2016 Legislative Session: Fifth Session, 40th Parliament
This is a DRAFT TRANSCRIPT ONLY of debate in one sitting of the Legislative Assembly of British Columbia. This transcript is subject to corrections, and will be replaced by the final, official Hansard report. Use of this transcript, other than in the legislative precinct, is not protected by parliamentary privilege, and public attribution of any of the debate as transcribed here could entail legal liability.
DEBATES OF THE
LEGISLATIVE ASSEMBLY
(HANSARD)
COMMITTEE A BLUES
TuesDay, march 15, 2016
Afternoon Sitting
PROCEEDINGS IN THE
DOUGLAS FIR ROOM
Committee of Supply
ESTIMATES: MINISTRY OF AGRICULTURE
(continued)
The House in Committee of Supply (Section A); D. Plecas in the chair.
The committee met at 1:35 p.m.
On Vote 15: ministry operations, $64,948,000 (continued).
Hon. N. Letnick: If I may, in the spirit of cooperation on this Francophonie Day, I'd like to provide the public and the member opposite with the 2015 stats on bees. How's that for quick service?
As we described this morning, in 2014, beekeepers had achieved a record year of 2,405. In 2015, the number is 2,363. Number of colonies in 2014, 44,999; in 2015, 45,571. Production of honey in prior years hovered around 1.8 million pounds. In 2013, it was just over two million pounds. In 2014, it was just under four million pounds, or 3.84 million pounds. In 2015, it's hovering around the same amount again, just under 3.7 million pounds or 3.692 million. The value of honey in 2013 was $10.58 million. In 2014, the value of honey was $12.617 million. In 2015, the value of honey recorded here is $19.471 million, almost double what it was in 2013.
So a lot of good news on the honey front.
L. Popham: I would like the minister to give me an update on small hive beetle in the Fraser Valley.
Hon. N. Letnick: Thank you to the member opposite for the question.
[1340]
Small hive beetle — I'll use SHB, for short — was confirmed in British Columbia. The Minister of Agriculture informed B.C. beekeepers and other stakeholders outside of British Columbia — in particular, in Alberta. Our response included a comprehensive fall survey to determine the distribution and prevalence of SHB.
We developed a framework of inspection standards and protocols to permit the movement of colonies between provinces, which was really important, because there was some threat of Alberta closing the door, which they have not done. We developed an inspection program that will incorporate testing for SHB, and we provided beekeepers with material to help them detect and control SHB.
Those efforts worked — a great thank-you to all our staff, including the assistant deputy minister, the deputy minister and, of course, our chief apiarist, talking to their colleagues in other provinces. B.C. and the western provinces have developed and agreed on inspection standards and movement protocols that will permit colonies to return to their home provinces after completion of the pollination services. It's obviously very important to our crop producers here.
To meet the inspection standards and facilitate the movement of colonies to other provinces, B.C. has committed to providing necessary resources for inspection services during the short three-week period this spring.
L. Popham: What's the number on the extra resources that the minister is providing?
The Chair: Minister.
Hon. N. Letnick: Thank you, hon. Chair, Monsieur le Président — Journée de la francophonie.
It will be covered within the ministry budget. What specifically will be covered is…. During the two to three weeks between mid-April to the end of April, the plan is to bring three to four extra resource people from other parts of the province down to the Fraser Valley to assist our chief apiarist in that inspection service.
L. Popham: Is the minister not hiring new inspectors? He's just using the ones we currently have?
Hon. N. Letnick: That's correct.
L. Popham: Is the minister under the same impression I am that the honey producers in the province would like to see more inspectors?
[1345]
Hon. N. Letnick: Thank you to the member opposite. As the member knows — she's heavily involved with bees and has a great reputation in the bee industry — the peak hive inspection periods are between March and late June each year.
The program offers services in beekeeping regions on Vancouver Island, south and Gulf Islands, Powell River and Sunshine Coast, Fraser Valley, Kootenays, South Okanagan, North Okanagan and Shuswap, Thompson, Cariboo and central north.
Some of these are new and have been filled. However, we still have one vacancy on Vancouver Island, central and north. My hope is to have that vacancy filled as quickly as possible, and then we'd go on from there.
L. Popham: When the hives that are moving across the border from Alberta into B.C. — generally early season, pollination season…. Is the minister saying that that period is just three to four weeks, and we're going to move our inspectors from other locations down to focus mostly on the transfer of hives over the border? If that's the case, what's going on in the areas of the province that those inspectors are coming from?
I'm just going to finish off with…. Has the ministry increased its budget around apiary, bees and honey production and pollination? Has there been an increase in the budget at all over last year?
Hon. N. Letnick: It's interesting to see other provinces and what they do, and in particular the western provinces, since this is what we're talking about when we're talking about the hive issue.
In Alberta, beekeepers are expected to do their own inspections and disease control. In Saskatchewan, there is no dedicated inspection program at all. In Manitoba, the recent expansion of the apiculture inspection program increased from one to two people. When you compare us to these other provinces, well, I think the member opposite can do the math.
In particular, on the question as to how we are going to manage this, there will be some of the time that's been allocated in the different parts of the province for those people to come down to the Fraser Valley during the critical time that we're all concerned about with this issue.
Now, the ministry will manage that in two ways. One is within the budget of the ministry, so there are no new dollars provided to the apiarist to do this. It's going to be managed within the complete budget of the ministry. And two, those people that are leaving — those two to four people that are leaving their home turf, so to speak — will be asked to do their inspections before they come down to the Fraser Valley and then catch up after they finish in the Fraser Valley.
[1350]
That's how we're going to manage their workload back home and still be able to provide the extra services to the people in the Fraser Valley.
L. Popham: I'm going to translate what the minister just told me into: "We're lucky to have what we have, compared to other provinces. It's good enough to do the job, and we don't need to worry about the spread of small hive beetle because we've got it under control."
Is that what you're saying?
Hon. N. Letnick: What I'm saying is what I said, hon. Member.
The system will be one of taking members who are working in other parts of the province down to the Fraser Valley — two, three or four — to assist our chief apiarist to manage the inspection process. They will be asked to do their local inspections to accelerate those before they come down and then to catch up after they finish that two- to three-week critical period in mid-April to the end of April.
The amount of dollars that will be required for the extra work that they'll be billing for will be covered within the ministry budget.
L. Popham: Does the minister believe that the honey producers in the province are going to be happy with that answer, or do they expect more?
Hon. N. Letnick: I guess if you look at any program that government delivers, whether it's municipal, of which I've had the privilege of serving, or provincial, of which I now have the privilege, and federal, of which I will never have the privilege of serving, before you ask, there are always requests for more services, and I appreciate constituents asking for more.
The question being: in my discussions with people in agriculture, are they looking for more? I would say they're consistent with most people. They would like to have more. However, the chief apiarist tells me that for the most part, people who are working with him, consulting, providing him information from the industry, are relatively happy.
There is, again, that gap on Vancouver Island, which we acknowledge, and we are working hard to fill that gap for inspection services.
L. Popham: I just want to confirm on record that the minister is saying that the resources we have in place right now are…. We have enough resources to control disease with bees in British Columbia, including small hive beetle.
Do we have enough resources in place to make sure diseases don't spread?
[1355]
Hon. N. Letnick: I'm confident that our government's response to control this disease is appropriate. I'm also aware — as the member opposite is, as well, I'm sure — that industry also has a responsibility to play when we talk about transmission of diseases.
We are there to assist the industry on the issue of diseases in the question of bees. We actually provide our apiarists and other experts free of charge for their services, and we don't charge lab fees either to people who need services from the lab. I think that's very appropriate for government to do, and I see nothing in this year's budget that would change that.
L. Popham: Does the provincial apiarist have any restrictions on his travel?
Hon. N. Letnick: In the essence of time, I'd just say it's the same principles that we discussed yesterday regarding the different levels, whether it's within the province, outside the province — who would have sign-off. The chief apiarist has advised me that he's never had any travel request refused inside or outside the province.
L. Popham: I think that's all we're going to do on bees today. Thank you for coming in.
My colleague from Delta South is going to ask some questions.
V. Huntington: I would have asked these yesterday….
Interjection.
V. Huntington: We'd like more of them, yes.
These questions relate obtusely to the ALC, and I don't believe you'd need staff, but I was unable to be here this morning.
The minister's 2015 mandate letter requires you to "report to cabinet any benefits or challenges" that you and your ministry find that arise from the amendments to the Agricultural Land Commission Act. Have you and your ministry identified any of those challenges or benefits yet? Will you be reporting on them publicly?
Hon. N. Letnick: The mandate letter says exactly that. We are still working on putting the reply to cabinet together. Indeed, even some of the changes went into effective use last week. It'll take some time, but it will be available to cabinet before the deadline of the mandate letter. After that, it'll be a submission to cabinet and will follow all the same rules for reports to cabinet that all other reports to cabinet follow.
V. Huntington: We are unlikely to see any official considerations on how the act is unfolding and whether you feel it's a challenge to the farming community this year at all. Is that correct?
[1400]
Hon. N. Letnick: Our target is to deliver a report to cabinet sometime this summer. The answer is yes. We plan to provide a report this year, so the member doesn't need to be concerned.
V. Huntington: This member would just like to know what's in the cabinet report; that's all.
I'll move on to the RB Group. Reckitt Benckiser put its purchasing program, presumably, on hold last June. We later found out, as the minister knows, that three separate purchases of approximately 4,000 acres were subsequently purchased after their moratorium was announced — presumably because those sales were in the works. The minister had said to the House that he would be working with the Agricultural Land Commission to determine whether or not RB Group was in compliance with the legislation.
I'm wondering if you and the ALC have been working to ensure that the ALR land isn't being planted with trees designed for carbon offset schemes, regardless of whether those schemes require covenants or were for internal company programs, as was the case with RB.
[1405]
Hon. N. Letnick: Yes, hon. Member, we are working with the Agricultural Land Commission. We have been, since the early days, on that. Currently we are working with the commission towards resolution as to how we come up with a more permanent solution than the one that we have right now, as the members said.
They haven't bought any new land since those last pieces. They committed to not doing anything with those properties until they figure out what their options are and are able to channel those options through their leadership team. They are in regular communication with the deputy minister.
I have every confidence they will follow through on their commitment. Also, I believe, from communication that I've seen, that they recognize now the special relationship that British Columbia has towards its agricultural land reserve, which they didn't know before, and will continue to respect that until they come up with their permanent solution to the lands that they do own.
As I said at the beginning, we are continuing to work with the land commission on a more permanent solution to try to avoid these kinds of events in the future.
V. Huntington: Could I ask just ask the minister very briefly, then: what is his estimation of the permanent solution? Are we or are we not going to be in support of enabling agricultural land to be used for carbon offset purposes? What do you see as the long term?
Hon. N. Letnick: When this issue was first brought to my attention by Minister Rustad when I did a tour of the province at that time — it's a couple years ago, I think — and then brought again to my attention a few months after by the Minister of Small Business….
Interjection.
Hon. N. Letnick: Yes, of course — and you as well. But I want to make sure that I put it in the sequence in which it was brought to my attention: the Minister of Aboriginal Relations, then the Minister of Small Business and then, very loudly, of course, the opposition. And that's fine.
We looked at the legislation, which was passed unanimously in this House by most people that are in this room right now — or at least the majority of — back in, I think, November of 2011.
Basically, we said: "If you are going to be planting trees for a long term, 100 years, to do so for carbon credits, you need to put a covenant on the land, and if you're going to put a covenant on the land, you need to go to the ALC for permission." That's the law that we changed back then.
Of course, this business said that they weren't going to apply for a covenant because they weren't trying to get the actual carbon credits, as the member has clearly said is true. Therefore, they didn't think they would have to get permission of the commission.
In the long term, we need to resolve that issue. Where someone can come in and even though they are not going to apply for financial credit for the planting of the trees, we still should have some way of ensuring that the act is respected by all people from anywhere.
D. Donaldson: I have a question dealing with the 2016 farmers food donation tax credit.
As the minister knows, the food donation tax credit was advertised as something that will enable families who use food banks and charities and local school lunch programs to have further access to fresh, healthy and local food.
The tax credit is open to individuals and corporations donating a qualifying agricultural product to a registered charity. The agricultural product may include meat, and a credit is worth 25 percent of the fair market value of the qualifying agricultural product.
There is fair market value now on farm-raised venison. I'm saying that because my question has to do with wild meat. The Guide Outfitters of B.C. have conducted a fair-chase food and meat donation program since 1993. Since then, they estimate that they have donated 425,000 pounds of wild meat to families in need and local charities in British Columbia. In fact, in 2010, they donated 900 pounds of wild, free-range, organic meat to the Salvation Army food bank in Kelowna.
[1410]
The Minister of Forests, Lands and Natural Resource Operations was at that event to witness the donation of that amount of wild meat. As well, the Kelowna ministries of the Salvation Army located on Rutland Road South, which perhaps is in the minister's constituency, or nearby, wrote a very enthusiastic letter of appreciation.
My question is to the minister. Considering that wild game meat is natural, organic, has no steroids, artificial colours, hormones or other chemicals and exactly suits the intention of what this program is about in creating further access to fresh, healthy and local food, did the minister consider the small business owners and the guide-outfitters industry when considering this tax credit? If so, why weren't they included? And if not, under this budget cycle, will he commit to including them in the food donation tax credit so families have further access to healthy, fresh, wild game meat?
Hon. N. Letnick: Yes, the location that the member so eloquently articulated is like a 9-iron from my riding boundary, so I know the Sally Ann very well, and actually, I was with the Minister of Forests, Lands and Natural Resource Operations when those meat donations were provided to them over those two years. It was a great donation, excellent for our community, and again, I want to thank all the hunters that did their job to provide that donation.
Specifically to my mandate letter, it says: "Work with Finance to implement the 25 percent tax credit on the value of farmed food donated to non-profit organizations for Budget 2016-2017." The key words there are "work with Finance." This is a Ministry of Finance question. You should direct it to the Ministry of Finance estimates.
G. Holman: I had a question regarding fish farming. I realize that maybe you don't have staff there, but you could take it on advisement.
There have been a number of committees, inquiries that have looked at the issue of moving the industry to closed containment regarding concerns around disease and sea lice and those kinds of issues. The most recent was the legislative all-party committee that was struck in the mid-2000s. My understanding is that that committee, as well, recommended moving towards or providing support for, incentives for moving to closed containment.
My question to the minister is: is there anything within your budget that provides such support to try and encourage or move the fish farm industry towards closed containment or to pilot closed-containment projects? Is there anything in your budget that supports those kinds of recommendations that have come forward?
[1415]
Hon. N. Letnick: I do understand the member's question: specifically, is there support or has there been support for closed containment of salmon in British Columbia? Yes, there has been. We'll have to check the numbers, as the member has given us that latitude to go and get him the exact numbers. My memory, if it serves me well, is something like around $300,000, but we'll get you the right numbers. It comes from the Investment Agriculture fund and was to help with…. I believe Kuterra was the recipient. We'll get you the numbers.
The other piece is our strategic growth plan that we announced. I think it was in December. It calls for us to look at expanding the Growing Forward or whatever the next suite of provincial-federal agriculture dollars is going to be. Right now we have Growing Forward 2 — approximately $3 billion across the country, $375 million right here in British Columbia.
A majority of that is in BRM — business risk management — programs. But about $110 million of that is in innovation funds. But it's specifically for agriculture. Part of our plan is to advocate with our colleagues across the country, some of whom are actually receptive, especially those that have ocean on their borders, to see that suite expand to include aquaculture as well.
There, if we are successful, we might see more opportunities to partner with the federal government on providing innovation dollars for things like Kuterra, Taste of B.C., I think it's called, Steve Atkinson in Nanaimo and some of the other people that are doing closed containment.
I also have to reflect on the premise that is: it's either farmed salmon in the open nets or farmed salmon in closed containment. We don't look at it that way. There's a role for closed containment, absolutely, and there's a client base for it. But we look at it as more complementary, where we can have a growing environmentally responsible open-net industry on our coast.
Right now — I don't know if the member realizes — if you look at all our commodities, the top commodity that we have in agrifood receipts is dairy. Number 2 is farmed salmon. It's a very important industry on our coast, especially for First Nations, and we want to make sure that the open-net industry operates in an environmentally responsible way.
We have resources for that, not only for the closed containment on the land but also the open net, in our lab in Abbotsford. Two of the only board certified fish pathologists, I believe, in Canada are right here in British Columbia, working with our industry. They've committed to achieve the highest standards in the world by 2020 on all their farms.
[1420]
Again, I think we need to look at the closed net as an opportunity, for sure, on land, to continue to grow that part of the industry. But it's not in replacement of; it's more complementary and moving together. I want to see — I'm sure all British Columbians want to see — continued good protein provided to British Columbians and to our markets.
The food supply security question that's throughout — our agrifood plan, for the next five years, talks about increasing productivity and production in all our commodities. I think farmed salmon — both on the ground, on land in closed containment, as well as those that are done environmentally well in the right place, of course, in our waters — has a role to play in achieving that.
L. Popham: I'd like to ask a couple of questions about the Investment Agriculture grant that was given to Sunshine Organics. Can the minister tell me why this grant was clawed back?
Hon. N. Letnick: Thank you to the member opposite for the question.
The Sunshine Organics application was done through the Buy Local program. That's the $8 million, four-year now Buy Local program, which is leveraged. We estimate that by the time the $8 million is issued, it's close to $20 million in total local promotion and other acceptable pieces that apply to the Buy Local program.
The Buy Local program is administered by the Investment Agriculture fund. As I understand it, the foundation held discussions with Sunshine Organics about their project, and the company's application for funding was revised from $100,000 to $50,000. It wasn't clawed back. The application was revised.
The company's project promoted locally grown organic foods on the Sunshine Coast and the Comox Valley. The foundation worked with the company over a period of time and has received appropriate records of expenses for the $50,000 that the company did receive.
L. Popham: Originally, it was $100,000. So $50,000 of that has been paid back and recovered by government?
Hon. N. Letnick: No, there is no clawback. The original application was for $100,000. IAF met with the foundation to help them revise their application. Their application was then for $50,000. The $50,000 was awarded. They have since provided expense receipts, and all the appropriate records are correct.
L. Popham: So only $50,000 was exchanged by government to the grant recipient?
Hon. N. Letnick: That's absolutely correct.
L. Popham: Does the minister know of any other circumstances where this happens at Investment Agriculture?
[1425]
Hon. N. Letnick: I'm going to clarify my answer from before just to make sure we're clear on the process. In the process here, IAF awarded $100,000 to Sunshine Organics. They then started providing receipts that did not meet the criteria, according to the Buy Local program. IAF then worked with Sunshine Organics to revise the award. The award was then reduced down to $50,000, and IAF had qualified receipts for the $50,000.
Does that happen in other cases? Yes, I've been advised that there are many cases where an applicant will make an application, get a preliminary award of whatever it is — $50,000, $75,000, $10,000. They start providing the receipts for the expenses that do not meet the criteria that is set out, and then IAF will work with them to complete the rollout of their project. It could be very well, and has happened, where that amount of money is less than what they were initially awarded, based on achieving this criteria that's in the application.
L. Popham: Just a quick answer. I just want to confirm that Sunshine Organics was never asked to repay any money.
[1430]
Hon. N. Letnick: If I can apologize to the member opposite and the public. I had the wrong answer before. IAF did ask Sunshine Organics to repay the $50,000 that was advanced to them.
[G. Kyllo in the chair.]
L. Popham: Thank you for that clarification.
I'm going to switch to my last two questions. I don't think I have time to wait for an answer, so I'm going to ask if the minister could give me the answers to these questions in writing at a later date. I'd also like to say that my colleague from Delta South and I will be submitting other questions to the minister regarding estimates, which I hope he'll accept after the break.
Interjection.
L. Popham: Okay.
This line of questions is regarding the College of Veterinarians. I'm doing this on behalf of another colleague, so I'm going to read it right off this paper.
"After permitting the college of vets to appeal a significant Human Rights Tribunal ruling that was ten years in the making, he said he was going to take action by setting out expectations that the college follow the human rights code and implement a culture of non-discrimination to regain public confidence. Aside from the fact that accepting the HRT ruling would have been the right thing to do to regain public confidence, the college was instructed to report to the deputy minister in 60 days on how it was meeting the expectations set out by the minister."
I'm just wondering if there's an update available. The letter said: "Please provide an update to Mr. Sturko within 60 calendar days of receipt of this letter."
Question two. This ministry's own briefing notes admit that the government provided an indemnity to backstop the college during the HRT ruling. I quote from a briefing note from the 2013 estimates:
"The CVBC's financial challenges are a result of the costs of legal actions and college administration complaints. The ongoing threat to legal action has also undermined the ability of the college to obtain indemnification insurance coverage by the private sector.
"Given the risk to the province of potentially having to assume administration of the veterinary profession, Agri sought and confirmed Ministry of Finance support for extending the term of the indemnity to the CVBC's insurance company. This provides flexibility for CVBC to extend the time frame needed to capitalize on their own captive insurance fund through registrative levies."
How much has been paid out of the indemnities provided to the college and its predecessor, the B.C. Association of Veterinary Medicine?
[1435]
Vote 15: ministry operations, $64,948,000 — approved.
Vote 16: Agricultural Land Commission, $4,524,000 — approved.
The Chair: I'll now call a recess just for a few short minutes.
The committee recessed from 2:35 p.m. to 2:38 p.m.
[G. Kyllo in the chair.]
ESTIMATES: MINISTRY OF
SMALL BUSINESS AND
RED TAPE REDUCTION
On Vote 40: ministry operations, $3,862,000.
The Chair: Minister, do you have a statement you'd like to provide at this time?
Hon. C. Oakes: I do, if that's okay.
The Chair: Of course.
Hon. C. Oakes: Thank you very much, hon. Chair.
I would like to start by introducing the staff that we have with us here today. It's always important, as we go through these very important estimates, that people understand and know who the team is who are supporting us as ministers.
Of course, Deputy Minister Tim McEwan. Blain Lawson is here — the general manager and chief executive officer of the Liquor Distribution Branch. Roger Bissoondatt, chief financial officer of the Liquor Distribution Branch. Doug Scott, assistant deputy minister of the liquor control and licensing branch. Welcome, Doug. Elaine Vale, acting director of policy, planning and communications for the liquor control and licensing branch. Tracy Campbell, acting assistant deputy minister of the management services branch.
[1440]
As the Minister of Small Business and Red Tape Reduction and the minister responsible for liquor, I oversee two branches of government responsible for the beverage alcohol industry in British Columbia: the liquor control and licensing branch and the Liquor Distribution Branch.
The liquor control and licensing branch oversees the regulation and supervision of the liquor industry in British Columbia, with a mandate to support public health and safety when it comes to the production and sale of alcohol.
As the sole buyer and reseller of liquor in the province's mixed public-private model, the Liquor Distribution Branch is one of the largest liquor purchasers in the world. The LDB is proud to contribute nearly $1 billion annually to the province of British Columbia, helping to provide financial support for vital public services, such as health care and education.
One of the main focuses of my ministry and of government is the implementation of recommendations made by a parliamentary secretary through the liquor policy review of the MLA for Richmond-Steveston.
We've listened to British Columbia as part of this process, and we are making changes to the liquor laws that are increasing consumer convenience, cutting red tape for B.C. businesses and supporting the breweries, wineries and other producers that contribute to the cultural development and economic growth of our province.
With that, I look forward to estimates.
D. Eby: I thank the minister for her opening remarks, and I certainly welcome all the staff members here to support the minister today. You've got important work that you do, and I thank you for it, on behalf of the people, certainly, of my constituency and on behalf of the opposition.
I'd like to start off with a question for the minister in relation to the net revenue received by the Liquor Distribution Branch for this year. The minister knows that the government increased the cost of beer, increased the cost of hundreds of different liquor items, eliminated discounts for family businesses across the province and, as a result, has experienced a net income increase of $89 million more than they expected to take in.
My question to the minister is: was this part of the Ernst and Young plan contained in the report that she refuses to release?
[1445]
Hon. C. Oakes: Thank you to the member opposite for the question. I think what's really important to perhaps qualify a little bit is…. Part of the work that we've done is to look at how, when we did the separation of the wholesale and the retail structure, it placed liquor retailers on equal footing. While the provincial government has seen, as the member opposite alluded to, an increase in revenue, above what was forecasted, of $89 million, we also have found it's been a fantastic year in sales right across the board.
If you look at the other volumes that we've seen in the private sector, what you have seen is an increase in volume. Part of that comes…. I ask the question, when you start seeing revenues like this above what is average. We had a fantastic tourism year. Our tourism stats…. A lot of that has to do with the strong Canadian dollar. If you look at what is happening currently in the Okanagan and Whistler and some of those primaries, we've seen, obviously, an increase in tourism revenue that was significant. That has played its course out in what we've seen on the revenue and the volumes. As well, I should note that we had a very hot summer.A hot summer also leads to the fact that you have higher volume sales.
D. Eby: Well, it was certainly a hot summer for British Columbians that enjoy packaged craft beer. As the minister knows, her government's policies jacked the prices on B.C. craft beer. This is the exact product that the minister says her government is supporting. They were hurt the worst by these price increases that have led to the minister declaring a record $89 million surplus over her own projections in profit. She says it was a hot summer. Well, that is certainly a very hot summer.
I guess I'd like to bring the minister back to my question. Was it in the Ernst and Young report — that was paid for by the public, that was commissioned by a public Crown corporation — that was given to the minister, advising on this program of eliminating wholesale price, increasing prices to consumers and retailers, that resulted in this surplus…? Was it in that report that the government could expect a surplus like this through this hidden tax increase on consumers in B.C.?
[1450]
Hon. C. Oakes: No.
D. Eby: In the Ernst and Young report, were there any projections whatever about revenue that the government could expect after eliminating the wholesale price discounts to retailers across B.C. and increasing the cost of beer and wine?
Hon. C. Oakes: Thank you again to the member opposite for the question. Again, last year the Liquor Distribution Branch created a clear separation between wholesale and the retail arm of the branch. It was really driven by industry, which for many years had asked for that separation so that there would be clear transparency to support.
Industry had requested that. We followed through with a commitment from government to ensure that there was fairness and transparency. In fact, LDB went as far as to create separate reporting systems and distinct executive roles that physically moved retail and wholesale staff to ensure that they are not co-located.
When the methodology was designed about this new wholesale method — I think it's important to note — yes, the intention was to be revenue-neutral. We have found that the performance in the marketplace and the buying behaviour of individuals has changed. That's where you see the increase in revenue to government.
D. Eby: I'm looking at the minister's own actual per-square-foot sales numbers for stores: a decrease of $257 per square foot in in-store sales, 2014-15. When you compare with what they were forecasting, $1,300 per square foot was what they were expecting. They got $1,046 per square foot in B.C. liquor stores.
The minister is standing and saying that this increase is not due to the fact that they eliminated the discounts for cold beer and wine stores, for wine stores, and that they increased the cost of beer, increased the cost of wine and so many products. She's saying it's due to increased sales, yet I'm looking at the minister's own sales numbers here, and there is a decrease in per-store sales.
When I compare…. She's probably going to stand up and say, "That's because they separated out the wholesale," and yet they used the old, pre-existing forecast number to say: "Oh, we only made an extra $89 million." They didn't shift that number at all.
I guess what would probably make this easiest for everyone is if the minister simply released the Ernst and Young report that, I can almost guarantee, told the minister that if she got rid of discounts and if she increased prices, she would increase revenue, which is exactly what we saw here. Will she do that?
[1455]
Hon. C. Oakes: There are a couple of layers to the question. The first is the question about releasing the Ernst and Young report. It is under privilege, so I can't release it. But I would say to the member opposite that it was a small piece of the decision point of the separation of wholesale and retail. Again, going back, industry had been asking for many years to have that separation of wholesale and retail.
I think it's also misleading from the member opposite when we look at how we talk about the new discounts or the removal of discounts. I think what is important to note is that when we went to the new wholesale model, part of that was ensuring that there is uniformity in a new wholesale price. So whether it's, you know.... It just created, well, a wholesale price, which had been asked.
The other one, around the square footage, I think, again, is a little bit misleading as well. What the separation of wholesale and retail did, especially in rural agency stores, was it eliminated a lot of the LRSs in rural stores from actually being the wholesale.... It eliminated the wholesale on their sites. So the square footage changed because they're now doing that directly through wholesale.
D. Eby: For the life of me, I have no idea what industry the minister is talking about when she said the industry asked for the elimination of their discounts when they were purchasing from the LDB. The minister and her colleagues have achieved the unthinkable, which is that the BCGEU and the Alliance of Beverage Licensees are actually working together because of these changes that the minister has brought in, because they are so opposed to what the minister and her colleagues have done.
[1500]
I struggle a little bit with knowing what the heck the minister is talking about when she's saying that industry asked for this. I guess she means that in the sense of they deserved it. It's a very strange suggestion, given the response of industry to the changes the minister has made.
The minister also says.... Maybe I can encourage her along these lines if it's her understanding that she can't release this report. Actually, she can. The act provides the government with the ability to claim exemption from releasing documents, but they can waive those exemptions, and they regularly do to release documents that may otherwise be withheld, legally. Under the act — I'm not suggesting the withholding is illegal — they can legally withhold it, but they can also waive that privilege and release that document.
If that's the case, I'll ask the minister again. Can she investigate waiving these claims of privilege over this document and releasing this document? There is a lot of speculation, in the same industry that I believe the minister is talking about, that this document told her exactly what would happen when she eliminated these discounts and when she increased the price of alcohol products in B.C. — that, no surprise, she'd take in additional income.
Hon. C. Oakes: The hon. member opposite is quite right. We can waive privilege. We will consider what the member has asked, and we will get back to the member.
I would like, though, to clarify again what.... The member challenged us on what industry has asked for. Industry did, in fact, ask for a separation of wholesale and retail. They wanted that transparency. The introduction of a new wholesale pricing system was a big step forward in ensuring that liquor retailers were placed on an equal footing and were able to provide competitive service for consumers. Overall, retail prices in B.C. appear to be remaining relatively stable. There are normal fluctuations in prices. There are, with any type of product in any given month, price changes.
I would also note to the member opposite that the LDB has a good working relationship with the BCGEU. We've been listening to them. You have Sunday openings. We have refrigeration. You've seen, both on the wholesale and the retail side, that folks have the ability to be more competitive, and you're seeing the volumes display that.
[1505]
D. Eby: I do appreciate that the minister will consider that. Her ministry has known that we've been asking for that report for quite a long time now. I do hope that she is true to her word and actually considers waiving this privilege and releasing this document, which is of great interest to people, especially given that the minister has experienced an increase of $89 million that she didn't expect following these revenue-neutral, we're told, changes.
Given that the minister has made an extra $89 million that she didn't expect, perhaps now is the time to consider a discount for hospitality, for restaurants. She talked about tourism as being important and, obviously, the close link between B.C. wines and B.C. spirits and B.C. beers and tourism, as we see in other jurisdictions around the world.
And yet in British Columbia, we actually charge restaurants and tourism service providers full retail cost, and then they put their own markup on it in selling to their customers. So when people come from around the world to B.C., they say: "We'd love to try that B.C. wine, but it's ten bucks a glass. We'll have the $5 Chilean wine."
I think the important question here for the minister is: will she take this unexpected windfall of $89 million and turn it into something useful for restaurants and tourism operators in British Columbia?
Hon. C. Oakes: The parliamentary secretary, the MLA for Richmond-Steveston, finished the consultations with stakeholders in the fall. It was identified on the hospitality side that that is something that has been raised through recommendations. We are currently analyzing these options, and it will be part of the comprehensive response to the recommendations.
D. Eby: Now, it was July of 2015 when the member for Richmond-Steveston told the media that government would be releasing changes — when did he say? — in fall of 2015. And yet since then, no answer for the craft brewers, who have been dealing with a spike in their packaged product costs; no answer for the hospitality operators, the restaurant operators looking for a break on the outrageous prices they have to pay for product when they're in a very tight-margin industry.
I don't know what the member for Richmond-Steveston is doing, but it's been since fall of 2015, and here we are coming up on a year past the deadline, once we get through the summer, which I know is a very busy time for government. I guess my question for the minister is: what's the delay? If the member for Richmond-Steveston is holding the file on the hospitality price cut, what's the delay? Restaurant operators are waiting.
Hon. C. Oakes: This, for me, is a new portfolio — since August. It was clear that we wanted to ensure that we were reaching out to stakeholders, that the consultation was being revisited and that we have a very thorough understanding of what craft brewers were saying.
[1510]
We have been listening. We heard from the craft brewers that they wanted to grow at their own pace without concerns for financial cliffs. We've certainly heard that. We've responded to that by graduating their wholesale markup.
We also heard about the challenges with distribution and wanting to get their product on the shelf without a lengthy listing process, and we responded just before Christmas to give local craft breweries the opportunity to showcase their products at their local B.C. liquor store.
We heard from craft brewers and others that only being allowed to sell products they made themselves was a barrier. We responded that, now, if a group of people want to go to a brewer's on-site lounge and a few of them might not be keen on beer, they can order a glass of wine or other drink with their friends — and enjoy a beer.
We also heard from consumers that they wanted craft beer to be part of the buy-local movement, and we're working closely with the Ministry of Agriculture on that. We've also responded by allowing craft beer sales at artisan and farmers markets, as well as Christmas markets.
We will continue to work closely with this very important, growing sector in British Columbia. In fact, I would note that since 2015, there has been a 34 percent increase in the amount of microbrewed beer sold in British Columbia. We'll continue to work with them. We're just working, finalizing the analytics, and we are confident that it will meet the needs of the craft breweries.
D. Eby: The member for Richmond-Steveston is, generously, six months late on his review. Where is that review?
Hon. C. Oakes: Again, what we've heard…. I've just responded. I could go through the list again of what we heard from the craft brewers.
We heard from craft brewers that they wanted to grow at their own pace, without concern for financial cliffs. We responded by having a graduated wholesale markup. We heard about the challenges, as we've gone through consultations by the MLA for Richmond-Steveston, about wanting to get their products on shelves without a lengthy listing price. We responded before Christmas to give local craft breweries the opportunity to showcase their products at the local B.C. liquor stores.
We also heard, through the consultations that have been ongoing, that only being able to sell products…. They wanted to be able to sell products at farmers market, at craft sales. Christmas time was a great opportunity for a lot of our local artisan markets to showcase some terrific product.
As the parliamentary secretary has gone out and done consultations, we've listened to what the craft brewery sector has said. We have been making gradual changes along with what we've heard, and we are continuing to look at the analytics of what we've heard. We will be coming out shortly with more changes.
D. Eby: I can tell the minister that she doesn't have to repeat herself. It's not necessary. The question is quite straightforward. Where is the report? When will we see it? What's taking so long?
Now, I know that the minister has heard a lot of things. I read the paper too. In the paper, when you open it up and it talks about craft beer prices, the craft beer producers say: "We are getting burned on packaged product. Our prices have gone up significantly. This is making us less competitive."
This is a sector that the minister says she wants to prioritize. I can't imagine what the minister is expecting to hear from restaurant operators when she goes to consult with them on reducing the price they have to pay for beer and wine. Is she thinking that they're going to say: "No, we don't want a reduction in the price that we pay for beer and wine"? What is the consultation here?
I try to understand how a government could put in place a wholesale price reform, without consulting on it, that increases the price of products, that results in an $89 million surplus that they didn't expect, that hurts small businesses. Yet when it comes to reducing the prices for craft brewers, reducing the prices for restaurant operators, they say: "We need to consult."
Perhaps the minister can clear up that contradiction for me.
Hon. C. Oakes: Again, I will repeat to the member, we did consultations in the fall. We heard the changes that we could make leading up to Christmas. We have made those changes. We are also in the process right now of doing the analysis, and the report will be coming out this spring. But we want to make sure that we get it right.
[1515]
D. Eby: I'll await that report in the spring. I thank the minister for that.
I see that the LDB is expecting administration costs to increase from $127 million to $136 million in two years. That's a $9 million increase. Why is that happening?
Hon. C. Oakes: We would expect, with the volume prices that we've seen go up, that we would see the additional administration costs. Bank charges, keep in mind, are up $1.9 million, driven by sales on credit cards. We all know that there is a cost to using those credit cards. Freight, of course, has also been increased. Storage has increased. It's tied directly into the increase in volume.
D. Eby: The minister seems to have a breakdown of that administration expense. Would she be prepared to release that to the opposition?
Hon. C. Oakes: We'd be happy to provide that.
D. Eby: I thank the minister for that.
The government is planning an auction of licences for grocery stores to be able to sell wine. I've heard a number of different numbers. I understand that this will be an auction of six licences. Can the minister tell me where these licences come from?
Hon. C. Oakes: The licences that are being auctioned off are dormant licences that have existed since 1987, when the free trade agreement came in. It can be up to 18 licences that we are auctioning off.
D. Eby: I've heard a number as high as 24. Is the minister saying that the maximum number of dormant licences is 18?
[1520]
Hon. C. Oakes: We are confident that we will be within our trade obligations with the decision of going with up to 18 of the dormant licences.
D. Eby: I'm trying to figure out how the minister got to that answer from what I asked. If they're dormant licences…? I mean, how many dormant licences are there? Are there 18, or are there 24? Or are these not dormant licences? Are these new licences?
Hon. C. Oakes: Thank you to the member opposite for the question. I think what is critical is that we need to ensure that we are meeting our trade obligations. That's both with CETA and the free trade. At most, we have made the decision to ensure that we are within alignment with what our trade obligations are and that we will be auctioning off up to 18 dormant licences.
D. Eby: Now, in Ontario, they are doing some very similar initiatives to B.C, but in their model, as I understand it, they're selling beer in grocery stores, whereas we're going to be selling wine in grocery stores. In Ontario, what they did was they said: "It's really important to us that it's not just the big fish that get access to these licences. We want independent grocers to have a shot as well." So what they did was they reserved a set of licences for small and independent grocery stores.
Now, if you look at the trend lines for the minister's program, it is not a good trend line for small and independent grocery stores. In fact, only one grocery store chain has all of the licences so far. Overwaitea has every licence.
The minister's going to auction off some licences here. My question is: what about the small and independent grocers? Are they going to be protected? Are there going to be licences exclusively available to small and independent grocers, or should we expect Overwaitea to pick up all of these licences as well?
[1525]
Hon. C. Oakes: I know many jurisdictions right now are.... You're seeing significant changes in other jurisdictions. What I can tell you is that staff have met on two occasions with the general stakeholders — large, medium and small — and their affiliates.
To be clear, the auction will be open, fair and transparent. The six auctions that are currently underway right now, with up to 18, will be run through B.C. Auction, an agency through the Ministry of Technology, Innovation and Citizens' Services. It's not restricted to the large grocers. In fact, we've had technical briefings. We've supported anyone who is interested in finding out more about how to get engaged with this process. We've met with, again, the small, medium and large stakeholders in advance of the technical briefing.
D. Eby: I guess it's all about your definition of fairness, really. In Ontario, fairness meant recognizing that a small independent grocery store is not going to be able to pay the same amount of money as Overwaitea Foods is, which will budget this as a capital expense over many, many years. So a ma-and-pa small-town grocery store versus a huge company bidding on the same licence. It's not hard for me to figure out what's going to happen here.
Is the minister saying that she is perfectly content if all of the licences under her program end up in the hands of a single company?
[J. Martin in the chair.]
[1530]
Hon. C. Oakes: What is really important here is that we wanted a process in British Columbia that was open, fair and transparent. We have met with both small, medium and large grocers, and we encouraged everyone to look at the opportunity of these six licences, up to 18 — six licences at this point, to be clear.
I think it's also important to note that we currently have 1,500-plus liquor establishments in British Columbia that support a wide range of businesses across British Columbia, and we're talking about six licences.
D. Eby: I hear the minister saying that this is just six licences, and then, well, actually, it's going to be 18 licences. Let's be honest about where this is going. This is going to a model of selling alcohol in grocery stores like in Washington state and other jurisdictions. That's where it's going. The minister's direction is clear.
She talks about trade obligations. We know what the trade obligations are going to result in, which is the opening of the grocery store shelves. That will be, initially, all B.C. products. Then it will be all products. So if it's all wine products, then it will be international wine products as well, because it is very difficult to justify, under trade obligations, anything else. We're in a softwood lumber dispute.
It's very clear about the direction that this is going. When I asked the minister about fairness for small grocery stores, for fair treatment for small grocery stores, it's not about six licences. This is about where the minister is going with this program.
That is why so many small wineries are incredibly alarmed with the minister's plans. All you have to do is look at the Penticton VQA store as a case in point. You have a group that just sprang up, out of the minister's initiatives, called the Responsible Liquor Alliance of B.C.
It's a group of small wineries that opposed the idea that Penticton would allow wine to go into grocery stores without a one-kilometre restriction. They were very much in favour of that one-kilometre restrictive zone in order to protect their VQA store, because they were worried that it was going to disappear. It's an incredibly important part of the local economy there.
[1535]
Maybe the minister is willing to address the issue of the Penticton VQA store and to tell the people of Penticton exactly why it is that her government would support a policy that would close this independent store and move it into a major conglomerate grocery store chain in the name of progress.
Hon. C. Oakes: I would like to clarify something that the member started with. The framework that we chose is, in fact, not like what is happening in Washington or other jurisdictions. We have a two-part framework that we have developed here, a B.C.-specific model. I think it's important that we do review that.
We have the wine-on-shelves model, which is eligible in grocery stores, which we've been discussing — the member opposite. That is where we are currently auctioning six licences, up to 18. The wine-on-shelves model is really a limited amount of what we are talking about. I think it's also critically important to note that.
I encourage the member opposite to go and visit one of the wine and grocery stores Kelowna opened in Orchard Park. I think it's critically important for the wine industry to…. When you actually go into these grocery stores, you'll see 700 to 900 SKUs. It's fascinating to see so many. In one of the stores I went in — 700 small- and medium-sized wine SKUs of wines that I had never seen before, representing a very dynamic, growing industry in British Columbia.
I think it's a great opportunity too. When you look at 700 to 900 SKUs…. If you look at, I think, the statistic that was provided previously…. If you're looking at what is in a government liquor store or a private liquor store and what the shelf space offers, it's really interesting to look at the fact that you can get 700 to 900 small and medium wines on shelves in their SKUs.
The other thing that I think is important, the second element of that, is the store-within-a-store model. That is where you have a variety of domestic and international beer, wine and spirits that are operated through different cashiers.
We've been really clear, as we've been working through these processes and around understanding the trade obligations, that we've kept those separate. Again, when we talk about wine in grocery and we look at…. Again, we are auctioning six dormant licenses, up to 18. There is up to…. We’ve talked about 1,500-plus liquor establishments. I think it's important to put that all into perspective.
[1540]
D. Eby: I just want to read here, for the minister, a quote from a small winery owner-operator named Kim Pullen from Church and State Wines.
"B.C.'s small and medium-sized wineries have had guaranteed shelf access to specialized VQA wine stores, and the system works well. Our own local VQA wine store at the visitor information centre in Penticton will be severely jeopardized if wine is sold in grocery stores in Penticton.
"Local wineries have little to be gained from the wine-in-grocery model in its current form, but there is much to lose. The consequences could be dire. Local wineries could be forced to lay off staff or some close completely."
Our local VQA wine store may close, and jobs would certainly be lost in local liquor stores.
I think it's important for the minister…. Although she has a lot of reassurances for people about what's going on, she needs to look at the actual outcomes of what her policies have been. We're talking about the closure of independent, small businesses, VQA stores across the province, and the sale of those licences to a single grocery store chain.
When you look at the Kelowna licences, when you look at what happened in Victoria — the closure of small, independent businesses that service the local wine industry as their main focus and the sale of those licences to one of the biggest companies in British Columbia and one of the largest grocery store chains in Canada — this is the outcome of the minister's initiatives.
Now she's going to auction off additional licences in a manner that makes it totally unavailable for small and independent grocery store chains, even, to have a shot at this. What she is doing is closing independent businesses and transferring the benefits that were set up for small, independent businesses and for the B.C. wine industry directly to one of the most profitable chains in Canada.
I guess my question is, for the minister: if she's going to tolerate this process, if this is something she is in support of, will she, at least, look at the idea that, when these licences are sold to a grocery store chain — to one of the biggest grocery store chains in B.C., if not the biggest — will she remove the benefits that come with the VQA licence? Will she remove the discounts and the incentives that were set up for small and independent businesses and have now been transferred directly to a major grocery store chain?
[1545]
Hon. C. Oakes: I think I will answer this in three points. Again, first, I do want to correct the member opposite that the auction of the dormant licences up to the six, right now, and up to 18…. Again, it's a transparent process that small, medium, large…. There are opportunities for everyone on that.
I think it's also critically important that the B.C. Wine Institute, which represents about 94 percent of small, medium-sized and large wineries — which is also the trade association on record for B.C. wine — is supportive of the decisions that we've made.
I think the third question is: what about the business decision around the wine and grocery — and the concern that you mentioned from the owner of Church and State about how are the terms and conditions are going to be different? The terms and conditions through both the B.C. Wine Institute as well as the six auctioned licences that we are going to now are the same terms and conditions — that small, medium-sized and large wineries need to be carried.
I would note that Church and State is currently carried at the grocery store at Save-On-Foods. Oh, and you know what? It's an opportunity, as well, for me to do a little bit of a quote, since the member did a quote, and to really see…. I get that change, as we're going through this process, requires us, as a government, to ensure that we are communicating very clearly. It is something we are absolutely committed to continue to support.
There is an article that was released today by a successful Richmond business owner, who has actually sold their licence to one of these. One of the things I think that's important to…. You know, lots of experience. I think it's important what he said. "Despite selling his VQA licence, Wosk is optimistic about the future for the wine consumer. 'My crystal ball is that the wine consumer will be better off. I know that the Save-On grocery stores that have opened B.C. VQA-wine aisles are doing extremely well. And they also hired the staff that operated at the local VQA stores.'"
D. Eby: It's hard to know where to begin. First of all, the minister starts by celebrating, again, the closure of an independent store and the sale of the licence to one of the biggest grocery store chains in B.C. — and a licensing process that is totally unavailable to small and independent stores. Everyone is equally able to buy a Ferrari or a Lamborghini or a McLaren or whatever it is they want to buy. Everyone is equally allowed to buy it, but they're not equally able to buy it.
The idea that a small grocery store chain in British Columbia or even an individual grocery store could compete against Overwaitea in an auction for a licence…. The minister cannot be so naive as to suggest that this is a process that will result in a distribution of licences across all different size grocery store chains in B.C.
Surely, she's not suggesting that, because it's not what's going to happen. We'll see it in the licensing process when we come back next year, I guess, and I can say, "I told you so." But it will be cold comfort for the fact that this process has been put in place and has been exclusively enjoyed by one single grocery store chain.
I want to get into that a little bit. Also, I guess I have to point out to the minister that the VQA licences have many exemptions that other licences don't. They're exempt from the one-kilometre rule. They pay differently. They're entitled to different discounts. I don't know why the minister would say that that's not the case.
[1550]
The VQA licenses are all being sold to a single grocery store chain.
We're told by the VQA, through the media, that no other grocery store chains are interested in purchasing these licences. I find that very difficult to believe.
I would FOI this institute which is selling public licences to Overwaitea, but the minister's colleague the Minister for Advanced Education exempted the B.C. Wine Institute from FOI just before this process started.
I'll ask the minister: why would she exempt the Wine Institute from FOI during the exact time when they are administrating so many public benefits and selling them to a single grocery store chain?
Hon. C. Oakes: The FOI exemption is something that we'll take on notice, and we'll have to get back to you.
D. Eby: The minister's predecessor, still the Attorney General, was kind enough to provide me with a list of the net margins per category for spirits, wine, beer and refreshments and non-liquor. I wonder whether the minister would provide me with that table again for the most recent set of numbers.
Hon. C. Oakes: We'd be happy to provide that to the member opposite.
D. Eby: I'm going to take the minister now to an issue she touched on earlier, which is packaged–craft beer prices. Can the minister commit, on the record, that her budgetary plans for the coming year include a reduction in packaged–craft beer prices to make them competitive again with packaged beer from international producers?
Hon. C. Oakes: We're finishing our analysis on that and will have a decision in the spring.
D. Eby: It's disappointing that the minister isn't sure whether or not she's going to help our local beer producers. I know they've been very successful, on the draft side. I will acknowledge that there are changes that this minister made that are helping these breweries.
Yet simultaneously, when they try to transition into packaged product, this minister's wholesale price changes hammered these breweries. Yet the minister, despite an $85 million windfall, is unwilling to say that she's going to address this issue.
I'm going to give the minister one more shot. I'm not trying to catch her out or anything. I just want her to provide some assurance to the industry in British Columbia that if they move into packaged product to compete with breweries across Canada and across North America…. There's a great appetite for these small breweries' products all the way across North America, but you can't do the draft tasting room that you do in British Columbia all across the continent. You need to put the beer in packaging and sell it.
[1555]
Will the minister commit to providing that support? They're going to start locally in B.C., and then they're going to expand their packaged product out. But if they're not starting in B.C. because of the minister's changes, they can't expand to export, and they can't expand to go across Canada. Will she commit to fixing this issue?
Hon. C. Oakes: Thank you to the member opposite again. Consultations happen in the fall. The analysis is currently happening now. We will have a response to the recommendations this spring. But again, I think it's critically important…. You know, since we made the decisions last April, we've seen 17 new breweries come into effect, with more to come. We've seen nearly 50 new breweries in the past two years. Craft beer sales have almost tripled in the past five years.
In an industry that is estimated to employ over 2,500 people, we are seeing significant success since April of 2015. There has been an actual 34 percent increase in the amount of microbrewed beer sold in British Columbia. On top of that, there are 24 new breweries that are currently on the horizon.
Again, as we've gone through and we've consulted closely with the sector and met with the craft breweries, we heard that the craft breweries wanted to grow at their own pace without concerns for financial cliffs. We responded by ensuring that we had a graduated wholesale markup.
We heard about the challenges that were happening on the distribution, of wanting to get on the shelf without a lengthy listing process, and we responded before Christmas to give local craft breweries the opportunity to showcase their products at their local B.C. Liquor Store.
In Prince Rupert, I know that the member opposite — the MLA from Prince Rupert, North Coast — was talking about how proud she was of her local craft brewery. I'm incredibly proud, in Quesnel — Barkerville brewery. In our community, we are seeing a thriving, growing craft beer sector. As the province of British Columbia, we're going to continue to listen, to work closely with them to ensure their success. We will be seeing more changes to come in the spring.
D. Eby: Now, the minister, or at least her predecessor, knew within three weeks — there's a briefing note; we have it; we have the date — of the April 1 price changes that those price changes had an impact on packaged products from B.C. craft brewers. It wasn't a small impact. It was a significant impact on a sector that is already more costly than major macrobrew production that comes from international breweries.
The reason it's more expensive is because they use B.C. products, because our labour costs are higher than many jurisdictions where beer is packaged internationally. They are at a competitive disadvantage with some of these breweries. When the minister's changes came in, within three weeks, this government knew that they had inadvertently increased the price of craft beer packaged product.
It's important for the minister to know that that was a year ago that that happened. That was a year ago that the government knew that this happened, and yet nothing changed, and now there's been $85 million surplus that the minister has enjoyed, partially at the expense of this unintended increase to B.C. craft brewers' packaged products.
[1600]
For all the reasons that the minister listed, all the excitement that we all have about our local craft brewers, all the delight that we get that local people are doing this stuff, that is why the minister needs to act to fix this and why she needs to commit to fix this issue.
Just because I think the minister may not have understood that the government has known about this for a year, I'll ask her one more time: will she commit to fixing this issue?
Hon. C. Oakes: The packaged product of beer was raised in the consultation as part of the recommendations. As I mentioned previously, it is part of the analysis that is currently underway. I think it's important to know that we have a fantastic working relationship with the guild and really want to thank them for their support, for bringing forward ideas that we could move on.
In fact, it was when I visited the guild that they raised the fact: "Wouldn't it be great if we could get some of our local B.C. craft beer on shelves by Christmas at our local government liquor stores?" We were able to make those changes, the changes we made around removing some of the financial cliffs.
These are things that we heard from the guild and the sector. We are committed to working closely with them. I'm sure that the member opposite will be pleased with the work that will be announced this spring.
D. Eby: I hear the minister celebrating getting some craft beer products into government liquor stores, which is certainly something I appreciate as well. I wonder whether she's considered the fact that there are so few craft distillers in government liquor stores and why that may be.
[1605]
Certainly, through my discussions with craft distillers, they tell me in no uncertain terms that when they move their product out of their distillery and into a government store, the markup is punitive and makes them not competitive.
Has the minister looked at addressing the issue faced by craft distillers of getting their product onto the shelf in government stores or in private stores, for that matter?
Hon. C. Oakes: Thank you to the member opposite for bringing forward another important sector — the craft distilleries in British Columbia.
It's interesting to note that there has been significant growth over the past 18 months. We've gone from five to 30 craft distilleries. I think that's another success story that we're seeing in British Columbia, and it is part of the work that has come forward through the recommendations that the parliamentary secretary and the MLA for Richmond-Steveston is looking at.
D. Eby: Another important sector, I would argue, is B.C. ciders, produced with B.C. apples. I have a few favourites. I'm sure others in the chamber do as well. Sea Cider, Lonetree, Left Field — all wonderful B.C. ciders.
I wonder why it is that these ciders are dealing with markup in the same kind of category as mass-produced, sugary, alcopop drinks. Why are they not in their own category, like beer, like craft distilleries? Will the minister be addressing that issue?
[1610]
Hon. C. Oakes: B.C. cider is.... The classification is it's a refreshment beverage. We all enjoy a nice cup of cider on a hot day, not just in the summer. I agree with the member opposite. It's a great product.
They do have access to the same markup-free opportunities if they're a land-based winery. So that is an opportunity for B.C. cider.
D. Eby: Mr. Chair, you reminded me of Merridale Cider. Of course, I don't know how I could have overlooked that. If we reach a point of agreement today with the minister, it'll clearly be that B.C. cider is a year-round drink. There's something that we can all nod our heads at.
I wonder about, though, beyond the land-based winery model, whether the minister has looked at packaged markup discounts similar to the treatment that she may be anticipating for B.C. craft beers — a similar type of treatment for B.C. ciders, in the same way, given the remarkable similarities between the two products.
Hon. C. Oakes: Currently, that is not part of a submission that was made to the parliamentary secretary, the MLA for Richmond-Steveston. We're happy to look at that, so thank you to the member opposite for bringing that forward.
The Chair: One more?
D. Eby: I just, Mr. Chair, wanted to put on the record that I expect that I may actually be able to wrap up today. I know that some of the staff here may have travelled to be here today. If we keep going at this pace, I should be able to wrap up by the end of the day, if they want to make travel arrangements.
If you wouldn't mind, if we could take a brief break, I'd appreciate it.
The Chair: We'll take a five-minute recess.
The committee recessed from 4:13 p.m. to 4:20 p.m.
[J. Martin in the chair.]
D. Eby: I'm going to ask the minister a question about the LDB warehouse. It was August of 2014 when the government sold the LDB warehouse to a coalition of First Nations. At that time, the government said the LDB would be moving into a new warehouse by 2017.
In April 2015, their annual report said the LDB warehouse would be operational by 2018. That was a year later, and it was going to be a year later. Then in July of 2015, the minister at the time, the Attorney General, told the Vancouver Province that "the LDB expects to be fully operational" in a new warehouse location by 2018. Now it's 2016, and in February, we're told that the government plans to be in a new warehouse by September of 2019.
We have moved a full two years in real time. Simultaneously, we've moved the goal for being in a new warehouse two years down the road as well. Can the minister explain what the delay has been in moving into a new warehouse and why the LDB is paying rent for a warehouse that we used to own? What was the rush in selling it?
Hon. C. Oakes: Thank you for the question. The Liquor Distribution Branch distribution centre project is a very major capital investment, and it's important that we do this process right. The LDB is currently developing a business plan for the long-term warehousing solution for 2019, as we well know. We've certainly outgrown that space. If the member opposite would like to visit the location to understand the dynamics of what we're faced with, I would certainly offer that.
The branch has issued — just an update — requests for a proposal for advisers that will inform the business plan and help plan for the future. It is to ensure that the branch can continue to support B.C. businesses and support consumers with their choice, for British Columbia. The business plan will thoroughly examine forecasting of the future, which will, in turn, inform the requirements that support the long-term goals of the LDB.
[D. Ashton in the chair.]
D. Eby: Taxpayers are paying rent to occupy a building that we used to own. It was sold way back in August of 2014. My question to the minister is: why did LDB management, why did the government, sell the warehouse with no capital plan in place, no strategy in place?
Now it's just 2016 that they're doing the work — the very careful planning, the minister says — about where we're going to end up. I say this because, as I understand it, the LDB's lease in this warehouse expires in August 2019. Time is running out for the minister. You can only kick this ball down the road so many times.
[1625]
There is absolutely no money in the budget, as far as I can see, for capital for a new warehouse. My question to the minister: if there's no capital in the budget for a new warehouse, how is it that this major capital expense is going to be undertaken?
Hon. C. Oakes: Thank you to the member opposite. Again, I think it's important to note that the Ministry of Technology, Innovation and Citizens' Services does have the lead on the sale of provincially owned land.
But I think, equally, it's important to note that we have seen a significant population growth, an increased consumer base, and the current warehouse just simply does not have the capacity to serve the thousands of businesses that currently rely on it. I think the member opposite would agree that this is an important part of ensuring that we're supporting those small businesses.
Our goal is to have a long-term warehouse solution in place by 2019. The current agreement with LDB has a lease agreement with the new owners for three years, with two one-year options to renew, which will expire in August 2019. Again, we are going through the business plan process right now, and once we have that business plan, we will be moving forward through treasury.
D. Eby: Mr. Chair, why do I feel like a year from now, I'll be asking the same question and getting the same answer, just like has happened every year for the last two years, since the government sold the warehouse?
I don't think it'll be a surprise to the minister to hear that there's a lot of speculation that it's government's plan to actually privatize the warehouse. Is that the government's plan?
Hon. C. Oakes: There is no plan to privatize.
D. Eby: When the government looks at the mix of revenue that comes from wholesale and retail sales and the LDB over the coming years, what is the proportion of revenue that it sees coming from those two sources? Will it be primarily revenue from wholesale, or will it be primarily from retail? Or will it be a mix, and if so, what will that mix be in the business plan of the government for the budget?
[1630]
Hon. C. Oakes: I'd like to be able to give you the exact specifics, but if you don't mind, can we take that on notice? We'd be happy to give you the actual breakdown on the wholesale and retail mix.
D. Eby: I certainly would appreciate receiving that from the minister. The numbers that I'm looking for, I guess, then, would be the net revenue from the wholesale versus the net revenue from the retail arms of the LDB.
Taking the minister to the issue of capital spending, we saw that the minister had reduced the anticipated capital spending for 2015-16 from $90 million that they were planning on spending down to $75 million. Can the minister explain why that was reduced?
Hon. C. Oakes: As the hon. member opposite alluded to, because of the process that we're currently going through on the business plan for the Liquor Distribution Branch's warehouse, we felt it was best to free up the capital and move it to other priorities.
D. Eby: Well, that invites the question of what the other priorities are. And I misspoke. I said that it was reduced from $90 million to $75 million; it's $90 million to $65 million. That's the number. I'm referring to page 129 of the budget and fiscal plan document, which is the anticipated capital expenditure of the government for 2016-17, '17-18 and '18-19.
The minister is planning on spending $161 million on capital for the LDB. Can she tell us what priorities it's going to be spent on? Where is this money going to be spent, and how?
[1635]
Hon. C. Oakes: Some of the priorities, of course, when we look at the point-of-sale system…. There were significant upgrades on the PeopleSoft upgrade project. That's the phrase project, the Oracle R12 ERP upgrade project — the retail pricing and point-of-sale upgrade.
There were some intangible assets that were made priority. Some of the operating equipment for the warehouse was in there — information system hardware, mobile equipment. Tenant improvements — of course, we have refrigeration now in our government liquor stores. Demand planning purchasing. A project to look at enabling future technologies.
I think it's interesting. Because of the amount of considerable investment that we're making on the warehouse, if you start looking at some of the large retailers and how you get product to market and how you get…. There is so much innovation that is happening right now. We want to make sure on the technology side that we're looking at those types of efficiencies. So that's where the priorities on the spending have gone.
D. Eby: Does the minister have a breakdown of the line items that she just went through that explain these numbers and that she'd be willing to provide?
Hon. C. Oakes: We'd be happy to provide a high-level overview. I think on the capital side…. Sometimes with the capital projects, there can be changes over that, but we'd be happy to provide you an overview.
D. Eby: I thank the minister for that.
I'm looking at page 160 of the estimates for the fiscal year ending March 31, 2017. In it, under core business, there's a $318,000 disbursement under capital expenditures for the liquor control and licensing branch.
Can the minister explain what that is?
Hon. C. Oakes: That money is for vehicles for the liquor inspectors that travel throughout the province.
D. Eby: I'm going to move on to a new topic. I'm going to move to the issue of ID checks. The minister reduced her forecast compliance rate for ID checks in stores.
[1640]
Now, the original target was 82 percent, but the minister has reduced her forecast compliance to 69 percent. When I look at 2016-17, the original target was 84 percent ID checks, and now the target for 2016-17 is 73 percent.
Why is the minister reducing her targets for identification checks, which seems to me to be critically important?
Hon. C. Oakes: Thank you to the member opposite for your patience. I think it's clear that we have a social responsibility. No one wants to see liquor sold to under-age youth.
Initiatives. We are looking at the types of initiatives that we are providing as a government around ensuring that we are meeting those obligations. One of the things that we have moved to is to more risk-based checks, and we continue with the random-driven numbers. I think that's important.
The other thing that we're looking at is looking at a holistic approach as well. In September 2015, based on what we heard clearly out in British Columbia around this particular issue, we changed the Serving It Right program. We enhanced it and expanded to include that everyone who sells or serves alcohol in British Columbia understands specifically, from education and communication, our responsibility around ensuring that people know their responsibility for not serving under-age youths.
[1645]
D. Eby: I know that the government is looking at the suggestion that has come forward around the sale of marijuana potentially being in both B.C.'s public and private liquor stores. That proposal has come forward to the government.
I think, in that context, a target rate…. This is the target. This isn't even the rate that we're hitting. The target is 73 percent age-checks.
I'm trying to understand how the minister finds it acceptable that the target across all liquor retailers isn't significantly higher than 73 percent and why it is that her investigators are finding such low compliance with this very important issue, which will only become more important in British Columbia if, in fact, that proposal comes to fruition.
Can the minister explain why it is that her targets are so low for checking the age of people who are buying these products?
Hon. C. Oakes: Thank you to the member opposite.
Actually, what you're seeing on the stats is…. When somebody is found to be non-compliant, that's what drives the stats down. We've taken a focused approach. It is targeted at those who…. Perhaps we have information that they may be selling to the under-aged. We're taking a much stronger approach on being targeted. That's why you see the reduction, actually, in this. If it was just random, that's where you'd see a much higher number.
D. Eby: Can the minister then assure me that she is doing random checks and that she is seeing higher compliance among random checks? If that's the case, will she release those numbers to me?
Hon. C. Oakes: I should stand corrected. We do still do random. I think the member opposite identified an issue. We, too, have found that currently the random and the targeted are not separated. But my commitment to the member opposite is that we are moving forward. We are going to ensure that we are separating both random and targeted so that we understand the compliance. We'd be happy to provide the member opposite with that information going forward.
D. Eby: I have an interesting question. I imagine the minister is going to have to take it on notice. But I'd invite her to give me an idea, if she can, about the system that's at work here.
There's a Return-It depot in Burnaby-Edmonds — this is one of those recycling depots — where they receive a significant number of beer bottles and cans as part of their work. Now, for some reason, every Return-It depot in B.C. is not automatically entitled to recover the deposits for beer bottles and cans that they receive.
[1650]
I understand they've received about 1.65 million cans and 480,000 bottles in 2013. Yet I've got correspondence here that indicates that somebody in Alberta that works for a group called the Brewers Distributors Ltd. is telling this depot that they're not entitled to receive the full deposit back.
Try to imagine this. A consumer pays a deposit on a bottle. The money goes into, I presume, the bank account of this Alberta Brewers Distributor Ltd. Then a depot collects the bottle back, gives the consumer back the dime for the bottle, and yet the Brewers Distributor Ltd. then refuses to provide that refund back to the depot. It seems remarkably unfair.
The minister can probably see why she might need to take this question on notice. I would ask that she look into this and perhaps, if she can — just by way of background for me — explain to me how it could be that someone in Alberta decides who gets to receive these refunds, which are collected and held in trust from consumers, and why it would be that that wouldn't be a British Columbia decision.
Hon. C. Oakes: We were hoping that we would be able to find an immediate answer for that, but we will take that on notice and connect with our colleague.
D. Eby: I'll provide the minister with the paperwork for that. That issue was raised by my colleague from Burnaby-Edmonds.
I note that there's a half-million-dollar decrease in actual employment expenses for 2014-15 compared to the forecast, and there's a $14 million increase in forecast employment expenses for '15-16. Can the minister explain what's going on with employment costs?
[1655]
Hon. C. Oakes: I'll answer the question of the $500,000 decrease this year in employment costs. Our total labour cost budget is $190 million, so the $500,000 decrease is a really small piece of that.
Why are we looking at an increase in '15-16? Well, we are projecting a couple of things. We know that we are seeing an increased volume. As we've canvassed earlier, there are increased labour costs that we currently have at the warehouse. It is very labour-intensive to get the product out to consumers. It does require increased labour to get the type of volume that we're talking out to consumers.
As well, I think it's important to note we also had increased costs on labour because we're open Sundays. Government stores are now open on Sundays, and of course we have to staff them accordingly. Again, there is increased volume, which creates the additional requirement of labour at the government liquor stores as well.
D. Eby: I was surprised to see.... I'd like the minister to explain to me the logic behind the decision to stop collecting customer satisfaction data from wholesale customers. Now, I've read what's in the report, which is to allow wholesale customers to settle into new processes. I really suspect that, actually, the minister knows, as I know, the wholesale customer satisfaction would be down significantly by the changes that the government has made in relation to the wholesale price.
Can the minister explain to me in some more detail why it is that the LDB would be so rigorous around collecting some metrics throughout this process but would abandon wholesale customer satisfaction data at the exact time when they need to know whether what they're doing works?
Hon. C. Oakes: Great idea. We're going to reintroduce it, actually. Just to clarify, we are actually reinstating the customer service surveys through the wholesale. What we did want to do is to provide the new team the opportunity, over the last year, to look at the market, allowing it time to settle, and to ensure that the data we're collecting is more accurately reflective of what is happening. But we are reinstituting the wholesale customer service surveys.
D. Eby: What is the minister's target for the satisfaction rate on that reinstituted survey?
Hon. C. Oakes: We're projecting a 90 percent satisfaction rate on the new wholesale customer service survey.
D. Eby: Well, the minister is nothing if not ambitious. I can certainly give her credit for that. I will look forward to seeing how the results come back.
Last time I was here, with a different minister, we talked a little bit about an operating margin for retail stores. We had a bit of a disagreement about how much operating margin retail stores need to operate and break even. In any event, during that conversation, the minister advised me that she was targeting an operating margin in retail stores of 18 to 18½ percent.
[1700]
Is that the same operating margin that the minister is targeting, and is she realizing that margin in the stores right now — or less or more?
Hon. C. Oakes: Again, it almost goes back to our original conversation about the separation of wholesale and retail. Up until last year, we did report publicly on the markup and the retail margins of the B.C. Liquor Stores. However, since all retailers in British Columbia now purchase products at the same price and set their own retail margins, it would put the B.C. Liquor Stores at a competitive disadvantage to disclose this information.
I can tell you that the retail margins do fluctuate with market conditions. However, as I've mentioned, the margin that the government liquor stores add to the new wholesale price will not be publicly disclosed due to competitive reasons.
D. Eby: Well, I have to say I disagree profoundly with the minister's logic here. The idea is that you're protecting the B.C. Liquor retail stores from competition by not telling the public what the operating margin is for those stores. But the reality is that that means the only people who know what the margin is are the competing stores.
The private stores know exactly what the margin is on each product, because they are paying, as the minister says, the same cost as the B.C. Liquor Stores. The only people who don't know what the operating margin is, as a result, is the public. These are public stores that the minister is operating on behalf of the public, and the minister is telling us here that she can know and her government can know and the private store operators can know, but the group who can't know is the public, who actually own the stores.
I'm going to ask the minister to reconsider her answer, given the reality that it's very easy for the private stores to figure out what the operating margin is, because they know what the cost is. But they're the only ones who know. The public does not know. Will she tell the public what the margin is in the retail stores?
[1705]
Hon. C. Oakes: Your point is taken, and we'll take it under consideration.
D. Eby: I'm afraid I don't know what that means — that the minister is going to take it under consideration. Is she going to provide me an answer in writing? Or is she...? I don't know what that means. Maybe she can tell me what she means by that.
Hon. C. Oakes: Yes.
D. Eby: Just so that we're all very clear about what's going to be provided in writing, the minister will provide me with the operating margin for the stores and the operating margin for the distribution centre. Is that correct?
Hon. C. Oakes: Actually, what we said is that we will provide you an answer as to the consideration of your request.
D. Eby: I mean, it's not much.... I won't waste the minister's time or her staff's time by asking them to send me a letter that just says what the minister told me on the record in estimates. It's a waste of everybody's time. So if the minister is not going to provide me with the answer, then I would appreciate it if she would stand up and say: "No, I'm not going to give you that information. That's available to the private stores. That's available to me and my government. That is not available to the public." I just wish she would go on the record and tell me whether or not she'll provide me with this answer.
Hon. C. Oakes: Again, your point is taken. We will take it under consideration. You raised a point here. We are going to review that, and we'll get back to the member.
D. Eby: One of the challenges faced by small companies that either do importing or that produce here in British Columbia is that the government is requiring them to pay full retail cost for the bottles of their own product that they use for sampling. I know this issue has been raised before, because I've raised it before with the government. The government still hasn't fixed it.
[1710]
Try to imagine, Mr. Chair, that you're forced to buy at full retail value your own product back from the government in order to give people the opportunity to sample it.
Has the minister been briefed on this issue since she's taken on the portfolio? Is she addressing this issue?
Hon. C. Oakes: Thank you to the member opposite. Thank you very much for your patience as well. With some of the changes that we're making, we have to figure out if they've been announced yet. On this one, though, I will say that we have heard what you have raised, and it is certainly something that we need to review. So thank you.
D. Eby: The minister should not hesitate to make announcements today, especially if they're good news for the industry.
I'm going to take the minister back to the issue of the new warehouse. What are the total planned capital and administrative costs for the new warehouse? If she could break those out, that would be helpful, but a global figure would be fine as well.
Hon. C. Oakes: As we are currently moving through the business case, it's premature to look at the capital breakdown of that. It's just too early in the business case planning process.
D. Eby: Last year, the minister was able to give me a figure of $262 million. Can the minister advise where that figure came from, and whether that's an upper limit? Why was I able to get a number last year, but I can't get a number this year?
Hon. C. Oakes: The business case, again, will flesh out the numbers of the specific costs. At this point, I'm not sure where the $262 million came from.
[1715]
D. Eby: Well, me neither, Mr. Chair.
How much has the LDB paid to lease back the warehouse that used to be public but has since been sold, from the date of sale to the most recent date the minister has?
Hon. C. Oakes: It's $1.4 million a year, and that's what is market rent.
D. Eby: When the government sold this warehouse…. There have been a number of different figures given for the value of the sale. Last year the Attorney General said that government received $36 million from the sale of the LDB warehouse. That's a $900,000 difference from the LDB's annual report, which said that the LDB received $36.9 million for this sale. That's a $1.9 million difference from the records that were posted on B.C. OnLine, which has the sale recorded at $38.808 million.
I'm curious about why there are three different figures for the value received for the warehouse, ranging from $36 million to $38.8 million. That's a lot of cash to be wondering about.
Hon. C. Oakes: The net gain of the sale was $36.9 million.
D. Eby: Can the minister explain why the records posted on B.C. OnLine say that the sale was made for $38.8 million, and why there's a difference of — I can never do math on the fly — about $2 million? Let's leave it at that.
Hon. C. Oakes: It's through the differences based on commissions and depreciation on the capital.
[1720]
D. Eby: The difference between commission and depreciation on the capital. So after the sale was made, there was a commission that was paid, I presume, then, to a real estate agent of some type, a commercial real estate agent.
Then I would assume that the depreciation on the capital was some kind of adjustment to the final sale price after the building had been inspected. Can the minister give me a bit more idea about what she means by "commission" — who was the commission paid to? — and "depreciation of the capital"?
Hon. C. Oakes: We can take it on notice and refer it to MTICS.
D. Eby: I want to explain a little bit why I'm surprised about the state of planning — that there's not even a ballpark estimate of the capital and administrative costs for the new warehouse. It was in 2013 when a group called Sedlak Management Consultants was hired as a facility consultant to assist the LDB in finding a new warehouse. Their initial contract expired in October of 2015 with the option for a four- to six-month renewal at the discretion of the LDB, and a maximum payment of $350,000 is set.
Given a two-year contract that could have cost taxpayers as much as $350,000 in relation to establishing a new LDB warehouse which has still not been established or even a budget set, can the minister explain to me what Sedlak Management Consultants were doing and how much they billed taxpayers for?
Hon. C. Oakes: I think what's important to clarify is that there is a difference between building a box and figuring out what the actual material looks like inside that box. We all know that the retail market landscape has changed considerably.
[1725]
You look at the new retailers — Canadian, Lululemon — and what their new retail landscape looks like. Really, Sedlak is a specialist in this subject matter — of making sure that we look at whether it's the automation or what have you within the actual confines of the warehousing aspect of this project. That is the contract that we are working with Sedlak on.
D. Eby: Has the Sedlak contract been extended beyond the initial expiry date of October 27, 2015?
Hon. C. Oakes: Yes, that has extended, but the contract did allow for that.
D. Eby: Can the minister tell me how much has been paid to Sedlak to date?
Hon. C. Oakes: We want to make sure that we provide you the accurate numbers, so with your leave, can we provide that and take it as a point of following up?
D. Eby: I'd appreciate the minister's response in writing, and I appreciate her offer of that.
The other reason why I was surprised to hear how little progress has been made on the warehouse file is because last year, when I was here in this same place asking questions of the minister's predecessor, I asked about the increase in administrative costs for the LDB. I was told by the Attorney General, the Minister of Justice, that a significant portion of the increased administrative costs — it amounts to about 30 percent over the coming years, including this current year that we're in — was planning and preparation for the new warehouse.
I assume the contractors billed close to what the contract was for, which was $350,000. You've got a significant increase, in the tens of millions of dollars, in administrative costs for the warehouse preparation, and yet we still don't have a budget or a vision or a site for the warehouse.
Can the minister explain why I would be told that administrative costs were going up so much due to warehouse preparation and yet there's still no budget or site?
[1730]
Hon. C. Oakes: Could the member opposite provide us maybe a little bit more clarification? We did answer the administration question before. Could you clarify your question, please?
D. Eby: Mr. Chair, with your leave, I'll just take a moment to read off a screen, with apologies.
In the last set of estimates, I said to the minister: "In the summary financial outlook on page 12 of the service plan, the minister has set out operating expenses, administration.... When I look at the numbers, I see a steady climb from $97.1 million in administrative costs in fiscal 2013-14 to a projection, in 2017-18, of $126.2 million in administration costs. This reflects an increase of 30 percent. What does the minister attribute this increase in administration costs to?"
The minister responded: "Quite a lot of that is associated with the costs for the plan to move into the new warehouse. There will be extensive new systems required, preparation, planning, thinking and so on. That's why the administrative expenses are expected to be higher."
My question to the minister is: if that money has been spent on the new systems, the preparation, the planning and the thinking, then why is it that we're still so far behind in this project?
The Chair: Member, thank you very much, but I would just draw your attention to the Speaker's memorandum. It says that unless otherwise permitted, electronic devices must be not be used by a member who is in possession of the floor. I would just remind you of that.
[M. Hunt in the chair.]
Hon. C. Oakes: Again, just a reminder that we have committed to you that we will provide you with that overview of the operating costs. That will be provided.
Just to recap, where you see that increase in administration costs, it is around credit card fees. You have the new point-of-sale system, and with that come licensing fees and depreciation fees. But our commitment to you is that we will provide you with a more fulsome overview.
D. Eby: I thank the minister for that.
In addition to Sedlak, the minister has also, with the LDB, put out a request for proposals for a land adviser, a quantity surveyor and a facility consultant to help with the new warehouse project.
Let's start with the land adviser, which I understand the LDB told Bob Mackin they were expecting to be in place by March 11. Is there a land adviser in place, and if so, who is that, and how much is that person being paid?
[1735]
Hon. C. Oakes: The RFP closed on March 11, so we are in the middle of the process of evaluating what has come in. I estimate that that will take approximately one month to do the evaluation. I would let the member know that this is an open, fair and transparent process through Partnerships B.C.
D. Eby: Can the minister explain the LDB and the government's logic in selling, in the Vancouver real estate market, the property in 2014 and then waiting two years before getting back into the market without lining up some land? Why is it on March 11 that the government is now moving to find land for this warehouse, during which the Vancouver real estate market...? I don't know. It's gone up — what? — 40 percent in those two years.
Hon. C. Oakes: On the specifics around the sale, I would.... Again, it was through MTICS, the ministry, for the specifics of that.
[1740]
I think it's important to note that the terms of the agreement really allow the flexibility as well as the competitive process so that we make sure we're the right-sized fit for the future — 20 to 30 years. Again, when you go and tour the current warehouse, you…. I think it was built in the 60s, and our province has certainly changed a lot since the 60s.
When you look at the opportunities moving forward.... One only has to canvass what has been raised here today in estimates — to talk about the growing wineries, the growing craft beer, the growing distilleries, the cider products. The wholesale market and the fact that you need space for the future has certainly changed — and for consumers. To make sure the consumer has great access to products is, I think, something that we take incredibly seriously. We've done a really thoughtful process of ensuring that the terms of the agreement allow for that. The RFP, like I said, has gone out. It closed on March 11.
I guess the final thing to note is it's not just the area of Vancouver that we're looking at. We're looking at, actually, the Lower Mainland as an area. I like to tease them. To be fair, I thought Quesnel would be a great place. But again, we're looking at the Lower Mainland.
D. Eby: I have bad news for the minister's prospects for real estate in the Lower Mainland. It's an expensive place to buy land right now.
I note that the government rushed to sell this property in August 2014, for $37 million, to a group that included a major donor to this government — the Aquilini Investment Group. Yet there seems to have been no rush in finding replacement land. That has cost taxpayers a lot of money. When the government gets back into the land market, I think the minister will see that.
I'm curious about this land adviser. Is that a real estate agent? Is that what a land adviser is, or is this a consultant? Why is the minister not going to her colleague at the ministry for citizenship and technology to say: "Hey, do we have some public land that we can use?" Why hire yet another consultant on this project?
[1745]
Hon. C. Oakes: When we're looking at site selection on a project like this, it certainly isn't easy. We're looking at…. There are specialized requirements about a preload area in conjunction with specialized pads, and we are working closely with MTICS and Partnerships B.C.
I think it's important to know that.... When you're looking at bringing to bear a project of this scope and size, it's important that we use multiple resources, and we look at evaluating everything to the fullest extent. That is why an executive project board has been established to provide direction and oversight through all the phases of the distribution centre project and to fill the reporting and financial reporting requirements.
The ministry's approach is based on sound fiscal and risk management, is aligned with the government direction for capital projects and will ensure that the Liquor Distribution Branch can continue to provide the highest-quality service to its customers.
D. Eby: Who are the members of the executive project board?
Hon. C. Oakes: The members of this board will be made up by the deputy minister of small business, red tape reduction and liquor distribution, Tim McEwan; the CEO, Blain Lawson; the acting ADM, Tracy Campbell; the vice-president of Partnerships B.C., Mike Houle; and associate deputy minister through the Ministry of Technology, Innovation and Citizens' Services, Sarf Ahmed; and support staff.
D. Eby: Has this board met yet?
[1750]
Hon. C. Oakes: The committee has been meeting regularly since the fall.
D. Eby: I'm wondering about the three consultants that, I assume, then, the executive project board is looking at hiring here: the land adviser, the quantity surveyor and the facility consultant.
The facility consultant, it would seem to me, is actually Sedlak. Is this a separate contractor? What is the purpose of that contractor, if it's different from what Sedlak has been doing? A quantity surveyor — I don't know what a quantity surveyor is. That could be…. I mean, in liquor, it's a bartender, but I don't know what it is in this particular situation. Again, a land adviser — I don't know what that is. Is it a real estate agent, or is it someone with an expertise in distribution centre siting?
Can the minister clarify about these three roles?
Hon. C. Oakes: The land adviser is the person that looks at site selection, the logistics, the traffic flow and zoning. Is it specific for what you're looking at? The quantity surveyor breaks down the premises, the size, the actual box itself. The facility manager is really the engineering company that looks at the HVAC systems, the washrooms, the set-backs — what it looks like. Then finally, the company of Sedlak, again, is the inside. It's the actual mechanization of getting that product through the warehouse.
D. Eby: How much is the minister budgeting for these three consultant roles in relation to this facility?
Hon. C. Oakes: Because we are in mid-process of RFPs going out, we can't taint that process by providing an end budget.
[1755]
D. Eby: We'll move on to a different issue. This is a case-specific issue.
In Vancouver, there is a wine store called the Wine Cellars, which is run by a gentleman named John Clerides. This government's changes to wine store licences mean that Mr. Clerides was hit twice. He lost his discount. He used to be able to buy product at a 30 percent discount. Then he was told that the one-kilometre exemption for wine stores was being eliminated.
Mr. Clerides has been on Davie Street for decades now. He's across the street from a cold beer and wine at a bar that came in after he was in his location. Now he's being told, because he's within one kilometre of that cold beer and wine store, he's going to have to move. I'm sure Mr. Clerides is not the only wine store operator in this situation.
Is the minister familiar with this issue? If so, what is she doing to grandfather these stores that have been there for a long time but now find themselves next to a cold beer and wine store, which is no longer acceptable under the government's rules?
Hon. C. Oakes: Thank you for bringing the question forward. We have been meeting actively and working closely — the deputy minister, the ADM and the CEO — with Clerides. My commitment to both the member for Vancouver–West End and the hon. member from Point Grey is that we'd be happy to sit down, if you would like to meet with staff to go over where that file is and some of the things that we're looking at. We'd be happy to set up a meeting if that would work.
S. Chandra Herbert: Thank you to the minister and to my colleague from Point Grey for raising this question. I think the key thing, for many people in our community, is that it's such a popular wine store. It's its 30th year. It was really kind of the pioneer, so to speak, for wine stores in B.C. and provides incredible selection with an incredible staff.
The concern we have is that with the one-kilometre rule, there really doesn't appear to be many places at all in Vancouver that you could site such a store, and certainly not in the West End, where I live, because there's just no more land — unless you put it out on a barge somewhere, which I don't think the minister is going to suggest. But hey, maybe.
[1800]
Really, I guess the question is: what is the timing in terms of this desire to basically shut down the store, if that's where the minister is going? I'm hoping the minister is not, that she will understand that this store was here first and that it deserves the care and attention it should have been given before these rules came in.
I certainly will follow up with her, but I just wanted to ask on the record, so we'd get a sense of what the timing is. As you know, sometimes we can be told all sorts of things, but if it's not the record, it may never have even happened.
Hon. C. Oakes: Just to provide you, maybe, with some certainty and clarity, first of all, I should point out that it is business as usual. There is nothing that would suggest that the business would need to close.
We do recognize that when we made the change to wholesale, we did reduce the 30 percent commission. We understand that as a small business…. What we wanted to provide for a few of the small businesses that were affected by that change in commission rate were a couple of options. The options that we provided were that if they decide…. They can move and become a full liquor store so that they could sell all products. They have ten years to make that decision, if they would, in fact, like to change their licence for that.
We're looking at some other supports with a few of these independent wine stores that have been affected. Because we do, as a small business, recognize what the member has brought forward.
Again, I encourage the member opposite. We'd be happy to sit down with you and to listen if you've got other suggestions. We'd be happy to listen and to work closely with the small business.
S. Chandra Herbert: Just to ask: what are the "other supports" that the minister refers to?
[1805]
Hon. C. Oakes: Thank you to the member opposite.
Some of the other things that we are looking at supporting. We've heard and we are currently evaluating the request for a fee for tasting high-end products that had been raised by some of the independent wine stores. We are also offering to the independent wine stores the option to go wine and grocery, and they have six months to execute that. Finally, it had been brought forward that they would like to be an agent of record, and that is being evaluated.
D. Eby: This is in relation to — I'm going to be delicate in how I phrase this, Mr. Chair, because the minister and I have had differences over this — how the LDB calculates commissions to wineries, whether they do it on the wholesale price or whether they do it on the retail price.
There was a cost of $5.3 million attributed to a decision to calculate this on the retail price instead of on the wholesale price. The minister, I'm sure, will correct me if I've got my description of this process wrong, but can she tell me whether that cost of $5.3 million has been confirmed to be the entirety of the cost? If so, where does it show up in the budget documents? Also, whether or not it has become the practice of the LDB now to calculate on the retail price instead of the wholesale price.
Hon. C. Oakes: B.C. commercial wineries do receive a 7 percent commission on their direct sales to wholesale customers. As part of the move to a new wholesale pricing model, the LDB reviewed all sales agreements. During this review, the LDB did determine that the commission to commercial wineries was based on a product's retail price and not its wholesale price.
While it was originally characterized as a technical error, a further review found that this was not factually demonstrable, as the commission had not been paid on the retail price during the entire lifespan of the program. Despite this, the LDB believes and continues to believe that going forward, it is more appropriate to base the commission on a wholesale amount.
D. Eby: Can the minister advise whether that $5.3 million amount was, at the end of the day, the difference for the seven years that the commission was based on the retail not the wholesale amount?
[1810]
I can rephrase that question if that doesn't make sense to the minister. I'm trying to be clear — maybe failing at the end of the day.
Hon. C. Oakes: If the member opposite would permit me, I put a "not" in one of the parameters. So it had been paid on the retail price during the entire life span of the program — the commission. My apologies for that.
The member asked if it was $5.3 million over seven years. That is correct.
D. Eby: Has the LDB put in place some type of a review process to catch similar interpretation issues that may be identified in other agreements and other commission payments that are made by the LDB? I'm curious about how this went on for seven years before it was detected, whether there's a lesson that has been picked up from this and whether there are other reviews that have been done.
Hon. C. Oakes: Thank you for the question.
As part of the separation of the changes that we've made on retail and wholesale, we have changed the review process. We thoroughly review all of our contracts. It goes through a finance team, a regulatory team, legal, and then it goes to the executive, so a thorough review process is in place.
D. Eby: That concludes my questions.
Just before I close off, I wanted to thank the minister and her staff for their prompt answers, which enabled us to get through today rather than extend this over two days. I really appreciate that. I found the answers very instructive, and I appreciate that very much, all of you — for coming and being so frank in the responses.
I also wanted to take a moment to thank all of the liquor store and distribution centre employees for all of their hard work slaking the thirst of British Columbians. I wanted to recognize all the small operators across B.C. running stores, working in stores — B.C. producers big and small.
[1815]
I know we've got a couple of macrobreweries in British Columbia as well as a whole bunch of craft microbreweries, as well as the wineries, all the wine store workers and the craft spirit producers.
I'm sure I've missed some. I wouldn't want to miss the hospitality workers that drive our tourism industry and make our province an exciting place to visit. Thank you to all those people who make the system work. It's a challenging system. It's a system where there's a lot of room for improvement. I hope that we can get to that place with a cooperative spirit, which is certainly what I saw here today.
Hon. C. Oakes: If you would permit me, I would like to, on the record, make a quick clarification for the record that, in fact, licences can't be sold. The business is sold, and the licence is transferred. The general manager must approve the transfer of the licence. That was in regard to an earlier question.
I, too, if I may be permitted just a quick comment, say thank you very much to an amazing team of staff that have worked very hard on significant changes that we've seen in the liquor world, both on the wholesale and on the retail side.
To the member opposite: I know that while you and I don't always necessarily agree on a direction, what I certainly know is that you and I are both passionate about supporting the industry and want the best for it.
I know that the member opposite, as do I…. I am incredibly pleased. When you see the amount of growth and you see what is happening in multiple sectors of beverages in British Columbia, it's an interesting time for us. We'll continue, through the changes, to make sure that we are supporting our small businesses.
I would like to close with the same compliment to the members of our liquor stores, our employees, who do a tremendous job for us. We thank them very, very much for the work that they do.
With that, I move that the committee report resolution of Votes 15 and 16 of the Ministry of Agriculture, progress on the Ministry of Small Business and Red Tape Reduction and liquor distribution, and ask leave to sit again.
Motion approved.
The committee rose at 6:17 p.m.
Access to on-line versions of the official report of debates (Hansard),
webcasts of proceedings and podcasts of Question Period is available on the Internet.
Chamber debates are broadcast on television.
Copyright © 2015: British Columbia Hansard Services, Victoria, British Columbia, Canada