Portfolio organizations: Standing Committee on Government Operations and Estimates—June 10, 2022

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Canada Post health and safety

Key messages

Key data point

Background

Level 2 medical masks

Distribution of level 2 masks across the entire Canada Post network has been implemented. Employees receive instructions for the new masks when they arrive at their work location. To date, the masks have been well-received by employees due to their ease of use and added protection.

Devices requiring a fit test

Canada Post is required to verify the safety of any respiratory device used in the workplace by an employee, and follows Canadian Standards Association Group standards, which require a fit test for certain respiratory devices (commonly referred to as N95 or KN95), with no exceptions. The fit is crucial to their effectiveness; therefore, a qualified fitter must conduct a fit test for each individual.

With over 50,000 employees in workplaces across the country, the requirement to safely use respirators with fit tests is not feasible in the short term. Starting with 3 of the company’s major facilities, Canada Post has piloted the use of N95 respirators with the final conclusion of this pilot under review.

Mandatory vaccination

Canada Post’s mandatory vaccination practice came into effect on October 29, 2021, and all employees have been informed. The policy is in line with the federal government’s approach and was developed following a significant process of consultation and discussion with all bargaining agents, including the Canadian Union of Postal Workers.

Under the practice, all employees must attest to their vaccination status. As of November 26, any employee who is not fully vaccinated, is partially vaccinated and not on their way to full vaccination, or is not being accommodated based on limited grounds, has been placed on leave without pay.

Canada Post Financial Stability

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Background

The Canada Post Corporation is a federal Crown corporation created by the Government of Canada in 1981 under the Canada Post Corporation Act to operate a postal service for all Canadians. Canada Post’s long-standing mandate is to serve every Canadian address while maintaining financial self-sustainability.

Canada Post has the exclusive privilege to collect, transmit and deliver letters up to 500 grams within Canada. The Canada Post group of companies includes Canada Post and its 3 subsidiaries:

Canada Post operates at arm’s length from the government and reports to parliament through the Minister of Public Services and Procurement. The minister is accountable for providing guidance and oversight to ensure that the overall direction and performance of Canada Post aligns with the government’s policies and objectives.

The pandemic has changed the needs of Canadians dramatically, putting further pressure on the corporation’s existing business model and operations. To grow the business and better meet these evolving needs, Canada Post must invest to expand capacity, improve the customer experience and innovate its operations.

The corporation faces a structural decline in mail volumes as customers shift to digital alternatives. The rapidly declining letter mail volumes, financial commitments such as funding pension obligations, expanding delivery network and maintaining success in a highly competitive parcel industry are challenges that may put the corporation’s long-term financial self-sustainability at risk.

Canada Post 2021 Annual Report

The Canada Post segment’s loss before tax was $490 million in 2021. That is an improvement from a loss before tax of $779 million in the prior year. Revenue for the Canada Post segment increased by $407 million, or 6.3%, in 2021 compared to the prior year. Compared to 2020, parcels revenue grew, transaction mail revenue increased slightly, and direct marketing revenue and volumes started to recover toward pre-pandemic levels. Year-over-year comparisons are affected by COVID-19: in 2020, direct marketing and transaction mail volumes had declined substantially while parcels volumes had increased significantly. Cost of operations increased by $127 million, or 2.0%, in 2021 compared to the prior year.

With sustained and elevated demand for parcel delivery across the country, Canada Post is responding by investing to expand capacity, improve service and innovate operations.

Canada Post quarter 1 2022 financial results

Canada Post recorded a loss before tax of $129 million in the first quarter of 2022 as revenue declined more than costs.

Revenue fell by $120 million, or 6.1%, in the first quarter of 2022 compared to the same period in 2021. The largest component of this decline is from lower parcels volumes in the first quarter of 2022, compared to high parcels volumes in the first quarter of 2021, when many stores were closed due to COVID-19.

Transaction mail revenue and volumes also decreased from the prior year. Direct marketing continued to recover from the impact of customers postponing or cancelling marketing campaigns, which had begun early in the pandemic, and so revenue and volumes increased.

Cost of operations decreased by $77 million, or 2.3%, in the first quarter of 2022 compared to the same period in 2021. Labour costs decreased by $34 million in 2022 due to a drop in parcel volumes and one less paid day compared to 2021, while employee benefits costs decreased by $85 million due to an increase in discount rates. These were partly offset by higher transportation and facilities costs, as well as increased spending to sustain the network and improve its capacity.

Canada Post rural/urban delivery pricing

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Background

Parcel rates in Canada are non-regulated and fully competitive within the industry.

Canada Post determines shipping rates based on several factors, including parcel weight and size, the distance between origin and destination, as well as the costs of processing, transportation and delivery. Canada Post reviews its origin and destination grid regularly in response to competitive pressures and as part of normal evaluations.

The rates offered by other companies, such as UPS, FedEx, and Purolator, are solely determined by them based on factors such as the location from their major shipping hubs and their network’s frequently travelled areas. Some companies offer a flat rate or a subsidized rate, and others offer free shipping with a minimum purchase. These decisions are made by each individual company.

While the community of Wendake is in the Quebec City area, the postal code of G0A 4V0 for Wendake is considered a ‘rural’ postal code. While Wendake is an urban setting, the community falls under the 1994 Rural Moratorium (as does Kahnawake), which was introduced by the federal government and has not been updated since it was introduced.

With regards to the postal code of G0A 4V0 for Wendake, the first letter of the forward sortation area (FSA) uniquely identifies the province or territory. A 0 indicates a rural area, while any other digit 1 through 9 represents a (comparatively) urban area. This is not unique to Indigenous communities or communities in Quebec.

Rehabilitation of National Capital Commission assets including 24 Sussex, Rideau Hall, and Stornoway

Key messages

Key messages on preliminary functional requirements study—24 Sussex:

Key messages on the cost of recent studies relating to the future of 24 Sussex:

Key data points

Background

In 2017, the National Capital Commission commissioned in-depth building condition reports for the largest and most complex buildings in the official residences portfolio. These reports, made public in 2018, found that 58% of the assets in the official residences portfolio were considered to be in “poor” to “critical” condition, including half of the main residences. This analysis was refreshed in 2021 using the same methodology. The findings are laid out in the Official Residences of Canada: 2021 Asset Portfolio Condition Report, which details the current state of all 6 official residences and their secondary buildings under the stewardship of the NCC. The latest findings confirm that the overall condition of the portfolio continues to deteriorate with only 24% of the assets considered to be in “good” condition, down from 34% in 2018. The report was presented to the NCC’s Board of Directors on June 23, 2021, and subsequently published on the NCC’s website.

The report highlights the shortfall in funding required to restore and maintain the heritage buildings in this asset portfolio. Since the 2018 report, the NCC has invested approximately $26 million in capital funding on rehabilitation work. Despite these investments, 61% of the assets in the official residences portfolio remain in poor or critical condition. The cost of addressing the portfolio’s deferred maintenance deficit has increased and it is now estimated that a one-time injection of $17.5 million per year, over 10 years—for a total of $175 million—is needed to close the deferred maintenance gap and support sustainability investments and universal accessibility, in accordance with federal legislation. In addition to this sum, the report identifies a need for $26.1 million in annual funding to cover ongoing maintenance, repair, and renovation costs.

24 Sussex

Over the last decade, the NCC has completed some work related to health and safety at 24 Sussex including the rehabilitation of chimneys and fireplaces, fire compartmentalization, stabilization of escarpment, and the removal of hazardous materials, such as asbestos, from the main building. However, the corporation has not been able to proceed with the extensive rehabilitation of the residence and has been limited to completing repairs that were urgently required for health and safety.

Since the property has not seen significant investment in over 60 years, the additional work required would include the rehabilitation of the building envelope, replacement of mechanical and electrical systems, and construction of universally accessible entrances and washrooms. All buildings on the site would require extensive recapitalization and the NCC would need prolonged access to the residence. The NCC is working with its federal partners to develop a plan for the future of 24 Sussex Drive and is ensuring that issues related to security, functionality, environmental sustainability, universal accessibility, design excellence, and heritage preservation are taken into consideration in its preparations.

As part of its duties as steward of the official residences, the NCC is renewing various studies, including functional program options for the building, site surveys of the grounds, the main building and the four secondary buildings, asbestos testing, and other life cycle evaluations. Investments of $767,000 have been made since 2016 in engineering reports, feasibility studies, functional program options, hazardous material abatement surveys, cost estimates and third party cost validation reports for the 24 Sussex site (such as, main residence, pool house, and 10 Sussex Drive).

The NCC is working with federal partners (including Public Services and Procurement Canada, Royal Canadian Mounted Police (RCMP), Privy Council Office, Finance Canada, and Treasury Board Secretariat) developing a plan for the future of 24 Sussex Drive that includes a range of options.

This work includes a preliminary functional requirements study for the prime minister’s official residence. Drafted based on input from various federal partners as well as several previous occupants, the study supports the development of a thorough and appropriate functional program, which will act as a guide in the planning and design of potential future solutions for the official residence of the prime minister of Canada. The purpose of the study was to determine the spatial requirements suitable to address both their governmental and personal functions. Future stages of work may address issues of site or design.

Rideau Hall

Since 1986, the buildings and grounds of Rideau Hall have been managed by the NCC, which is implementing a long-term rehabilitation project to ensure that the valuable heritage buildings on the estate remain in optimal condition.

The NCC assists the Office of the Secretary of the Governor General of Canada (OSGG) in delivering their program of work at Rideau Hall, recognizing that it is an official residence, a public destination, and a workplace for over 200 federal public servants, including employees of the OSGG and the NCC, the RCMP and other agencies.

Since 1988, development plans, supported by asset condition reports, for both the buildings and grounds have been completed and several upgrades have been made. The NCC also completes projects on behalf of the OSGG in support of its programming at Rideau Hall. Some projects undertaken at Rideau Hall fall outside NCC’s scope to furnish, maintain and rehabilitate the property. These are commissioned and paid for by the OSGG, including a recent feasibility study examining multimedia options for the ballroom and installing an access control gate in the Monck Wing.

All NCC projects that are planned or underway at Rideau Hall are coordinated in collaboration with the OSGG in order to ensure effective implementation.

Overall, the Rideau Hall main residence was determined to be in “fair” condition in the NCC’s Official Residences of Canada: 2021 Asset Portfolio Condition Report.

Stornoway

Stornoway holds a “recognized” federal heritage designation. The main residence functions primarily as a private residence for the leader of the opposition and their family. Since 1988, development plans, supported by asset condition reports for both the building and grounds, have been completed and several upgrades have been made. Currently, elements of the main residence that need to be upgraded or replaced include the building envelope, fire alarm, as well as the electrical and heating and cooling systems. Aspects of the residence also need to be renovated to permit universal accessibility. Overall, Stornoway was determined to be in “fair” condition in the NCC’s Official Residences of Canada: 2021 Asset Portfolio Condition Report.

National Capital Commission, aymentinlieuoftaxes, and Chelsea

In this section

Key messages

Key messages on payments to the municipality:

Key data points

Background

Under section 125 of the Constitution Act, 1867, the Government of Canada is exempt from municipal taxation. As a federal agent Crown corporation, this exemption also applies to the National Capital Commission.

To demonstrate the Government of Canada’s commitment to supporting local communities, the federal government has adopted legislation since the 1950s, that provides for the fair and equitable administration of payments in lieu of taxes where it owns real property.

Since its inception, the NCC has made PILT payments to the municipalities in which its lands are situated as compensation for the fact that federally owned land is not subject to municipal taxation in Canada. The NCC does so willingly, knowing that its municipal hosts are important partners.

To preserve the municipality of Chelsea’s financial capacity and honour the productive relationship it has long enjoyed with all of its municipal partners, the NCC has continued to make PILT payments based on values the NCC determined to be appropriate.

The NCC saw a 58%overall increase in its PILT in Chelsea between 2017 and 2019, during a time that the annual property tax increase was around 3%. The NCC became particularly concerned with 36 of its properties in the Chelsea-sector of Gatineau Park, being assessed as if they had development value and that the NCC could transfer the lands to a willing developer for commercial purposes. The NCC has neither the intention nor the unilateral ability under federal law or its planning framework to sell Gatineau Park lands for development. Moreover, Chelsea’s own land-use plan formally categorizes many of these parcels as being land for conservation.

At the end of 2018, Chelsea referred this matter to the Payment in Lieu of Taxes Dispute Advisory Panel (DAP). The DAP is a federal body responsible for making recommendations on PILT disputes. It is a recommendatory, not a judicial body. A hearing was conducted in November 2020 and, on February 16, 2021, the DAP provided its advice.

Beginning in June 2021, the NCC made public its proposal to the Municipality of Chelsea to make payments equivalent to 100% of the amount recommended by the DAP in its review, through a combination of PILT and non-PILT payments. The Municipality of Chelsea rejected this offer.

Pursuant to the NCC’s final decision on PILT, dated November 19, 2021, for the challenged years 2018, 2019, and 2020, the NCC has paid a total of approximately $1.8 million in PILT to the Municipality of Chelsea for the properties that were the subject of the appeal to the DAP.

The Municipality of Chelsea has filed an application for a judicial review of the NCC’s decision.

Next teps

Now that the matter is before the courts, the NCC is refraining from public comment until the matter has been heard.

National Capital Commission, payment in lieu of taxes, and Gatineau

In this section

Key messages

If pressed on payments to the City of Gatineau:

Key data points

Background

Under section 125 of the Constitution Act, 1867, the Government of Canada is exempt from municipal taxation. As a federal agent Crown corporation, this exemption also applies to the National Capital Commission.

To demonstrate the Government of Canada’s commitment to supporting local communities, the federal government has adopted legislation since the 1950s, that provides for the fair and equitable administration of payments in lieu of taxes where it owns real property.

Since its inception, the NCC has made PILT payments to the municipalities in which its lands are situated as compensation for the fact that federally owned land is not subject to municipal taxation in Canada. The NCC does so willingly, knowing that its municipal hosts are important partners.

To honour the productive relationship it has long enjoyed with all of its municipal partners, the NCC has continued to make PILT payments to the City of Gatineau based on values the NCC determined to be appropriate.

There has been an ongoing disagreement between the City of Gatineau and the NCC regarding PILT for 12 NCC properties located in Gatineau Park. For some of these properties, the disagreement began in 2007.

A particular point of concern is the real estate comparisons used to determine the value of NCC-owned land in Gatineau Park as well as the application of the tax rate associated with serviced vacant land.

The NCC’s disagreement with the City of Gatineau was referred to the Payment in Lieu of Taxes Dispute Advisory Panel. The DAP is a federal body responsible for making recommendations on PILT disputes. It is a recommendatory, not a judicial body. A hearing was conducted with the DAP in September 2019 and the DAP provided its advice to the NCC in January 2020.

In June 2021, the NCC proposed to the City of Gatineau to make payments to the city equivalent to 100% of the amount recommended by the DAP in its review, through a combination of PILT and non-PILT payments. The city declined the NCC’s proposal in October 2021.

In February 2022, the NCC provided the city its final decision regarding these matters. The NCC concluded that it shall increase initial payments for a total of approximately $166,400, in addition to the amount already paid.

On March 2, 2022, the City of Gatineau filed an application before the Federal Court for a judicial review of the NCC’s decision.

Next steps

Now that the matter is before the courts, the NCC will refrain from public comment until the matter has been heard.

Harrington Lake rehabilitation and renovations

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Background

While the main cottage at Harrington Lake is 95 years old, most of the buildings were built between 1850 and 1925. Harrington Lake, the official country residence of the prime minister, is used for both official and private functions, with buildings that can accommodate official business as well as state visits. The Harrington Lake property was deemed to be in “critical” condition in the NCC’s Official Residences of Canada: 2018 Asset Portfolio Condition Report.

As part of a broader long-term program to preserve, maintain and restore all the official residences under NCC management, the NCC allocated $8.6 million to rehabilitate the Harrington Lake property. This project improved the condition of the farmhouse (formerly known as the caretaker’s cottage) from “critical” to “good”, and the condition of the main cottage, from “critical” to “fair”, and it was completed under budget.

The farmhouse, built in 1850, was dismantled, relocated and rebuilt on a larger footprint close to the main cottage to improve its practicality and use. This $2.5 million rehabilitation project began in the fall of 2018 and was completed in June 2019. The investment in the farmhouse has provided the site with a more functional, environmentally-friendly building. The renovated building features full universal accessibility on the main floor, and offers more useable space for family rooms, studies, offices, meeting areas, official state functions, and use by the RCMP and foreign dignitaries’ security details. Prior to this work, the building had been closed since 2008 due to health and safety concerns; it required complete rehabilitation to prevent its collapse.

The rehabilitation work at the main cottage involved maintenance and life cycle renewal to stabilize key systems and building elements to simplify ongoing maintenance, and to reduce insect infiltration. Some examples of the work include:

This project began in the fall of 2019 and was substantially completed in December 2020. The overall cost of $5.792 million was under the initial $6.1 million budget. This investment falls short of addressing all of the required renovations at Harrington Lake and does not include modern building improvements such as universal accessibility and environment sustainability.

Rideau Cottage maintenance and operations

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Background

Rideau Cottage was built in 1866 and 1867. It is located on Rideau Hall’s premises and has served continuously as the residence of the secretary to the governor general until October 2015. Since that time, it has served as the temporary residence of the Prime Minister of Canada and family. The building underwent an extensive renovation in 2012 that involved significant upgrades to exterior envelope, interior finishes and mechanical/electrical systems.

As part of a broader long-term program to preserve, maintain and restore all the official residences under NCC management, the NCC allocated $3,166,191 to rehabilitate the Rideau Cottage property. Note that most of the capital expenditures are attributable to the role of the RCMP in providing security to the premises—questions about the details of these costs should be directed to the RCMP. If those costs are excluded, the total capital expenditures for Rideau Cottage for that time period are approximately $388,103 for the following items:

In relation to operations and maintenance, the costs for Rideau Cottage include items such as:

Note that Rideau Cottage is a designated federal heritage building, 931 square metres in area and constructed at the end of the 19th century, which necessitates additional care and considerations in terms of ongoing operation, repairs, and upkeep. The cost of gas utilities for Rideau Cottage also forms part of operations and maintenance.

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