Wednesday, December 14, 2016

May 2011 Posts

16 Posts from May 2011

Public health spending as a share of public sector health expenditures has grown dramatically in recent years especially as a result of concerns with SARS and H1N1.  Historically, public health measures such as immunization and clean water technologies have been responsible for much of the twentieth century mortality decline.  Today, there are new public health issues such as obesity and environmental factors and their influence on health.  Visit my latest post on Worthwhile Canadian Initiative for a discussion of differences in per capita funding for these programs across the provinces and what it might mean.

Election season is rapidly approaching in Ontario and it will be accompanied by plans and proposals to deal with Ontario’s deficit, which according to the last provincial budget was 16.7 billion in 2010-11 and is projected to decline to 15.6 billion by 2011-12.  Needless to say, with these kinds of deficits, the net public debt will soon break the 250 billion dollar mark and generate debt service costs that will eat into program spending. 
How to fix Ontario’s public finances?  Well, what must be addressed is the balance between revenues and expenditures.  As Figure 1 shows, a major gap opens up after 2007.  Over the period 2001-2011, total expenditures grew at an average annual rate of 6.3 percent while revenues have grown at an average annual rate of 4.7 percent – an unsustainable trend.  However, one should probably factor out the Great Recession, which brings the average annual growth rates for 2001 to 2007 to 6 percent for expenditures and 5.7 percent for revenues – still unsustainable.  Clearly, the expenditure growth rate needs to fall or the revenue growth rate needs to rise or some combination thereof. 


Figure 1

 






What might some possible scenarios look like?  I have three scenarios outlined below in Table 1.  Scenario 1 assumes that revenues and expenditures will grow at the average annual rates of the 2001-2007 period.   Clearly, this does not solve the deficit problem at all despite growing revenues.  Scenario 2 has an initial 2 percent spending cut in 2012 followed by annual expenditure growth of 3 percent and less optimistic annual revenue growth of only 4 percent.  This does a better job of shrinking the deficit but by 2017 there is still a 3.7 billion dollar deficit.  Scenario 3 has a three-year spending freeze followed by 3 percent expenditure growth and overall revenue growth of 4 percent a year.  By 2016, the budget is balanced with a small surplus while by 2017 the surplus has grown to 1.7 billion dollars.  Of my three options, this is my preferred option in that it solves a big problem in a measured fashion but avoids the pain of big explicit budget cuts (though there will be reductions due to inflation).

How do these scenarios compare to what is currently being proposed by the government and the official opposition?  The provincial Liberals plan to eliminate the deficit by 2017-18 by holding program expense growth to about 1 percent a year between 2010-11 and 2012-14, combined with initiatives to improve public service delivery.  The revenues and expenditures under their plan are presented in their most recent budget and amounts to average annual revenue growth of about 4.6 percent and average annual total expenditure growth of about 2.2 percent.  As well, the 1 billion dollar contingency reserve fund is accorded to expenditures.

The Progressive Conservatives propose cutting Ontario government spending by about 2 percent a year on programs outside of health until the budget is balanced by about 2017-18. This only amounts to cutting about 600 million dollars a year or a total of about 3.6 billion dollars over 6 years.  This will also be accompanied by a total of 3.7 billion dollars in new spending which taken together essentially means an overall spending freeze. The PCs also propose tax relief by scrapping a number of fees, removing the 8 percent provincial portion of the HST on electricity and home heating bills, and reducing income taxes, which the Conservatives say will amount to about a 3.5 billion dollar tax reduction – or about a 3 percent drop in revenue.   Based on these numbers, I’ve also simulated revenues and expenditures based on this plan but assuming a lower the average annual revenue growth rate of 4 percent after the 3 percent revenue drop.

Table 2 compares the two scenarios.  It would appear that both scenarios eliminate the deficit by 2017 with the Progressive Conservative scenario actually showing a 3.8 billion dollar surplus.  Aside from this, by 2017, the Liberal Scenario involves 13 percent more spending and 11 percent more revenue.  They have produced what could be termed a more “expensive” plan to reduce the deficit.  By 2017, the government’s footprint in the Ontario economy will be smaller under the Progressive Conservative plan.  The Liberals, however, have asserted that the Progressive Conservative plan actually involves a much larger gap than the 3.5 billion dollar revenue drop, which would place the ability to eliminate the deficit by 2017 in question.  As well, one must concede that a plan that essentially freezes overall spending for six years is probably unlikely to last very long given that elections are every four years. Of course, none of these scenarios can predict what exogenous shocks may hit either revenue or expenditures - the future is inherently unpredictable.  Still, the positions have been staked out.  I think I still like my own Scenario 3 plan better.


The release of the Urban Aboriginal Peoples Study by the Environics Institute reveals that as of the 2006 Census, half of Canada’s aboriginal population lived in urban centres.  Thunder Bay was one of the 11 cities examined in the report and the report shows that between 2001 and 2006, the aboriginal population in the Thunder Bay Census Metropolitan Area (CMA) grew by 23 percent – from 8,205 in 2001 to 10,055 in 2006.   This represents an annual growth rate of 4.1 percent and is responsible for the overall growth of the Thunder Bay CMA’s population between 2001 and 2006 given that the non-aboriginal identity population shrank by one percent over the same period (for an annual growth rate of minus one-fifth of one percent).
This is important information because if these growth rates are applied to the aboriginal and non-aboriginal populations and extrapolated forward, they show that Thunder Bay’s population is actually going to increase significantly over the next thirty-five years.  Applying these crude growth rates to population starting in 2006 and carrying forward to 2041, finds that the aboriginal population would reach 41,035 by 2041 while the non-aboriginal population would continue a slow decline and reach 103,447 people.  This is shown in the accompanying Figure constructed using these growth rates.  Adding the two figures produces a total population for the Thunder Bay CMA of 121,050 in 2006 and 144,482 by 2041.  In other words, under these simple assumptions, Thunder Bay’s population is not going to decline but rather will actually increase by almost 20 percent.
Of course, this projection is crude and does not take into account the age structure of the population, birth and death rates, and the potential for other exogenous shocks and changes due to in or out-migration.  This is a simple extrapolation based on a five-year growth rate assuming all other things constant.  Nevertheless, it is a vision of a future of growth and change.  A growing population signals economic opportunity and a reversal of the population stagnation of the last couple of decades.  At the same time, there will be a compositional change in the population with these numbers suggesting an increase in the aboriginal share of the Thunder Bay CMA from 8.3 percent in 2006 to 28 percent by 2041.  Moreover, the aboriginal population will be much younger than the non-aboriginal population meaning that they will have to be a crucial part of the future labour force.  The success of the growing aboriginal population in acquiring secondary and post-secondary education – human capital – will be crucial to the future success of Thunder Bay’s economy and probably the most important future challenge facing our region.


The process of Northern Ontario economic development has recently taken an even more convoluted turn given what seems to be a proliferation of task forces, steering committees and summits in the wake of the release of the Northern Growth Plan and the recent provincial budget.  There has been a call for the establishment of “pilot economic development planning areas” in Northern Ontario and regional leaders here in the Northwest decided that there needed to be another group to steer this process and formed the Joint Task Force (JTF) on Northwestern Ontario Economic Development Planning.  The JTF (not to be confused with JTF2 which is the Canadian Armed Forces Special Operations Force) is to play a lead role in developing a proposed model and implementation plan for regional economic planning in northwestern Ontario. 
The JTF joins the Northern Ontario Development Network (NODN), the Northwestern Ontario Municipal Association (NOMA), the City of Thunder Bay (CTB), Common Voice Northwest (CVNW) and the Thunder Bay Community Economic Development Commission (CEDC) together to begin a process with counterparts in Northeastern Ontario who no doubt also have a large number of organizations with confusing acronyms.  In addition, The Ministry of Northern Development and Mines (MNDM) is establishing a multi-stakeholder Northern Advisory Committee (NAC) that will provide input into the establishment of regional economic development planning zones.  The NAC will work with JTF and the Northeast Pilot Implementation Team (NPIT) to develop regional planning models as well as provide advice on the Northern Growth Plan.
All of these groups will come together for summits to be held in Thunder Bay, June 13-14 and Sudbury June 15-16 to lay the groundwork for best practices in economic planning. According to NOMA Vice President Iain Angus (who is also Chair of JTF and a Councilor-at-Large for CTB) “We are working hard to make sure this is not just another ‘Think North’ “ and that “It is imperative that we leave the Summit with a clear indication as to what the Northwest wants the Pilot Project to look like.”  On the other hand, a memorandum to Northern Ontario partners and stakeholders from the Ministry of Northern Development and Mines (MNDM) dated May 20th, 2011 invites everyone to register for the “much anticipated Think North II Regional Conference” that is designed to “put great ideas into action with workshops designed to help shape two pilot regional economic development planning areas…in the northeast…the northwest.”  Perhaps there are some aspects of the role of the summit that still need to be ironed out between MNDM and JTF.   Incidentally, the great ideas for Think North II will be coming from keynote speakers being brought in from Ireland, Scotland, New Zealand and Alaska.  For Think North I in 2009, the speakers came from the United States, British Columbia, Australia and Finland.  Too bad they are not bringing in a speaker from Quebec who can talk about the 2.1 billion dollars that is planned to be invested in Quebec’s North under their Plan Nord.
What is one to make of all this?  Let us leave aside the issue of whether you can actually have government officially plan economic development, something that some feel was settled with the fall of the Berlin Wall.  After all, economic development requires the private sector to take a major role albeit with the infrastructure support and institutional facilitation of government.  But what government will it be? 
What is rather confusing about all this that they are going to discuss regional economic planning but there is currently no regional institutional infrastructure within which to plan.  How do you plan regionally without the tools to implement anything regionally?  Aside from a perpetually simmering alphabet soup of groups, there is no regional framework for implementation of regional decisions.  Everything is currently centralized at Queen’s Park and implemented via the provincial government and its ministries. 
For example, how do we regionally plan land use policy to foster economic development when the provincial government essentially makes those decisions for us as recently witnessed with the Far North Act or the forest tenure reforms?  Is the provincial government planning to bring about regional government to deal with economic development as a follow-up to these planning meetings?  JTF says local decision-making is one of its priorities for regional economic planning.  The best you can decipher from MNDM is that “We look forward to working with the NAC, local implementation teams and other interested northern groups to shape an approach to regional economic development planning that is reflective and responsive to the circumstances of Northern Ontario.” Local decision making versus shaping an approach – that seems to be two vastly different points of view but then the confusion is understandable given the plethora of plans and planning groups.  Where is a common voice when you need it?

When we discuss urban centers and development in Ontario, we are often told that cities are engines of growth and that Toronto in particular is Ontario’s economic engine.  The implication of course is that Toronto needs special policies and attention from the provincial and federal government to ensure that Toronto continues to be an important economic engine.  That Toronto is an important economic engine for both Ontario and Canada is not in dispute.  Toronto, for example accounted for about two-thirds of the building permits issued in Ontario in March and the GTA accounts for nearly half of Ontario’s employment.  With a Census Metropolitan Area (CMA) population of nearly 5 million, Toronto is Ontario’s (and indeed Canada’s) largest city and other Ontario cities have fallen well behind.    This dominance has grown over the course of the twentieth century as Ontario once had a more dispersed and balanced pattern of urban development.  In 1951, the Toronto CMA accounted for 27 percent of Ontario’s population while today it accounts for 40 percent.
However, can there be too much of a good thing?   Can a dominant urban center by virtue of its institutional monopoly on a country or region’s economy and political life  extract economic rent from the surrounding countryside and ultimately kill the goose that laid the golden egg?   Alan Beattie, in his False Economy: A Surprising Economic History of the World, discusses urban centers and growth and mentions the combination of large cities that are political capitals, which gives them the “ability to punch well above their political weight”.  Historical examples show that in capital cities, it is difficult to ignore the wishes of the disgruntled, because their proximity makes them difficult to ignore.  Beattie points out that in strong democracies, it makes little difference where “malcontents” live but in weak democracies it can be a critical factor especially if they live in a large urban center that is also a capital.  The classic example is probably imperial Rome where rent was extracted from an entire empire to maintain the urban population with bread and circuses.
Of course, Canada is a stable modern democracy not given to urban mobs seeking to overthrow the government.  Yet, the potential relationships are interesting ones.  Does having a large share of population residing in the capital city create an environment of economic rent seeking that siphons resources from the rest of the economy into the capital via public spending and regulations that ultimately weaken aggregate economic performance?  Canada’s provinces vary quite a bit in terms of the provincial population share accounted for by the capital city from a high of 59 percent in Manitoba to a low of 8 percent in British Columbia. Provinces where at least one-third of the population lives in the provincial capital include Newfoundland & Labrador, Nova Scotia, Ontario, Prince Edward Island and Manitoba.  With the exception of Newfoundland and Labrador with its new resource opportunities, none of these provinces have been particularly stellar performers recently in terms of GDP growth.  Provinces with strong second and third cities aside from the provincial capital – for example, Alberta, Saskatchewan, British Columbia and Quebec – may have a more competitive urban environment, which fosters innovation and growth.
In the case of Toronto, its economic dominance within Ontario combined with the concentration of government and media make its issues everyone’s issues.  While some of this attention is justified, one cannot help wondering if it is out of proportion to actual needs.   Case in point - education.  In Ontario, the last decade has seen numerous closures of smaller elementary and high schools across the province. Oddly enough, in Toronto, the boards have not only managed to keep more schools open but also maintained funding longer for things like swimming pools and teacher-librarians.  Apparently, 19 percent of schools in Eastern Ontario and 10 percent of schools in northern Ontario have teacher librarians compared to 92 percent in the GTA schools.  This is an odd distribution given that education in Ontario is now highly centralized in terms of both funding and policy.  Did close proximity to the provincial decision makers create opportunities for advocacy not available outside the capital?  Moreover, is Toronto’s dominance and the decline of rural and remote regions a self-fulfilling prophecy when so many of the policy makers and opinion leaders influencing the government are in Toronto and able to make their voices heard? These are vital questions for not just Ontario, but indeed all of Canada.


Thunder Bay City Council has given its blessing to a hotel project - a 75 room "mid-luxury" Hampton Inn that will be built on land leased from the Thunder Bay International Airport Authority.  Coming on the heels of an announcement that another developer wishes to build a new hotel on city-owned land at the corner of Junot and John Street, one is left with the impression that a local boom in hotel building is underway.  As well, by some accounts, the new multiplex may also come with a hotel project.  This is reinforced by the fact that over the last few years a new Days Inn has been constructed just adjacent to the regional hospital on Junot while another Days Inn was recently built just off the intersection of Balmoral and the Harbour Expressway.  And not that long ago a new Best Western went in near the intersection of the Expressway and Arthur Street.
While I recently opined that the opening of so many donut shops in the city seemed to herald the arrival of a "donut economy", I suppose I can now coin another term by asking if we are also acquiring a "sleepover economy".  What explains all the new hotel construction?  Could it be that so many people have moved from Thunder Bay over the years that they now need someplace to stay when they come back and visit?  Not likely, given that our population is stable and will probably show a small increase once the next census is released.  Besides, Thunder Bay born and bred people are thrifty and will stay with friends and family when they come back to visit.  Hotels are for "the others".
The factors are likely rooted in the increased regional role the City plays in the region and the increased mining and resource development in the Ring of Fire.  Travel to Thunder Bay is definitely up when you look at the activity at our airport as the accompanying graph illustrates.  Data obtained from the Thunder Bay International Airport Authority shows a substantial increase in passenger volume over the last decade.  Since 1998, the number of passengers has increased about  30 percent - despite the downturn in the forest sector. 
Much of the increase is probably connected with travel for government and business purposes which in turn generates a demand for accommodation.  In addition, Thunder Bay's medical and educational services also generate an inflow of people from outlying communities as well as the growing aboriginal population in the region and they also require temporary accommodation when visiting Thunder Bay. 
Of course the really interesting observation is as follows.  There has been a spate of new hotels either constructed or proposed by private sector entities. If the private sector wants to do something, it usually means they have done some homework and believe they can make a profit.  They don't always get it right but by and large, if the private sector wants to build something, it likely means there is a solid economic or business foundation.  So, why have we not yet heard an announcement about a new hotel on our new redeveloped waterfront by a private developer? There were gurgles that an announcement was imminent during the last municipal election (only about six months ago) and renewed musings early in the new year followed by mutterings that confidential discussions were underway.  Yet, no new hotel has been announced on the waterfront.  Other hotels announcements in other locations are coming up like flowers in spring and yet on the waterfront we are greeted by a silent spring.  As Spock would say, "Fascinating".



Figure


Thunder Bay’s Economy: Another View
This originally appeared in the Thursday May 12th edition of the Thunder Bay Chronicle-Journal.
 By Livio Di Matteo
While it has become the optimistic conventional wisdom to say that Thunder Bay’s economy is transitioning towards new opportunities in the knowledge and post-industrial sectors, there are some other trends that bear watching.  It will be interesting to see what economic and demographic data the 2011 Census provides in the wake of the forest sector crisis and the transitioning economy.  Employment, for example, has not returned to its pre-forest sector crisis level in Thunder Bay and this has undoubtedly affected income and more specifically the distribution of income. 
Many of the workers who lost their jobs in the forest sector are obviously not working and if they are it is likely they are earning lower incomes.  Given the erosion of well paying industrial employment, Thunder Bay’s economy appears to be transitioning into a sector of well-paying and relatively secure knowledge economy, public sector and professional employment and then a very large service and support sector whose employment and earnings are much more precarious.   In the long run, this should be reflected in retail and commercial development.  One should expect to see a split into high end and low end commercial and retail establishments with very little left in the middle.
The trend appears to be underway with the proliferation of donut shops and fast food accompanied by the expansion of higher end restaurants.  Nowhere is this more starkly evident than at the corner of Junot and Oliver where the new higher end Five Forks Restaurant shares a parking lot with the adjacent brand new Subway Restaurant.  Both of them have a neighbour across the street in the form of the ubiquitous Tim Horton’s donut shop.  Indeed, when it comes to economic development, Thunder Bay has not only moved beyond the industrial economy but also past the knowledge economy into what can be only termed a donut economy.  An old friend of mine used to be curious if one could actually run an economy on the recirculation of income from donut shops with everyone eating and spending at everyone else’s shop.  My answer now is Thunder Bay could well be an experiment in progress.
Based on a quick Google search, Thunder Bay currently seems to have 15 Tim Horton’s locations and another 16 Robin’s locations.  There is a major donut franchise for every 4,000 people in the city and the number of shops only seems to be growing.  Tim Horton’s may be considering yet another store on the vacant property on the northeast corner of John and Junot, that would be accompanied with a new hotel!  Of course, there already is a Robin’s just metres away on John as well as the Tim Horton’s on Junot and Oliver but the City of Thunder Bay will likely re-zone the land because they are desperate for any revenue they can get. 
New hotels seem to be the other feature of Thunder Bay’s transition and it is difficult to pinpoint where the demand for accommodation is coming.  One possibility is the increased regional role of the City when it comes to health and government services for the smaller outlying communities as well as the expanding regional aboriginal population.  More and better quality data on all these trends would be useful. Hopefully, that will be a role of the new policy institute the provincial government has promised us, though everything appears to once again be quiet on that front.
In the end, the decline of the industrial base is a major feature of Thunder Bay’s economic transition and it has placed an increasing burden on residential taxpayers. As a result, the City of Thunder Bay grabs any opportunity to sell off land and get it developed.   Who can blame them given their reluctance to reduce their spending.  At this point, any reduction in City spending would probably have a major employment impact given the number of municipal workers the City of Thunder Bay now employs.  As for those who live adjacent to yet another planned Tim Horton’s, the moral of the story is in Thunder Bay, you should never buy a house near green space without checking out who owns the land.  Just ask the people who live out near the Norwesters.



From the Winnipeg Free Press - PRINT EDITION-May 17th, 2011, p.A10.
Manitoba lagging in recovery, earnings
By: Livio Di Matteo
Last year, when the provincial GDP growth numbers were released for 2009, Manitobans basked in the news that despite the storm of the great recession, Manitoba was Canada's economic growth leader. Of course, the Manitoba economy did not grow at all in 2009 but then everyone else's economy shrank.
When it comes to economic performance, everything is relative. Statistics Canada has released the preliminary provincial growth numbers for 2010 but the news has been buried by the fascination with royal wedding as well as the federal election.
It is probably just as well. The results are not as favourable for Manitoba this year.
While Manitoba led the country during the economic downturn, it is lagging the country when it comes to the recovery's upturn. While Canada's real GDP growth for 2010 is estimated to be about 3.3 per cent, Manitoba's comes in at two per cent, which places it at the bottom tied with Prince Edward Island -- also at two per cent -- and just behind Nova Scotia at 2.1 per cent.
While Manitoba's performance is steady, the fact is being a leader when times are bad and growth low but a follower when times are good and growth high is not the best recipe for long-run economic performance.
The explanations for this performance vary. One explanation, as put forward by the Manitoba Bureau of Statistics, is the number is simply an underestimate and when the final numbers are in, the growth rate will be revised upwards.
Indeed, the Manitoba government forecasts the economy in 2011 is expected to grow at a more respectable 2.7 per cent and 2010 should come in at 2.5 per cent.
If that is the case, however, Manitoba will still rank at the bottom because every province's numbers are going to be revised. This explanation only works if there is something systematically different about how Statistics Canada estimates Manitoba's GDP and that is not likely.
Is there something different about Manitoba's economy? Manitoba and Saskatchewan are still highly dependent on agriculture. One of the reasons both their performances were weaker in 2010 was due to a fall in crop production as a result of bad weather.
This in turn can also especially affect manufacturing in Manitoba as much of the manufacturing sector is tied to food processing and agricultural equipment.
The weather has also affected economic growth in the United States recently as the winter storms in the first quarter of 2011 helped slow economic growth there to 1.8 per cent.
If one compares Manitoba's economic growth in 2010 with that of nearby North Dakota, however, one finds North Dakota grew at 3.5 per cent, more than twice the rate of Manitoba's economy.
One can point to the fact that despite the lower GDP growth rate, Manitoba's employment is up and employment and labour-force growth is ranked fifth- and second-best among the provinces respectively.
Weekly earnings in 2010, however, were up only two per cent and below Canada's increase of 3.6 per cent. Having superior growth in employment but not in earnings suggests the labour force may be lagging in terms of its productivity.
So what is happening in Manitoba? Several things.
First, productivity in Manitoba is lagging other parts of the country and while more jobs are being created, their productivity contribution is not robust. This is a long-term problem best dealt with over the long run with improved investment in human capital and training.
Second, Manitoba's economy is still very dependent on agriculture both as a primary production sector as well as an input into manufacturing. Bad weather in 2010 helped slow that sector down and with the flooding of 2011, the new crop year is probably not getting off to the best start.
The economic impact of weather is more problematic as government policy cannot change the weather. One solution may be to encourage more agricultural production in products that are less affected by the weather. Apparently, wheat has not done as well recently whereas receipts for hog production are up.
Another solution is to further diversify the manufacturing sector into non-agriculturally related production and further diversify the economy into service and knowledge-sector activities.
This, however, is where the private sector also needs to take a leadership role as wealth creation is ultimately a private-sector activity and government incentives can only follow where the private sector sees opportunity.
Livio Di Matteo is a professor of economics at Lakehead University.

The Conference Board of Canada recently released its May 2011 edition of Metropolitan Housing Starts and it provides housing start data for Canada's census metropolitan areas.  They report that 15 out of 27 markets have posted a year over year (April 2010 to April 2011) decline in housing starts.  The two figures below summarize the numbers for the Ontario CMAs.  In terms of total seasonally adjusted annual housing starts, Toronto currently leads the statistics with over 44,000 housing starts while Thunder Bay comes in last with only 217 (Figure 1).  This is of course a difference due to the scale of the urban economies being compared.  If one looks at the year over year percentage change to gauge growth rates, Kingston, St. Catharines, Thunder Bay, Toronto and Windsor are up this spring while all other Ontario cities are down when it comes to housing starts (Figure 2).  Thunder Bay is up 39 percent from last April and in terms of percent change is third highest in Ontario and the sixth highest amongst Canadian CMAs. 


Residents of Thunder Bay have long crossed the U.S. border to shop in Duluth in far greater numbers than cross the other way from the United States despite the more generous exemptions Americans have.  Indeed, those exemptions may be about to change.  According to a report in the May 11th edition of the Globe and Mail, the U.S. government is pressing the Canadian federal government to loosen the rules so that fewer Canadians have to stop and pay duties as they return from a trip to the United States:  “The personal exemption issue has been formally raised by the United States trade representative,” an official with the U.S. embassy told The Globe and Mail on Wednesday.
According to the Globe and Mail story: “The message is that the U.S. believes that both countries have a lot to be gained by reducing trade barriers in general. And there is work to be done on both sides to achieve that goal.” Of course, the U.S. government is raising this in the context of national security, that is: “Border inspectors need to spend less time looking for extra bottles of duty-free whisky and more time trying to identify people who might be a genuine threat.” It would appear from the sub-text of this story that the Obama administration is concerned that terrorists might enter Canada from the United States which is certainly a reversal of the general American attitude regarding terrorists and Canada.  In reality, the higher Canadian dollar is encouraging more Canadians to shop in the United States and a larger exemption is good for border businesses.
Apparently, legislation recently reintroduced in Congress calls for the United States to raise the amount Americans can bring back customs-free from Canada – even on a day trip – to $1,000 from $200. In contrast, Canadian law does not waive any taxes or duties for items purchased on a day trip. A 24-hour stay is required for a waiver on up to $50 (not including tobacco and alcohol). That amount rises to $400 for a 48-hour stay and $750 for a week-long visit.  Why does this concern the federal government?   Well, preliminary data from Statistics Canada show Canadians spent $18-billion in the United States last year – a 14.5 per cent jump from 2009 and nearly 40 per cent more than in 2006. The concern in Ottawa is that making these trips any easier on Canadian wallets will hurt retailers at home and mean less sales-tax revenue.   Oddly enough, lowering the GST rate also reduced sales tax revenue and apparently has not deterred Canadians from visiting the United States. 
The cross-border shopping saga is a long one in Canada and as the accompanying figure shows, despite the recent increases in spending by Canadians in the United States, trips are no where near their peak in 1991.  The fact is that same day auto trips by Canadians to the United States have actually been flat over the last five years or so.  What has increased in the number of one or more night trips and we are obviously spending more per trip.  Canadians have gotten around the low exemption amount they can bring back by simply going to the United States longer enabling them to spend more and bring more back.  Really, who can blame us?  Ninety percent of our population lives within one-hundred kilometers of the border and U.S. cities are often closer than Canadian ones.  Indeed, in Thunder Bay, the closest major city to us is Duluth and it is a four hour drive away.  Moreover, many of our retailers in Canada are American anyway but charge higher prices because they are obviously able to get away with it in the Canadian market.  Canadians, it seem are willing to pay more in Canada and those who don’t cross-border shop.  If anything, more cross-border shopping may provide some pressure on retailers in Canada to lower prices.




It was an interesting exercise in neighborhood participatory democracy that I attended this evening at the Boys and Girls Club on Junot.  Members of the neighborhood turned out to discuss the proposed sale and development of a forested lot of city-owned land at the corner of Junot and John. Also in attendance were Mayor Hobbs and Councillors Ruberto and Mackinnon. 
The essence of the issue seems to be as follows: the City of Thunder Bay has a conditional agreement of sale on a piece of land in the middle of a residential area to a developer who wants to build a mega Tim Horton's and a future hotel on the property.  The City rezoned the land in 2010 from residential to Neighborhood Centre 3 to make it more attractive to developers and by extension make the property more attractive to buyers via additional uses.  The City benefits from the sale first in the revenue from the sale but also from the conversion of the property into a productive piece of tax-paying property. The neighborhood gets increased traffic and congestion at an intersection that is already prone to frequent accidents.  The debate was quite spirited though in the end given that the property was already rezoned to NC3 in 2010, ultimately the issue is whether the City will rezone the land to permit the bigger Tim Horton's and a hotel.  If the developer had not applied for the rezoning, the land could have been sold quietly and an albeit smaller Tim Horton's constructed there anyway.
My major points at the session were: 1) If the purpose of locating the new EMS station on Junot (just up from this piece of land) was to improve response times, how did creating more traffic on the road contribute to improved response times for emergency vehicles and 2) There were a number of pieces of land in the city already that have been sold and were supposed to be developed and all that has happened is that their trees have been cut down and they have remained vacant for years and how does the City of Thunder Bay ensure the developers follow through.  3) The development could likely reduce my property value, not that property values here have been going anywhere over the last twenty years. No one tackled my first or third points  but Councillor Ruberto in response to my second comment proceeded on a rambling explanation of how the City had many things to balance and that included generating tax revenues through land sale.  When I assertively asked if this meant that the City then did not care what happened to a piece of land they sold as long as it generated revenue, Councillor Ruberto responded rather heatedly that I had made a "false statement".
Councillor Ruberto has a reputation of being a rather frank and direct fellow but if he publicly states I have made a false statement then he is basically calling me a liar.  That is particularly disturbing behaviour for a politician - if you don't like what someone is saying, then either say or insinuate they are not telling the truth.  The fact is, the City rezoned the land from residential to commercial uses so that they could eventually sell it and generate revenue.  It was obviously a successful process as they now have a conditional sale which, lo and behold, will generate revenue.   Given the failure to place conditions on rapid development of a property after sale so that it lies deforested and vacant means they either don't care what happens to it or are not forward thinking enough to follow through.  Why that analysis constitutes a "false statement" is beyond me.  I could ask for an apology but I won't because I already know that being a politician in Thunder Bay probably means never having to say you are sorry.
P.S. To aspiring politicians everywhere, the following advice.  When faced with a constituent whose views you disagree with, correct responses may include "I do not agree with you" or "I think your analysis may be flawed" or the completely innocuous "That is an interesting point". Telling them they have made a false statement is probably not a good idea.

Quebec has just announced its own northern growth plan and it appears to be more focused and concrete in resource allocation terms than the recently released Ontario Northern Growth Plan.   Ontario’s Northern Growth Plan was “a call to action and a roadmap for change” organized to provide policy direction for growth around six principles: (1) a globally competitive economy, (2) education and skllls for a knowledge economy, (3) aboriginal partnership, (4) networks of social, transport and communications infrastructure, (5) sustainable environment and (6) innovative partnerships to maximize resource potential. The plan had detailed checklist for short, medium and long-term actions that required implementation and of course more planning including regional plans within the region.  Indeed, if one could summarize the Ontario plan, it is simply a plan to rule all plans and the planning is not over yet.  The major resource announcements that accompanied it were 5 million dollars for a policy institute (on which little has been said since) and a few million dollars to begin integrated transport planning.
Contrast this to Quebec’s vision for its own north, which is being touted as “The Project of a Generation”.  According to Premier Charest "The Plan Nord is ambitious. Its implementation will necessitate essential investments to facilitate access to the territory and enhance the quality of life of its inhabitants.  The new business model developed in respect of projects under the Plan Nord has unquestionably altered the manner in which Québec will fund infrastructure and public services. Starting today, construction and maintenance costs will be shared throughout the infrastructure's useful life by businesses, the communities concerned, the gouvernement du Québec and other users." 
Indeed, the Quebec government is establishing a crown corporation – the Societe du Plan –to carry out projects and coordinate all of the investments. The government corporation will oversee the public investments in the social and transportation infrastructure sectors. The first action plan under the Plan Nord covers the period 2011-2016, during which the gouvernement du Québec will implement measures totaling $2.1 billion. Of this amount, nearly $1.2 billion will be earmarked for infrastructure development and $382 million for social measures related to housing, health, the reduction of transportation costs, and education. In addition, Investissement Québec will manage a special $500-million allocation to enable Quebecers to acquire equity participations in investment projects in the North.  This phase is apparently only the beginning.  The Plan Nord will be carried out over 25 years and lead to 80 billion dollars in investment and create on average 20,000 jobs per year in energy, mining, forestry, transportation and infrastructure to develop Quebec’s vast northern region.  The mining portion alone of this plan is being touted as the largest natural resource project in Quebec since the hydroelectric development of the 1970s. 
Plan Nord may be part hype and the future implementation remains to be seen but it seems a lot more focused than the vapid prognostications set out in Ontario’s plan.  The tone of the entire plan is dynamic.  The Plan Nord is “The Project of a Generation” that sets forth a new investment frontier while Ontario’s Grow North Plan is to quote:” in part an economic development plan, an infrastructure investment plan, a labour market plan and a land-use plan. It is a plan that recognizes the interconnected contribution of people, communities, infrastructure and the environment to a successful and sustainable economy. It is a plan that recognizes and builds upon the unique characteristics of Northern Ontario, including a bilingual workforce in many communities.”  No doubt, the Quebec government at minimum has access to better marketing consultants than the Ontario government. Quebec’s Northern Policy seems to trump Ontario’s in both tone and content.  Quebec has said oui a un Nord qui ose!  Ontario is still planning to plan.



American historian David Potter’s book People of Plenty argued that resource abundance shaped the American attitude towards possibility and opportunity.  Abundant resources set the stage for wealth accumulation and created a society that believes that everyone can become rich through their own work and effort and that initiative and opportunity are the key to social mobility and success.  In Canada, we also have a tradition of resource abundance but it has generated not so much an ethos of aggressive individualism but one of more government involvement in the economy.  Indeed, the resource rents from natural resources have played a role in government finance whether it was late nineteenth century Ontario’s forest sector (which generated at its peak 20-25 percent of provincial government revenues) or energy in Alberta and Newfoundland and Labrador today. 
As Herb Emery and Ron Kneebone have recently written in Alberta’s Problems of Plenty (May 2011, Policy Options), in the Alberta context the main role of resource abundance and resource rents has been to augment both private and public consumption.  Emery and Kneebone detail how the heavy reliance on resource exploitation carried with it the problem of large swings in economic activity – boom and bust – which can play havoc with health and education spending if short-term resource revenues are funding unsustainable increases in program spending. They argue that the solution to this problem is to redirect revenues from natural resource rents away from current government operating budgets and into savings.  This would build endowments that would fund spending in the future in a stable pattern pointing to the successful employment of this approach by energy rich Norway.  Alberta has only saved about 10 percent of the natural resource revenue it has collected whereas Norway has saved over 90 percent.
Such a policy appears to have eluded not only Alberta, but indeed, most Canadians who at various points in their history have been the beneficiaries of major resource booms.  Why we have been unable to save and invest a larger share of our natural resource rents over the last century is an interesting question.  Given that personal saving rates have also declined over the last two decades, do Canadians in general simply have a high rate of time preference - that is, they prefer immediate gratification?  We used to have higher savings rates before.  Could it be Canadians preferred the benefits of natural resource revenues to accrue to current consumption so that they could save more privately?  Perhaps the best way to save and invest resource rents is to dedicate the endowment fund for a particular purpose.  We may be averse to simply stockpiling resource revenues into a general fund.  Why not create dedicated public endowments out of natural resource revenues– like one for health care, one for education, etc…  In the case of health care, this could be a form of pre-funding health expenditure.  Provinces like Alberta, Saskatchewan and Newfoundland & Labrador are certainly well positioned to try this out. 
In Ontario, the proposed Ring of Fire may also generate new resource rents down the road.  Given that one hundred years of forestry and mining revenues were never used to generate a public endowment, perhaps we might try and get it right this time.  During the period from 1870 to 1920, resource rents from forestry and mining in Ontario - in particular, Northern Ontario - generated a large chunk of the revenue for the provincial government which fueled public expenditures that benefited all Ontarians. If even a portion of this money had been invested in a permanent fund for the North, today it would be a massive endowment that could fund projects in the North on a permanent basis.  The Northern Ontario Heritage fund that currently exists is but a pale imitation of such a fund because it relies on the government continually committing funds for it out of its operating budget.  As the North's population share shrinks and our influence diminishes, one day the budget for the Heritage fund could simply vanish.  With the Ring of Fire, there will again be substantial resource rents.  We should advocate and plan now so that a share of these revenues are ploughed back into a permanent regional endowment to fund regional infrastructure and service for the long haul.

Statistics Canada has just released its building permit statistics for March 2011 and they show that the total value of permits issued by municipalities in Canada is up in March by 17.2 percent over February at a level that has not been seen since June 2007.  Much of the gain is apparently due to residential and non-residential sector activity in Ontario.  Year over year (March 2010-March 2011) Ontario is up by 37 percent with residential permits up 16.5 percent and non-residential permits up by 71.2 percent.  However, an examination of the year over year permits by Ontario Census Metropolitan Area (CMA) suggests that much of the growth is concentrated in the Toronto area especially given the size of the Toronto CMA.  In March 2011, Toronto accounted for about two-thirds of the value of building permits issued in Ontario. The year over year value of permits is actually down in Thunder Bay, London, Guelph, Brantford, Kingston, Hamilton, Peterborough and even Ottawa.  Windsor and Oshawa appear to be on the mend in the post auto-sector downturn world.  For the Northern Ontario CMAs, Sudbury is up 141 percent while Thunder Bay is down by 43 percent.


According to a report in this morning’s CBC newscast, this coming Monday evening, Thunder Bay City Council will apparently be considering five potential locations for the location of the proposed new multiplex facility.  That locations are being considered is interesting given that officially no decision has been made on whether or not there will be a new multiplex and that the new strategic plan, which will invariably include a recommendation for a multiplex, has not been completed yet.  No doubt, our City Council is probably being pro-active and doing their due diligence by making sure that the logistics of location are considered prior to the final decision.  After all, given the age of the Fort William Gardens, a replacement facility of some type is inevitable.  As well, one can dryly observe that the experience of the Norwester windmills has probably reinforced the importance of considering location in advance when it comes to public projects.
Where to locate the multiplex will in true Thunder Bay fashion result in a heated debate.  Some elements of this debate have already surfaced in the local media with the Mayor suggesting that it go in the Simpson Street area to help revitalize that area whereas a recent Chronicle-Journal editorial has argued that the waterfront is a logical location.  The Port Arthur-Fort William  divide is apparently alive and well forty years after amalgamation.  The recent flurry of road and access construction in the former Innova park area bounded by the Expressway, Harbour Expressway and Junot leads one to suspect that this may be the prime green field location the City has in mind given its neutral central location, wide open spaces and failure as an industrial park.  A green field location is exceptionally attractive given the absence of adjacent neighborhoods and the likely availability of substantial parking space.  However, given the progress made over the last twenty years in trying to locate more activities in the core areas, locating the new multiplex outside of a core area simply for the sake of parking would be a step backwards.  It would also send an inconsistent environmental message given council’s previous preoccupations with bike paths and expensive alternate energy sources such as windmills. 
The multiplex is more than an arena for hockey – it is going to be a multiuse arena and convention facility that will feature sports, concerts, family shows, community events and conferences.  The City’s own preliminary study of other such facilities found that out of 11 such facilities in cities of comparable size, 9 of them were in a downtown area and 7 were either on a waterfront or in close proximity.  On balance, most places have opted for downtown/waterfront locations as part of a concerted strategy of urban development.  Indeed, given the new waterfront development in the Marina Park development and the evolution of the North core as a tourism/entertainment area, functional coherence makes the area a logical location for the multiplex.  Of course, parking will be more limited than on a green field site where suburban mall style parking lots can be made available.  However, if you are trying to attract conventions, it only makes sense that you will be clustering activities in one location so as to create density and an exciting visitor experience.  Surely, downtown arenas in these other cities offer examples of solutions to the parking dilemma?
The location of the multiplex will be an important test of the new council’s vision and ability to make strategic decisions.  The choice of a green field location because of lower construction and site preparation costs and parking considerations alone will indicate that not much has changed when it comes to decision making at City Hall.  Such a decision will demonstrate that when it comes to long term urban vision and development, municipal government in Thunder Bay is strong on rhetoric and symbolic displays but weak on actual implementation.  We shall soon see if in this major decision, City Council is going to be strategic if necessary but not necessarily strategic. 


With a Conservative majority government, one can expect to see a continuation of current federal economic policy with respect to lower corporate taxes, targeted spending programs, as well as a more explicit articulation of a philosophy of smaller and less intrusive government.  The international investment community and financial markets will welcome this.  On the other hand, while a majority government will be seen as stabilizing after the fractious minorities of the last two seven years, the move towards a more explicit two party system means the polarization of Canadian politics into more extreme policy positions that may generate longer term uncertainty about Canada.   Should the Liberal Party decline be permanent, in the long run the choice between a Conservative or an NDP government may mean more abrupt policy shifts than the traditional choice between Liberal and Conservative governments which have tended to govern from the center.   However, in the short term there will be little effective intellectual opposition to the Conservative majority.  The NDP has a newly expanded caucus with the bulk of its members from Quebec and will be kept busy building an opposition role while the Liberals and the Bloc have been decimated.  One point to watch will be transfer payments.  The Conservative majority has been built on a coalition of Western and Ontario voters but is less well represented in the more transfer and equalization dependent regions.  This may indeed signal a new regional divide in the Canadian federation based on regional wealth distribution.
Here in Northwestern Ontario, there has been no change with Greg Rickford being returned in the Kenora riding for the Conservatives and John Rafferty and Bruce Hyer winning again in Thunder Bay-Rainy River and Thunder Bay Superior North.  The region will have representation and input in a majority government but Thunder Bay will have opposition members as its representatives. However, the strong second place finish by Conservative candidates in both the Thunder Bay ridings should provide a signal to the government that there is a constituency for its policies in the region’s major center and should assist federal public infrastructure investment and other initiatives in the region.  At the same time, we are no longer in a minority government situation and there is therefore less leverage to lobby the federal government with respect to regional spending and infrastructure projects.  With respect to regional economic development such as the debate over the role of Fednor, one can expect that Fednor will not become a stand-alone agency and will remain a division of Industry Canada.  Northwestern Ontario can expect things to continue pretty much as before but in the case of Thunder Bay with perhaps a little less interest from the Federal government than was exhibited over the last couple of years.