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Law Times • December 6, 2010 Praying for a miracle on Queen's Park Circle 'Tis the season for jolly St. Nick, and you can bet the embattled government of Premier Dalton McGuinty is hoping for a miracle on Queen's Park Circle this holiday season. It would probably take divine intervention to push fate off the track it seems locked onto at this point. With 10 months before people go to the polls, the longest- running provincial election cam- paign in history is shaping up to be a lynching at the ballot box for the Liberals barring, of course, the aforementioned miracle. So what kind of miracle can save them? Last month, Finance Minis- ter Dwight Duncan pegged On- tario's deficit for this year at $18.7 billion, down from the $19.7 bil- lion predicted earlier. But the over- all debt the province owes is some- where north of $212 billion. Ouch. This means that kicking back cash to the electorate in the form of tax cuts amounts to bribery with borrowed money. Of course, that didn't stop them from adding another $1 billion onto the debt to pay for the $150 hydro bill rebate. Unfortunately, the irony of that rebate is it was money thrown into the fire and wasted. In the same breath, the government admitted hydro rates could climb by 56 per cent. Even with the 10-per-cent rebate, that would still mean a big hike over the next few years. The chief cause is the dubious feed-in tariff program, which was paying up to 80 cents per kilowatt hour for power. The government has since scaled it back because it was too expensive. Of course, there's a spin on this. "Over the course of the next 20 years, the electricity bill will go up, on an annual basis, on average 3.5 per cent," McGuinty explained in the legislature. "During the course of the past 20 years, it went up, on average, annually 3.6 per cent. Electricity went up during the last 20 years 3.6 per cent; natural gas 4.7 per cent; cable TV five per cent; fuel oil 5.2 per cent." The increases are OK, he argues, because the average resale price of a home has more than doubled in that time. There is good news, McGuinty noted. "In the natural order of things, it is not unusual for prices to go up. During the next 20 years, it will in fact go up at a lower rate when it comes to electricity costs than it did during the past 20 years." So in an era in which inflation is about two per cent, other core prices will go up by roughly double that rate. This is good news? In a way, it's painful to watch. McGuinty and his cabinet are reel- ing from repeated hits on several is- sues. It's enough to make you want to ask for an election now just to stop the pain and get on with the business of government that's now mired in partisan politics to the point where precious little is getting done other than damage control. There's little hope for a return to legislative action as long as the sta- tus quo of mudslinging continues because politics, of course, is the art of staying in power and there's Inside Queen's Park By Ian Harvey still hope among the government benches that they can pull off a miracle. I know, it's hard to imagine, but some folks still believe in Santa. So let's be charitable at this special time of year and say it's possible events could transpire to turn the electorate's mood around. Tim Hudak, the front-runner to replace McGuinty as premier, could have a meltdown. The Con- servatives could self-destruct as they did under the likeable and trustworthy but naive John Tory, whose gaffe on funding for faith- based schools sent voters into McGuinty's arms in 2007. Indeed, critics point to Hudak's lack of clear policy as his weakness. At the same time, McGuinty has become more aggressive and testy in the legislature lately while bait- ing Hudak as "the man without a plan" and referring to the Tories as the "pro-coal" party over comments their MPPs have made about the wisdom of shutting down thermal generating plants. It's true that Hudak has scored points in attacking McGuinty while failing to offer concrete al- ternatives. But then Rob Ford has just become mayor in Toronto by running a campaign to "stop the gravy train" that similarly avoided specifics. On the other hand, the econ- omy could suddenly surge to ex- ceed economists' expectations. In that case, Ontario could find itself with a low Canadian dollar again and a manufacturing sector run- ning all the time and hiring work- ers at a pace matched only by the Alberta oilsands in their heyday. This would almost wipe out the deficit as consumers scurry to the malls, car dealerships, and housing developments generating subway cars full of tax revenues along the way. McGuinty and his colleagues would look like geniuses. Of course, Santa could bring me the Ferrari I asked for, too. With the chances that St. Nick would deliver that miracle being so slim, the Liberals might look at an alternative: St. Thomas More, the clergyman who lost his head to King Henry VIII when the mon- arch rampaged through the Catho- lic churches and established the Church of England in opposition to the papacy. More was installed as the patron saint of statesmen and politicians a couple of years ago and may be worth a prayer or two in appeals for help. Failing that, there's one more option: St. Jude, the patron of lost causes. LT Ian Harvey has been a journalist for 32 years writing about a diverse range of issues including legal and political affairs. His e-mail address is ianharvey@rogers.com. www.lawtimesnews.com I COMMENT Assessing Ontario's $1B Teranet renewal had a flashback recently of that iconic scene from Austin Powers in which Dr. Evil is threatening to hold the world hostage for — wait for this — $1 million only to be reminded that inflation and the passage of time have conspired to make everything much more expensive. Triggering the memory was last month's announcement by the Ontario government that it had negotiated the principal business terms of its renewal of the Teranet franchise to provide electronic land registration ser- vices in Ontario. Under the proposed deal, Teranet's owner, Borealis Infrastructure Manage- ment Inc., would give the province an upfront pay- ment of $1 billion for an additional 50 years of the monopoly. But that's not all. In ad- dition to the initial lump-sum amount, there will also be future annual royalty payments beginning in 2017, starting at approximately $50 million annually, and growing in future years thereafter. Not much appears to be dif- ferent in terms of the arrangement between Teranet and the Ministry of Government Services, with the province maintaining ul- timate oversight of the electronic land regis- tration system, as it currently does. Of specific importance to Ontario's real estate lawyers is the provincial control over any Teranet fee increases for statu- tory services. The proposed agreement provides for a fee freeze at current levels for five years. In 2015, certain fees would increase to equalize charges for searches done in land registration offices and those done remotely. Thereafter, certain fees would rise annually by not more than 50 per cent of the corresponding increase in the consumer price index over the same period. In theory, since the annual per- mitted increases after the initial five-year moratorium could never exceed 50 per cent of inflation, it follows that the fees would always decline in real terms over the course of the renewal term. Apparently, there are also provisions ensur- ing the province has the ability to share in po- tential windfall profits that might result from a sale or exceptional business performance, as well as commitments to continually upgrade the infrastructure as technologies change. But the parties have yet to draft the final docu- mentation on how this upside participation kicker or technology innovation covenant might work. In the meantime, the deal isn't expected to close until the end of the year. Teranet began in 1991 as a so-called public-private partnership between the province and the private sector to create an electronic land registration system for Ontario. In August 2003, the govern- ment sold its 50-per-cent interest in Tera- net to Teramira Holdings Inc. (the then other owner of Teranet) for $370 million. In June 2006, the initial public offering of the Teranet Income Fund netted the province additional proceeds of approxi- mately $573 million. Then in November 2008, Borealis Infrastructure announced its successful takeover bid for the fund, ultimately making it the sole owner of the Teranet system. Under existing agreements with the The Dirt province, Teranet's exclusive franchise to operate Ontario's electronic land registra- tion system wasn't going to expire until 2017, with the government having until 2014 to decide on renewal. It revealed its decision to renew the franchise a bit ear- lier than the 2014 deadline on March 25 when, as part of one of its budgetary bills, it passed the Electronic Land Registration Services Act giving it the authority to enter into such a long-term deal. The act received Royal By Jeffrey W. Lem assent on May 18 and came into effect shortly thereafter. Before the an- nouncement of the pro- posed renewal, some of the most senior and well-respected members of the real estate bar had criticized the fact that, by introducing the legislation through one of the government's budgetary bills, the act passed through the legislature without any real public knowledge or input. Ontario Bar Association real property section ex- ecutive member Maurizio Romanin, in a powerful speech delivered at this year's Six- Minute Real Estate Lawyer conference at the Law Society of Upper Canada, queried how, given that it has secured a monopo- ly extending out 50 more years, Teranet would ever have any incentive to innovate technologically. While there remain, as one might expect, concerns and speculation about the future of Ontario's electronic land registration system under an extended monopoly, that shouldn't deflect from the sheer enormity of the task already accomplished by Teranet and the ministry in migrating a centuries- old paper-based system into one of the, if not the, most sophisticated digitized land- recording databases in the world. In 1999, the first electronic transaction took place in Middlesex County in southwestern Ontar- io. Since then, volumes have exceeded two million registrations per year. Furthermore, the long process of converting Registry Act titles into land titles conversion qualified title is now all but complete. As a result, the province's entire stock of Registry Act properties are now converted except for approximately 50,000 titles, all of which didn't fit the risk-tolerance conversion pro- tocols then in existence. Adjusting to more current risk-tolerance conversion protocols might convert another 50 per cent of those titles, whittling down the orphaned Registry Act titles to about 25,000. That's a pretty impressive conver- sion rate given that there are more than five million discrete titles in Ontario. It's an ac- complishment for which we should congrat- ulate both the ministry and Teranet. LT Jeffrey W. Lem is a partner in the real estate group at Davies Ward Phillips & Vineberg LLP. His e-mail address is jlem@dwpv. com. PAGE 7