Proceedings of the Standing Senate Committee on
Banking, Trade and
Commerce
Issue 25 - Evidence - Afternoon sitting
TORONTO, Thursday, July 30, 1998
The Standing Senate Committee on Banking, Trade and Commerce met this day at 1:20 p.m. to examine the present state of the financial system in Canada (Small Business Loans Act).
Senator Michael Kirby (Chairman) in the Chair.
The Chairman: Honourable senators, our last witnesses today are from the National Voluntary Organization. With us are Flo Frank from the Common Ground Resource and Consulting Group in Meacham, Saskatchewan -- and Senator Tkachuk will certainly know where that is -- and Glenn Stansfield from Niagara Enterprise Agency in St. Catharines. Welcome to both of you. Thank you for coming.
I know you listened to part of the discussion this morning. Perhaps one or both of you would make an opening statement and then we will ask you questions.
Ms Flo Frank, Common Ground Consulting Inc: I would start by thanking you for inviting us here today. The Digby Network, the non-profit corporations, and the voluntary sector believe it is important to the economic development of our community that we spend this time with you today, recognizing that the work you are doing is important and you are hearing from groups right across the country.
The Chairman: I cannot resist asking you, since we all know where St. Catharines is, where exactly is Meacham, Saskatchewan?
Ms Frank: It is 45 miles east of Saskatoon. It was, primarily, an agricultural-based community. However, with the railway lines being removed and the grain elevators being taken down, it has had to reinvent itself. It is now half agricultural based and half arts based. It is a thriving community with 51 per cent of the tax base being generated in the performing and visual arts. We have several sculptors. It is the Salt Spring Islands of the prairies. I have an article about our community, if you would like to see it.
The Chairman:We would.
Ms Frank: I will leave you a copy.
The arts community is generating a profit.
Senator Meighen: It is the fourth largest employer in Canada.
Ms Frank: I understand that you received copies of our brief introductory paper.
We want to present for your consideration the argument that community economic development organizations ought to be included in the access to small business loans. We would invite this group to continue the dialogue with the voluntary sector to determine work the considerations that apply to this area.
Our position is that community economic development and its organizations are much more like business than anything else and, therefore, ought to have access to the SBLA.
The Chairman: My perception has always been that community economic development organizations vary significantly, depending on the community. First, how would you define or describe a community economic development organization?
Second, how do you think the Small Business Loans Act could help you? As you heard the witnesses this morning say, people agree that this is an important group to help, but that it would involve having a different program from the one defined under the SBLA.
First, what kind of assistance makes sense from your point of view; and, second, does it have to be a new animal or can it, in fact, fit within the current definition and description of the SBLA?
Mr. Glenn Stansfield, Niagara Enterprise Agency: The Niagara Enterprise Agency is one of the Digby partners.
Our services are unique in the partnership. You are absolutely right that community economic development is defined, in many respects, by the community it represents.
In our particular case, our organization sponsor, the Niagara Canada Community Investment Plan, is one of 22 communities across the country. We have been involved in Industry Canada demonstration projects over the previous two years. The services we have provided in those projects have involved dealing very closely with the financial sector, including the banks and venture capitalists. We spend a considerable amount of time travelling to Toronto to meet with the heads of the major funds. We have dealt with a number of situations in the Niagara region involving the Small Business Loans Act as a piece of the overall financing equation in smaller, growth-based businesses.
Some of our other partners in the group -- and we have partners in every province -- deal differently with different products and services that are provided for the unemployed. Other partners deal with the issue of poverty in different regions of the country. That includes everything from literacy training to child support for working parents.
We think we are in a unique position as a cross-Canada group of best-practice practitioners who have come together in this partnership to give you a good national picture, certainly from our perspective, of how the Small Business Loan Act fits the not-for-profit sector, and how it fits the businesses and customers we deal with in each of our communities.
Senator Meighen: Are you a not-for-profit organization?
Mr. Stansfield: The Niagara Enterprise Agency is a non-share capital corporation and not-for-profit, yes.
Senator Tkachuk: Are most of the members of the Digby Network also not-for-profit organizations?
Mr. Stansfield: Yes, they are.
Ms Frank: Most; not all.
Senator Tkachuk: Where do the funds that you employ come from?
Mr. Stansfield: Under our Canada community investment plan we charge fees, and such fees are subsidized through federal government involvement in the program. We provide other services in the community for which we charge fees. We would like you to think of us as Robin Hood. We charge fees to those who can bear them, and we turn back into the community our surpluses and our resources for those who are not in such an advantaged position to bear the full costs of our services.
Senator Tkachuk: Do you solicit contributions from the community?
Mr. Stansfield: Yes, we certainly do.
Mr. Tkachuk: Do you issue tax receipts?
Mr. Stansfield: No. We are not a charitable organization. The community must provide one-third of the total budget. We have received support from the Royal Bank of Canada, the Canadian Imperial Bank of Commerce, the Toronto-Dominion Bank, the Niagara Credit Union, and from private corporations such as Algoma and Central Marine, the founder of Trivial Pursuit. We have also received support from public sector organizations such as Brock University and Niagara College. There are many different ways not-for-profits can bring in community support.
Ms Frank: Every community development corporation or every community economic development initiative is different. For example, there is a salmon ranching operation on the west coast of British Columbia which, at one time, had been privately owned by a First Nations band. It was expanded to include community members and it now operates like a cooperative. It generates revenue and it ranches salmon. I personally do not know a great deal about salmon ranching but I know that there is a fairly big demand for salmon right now and that they are making money. They are doing fairly well. They operate in every way like a private sector business. They create jobs. They train their staff. They contribute to the tax base. In every way they resemble a private sector business.
Only two things are different about this and any other community economic development corporation and those are the ownership and where the profits go. Community development corporations are clearly in business, and they are clearly in business to make profits as is any small business. The difference is that the community and/or certain partners within a community own it, and the proceeds, the profits, are turned back into the enterprise or into the community.
Another example is the casino in Dawson, Yukon which is owned by community members. It is a community development corporation. It makes a lot of money. It trains people, and it generates a trust fund out of its proceeds. Every year it makes a profit. Tourists dump their money there. Everyone is paid. The profits go to subsidize all the recreation in Dawson. Taxes in Dawson are low, approximately 10 per cent of the tax base. Everything in that community for recreation for children is free and that is all paid for out of the profits of the casino. Anyone in Dawson who requires a small business loan can apply to the casino trust fund for it.
That is a community development corporation. It is not-for-profit, and it does not at this point have access to these loans. It could benefit from having that access.
As well, there are housing cooperatives, land trusts and, in many instances, food co-ops which all make money.
The Chairman: When you say it does not have access to the loans, by the "it" do you mean the community development organization? Are you saying that, if the community development organization wants to lend to a small business in Dawson, you would like that loan to be under the SBLA. I am trying to understand whether the SBLA money is being used to support the economic development corporation, or if the money is being used to help finance loans to companies that are borrowing from the EDC.
Ms Frank: The answer to that is: both.
The Chairman: In one case, the EDC is playing a role similar to that of a bank.
Ms Frank: As one of the things that it does, yes.
The Chairman: In the other case, the EDC is equating itself with a small business which wants a loan to the EDC to be eligible under the SBLA. It may be both, or it may be you are only asking for one.
Mr. Stansfield: Our primary interest is seeing the not-for-profit segment having available to them the lending vehicle of the Small Business Loans Act.
The Chairman: If, for example, an economic development corporation, per se, wanted a loan, it would like to be able to get that loan from a bank and have that loan under the Small Business Loans Act.
Mr. Stansfield: Yes. However, since you have raised the second issue, I think there is another significant issue associated with the risk management of the SBLA.
Our experience in the Niagara region has been that you can have a community partner present to deal with some of the risk analysis and to help oversee, from a community point of view, the investment of the funds in partnership with the lenders, the financial institutions. In developing that type of a strategy, a very important vehicle could be put into place that would minimize risk for the lending under the SBLA.
Primarily, we are asking that it be opened up to the not-for-profit sector as a lending vehicle for their own financial needs.
Secondly, there are very credible organizations in this country, and the Digby members represent some of them. Some could assist in the overall due diligence risk management and ongoing mentoring of these loans in the communities. That would help with the risk management provisions of the act. I would suggest that the 22 Canada Community Investment Plan demonstration sites that Industry Canada has funded over the last two years would be an excellent place to start with that process.
The Chairman: How do economic development corporations borrow money now? Do they go to a bank? Do they apply to a municipal government?
Mr. Stansfield: It differs greatly. In our particular case we have been fortunate enough to work with a major financial institution, the Royal Bank of Canada, who have offered us a relatively unsecured operating facility which they make available to us for our operational needs.
In other communities, the banking sector has not been as proactive, and it is very difficult, in the evolution from full government support to various levels of self-sufficiency, for the not-for-profit sector to find financing which is available to them.
Ms Frank: It often comes in three forms. Although it varies, there is only a certain number of options one has when generating revenue.
Primarily, in community development corporations in Western Canada, the credit unions and cooperatives have been involved funding cooperatives and community-owned ventures since the beginning of the cooperative movement during the depression. They tend to be, at least in our experience in the west, a little bit more open to the notion of funding what is oftentimes unsecured business loans.
In many instances, the start-up capital comes from shareholders. One hopes that profits are generated within a shorter period of time than it is generated by regular business because they are operating with less money.
The third place that it comes from is personal loans and guarantees usually put forward by boards of directors and the shareholders who believe in what is going on.
Senator Oliver: My question was about the guarantee and who will actually will give that. What effect will it have on the voluntary sector if a 25-per-cent guarantee is requested in every case?
Ms Frank: What we would stress here, Senator Oliver, is that you should not relax the standards. We are not asking for special consideration. Apply the same standards, and these organizations will apply the same due diligence. If a 25-per-cent guarantee is required, that can, in most instances, be attainable.
Senator Oliver: Do you think that would be a deterrent?
Mr. Stansfield: It would depend on the community. In our case, I would go to one of my community partners, possibly Casino Niagara who have supported us, and I would suggest that they secure the guarantee on our behalf, and that it be done through the community. We would then be able to purchase the equipment we require.
Senator Meighen: Would you like to have the option of leasing that equipment?
Mr. Stansfield: I do not believe that the SBLA should apply to the leasing sector.
The Chairman: I am sorry that we keep interrupting you but, obviously, we have not heard from witnesses from your segment of the economy before and we are trying to understand it.
Ms Frank: As a matter of fact, this kind of dialogue is healthy because we do not come here professing to know all about it, because there are many variables.
In terms of the Small Business Loans Act, I can understand concern and caution about how certain people make money because what they do is good work but not necessarily profit motivated. Let us be clear, we are not suggesting that these loans be available to all of the voluntary sector.
Senator Oliver: Where do you draw the line?
Ms Frank: You do not need to draw a line. You need only apply the same standards you normally would, such as, assessing the business plan and determining if the business plan is viable. You can question whether there is support and whether they have the 25 per cent equity. Does the applicant have what is required?
You could open the floodgates. You could have an application, for example, from the women's shelters. They do not generate profit. In many instances, recreation programs are not designed to generate profit, so how could they do business?
Senator Oliver: If they own the building they have the equity.
Ms Frank:They may have the collateral. We are not suggesting that you open the floodgates.
Let us clearly understand what community economic development enterprises are. They are in that vast kettle of not-for-profits. They walk like business; they talk like business; they make money like business; and they should clearly be included. They are a duck.
Senator Meighen: Even if some of them lose money?
Ms Frank: Yes, absolutely, some of them fail. I can tell you wonderful stories about failures. However, in most instances because they are community-owned, and because there is a board of directors whose credibility is on the line, I would suggest that bankruptcy and receivership do not happen. Debts are paid.
I worked for the federal government for a number of years giving away grants to small businesses, so I appreciate your concern. However, even within business, you must turn some down some because they are higher risk. They may not have the skills required. Even if they have a business plan, they may have paid a hotshot consultant to write it. One has to make certain determinations.
However, the community sector is big business and many of them are making profit. They have the skills, the abilities, and in some cases the assets required to do business with you. We are suggesting that you let those ones continue the dialogue with the others.
We have many examples to give you. It is not that there are only 10 in the country and we are picking our best three. There are hundreds.
For any of you who have travelled to Europe or to South America, you will know that community economic development and community-owned business is the way of doing business in those places. There are three sectors: the private sector, the government sector, and the community sector, and they are all designed to make profit, or to at least reduce their operating costs. They are obliged to do that. In North America we have not had to do that yet, but we are starting.
We have a very active sector. Everybody is talking about community economic development. I have worked in community economic development for over 25 years. At that time, people had no clue what that was. Now we have governments, big foundations and community groups are in favour of enterprise development through CED. However, our biggest obstacle is access to traditional banking, access to venture capital development, and access to loans, even though, in every way, we resemble business.
In the small community I came from, we are very fortunate to have three world-class sculptors. I realize that most people equate the arts with social services in terms of making money, however, we do have an interesting partnership. We have dinner theatre, as well as a recording studio. I will provide you with copies of this article.
Each of those organizations has formed a community-based cooperative partnership which means that one may lose money in one instance and the other one will make it up. To a certain degree we share our resources. Who would ever expect our dinner theatre to make money? In fact, it did not. However, the bar attached to the cafe is making a fortune and the money is transferred back and forth. We do not have access to a small business loan even though we seat 175 people. We sold out three consecutive shows before they opened, and all we needed was 50 per cent to break even. We had shareholder investment. We have $30,000 worth of shareholders' money invested in there. We have assets that we did not wish to put on the line, but if we had to, we could have, including the building which houses the theatre.
The not-for-profit corporation does not own the building. The not-for-profit is a community-based development corporation. It has no assets but the shareholders do, and when and if necessary, we will put those assets on the line. We have already put our assets on the line. In order to get a small business loan, which we did, we had to sign the theatre over.
We have been making a profit now for a year and a half. In business, who knows three years from now where we will be. My little tiny town has 89 people. We employ 14 people full time in the dinner theatre, the arts. We are training sound and lighting technicians, stage managers, marketing people and an assistant director for theatre. Jobs are being created. Profit is being generated. It operates like a business. By the way, we take no government grants.
Senator Meighen: Did you say you did get a small business loan but not under the SBLA?
Ms Frank: We got a loan from the credit union because the manager of the our particular branch liked the first show he saw.
Senator Oliver: You said you had to turn the theatre over.
Ms Frank: Yes, we did. The theatre is worth $25,000.
Senator Meighen: Is there any guarantee that, under the SBLA, you would not have to turn the theatre over?
Ms Frank: Even if we had to, that would be fine. Our community bank manager was able to communicate easily with us, so we were able to borrow that money.
Senator Meighen: Isn't that the same for everybody? The bankers who were here indicated that the vast percentage of their loans were not made under the SBLA. What is the advantage? You were able to get a loan without relying on the SBLA.
Ms Frank: It took us two and-a-half years to build up that relationship and before that we operated strictly on personal shareholders' investment.
Senator Meighen: Because the SBLA would apply to you, I would presume that the banker might be more inclined to take the risk. He knows he is covered to some extent. However, it might cost you more.
Ms Frank: That may well be, but what we are arguing for here is access, not the interpretation of that access. We are suggesting that community-based enterprises should have the same access, and be judged against the same criteria as any other business. That is all. Circumstances will vary in each instance.
Mr. Stansfield: In Niagara -- and I may shock some of you when I say this -- the SBLA has become a quasi-equity vehicle in bringing deals together. Some of our banking partners support this perception.
The vast majority of small business deals that fall within this legislation are in the $100,000-and-less range. As the deal comes together, the bank is prepared to provide a portion of the financing equation through debt. The most common failure of many of these deals proceeding is the lack of the founder's equity in the deal. I know for a fact that the banks are using the Small Business Loans Act as a quasi-equity vehicle to provide that extra impetus which will allow the deal to go ahead so that they can meet their ratios.
The SBLA is providing a very valuable piece of the financing equation in small business investments. It is a collaboration of the lenders, and it gives that little bit of impetus on the quasi equity side which not many vehicles can provide.
I would now like to comment on the 25-per-cent loan guarantees. I would argue, and I do not speak on behalf of the Digby Network on this, that a mistake was made when the loan guarantees were lowered to 25 per cent. I would suggest that it was not in the best interests of the federal government to see those loan guarantees eroded to 25 per cent.
In most financing deals that come together under the Small Business Loans Act, there is a partnering investment by a financial institution on the debt side of the equation. Previously a blanket guarantee was put up against the whole investment. Since it has been lowered to 25 per cent, the banks still go out and place a blanket guarantee over their side of the investment. The government's side of the investment is only covered by a guarantee of up to 25 per cent. In the event of failure, who do you think collects a greater amount of their security, the bank or the government with their 25 per cent guarantee? I would never argue that the guarantee should be lowered. On the contrary, I think it was a mistake to lower it in the first place.
Ms Frank: We are not talking about changing the standards, we are simply suggesting that you open up access, and that the community-owned businesses, which is what they are, should be considered the same as any other business.
The Chairman: I hear you saying that, if we open the SBLA to the voluntary sector, we should not open it to the entire voluntary sector. You are suggesting we narrow the opening to include only economic development corporations because they are businesses in the natural sense of the word; and, conceivably, go slightly beyond that to include other voluntary sector businesses that are clearly businesses as opposed to charities, religious or social entities. In other words, you would use a fairly tightly constrained definition of the expansion, and you would not include the voluntary sector in general but only in a very narrow context.
Ms Frank: Correct.
The Chairman: You need not do this today, but could you contact Dr. Goldstein, our researcher, and tell us exactly what you think that definition ought to be? It seems pretty clear from the other evidence that there is little support for a broad definition of the voluntary sector. Frankly, you have identified an area that I would not have even thought of as part of the voluntary sector.
Ms Frank: Our goal has been met.
The Chairman: To the extent that you can help us define who would be included in this enlarged group, that would help us.
Ms Frank: We would be happy to do that. We would also be pleased to continue this discussion with you because we recognized that you cannot change the act based on this 20-minute or 30-minute conversation. We are here to offer you ongoing access to and dialogue with the Digby Network who are the leading best-practice people in Canada.
You have succinctly captured what we had to say today. We are talking about a fairly large sector within the community. It is a growing sector, and it will continue to grow.
Senator Kelleher: Are you incorporated under some act or statute?
Ms Frank: In many instances the incorporation is through the Society's Act. There are hundreds of community development corporations across the country.
Senator Kelleher: I do not believe there is any such act which specifically deals with the vehicle the witness is talking about. At least I have never heard of one. You will have to clearly or closely define what you are talking about because, if not, you will open the floodgates.
The Chairman: It seems to me that you would have a much better handle on what that exact definition would be.
Ms Frank: We would be happy to work with you in that regard. We can clearly delineate what is a profit-making enterprise centre and what is not.
The profits from these business centres oftentimes offset the costs of the agencies who have no source of revenue. That is the purpose, but they sometimes get mixed up.
Some of the festivals that are held across the country have funding fed into them through a community development corporation that does a whole manner of things to generate revenue. It feeds that revenue into an organization or an activity that does not make a profit or is a high risk.
Senator Tkachuk: I apologize for not being here earlier.
As you know, governments contract to non-profit and charitable organizations to look after, for example, disadvantaged teenagers who might even be described criminals. Instead of being wards of the state they would actually live in state homes where they receive counselling, psychological care, and they are educated. This is operated on a contract. They do not qualify for a loan to build a home, a place for the people to stay. That is a business. Would that qualify in your mind as well?
Ms Frank: Are they going to build more than one house and sell the other one for profit?
Senator Tkachuk: No. They are not interested in real estate speculation but they must speculate on the number of bad kids there will be in the marketplace.
Ms Frank: I would suggest that that is an operating cost. Using your example I know of a similar business on the West Coast in the northern part of British Columbia. It is funded by and large by government to do government's work or what was government's work. Their grants have been cut back.
I am not suggesting you open up loans to include operating money. That non-profit organization in British Columbia has purchased land and is building houses. It selling those houses and generating revenue and profit, and feeding that money back into the services that help their mentally disabled adults and young people. This not-for-profit organization is a business and it is feeding profits back into the organization.
Senator Meighen: Perhaps modification of the CMHC Act could help your organization build a house.
Ms Frank: You are clearly describing a social service. However, a good social worker may not be a good business manager. Those are two completely different sets of skills.
If a business is owned by the community and it speculates in, say, real estate, housing development or shingle making, that is clearly a business, and it clearly should have access to loans.
I am sure that you know that music festivals or folk festivals in your communities do not often make money. The organizers or those events receive grants and donations from sponsors. We would not argue that that group should be included. Do not give the Nest Creek Festival access to loans because it is high risk even though it has the appearance of a business. However, the funders for this festival at Nest Creek own a service that fixes, maintains and chops wood. It looks after campgrounds. It is a not-for-profit organization and it is community-owned. It is a maintenance company. It looks after three or four of the provincial campgrounds in northern B.C. and it makes a profit. It employs 37 or 38 people. The profits from that are contributed to this festival. It is clearly a community economic development vehicle.
Senator Meighen: What am I missing? The only difference is where the profits go.
Ms Frank: Correct. It is a matter of who owns it and where the profits go.
Mr. Stansfield: Not-for-profits do not make profits.
Senator Meighen: Who owns it? That is just the identity of the shareholder.
Mr. Stansfield: Not-for-profits do not make profits. They make operating surplus which is returned to the principal mission, the community of the organization.
Senator Meighen: It is a profit by another name.
Mr. Stansfield: It is a very dirty word in the not-for-profit sector. "Retained surplus" is a very nice word.
Senator Meighen: I understand what you are saying. If you insist on calling it a "retained surplus" as opposed to a "profit", does that exclude you from being eligible for an SBLA?
Mr. Stansfield: Not-for-profit corporations do not qualify under the legislation. Our emphasis is not on the not-for-profit industry as much as it is on the proper risk. They should have to qualify in the same way as a business, with proper risk assessment and due diligence. I would argue in a general sense that that whole process needs to be upgraded for all sectors so that the government is not at risk, because the financial sector sees reduced risk because of the government guarantees.
The Chairman: I believe you are right. The law has looked differently at an organization that is community-owned and has a retained surplus. The law also looks at cooperatives differently, even though cooperatives in Calgary run the biggest grocery store system in Calgary. The fact is that, under the law and, indeed, in the taxation scheme, they are considered to be quite different from, say, Safeway. The witnesses are asking if we can get over that distinction.
Senator Kenny: I have a supplementary which will, hopefully, illustrate one of Senator Tkachuk's better points.
One difference is that, obviously, there is no room for the personal guarantee. You can isolate an individual who is running a for-profit operation and let him know that if his business goes into the dumpster, he will be hurt to a certain extent as well.
The Chairman: They said they were prepared to put the personal guarantee on board.
Mr. Stansfield: We are not suggesting you do away with the personal guarantees.
Senator Kenny: I am not sure how many boards of not-for-profit operations are prepared to do that. Usually people on boards like that are contributing their time at considerable personal expense. A question that is periodically raised by members of not-for-profit boards concerns whether they can be sued as individuals. They are contributing their time and being good citizens and they do not want to get nailed.
Mr. Stansfield: I provide all my directors with directors' liability insurance of $2 million. They would not serve otherwise. We would not ask our directors for those guarantees. We would ask our community partners to provide those guarantees. Organizations deal with us and see a benefit in dealing with us to better the community, so we would have no problem getting that guarantee from a partner.
Ms Frank: They are not without assets. Many have assets and the ability to guarantee loans. We are not asking for an exception. We are asking for access.
Senator Kelleher: Senator Meighen and I agree that directors' liability insurance is not worth the paper it is written on. If you carefully go through those policies, you will recognize that. There are so many loopholes you can hardly ever collect on them.
Senator Tkachuk: Even in our province where the word "profit" is a negative term from time to time, non-profit corporations run many businesses rather than for-profit corporations. For example, non-profits are involved in the environmental business. They pick up and recycle cans and bottles. This is a business. The government did not see it as a good thing to give that business to the private sector, so a non-profit company operates a for-profit business and, therefore, it does not qualify.
There are all kinds of businesses that I believe non-profits will be into in the future. The homes for these delinquent young people I talked about are, in fact, a business enterprise. This is a place where they are schooled, counselled, and receive psychiatric care. They happen to sleep in a portion of it. It is a little factory. It is a place where they go for help such as a doctor's office. It is a service factory. Therefore, it is not a home that you would sell on the open market, because it is used to create a cash flow from the government which needs this service. Governments will have to deal with this because they are getting out of this business and giving it to others. There may be an opportunity there. I just make the point even though I do not like the whole program only because I believe that, if you give it to one, you must give it to everybody. I support them on that basis.
The Chairman: We would appreciate receiving your definition. Do not worry about getting a lawyer to draft it or none of us will understand it.
Ms Frank: We will provide it in lay language.
The Chairman: We would appreciate it if you could help us draw the walls around the box so we know who ought to be in the box by your description. You need not describe who would be left out. Just tell us who you would include. That would help us.
In response to my question about pilot projects, you said that one should use those 22 community development areas, which have been tested for the past few years by the private industry, as a potential model.
Ms Frank: That is one group.
Mr. Stansfield: I suggested specifically those 22 communities under the risk assessment component of the Small Business Loans Act because that is what the Canada Committee Investment Plan is intended to provide, the due diligence, the packaging, and the investor readiness of an investment.
Senator Hervieux-Payette: In your definition, please be sure that you do not exclude some organization even though it receives grants. I am talking about any kind of theatre, and some festivals which receive annual grants of funding. Of course they take place in a limited period of time. Some are large events and they may require some permanent structures. I am thinking of the Festival de Lanaudière. Since we have so many festivals in Quebec, I know that some are financed purely by donations or entrance fees, and so on. They might not be a viable, permanent structure these festivals create a lot of jobs.
Ms Frank: In Edmonton we have the Edmonton Folk Festival. They generate a profit of in excess of $75,000 every year. They are in their twentieth year. They are a business.
The Chairman: Is this Klondike Days?
Ms Frank: No. The Edmonton Folk Music Festival. It is moving into the world market now. It is now in the league of the Philadelphia Folk Festival and it employs, on a full-time basis, over 50 people. It now makes money, although it did not years ago.
Senator Hervieux-Payette: When they are properly run, these festivals are structured like a business way. Years ago, if people had said that the Cirque du Soleil was a business, everybody would have laughed, a circus being a serious business. Now it is a worldwide business.
I just say when you devise your criteria, make sure that you do not capture some of these recreational activities. They are certainly a growing industry. That being so, it is more difficult to succeed. It is rather like the knowledge-based industry. Assessing the risk and structuring them properly is something we have not yet mastered.
It is similar to tourism. Almost half of the GNP of France is derived from tourism.
We have not developed the mechanism to assess, and to support certain industries. Our challenge is to try to make recommendation to the minister which will enable us to develop the proper tools to assist the industries of the future.
Ms Frank: They are the new economy; and we are there.
In closing, we would extend an invitation to you to contact us. We do not have all the answers you need but we do have respect for the task you are undertaking and we would like to work with you to the best of our ability. We can bring some applied thinking. Collectively, we can bring 25 to 30 years worth of experience within the Digby Network and our communities. If the answers were easy, you would not be here. We are familiar with this particular sector, and we would be glad to assist you in any way we can.
We will certainly work within our organizations and enterprises to bring you some criteria for consideration. We would like to continue the dialogue related to community economic development and to invite you to continue to consider the community sector, which includes volunteer, not-for-profit, charity, and others.
The Chairman: Thank you for your assistance. You have given us a perspective we have never had before. It has been very helpful. I am sure we will have an ongoing dialogue and we may well require your assistance on other issues down the road.
The committee continued in camera.