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Bill 29 - Alberta Capital Finance Authority Amendment Act, 2008

October 21, 2008 - Second Reading

Ms Blakeman: Thank you very much, Mr. Speaker. I notice that the sponsoring member repeated his opening comments twice, on the 16th and again today. I guess they must be really important. I’m just going to make a comment based on what he said both times.

It’s indeed true that the Alberta Capital Finance Authority operates on a break-even basis and is not subsidized by the province. True enough, Mr. Speaker, but it is 100 per cent guaranteed by the province, so it’s not as though this is a guilt-free, hands-off, no problem kind of fund here. The government guarantees every single loan 100 per cent, so if things go south or north or any other direction you want to talk about here, ultimately the government of Alberta and through them the taxpayers of Alberta are responsible for the choices that are made here.

I have to say that at my first look at this I thought: well, yes, okay, simple enough; this fund is going to max out very quickly. Organizations like municipalities, the metropolitan areas, educational institutions, technical institutes, school divisions, et cetera, can borrow money at a better rate through this agency, which, as I said, is backstopped by the government, for their capital projects. When I first saw a version of this act, which was in the spring – or I knew about it, I guess – they figured that the fund was going to need the ability to expand within two years. Now they’re talking 18 months.

My dismay around this is that it is moving the amount to be decided, the total amount of the fund, away from the scrutiny of the Legislative Assembly and, therefore, from the knowledge and scrutiny of the citizens of Alberta and once again behind closed doors for the government to make up their own mind in secrecy with no transparency, no accountability back to the citizens and very difficult to track when they’ve actually made a decision. This is a choice this government makes consistently, and I disagree with it consistently. It flies in the face of what the Premier would like people to believe, that this is a more open and accountable government. In fact, I would argue that since his tenure as Premier began, this is a less open and less accountable and less transparent . . . [interjections] It most certainly is.

It was originally in the act that it was allowed to borrow money that would then be passed on to those organizations I mentioned to the $7 billion mark. This will now be determined under the regulations. You can see how important that is. Prior to this amending act that amount would have come before the Assembly. We would have found out who was getting these and why and why there needed to be an increase in this. We will never have that debate henceforth in this Assembly, and I think that that’s problematic.

Now, let me look at a couple of other things that this does allow. It basically allows with the consent and co-operation of the cabinet for, you know – whoo hoo – wide open kind of borrowing/spending power for this agency without the checks and balances that I would expect to come through this Assembly. It is the Wild West as far as what this agency can do. I am interested, therefore, so I’d like to hear from the sponsor of the bill. These obligations of the authority are unconditionally guaranteed by the province of Alberta. I would like to know what the current assessment of risk is on the obligations that are currently outstanding, that have been loaned out, in effect, by this agency to the variety of public entities that I mentioned earlier: school boards, municipalities, colleges, technical institutes, et cetera.

What is the current level of risk? As we know, we’re now facing very uncertain times ahead. What is the forecast of the risk from this fund? What is your level of acceptable risk, and at what point are you going to go over it? I’d like those numbers stated. I’d like to know what kind of benchmarks this cabinet has given itself. Now that it can make these decisions behind closed doors, I want you to publicly tell me what level of risk is acceptable to you and how you’re going to measure that. Are you going to make any of that information public?

If you set a certain benchmark of risk and you’re coming up toward it, can you just keep moving the benchmark higher? Can you just keep saying, “Well, actually, you know, we’d said it was such a percentage, and now we’re going to say it’s more than that”? You can keep moving the bar up, so how do you hold yourself accountable for the level of risk this agency is incurring? It’s 100 per cent backstopped by the government of Alberta, which is 100 per cent backstopped by the taxpayers of Alberta: that’s why I want to know that. I’d also like to know how many of the class B shares are currently held by the nine health authorities and what happens to those class B shares because the health authorities have now been disbanded.

Where are their class B shares? Have they flowed through to the new Alberta Health Services Board? Is that appropriate that the Alberta Health Services Board will now hold considerably more? There are a thousand class B shares out there. How many of them would then be held by the Alberta Health Services Board, and is that appropriate? How do the others that are in that same grouping feel about now having one entity holding a variety of shares that previously were held by nine different entities? It gives them a much more powerful position in that grouping, and I’d like to know how the others that are in that grouping feel about it. That’s going to cover things like Métis settlements, municipal districts, counties, special areas, regional airport authorities, drainage districts, irrigation districts, regional services commissions. How do those folks feel if that’s indeed what happened?

So the first question is: what happened to the shares that were held by the nine health authorities? If they got transferred completely, where is that transfer? Can I get documentation on that to show those shares being transferred? Is there some sort of paper trail that the member sponsoring this bill is able to provide me? If not, I’d like to know why not.

Now, clearly, I’ve talked about the risk with the higher limit, I’ve talked about what’s happening with the transfer of shares, but ultimately the real question here is: what was the reason? Can you give me some very concrete examples of why it was identified that a higher limit would be required by the Capital Finance Authority? What number are they at now? What is coming online that made you believe that it was going to need to be higher? I mean, what I’ve seen from the minister was that due to strong demand for loans from its shareholders, ACFA will likely exceed this limit sometime in the next 18 months. If the limit is not increased, then ACFA would have to stop lending to shareholders or not lend to new ones, I suppose, or not renew any of the agreements that they have. Thus, my question about: well, what’s pushing this forward exactly?

Part of the issue that we all know that we’re dealing with here in Alberta is that the government has made choices to not put money into infrastructure, meaning construction, when times were lean. They chose to make other placements with that money, primarily paying off their cash debt. As a result of that we have had a lot of money poured into infrastructure construction in the last couple of years, which itself has just fired up an inflation rate that’s quite astonishing and has a far-reaching effect on everything else in our province. With what the oil and gas sector is doing – again, that is largely controlled by the government as well in how fast they give out the leases or permission to construct new projects in Fort McMurray and north of Fort McMurray but also in the rate of things that are being caught up with in infrastructure.

I mean, we know that you may have paid off the cash debt, but you were left with I think it was $8 billion worth of infrastructure debt, which it seems you’re trying to build in, like, 18 months. So we’ve had a really high level of inflation, and that has been experienced most strongly by the municipalities. I’m wondering if that is what has happened here, that municipalities that were originally told that a particular road or municipal building was going to cost X amount, of course, with the inflated rates that they’re finding in the construction sector, very quickly they were told: no, no, it’s not going to cost you $200 million; it’s going to cost you $450 million. They now have to go back to the Alberta Capital Finance Authority and say: we’re going to have to borrow more money in order to cover this cost because the inflation has been so fierce in trying to get this job done.

Now, there were two other amendments that I was expecting to see here and I’m not seeing here, and I would like to know why because I think their omission is very interesting. We were expecting to see an amendment that would have clarified the types of health authorities that could borrow from the ACFA and would also make that borrowing limit subject to regulation. The second amendment we were looking for is a change. Currently the Alberta Capital Finance Authority Act allows the owners of approved hospitals under the Hospitals Act to become shareholders, so they become part of that class B or class C shareholder grouping. That provision allowed private-sector entities that operate certain kinds of extended health facilities to borrow from ACFA. So we had private operators that because they were operating long-term care facilities were allowed to borrow through this special fund that is supposed to be, clearly, from the list I read you earlier, public entities: municipalities, Métis settlements, municipal districts, counties, special areas, regional airport authorities, drainage districts, irrigation districts; health authorities were specifically listed – mental health hospitals, regional health authorities, and provincial health boards – cities, towns, and villages; and educational institutions. These are all public entities that have a public function, and they report back to the citizens in the same way, so I was expecting to see something that was going to clarify around the changes to the regional health authorities and the Alberta Health Services Board.

It would have clarified whether it was possible for private entities – in other words, private hospitals or private providers of health care – to borrow money from this public entity to build a private facility in which there is a profit motive. I have not seen that come through in this particular legislation, and I’m curious as to why because without it, the way the act is now, that in fact can happen. We can have private operators borrowing money from this agency to build private hospitals or facilities offering private health services. I’m curious as to why that has not been addressed in this act. Clearly, from the time that this was first anticipated to what we’re looking at now, we have in fact had a huge change in the way public health care is delivered in the province. I would have expected to see that dealt with specifically in this act. It has not been dealt with in this act, so I would like the answer to that question, please. Yeah. There should have been something in there, and there hasn’t been anything in there.

On the surface this appears to be a pretty innocent proposal, Mr. Speaker, and it may well be. I’m looking forward to the answers that would make me feel better about that, but otherwise I’m not supporting it.

[…]

The Speaker: Sorry, hon. member. I may have been a little hasty with the hon. Minister of Finance and Enterprise. Did you want to participate in the question-and-answer segment? We have five minutes for that.

Ms Evans: I was trying, in fact, to help clarify some of the questions that the hon. member was looking for and not to close the debate.

The Speaker: Thank you.

Ms Evans: First of all, Finance and Enterprise is responsible for controlling and monitoring and is the borrowing agent for the Alberta Capital Finance Authority, so therefore the types of controls relative to that would vest in our department.

There’s a comment I have to make on risk, and that is that we’ve never had a loss on the loan. The Auditor General makes no loss provisions for this borrowing entity, so it always has to and always has met all of its obligations. If a municipality or college or some authority borrows, then they have to make the payments. Simply put, we expect by year-end this year, because of the advantage that various institutions have taken, to accelerate their borrowing requests to up to $8 billion, and we wanted to have an opportunity to have some flexibility. Particularly when the economy moves to the dark side, one might anticipate that there may be even more borrowing done by some of the local entities in order to accomplish things at lower constructions costs than they were being able to do otherwise. Rather than, in fact, take a shot at what it might be someday, with Finance and Enterprise being accountable to the Auditor General and being accountable on behalf of Alberta Capital Finance Authority, we deemed that having an open amount for the municipal authorities, the other local authorities to borrow was not a bad thing.

On the question of the regional health authorities, until the superboard is created, there will be no provisions made for change other than the circumstances we still find ourselves in today with the same rules applying to the regional authorities. However, on the matter of private, for-profit groups requesting some borrowing, although the act is currently silent on it, that screening is done by the department. We may well, given the nature of what will come forward under the singular health board, choose at that time to make an amendment so that we can assure that private institutions would not have access to the fund. Currently they are screened out because that has not been permitted, so there is no permission being granted by the ACFA. I have indicated the same to them when I met with them, that I had no intention of seeing this as a resource. Although it’s open there and may be open to interpretation, we can make it quite clear and do today when they make requests for borrowing. Now, one place where we may wish in future to have some capacity is where hospitals are currently funded or totally funded by the government, to provide them opportunities for capital and allow them some borrowing opportunities. Although it’s silent on it at this stage, it isn’t implicit, then, that almost anybody can chime in and borrow.

The Speaker: Okay. We’re having a question-and-comment period.

Normally, this thing refers to if the hon. Member for Edmonton Centre was speaking. Usually questions are directed to the hon. Member for Edmonton-Centre, the spokesperson. Now we have a comment from the hon. Minister of Finance and Enterprise, and I gather that the hon. Member for Edmonton-Centre is going to ask the hon. minister a question. Is this correct?

Ms Blakeman: Well, I’m certainly going to make a few statements, which is allowed, and some questions.

The Speaker: I just want to appreciate all these permutations and parameters that have come in here. You’ve got one minute and 28 seconds. Use them as you wish.

Ms Blakeman: It doesn’t specify who asks and who answers.

The Speaker: This is true.

Ms Blakeman: Thank you very much, Mr. Speaker. May I continue?

The Speaker: Absolutely.

Ms Blakeman: Thank you.

I’m going to take issue with that. This is a bottomless pit because it is always backed by the taxpayers. So if they run over, the government picks up the tab; the taxpayers pick up the tab. My concern is that we can have P3s and private entities borrowing this money at a lesser rate for building a service that they will make a profit from in the end, and that is very wrong. I appreciate the minister’s integrity. She will not allow that to happen on her watch. But it’s still allowable in the legislation, and the next person can do it, or for whatever reason she could be pressured into doing it. That’s why I want to see the change in the legislation. It’s still possible to do, and I think that possibility should be removed, especially in this age and given the appetite of this particular government for arrangements like P3s, which are involving a for-profit agency. I think it would be very wrong and it should be prohibited to have those for-profit agencies be allowed to borrow money at a lesser rate through an authority that was set up to help public entities. Thank you.