No, the engineer in his report would have to be careful not to place the estimate too high, because you give a guarantee to the financial people of a certain amount at certain times. Difficulty arises from the necessity of fixing the subsidy in advance.
That would be the case if a company is investing money but with a few individuals building it on the strength of preliminary arrangements made with the government on the basisi of a valuation with a condition that they be paid three per cent on the cost of it, then after the completion of the dock the actual cost could be obtained from data furnished during the construction and the payment could be made on that.
The very essence of this is that you shall be able to give financial people absolute certainty of so much money at certain times. If the government were to allow that payment to be fixed on an excessive valuation that would be improper; that would realize the danger which my hon. friend suggests. We would have to see that the report of the engineer was carefully made, and did not value the property in excess of its real value.
This does not seem to go on the same principle as the last Act. Reading subsection 2 of section 4, the basis of the subsidy would appear to be as the1 minister suggests, that the chief engineer of the department shall make a careful estimate, before the work is executed, as to the probable expense, and upon that the government shall base a subsidy that shall be final. That would appear to 1 be in accordance with the wording of the
section. But I know as a matter of fact tiiat under the old Act, after the work had been executed the government sent an engineer to value the work, and by the valuation of the engineer and by the examination of the accounts, the government ascertained what was the actual cost. I do not know whether there is any reason for changing the system. Take the case of Collingwood. After all the work was executed, Mr. Coste, I think it was, examined the work and determined that a certain amount must necessarily have been expended. Also certain accountants went into the matter and went over the books and papers so far as they could be obtained for the purpose of ascertaining where the money had been actually expended. I think that was in accordance with the old Act. Is there any reason for departing from that principle? Is not that a better principle than this merely preliminary estimate before the work is executed?
I rather think that the old system was the better one. But the difficulty has been that it .leaves an element of uncertainty as to the payment of the subsidy. Although that did not avail against the Collingwood dock, it has been found to avail against other schemes of docks. The Collingwood people were willing to construct a dock under these terms. There was some discussion last year over the Collingwood dock. I am not familiar with the details, but I know that the essence of the old arrangement was that the cost was determined by a report of the engineer at the time of completion, and on that the subsidy was paid. Now it has been found that financial people who have been asked to assist another dock scheme, particularly the one at St. John, N.B., people who were disposed to put money into it, said, Well, we are financial people but we are not dock operators, and we do not want to be called upon to take the risk of this dock being operated to the satisfaction of the government; we think the government should make some arrangement for the operation of the dock. It is to meet that difficulty that this change has been made. Therefore we propose to have a report made by the engineer at the beginning, and in view of the facts suggested by hon. gentlemen opposite, we shall satisfy ourselves that the report is a very conservative report, and thereupon a valuation shall be fixed. Then we shall say to the financial people, We have satisfied ourselves that this dock will cost say a million dollars, and we will agree to give you 3 per cent upon that million dollars for twenty years, and we undertake by another method to look after the operation of the dock. It is to meet that condition that the change was made.
I think the minister has made the time limit rather short when the purpose is to get new docks. I Mr. LENNOX.
can understand that docks already in operation would take advantage of the time for enlarging them, but is there a sufficient inducement for capital to take hold of a new dock in a guarantee- of twenty year bonds at 3 per cent? Unless the minister may have some information I have not got, I think it will be difficult to find capitalists willing to build docks with such a limited guarantee as twenty years.
I should not like to make the conditions too hard, because the object is to secure the construction of docks at appropriate places. On the other hand, I would not like to make the conditions so easy that people would be tempted to go into the enterprise as a pure speculation. It is well that people should look at the matter carefully, and be content with a moderate guarantee such as the government gives them, and look for a balance out of the operation of the dock itself. The subsidy originally allowed was only 2 per cent, we increased that some years ago to 3 per cent. A twenty-year subsidy of 3 per cent is a fairly strong inducement for people to put money into an enterprise where there is a commercial basis for it. They would have to look for the development of trade for their compensation over and above this twenty years. But unless there is that condition of trade which gives promise of some revenue to the dock, then it is not desirable that the dock should be constructed. We do not want to make it so easy for docks to be constructed that the construction shall be undertaken at numerous places where there is not really business for them.
And especially in view of the fact that the tendency of money is always downwards. Three per cent is not a bad interest on money, it is all the interest that banks will allow. Three per cent for twenty years would indemnify a company for going into the enterprise.
I would think that the agreement that we have made, for example, with the Collingwood dock under the Act existing at the time would continue. But. if there is any doubt about the matter I would be glad to take the hon. gentleman's suggestion into consideration. We have no desire to prevent payment to existing docks. If my hon. friend really thinks that it is open to doubt I will let the Bill stand in committee. It is one of those questions with regard to which we should make assurance doubly sure and I should be very
glad to let the Bill stand and ask the Department of Justice to look into it.
It does not seem to me that clause 9 provides that you should be paid for any outlay besides operating expenses and maintenance. Suppose you have an initial outlay of $10,000 or $20,000 to put a dock in condition after you take it over ; then you can only pay for the advances which have been made out of operating expenses and maintenance.
Read the last portion of section 9. It says that the government shall apply the balance first in repayment of the advances made under the next preceding section and secondly in payment of accrued interest on bonds. But the working expenses must be the first charge. In order to have the cow give milk, the cow must live. You must have working expenses in the first place and anything over and above that is applied to two things, first, to the payment of government advances and. next, to the payment of interest on bonds, if there are any outstanding.