Here are some of the recent items I found to be of economic significance to northern Ontario. If you are interested in the regional impact of the Federal budget this week from my perspective, see my previous post. There was also this somewhat more upbeat story on CBC:
As well, the 25 million dollar boost to Fednor seems to have gotten some attention. I guess in northern Ontario, 25 million dollars is considered alot of money and the source of much optimism.
The arrival of the M.V. Manitoulin was a record breaking early arrival for the first ship and leads to the hope this is the start of another great shipping season for the Port of Thunder Bay. The Port of Thunder Bay has been on an upward trend the last few years.
As well, it turns out Sunrise Records will be adding to Thunder Bay retail filling the hole left by the closure of HMV. See:
And the upbeat news continues all over the north. In the Sault, despite concerns raised by the local Chamber of commerce at a public forum, the city's Mayor has assured everyone that municipal costs are under control.
After all, the city council in the Sault has shrunk from 12 to 10 saving $60,000 annually! However, to put $60,000 in perspective, keep in mind the total municipal levy for 2017 in the Sault is projected at 108.9 million dollars.
In terms of infrastructure, Timmins is opening a new hospice center and the optimism was contagious also spilling over to a generally positive view of certain elements of the federal budget by the Timmins Chamber of Commerce. Perhaps some of that new Fednor funding is headed towards highway construction in the Timmins area. See:
Hopefully, concrete might do a better job withstanding the potholes that have been plaguing me as I drive around Thunder Bay. It is difficult to remain upbeat when one's innards are constantly jarred by potholes.
Meanwhile, things are looking up in North Bay. While North Bay's population, like much of that in northern Ontario is aging at a fast rate, it remains that there might be a silver (no pun intended) lining....
The Growth Plan for Northern Ontario was released on March 4, 2011 and nearly six years on
it is probably time to see what impact it has had on the economy of northern
Ontario.The 25-year plan was to
guide provincial decision-making and investment in northern Ontario with the
aim of strengthening the regional economy and its ultimate goal was to
strengthen the economy of the North by:
Diversifying the region's traditional
resource-based industries
Stimulating new investment and
entrepreneurship
Nurturing new and emerging sectors with
high growth potential.
Of course, evaluating the success of the Growth Plan for
Northern Ontario can be a complicated endeavor as it is very important to
decide what to measure.The Plan
itself did have a section on monitoring and performance measures – Section 8.4 that
read as follows:
8.4 Monitoring and Performance Measures
8.4.1 The Minister of Infrastructure
and the Minister of Northern Development, Mines and Forestry will jointly
monitor overall implementation of this Plan and report on what progress
provincial ministries and municipalities have made to implement the policies in
this Plan.
8.4.2 The Minister of Infrastructure
and the Minister of Northern Development, Mines and Forestry will work with
external partners to develop a set of performance indicators to assist in Plan
monitoring and reporting as set out in Policy 8.4.1.
8.4.3 Success in achieving this
Plan's outcomes will, in part, be measured by assessing progress in:
attracting
investment and business growth in Northern Ontario
diversifying
the North's economic base
supporting
education and skills development of the North's workforce
increasing
the involvement of Aboriginal peoples in the northern economy
improving
the connectivity of the northern population though information
technologies.
It is
further acknowledged that long-term progress in these areas requires sustained,
co-ordinated efforts by the Province and all its external partners.
8.4.4 The Province is further
committed to the development of performance measures for ministry-specific
initiatives that support implementation of the policies in this Plan.
Now the indicators suggested by this section can be
considered important indicators of success but actually measuring them is a
much more difficult endeavor and in the end one will have to measure some of
them indirectly.While it might be
possible to measure government investments in aboriginal education and skills
development, how does one measure diversifying the North’s economic base or
increasing the involvement of Aboriginal people’s in the northern economy?
So in the absence to my knowledge of any official effort to yet
present comprehensive evidence as to what the overall progress and evaluation of
the Growth Plan for Northern Ontario has been to date, I have decided to devote
several blog posts in the coming weeks to assessing the impact of the plan on
economic performance and activity in northern Ontario. And of course, as an economist there are some pretty standard measures or indicators of what I would term to be economic growth. After all, if something is called a "Growth Plan" then one needs to see growth over the time period spanned by the plan. Stay tuned!
Well, the 2017 federal budget is out and I have put together some comments in two parts: general and northern Ontario specific.
General Comments
Today’s federal budget addresses Canada’s economic
uncertainty by stimulating spending without adequately addressing the
long-term productivity growth of Canada’s economy.Total spending is expected to rise from 315.1 billion dollars in 2016-17
to reach 371.8 billion dollars by 2021-22 – an increase of 18 percent.The 2017 federal budget is disquieting
given that revenues will still rise from 292.1 billion dollars to 356 billion
dollars – an increase of 22 percent - over the same period and yet still result
in the accumulation of more deficits.
The
federal debt is 637.1 billion dollars in 2016-17 and projected at 756.9 billion
dollars by 2021-22. Debt service costs will rise from 24.3 to 33.3
billion dollars over the same period. The deficit will be 23 billion dollars in
2016-17, 28.5 billion dollars in 2017-18, 27.4 billion dollars in 2018-19 and
decline moderately to 18.8 billion dollars in 2021-22.
While the introduction of a contingency reserve is welcome,
it still remains there is no long-term plan for addressing the fiscal deficit situation
of the federal government.This is
of concern given the importance of private sector confidence when it comes to
making investment and business decisions.This is also worrisome given that interest rates are projected to rise as well as the economic uncertainty we still face
given the trade and economic policies of the Trump administration in
Washington.
Despite the increased spending, there is to date relatively
little to show for promised federal infrastructure investment and the federal
government’s promises of a bold and transformative agenda have fallen flat when
it comes to actual implementation.While today’s budget focus on social policies such as more
skills training, better access to child care, innovation and infrastructure
spending for First Nations is commendable, there is really no assurance that
the government will be able to implement anything given its slow pace of
implementation on the preceding year’s infrastructure and spending commitments.
According to a recent report from the Institute of Fiscal
Studies and Democracy, the federal government already spends nearly $23 billion
on innovation, skills development and training across 147 activities and there
is little available in the way of performance measurement to evaluate what
works and what does not.
In the case of assistance to the middle class, it remains
that the recent reduction in middle class tax rates from 22 to 20.5 percent
generally benefited tax filers making between $50,000 and $100,000 per year
while nearly two-thirds of Canadian tax-filers report total income below
$50,000 and saw no benefit from the tax decrease. Moreover, the increase in
unemployment insurance premiums in 2018 to partly offset the government’s
skills-training proposals and the increase in excise taxes constitute a tax increase on the middle class.
However, the government is to be commended for not further increasing the tax
burden via increases in capital gains taxation.
While the federal government has grand aspirations and seems
willing to spend a lot of money it falls short on achievement and does not
appear able to fully address concerns that it is generating the best value for
money.A budget must be more than
an aspirational document that announces spending that is to be spread out over
time.It should set goals and then
achieve them.
Northern Ontario
Comments
This is a government that has decided to run large deficits
and add substantially to the public debt.In the case of northern Ontario, one has to ask where the regional
benefits of this increased spending are given the federal emphasis on
infrastructure investment, the innovation agenda and assistance to the middle
class?In many respects, the
budget is a disappointment with respect to some of the specific issues the
northern Ontario economy faces.Northern Ontario is still
characterized by slower economic and employment growth relative to the rest of
the country and given that its has substantial representation at the federal
level both in terms of MPs as well as cabinet, one wonders where the federal
growth agenda for northern Ontario is now that we are two years into the
federal mandate?
Northern Ontario receives little in the way of specific mention in Budget 2017. An extra 25 million dollars over five years for Fednor is not much in a world of multi-billion dollar spending projects.Here is what I would have liked to see
in the 2017 federal budget with respect to the economic future of northern
Ontario.
·1.It is Canada’s 150th
anniversary.Where is the federal
vision that would see us embark on finally completing the Trans-Canada highway
through northern Ontario up to a standard that is worthy of a nation as wealthy
and developed as Canada?When will
there finally be a commitment to complete a four-lane national highway through
the middle of Canada fully linking east and west?
·2.Northern Ontario municipalities have not had the
increase in economic base characteristic of larger urban centers and their revenue
is increasingly being borne by residential ratepayers.At the same time, the physical
infrastructure in northern Ontario municipalities is increasingly in need of
repair and renewal.Notwithstanding the announcements of investing in infrastructure, where
are the federal infrastructure projects and dollars infrastructure in terms of
roads, bridges and sewers here in northern Ontario?
·
3. Where is federal leadership when it comes to investing
in the Ring of Fire?Commodity
prices have bottomed out and are in the process of starting an upturn.What are the federal plans to providing
the infrastructure investment to assist in development of mining resources in
northern Ontario in advance of the coming upturn in commodity prices?
·4. The federal government maintains it is committed
to research and innovation and economic development.When can we see some direct and more substantial federal
investment in research directly related to northern Ontario economic
development issues, to the analysis of the regional economy of northern Ontario,
and the economics of natural resources, mining and transportation?Where are the Federal Research Chairs
and research support directly dedicated to these areas?
·5. The 2016 Federal Budget said it planned to
invest $8.4 billion over five years for indigenous people with $1.5 billion
earmarked for 2016-17 and the 2017 Budget earmarks an additional 3.4 billion
over the next five years. The
money was supposed to be spent on health, infrastructure, renovating and
building schools on-reserve as well as improving water supply and treatment
infrastructure.How much of this
in 2016-17 made its way to northern Ontario? How much in 2017-18?
Well, another week has come and gone and there are many economic stories bubbling around northern Ontario and even farther afield with implications for northern Ontario. For example, this morning's Thunder Bay Chronicle-Journal reported on upcoming talks between the forest sector and the federal government on preparing for the upcoming Canada-US softwood lumber negotiations. However, little information was provided in the story as to what strategy options are being explored as Canada moves into negotiations with the Trump administration on this file.
The policies of the Trump administration will soon also be front and center with respect to environmental funding dealing with the Great Lakes. The budget proposed in the United States has put forth rather large cuts to program spending and one area that will have a direct impact on northern Ontario is what seems to be the complete elimination of $300 million dollars annually for the Great Lakes Restoration Initiative with plans shifting the responsibility onto state and local governments. See:
In brighter news, while northern Ontario reports the lowest optimism when it comes to construction activity in the Ontario Construction Secretariat 2017 Construction confidence Indicator, it is nevertheless up from 2016 and part of that optimism is due to a number of post-secondary construction projects in Sudbury and North Bay at Laurentian University and Canadore College. However, the Trump effect is again rearing its head here as: "Despite the boost in overall confidence, nearly half of the 500 contractors surveyed report they expect the Donald Trump presidency to have a negative or harmful effect on Ontario’s economy and construction industry. This sentiment is most acute in Windsor-Sarnia where 59 per cent of respondents believe Trump’s government will harm Ontario’s economy." See: Post-secondary projects generate optimism in North Bay, Sudbury-survey. North Bay Nugget, March 16th, 2017. In business activity and expansion news: Explor Resources starts drilling program on Timmins-area property. Northern Ontario Business. March 16th, 2017.
When it comes to civic issues and municipal government, a couple of items. The urban renewal legacy of the 1970s haunts us still. In Thunder Bay, they are revisiting the future of Victoriaville Mall. In the 1970s, both the north and south downtowns in Thunder Bay (corresponding to the old cities of Port Arthur and Fort William) received urban renewal makeovers that in the long run were less than successful. The Keskus Mall in downtown Port Arthur was eventually demolished to make way for the Casino but Victoriaville which was built right on the main downtown intersection and permanently affected traffic patterns lingers on and apparently costs the City of Thunder Bay $500,000 annually. Victoriaville hit tough sledding right off the bat in the recession of the early 1980s as its anchor store -the Chapples family store - went under. Keskus did not lose its major retail anchor until the late1990s when Eaton's went under.
And in Sudbury, the big municipal fiscal issue is the contentious reorganization of its fire and paramedic services with a big meeting slated for March 21st. For my take on the issue and links to some of the news stories, see my earlier blog post here.
It is also Federal budget week with the budget coming down March 22nd and we will have to see what emerges specifically geared towards northern Ontario. For my contribution to federal budget debate this week, see here. Have a great week.
Sudbury is in a bit of a tizzy over proposed changes to its
fire and paramedic services.The
proposed plan will see nine of the current 24 fire halls closed and a move to
reduce the number of volunteer firefighters and hire more full time
firefighters. The staff report estimates that the full-time compliment would go
from 108 to 166 within the next decade, while the volunteer ranks would be
almost cut in half from the current staffing level of 350.
Sudbury is a very large and dispersed municipality with the
central core area served by full time firefighters and outlying areas served by
volunteers who are paid part-time employees. Under the new plan, Sudbury's municipal government maintains that firefighters would be able to reach 90 percent of
Greater Sudbury within nine minutes, as opposed to the current 69 percent.Part of what is planned is an
equalization of services to standardize and improve coverage and response
times.However, part of the plan
also involves composite stations staffed by both full-time and volunteer
firefighters, as well as increases in taxes in the areas currently served by
volunteer firefighters.
It is useful to see where Greater Sudbury stands in its fire
service costs relative to other cities in Ontario.Figure 1 uses data from the BMA Management Consulting 2016
Municipal Study to plot the net per capita fire service costs (including
amortization of any capital assets) for cities in Ontario with more than
100,000 of population as well as the Northern Ontario Five (N5) – Thunder Bay,
Timmins, Sault Ste Marie, North Bay, and Greater Sudbury.The results show quite a difference in
per capita costs ranging from a high of $273 in Thunder Bay to a low of $102 in
Milton.Sudbury’s costs are quite
modest coming in at $149 – the lowest among the N5 – and placing 22nd
among the 27 cities in Figure 1.
Of course, one can understand the concerns of ratepayers in
Greater Sudbury that the proposed changes will raise costs and therefore raise
taxes. The costs of fire fighting according to the BMA Municipal Study 2016
Report can vary as a result of a number of factors, which include:
1. The nature and extent of fire risks: The type of building
construction, i.e. apartment dwellings vs. single-family homes versus institutions
such as hospitals
2. Geography: Topography, urban/rural mix, road congestion
and fire station locations and travel distances from those stations
3. Fire prevention and education efforts: Enforcement of the
fire code, and the presence of working smoke alarms
4. Collective agreements: Differences in what stage of
multi‐year agreements municipalities are at and also differences in agreements
about how many staff are required on a fire vehicle
5. Staffing model: Full‐time firefighters or composite
(full‐time and part‐time)
Costs in the end are an interactive function of the geographic area that must be served as well as the population base in that area that is available to cover the costs as well as its compactness - in other words, population density is a factor. The importance of population density as a determinant of
fire service costs is highlighted in Figure 2, which plots the net costs per
capita of Figure 1 against population density (population per square kilometer)
and reveals an inverse relationship when a linear regression is fitted to the
data.It of course does not
control for any other variables and there is a fair amount of dispersion (the
R-squared is also very low) around the fitted relationship but if Sudbury’s
population density is plugged into the relationship, all other thing given, the per capita cost of its
fire services rise to 181 dollars per capita.Thus for Sudbury to be at 149 dollars per capita it must
mean there are other factors affecting its costs or it is doing something to keep its costs well below – nearly 20 percent
below - what is predicted by its population density alone.
It is the volunteer staffing model which has probably been a
factor in keeping Sudbury’s fire fighting costs per capita relatively low
given the large land area that must be served and the accompanying low
population density.Moving away
from this model will probably bring Sudbury’s per capita costs more in line
with other major Ontario municipalities.No wonder ratepayers are upset.At the same time, making the changes needs to weigh the improvements in
service and response time that are expected to emerge against the expected
additional costs. It is an
important cost-benefit analysis and should make for an interesting City council
meeting in Sudbury on March 21st.
