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CBC, VIA Rail considered for auction block: Documents

 

 

BY ANDREW MAYEDA, CANWEST NEWS SERVICE

JUNE 1, 2009 6:49 PM

 

OTTAWA — The federal Department of Finance has flagged several prominent Crown corporations as "not self-sustaining," including the CBC, VIA Rail and the National Arts Centre, and has identified them as entities that could be sold as part of the government's asset review, newly released documents show.

 

In its fiscal update last November, the government announced that it would launch a review of its Crown assets, including so-called enterprise Crown corporations, real estate and "other holdings."

 

Finance Department documents, obtained by Canwest News Service under the Access to Information Act, reveal that the review will focus on enterprise Crown corporations, which are not financially dependent on parliamentary subsidies. Such corporations include the Royal Canadian Mint and Ridley Terminals, which is a coal-shipping terminal in Prince Rupert, B.C.

 

But the documents also reveal that the government will consider privatizing Crown corporations that require public subsidies to stay afloat.

 

"The reviews will also examine other holdings in which the government competes directly with private enterprises, earn income from property or performs a commercial activity," states a Finance briefing note dated Dec. 2, 2008. "It includes Crown corporations that are not self-sustaining even though they are of a commercial nature."

 

In the briefing note, the Finance Department identifies nine Crown corporations that fall in that category, including Atomic Energy of Canada Ltd., the CBC and VIA Rail.

 

The government announced last week that it will split AECL in two and seek private-sector investors for the Crown corporation's CANDU nuclear-reactor business.

 

The Crown asset review comes as the government struggles to contain the country's deficit, now expected to top $50 billion this year. The Jan. 27 budget assumes that the government will be able to raise as much as $4 billion through asset sales by the end of March 2010.

 

The budget identified four federal departments whose Crown assets are being reviewed first: Finance, Indian and Northern Affairs, Natural Resources, and Transport and Infrastructure. VIA Rail is overseen by the Transport Department, while the CBC and the National Arts Centre fall under the portfolio of the Canadian Heritage department.

 

The Finance Department documents confirm that all government assets will eventually be reviewed.

 

Privatizations tend to work well when Crown corporations enter a reasonably competitive market with a good chance of turning a profit, said Aidan Vining, a professor of business and government relations at Simon Fraser University. Unlike successfully privatized firms such as Canadian National Railway, it's not clear that CBC and VIA Rail could operate as profitable ventures while maintaining the public mandates they provided as Crown corporations, he noted.

 

"They're not the classic privatization candidates, where you sell and walk away," said Vining, an expert in Crown corporation privatizations. "Unless, of course, you're prepared to fully withdraw from the public purpose (of the Crown corporation)."

 

Certainly, the sale of a flagship Crown asset such as the CBC would be politically controversial. After the CBC announced this spring that it would lay off hundreds of employees, opposition critics accused the government of turning a cold shoulder to the public broadcaster's struggles.

 

Under the Financial Administration Act, Parliament would have to approve the privatization of any Crown corporation. "It's hard to believe that some of these sales would go forward in a minority Parliament," said Vining.

 

The Finance Department has also begun to examine the government's vast real-estate portfolio, which includes 31 million hectares of land, and more than 46,000 buildings totalling 103 million square metres — more than double the office space available in the Greater Toronto Area, according to the Finance documents. The government's holdings are worth at least $17 billion, Finance officials estimate.

 

A briefing note labelled "secret" said that the Department of Indian and Northern Affairs acquired $7 million in surplus properties between 1998 and 2006 for potential use in land-claims deals. Over the same period, the properties cost $2 million to maintain. Divesting such properties could not only generate revenue for the government, but also cut "ongoing operations and maintenance costs," states the briefing note.

 

A Finance Department spokeswoman said the asset review won't necessarily lead to sales in all cases.

 

"Reviews will assess whether value could be created through changes to the assets' structure and ownership, and report on a wide set of options including the status quo, amendments to current mandates or governance," department spokeswoman Stephanie Rubec said in an e-mail. "In some cases, it may be concluded that selling an asset to a private sector entity may generate more economic activity and deliver greater value to taxpayers."

 

 

Crown corporations identified by the government as "not self-sustaining":

 

(Company name, commercial revenues, parliamentary subsidy, expenses)

 

Atomic Energy of Canada Ltd., $614.2 million, $285.3 million, $1.3 billion

 

CBC, $565.5 million, $1.1 billion, $1.7 billion

 

Cape Breton Development Corp., $5.1 million, $60 million, $94.1 million

 

Federal Bridge Corp. Ltd., $14.6 million, $31.0 million, $42.9 million

 

National Arts Centre Corp., $26.0 million, $40.6 million, $65.7 million

 

Old Port of Montreal Corp., $16.7 million, $15.1 million, $32.0 million

 

Parc Downsview Park Inc., not available, not available, not available

 

VIA Rail Canada Inc., $293.9 million, $266.2 million, $505.5 million

Source: Department of Finance, Public Accounts of Canada

 

Note: Financial results are for 2007-08

 

http://www.ottawacitizen.com/Rail+considered+auction+block+Documents/1652330/story.html

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