February 14, 1936

CON

Hugh Alexander Stewart

Conservative (1867-1942)

Mr. STEWART:

I know the hon. member has criticized this method of acquiring armouries, and as some were acquired between 1930 and 1935 on this basis perhaps a statement from me is not out of place. The hon. member seems to think that this method is unsound. Let me point out to him that ordinary public works of the dominion are not paid for over a period of years. All buildings constructed in the ordinary course of events are paid for out of revenue. If in one year we undertook to pay the whole cost of an armoury we would be obligating ourselves to the payment of a large amount of money out of any one year's revenue. In the cities, or other places where there are regiments, there are associations of officers and others, public spirited gentlemen, who desire these accommodations. They feel that to ask a government in any one year to expend the amount necessary to construct a building constitutes a heavy demand. Therefore they have devised a scheme by which over a period of years a building will be acquired or constructed and paid for on the instalment plan. In entering into the transaction the department have an agreement with the association and have supervision over construction. It must be constructed according to plans approved by the department, and under public tender. There is no opportunity, such as the hon. member suggests, for an association t'o run at large or to construct a building at any cost and entirely without supervision of the department, afterwards calling upon the department to pay the cost. The plan is not as unsound as apparently the hon. member 'believes it to be. I know some purchases have been made on a very favourable basis. The reason for the plan, as I have indicated, is that if constructed in one year and paid out of revenue the cost would be a heavy burden indeed.

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LIB

Alexander MacGillivray Young

Liberal

Mr. YOUNG:

If the explanation of my hon. friend the former Minister of Public Works (Mr. Stewart) with respect to armouries is sound, it is equally sound with respect to any public building. I entirely agree with my hon. friend over here that when public buildings are erected for Canada the dominion government can borrow money more cheaply than any private concern, and therefore can build the building more cheaply. I recognize that this is not the first time this has been

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done. I am not in favour of this method of building public buildings. It has been the method used particularly with respect to armouries; and there may have been some reason for using it with respect to armouries.

I should like to ask the minister when this building was erected, what was its cost, how did the department supervise the cost and know exactly the final result in that regard, and also what rate of interest is being paid.

I take it that the cost is amortized, and I am sure that if we went into these matters in detail we should find that we are not saving money by buying buildings in this particular way.

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LIB

Pierre-Joseph-Arthur Cardin (Minister of Public Works)

Liberal

Mr. CARDIN:

The agreement between the department and the Victoria Rifles Armouries Association was entered into on March 22, 1932. It was agreed that the association would erect the armoury, not to exceed $190,000 in cost, which included architects' fees and so forth. The dominion government agreed to take over the building on a rental-purchase basis covering a period of twenty years, with an annual payment of $15,140.

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CCF

Abraham Albert Heaps

Co-operative Commonwealth Federation (C.C.F.)

Mr. HEAPS:

What will be the total amount paid in at the end of twenty years for this building?

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LIB

Pierre-Joseph-Arthur Cardin (Minister of Public Works)

Liberal

Mr. CARDIN:

That is a matter of calculation.

Mr. HEAPS': I have calculated it roughly, and it means that we are paying over $300,000 for a building erected at a cost of $190,000. I would ask the minister to answer the question put by the hon. member for Saskatoon (Mr. Young) as to the amortization rate.

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CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

Mr. Chairman, some years ago I opposed this plan of buying public buildings. When we had the responsibility of providing facilities for volunteer military organizations throughout the country in time of great depression it became apparent, when proposals were made by men who had put their own money into these things merely for the purpose of trying to assist their fellow citizens to have a place in which they could gather and train, that we could charge to revenue the ordinary sum that would be payable for rent or upkeep, and a very low rate of interest as things then were-though not low to-day-to complete the purchase of these buildings on a rental basis. No capital obligation was incurred on the part of the country, nothing was added to the debt, and no more money was expended than we would have paid by purchasing outright, except the trifling sum for rental if we had continued to rent them. The Minister of Finance will remember one

instance in which I joined issue with him because I thought it was a wrong principle, but as a matter of fact in connection with armouries it was the only way in which facilities could be provided at all. It will be recalled that it was a Liberal administration which first fixed on this plan of dealing with them, and I must say that I believe it has turned out satisfactorily. I will give an illustration. There has been an extreme depression in the value of real estate in western cities. There was a building in one of our western towns occupied with stores in a military district. The building cost three or four times what it could be bought for today, and the owner said, "Instead of paying rent, take it off our hands. We are not getting anything out of it, and we would like you to have it at this figure," which was to be paid over a period of years and which amounted in reality to less than the rent that was paid a few years ago. The result is that the building at the end of ten years-it was then practically new-will belong to the crown without having added anything to the debt, without incurring any capital charge. The property will have cost just a little more than was being paid for .rentals.

I have in mind another instance, outside of Canada, in which we had a building constructed through the public spirit of the gentleman who represented us in that particular country. Later we were able with improved conditions to pay the cost of the building. The interest rate at that time I think was four and a half or five per cent. I have in mind still another building where conditions were similar. The real fact is that in many parts of this country you can purchase buildings at a price very much less than cost. For instance, many of the banks have closed their branches in western towns, and we found it desirable to purchase for postal facilities, at a cost sometimes only one-third of the original cost, the bank premises in question. In these cases the amounts involved were small and we were able to buy the properties at once. There are other cases where owing to the depressed state of real estate, and the desire to get something out of the wreck, people have been induced to sell their properties at a very low price on a rental basis, capitalized at a very low rate of interest, in some instances lower than the going rate.

I mention these things because I was not at first friendly to this method, but when I came into office I found that it was admirably adapted to the circumstances in connection with many matters, but more notably

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in connection with the providing of suitable premises for those who are offering volunteer service and who might at any time be called upon to protect life and property in this country. It was largely from the point of view of that consideration that the plan was continued as originated by my friends opposite, without adding anything to the debt, and adding but very little to the annual rental charges. I think it fair to make that statement because the method has been limited largely if not wholly to armouries.

There are one or two cases other than armouries. Some years after I first came to this house I asked some questions about buildings in Ottawa. I think I am not saying too much when I say that there are buildings in this city that we have paid for two or three times over in rents. Had we had just the plan that is now being considered we. would own at least three buildings in the city of Ottawa-I am putting it very low-which to my certain knowledge we have paid for three times over in one instance, two and a half times in another, and once, or more than that, I am told, in another. That is the reason behind this plan which was adopted some years ago by our predecessors. At the time I was not very friendly to it, but, as I told my hon. friend the Minister of Finance, in practice I find that it has worked out very much better

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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

As a matter of fact you gave me quite a ride on it.

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CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

Where was that?

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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

In Regina.

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CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

It worked out very much better than I had expected. Because of the depression the cost of the buildings has been so low that in many instances it does not represent anything like the original cost, exclusive of the land.

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CON

Hugh Alexander Stewart

Conservative (1867-1942)

Mr. STEWART:

Do these contracts not

contain a clause that permits the department to pay up the amount in full at any time they desire?

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LIB

Pierre-Joseph-Arthur Cardin (Minister of Public Works)

Liberal

Mr. CARDIN:

Yes.

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CCF

Abraham Albert Heaps

Co-operative Commonwealth Federation (C.C.F.)

Mr. HEAPS:

The argument of the leader

of the opposition (Mr. Bennett) does not seem to bo as sound as his arguments usually are. In many cases it was possible to erect these armouries only because it was known that an agreement with the government was to be consummated. In reality these companies had behind them the credit of the government, otherwise the buildings could not have been erected. Many of these buildings are not old, the one we are now dealing

with having been erected in the past two or three years. I should like some statement from the minister as to whether this practice is to be discontinued. The question has been asked as to the rate of interest at which these amounts are to be amortized over the period of twenty years; I wonder if the minister has that information before him.

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LIB

Pierre-Joseph-Arthur Cardin (Minister of Public Works)

Liberal

Mr. CARDIN:

In connection with Montreal, the rate is five per cent.

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CCF

Abraham Albert Heaps

Co-operative Commonwealth Federation (C.C.F.)

Mr. HEAPS:

What about the one at

Westmount?

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LIB

Pierre-Joseph-Arthur Cardin (Minister of Public Works)

Liberal

Mr. CARDIN:

That is six per cent.

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CCF

Abraham Albert Heaps

Co-operative Commonwealth Federation (C.C.F.)

Mr. HEAPS:

The one at Westmount was

built in 1931, and at that time I believe the government could have borrowed money at a rate of about four per cent. For twenty years we will be paying at least two per cent per annum more than we should be paying.

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LIB

Gerald Grattan McGeer

Liberal

Mr. McGEER:

Mr. Chairman, the principle of financing our militia by private means is thoroughly unsound. The militia should be considered as definitely under the control of the national government. I happen to have had the experience of being told by militia officers in Vancouver that a number of men could not turn out for the parade held on the occasion of the celebration of the king's jubilee because they were not equipped with shoes in which to march. I was told that this equipment was being supplied through contributions made by the officers, but the depression had hit the officers and their contributions were no longer available. If Canada has fallen to such a pitiful level that she cannot maintain her militia, then it is nearly time to close out this particular service. If this service is to be maintained by private contributions, the inevitable end will be the establishment of private armies in the dominion, to the disaster of the country. Armouries have been built with funds provided by private enterprise, and we are paying five and six per cent interest on this money. The building of these armouries should be an obligation upon this dominion, and I think the time has arrived when we should recognize the militia as a worthy unit of the institutions that form the fabric of the government of the dominion. Our armouries should be built by the government, and the government should supply the necessary funds to equip the men. The pitiful weakness of our whole scheme of government seems to stand out. We are a nation rich in natural resources; we have no standing army and we have no naval obligations, but in the matter of militia we have probably the lowest standard of any country in the British empire. It is a sorry reflection

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upon the administration of public affairs when we have to maintain our militia by means of contributions from the officers and other private individuals. I have been informed that the Seaforth cadets in Vancouver receive a contribution from the national government of only one dollar each per year. As one officer told me, this is equivalent to the cost of one belt for each cadet. This is only one of innumerable instances. Whatever militia service we intend to have should be maintained without resort to the unnecessarily costly system of assistance by private enterprise.

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SC

James Alexander Marshall

Social Credit

Mr. MARSHALL:

Could the minister give the committee the names attached to the agreement in connection with the Montreal armouries?

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LIB

Pierre-Joseph-Arthur Cardin (Minister of Public Works)

Liberal

Mr. CARDIN:

I cannot give the names at the moment. My hon. friend understands, I think, that the deed was signed by someone personally on behalf of the armoury, the other party being the Minister of Public Works.

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February 14, 1936