislation will make marine transportation of your product, raw material and vinyl products, more economical for you than either rail or truck.

Mr. Campbell: Yes.

Mr. Jordan: Did you buy the plant?

Mr. Campbell: Yes, we did.

Mr. Jordan: So I guess municipal taxation would be a big factor with you.

Mr. Campbell: Always. But we will say that the city, when we first arrived on site, was very cooperative and helpful with the tax issue.

As a result of us opening the plant, of course, we generated somewhere in the neighbourhood of $600,000 or $700,000 in additional tax revenue to the city.

Mr. Jordan: I guess you can tell us, did they give you a break on your assessment or on the amount of municipal tax you paid for awhile?

Mr. Campbell: No direct break. That's an ongoing negotiation issue with the assessment board.

Mr. Jordan: A big factor in implementing this change is the concern it will have for the municipal taxes that are likely to be levied.

Mr. Campbell: Yes.

Mr. Jordan: It was a concern of yours, no doubt, when you thought of relocating here, but the city was cooperative.

Mr. Campbell: Yes, they've been very supportive.

[Translation]

Mr. Dubé: You said that your head office is in Montreal. Do you have operations somewhere other than Thunder Bay? Could you paint me a picture?

[English]

Mr. Campbell: Do you mean the overall layout of the parent company and where else we have facilities?

[Translation]

Mr. Dubé: Yes.

[English]

Mr. Campbell: St. Laurent Paperboard is about a $500-million-a-year company. They have facilities in La Tuque and Matane. Matane is a user of the seaway, as I'm sure you're aware. They do export some of their material.

We have container plants in Toronto, both in Burlington and in Markham. In addition, we have a container plant down in Latta, which is in South Carolina. Our marketing office is located in Pennsylvania. We're also looking at expanding into the lithographic area. We just purchased a small printer in Toronto and are continuing to expand as a company.

The Chairman: Thank you, Mr. Campbell. I think Mr. Comuzzi was most wise in seeing that you appeared here.

For information of the committee members, that concludes the morning session.

Mr. Comuzzi: Before we conclude, I have a submission I'd like to table. It's from a presenter who wanted to be with us but couldn't.

It's from James River-Marathon Limited, a large pulp and paper company in Marathon, Ontario. They've made some recommendations.

I'll go through them in a moment with you, but perhaps the clerk wouldn't mind giving out these submissions. This is the first time people from outside of the area....

.1150

Marathon is a community of about 8,000 people, located about 250 miles east of Thunder Bay. It houses the Hemlo gold fields and James River-Marathon Limited.

They say overall they support what Bill C-44 is trying to accomplish. They support the provisions of part I of Bill C-44.

There's a statement I should read:

The Port of Vancouver competes with the Port of Seattle; the Port of Halifax competes with New York and the Port of Montreal competes with Philadelphia.

This is their corporate philosophy:

If Seattle is more efficient and less costly than Vancouver, then we must consider using Seattle. We believe that it is essential that Canada's major ports operate with commercial discipline to enable them to respond more effectively to the requirements of Canada's exporting industries.

They go on to talk about commercial discipline in the administration of our ports. They talk about the directors and say they believe in a smaller board of directors, according to subclause 6(2) of the bill.

As for clause 13 and paragraph 14(e), they believe that qualified individuals, regardless of whether they're users or not, should be members of that commission. They don't like the minister's authority to appoint as it's stated in the bill. They think there should be some protection in it.

Under clause 33, they believe completion of this special examination with respect to reviewing port activities should commence to review, and should be used to ascertain, the annual stipend paid to the government for the use of the port.

Since they're in the pulp and paper industry and they represent a good deal of the pulp and paper industry, they go to great lengths to say they're concerned about the smaller ports in the country where logging operations and pulp mills are located. They will be turned over, as I think the bill states. It's a hierarchy. If it's not a port, it goes to the province first and then the municipality or private users. They believe that should be implemented and that only those ports, even the smaller ports, that can show they are economically viable should remain in operation.

They thoroughly disagree with the manner in which the coast guard implemented the user fee system, and they're requesting this committee to make whatever changes are necessary to get the cost recovery and the coast guard back on a commercial basis, where they only pay for those services that the commercial industry requires.

Thank you. That's it. I submit that on their behalf.

The Chairman: Thank you, Mr. Comuzzi.

That will end it until 1 o'clock. Would members please be back in the room at 12:55?

.1153

.1300

The Vice-Chairman (Mr. Comuzzi): Good afternoon, ladies and gentlemen. We will reconvene the hearings on Bill C-44.

As you're aware, the purpose of these hearings is twofold. One, it's to review the pertinent legislation with respect to Bill C-44, an act to change marine transportation acts in Canada. The second aspect of our review is the effect of transportation on trade and tourism in Canada, and because we're in northwestern Ontario, we're focusing on northwestern Ontario.

Our first presenters are Mr. French and Mr. Hole.

Mr. French is the president of the North of Superior Travel Association and is very involved in tourism in all of northwestern Ontario. He is one of the owners of the Airlane Hotel and has been a dedicated person from northern Ontario all of his life, his father before him and Bill now.

Mr. Hole is the managing director of the North of Superior Travel Association.

Gentlemen, it's your turn.

Mr. Bill French (President, North of Superior Travel Association): Take her away?

The Vice-Chairman (Mr. Comuzzi): Take her away, Bill.

Mr. French: I'm Bill French of the Airlane Hotel and volunteer president of North of Superior, along with Bruce Hole, managing director of North of Superior Travel Association.

We'd like to thank the House of Commons standing committee for holding their hearings in the north of Superior tourism region and boosting the local economy with tourism dollars.

The North of Superior Travel Association was established by legislation in 1974 under the Tourism Act and is mandated to perform tourism marketing within the geographic district of Thunder Bay. Our boundaries are north to the Albany River, south to the U.S. border, west to English River and east to White River, encompassing Pukaskwa National Park.

We are governed by a volunteer board of directors from various segments of a multifaceted tourism industry in our region. Our membership includes private sector tourism establishments, municipalities, local tourism organizations, chambers of commerce and non-traditional members such as Lakehead University, Parks Ontario, North of Superior Marina Marketing Association, Heritage Canada and major forest companies.

We are entrepreneurial, bottom line-oriented tourism professionals. Our association is consumer-driven and private sector-oriented. Therefore our role is one of optimizing the economic benefits accruing from tourism spending within the north of Superior region. This objective is achieved by creating an awareness of the region by getting more tourism and visitors into our region, getting tourists and visitors to stay longer and getting tourists and visitors to spend more while they're in our region. That's pretty standard with any tourism guy in the business.

.1305

Our role is that of a coordinating agency, to carry out integrated tourism marketing in our region.

At this time I would like to turn it over to Bruce Hole, who will explain a little bit about the presentation that we have for you today.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. French. Mr. Hole, please.

Mr. Bruce Hole (Manager, North of Superior Travel Association): Due to time constraints, we have divided our presentation into three segments: VIA Rail; the establishment of a tourism train for the region; and highway transportation.

VIA Rail uses its intercontinental service three times per week from Toronto to Vancouver. When the previous government implemented change, it decided this service would travel through northern Ontario by utilizing the CN ``northern route'' between Sudbury - Capreol - to Winnipeg, rather than the CP ``southern route'' between Sudbury, Thunder Bay and Winnipeg.

According to the most recent statistics available, the CN route serves 12,400 citizens, while the southern, CP route serves in excess of 200,000 citizens. The mileage difference between the two routes is approximately two kilometres.

We understand that there were reasons for this decision.

The benefits to tourism are astronomical. Rail tours are one of the fastest growing vacations in North America. Our visitor information staff in northwestern Ontario report that rail tours are one of the first vacations people ask for. The beauty of the Canadian north shore of Lake Superior is unsurpassed in North America. It would have a major impact on tourism in our region, with the development of new packages to stop and tour.

In terms of economic development, a VIA Rail service would be the catalyst for new private sector tourism development. By servicing these approximately 200,000 citizens, it would also add to the social fabric of the north shore, with new and innovative community development.

We are optimistic that the northern Ontario Liberal caucus will continue to lobby the minister - the Hon. David Anderson - to have VIA run on the CP line on the north shore of Lake Superior.

The second part of our presentation regards the tourism train. We call this the Budd car, or self-propelled vehicle.

During the summer of 1996, North of Superior Tourism completed a study entitled ``Passenger Rail Transportation in the North of Superior Region, a study of the feasibility and tourism potential''. The association would like to publicly acknowledge the assistance of Mr. Joe Comuzzi, member of Parliament, and his staff for their help in making this study possible. We will leave a copy of the study with the committee.

As a result of this feasibility study, we see a major opportunity for private sector development and the establishment of a Budd car system, or other self-propelled vehicle or tourism train that would operate on the CP tracks on the north shore of Lake Superior.

This tourism train would, as our study supports, link the towns and small villages along Lake Superior into a new and innovative tourism opportunity, with package tours such as U.S. tour boats bringing Americans into Canada and the north of Superior tourism train corridor.

The system would bring new investment money into the region and develop an interesting new tourism synergy that would travel from Thunder Bay along the north shore of Lake Superior.

There are a few problems to be addressed with the operation of a short-line Budd car type of system. As we point out in our study, there is need for discussion with government, and government involvement, with regard to opening up negotiations with CP Rail to get the use of the track. The plans for and establishment of a tourism train depend on what CP does with the track. There has to be a discussion between CP Rail and the government to make this a successful plan for private enterprise to operate.

As examples of successful private sector involvement, we draw the committee's attention to the Rocky Mountain tourism train service in the west, and in the east, the Algoma Central Railway Inc.

Algoma Central Railway has in excess of 100,000 passengers per year, with a minimum of one night's overnight accommodations and, more likely than not, two nights' accommodations in Canada, and that represents major dollars.

With the establishment of a Budd car type of system, the small communities will get more visitors and tourists into their communities with package tour groups and they will develop new attractions for visitors. Establishment of a tourism train will mean economic development for these communities. Opportunities abound for such tour packages. Coupled with small cruise ship visitation, the possibilities for private sector economic development are tremendous. This new tourism infrastructure will also enhance the quality of life for these communities on the north shore of Lake Superior as well.

In Thunder Bay we are fortunate to have Bombardier, one of the world's leaders in ground transportation. The mass transportation group of Bombardier has a self-propelled vehicle on the drawing boards, designed for the year 2000. What better opportunity to test the feasibility of such a method of transportation than on a short-line tourism train in the same area the vehicle was designed and built. John Walker, general manager of Bombardier's Thunder Bay plant, fully supports the concept and says, ``What a great sales tool for international export sales of the system.''

.1310

We see this as an opportunity to own and operate a system run by the private sector. To do so, North of Superior Tourism, or some other agency within the community, needs a small amount of money to do a cost study to develop terms of reference to use in a nationally advertised bid document to bring this plan into fruition.

We see this opportunity - again, I must stress, to be run by the private sector - bringing much-needed investment dollars into northwestern Ontario.

The third part of our presentation is on road transportation. We feel that to compete with tourism in the United States, our roads must be brought up to the standards of the U.S. I-75 highway.

We realize that another presenter, Mr. Di Gregorio, will be making a presentation on this matter, but we wish to go on record as promoting a national highway system and accept the need for innovative means of accomplishing these goals.

Thank you very much, gentlemen.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Hole.

Mr. Dubé.

[Translation]

Mr. Dubé: Concerning this tourism train, you say that it is self-propelled. Can you explain what you mean by that?

[English]

Mr. Hole: A self-propelled train is a rail car with a diesel engine that is designed specifically to go up and down the tracks. The self-propelled vehicle doesn't have to have a turnaround. With a train you have to take a front-end engine and take it from the front of the train and the back of the train to go up and down the tracks. A self-propelled vehicle - the one that Bombardier has - can go either way.

Right now Bombardier is exporting cars to Ankara, Turkey, that are of a very similar type of concept, with diesel engines that will go up and down the tracks.

Does that answer your question, sir?

[Translation]

Mr. Dubé: Yes, completely. You mentioned that Bombardier has a plant here in Thunder Bay. Are the specialized works they do about this Budd car? What does Bombardier produce in Thunder Bay?

[English]

Mr. Hole: Mr. Dubé, I'll have Mr. French answer that question.

Mr. French: Mr. Dubé, in my last tour of Bombardier they were making a similar type of Budd car train for Ankara, Turkey. They are also making subway cars for TTC in Toronto, as they have for Los Angeles. I think they've made cars for most of the major rail and subway systems in the world, not far from here, at the Bombardier plant.

[Translation]

Mr. Dubé: About the southern line that VIA Rail should use in your opinion, what prevents... Has there been a notice? If you are making this presentation today, it probably is because the federal government can authorize it, through the Department of Transport or the National Transportation Agency. What are you expecting from the committee? CP is a private company.

[English]

Mr. Hole: As we said in our presentation, Mr. Dubé, we understand that there were reasons that VIA Rail ran on the northern portion of northern Ontario. Those reasons were political, we believe.

Perhaps the chairman of the committee could answer that. Mr. Comuzzi, would that be a possibility, sir?

The Vice-Chairman (Mr. Comuzzi): Yes. When they decided to downsize VIA Rail in Canada and they wanted to continue the trans-Canada operation from Montreal and Toronto to Vancouver, they had a choice in northern Ontario as to whether to use the northern line, which is far north and is owned by CNR, or the southern line, which follows Lake Superior from Sudbury, White River, Marathon, Terrace Bay, Schreiber, Nipigon, Hurkett, Dorion, Thunder Bay, and then up to Ignace, Dryden, Kenora, and then to Winnipeg.

They chose the northern line for a couple of reasons, at that time. CN was operating at a substantial deficit and it took us a long time to find out that the track rental - what CNR charged VIA Rail for the use of the tracks on that northern line - was around $60 million a year. Mr. Lawless, who was the chief executive officer at the time of both CNR and VIA Rail, was not going to let that income leave CN; therefore they used the CN over the southern line, which was a very unfair decision.

The points these gentlemen make.... I've done the research on it, and there are 12,400 potential passengers or residents on that northern line, and on the southern line, the CP line, there are in excess of 285,000 potential passengers. Really, the logic of it doesn't make any sense if you're providing transportation; go through the areas. There are other reasons, too, but that was the major consideration at the time.

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[Translation]

Mr. Dubé: Thank you and good luck.

[English]

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Dubé.

Mr. Jordan.

Mr. Jordan: I think that certainly the concept of having the tourism train, as you call it, on the CP rail.... Has the tourism industry approached CP and has CP said no way, nothing doing, or is there no dialogue going on?

Mr. French: All there has been is conversation and discussion. A study has been done to see if it even makes any sense to proceed with it. Our position right now is that the study has been done and we're presenting it to the committee. What direction do we take? A community such as Thunder Bay can knock on a lot of doors before we get the right door to open. We wonder if we proceed, does the committee open some proper doors perhaps for us to ask the right people if that's even feasible?

Mr. Jordan: I wouldn't think it's particularly in the mandate of the committee, but I would think your local member of Parliament, being a very astute gentleman, would be of great help to you in getting on with the dialogue. I suspect it's a matter of....

As I think Mr. Dubé suggested, what would be the problem? I imagine CP Rail would be rather anxious to generate some money from that track, which is probably under-used, in its view. So I really don't think it falls under the mandate of this committee. I'm interested and I'm sure we all are, but I think if you approached your local member of Parliament to see if he could facilitate the dialogue between CP and the tourism industry, that would be a big help to you, wouldn't it? Wouldn't that help?

Mr. French: Yes, I'm sure it would.

The Vice-Chairman (Mr. Comuzzi): That's been undertaken, Mr. Jordan.

Mr. Jordan: Thank you.

The Vice-Chairman (Mr. Comuzzi): Thank you very much, Mr. Hole and Mr. French, for taking time to be with us today. As you know, your submission is very important to all of us in northwestern Ontario. I'm particularly pleased that you were able to come here. You're going to give us a report. That's a report that we had done by the -

Mr. Hole: We're very fortunate, Mr. Comuzzi, that in Thunder Bay we have Lakehead University. We had two master's degree students from Lakehead University work with your staff, with your guidance and help, to have the study done. We have shown it to other people within the tourism industry and in the railroad industry and they say.... If we had to pay a private sector consulting firm, we're talking about a $100,000 study, and we would like to thank you once more.

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The Vice-Chairman (Mr. Comuzzi): Thank you. They did an excellent job on it. Thank you for bringing enough copies of it.

We're going to move to Harvey Smyth and Nelson Bolton. Harvey, please take the witness chair. Mr. Bolton, will you join him, please?

Members of the committee, Harvey is the national president of the National Council of Canadian Pacific Pensioners. He's a retired railroad conductor. Mr. Bolton is the president of the local chapter of that association. He is a retired engineer. They've brought with them their travel companions, most of them in the audience, to indicate to the group how important this issue is in northwestern Ontario. Mr. Smyth, please do the honours and make your presentation.

Mr. Harvey Smyth (National President, National Council of Canadian Pacific Pensioners): Thank you very much, Mr. Chairman, for allowing me time to make my presentation before this very important committee.

Almost seven years ago, the people of Canada lost a beautiful train called The Canadian, which ran along the south corridor over CP Rail tracks. The government of the day coined the phrase ``If you don't use it, you'll lose it''. I wonder then, as I wonder today, where it found the figures to back up such a statement. It was certainly not in this part of the country. How many times, when trying to make a reservation, did we hear someone say that there was no room on the train? It was all too many times.

In the same vein, I had made it my business to approach conductors working on The Canadian to ask about available space on this train. The response was that there was no room. There would be ten passengers riding in the dome car because there were no seats, or something along those lines. Too many people who preferred to travel by train were denied for lack of accommodation. So it was definitely not a case of not using the train; we were not allowed to use it. Our train was taken away from us even in the face of these reports.

I have written many letters on this subject to politicians and ranking officers of the railway industry, all to no avail. We pensioners are really proud of those politicians who have never given up the fight to restore passenger train service to the south line along the north shore of Lake Superior. We salute MP Joe Comuzzi, who has never left us and continues to press for the train.

There are several methods of operating a passenger train from Toronto to Winnipeg, through Sudbury and Thunder Bay. They are as follows: first, seven days a week, one train each day in both directions; second, one train every other day each way; third, one train three times a week each way; and fourth, the Budd car system. We are a little contrary here.

In this case, in our opinion, we would not be able to take advantage of the potential ridership over the long haul. You will recall the plan that was to reduce passenger service by 50%. We could, and did, agree this would be fair to all: 50% from CP lines and 50% from CN lines. Little did we know that this plan would see the demise of all trains along the south corridor and some reductions on the north line. In our minds it was much more than 50%, so it was not fair to all.

As a responsible group of Canadian citizens, we are concerned about the cost of services in every phase of the operation of a passenger train. We believe that if we are to see the return of VIA to CP tracks, an in-depth study of all agreements between VIA and CP Rail must be undertaken in order to produce an equitable and suitable agreement in the best interests of all concerned.

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Rail fare should be in line with the average citizen's income, basically slightly higher than bus fare but noticeably lower than air fare. In other words, it should suit the pocketbook of the middle-income earner.

We believe far too much money is spent on advertising. Once the word is out that our train is indeed back on our track, the media will take it up with great enthusiasm, and word of mouth will take care of the rest.

We are constantly being asked ``When are we going to get our train back?'' Only the federal government can answer that question.

And why is it running on the north line? We've gone through this, but let's look at the figures. Almost 300,000 potential riders live along the north shore on the southern route, while only 12,000 live along CN tracks on the northern route. Is it not good business to put the industry where the people are?

Much has already been written and said about environmental consequences of operating various modes of travel, be it in the air or on the ground. It is generally agreed that the train is by far the most environmentally friendly of any of the others.

Of course planes are vital to business and other regions where speed is essential. Get there; get the job done; get back. Only a plane can do that. Buses are great for short-haul runs, but not for cross-country trips for the elderly or the very young.

The train is the answer. It's comfortable and affordable, there's good food on board, excellent service and friendly employees. A long trip can be a joy and a learning experience for all travellers. There's room to move around and meet people. You can see the passing sights from your large windows or from the dome cars. It's a different world.

For many years I have kept a running record of what has been happening with our passenger train. It makes some interesting reading, but there's far too much to relate here.

On April 27, 1976, I made a presentation to the Railway Transportation Committee of the Canadian Transport Commission, and it was held in this city. In that report some 20 years ago I spoke of the advantages of rail passenger service over other modes of travel, and at that time made the remark ``The national dream is fast becoming the national nightmare''. Even at that time we were in danger of losing The Canadian. However, the government decided the train must stay. Members of the committee at that time were J.M. Woodard, D.H. Jones and E.H. LaBorde.

On September 5, 1990, the Royal Commission on National Passenger Transportation held their meeting here in Thunder Bay under the chairmanship of Louis D. Hyndman. I again addressed the problem. This was an appeal for the return of VIA Rail to the south line. But, as we all know, that appeal failed. So in effect, my prediction of the Canadian nightmare came true after 14 years, and here we are again still trying to restore the national dream.

At this time I would like to quote from a letter I received dated May 4, 1992. It says:

As I am sure you can appreciate, the specific VIA route reduction decisions taken in 1989 were not undertaken solely on the basis of ridership. As you indicate, the southern CP route through Thunder Bay would serve a higher population base than the more northerly Winnipeg-Capreol route, which was retained.

This letter is signed ``Don Mazankowski, Minister of Finance''.

On June 19, 1989, Transport Minister Benoît Bouchard said he would consider shutting down passenger rail service in Canada entirely if VIA Rail wanted to do that. One week later, on June 26, VIA Rail president Ron Lawless said there would be no large cuts to passenger train service in 1989.

On October 29, 1989, Amtrak chief W. Graham Cleyter Jr., said:

Today in Canada VIA Rail is the railway that can't. Its supporters say that the story would be different if the government would only try.

He went on to say:

Trains are a part of the U.S. heritage, just as they are in Canada, where some say VIA strengthens the Canadian character and national unity.

The clincher, in my mind, is his statement:

Amtrak echoes VIA in saying investment in new equipment pays off in increased business and reduced government subsidy.

Mr. Chairman, we are not looking for a luxury excursion-type train with all the amenities of the Love Boat or the glamour of the Orient Express. We want to return to the train we remember, a people train. What we are trying to do is right a wrong by putting a viable train back in service for all the right reasons.

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If we can link up between Toronto and Winnipeg, I feel sure Manitoba will follow suit, then Saskatchewan, Alberta and B.C., and we will be back in business. The time to act is now. All mayors and reeves with their councils and with the help of chambers of commerce must get up and running by lobbying their federal and provincial governments to produce the desired result. The desired result is our train back on our track over CP lines from Toronto to Winnipeg as the first leg.

There are many retired CP employees out there who would be glad to offer their vast amount of expertise and experience. They come from all classes of service. Just ask.

Mr. Chairman, at the beginning of this presentation I suggested four ways of getting the job done. I will close by outlining an outrageous alternative. We are now aware that CN Rail has been privatized to a great extent. Therefore, first, change the incorporation of VIA Rail from Montreal to Winnipeg. Second, turn the passenger equipment over to CP Rail at Toronto at no charge. Canadian taxpayers have already paid for it. Third, provide a healthy subsidy to get started. In 1989, the Canadian government loaned Amtrak $100 million to get new equipment, while cutting VIA by 50%. Fourth, rename the train The Canadian. Fifth, tell CP Rail to make Toronto to Winnipeg work. They have the infrastructure and the experience to do it. Sixth, leave management of the train totally in the hands of CP Rail. In the U.S.A., the federal government played hands off and the Amtrak system prospered. Seventh, sit back and watch it grow and watch it go.

Thank you very much.

The Vice-Chairman (Mr. Comuzzi): Thank you very much, Harvey.

Mr. Jordan.

Mr. Jordan: That was a very interesting presentation. Are you saying give it to CP Rail? Give it back to CP? Do they want it?

Mr. Smyth: In my correspondence with the president of CP Rail regarding CP Rail actually starting a passenger train of their own, they said they could not do this. It was certainly in the hands of the government in power, but they would rent out their properties and so on. I believe they would like to have it back, but I can't guarantee this.

Mr. Jordan: The argument we sometimes hear is if you had every possible seat filled every time, they would still have trouble making money. You could set the price for the people who want to take this kind of a tour. They're not business people, largely. They're tourists and so on. If this was reflected in the price of the ticket, the price of the ticket would have to go up so much the whole thing might come back to haunt you.

I like the concept. I love trains and I travel on them whenever I can. But the argument we get is that out of the people who are on the move today, there are only limited numbers of them who want to take the train for the reason I like to take the train and you like the train. We're not where the big money is. If the price reflected the actual cost, this would cut down on the numbers taking the train.

I haven't anything else on this, Mr. Chairman.

The Vice-Chairman (Mr. Comuzzi): Do you want to respond to this, Mr. Smyth?

Mr. Smyth: I think subsidizing still goes on for highways, airways, buses. As a matter of fact, I've been paying taxes for a long time. I'm not a young man any more. I've paid a lot of taxes. I do disagree with the fact that I've had seven years of paying for somebody else's train and I can't get on it. But I didn't make any noise. I'm a nice guy. I just hope other Canadians would like to be nice people who keep paying their taxes and we'll subsidize the beautiful train called The Canadian.

Mr. Jordan: I hope we're all nice guys.

Mr. Smyth: Yes.

Mr. Jordan: And we're all getting old.

Mr. Smyth: Yes, every day.

Mr. Jordan: The subsidy aspect of it is the stickler now, with the government in the mood that this thing better be showing returns or we're getting out of the business. The government has had a horrid experience when it comes to being good business people. They're not.

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Mr. Smyth: That's right.

Mr. Jordan: They don't often turn a profit. I think the difficulty was the service was depending on the mentality that if you don't turn a profit, government will be around to help you out.

I think we exhausted ourselves as taxpayers with this kind of attitude. I'm not suggesting I have the answer, but I think I'm aware of the problem. I think perhaps you are too.

I'm just suggesting this is the bottom line today. If you're looking for a government subsidy, you'd better not be depending on getting that government subsidy, because the experience I've had lately is it's not there. It has to be put on a business basis. Unfortunately, those days when governments were looked upon as a form of maintaining a national purpose and a national trust and building nationhood have disappeared. To get that back, I don't know what we can resort to. In the minds of a lot of people, the feeling that there is another reason for maintaining a transcontinental system, with the sentimentality that was associated with it, isn't out there any more.

Mr. Smyth: Perhaps we could get it back.

Mr. Jordan: I wish somehow we could. Tell us how we can get that back.

The Vice-Chairman (Mr. Comuzzi): I don't like to interfere, but I'm going to on this point.

I think what we're talking about in the reinstatement of the passenger rail service to people in northeastern and northwestern Ontario is the fact that we're already running a train through northern Ontario.

So if there is subsidy to VIA Rail, and there is, that subsidy is already being handled because we're already operating the train. I think the thrust of the presenter's argument today is if you're going to run a train through northern Ontario, then run it where there are people and bring it down to the south line. This wouldn't add any additional costs. The service is already there.

Between Sudbury and Winnipeg, if you go the north line or south line, there is actually a difference of two kilometres. They are running it. Why not run it where there are people? I think this is the argument you're making here, Harvey.

Mr. Smyth: CP Rail is internationally known as very smart in the pocketbook. Mr. Crump fired an engine in Kenora and became the president of CP Rail. He became the president of the international railway presidents of North America. Why? Because CP Rail always made money, even during the Depression. When CN was always losing money, CPR seemed to always be operating in the black.

I suggest they get this subsidy as a start-up figure, get this train and see what happens with it from Toronto to Winnipeg. I'm suggesting Manitoba and so on will begin to think maybe they should have it too, but this is not what we're talking about here.

That would be quite a long run. It is 24 hours to get there. I believe the excitement of the start-up would carry on. I trust it would, anyway. I hear all the time about people wanting to travel by train. So if we can keep the prices down we'll be better off.

[Translation]

Mr. Dubé: Mr. Smyth, as far as I can tell, you have the support of your MP and you put your arguments to us with enthousiasm. You seem both totally convinced and very convincing.

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I notice also that your approach is supported by a group of people. Moreover, you are lucky. Quite evidently, you are supported by your MP since he helped with the study and everything else.

I'm from Quebec. Therefore, I do not want to interfere in what could be a conflict between Liberal MPs, as those from the Sudbury area would probably prefer the northern line. I want absolutely no part of it. Given the fact that there is a difference of only two kilometers and that the figures seem to weigh in your favour, I will let the particular political forces of Ontario play this out by themselves.

However, being a member of this committee, I would like to have more details. If there are 300,000 people living in this corridor and 186,000 potential users according to this study, on the face of it I come to the conclusion that even if VIA Rail would not create this new route, this special train you are proposing might be profitable anyway. Have you considered this possibility?

Also, maybe this train would not be profitable all year long, but then running it only during the tourist season, from the end of May until October might be worthwile. Have you considered some type of compromise that could make this project profitable? All your arguments on service to the public and on grants would not be useful.

[English]

Mr. Smyth: The first part of your talk was political business, and so on, in Montreal and Toronto. But all I'm saying here is that the Montreal-Toronto corridor is well taken care of.

[Translation]

Mr. Dubé: No, that is not what I'm talking about. I meant that I didn't want to have to make a choice between the northern and the southern line presently used by VIA Rail because the northern route goes through Sudbury. I don't want any part of it.

But I am listening to you. You're saying that the southern line has potential. Personally, I think that it should be possible for a special train running from Toronto to Winnipeg to be profitable in the corridor you're talking about. I'm simply wondering whether you have considered that possibility or only the idea that VIA Rail should use a different line. Have I made things clearer?

[English]

Mr. Smyth: No, I haven't given it a whole lot of thought. However, the Budd car system would work to advantage on the north line much better than it could possibly work on the south line. If we're looking for a long-haul run, we want a complete train between Toronto and Winnipeg. Turnaround points at both Toronto and Thunder Bay are accessible.

Short hauls up on the CN track, to my knowledge, would be acceptable, but not to all. But then, in January 1990, we weren't given a chance to say whether losing our train in its entirety was acceptable to us. So somebody has to bite the bullet every now and then.

But you're absolutely right that if there was a train on the south track and accommodation for a train on the northern track, that would absolutely answer that question.

[Translation]

Mr. Dubé: One last comment to respond to Mr. Jordan's. Personally, I lived for a long time in a town in Quebec called Charny, which is almost across from Quebec City and where there was a railway crossing.

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The train back home is part of our culture, just as the harbour is part of the culture in Thunder Bay. I have known a lot of pensioners who used to work for CN. Many of them still live in my riding and they show a great love and fondness for the train when they talk about it. Listening to you, I have a feeling that you are also in love with the train, that you are great promoters of this mode of transportation, and rightly so.

I don't want to criticize anyone in particular nor show any partisanship, but I think that we Canadians are influenced by the American concept of profitability for public utilities and for the train. Anyone who has traveled a bit in Europe realizes that the train is part of the European culture. Europe is also more densely populated. The people over there consider the train as an essential part and each community in France, in Germany or in any other country supports train services vigorously.

In a country such as Canada, distances are great. You mentioned 24 hours and it is very long. When you want to travel safely by car, even when the road is nice... Personally, I have diabetes and after a meal... I swear that many people tend to be sleepy. The train is a very safe means of transportation.

In my opinion, we are being influenced by a school of thought that wants the train tradition to disappear. May I remind to people - and that has nothing to do with politics - that without the train there would be no Canada. The historical compromise of 1867 was brought about by the train. Anyway, I respect your opinion. I have a feeling that the people who support you all share this love of trains. I'm telling you to hang in there.

As far as everything else is concerned, I think you can be grateful to your MP. We know that he arranged for you to be heard today. There are not many of us here because this is Friday afternoon, but everything that has been said will appear in the Minutes and will be considered by the other members of the committee. That's all I had to say. Hang in there. Thank you.

[English]

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Dubé.

I thank you and all of your supporters for coming out this afternoon.

Harvey, it's very encouraging, and thank you, Mr. Bolton.

Where are our presenters from the Canadian Automobile Association? Are they here?

[Translation]

Mr. Dubé: They had to take the train.

I'm looking at the schedule and they are supposed to appear at 2:30 p.m. It is still too early to expect them to be here. Maybe we should take a break.

[English]

The Vice-Chairman (Mr. Comuzzi): We're waiting for two more presenters. Bruno's Contracting was to be here at 1:30 p.m., and they're not here yet. The last presenter was from the Canadian Automobile Association.

I'm not too concerned about that. We had representations from the different automobile associations in Vancouver and Winnipeg yesterday.

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We have Mr. Silvio Di Gregorio from Bruno's Contracting. Mr. Di Gregorio has some very interesting comments, I'm sure.

By way of background, the corporation, amongst many corporations, one being part of this hotel, that Mr. Di Gregorio is involved with in business is a company called Bruno's Contracting, which does a majority of the work on road construction throughout northwestern Ontario and in other parts of the country.

He has some definite ideas about where we should be going with respect to a national transportation system, and I welcome him on behalf of the committee to the hearing this afternoon.

Do you have a presentation or something you want to start off with? After that, we'll ask you some questions. Thank you.

Mr. Silvio Di Gregorio (Secretary-Treasurer, Bruno's Contracting (Thunder Bay) Limited): Mr. Chairman and members of the committee, my name is Silvio Di Gregorio. I am secretary-treasurer of Bruno's Contracting (Thunder Bay) Limited.

Bruno's Contracting is involved in the construction of highways, airport runways, residential and industrial subdivisions, and various other infrastructure projects from the Manitoba border as far east as the Timmins and Wawa area.

First of all, I would like to thank the committee for giving me the opportunity to make submissions on Bill C-44 and the study on transportation, trade and tourism. My submission will relate to transportation and the national highway system.

Canada's national highway system is a 25,000 kilometre network of highways. It is of significant importance to the Canadian economy. Study after study has shown the importance to Canadian economic growth and development of a well-maintained national highway system. Many other studies have also shown the road safety benefits of a properly designed and well maintained highway network. Yet other reports prove conclusively that the lack of a coordinated program and a lack of committed funding has resulted in our national highway system being substandard in many areas and getting worse each year.

The estimated cost to rehabilitate the national highway network is estimated at approximately $14 billion. This includes a four-lane trans-Canada from coast to coast.

On the local level, our Highway 61 leads south to the Canadian-American border. For our region and our area, the area just south of the border is probably one of the largest markets for the business people in this community. Within a 500-mile radius of the border we probably have a market of 20 million consumers. We have to go a long way northeast or west to find a market like that. Highway 61 is a very important link, and also Highway 17, which leads west from Thunder Bay. Highway 17 is part of the Trans-Canada Highway.

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Both Highways 61 and 17 are operating at above-capacity levels in certain portions of the road. Any proposed development in the city that would require a rezoning amendment and would add traffic levels to these highways is currently being held up until improvements are made that would add traffic capacity.

How can you have job growth and development when the road systems cannot handle the traffic volumes? U.S. studies have found a positive relationship between public highway capital investment and private sector output and productivity. Thus, the road networks have to be available if we desire to see job growth and positive investment by the private sector.

The federal government currently collects 13.5¢ per litre, on average, from the sale of gasoline. This represents approximately $5 billion per year. In fiscal years 1996 and 1997, contributions by the federal government to highways is expected to be approximately $300 million. This represents less than 6% of the revenue that it collects from the sale of gasoline.

Our national highway system represents the only transport mode for which there is not a national policy to deal with system maintenance and forward planning. Air, rail and water all have national policies in place, yet a large majority of all passenger travel and goods shipments in Canada is by truck on the road system.

The federal government has a role to play in maintaining Canada's national highway system. The 25,000 kilometres of national highway network should be officially recognized by the federal government. The federal government should negotiate a national highway initiative. This initiative must include a partnership with the provinces, the local government and the private sector.

Regardless of what the method of funding will be.... This will really vary. If you are constructing a major interstate highway in an area where there are alternate routes and there's a large amount of traffic, you can use toll roads. In this part of the country, where you have one road that is a connecting link from area to area, there is no other alternative but for the traveller to use that highway. A toll system is not really practical.

We have to look at some other methods, whether we take some of the funds that are being collected as revenue from the gasoline excise tax or whether we look at adding another cent or two to the excise tax. We could say that we would put it specifically into our roads. I think each area will have to be looked upon on an individual basis, because in certain areas, a toll road could work and could very well pay for the total cost of it. This is why I'm saying it really varies and that it will have to be looked at.

Regardless of what the method of funding will be, the private sector has to be brought in prior to the preliminary design being cast in stone. It is at this stage that contractors, consulting engineers and other specialists in the private sector, working in a partnership with all levels of government, can contribute to the best trade-off decisions between capital costs and maintenance costs, and can make the greatest contributions to changes and considerations that would best accommodate regional issues, whether these regional issues be social or economical.

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Thank you. I would be pleased to answer any questions you may have.

The Vice-Chairman (Mr. Comuzzi): Thank you, Silvio.

Mr. Jordan.

Mr. Jordan: Would any of the recent projects that you have been involved in, such as road construction, have been funded under the national infrastructure program?

Mr. Di Gregorio: I'm not aware of that. Most of our highway projects are provincially funded, but I'm not sure.

Mr. Jordan: The infrastructure program was one-third municipality, one-third province, and one-third federal government. I'd be surprised if it did not involve highway construction.

Mr. Di Gregorio: I'm not sure what the make-up behind.... I know there were certain projects within the city for which there were federal infrastructure funds in place, and we were aware of them. I'm not aware, however, that any of the ones that we performed had that component.

Mr. Jordan: There's some suggestion that there may be another infrastructure program offered, although I don't think the government has made up its mind on it right now. They're looking for direction as to how they think it might go. If I'm hearing you correctly, I think you would support the idea of that money being destined for highway construction.

Mr. Di Gregorio: That's correct.

Mr. Jordan: That's taking it away from new libraries and new arenas and new this and new that. You'd suggest it should all be put....

Mr. Di Gregorio: I am suggesting that the federal government is currently taking in $5 billion a year through the GST and excise taxes that are directly related to gasoline sales and purchases. The people who buy gasoline are also the same individuals who are using our highway network, whether they be businesses, trucking companies or individuals. Some of that money has to go back into our road system.

Mr. Jordan: I agree with you on the toll roads. Just tell me a little bit about Highway 61 from here to the United States. Is it four lanes?

Mr. Di Gregorio: No, it is two lanes.

Mr. Jordan: And Highway 17 from here is two lanes.

Mr. Di Gregorio: It is also two lanes, and certain sections of the highway are at over-capacity. If you wished to construct a factory to employ people, you would be adding traffic to that portion of the highway, so you would not be able to do it. We are cutting off our left leg.

Mr. Jordan: I'm with you as far as the nature of this particular country is concerned. Transportation is so vital to us because we are a rather sparsely settled nation, in spite of the fact that we have some very big centres. Unless we can hook those centres up with suitable modes of transportation, we're not going to move very far on a competitive scale with the people with whom we're competing. So I am supportive of your idea of a national highway system. It has been mentioned and talked about.

The government has done something in the past. A lot of federal government money went into the Trans-Canada Highway. But the idea was that we'd help you build it and then it would be yours, and we would have nothing to do with the maintenance of it.

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Mr. Di Gregorio: But I think providing a major expansion to a four-lane so that it can handle the traffic that's being generated and that requires to use it is more than a maintenance issue. It is a capital structure, and some funding contribution is required.

Mr. Jordan: Ongoing.

Mr. Di Gregorio: Ongoing, yes.

As a businessman who purchases a lot of gasoline products, we are prepared to say, fine, let's put in another 1¢ or 2¢, but not like the other 13¢ we're paying. We're putting 13¢ in and getting 1¢ back into the roads. Let's put in 1¢ or 2¢, but let's say that this all goes to our roads.

Mr. Jordan: Earmarked for roads.

Mr. Di Gregorio: Exactly.

Mr. Jordan: It might be accepted by the public.

Mr. Di Gregorio: Certainly as a businessman who purchases a lot of gasoline products, we realize the cost savings and the benefits of having a good road network.

Mr. Jordan: Good point. I'm a four-lane man myself, so....

The Vice-Chairman (Mr. Comuzzi): Did you get your four lanes?

Mr. Jordan: Yes, I did.

The Vice-Chairman (Mr. Comuzzi): So now you're not interested -

Mr. Jordan: In anybody else.

Some hon. members: Oh, oh!

The Vice-Chairman (Mr. Comuzzi): Mr. Dubé.

[Translation]

Mr. Dubé: Yesterday, in Winnipeg, we heard a presentation from the Saskatchewan Association of Rural Municipalities. I would like to repeat for you the figures we were given then on the share of the federal government revenues from roads that is actually spent on roads: United States, 31%; Germany, 36%; Great-Britain, 100% - in Great-Britain, the road system is not very big and the country is densely populated - ; Italy, 44%; Spain, 64%; Australia, 51%; France, 68%; Canada, right now, 6%.

You must admit, as Mr. Jordan has said, that an effort was made 25 years ago to build the Trans-Canada Highway. A technical study has demonstrated that at a certain period during thawing, one passing truckload is equivalent to 16,000 cars. We have to note that our present national road system is deteriorating. I think that we will have to make special efforts to repair our road system. The people who appeared earlier suggested that the train has the benefit of being a very economical means of transportation.

Unfortunately, this is North America and we have to take into account our competitors who have a certain concept of profitability. We have to play by their rules. Canada is a huge country. I decided once to drive from Ottawa to Thunder Bay and I thought it was very far. That's the way our country is. Distances are lenghty.

I don't know many people who have the time to drive across the country from one end to the other and back. It can be done, but there are other modes of transportation. I'm thinking of those who would really benefit from a safer ride aboard a train or on a plane for longer trips.

People have told us in other cities that we should repair our existing road system around big centres and maintain a corridor in reasonably good condition between those urban centres. Do we have the means to go faster while we are running a deficit?

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It would be very easy to answer "Why not, let's spend it". But we have to make choices. Do you think it is useful to repair our road system? We must admit it is indeed dangerous in some areas.

Your argument about security is very much to the point. But before entertaining the idea of a four-lane highway from sea to sea, I would like to check whether it is truly a priority or whether there are other safer and more cost-effective alternatives.

[English]

The Vice-Chairman (Mr. Comuzzi): Do you want to respond to that, Silvio?

Mr. Di Gregorio: I can certainly comment. I think the four-lane from coast to coast has to be a goal that we have to be looking at for some time down the road. For really the next ten years, which is already a considerable distance down the road, there are enough chronic areas in our road network that we have to improve. We cannot have a road network that will not permit a factory to open up and have jobs and employ people. So where we have areas that the road is blocking the creation of employment, what do we do?

The four-laning of the highways, I think, has to be a goal, and it has to be down the road, but we have to be working toward that, starting to add a lane in areas where traffic is congested, where it is impeding the development of that area. If we cannot get our products to the market....

I understand your suggestion about rail. Our largest market in this region is the U.S. To my knowledge, we do not have a rail network, without shipping to Winnipeg and then down, that is a link between here and Duluth and Minneapolis and those areas. To try to ship by rail, shipping to Winnipeg and then through the Dakotas and then through Minnesota, would not be cost-effective at all.

So our region cannot be placed in that general view of rail transportation. We have so many communities here that are not serviced by rail or even by bus.

I was talking to an individual in the last few days who wanted to go to Chapleau. It's probably about 300 to 400 kilometres from here. He couldn't get a bus, he couldn't get a plane, and he couldn't get a train.

[Translation]

Mr. Dubé: Ontario is a big province.

[English]

That's all.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Dubé.

I have a couple of questions. This is going to be a little parochial, but it's very important. Anything parochial is important, I guess.

We've heard evidence, from the time we started this process, from Vancouver and the other provinces. Yesterday we were in Manitoba. The Minister of Highways and Transportation for the Province of Manitoba explained what the Province of Manitoba did to join with the United States. Because although we have the east-west for national unity, our trade is north-south.

When you look at what British Columbia has done to build a north-south highway that connects into the United States highway system; at Alberta, what they have done to build a highway system to connect with the United States; at Manitoba, with its Highway 75 from Winnipeg right down into North Dakota; at Windsor, Ontario, a great manufacturing area connected to the interstate highway system in the United States; at Sarnia, connected to the interstate highway system in the United States; at the Toronto-Hamilton area, connected to the United States highway system; at Sault Ste. Marie, connected by the St. Mary's bridge to the United States highway system; and Thunder Bay or northwest Ontario, no connection to the interstate highway system.... I know you and I have talked about this. How do we rectify that?

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If we're going to grow and prosper, we have to...94% of the product we make or produce here in northern Ontario is exported to the United States, and that goes through some - as you said - gyrations to get to the marketplace.

Mr. Di Gregorio: I couldn't agree with you more. As I indicated in my comment, the market we have just south of the border, within a 400 to 500 kilometre radius, is almost 20 million people. We have to go pretty well all the way to the east coast and the west coast to make up -

The Vice-Chairman (Mr. Comuzzi): Would this be an area where...? I understand your philosophy with respect to tolls and no tolls, but if we were to take it upon ourselves to build a highway with interstate specifications from Thunder Bay to Pigeon River.... I think I'm on pretty safe ground when I say that the United States Department of Commerce and the State of Minnesota already have the right of way to extend the highway from Two Harbors to Pigeon River, in a four-lane, I-75 configuration. That section of road, that 38 or 40 miles from here to Pigeon River on our side of the border, would be a natural for a toll road -

Mr. Di Gregorio: Provided that we left the existing Highway 61 intact.

The Vice-Chairman (Mr. Comuzzi): Yes.

Mr. Di Gregorio: We have to leave an alternative route. We could find another corridor. When you do construct in a new corridor, unimpeded by the traffic that normally uses that road, it is much more cost-efficient, because you don't have to contend with traffic. Also, when you're selecting the new corridor, you can take a look at the best corridor to facilitate the construction and, at the end, construction costs. Provided that the existing Highway 61 stayed intact, it would be a perfect scenario.

The Vice-Chairman (Mr. Comuzzi): Is that why you say that the road builder, the person who's going to be in charge, should be in a partnership with the engineers and the designers at the initial stage in order to...? You had a good term, ``the trade-offs''.

Mr. Di Gregorio: To evaluate what should be done, because the cheapest.... Assuming we're talking about this 40 kilometres of road between here and the border - and I think the comparisons will be similar in other cases - the trade-offs between the capital cost of constructing that road could be evaluated in the scenario if you called for proposals, and in no way would you have to limit yourself to specific individuals. In the preliminary stage you would call for proposals from interested parties, and parties of engineers, contractors, financial institutions and geo-technical people would form teams to evaluate the design, the construction and the maintenance.

What can also be done in that proposal is ``you build it, you maintain it'', for ten years, twenty years or thirty years. Suddenly, the same party that is going to be constructing it is going to have to pay the maintenance costs. At that point, he may say that it's better to spend an extra $5 million, and he may say, ``Let's design the road to a higher standard, because the maintenance costs in the next twenty years will be phenomenal.''

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As contracts are performed now, essentially someone designs them. Then they go for tender. The contractor has no choice at all. This is what he has to do. You excavate the muskeg or whatever and you put on twelve inches of gravel and you put on an inch of asphalt. If that's what they call for, that's what you have to do.

But when the group is given flexibility on the front end to look at parameters that may cost more on the front end but such that there will be substantial savings for the next thirty years, they will make that analysis. They would present-value the cost of that future maintenance and say, hey, we should spend an extra $10 million here, because it will save us $1 million a year for twenty years.

These are decisions such that when you form a partnership and do not operate as owner, contractor, consulting engineer, these people have to come together to look at ideas together and be responsible for the project together. Then you will get the best product for the most economical dollar in the long term.

The Vice-Chairman (Mr. Comuzzi): And that could be applied even on a trans-Canada system.

Mr. Di Gregorio: Anywhere.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Di Gregorio, for taking the time. I know how busy you are. Thanks for making that presentation. It's valuable, it's on the record, and it will be important to our discussions when we talk about transportation.

You know, the committee we all sit on now is almost getting out of business. We've sold off the railways. We're going to get rid of the marine. We've got rid of the airports. We have the navigation system under control. We have to start putting our minds now to a national highway system.

Mr. Di Gregorio: We'd love to see that.

The Vice-Chairman (Mr. Comuzzi): Our next presenters are from the Canadian Automobile Association. Representing northern Ontario are Mr. Fayrik and Mr. Salatino. Mr. Fayrik is the Thunder Bay vice-president of the Canadian Automobile Association. Mr. Salatino is the manager of fleet services, also located in Thunder Bay.

Welcome to the committee. I should say we've heard representations from the Canadian Automobile Association in both British Columbia and Manitoba. I think you will play a vital role in what we have to do here and deliberate on in the future.

Mr. Wayne Salatino (Manager, Fleet Services, North and East Ontario, Canadian Automobile Association): We represent the CAA in northern and eastern Ontario. With the exception of a small area around Sault Ste. Marie, our club territory extends from the Manitoba border to the Quebec border. Our head office is located in Ottawa. Major links of the Trans-Canada Highway traverse our region, including Highway 17, Highway 11, and Highway 69. That's almost 4,000 kilometres of the national highway system.

The CAA in northern and eastern Ontario represents 186,000 motorists. In this part of the province, on this day, our national association of clubs is launching Roads Work for Canada, a cross-country expedition from Victoria. The purpose of the expedition is to draw attention to the urgent need of the federal government to act in a partnership with the provinces and reach consensus on funding the national highway system. Across this country, the expedition will be stopping to allow our members, the general public, local and regional representatives of government, and commerce to sign petitions and demand that the federal government focus on its long-standing role of funding highways in Canada.

In addition to the stops in Kenora and Dryden, the expedition will be stopping here in Thunder Bay on October 15. Our local CAA members and staff will be represented, along with local authorities, in a show of support for this undertaking. Later that week, the expedition will also make stops in other cities within our territory, namely Espanola, Sudbury and North Bay. Ontario Premier Mike Harris has been invited to attend in his home riding of North Bay.

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The poster I have brought with me is on display across Canada in each CAA office and in several CAA-approved service centres. It says ``Danger - No Work Ahead'', and was specifically designed for this campaign to focus public attention on two points. First, that no roadwork poses a danger to the safety of all road users. They face a risk of collisions, injuries, and even death as a result of poor highways with narrow lanes, unpaved shoulders, congestion, poor signals, and too many access points.

Secondly, the poster signifies that if Canada allows our roads to decline, our country is in danger of losing its competitive edge and the economic strengths it has developed. Simply put, there may be no work ahead, and that is a concern to all Canadians.

We are also sending out envelope stuffers and postcards to CAA's 3.8 million members. CAA clubs are featuring editorials in their fall magazines to further our educational efforts. What all these materials have in common is that we are asking motorists to ``put their two cents in''. Of course motorists are already putting their two cents in, and literally much, much more, every time they fill up at the pumps. We are now asking them to put their two cents in figuratively, by asking the government to allocate 2¢ per litre from existing gas taxes to national highways.

On this day as well, the finance ministers are meeting in Ottawa with only CPP and the infrastructure issue on their agenda. We have notified the finance minister and his provincial colleagues of our concerns regarding the urgent need to resolve the highway funding issue and agree on a plan.

We believe that roads and their proper maintenance and expansion are at the root of our competitive edge if we are to compete within NAFTA. Roads need to be at their very best, when now they are at their worst. Our club has been active at spreading the word to regional MPs and members of cabinet that the NHS continues to languish just when competition demands the need for the best highways ever. It has been almost ten years since the national highway policy for Canada was launched.

In the U.S. and Mexico, there are several ambitious road projects under way to create a first class highway network. In Canada, we know the Prime Minister has recognized the need to have a competitive highway system. We also hear from our MPs that they are aware it is not just short-term jobs that will benefit, but long-term employment security as well. The economy will expand and, with it, both employment and the federal tax base, so that our industry will be more competitive and more Canadians will travel in Canada, thereby boosting both the economy and their understanding of this vast land.

A municipal infrastructure program was developed a few years ago. It is now time to support a truly national highway program. There are funding considerations that CAA has offered our comments on. However, funding must come from existing tax revenues. Our motorists in this area pay millions a year to the federal treasury for highway work they never receive. In this context, they are unwilling to pay even more for the basic necessity of good roads. An increase in gas tax is not an option; it will be viewed as double taxing.

CAA seeks at least 2¢ from the existing excise tax paid on gasoline - along with the appropriate allocation from diesel tax revenues and matching provincial funds - to be invested in the national highway system. It is important that taking funds from existing revenues should not be underestimated. Members should recall how CAA rallied motorists prior to the last federal budget. Finance Minister Martin decided wisely not to include the proposed gas tax increase. We are optimistic this same wisdom will prevail and a new highway investment plan will be developed.

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CAA North and East Ontario firmly believes this request is true to the original plan for a national highway system. It is in our national interest and demonstrates reasonable fiscal planning. Federal gas taxes today bring in more than $5 billion in revenue annually, but less than 5% of fuel tax revenues are invested in Canada's highways - one of the lowest investments in the industrialized world. Further neglect will only serve to drive the rebuilding costs up, making our crumbling roads and bridges a serious part of the national debt.

A road that is left until it is fifteen years old will require reconstruction at a cost of $250,000 per lane kilometre. If done by its twelfth year, that amount is reduced to just $80,000 per lane kilometre. An ounce of prevention is worth a pound of cure.

A properly funded national highway program will put the good arteries of a robust economy back to their previous good health. Roads tie us together and provide for a stable economy, deficit reduction, and long-term jobs. In our territory it is no secret that most commercial road transports use straighter, smoother, wider U.S. routes to move west and east around the lakehead, thus avoiding the potholes, curves, and heaved roadbeds found in northern and northwestern Ontario.

There is a need for better highways, and we urge the committee to consider carefully the motorist's voice. CAA North and East Ontario urges our government leaders to pursue this strategy and give Canada back her properly funded national highway system.

Thank you.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Salatino. Do you want to add anything to that, Mr. Fayrik?

Mr. Greg Fayrik (Vice President, Operations, North and East Ontario, Canadian Automobile Association): The CAA has been in Thunder Bay for a long time, and, as Mr. Salatino will attest, we have many truck contractors in the area, plus our own fleet, that do many service calls throughout this region and know that many stretches are in pretty bad shape. Something has to be done in this northern region - whether it be adding more passing lanes, or four-laning, or twinning, or whatever the case might be - to make things a lot better than they are.

Tourists come up to the area and find it very difficult, especially after travelling in the United States, where they have a much better road system. Up here it's kind of a disaster. We've improved a bit in terms of the highway, even to the border, where it's much, much better - passing lanes have been added. It's been extensive, it's been great, but there's a long way to go.

The Vice-Chairman (Mr. Comuzzi): We'll turn to the questioning then.

I've just been handed a note - for those of you who are veterans - that the Minister of Defence, Mr. Collenette, has just resigned.

A voice: Good.

The Vice-Chairman (Mr. Comuzzi): Mr. Dubé.

[Translation]

Mr. Dubé: I understand your point of view very well, but I wouldn't say the same about the figures I read earlier from the Saskatchewan Association of Rural Municipalities that prove you right about the federal share of road revenues. May I remind you, however, that the federal government has spent a lot of money to build the Trans-Canada Highway. If we had a look at the figures for those years, I'm sure that the percentages would be different.

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Right now, many road sections have deteriorated and are dangerous. Let's fix what is broken and dangerous. Pretty soon, we'll reach a consensus on what should be a priority.

[English]

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Dubé.

Mr. Jordan.

Mr. Jordan: It's appropriate that your presentation would follow on the very heels of a contractor who presented us with very similar ideas about the conditions of Canada's roads and how you're on a kind of slippery slope if you think you're saving money by not repairing your roads and everything that's associated with that.

But there was one difference. The contractor who was here just a few minutes ago would suggest that perhaps they put another cent or so per litre on gasoline or fuel for that specific purpose. You've condemned that and look upon it as double taxation or what have you.

Do you think there'd be any way in which it could be done and be totally transparent? We could say ``There is the money we've collected from this added source of revenue'' - a cent a litre or two cents or whatever it would be - ``and there's where the money was spent on road construction''.

That seems to be what's lacking now. We're collecting money because roads are used, but we're not willing to put the money collected back into the highway.

Mr. Fayrik: That's it in a nutshell.

Mr. Jordan: Yes.

Mr. Fayrik: In all these years, money has been collected, but where has it gone? Even years ago, too, with the tire tax, a lot of money was collected. Where did it go?

Mr. Jordan: Very often that's the case in a lot of things governments do. The intent was that some of the money would return to the road, but it often doesn't.

Do you think there's any compromise position there at all for CAA to think in terms of an additional tax, if it could be seen that it was going to that specific purpose and that purpose only, just for road maintenance or road construction?

Mr. Fayrik: The first part would have to be clarified in terms of what has happened to the funds and whether they have gone back into the roads. Dialogue or discussion could be opened up on the second part of that.

To give a firm answer on that from our standpoint, we'd have to consult the association as a whole to find out their feelings on it.

Mr. Jordan: Yes, but my suggestion would be that maybe you shouldn't close the door on that totally, for now anyway, and think ``In no way would we consider an added tax. Take the money you have and use it for road construction.'' I doubt that's going to happen.

I agree in principle with everything you're saying. What we've tried to do as a nation - and it's part of the economic times we're living in - is squeeze everything out of our roads that we possibly could until we reach some point in economic stability when we can go back and say now we have the money to do it. The danger there of course is after you let the road repair go too far, it becomes a very costly proposition.

Mr. Fayrik: It's almost as if we're sitting on a time bomb. If we don't do it now, what will it cost in five to ten years?

Mr. Jordan: Yes, I agree with you.

Also, I don't know whether or not you heard the chairman speak before, but I agree with him. We seem to have addressed various aspects of transportation in this country - air, marine and so on - so maybe it's about time this committee turns its energies to the most basic and fundamental form of transportation in the country, which is self-service transportation. That's the one we all use in some form or other every day.

So I agree with what the chairman said earlier. Perhaps it's time that we look upon that as part of our mandate and get on with the urgency you associate with it.

Thank you.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Jordan.

You were the last presenter.

Let me close off this session by thanking our researchers, who assist us in this process.

To move meetings across the country sometimes gets cumbersome, and the logistics get difficult. Already preparing to leave are the clerks, who make all the travel arrangements.

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A big thank you to those involved in the booths at the back for the excellent job they always do in providing translation services for us.

Mr. Salatino and Mr. Fayrik, I thank you for making that presentation. It was very helpful. It follows the Canadian Automobile Association representations we've had to date.

I thank you all, ladies and gentlemen, for being participants.

And last but not least, I thank my colleagues for letting me chair this meeting for them today.

Mr. Jordan: It was a pleasure.

The Vice-Chairman (Mr. Comuzzi): Thank you.

The meeting is adjourned.

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