Northern Economist 2.0

Saturday, 11 August 2018

Building Permits Decline

Statistics Canada's most recent report on building permits shows that in June 2018, Canadian municipalities issued $8.1 billion worth of building permits, down 2.3% from the previous month.
The decline was the result of lower construction intentions for residential buildings, following a strong May. Multi-family dwellings accounted for the majority of the decline while the non-residential sector did see increases.  The value of industrial permits rose 5.3% to $603 million, a third consecutive monthly increase. The industrial permit gain in June was largely the result of a few high-value permits issued for agricultural and manufacturing buildings in Ontario.

When the results are examined on an annualized basis - that is June 2017 to June 2018, the total value of permits in Canada was down 5.6 percent with residential permits down 1.5 percent and non-residential down 12.4 percent.  The biggest drop on the non-residential side was for institutional permits which fell 31.1 percent.  When Canada's CMAs are ranked for the June 2017 to June 2018 period (see Figure below), the range is from a high of 202 percent for Moncton to a low of -72 percent for Regina.


With respect to northern Ontario, Thunder Bay saw a decline of 13.9 percent and Greater Sudbury a drop of 43,6 percent in the total value of permits.  Even the GTA and central Ontario area saw a decline with Toronto down 16.5 percent and Kitchener-Cambridge-Waterloo down 46 percent.

Interestingly, despite the weakening in intentions for new construction, the unemployment rate continues to fare well.  Statistics Canada also reported this week that the July unemployment rate in Canada was down to 5.8 percent with annualized employment growth.  With respect to northern Ontario, Sudbury's unemployment rate (3-month seasonally adjusted moving average) fell from 6.8 percent in June to 6.6 percent in July even though its total employment fell from 80,500 to 80,400 jobs.  Meanwhile Thunder Bay's unemployment rate fell from 5.1 percent in June to 5 percent in July while its employment level rose from 64,900 to 65,000.

Wednesday, 8 August 2018

Thunder Bay's Municipal Election Issues: A Brief List


With all of the candidates signed up and off and running, it is now time for the candidates running for municipal office in Thunder Bay to present their platforms and debate the issues they feel will define and shape municipal government here over the next four years.  While no one can predict the future, there are a number of issues that face municipal government in Thunder Bay and will affect its ability to deliver public services.  The role of municipal government is technically not to provide services to the public but to provide services to the owners of property.  However, when said and done what the City of Thunder Bay ultimately does is provide public services to everyone.

 

First and foremost, municipal services need to be paid for and so a  key issue is the long-term fiscal sustainability of municipal services in Thunder Bay.  This of course then becomes tied to property tax rates, provincial grants and user fees – the three main sources of revenue.  The City’s finances in terms of its credit rating are good though as I have noted before it is easy to be prudent when the ultimate budgetary insurance is simply raising taxes.   However, given that there has been a gradual shift to the residential property tax base, the candidates will need to address how much more can the residential taxpayer bear in terms of increased tax rates especially when the tax rate increases have been accompanied by rising user fees for water. What can be done to make city services more cost-effective?

Second, there is the city’s social fabric within which we can include crime rates – particularly homicides – as well as the homeless population, racism, poverty and the growing use of food banks.  The social fabric of Thunder Bay is a crucial issue given its effect on both the quantity and quality of life for its residents.  It is also an important issue from the prospect of attracting new investment in the city given the poor press Thunder Bay garners in major media outlets in the Toronto area.  While there is reason for hope, at the same time continued hope requires action.  How can we deal with our pressing social issues?

Third, is the issue of future municipal governance.  Thunder Bay currently has a council of twelve plus a mayor with five of the councillors At-Large and the remaining councillors ward-based.  We do need to have a conversation as to whether this is still the best institutional framework for municipal decision making.  The At-Large/Ward hybrid harkens back to Amalgamation in 1970 as a compromise to deal with the need to make city wide decisions in the face of strong regional loyalties to the old municipalities and neighborhoods.  However, it is not 1970 anymore and some thought should be given not only to having a smaller council - as a signal that there is a commitment to efficient government - but also one that is either all Ward based or all At-Large.  As noted in an earlier posting, my preference would be for an all Ward based system.

Fourth, is the general issue of what I would broadly term city development but encompassing not only the city’s economy – about which City Council actually not do much about directly – but also its urban development, infrastructure development (I would include a new bridge over the Kam here)  and demographics.  Aside from providing an environment conducive to business via tax and regulatory policy and ensuring cost-effective and appropriate services and infrastructure, City Council cannot really turbo start the local economy.  That is a function of national and international economic conditions and the demand for what we do here.  Ultimately, what can we sell to the rest of the world from Thunder Bay? Tourism is one area where we can still do more as a city.  However, we are also hampered economically by having a spread-out city that is costly to service with new housing developments springing up willy-nilly in outlying areas.  However, we have made some progress in core-specialization with many government services in the former south downtown and a thriving cultural/arts/restaurant scene on the north side adjacent to the waterfront.  We also face an aging population that is quite pronounced given that so many of our youth have left.  While the First Nation’s population is young and growing, much work needs to be done to ensure they are equipped with the human capital necessary to maximize their economic potential and many of those tools are under the purview of the federal and provincial government.  There are no easy or quick answers here but one hopes candidates have pragramtic and workable ideas.

Finally, I am somewhat cautious about bringing up the next point but feel that I should despite the fact it is the kind of thing that some candidates may latch onto and neglect the more important and difficult issues already covered.  We can all recall the last municipal election when the debate was consumed by the Events Centre with all other major issues relegated to the sidelines.  Still, I would be remiss if I did not mention that 2020 will be the 50th Anniversary of the creation of Thunder Bay and we should give some thought to what type of events or projects we will use to commemorate Thunder Bay’s amalgamation in a manner that is positive and celebrates our potential.  Again, I have had thoughts on this in the past but there may be other ideas out there.

So, without further ado. Let the campaign debates begin!

Wednesday, 1 August 2018

Explaining Thunder Bay's Municipal Election Candidate Growth

With over 101 individuals seeking municipal office for October's municipal and school board elections this October, the question that now comes to mind is why are there so many candidates seeking office?  More importantly, why has this number been growing over time?  After all, in 2000 only 76 candidates sought office.  While there have been some ebbs and flows in numbers since then - there was another surge in candidates in 2003 - it remains that particularly since 2006, the numbers seeking the Mayor's job as well as an At-Large Council position have grown steadily.  Yet the overall population of the City is flat.

Friday, 27 July 2018

Analyzing the Candidate Numbers: Thunder Bay Municipal Election 2018

The nominations are closed and what a difference an additional week makes.  When you add up all the candidates, as of 5pm today there are now a total of 101 individuals running for office in Thunder Bay’s fall municipal and school board elections – up from 78 in 2014 – and a total of 61 running for City Council – more than the 51 of 2014.  So, it would appear that despite changes to the municipal nomination process for the 2018 election – a shorter time period for filing to run as well as the requirement of 25 signatures of support – there are more than enough people who want to fill municipal office.

However, a closer examination of the numbers suggest that the interest is greater for the Mayor and the At-Large Councillors.  Compared to the 2014 election, the number of candidates for Mayor is up from 6 to 11 – a 83 percent increase while the number seeking at At-Large position grew from 19 to 26 – an increase of 37 percent.  However, those seeking a Ward Councillor position fell from 26 to 24 – an 8 percent drop.  On the bright side, numbers for both the Lakehead and Separate Boards were also up from 2014.

Tuesday, 24 July 2018

Homicies Data Update: Thunder Bay Still Ranked First

Statistics Canada has just released the latest crime data report with the 2017 edition of Police Reported Crime Statistics. Overall, crime is up a bit in Canada.  While there has been some improvement in Thunder Bay's ranking when it comes to crime severity in general, what is of particular interest of course especially to us in Thunder Bay is the homicide rate.  According to Statistics Canada:

"After little change in 2016, the national homicide rate increased 7% in 2017, moving from 1.69 homicides per 100,000 population to 1.80. Police reported 660 homicides, 48 more than in 2016. The 2017 homicide rate was higher than the average for the previous decade (1.67 per 100,000 population for 2007 to 2016).



The increase in the national number of homicides was largely a result of the greater number of homicides in British Columbia (+30) and Quebec (+26).



With a total of seven homicides in 2017, Thunder Bay recorded the highest homicide rate among the CMAs for the second year in a row (5.80 homicides per 100,000 population). Abbotsford–Mission (with 9 homicides) and Edmonton (with 49 homicides) had the next highest homicide rates (4.72 and 3.49 per 100,000 population, respectively). Saguenay was the only CMA to report no homicides in 2017.



The attempted murder rate in Canada increased 4% from 2016 to 2017, to 2.25 per 100,000 population. A 25% increase in the province of Quebec was the main contributor to the overall national increase. This was due to the January 2017 shooting at the Islamic Cultural Centre of Québec. This incident resulted in six homicide victims and 40 victims of attempted murder."

I have done a number of posts on this topic over the years so its time to update some of the numbers. The two figures below plot the homicide rate (homicides per 100,000 of population) for Thunder Bay, Sudbury and Canada.  The first figure is the raw annual homicide rate while the second figure plots a smoothed series which gives you a better picture of the longer term trends. Annual numbers tend to have a lot of variation and you really should not base analysis or policy on one or two years of data. However, based on the smoothed series (LOWESS Smooth using a 0.8 bandwidth) you can see the picture that emerges here over the longer term.








While the homicide rate in Thunder Bay for 2017 is down from the previous year at 5.8 versus 6.6 homicides per 100,000, the long term trend in one of increase.  The annual  un-smoothed data suggests the upward trend began circa 2008-09 while the smoothed series suggests that it has been a 21st century phenomenon with the rise starting approximately around 2000.  Thunder Bay's homicide rate has diverged from the national trend which has been one of decline.

This is certainly one issue for the Fall 2018 municipal election.

Sunday, 22 July 2018

Thunder Bay City Council Races Growing

Well, what a difference a couple of weeks makes.  It would appear that the fall municipal election has finally caught the attention of the local community and the number of candidates is up considerably from my post two weeks ago.  In my July 7th post, I noted that with only a few weeks to go before the July 27th deadline, the number of candidates who had filed for election in Thunder Bay's city council race was down dramatically.  However, since then it would appear that a larger number of candidates have come forward.

In the 2014 election, the total number of candidates (including all the school boards) was 78 of whom 51 were running for spots on Thunder Bay City Council.  As of today, there are a total of 67 candidates registered of whom 40 are seeking a spot on City Council.  While the numbers are still down, the gap is not as great as several weeks ago.  The remaining week will likely see other candidates come forward.  For those of you who might think yours truly will be inspired to run I can assure you it is an honor I do not currently aspire to. (I thought the italics would be an amusing touch).   However, I am certainly glad others are taking the initiative first because the role is important and second because the perambulations of Thunder Bay City Council are often a source of inspiration for my blogging.

Friday, 20 July 2018

Is the Russia-America Global CoDominium About to Begin?

Well, I had so much fun writing this and posting it on Worthwhile Canadian Initiative that I decided it was worth posting here too!


In the wake of the Putin-Trump Helsinki summit, there is much speculation about what was actually said between Putin and Trump behind closed doors and the uncertainty spread throughout the American government about whether agreements had been reached on issues such as Syria and the Ukraine.  The subsequent invitation to Putin to visit the White house in the fall – probably just before the November elections – has resulted in further uncertainty especially after Putin’s statement that he proposed to Trump holding a referendum to resolve the eastern Ukraine issue.  So, what is really going on here?
Quite frankly, we have all have been scratching our heads as the behaviour in some respects is reminiscent of 18th and 19th century monarchs gathering to decide the fate of wide swaths of the world in private meetings.  Putin is an autocrat and Trump is a business autocrat who admires political autocrats, so their personal level diplomacy may indeed be a series of moves designed to remake the world and return it to an age when Russian and American led blocs were the only game in town. Both the Russians and the Americans have seen their political influence decline in a multilateral world led by growing Asia-Pacific economies and both countries have been less than comfortable with the rise of China.
One has to wonder if this is an attempt by Trump to forge some type of private alliance with the Russians in an effort to coordinate their interests and deal with their ebbing international influence? The idea sounds like science fiction.  Indeed, the idea of these two countries getting together and establishing a CoDominium actually has substance in an alternate reality – the science fiction world of Larry Niven and Jerry Pournelle.  In their novel The Mote in God’s Eye, which was originally published in 1974, a series of treaties between the Russians and the Americans establishing the CoDominium in the 1990s sets the stage for a global government and the expansion of the human species out into the galaxy.  This of course would place Trump’s musings about setting up a Space Force into quite an entirely different light. Indeed, is Donald Trump drawing inspiration from a mythical civilization disrupting character known as a Crazy Eddie
Trump may be trying to engineer some broader type of Russian-American political alliance to counter their waning influence in the world driven by a nostalgia for the 1960s and 1970s.  After all, the rise of the Chinese economy and the growth of Chinese military influence is seen as a potential concern in some circles.  It does not matter how far-fetched the idea may seem given everything else that has been happening lately whenever Donald Trump takes the world stage.  Disrupting the world, wrecking the liberal economic order and creating chaos and then having America and Russia step in to fix things may seem crazy but does it make sense to foreign policy experts?  And, while Trump may be thinking along these lines what is Putin really thinking? I doubt he is a Niven and Pournelle fan.
Of course, one expects that greater formal cooperation between the Americans and the Russians will ultimately require Congress to sign-off especially if actual treaties are eventually negotiated. On the other hand, if it is all kept informal and behind closed doors, who knows what is eventually going to emerge?

Monday, 9 July 2018

Advanced Industries: A Northern Ontario Economic Challenge


A recently released report jointly released by the Brookings Institute and the Martin Prosperity Institute lays out Canada’s path to future prosperity via advanced industries and the challenges Canada faces in this economic sector.  The report is titled Canada’s Advanced Industries: A Path to Prosperity and is authored by Mark Muro, Joseph Parilla, Gregory M. Spencer, Deiter F. Kogler and David Rigby. These industries are not just in manufacturing but span a number of diverse industries with the commonality being the application of advanced technology and innovation.  Brookings defines advanced industries as: “industries as diverse as auto and aerospace production, oil and gas extraction, and information technology—are the high-value innovation and technology application industries that inordinately drive regional and national prosperity. Such industries matter because they generate disproportionate shares of any nation’s output, exports, and research and development.”

The report argues that Canada’s advanced industries are not realizing their full potential and that these industries need to be targeted to build a dynamic advanced economy for future growth.  About 11 percent of Canada’s employment – about 1.9 million jobs – is currently employed in these higher wage advanced industries and they generate 17 percent of GDP, 61 percent of exports and 78 percent of research and development.  Services account for about half of the Canadian advanced industry worker base followed by manufacturing at about 36 percent.  What is more interesting is the variation in scale, intensity and diversity of this sector across provinces and Canadian CMAs. 

Ontario, Quebec, Alberta and British Columbia together account for 91 percent of advanced industry employment which is just a bit more than their total employment share which is about 87 percent.  Not surprisingly, the CMAs with the most advanced industry jobs are Toronto, Montreal, Calgary and Vancouver.  However, productivity growth in this sector has been lagging relative to the United states. What is particularly disconcerting from the point of view of northern Ontario economic development however is the fact that every Canadian CMA added advanced industry employment between 1996 and 2015 – the exceptions being St. Catharine’s-Niagara, Greater Sudbury and Thunder Bay.  Thunder Bay also ranks low when it comes to the regional value added generated by advanced industries (See figure taken from page 22 of report) whereas Sudbury does better because of the intensity of its mining sector. Moreover, Greater Sudbury and Thunder Bay are also at the bottom of the CMA rankings when the number of advanced industry specializations is compared in terms of local concentrations of activity.

 

Boosting advanced manufacturing in Canada according to this report requires a strategy of “four C’s” – capital, competition, connectivity and complexity.  Capital is of course the most fundamental – that is, investment in machinery and equipment but also knowledge capital such as information and technology systems.  The weakness in business investment has been a long-known factor in Canada.  As for competitiveness, Canadian industries have traditionally had less exposure to intense competition and this may be limiting the capacity of its advanced industries to innovate.  Fixing this requires greater market competition and indeed deregulation and easing foreign ownership restrictions.  Connectivity involves Canadian firms participating more in global value and production chains and networks.  Finally, complexity requires firms to master the technological complexity and specialization of the modern economy and this is often measured by patent activity which in Canadian CMAs is generally below American ones.  Policies for building connectivity and complexity in the end also involve the unleashing of greater competitive forces within the Canadian economy in order to achieve the market size or scale within which advanced industrial output can grow.

Thus, a major obstacle for Canada when it comes to growing its advanced industrial sector is its highly regional nature which in the end results in barriers to internal trade, less competition and small market sizes that militate against the scale needed to grow output.  In the case of northern Ontario, even with the growth in local entrepreneurship which has been quite noticeable in its larger cities such as Thunder Bay and Sudbury, it remains that without growth in market size, new innovative ideas will be like so much seed fallen in rock if the companies cannot grow their output.  In the end, any regional economic policy must focus on increasing the scale of output by boosting market size either via exports or via immigration and local population growth.

Saturday, 7 July 2018

Why So Few Seeking Municipal Office?


With the July 27th nomination deadline for municipal office in Ontario rapidly approaching, attention has been drawn to the observation that the number of candidates seeking municipal office in Thunder Bay seems to have dropped.  The accompanying figure plots the number of candidates seeking a position on Thunder Bay City council as of July 6th.   With the exception of the race for Mayor which has seen a healthy increase in both the quantity and quality of candidates, there has been a drop in most of the other ward races with McKellar Ward being an exception.  

 

Current River had four candidates last election while at present there is only one.  McIntyre and Neebing also only have one candidate whereas they had four and three respectively last time.  Northwood and Red River are down to two each from four each last time and Westfort only has three compared to four last time.  The drop is most noticeable in the At-Large Race which had 19 candidates in 2014 and only 5 to date.  The total number of candidates for the City of Thunder Bay was 51 in 2014 and currently sits at 28 – a drop of 45 percent.

Of course, the decline in the At-Large race is partly a function of the fact that a number of At-Large councillors have opted to run for Mayor.  Given that the number of candidates running for Mayor has grown while the councillor candidates have declined, it suggests that being the top dog in Thunder Bay is perhaps a more attractive job than being a councillor. Another possibility is that there is a general lack of interest in running for municipal office in Thunder Bay this time given that the same faces have had the positions locked up for years barring the entry of fresh faces and repeated defeats have reduced the candidate pool in the long run.  Even though there are now some openings, there may also be a feeling of why bother given the headaches of holding office in a city with so many economic and social challenges.

Yet, there may be other explanations.  Explaining this decline, the Thunder Bay City Clerk has suggested that the earlier deadline compared to other years may be a factor.  In the past, candidates had from January 1st to mid-September to decide to run but a change in the Ontario Municipal Act shortened the period to May 1 to July 27.  This could indeed be the case given that Greater Sudbury, which is a larger city than Thunder Bay at present (July 7th) also only has 28 municipal candidates seeking office down from 70 last time and they have 12 wards plus a mayoral race.  There were ten candidates for Mayor in Sudbury in 2014 and currently there are only 4.  Of the twelve ward races, ten are down from 2014 (See Figure).


If this drop in the number of candidates is replicating itself across Ontario it means that the changes to the Ontario Municipal Act that have shortened the nomination period may actually serve to reduce the quality of our local democracy by having the unanticipated effect of reducing the candidate pool.  Deciding to run for office is not something that one takes on lightly and a longer period to decide may be beneficial.  Certainly, having the deadline in the middle of summer when minds are preoccupied with vacations may also not be a help.  On the other hand, if you are going to run why should a shorter decision period matter? Perhaps there are other changes that have occurred that have made filing more onerous? Has the volume of paperwork or the fee required gone up? There are still about three weeks left to go before the nominations close.  We will have to see if a surge in candidates declaring occurs.

Friday, 29 June 2018

New Ontario Government and Cabinet Sworn In



Ontario now has a new provincial government with Doug Ford sworn in as Premier this morning and a new trimmed down cabinet of 20 members.  It would appear that Premier Ford has decided to make good use of the talent on his team and embrace a team of rivals approach to his cabinet with key positions for those he ran against to gain the party leadership.  First and foremost, Christine Elliot is Deputy Premier and in charge of the important health portfolio.  Caroline Mulroney is Attorney General and interim leader Vic Fedeli is in charge of the Finance portfolio.  This is certainly an astute set of choices and bodes well for what will be a large set of challenges not the least of which will include dealing with the province’s finances.  

And contrary to what might have been feared as a lack of interest in post-secondary issues, Premier Ford has not merged Training, Colleges and Universities with Education but instead given it its own minister – Merrilee Fullerton – who has a background as a physician.  Also keep an eye on Monte McNaughton in the vital infrastructure portfolio.  Interestingly, Premier Ford will also be Ontario’s federal diplomat in chief given that he is retaining the intergovernmental affairs portfolio for himself.  He will be directly making Ontario’s case when it comes to transfer payments and working with the federal government.

In terms of northern Ontario representation in cabinet, we are well represented with two northern Ontario members.  Kenora’s Greg Rickford is in charge of the all important energy portfolio as well as northern and indigenous affairs with his appointment as Minister of Energy, Northern Development and Mines, and Minister of Indigenous Affairs.  This is alot and will be hard work but will give him the scope to be a key player in northern Ontario energy, resource and economic issues given the importance of First Nations in developing the Ring of Fire.  And of course, there is Vic Fedeli from North Bay who probably has the most important and challenging job dealing with the province’s finances.  Personally, I cannot think of a better person for the job given his years of work and interest on provincial finance matters.

So, there you have it.  We have been sent a new government.  Once again, the drama begins.


Wednesday, 27 June 2018

Celebrating Grain Transshipment at the Lakehead


There was a short and well attended ceremony and plaque unveiling today at the Western Grain By-Products Elevator Site on Kingston Street held by the Historic Sites and Monuments Board of Canada and Parks Canada.  The elevator is the former Fort William Elevator No. 10 which was built in 1913 at the peak of the Canadian wheat boom.  The plaque is the outcome of a long period of lobbying and work by the Friends of Grain Elevators and commemorates the role of the grain elevators at the Lakehead twin cities of Fort William and Port Arthur in facilitating Canada’s role as a leader in the international grain trade.

The development of the grain industry and its transportation infrastructure during the Wheat Boom period of 1896-1929 was an event of national historic importance given that it represented the fulfillment of the national economic strategy envisioned by the Fathers of Confederation.  Under the criteria for events of national historic significance, the development of the grain industry and the grain transport infrastructure at the Lakehead (the former twin cities of Port-Arthur-Fort William, now Thunder Bay) qualifies as a “defining episode” in Canadian history. 

At the Lakehead, the rail and water components of the grain transportation system came together in a transportation node that linked together the economy of Canada.  Along with the fleets of grain transport steamers, the twin cities also became key points for the three national transcontinental railways that were completed during the boom era.  As well, at the Lakehead, the grain transport sector played the role of a booming sector in Thunder Bay's economic development. 

Between 1905-1929, grain shipments increased seven-fold and for much of the 20th century The Lakehead was the largest grain port in the world and Canada accounted for the bulk of the world’s grain exports.  At its peak, over 30 grain terminals lined the harbour with a storage capacity of nearly 100 million bushels.  Today, fewer than a dozen of these giant “Castles of Commerce” (as they were so aptly named by Rudyard Kipling) remain along the waterfront.  Many of the key players in the development of the Lakehead’s grain transportation role and the Canadian grain industry in general such as C.D. Howe and N.M. Paterson also went on to contribute their expertise to the national political stage. 

Grain transshipment at the Lakehead is an economic event of national historic significance in that it played the cementing role in the east-west grain transport infrastructure of the Wheat Boom era, a key stage of Canada’s development.   It represents a fulfillment of the key ideas of the National Policy economic strategy and represents a tangible application of those ideas in Canadian economic and historical development.  Without the Lakehead, there would have been no east-west economic flow.

 



 
Today’s ceremony was recognition of The Lakehead’s important role in Canadian economic history.

Wednesday, 13 June 2018

Northern Economist on the Road in Portugal! (Northern Portugal to Be Precise)


Well, I am currently engaged in extended travels in the Iberian Peninsula and it is probably just as well given the turmoil that has enveloped Canada in the wake of the G-7 meetings and President Trump’s high pressure approach to getting his way on NAFTA.  Given the success of the North American bid for the 2026 FIFA games, I suppose we can all look forward to President Trump’s involvement in getting everyone to work together on that project too. 

It has been interesting that the US President does not appear to be as interested in America’s old stalwart friends like Canada and France or the UK and Germany and seems more inspired with the company of his new friends North Korea and Russia.  His comments after the Singapore Summit suggests that Canada would be more interesting if it had a lot of unspoiled beaches for future condo and hotel development – no doubt with the help of assorted Trump holding companies.  Perhaps our Prime Minister can get President Trump’s undivided attention by inviting the presidents of China and Russia to Canada for a special summit on arctic development given the substantial pool of beach real estate and new waterways emerging there with global warming.

Nevertheless, I digress.  I am visiting Porto and have been having a wonderful time learning about Portugal and enjoying the sights and sounds of a very sophisticated society with a long history of accomplishment.  Today, for example on our visit through the Duoro Valley we drove through Sabrosa, which is the birthplace of Ferdinand Magellan and features a large statue of the explorer.  Portugal is highly urbanized with well over half of the population of approximately 10 million people concentrated in the urban areas of Porto and Lisbon.  Porto itself is the gateway to the world famous and UNESCO designated Duoro Valley wine producing region.  Of course, like many countries in Mediterranean Europe, Portugal was hard hit by the 2008-09 financial crisis and opportunity for its youth has been a challenge.  Tourism is becoming a more important part of the economy and the experience I have had  is excellent.

Bom Dia to all!


 


 

Friday, 8 June 2018

Ontario: The Road Ahead


Ontario has elected a new majority government and Doug Ford is Premier Designate of Ontario.  In the end, Ontario voters have voted out the Liberals and opted for a major change in government.  Congratulations to Mr. Ford and his team on their election victory and a thank you to all candidates in this election who chose to run and campaign.  Political life is a challenge and one cannot say enough about how important it is to have people willing to run for office and serve the public interest.  In the end, any democracy is only as effective as the people who are willing to participate whether as candidates or voters.

It is the day after and as of this morning the PCs hold 76 seats with 40.6 percent of the popular vote. Their share of the popular vote was in the end higher than the polls predicted.  The NDP hold 40 seats with 33.7 percent of the popular vote and the Liberals are down to 7 seats with 19.3 percent of the popular vote.  The Liberal collapse has reduced them to virtual islands of support - three seats in the GTA, three in Ottawa and 1 in northern Ontario.  The Green Party has also managed a positive showing electing 1 – their leader – in Guelph with 4.6 percent of the vote.  It is a majority government and for those concerned about uncertainty, a minority government would have created more uncertainty than a majority government.  Any concerns about uncertainty with respect to policy direction are now entirely in the hands of the new elected government.

With respect to northern Ontario, the region has diverse representation that includes members of the governing party as well as opposition voices to air issues and concerns.  The elected PC members are also spread across the north and include Greg Rickford (Kenora-Rainy River), Vic Fedeli (Nipissing), Norm Miller (Parry Sound-Muskoka) and Ross Romano (Sault Ste. Marie).  As mentioned in an earlier post, these are good and effective members of the incoming team with proven talent and the north will be well served by them.  Indeed, there is also cabinet material among them. Vic Fedeli is in my opinion a leading candidate for the finance portfolio while Norm Miller and Gred Rickford would make good ministers in portfolios such as northern development, natural resources and transportation.

In terms of the road ahead, the next few weeks will provide some indication of what the actual direction of the new government will be.  While many have criticized the lack of specifics of the PC campaign, it should also be noted that as a campaign strategy, presenting fewer targets for criticism can also be effective.  However, the campaign is over, and after the new government and cabinet is sworn in one can expect quick movement on a few high-profile platform items such as immediate lowering of the gasoline tax in order to demonstrate action on promises made.  However, longer term action will require more methodical work not least of which will be a budget and direction on the province's finances. 

With respect to the province's finances, as a start, I would suggest an expenditure growth target of 2+1 (2% inflation and 1% population growth) which would allow provincial expenditures to grow slower than historical revenue growth rates thus bringing the budget into balance sooner rather than later.  I would also urge  the establishment of a new independent capital expenditure review process to help better assess the approval of the capital projects which have been adding to the provincial debt.  I of course as always have a few other ideas and they are available here in more detailed format. I am also looking forward to how things are going to shape up also when it comes to initiatives for northern economic development.

So, there you have it.  The election is over and there will now be a few days in which to reflect on what has happened and why, but ultimately there is a province to run and a northern Ontario economy to build.  We have been sent a new government and despite the slings and arrows and acrimony of any election campaign, hope is always greatest at the outset of any new government’s mandate.  While there are concerns about the new government being a “wild ride”, one should always remember that as important as a party leader is, under our system of government the premier is in the end simply first among equals. 

Thursday, 7 June 2018

The North and Ontario's Population

Well, today is election day and as we pause and wait for the results later today, why not take another look at northern Ontario's population but this time with numbers from the 2017 BMA Municipal Study.  Two items for your consideration. First, a table showing population in the major northern Ontario municipalities as well as the growth rates of their population for the period 2006 to 2011 and 2011 to 2016.  The table ranks the cities from the highest to lowest growth rates for the period 2011 to 2016 and they show that at the top are Parry Sound and Greater Sudbury.  Their populations have continued to expand and while their proximity to the GTA and its opportunities may be a factor it remains that proximity has not helped North Bay.  Also of interest is Elliot Lake which has taken to marketing itself as a retirement community.  Despite an aging population, people are not retiring to Elliot Lake in droves.



With the north not really growing while Ontario's population rises, its share of Ontario's population is also declining.  However, in this case it turns out that the North has plenty of company when it comes to shrinking population shares.  The figure below - also taken from the 2017 BMA Municipal Study (using data from the Ontario Finance Ministry) plots the population share of each of Ontario's regions since 1991 and projected to 2041.  It turns out that each region is expected to decline as a share of Ontario's population by 2041 with the exception of the GTA.  The GTA is projected to rise from 42% in 1991 to hit 53% by 2041.  As for northern Ontario - it is going from 8 percent of the population in 1991 to 4 percent by 2041.  At present it is about 7 percent.


Two things.  First, Ontario is becoming increasingly lopsided in terms of population and employment with the GTA enjoying a perpetual boom and the rest of the province with perhaps the exception of the Ottawa area undergoing a slow stagnation.   This will be a major challenge for the next government when it comes to dealing with the provincial economy.  Second, as many of you are aware, there was an increase in riding numbers for today's elections - there are now 124 seats in the legislature up for grabs.  Of those, 13 are in northern Ontario which means that 10 percent of the election ridings are in the north but only about 7 percent of the population.  Whatever northerners may think about their relative alienation and neglect by the south, it remains that their votes yield clout out of proportion to their population numbers.  Northern Ontario needs to make use of this influence while it still retains it. It is unlikely that 2041 will see the north with 10 percent of the seats in the legislature but only 4 percent of the population.

Saturday, 2 June 2018

What Should Northern Ontario Voters Do?


With a few days left before the June 7th provincial election, northern Ontario voters face important choices and consequences.  The governing Liberals appear headed for defeat if one is to believe the evolving poll trackers.  Indeed, Premier Wynne has acknowledged the election is lost.  This means that come June 8th there will be a new government with consequences for the region in terms of public policy.  Public policy is of importance to the region given government’s role in health, education and transportation, the dependence of the region on government employment for economic sustenance and the stalled regional economy, which has seen little net employment growth compared to the rest of the province.

The Liberals have been in power since 2003 and their tenure encompasses the forest sector crisis and the stalled Ring of Fire.  On the one hand, the forest sector crisis was a function of a rising Canadian dollar, aging private pulp mills and increased competition from abroad.  On the other hand, the increase in electricity rates did not help.  As for the Ring of Fire, in the end it is not going anywhere until chromite prices rise no matter how much is spent on infrastructure.  The Liberal government’s short-term response to northern development was increased government spending in the region via assorted projects and initiatives including highway work.   The long-term response was the 25-year northern Ontario growth plan – which it must be noted actually predates the Wynne government.  Interestingly enough, to date the growth plan has not been accompanied by significant results and more to the point, there has been no mention of it during the current campaign.  Make of that what you wish.  However, given Premier Wynne has acknowledged the election is lost, thought must also be given to ensuring the region has some representation in any new government that is formed.

The NDP has surged in the polls since the election was called and their policies in health, pharma care, education, rent control and hydro seem mainly to be extensions of what the Liberals have been campaigning on.  For a region dependent on government job creation, an NDP government would be business as usual but with a more ideological bent away from market-based solutions to the region’s issues.  If one wants to differentiate the two parties when it comes to northern policies, one would have to say a key difference is that the pleasant Andrea Horwath is presently more popular than Kathleen Wynne.  However, when the rest of the team accompanying Horwath is examined more closely one wonders about the depth of talent available to serve in portfolios like northern development, natural resources and health not to mention finance.  Most of her team seems drawn from public sector, labor union, non-profit and social activism sectors.  Even the usually ubiquitous lawyers that dot politics are relatively scarce. Aside from a short–term continuation of government spending, the long-term economic benefits of an NDP government for northern Ontario are uncertain despite the claim of change for the better.

Just as uncertain are what the benefits of a Doug Ford government would be for northern Ontario given the lack of a detailed and  clearly articulated northern platform.  Natural resource revenue sharing has been promised as well as a jump start to the Ring of Fire but as noted earlier, the price of chromite is not going anywhere soon.  If the desire is simply for policy change, that would certainly be provided by a Conservative government more so than by the NDP but that change given traditional conservative values, is likely to not support the current orientation of the region towards public sector dependency.  On the other hand, given that we have been subjected to activist government economic development policies for several decades, it may be time for a different approach.  Moreover, whatever one might think of Doug Ford, it remains that his team would include some proven talent when it comes to northern Ontario – Greg Rickford, Norm Miller and Vic Fedeli come to mind.  Further reflection should also be given to the prospect that based on the distribution of votes, poll trackers are suggesting a high probability of a Doug Ford administration.

So what is a northern Ontario voter to do?  Good question.  Think about the region and its economy and the direction you think it should go.   Think about what the benefits and cost of each party and their policies might be to you and your families and friends.  Then make your decision and go vote.  None of the above is really not an option.  One must make a choice from the options available. On June 8th, the sun will still rise.  The northern Ontario economy will still face challenges and they will need to be tackled no matter who forms the government. That is the only certainty.

Thursday, 31 May 2018

Canadian Economy Slows in First Quarter 2018

Well, the Statistics Canada GDP numbers are out for the first quarter of 2018 and real GDP in the first quarter of 2018 grew at 0.3 percent which down from 0.4 percent the previous quarter.  Indeed a quick glance at a chart with the quarterly growth rates going back to 2013 suggests the period of more robust growth that took place in 2016 and somewhat into 2017 is winding up perhaps explaining the reluctance of the bank of Canada to raise interest rates yesterday. More to the point, expressed at an annualized rate, real GDP was up 1.3% in the first quarter. In comparison, real GDP in the United States grew 2.2%.

Real Gross Domestic Product Growth (Source: Statistics Canada)




combined line chart&8211;Chart1, from first quarter 2013 to first quarter 2018


The slower growth was driven by by a deceleration in household spending, lower exports of non-energy products and a decline in housing investment (-1.9%).   The impact of changing household spending is indeed a factor in the slowdown and may be tied to the recent increase in interest rates as well as other factors such as the rise in gasoline prices and rents.  According to Statistics Canada: "investment in housing fell 1.9% in the first quarter, the largest decline since the first quarter of 2009, due to a drop in ownership transfer costs (-13.5%). Lower resale activity coincided with new mortgage stress measures introduced nationwide in January...Household final consumption expenditure decelerated for a third consecutive quarter, slowing to 0.3% in the first quarter."

The sustainability of an economy led by consumer spending and housing may finally be coming into question.  How do things look going down the road? Well, FocusEconomics June 2018 Consensus Forecast still has Canada's real GDP growing at 2.2 percent annually this year with a decline to 1.9 percent in 2019 and 1.8 percent in 2020.  Given an annualized growth rate of 1.3 percent in the first quarter of 2018, we have a lot of ground to make up to reach 2.2 percent.The United States meanwhile is projected at 2.8, 2.4 and 2 percent for the same years.  Normally, when the United States does well so do as a result of our exports to them we but that traditional link has been under increasing stress given a more protectionist US economy. Today's news that the United States may be going ahead with tariffs on Canadian aluminum and steel will not help matters much.

Tuesday, 29 May 2018

Northern Ontario Property Tax Update

The 2017 edition of the BMA Municipal Study is out and there is a wealth of material here for blog posts for the next little while.  It is a municipal election year so comparisons of property taxes and service levels are particularly of interest. For this post, an update of property taxes paid for a detached bungalow in the five major northern Ontario cities.  According to the BMA, the definition of a single detached family bungalow is: "A detached three-bedroom single story home with 1.5 bathrooms and a one car garage.  Total area of the house is approximately 1200 sq, ft. and the property is situated on a lot that is approximately 5,500 sq. ft."

Figure 1 plots the average residential property tax paid for a detached bungalow for the five cities for the period 2005 to 2017.  In 2005, these averaged $2,260 and by 2017 the average was $3,530 representing an increase of 56 percent.  While property taxes trend up everywhere  there are several features that caught my interest. First, there is a clustering with Thunder Bay, Timmins and North Bay as higher property tax jurisdictions while Greater Sudbury and Sault Ste. Marie are generally cities with lower property tax levels - at least for this class of property.  In 2017, average taxes for a detached bungalow were highest in Timmins at $4,294, followed by Thunder Bay at $3,695, then North Bay at $3,576 then Greater Sudbury at $3,123 and finally the Sault at $2,954.


Second, the last year has seen the property taxes paid on an average  detached bungalow in Timmins apparently spike while those in North Bay actually declined.  Between 2016 and 2017, the value for Timmins rose from $3,574 to $4,294 - an increase of 14.4 percent.  Meanwhile, in North Bay, there was a decline from $3,632 to $3,576 -  a decline of 1.5 percent.  Naturally, these changes need to be put into the context of the local municipal economic and fiscal environment. 

Keep in mind, this also does not mean every property owner in Timmins saw a 14.4 percent increase in Timmins but the steeper increases may be related to how a change in assessment values for mining companies by MPAC that turned out to be lower than expected was measured in the BMA Report.  The projected decline could have resulted in higher rates on residential properties but the full impact appears to have been mitigated for the time being.   It turns out the average homeowner only saw a $125 increase in 2017 in Timmins.  As for North Bay, there apparently are rate decreases underway as a result of market assessment value shifts.


In any event, the annual percent increases for 2015 to 2017 plus an average of the three years are plotted in Figure 2.  The average increases in property taxes for a detached bungalow were highest in Timmins at 7.2 percent and lowest in North Bay at 0.6 percent.  Thunder Bay was in the middle of the pack at 2.9 percent - just below Sudbury at 3 percent and ahead of the Sault at 2.6 percent. more to follow.