A survey released today reveals local business may be confident when it comes to their future but more remain concerned about key economic issues, notably proposed government actions around Canada Pension Plan and cap and trade initiatives.
The Sarnia Lambton Chamber of Commerce, which co-released the inaugural Ontario Economic Report, highlighted concerns over the economic climate in the province.
The survey, produced by the Ontario Chamber of Commerce, includes references to several sets of data, including a Business Prosperity Index developed by the Canadian Centre for Economic Analysis and an Economic Outlook for 2017 prepared by Central 1 Credit Union.
The survey projects a positive net migration of 1,300 for an area that includes Sarnia-Lambton and Windsor. The report cites an improved unemployment rate of 6.3 percent, down from 6.6 percent and a rise in housing prices, with the $183,000 median cost still the lowest in Ontario.
But local businesses are said to be weary of investment, citing a combination of high risk and low confidence in the provincial economy, said Shirley de Silva, the Chamber’s CEO.
“Many of our members, particularly the small businesses, were shown to have the least amount of confidence in the economic outlook,” said de Silva. “From a practical standpoint, even though businesses have more financial resources available to them than they have in the last 15 years, they are less willing to invest in production, which would serve to generate wealth and jobs.”
The Chamber’s survey shows a relatively weak business climate, notably the result of a perceived weakness in exporting opportunities and a lack of government infrastructure, which at only 3 percent of GDP is lagging behind the recommended 4.5-5 percent of GDP, according to the Chamber report.
The report’s companion Business Prosperity Index also shows a drop in the generation of wealth generated from the production of goods or services.
“What that tells is that Ontario businesses are less likely to earn income from actual business activity today than they have in the past,” said the Chamber’s de Silva.
Ontario wide, the research shows that Ontario’s economic climate is posing challenges to the businesses represented by members of the Ontario Chamber of Commerce, including those in Sarnia-Lambton.
“Investment is being held back because of a high perception of risk,” said Ontario Chamber of Commerce CEO Allan O’Dette. “We need immediate action in order for our province to continue to grow and prosper.”
O’Dette said Ontario’s business prosperity is increasingly dependent on non-production, financial activities, with a 12 percent drop in production activities having taken place since the Great Recession.
Locally, the Chamber, on behalf of its membership, has continued to voice caution around the effect of regulatory burden, high input costs and government policies, said de Silva.
“The findings in this report reinforce this,” she said.
The Chamber, both locally and at the provincial level, will continue to prioritize workforce development, infrastructure, energy and health care as issues of key importance.
“In particular, our members are concerned about access to affordable energy, and improvement in infrastructure through funding of local, jobs-generating projects,” she added.
Opposition by business groups, including the Sarnia Lambton Chamber of Commerce, has struck home, with Prime Minister Justin Trudeau announcing in the House of Commons that the government will not, after all, tax employer-sponsored benefit plans.
A government report on tax expenditures, released last year, had indicated that such a tax would add $2.9 billion to revenues in 2017, prompting the opposition.
Locally, that response came in the form of a letter sent by the Chamber to local Members of Parliament (Marilyn Gladu of Sarnia-Lambton and Bev Shipley of Lambton-Kent-Middlesex) with a copy to Finance Minister Bill Morneau.
“We are gratified as a Chamber that the government has recognized how this kind of taxation could have quickly cascaded to the point where it becomes a hardship for Canadians,” said CEO Shirley de Silva. “On behalf of our members, it’s important that the Chamber steps up before actions like a proposed tax on health benefits become a reality.”
The Chamber is urging Lambton’s two Members of Parliament, along with the Federal Minister of Finance to steer clear of any plans for taxing health and dental benefit packages provided by employers. This comes on the heels of a report in the National Post on December 2, 2016 that the Department of Finance is reviewing the tax exemption.
In this letterto MP Marilyn Gladu of Sarnia-Lambton and MP Bev Shipley of Lambton-Kent-Middlesex, with a copy to the Hon. Bill Morneau, Minister of Finance, Chamber CEO Shirley de Silva and Mark Lumley, chair of the Board of Directors, voice concern on behalf of the Chamber membership.
Taxing health care benefits would result in fewer businesses, particularly smaller ones, that offer these benefits and it could cost employees hundreds or thousands of dollars each year. It also means that many Canadians may be at risk of losing access to vision care, prescription drug, dental care and other preventative services if their employer can’t afford to keep them insured.
The letter is another example of the Chamber, on behalf of members, taking a stand on issues of importance to the local business community.
“We do this on behalf of our members on a consistent basis,” said de Silva. “Our role as the Voice of Business in our community is acknowledged by elected government officials and regulators at every level and it’s one that we take very seriously.”
Chambers cite high costs of program on top of rising electricity prices, lack of sector-by-sector economic impact analyses and a changed policy direction of the United States.
Today 20 chambers across Ontario called for a deferral of the provincial government’s Cap and Trade program scheduled to be implemented January 1, 2017, citing the rising costs of doing business, the need for time to prepare, a lack of sector-by-sector economic impact analyses and a change in policy direction in the United States.
In Ontario, the rising cost of electricity is the greatest source of frustration for small businesses. A survey conducted by the Ontario Chamber of Commerce found that 33% of small businesses may delay or cancel investment because of increasing energy prices. A recent report by the Auditor General found that residential electricity bills may rise another 23% between 2015 and 2020. The introduction of the cap and trade system will add further charges on natural gas, gasoline and diesel fuel that will be felt by every individual and business in Ontario.
Shirley de Silva, President and CEO of the Sarnia Lambton Chamber of Commerce says, “Businesses are struggling to pay their electricity bills. It’s their number one frustration we hear about. We also hear that they need more time to understand and prepare for such a complicated new economic system as cap and trade.”
The Sarnia Lambton Chamber has joined 19 other Chambers across Ontario to request that the Ontario government delay the implementation of the cap and trade program for at least one year. The Chamber network has already voiced this message in the past, along with calls for an economic impact analysis in order to understand which sectors will be most affected.
“We are concerned that policy makers don’t know the full impact that cap and trade will have on Ontario. Nor do they know what will happen given the recent US election and the Prime Minister’s decision to mandate carbon pricing. We are extremely concerned about the impacts this uncertainty and added costs will have on jobs and the economy.”
An unintended consequence of implementing cap and trade this early is industry and businesses could leave the province for other jurisdictions that do not have a carbon price or an electricity grid that’s as clean as Ontario’s. “This would negatively impact not only jobs and the economy, but also the environment,” says de Silva.
The cap-and-trade system will result in only a small portion of the required greenhouse-gas reductions needed to meet Ontario’s 2020 target.
Cap and trade is expected to bring higher electricity prices, which may lead people to switch to cheaper natural gas—a fossil fuel that also produces greenhouse gases. Between 2017 and 2020, the Ministry of Environment and Climate Change plans to spend up to $1.32 billion of cap-and-trade revenues to address this issue. The Action Plan indicates that this will result in 3 Mt (megatonnes) of reductions. However, neither the Ministry nor the provincial agency that oversees Ontario’s electricity system could show how they arrived at the 3-Mt estimate. In addition, the $1.32 billion is expected to have only a small impact on reducing the expected electricity price increases. In particular, electricity prices are projected to increase by 14% for businesses and 25% for households; after applying the $1.32 billion, businesses will still face a 13% increase and households 23%.
No plan for achieving renewable natural gas goal.
Climate Change Action Plan commits about $1 billion to previously approved initiatives: some initiatives were approved years before the Action Plan was created. By including these projects in the Action Plan, the Province has found an alternative way to fund their costs— but will not achieve any additional emissions reductions
Under the linked system, Ontario’s cap does not actually control the amount of greenhouse gases that can be emitted in Ontario: Because Ontario has chosen to link with California and Quebec, Ontario may exceed its own emissions cap if Ontario emitters decide to purchase allowances from Quebec or California. The cap on emissions set by the Ontario government consequently does not actually control Ontario emissions.
LIST OF PARTICIPATING CHAMBERS
Ajax Pickering Chamber of Commerce
Burlington Chamber of Commerce
Chatham-Kent Chamber of Commerce
Greater Kitchener Waterloo
Greater Peterborough Chamber of Commerce
Greater Sudbury Chamber of Commerce
Hamilton Chamber of Commerce
Ingersoll Chamber of Commerce
Kingston Chamber of Commerce
London Chamber of Commerce
North Bay Chamber of Commerce
Northwestern Ontario Associated Chambers of Commerce
Newmarket Chamber of Commerce
Sault Ste Marie Chamber of Commerce
Sarnia Lambton Chamber of Commerce
St Thomas & District Chamber of Commerce
Thunder Bay Chamber of Commerce
Tillsonburg District Chamber of Commerce
Timmins Chamber of Commerce
Windsor-Essex Chamber of Commerce
The Ontario Chamber of Commerce (OCC) also commented today on the Long Term Energy Plan and called on the Minister of Energy to reduce electricity costs by prioritizing affordability and competitiveness as well as transparency and flexibility. The OCC recommends moving away from a central procurement model towards a competitive capacity market and leveraging expiring contracts to pursue more cost-effective measures.
“As the provincial government seeks to find solutions to the province’s energy challenges, Ontario must strive to balance objectives regarding climate change, renewable resources and maintaining a diverse supply mix without forfeiting the competitiveness and transparency of the capacity market system,” said Allan O’Dette, President and CEO of the OCC. “This will result in increased accountability and confidence in the energy market for Ontario businesses.”
The Sarnia Lambton Chamber of Commerce, on behalf of its members, is urging Ontario Energy Minister Glenn Thibeault to take advantage of the “wealth of experience and knowledge” represented by those in the local energy sector.
In a letter sent December 14, 2016, Chamber CEO Shirley de Silva and Mark Lumley, current Chair of the Board of Directors, responded to Thibeault’s invitation to consult on proposals for a 2017 Long Term Energy Plan.
The letter highlights the capabilities of Sarnia-Lambton businesses engaged in energy-related activities as well as the decision by companies such as Ubiquity Solar and Comet Biorefining to further invest in the future of energy transformation.
A delegation of representatives from the Sarnia Lambton Chamber of Commerce met earlier this week with officials from three Ontario government ministries—Environment and Climate Change, Energy, and Infrastructure— as part of an ongoing advocacy strategy to bring issues of importance to local business to decision makers at Queen’s Park.
Those issues included the impact of rules and regulations around reduction of carbon and the high cost of electricity as it relates to competitiveness. Chamber representatives also took time to highlight work being done in Sarnia-Lambton to further innovate beyond the traditional petrochemical base.
Two staff members of the Chamber—President and CEO Shirley de Silva and Monica Shepley, Manager of Advocacy and Policy Development—joined Peter Smith, Co-chair of the Chamber’s Energy Committee, and Michael Kooy, First Vice Chair of the Chamber’s Board of Directors, on Monday’s one-day visit to Queen’s Park.
“We were able to bring a number of key messages to the attention of senior officials,” said de Silva. “With the Ministry of Environment and Climate Change, for example, we discussed the impact of the government’s policy on carbon reduction, especially as it relates to local industry.”
The Chamber delegation also met with the Ministry of Energy, to discuss electricity costs on behalf of its members as well as Sarnia-Lambton initiatives, including LAMP 21, a proposed innovation hub that would develop advanced materials from bitumen and biogenic feedstocks, an alternative to the burning bitumen as fuel.
Finally, the delegation met with the Hon. Bob Chiarelli, Minister of Infrastructure, emphasizing the importance of a proposed Oversized Load Corridor that would improve the competitiveness of fabricators in Sarnia Lambton. Companies currently spend as much as 20 percent of their total shipping costs just getting the load to the Sarnia Harbor, much of it related to temporarily moving utility lines on roads. The Oversized Load Corridor project is seen as a big step forward for this community and has already received significant local support.
Mark Lumley, chair of the Sarnia Lambton Chamber of Commerce, called on the Sarnia City Council to continue improving the city’s financial viability while focusing more on economic development during a presentation on the 2017 budget.
Lumley emphasized the historical role the Chamber continues to play in representing local businesses and commented on the Chamber’s support for debt reduction and the competitive industrial class tax structure.
“We are appreciative of initiatives that include the Asset Management Plan, the identification of various vacant properties and the review of customer service provided by the Planning and Building Department,” said Lumley.
“We also think there is an opportunity for what we consider to be a strategic pivot in addressing the issue of infrastructure, something that has been raised fairly recently in a staff report to Council,” he added.
“We find it alarming to see that of the City’s nearly $2 billion in linear assets, a significant amount of money—$235 million—is needed to replace assets that are so outdated that they can no longer be rehabilitated.”
Lumley said the Chamber is encouraged that some $37 million in capital spending is proposed for high priority projects.
“We are, however, very concerned that that infrastructure backlog remains unaddressed. Indeed, based on what we see before us, a good part of the capital that is being proposed comes from reserve funds, which essentially means that we are drawing from savings rather than injecting new funds that are badly needed for infrastructure,” Lumley told Council.
While Lumley conveyed the position of the Chamber, that the city should not take on new debt as a means of covering general operations, “City Council ought to consider options for addressing the infrastructure problem in a way that paves the way … if you pardon the pun … for true progress in this critical area.”