Thank you, Mr. Yakeleya. Minister Miltenberger.

Thank you, Mr. Chairman. What was received were some unsolicited proposals that were brought forward and examined, which is where we get the information indicated — a premium of about $38 million. There was no formal request.

Mr. Chair, the unsolicited discussions that you’ve termed this way, the discussions with these people…. Have there been serious discussions with the private people saying, “We know the amount; can we sit down and have some further discussions to come to an agreement we can live by in terms of providing this type of service to the government?” Has that been discussed further in terms of seriously looking at the request you have in here in PWS?

After the receipt of the unsolicited proposals and looking at the portfolio we do have in terms of where all our office space is and the percentage of leased versus owned, the decision was made to proceed with the plans that are now presented for the government to build and own and operate their own office space.

That’s where I’m having some difficulty: buying now in terms of supporting our own government in supporting the private business people by having assets in our community. We support the local people. We support the businesses, so I guess that’s my difficulty: shutting out the businesses in the community. I guess I’m having difficulty with that type of policy in terms of…. I’m having trouble wrapping my mind around this concept. Do we support the local business only when we think it’s to our benefit in terms of ownership and leasing, or do we work with the

community? I’m having some difficulty understanding this.

The normal ratio or mix for leased and then owned assets usually is about 60-40. You have 40 per cent where you own it — you have your core business and you control the space — and you have the rest of your portfolio on the lease side. In Inuvik we have 93 per cent leased, 7 per cent that we own. The 7 per cent that we own is 30 to 40 years old and in a state of decrepitude, as the Minister of Public Works has articulated clearly. We have a portfolio in Inuvik that is overbalanced and limits our ability to have our core services in buildings we own and control. It’s an issue, which is one of the reasons we’re coming forward with the proposal to build as opposed to lease.

Is our DPW building included in this decrepitude? It’s also in desperate need of replacement. These are the Minister’s words, how he describes buildings in some of our small communities. That’s a good word to use for some of our facilities in our communities. I want to thank the Minister for explaining to me what the government is looking at in terms of this project being on the books.

I also want to echo Mr. Jacobson that some of our own buildings, even in our small communities, don’t seem to get much high priority in terms of fixing up our facilities here. I understand about Inuvik, and I certainly will take the Minister’s comments to heart about why they’re looking at this facility in Inuvik for our employees up there. But also remember that there are other regions that need facilities; they need to be looked at. The small amount of dollars…. You do what you have to do.

I’d like to say to the government, echoing Mr. Jacobson’s words, that there are other regions that sometimes need to be considered, and some of the facilities.… Go to Tulia; they’ve got the DPW garage with the…. I can’t say it here; otherwise I’ll be thrown out of the House, you see.

Anyhow, I’ll leave it at that, Mr. Chair. I’m going to have some more thought on this.

Thank you, Mr. Yakeleya. I don’t hear a question there. I’ve got one more person on the list, but I’d suggest we take a 15 or 20 minute break and come back with Mr. Krutko.

The Committee of the Whole took a short

recess.

I’d like to bring Committee of the Whole back to order. We’re on page 4-4, and on my list I have Mr. Krutko.

Thank you, Mr. Chair. We keep hearing discussions about a proposal that was out there. I’ll clarify for the record. The proposal was for a lease-purchase facility in Inuvik; the idea was to lease to the government for 25, 30 years and buy it out for $1. That was the proposal that was put out in the request for proposal.

But after the request for proposal was sent and reviewed, it came back that there were some financial implications because of Revenue Canada and the way they calculated the revenues from that lease. There was an implication where you had to pay the calculated amount of the lease, the front end, which was assessed at some $10 million. Again, I think the government has never made any attempt to go back and see if there was a possibility of a simple building, such as a P3 like we did in Fort Smith; we’ve been looking at P3s in other areas — the possibility of looking at another option than what was provided.

I’m wondering: has the government looked at options other than the ones that were looked at through the request for proposal in which there was interest from the private sector, along with the Gwich’in and Inuvialuit, in building a facility in Inuvik for the government in regard to office space?

Thank you, Mr. Krutko. Minister Miltenberger.

Thank you, Mr. Chairman. I’ll ask Mr. Aumond to give us the history of how we got the bids and the decision that resulted from that and the decision he made to move to our proposal to build our own building.

Thank you, Minister Miltenberger. Mr. Aumond.

In regard to the proposal for the lease-purchase, there were some ramifications with Revenue Canada. Was that ever discussed with the Department of Public Works in regard to a proposal in the Inuvik region?

Is the government considering building any other office space anywhere else in the Northwest Territories?

I think it is important that we do realize we have the private sector out there that we have to take in account. They have made a lot of capital investment in regard to properties. I know there are many questions in regard to how people are going to recoup their investments. A lot of these properties, especially in Inuvik, have been just newly acquired. These people have millions of dollars laid out over the next number of years in order to pay off those loans they got from the bank to pay down these assets. They will have to have some security over a number of years.

I think it is important that we aren’t seen to compete against the private markets or have to put people in the situation where they’ve got to get out of the business because they’re losing money. I believe this is exactly what’s going to happen with this project, especially in Inuvik region.

I believe there are a lot of risks taken by people getting into this sector. I know that the Gwich’in purchased facilities off the Inuvialuit because they wanted to consider that one as their portfolio. Part of that arrangement was that they were going to require assets in the Inuvik region and build up a portfolio of retail assets. Yet those assets are old. As with any old asset you have to make major investments to upkeep those assets. I know there have been a lot of discussions, especially coming from the deputy, saying: well, there are all these problems with air handlers; there are problems with elevators; there are problems in regard to access. Anywhere else in the territory that this government purchased office space, just part of that lease arrangement is intended improvements. Sure, you can have all the intended improvements you want, but at the end of the day you have to pay for them. Using those as excuses shouldn’t be a reason that we try to run these businesses out of town. For me that’s exactly what I see happening in this scenario.

I would like to ask the Minister: what’s the term of leases that you mentioned in Inuvik? When are those leases up? Exactly what are the renewal dates on those leases, and what’s the term on most of the leases?

Thank you, Mr.

Krutko. Minister Miltenberger.

Thank you, Mr. Chairman. The commitment has already been made that there’s not going to be any loss of rental revenue. The commitment is made to the current landlords that their space would still be used by government. Ninety-three per cent of what we now

currently have in Inuvik is leased, when the average is 60 per cent lease, 40 per cent rent.

So it’s very clear that we have a commitment to supporting the private sector in Inuvik, to the point where it’s been noticed that, in fact, we are over-represented on one side of that particular breakdown. The years of the leases for all existing space we do not have with us, but we can commit to get that information or maybe look to the Minister to see if he wants to add anything further. We’ll commit to get the information on the terms of the leases.

Again, Mr. Chairman, I think it is important that we do understand what the retail market is in Inuvik in terms of people’s leases, when those leases are up and, more importantly, what the implications are going to be if there is a downtrend in the market with people’s ability to borrow to do these retrofits we were asking for. The people made major capital investments in these assets just a number of years ago. As I stated, less than four to five years ago these assets were acquired. So these people are in it for 20 to 30 years, and now, as government, I do not think we should be in the business of putting the private sector out of business for the comfort of a few departments.

Those departments that are there already are not in the dire straits you’re making them out to be. I’ve been in the Public Works office in Inuvik in the Perry Building. The sky isn’t falling quite yet. You go over to the MACA office where they’re located, and that office looks like it’s in pretty good shape. There again, you don’t have ramps or anything for disabled people to get into that facility, but you’re asking the private sector to do it.

I think you have to think long and hard about this decision. There will be implications, with regard to 47,000 square feet of office space, for space in Inuvik, which will have a detrimental effect on those assets in Inuvik at the present time. You’re talking about facilities in Inuvik that are getting up there in age. Some space is over 30 years old. Yes, they are aging pieces of infrastructure, but the private sector can only afford to maintain that infrastructure if they have tenants in those buildings and if they know they’ll be able to maintain and pay down that asset.

Again, I ask the Minister that before you move on this project, you do an independent assessment and evaluation on market disruption with regard to the Inuvik retail market.

The Member’s made the case repeatedly. We’ve responded repeatedly as to why we’re proposing what we are proposing. Ninety-three per cent of the space we now have is either leased or rented. The balance of most

portfolios would be 60 per cent leased or rented and 40 per cent owned. A lot of the buildings we’re replacing are our own. They are old and aged, showing the wear and tear — advanced stages of decrepitude in some cases. We’re of the opinion that this is the best way to proceed.

Thank you, Mr. Miltenberger. I have other people on my list. We’ll move to 4-4. Public Works and…. Mr. Krutko.