This is page numbers 909 - 930 of the Hansard for the 12th Assembly, 5th Session. The original version can be accessed on the Legislative Assembly's website or by contacting the Legislative Assembly Library. The word of the day was chairman.

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Bill 18: Write-off Of Debts Act, 1993-94
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

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John Pollard Hay River

Thank you, Mr. Chairman. The purpose of the Write-Off of Assets and Debts Act, 1994, is to authorize the write-off of certain debts listed in the schedule to the act. Pursuant to the Financial Administration Act, the write-off of assets or debts exceeding $20,000 for the government and most boards and agencies must receive Legislative Assembly approval.

The write-offs being proposed in this act will not require a new appropriation. The write-offs will be charged against allowances for bad debts which were established in previous department budgets. At the time it was determined that collection of the debts would be unlikely.

Mr. Chairman, a large component of the accounts being written off are loans made by the Business Credit Corporation. The number of loans being written off is significantly greater than usual. This is due to the Business Credit Corporation doing a comprehensive review of its accounts in order to update its records.

I wish to emphasize, Mr. Chairman, that the write-off of a debt does not relieve a debtor of the liability for repayment or mean that the government will not continue to attempt to collect the outstanding amount. Through continued reviews by my staff and those of the Business Credit Corporation, future recovery of the debts may still be achieved. In addition, we track the principals of each firm for future credit reference.

Mr. Chairman, I am, or the appropriate Minister is, prepared to answer questions on these proposed write-offs. Thank you, Mr. Chairman.

Bill 18: Write-off Of Debts Act, 1993-94
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

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The Chair

The Chair Tony Whitford

Thank you, Minister Pollard. Is the chairman of the Standing Committee on Finance prepared to make comments on the bill? The chair recognizes the Member from Kitikmeot, Mr. Ng.

Standing Committee On Finance Comments

Bill 18: Write-off Of Debts Act, 1993-94
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

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Kelvin Ng Kitikmeot

Thank you, Mr. Chairman. The Standing Committee on Finance reviewed Bill 18, Write-Off of Debts Act, 1993-94, at its meeting in Yellowknife on March 23, 24 and 28, 1994. The committee was pleased that the Ministers of Finance and Economic Development and Tourism and their staff were available to answer questions.

In the past four years, the government wrote off a total of $1.2 million in debts. This bill, however, provides for the writing off of over $2.1 million in debts in a single year. The Standing Committee was concerned about this large increase in the amount of debts to be written off.

Most of the debts come from loans made from the business loans and guarantees fund. These loans have since been transferred to the Business Credit Corporation. The Ministers of Finance and of Economic Development and Tourism explained to the standing committee that this year they have made an effort to clean off the books. Further, the committee noted that many of the debts being written off date back five, six or seven years.

The standing committee trusts that the large total of $2.1 million we see in this bill is not the beginning of a trend in writing off debts. The Minister of Economic Development and Tourism assured the standing committee that recent loans have been made using more stringent guidelines. In fact, the recent Auditor General's report on the department and the Business Credit Corporation stated that: "The new loans made since BCC started are in better condition than the older loans".

The standing committee also had some concerns about policies related to loans to businesses. Committee Members were concerned about the risk involved in many of these loans. The standing committee recognizes that the Business Credit Corporation exists, in part, to provide loans to small business in the north which might not be able to borrow from banks or other conventional sources. Further, Members recognize that these loans carry a higher risk. This risk may be a necessary cost of stimulating the northern economy. However, the BCC still has a responsibility to minimize that risk and standing committee Members have been assured that the corporation

and the department will address this important and complex issue.

Finally, standing committee Members expressed concern about the position of the government as a creditor when borrowers file for bankruptcy. In many of the cases contained in this bill, other creditors were given higher priority than the GNWT in the distribution of assets and proceeds resulting from the bankruptcy. The Standing Committee on Finance asked the government to address this issue. Individual Members of the standing committee will take this opportunity in committee of the whole to ask questions. Thank you, Madam Speaker.

Bill 18: Write-off Of Debts Act, 1993-94
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

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The Chair

The Chair Tony Whitford

Thank you, Member for Kitikmeot, Mr. Ng. General comments. The chair recognizes the Member for Deh Cho, Mr. Gargan.

General Comments

Bill 18: Write-off Of Debts Act, 1993-94
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

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Samuel Gargan Deh Cho

Thank you, Mr. Chairman. I have a general question and it is about the amount of personal loans, besides student loans, that have been given. I'm just wondering when people are given loans from the corporation, are those people allowed to operate if they have a debt or do they go under?

Bill 18: Write-off Of Debts Act, 1993-94
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

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The Chair

The Chair Tony Whitford

Thank you, Mr. Gargan. Minister of Finance, Mr. Pollard.

Bill 18: Write-off Of Debts Act, 1993-94
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

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John Pollard Hay River

Mr. Chairman, could I ask the Member to repeat his question? I didn't quite get the question.

Bill 18: Write-off Of Debts Act, 1993-94
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

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The Chair

The Chair Tony Whitford

Thank you, Mr. Pollard. Mr. Gargan.

Bill 18: Write-off Of Debts Act, 1993-94
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

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Samuel Gargan Deh Cho

Mr. Chairman, I asked when a person owes money to the government and it is written off, presumably the person has gone under. Or, do the people still operate and get their loans written off?

Bill 18: Write-off Of Debts Act, 1993-94
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

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The Chair

The Chair Tony Whitford

Thank you, Mr. Gargan. Minister of Finance.

Bill 18: Write-off Of Debts Act, 1993-94
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

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John Pollard Hay River

Mr. Chairman, there can be a number of reasons for loans being suggested for write-off. The usual one is the accounting term that the loan is no longer profitable or that it is impossible to pursue the person to get the money back. It may be because they've gone bankrupt, declared personal bankruptcy, that they're destitute, that they have no assets whatsoever, or that they've passed away and their family is unable to pay their loan. There's any number of reasons, and it doesn't necessarily mean that the person has gone bankrupt, Mr. Chairman. Thank you.

Bill 18: Write-off Of Debts Act, 1993-94
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

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The Chair

The Chair Tony Whitford

Thank you, Mr. Pollard. The chair recognizes the Member for Kitikmeot, Mr. Ng.

Bill 18: Write-off Of Debts Act, 1993-94
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

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Kelvin Ng Kitikmeot

Thank you, Mr. Chairman. When the Business Credit Corporation of the government advances loans to individuals who are involved in business enterprises, do they undertake to maximize the securities on the principals who are undertaking those loans, such as personal guarantees and possible cross-company guarantees if there's more than one company involved with the principal who is applying for the loans? Thank you.

Bill 18: Write-off Of Debts Act, 1993-94
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

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The Chair

The Chair Tony Whitford

Thank you. Minister Pollard.

Bill 18: Write-off Of Debts Act, 1993-94
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

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John Pollard Hay River

Mr. Chairman, this would be part of the policy of loaning money and I would defer to the Minister of Economic Development and Tourism, Mr. Todd.

Bill 18: Write-off Of Debts Act, 1993-94
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

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The Chair

The Chair Tony Whitford

Thank you. Mr. Todd.

Bill 18: Write-off Of Debts Act, 1993-94
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

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John Todd Keewatin Central

Thank you, Mr. Chairman. As I said to the Standing Committee on Finance, if you look at some of these loans, some of them were six or seven years old. I'm not convinced that the necessary securities that perhaps should have been in place and the timely signatures on paper were not as efficient as they should have been.

As part of the overall review of the Department of Economic Development, we've looked at the Business Credit Corporation and I've pretty well said publicly that I see the Business Credit Corporation as one that takes higher risks than a bank, taking less collateral, and simplifying the paper work. So, would there be personal guarantees and cross-company guarantees? I would think that would be part of the policies that the Business Credit Corporation would develop and I would have to check with them to see if that is now in place. It was originally in place and it didn't happen as well as it should have.

The way I see the Credit Corporation is as a lender of last resort, and I'll say that again. I think in certain instances, there may be cross guarantees between companies and in certain instances, there may be personal guarantees. I think you have to take each loan one at a time, the same way as the bank deals with them. When you go to a bank, depending on the risk, the track record, and personality, it depends on the collateral and the security you provide. That's my answer. Thank you.

Bill 18: Write-off Of Debts Act, 1993-94
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

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The Chair

The Chair Tony Whitford

Thank you. Mr. Arvaluk.

Bill 18: Write-off Of Debts Act, 1993-94
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

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James Arvaluk Aivilik

Thank you, Mr. Chairman. Recognizing Mr. Pudluk's statement earlier, it is Arvaluk. Thank you. Mr. Chairman, I have no problems with other bills. Usually, there is a motion to make amendments to bills, but with this bill, there are specific companies dealt with. What I don't see here is submissions about which ones should be forgiven and which ones should stay on the record. Even if you don't collect them this year, next year, or the next year, is there an absolute requirement for the government to write off all these debts?

There is a company who is still operating and who has a debt that will be written off, for economic reasons. There's another company that will be written off on the basis of bankruptcy where the principal who owned that company still holds a functioning business somewhere else. Isn't the whole idea of running a business to make money? And, that if you cannot make money in one area, another company you own that is making money should bear the costs? Don't people care any more when one of their companies go bankrupt and the others are doing okay? I'm trying to understand this bill and the purpose of being in business. The purpose of being in business is not like government trying to serve people, but trying to serve people and make money at the same time.

That's the name of the game. Shouldn't you be responsible if one of your companies go bankrupt, as a person?

Why aren't those kind of considerations given, that although the company is bankrupt the owner is still doing very well in some other area? We can say we cannot forgive that, but we'll defer the collection. Or, at least introduce a new act preventing the companies with multi-companies from doing that. My question to the Minister is, have you looked at any other alternatives or have you considered the introduction of amendments to the different acts to allow yourself to collect debts easier so you don't have to introduce this kind of act because you're cornered?

Bill 18: Write-off Of Debts Act, 1993-94
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

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The Chair

The Chair Tony Whitford

Thank you, Mr. Arvaluk. Minister of Finance, Mr. Pollard.

Bill 18: Write-off Of Debts Act, 1993-94
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

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John Pollard Hay River

Mr. Chairman, the Financial Administration Act says that if we're going to write off anything exceeding $20,000 we have to report it to this House, which is what the act is doing. I guess what we're doing is trying to be realistic and saying that instead of carrying these debts on our books and hoping to get them paid in future years, we're being realistic in saying -- as all businesses and governments do -- we do not think we will be able to collect these portions of our debts at the present time Secondly, we're saying that in the event that they are collectible in the future, we will try to do that. It doesn't mean that we won't try to pursue that money in the future. So if somebody has a turn of luck and they have made certain commitments when they took out the loan, we will try to get those people. As I said before, if their financial situation changes in the future, to get that money back. But only within the terms of the loan agreement that they signed, Mr. Chairman. So it may be possible for an individual to not have to pay anything on these particular loans, yet still be in business in the Northwest Territories and appear to be successful. It depends upon the agreement that was signed between themselves and the government, in this case, at the time the loan was let out. That may have included personal guarantees. It may have included using their own personal homes to back the loan, it may not have.

So I think in the instance that the Member was talking about where somebody had owned a company and the company had gone down, it depends on what was pledged from that company or from those shareholders to the government. If it wasn't anything personal, theoretically, those shareholders could go away and become business people in other parts of the territories and not have to pay these loans back. It changes from loan to loan. In this instance, we are being realistic in saying that we don't think we can get this money back.

With regard to changing acts, I think that the Minister of Economic Development and Tourism would agree with me that since the time that the majority of these loans were made, things have changed over at the Business Credit Corporation. It is a much more professionally-run organization. Although the Minister says it will take higher risks than a bank, it is certainly getting the "i's" dotted and the "t's" crossed before money flows. In some of these cases, perhaps things were done absolutely to the tee.

I think when Mr. Arvaluk asks if we should be changing things, I think the Minister would concur with me that policies have been changed within the BCC to try to prevent some of these

things from happening in the future. Thank you, Madam Speaker.

Bill 18: Write-off Of Debts Act, 1993-94
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

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The Chair

The Chair Tony Whitford

Thank you. Mr. Arvaluk.

Bill 18: Write-off Of Debts Act, 1993-94
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

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James Arvaluk Aivilik

Thank you, Madam Speaker. I'm having a very hard time that John Doe from Iqaluit can go to the government and say he would like to buy a tractor from Montreal, bring it to Coral Harbour and start a little company there, a subsidiary of his Iqaluit company, and when that Coral Harbour company goes bankrupt, that you decide to forgive him. The tractor that was used for work in Coral Harbour cannot think, cannot talk, cannot make deals and goes bankrupt because it has broken down. But, the owner who made the deal is still doing very well in Iqaluit. Who is the one who made the deal to get the loan? Not the tractor in Coral Harbour, that he's hiring to do the work.

I cannot see the logic in those kinds of business deals the government makes with the company, where such persons are not accountable for their loans. They just file bankruptcy and they do very well in other places.

Bill 18: Write-off Of Debts Act, 1993-94
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

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The Chair

The Chair Tony Whitford

Thank you. Minister Pollard.

Bill 18: Write-off Of Debts Act, 1993-94
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

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John Pollard Hay River

Mr. Chairman, I sympathize with the Member because many years ago when you borrowed money from somebody, or you borrowed money from a bank, you did it on the shake of the hand and said you were giving your word that you would pay the money back. I remember those days and I think there's a lot of people who remember those days. When banks turn them down, they get extremely frustrated because they say that they gave their word that they would pay the money back and the banks are not prepared to loan them the money.

Unfortunately, in today's corporate world, there isn't that kind of personal guarantee any more. There's not that kind of pride in knowing that people took the money out and, in one form or another, they will pay it back. Today, we're into who is liable, what does the law say, and what was placed as collateral. In the instance that Mr. Arvaluk cited, if the person from Iqaluit never pledged anything from his company in Iqaluit or never pledged anything personally of his own against the loan he made in Coral Harbour, unfortunately all that would be left would be the asset which might or might not be operational.

I sympathize with the Member, but in today's day and age, things have changed greatly as far as paying back loans. I think people who loan money are expected to take the risk and if they don't make it or they don't get good enough collateral, then they take their lumps. It's sad, but true. I think in defence of the Business Credit Corporation, they are now recognizing some of the problems that have occurred ten or twelve years ago and are trying to make, within the realm of reasonable, some of the changes so that there aren't as many cracks for people to slip through. Thank you, Mr. Chairman.