What’s Wrong with Municipal Bonusing?

OntarioUntil the early 1970s, municipalities in Ontario were involved in a free-for-all competition to attract business and industry. They offered tax breaks, free land, free infrastructure, utilities or services, housing — whatever it took to get a plant or office to open within their boundaries. A lot of small Ontario communities were able to attract businesses that way, and many got major industries.

Of course, the local taxpayers paid for these benefits, but the towns subscribed to the theory that eventually the extra jobs and tax revenues coming into the municipality would pay for the up-front largesse through increased revenue across the community. The plants would bring jobs, which would translate into new homes and property taxes, and the increased population would create a demand for other businesses such as retail stores, restaurants, and the service industry, themselves creating new jobs.

For a while, that system worked, mostly to the advantage of municipalities which could both afford the largesse, and had the land and services readily available. Not everyone considered such competition the best way to run a province, however, and there were arguments that through bonusing, municipal taxpayers were increasing the profits of private enterprises.

Then, in 1974, the provincial government stepped in and said the practice wasn’t fair. All municipalities, the province decided, should compete on a level playing ground: bonusing of this sort was made illegal in Section 106 of the Municipal Act. The Act even makes loans illegal:*

Assistance prohibited
106. (1) Despite any Act, a municipality shall not assist directly or indirectly any manufacturing business or other industrial or commercial enterprise through the granting of bonuses for that purpose. 2001, c. 25, s. 106 (1).
(2) Without limiting subsection (1), the municipality shall not grant assistance by,
(a) giving or lending any property of the municipality, including money;
(b) guaranteeing borrowing;
(c) leasing or selling any property of the municipality at below fair market value; or
(d) giving a total or partial exemption from any levy, charge or fee. 2001, c. 25, s. 106 (2).

David Sunday, a lawyer writing on the Sorbara Law website, noted in late 2014:

Section 106 of the Ontario Municipal Act, 2001 is a much worried about “anti-bonusing” provision of broad application. It is worrisome because its limits and applications are far from clear. By its terms, the provision purports to create an unqualified prohibition on municipalities directly or indirectly assisting any manufacturing, industrial, or commercial enterprise through “bonusing”. The scope of prohibited “bonusing” extends to the giving or lending of any municipal property, including money, guaranteeing borrowing, leasing or selling any municipal property, or giving a total or partial exemption from any levy, charge, or fee.

The change was made more than a generation ago. Since then, the Auto Pact has become defunct, the Canadian dollar has risen too high to offer the economic benefit that once attracted U.S. firms and its recent slide came too late to turn things around. Many factories closed in North America and reopened in Asia, creating massive unemployment everywhere. Consumer buying trends have shifted from quality products to the least expensive on the big-box store shelf. Wages, especially in unionized plants, have escalated to uncompetitive levels compared with Asian workers. It’s a different, more challenging world today.

[youtube=https://www.youtube.com/watch?v=KVybNCPzG7M]

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Ontario’s liquor sales conundrum

The C.D. Howe Institute released its report on beer and wine sales in Ontario, today, advocating for a more liberal approach and allowing beer and wine to be sold in other outlets, such as supermarkets and convenience stores. You can read the report here.

I have a grudging respect for the C.D. Howe Institute, but not always an agreement with their conclusions, because I feel they are seldom as free of right-leaning ideologies as I would hope. But the report is a good read, nonetheless. It has a local significance in that we have seen three craft breweries open in Collingwood this term and their well-being is important to our local economy.

Coincidentally, the Beer Store was an exhibitor at the recent AMO convention*, and made presentations (as well as handing out reports) that proved a counterpoint to the C.D. Howe study. It’s a battle of conflicting figures and facts being tossed about.

Of course, The Beer Store (TBS) has a vested interest in keeping its near-monopoly on beer sales. Contrary to what some folks think, the Beer Store – we knew it as Brewer’s Retail when I was growing up – is not a government outlet like the LCBO. It’s privately owned; although it’s technically designated “not for profit” some reports say it managed to garner $700 million in “incremental profits” every year for the past few years.

This figure is challenged by Jeff Newton, President, Canada’s National Brewers, who writes:

The Beer Store does not make $700 million a year in profit; it actually makes no profit, a fact that can be confirmed by reviewing the corporation’s publicly available financial statements.

The so-called 2013 study that produced this erroneous claim was funded by the convenience store lobby association and has since been proven false by two former assistant deputy ministers of finance in the Ontario government.

What the convenience store lobbyists claimed to be a $700-million profit was actually shown to be higher Ontario beer taxes. The report debunking this claim can be found at ontariobeerfacts.ca/files/studies/earnscliffe_comparison.pdf.

Well, if The Beer Store itself isn’t making those profits, the brewers who own it are, according to the CD Howe report:

The Beer Store enjoys significant economies of scale. These factors combined allow brewers to earn what we estimate to be $450 to $630 million in additional profits compared to what would have occurred in a competitive retail market similar to that in Quebec.

Nothing against profits, mind you: they keep the brewers in business. But maybe we could shave off a couple of points to allow some of the smaller, Ontario brewers to get a bit more of the action. Encourage local, home-grown craft breweries.

Over the past few years, TBS has been the subject of considerable political controversy over its practices and policies that, some companies say, are prejudicial against small, craft breweries. The ownership of The Beer Store is also controversial because it is now an international conglomerate, not even Canadian:

…when you buy beer at The Beer Store, you’re actually supporting massive corporations based at least in part in the States, in Brazil, in Belgium, or in Japan — regardless of the brand of beer you actually buy.

The Beer Store, as you probably already know, is actually owned by Labatts, Molson-Coors, and Sleeman, and however Canadian these household brands may sound, they’re not. Molson isn’t really just Molson anymore. It’s Molson-Coors, a company with equal ownership in Canada and the United States. Labatt Brewing Company is owned by Anheuser-Busch InBev, a Belgian-Brazilian multinational company headquartered in Leuven, and, since 2006, Sleeman has been owned by Japanese brewer Sapporo.

As the owners of The Beer Store, these three brewers are not only taking in an astounding 79.2% of the market share of all beer sold in Ontario, but they also gets to make up standards and fees to which any other brewer must adhere if he or she wants the store to stock his or her products.

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Random grumblings for a Sunday afternoon

Star WarsWhy can’t I buy Yorkshire Gold tea in town? I can buy Barry’s tea, from Ireland, and Morse’s tea packaged in Nova Scotia locally. As well as other brands. Surely someone can bring in Yorkshire Gold… and yes, I’ve gone to every grocery store in town and asked for it. Even Sobeys – where I had been told it was available – the staff there had no idea what it was. Never heard of it, I was told.

Barry’s tea is nice: a bit on the robust side, which we like, but the tea bags could use a tiny bit more to give it that oomph. Available at Metro.

Tetley has two new teas on the shelf: Bold and Pure Ceylon.The Bold doesn’t taste to me any different from their regular tea. But I like the Ceylon, albeit it’s not as full-bodied as I would prefer. Still, it has a nice flavour and may replace my regular Tetley. Available at Freshco.

What happened to Tazo Tea? I used to really like their full-leaf Awake tea, an English breakfast tea, and often ordered it at Starbucks. But the last two times I’ve bought a box for home consumption (one bought at a grocery store, the other from Starbucks), I’ve been greatly disappointed. The first time because the tea turned out not to be full-leaf (the box label was unclear…). The second because the full-leaf bags contained only a small portion of what they used to contain. The result in both cases is a weak, watery, insipid tea. No more Tazo for me, in future.

I prefer whole-leaf teas and tea bags because they seem fuller and richer than the broken leaf and leaf dust you get in the standard grocery-store tea bag. But they’re not the common product: most brands don’t offer full leaf. Most are called  “orange pekoe”  but are really broken orange pekoe – a low-level grading.

Lately we’ve taken to drinking Typhoo Tea. Even the decaf is pretty good. PG Tips, another Brit tea, is fair, not really much different from Tetley. Have to ask Susan to bring back some other teas from England when she goes across the pond this summer.

I bought a box of Choice organic English breakfast tea at Costco last week. Ho hum. Like the Tazo Awake, the bags or their contents are too damned small to make a decent, strong cuppa. Takes to bags for my large cup. Another one to avoid in future.

Costco (at least the Barrie store) has a limited and rather unexciting choice of teas (not to mention it seems to have dropped the green cerignola olives – the best olives they’ve ever stocked – and their superb vidalia onion salad dressing in favour of mediocre product . Which means we are on the verge of giving up on Costco entirely (well, maybe if they keep those large bottles of marinated artichokes, we’ll hang on, albeit grimly…).

Too many products we get to know and love that get dropped. Happens at local grocery stores, too.

Used to really like Costco, and made a trip there every three or four months. Now my respect has plummeted and the few times we do go there, we buy very little compared to the past. Even their selection of DVDs is flaccid, and their selection of books is sheer crap. But they do have good shirts and clothes. Still… why can’t they keep a single brand of olives in stock?

A few weeks ago, we were down in Brampton and visited an Asian food market. Great place, full of wonderful produce, fish, sauces… I ended up buying a bag full of green teas (and a hot sauce). One of those boxes was a Korean green tea, which I have not yet tried, but I have never sampled Korean tea, so I’m looking forward to it. As soon as I finish my current supply of Lung Ching (Dragonwell) green tea, I’ll open it.

Dragonwell is my current favourite Chinese green tea. The current box is from Golden Sail, but it’s only fair quality. There seems to be a faux market in Dragonwell teas, with some low-quality products being passed off as the real thing. I can’t tell which is authentic, but I can tell which tea tastes good; which has a full, rich body. Frankly, that’s all that really matters to me.

I enjoy some Japanese green teas, but not a steady diet of them. Sencha is my favourite, and matcha when it can be had, but I’m iffy about the roasted brown rice and barley in some other varieties.

In my experience, most of the green teas in the Asian markets are only fair quality; some are actually mediocre. It’s a guessing game, but because the prices are usually modest, it’s not a big investment. I buy several and hope for the best. Regardless, I usually use them all. The boxes don’t really give you a lot more than vague promises of quality, but now and then you get a treasure.

We used to buy a lot of tea and sauces at Soon Lee’s, in Scarborough (along with many great hot sauces), but since they moved, we don’t have a good substitute Asian market (although we did find a good one on Kingston Road last year). In Brampton, we went with a Chinese woman who translated the labels so i could pick products by description, rather than just guessing (which is why I ended up with a bottle of Uncle Chen’s “chilliciously hot” extra hot sauce when I would have otherwise overlooked it).

You can get a nice, organic green tea called Uncle Lee’s, from both Metro and WalMart. It’s almost as robust as Ten Ren green tea, but not quite. Ten Ren you’ll have to get out of town – we buy ours in Chinatown at a tea shop on Dundas Street West. To my palate, Ten Ten makes the very best green tea. I have tried a few of their black and herbal teas, too.

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Time to get serious with distracted drivers

Distracted drivingIn March, the fine for being caught texting,  talking on your cell phone, or tinkering with your MP3 player while driving will jump from $155 to $280 in Ontario.

That’s better, but not good enough.

Distracted drivers are a growing threat to everyone sharing the road – other drivers, pedestrians, and cyclists. We are all at risk.

As the CBC reported:

The fine for distracted driving in Ontario will soon nearly double.

As of March 18, driving with the display screen of a phone, computer, MP3 player or tablet computer visible to the driver will jump to $280 from $155. The total includes a $25 victim surcharge and $5 court costs.

Last week Ontario chief justice Annemarie Bonkalo signed a judicial order approving the new fines.

The fines will not apply to GPS screens.

It’s not enough. The legislation needs to be tougher. It needs to parallel the legislation about impaired driving, or street racing, with similar penalties and fines.

Curiously, as The Star notes, the provincial Liberals (an inconsistent and meandering party seemingly adrift the policy sea, but that’s another post…) didn’t support one of their own MPP’s private member’s bill which would have increased fines and added demerit points:

…the Liberals haven’t pushed a private member’s bill introduced last year by one of their own MPPs, Bas Balkissoon (Scarborough-Rouge River), calling for fines between $300 and $700 and demerit points after one of his constituents, a young mother and community volunteer, was killed by a distracted driver.
“This is a serious, serious community safety issue,” Balkissoon said. “One way or another, I’ll get it.”
He said he was concerned any legislation the government introduces could be delayed by a spring election, and also said he was “disappointed” Bonkalo set the fine at $280 and not his preferred level of $500, the Highway Traffic Act maximum.

So one has to question how seriously the Liberals take the problem.

As the Economist calls it, distracted driving is the “new drunk driving.”

THE driver who killed Jennifer Smith’s mother in 2008 by hitting her car at a crossroads was sober and had never received a speeding ticket. But he was talking on his mobile phone. He was so engrossed that when the policeman later asked him what colour the traffic light had been, the driver said he had not even seen one.

As the article notes, even hands-free devices add to distracted driving:

The human brain has to work harder to process language and communication with somebody who is not physically present. (Conversation with passengers is much less distracting, apparently because those passengers are also aware of the traffic situation and moderate their conversation.) A study by Carnegie Mellon University using brain imaging found that merely listening to somebody speak on the phone led to a 37% decrease in activity in the parietal lobe, where spatial tasks are processed. This suggests that hands-free use of mobile phones cannot help much. Such distractions, according to one study, make drivers more collision-prone than having a blood-alcohol level of .08%, the legal limit in America. It appears to raise the risk of an accident by four times. Texting multiplies the risk by several times again.

So we need some serious attention paid to technology and its social and cultural impact. One of the reasons our health care costs are skyrocketing seems to be easily found here: distracted drivers are causing an increasing number of accidents and deaths.

Distracted driving sticker

Simply raising the fine won’t change that. Paying $280 may be more of an annoyance to people than a real game changer.

Why don’t we treat it like street racing and stunt driving? That gets the driver an immediate suspension of his/her licence at the roadside, a minimum fine of $2,000, and it can be as high as $10,000. A street racing conviction can mean imprisonment for up to six months. It can also lead to a further suspension of the driver’s licence for up to two years for the first conviction and that can go as high as ten years for a second conviction! A convicted driver’s insurance rates increase 100% for the next three years, plus they get dinged six demerit points!

Now that’s a serious law. Distracted driving law? A slap on the wrist. The Ontario Ministry of Transportation’s own Road Safety Report for 2010 (the latest published) barely mentions distracted driving. Yet clearly the problem – and threat – is accelerating.

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Collingwood’s municipal debt and 2014 budget

Aging infrastructureTuesday, Council got a combined debt-and-budget presentation that set the stage for the upcoming, fuller 2014 budget deliberations starting next week. CAO John Brown gave us a recap of a report (produced by BMA Management Consulting) about the town’s debt situation and financial wellbeing. It was a mix of good news/bad news.

The good is that it’s not as bad as it seems, certainly not as bad as some other municipalities, but mostly in the middle of the peer group selected for the report. The bad is that it’s not as good as we’d like it to be. But barring a big tax increase to reduce the debt and funnel more into reserves, I don’t see how it could be a lot better.

His report also included a comparison of Collingwood’s financial situation to six other municipalities:

I have to wonder why several of these were chosen as comparators by the consultants. The majority are not at all like Collingwood:

  • Wilmot Township, according to its own website, is “…approximately 20,000 persons living in small towns, settlements, and on farms.”
  • Springwater Township “…consists of both urban and rural communities, with a population of over 18,000 people. There are nine settlement areas, with Midhurst and Elmvale being the largest with a population of 3100 and 1700 respectfully. Other settlement areas include Snow Valley, Centre Vespra, Minesing, Anten Mills, Phelpston, Orr Lake and Hillsdale.”
  • Prince Edward County is similarly not one urban centre, but a collection of small, rural communities, the largest of which is under 5,500 population.
  • Innisfil is similar: small communities, some bedroom residential development close to Barrie, but mostly rural. Cookstown, one of the largest centres, has a population of about 2,000.

Only Orillia and Owen Sound are similar, small urban centres. Why would we not compare ourselves to Midland or Wasaga Beach? Brockville? Uxbridge? Huntsville? Orangeville? Surely these small urban centres would provide more of the apples-to-apples comparisons.

I’d also like to have seen such data as how  many employees are on the municipal payrolls in each; if they have their own or use OPP police service (and how much their police and fire budgets were – our services for 2014 will consume 22%, or $6.1 million, for policing, and 16%, or $4.4 million, for fire: more than a third of our budget in the combined costs).

I’d like to know their total budget, including operations, capital, how many buses they run, and so on. What are they spending their money on and why? What reserves do they have, what assets? Municipal finance isn’t so simple it can be reduced to a few lines.

Rural communities have very different needs, infrastructure demands, growth issues, etc. that make it difficult to adequately compare them to Collingwood.

We are also a combined retirement and tourist destination centre, which creates different sorts of challenges for services and infrastructure. Our percentage of people 65 and older is about 23% – much higher than the provincial average of 14.6%, and our percentage of people under the age of 55 is lower than the provincial average. That has implications for housing, employers, services, and commercial and industrial growth.

On page 8 of the report, it notes that the average percentage of farmland by assessment value in our comparators was 5.2%, while the amount is only 0.1% in Collingwood. But if you look at the maps, the actual, physical amount of farmland in those four “peers” significantly dwarfs the whole area of the Town of Collingwood. Farmland is the lowest on the assessment ladder, so having less is good for potential tax revenue.

We also have a higher percentage of commercial and industrial assessment, which is equally good for tax revenue.

What we never learned from the report was how much money had any of them invested in major infrastructure projects or municipal facilities over the past decade or more. Collingwood has had an ongoing infrastructure upgrade and replacement program, as reflected by the projects paid for by debentures. Plus we have a fairly modern museum, a new municipal building (library and planning services), a new fire station, upgraded police station, new parks, new recreational facilities, new trails, new works building, an airport, a harbour and a comprehensive municipal transit system. Not many municipalities can boast all of that.

Our CAO explained that debt wasn’t all bad – debt means you are building, upgrading and maintaining infrastructure, erecting new facilities. We maintain our infrastructure constantly else face higher costs when it fails. Debt isn’t operational: it’s used for capital projects.

But, the CAO cautioned, it’s important to manage that debt wisely. Which this council has been doing. And, he said, we can’t continue the status quo; we don’t want to push our debt capacity to its limit.

First, of course, we have to manage our spending. The initial overview of the budget has a projected 2.1% increase (about $67 per average household). However, in light of the CAO’s sobering presentation, I would not be surprised if department heads were told to come back with lower budgets, even in the negative area. I will certainly argue for a lower amount in many areas.

Personally, I’d rather see an overall increase in taxes no more than 1.2%, but even better would be a small reduction, say -1% or even -2%.

Of course, it may mean a reduction of non-essential service in some areas. You cannot continue to provide certain levels of service without paying for them – and costs always increase. Utility costs, inflation, fuel costs, food, wages, benefit costs, materials – they all go up. So to maintain even a zero-increase-based budget, you need to cut something or someone. Essential services won’t be affected.

Therein lies the rub. Quality of life is measured by some of those services. Taxpayers pay for a good life – and we do have a good life here in Collingwood. So what, if anything, are they willing to forego in order to avoid any increase? Or would they rather pay a little more to retain these services?

What can council or staff find in the budget that is non-essential and can be removed or reduced without affecting that perceived quality of life?  We need to find more opportunities for shared and contracted services.

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