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Greater Niagara Chamber of Commerce

 

2020 has been a long and a difficult year for people across the entire world. Canadians have been relatively fortunate, but in this case, to be fortunate is still to say that we have witnessed a toll in lives lost, in unemployment and in business closures, in public and private debt, and in other ways still uncounted.

We have also seen a great spirit of cooperation, however, and even as our communities have suffered, they have grown stronger in other ways. Harnessing that strength will be vital in our recovery, and in rebuilding to be better than we were before. We owe it to all those who have suffered in this pandemic to ensure that mistakes are not repeated and that we emerge from this crisis having learned and grown.

Governments at all levels have come together, often putting aside partisanship to work together on common solutions. Our elected officials have not fallen prey to the temptations of politics and have recognized that the health and the welfare of their people is a goal that they all share, regardless of their political stripe. We hope that such a spirit of cooperation will continue to prevail.

Niagara itself is also stronger and does better when we work together. Cooperation goes beyond the economies of scale that can be realized when negotiating, for instance, one large contract instead of half-a-dozen smaller ones. It means sharing best practices between communities, so technologies and concepts that one municipality uses to reduce cost and improve services can be adopted by all. It means utilizing resources to our best advantage by unifying departments and reducing overlap. It means optimizing and harmonizing regulations and permits across the region to encourage businesses outside Niagara to come here, and those already in Niagara to grow and expand, including beyond their original locations.

It is in this spirit we turn our minds to the question of economic recovery and rebuilding. To replace the jobs and the livelihoods that were lost, we need to nurture our businesses and encourage new ones. Governments at all levels have been presented with the kind of challenge that few elected officials must ever face. But they have also been presented with a similarly rare opportunity – an opportunity to rebuild and to grow, and to correct the errors of the past. Niagara does not want to go back to the way things were. We believe a better community can emerge, and we offer these suggestions as ways to ensure that it will.

Infrastructure investment

Build sustainable public infrastructure that serves future community needs

Although big-ticket municipal and federal infrastructure attracts a lot of attention, 60% of all infrastructure in Canada is owned and maintained by municipal governments. Due to budgetary constraints, however, a sizeable backlog of outstanding work in crucial municipal infrastructure areas such as roads, bridges, water mains, and sanitary sewers existed even before the COVID-19 crisis. At the end of 2016, for example, the City of St. Catharines found that its own gap was $140-million, and that annual infrastructure investment fell short of what was necessary to maintain existing infrastructure by $14-million. By early 2018, the St. Catharines gap had increased by $132-million despite a 1% infrastructure levy introduced in 2016 aimed at closing it. Niagara Region, in 2016, faced a $185-million infrastructure gap. Now that municipal governments have had their budgets drastically cut by the 2020 economic downturn, that gap will only grow.

This is not a unique problem for Niagara. Across Canada, pre-COVID, municipalities owned $141-billion of assets rated as in “poor” or “very poor” condition, according to the Canadian Infrastructure Report Card. The pressures of climate change and population growth will only add to this burden as infrastructure is damaged or simply proves inadequate to new conditions.

To avoid future catastrophe, such as mass failures of vital infrastructure or municipal bankruptcy, action must be taken now. Municipal spending and streamlining alone is not enough to solve this problem; substantial provincial and federal investment will have to support our infrastructure. Although all governments are facing budgetary problems, infrastructure is an area where the eventual cost to the taxpayer will only grow if the problem is not addressed in a timely manner.

Support digital needs of small and medium-sized enterprises

Canadian businesses, especially SMEs, have long struggled to enter the internet age, and this issue has been spotlighted in the COVID-19 crisis. In the spring of 2020, 3.4 million Canadians were working from home. E-commerce was already a growing trend before the pandemic, however, and in 2019, almost 9 in 10 Canadians had made a purchase online in the last year, while 50% of Canadian online time was spent shopping.

SMEs, however, do not have the resources to embrace remote working and ecommerce in the way that major multinationals have, and will need support to successfully maintain their presence in an economy that will be increasingly digital. Programs such as Digital Main Street, with the backing of companies such as Google, Microsoft, and Facebook, as well as the support of the Government of Canada, are a step in the right direction, but will have to be deepened and broadened to ensure that our economy does not lag behind in the digital age.

Champion projects that quickly and sustainably relaunch the economy

Rebuilding the economy will require spending and investing, and it is likely that government funding, particularly federal funding, will be seeking projects. The federal debt-to-GDP ratio remains competitive, and deficit spending to stimulate economic recovery is likely.

However, investments should be focused on sustainability and on addressing long-term issues in the economy and in society. For example, the affordable housing crisis existed long before the pandemic and has not been alleviated. This crisis has been felt in communities across Canada, including in Niagara. Niagara’s stock of available housing, particularly affordable housing, was at crisis levels even before COVID-19. The total supply of rental units has remained stagnant since 2011, increasing by only 167 units, or 1%, around a quarter of the rate of population increase. The supply of bachelor and 1-bedroom units is now less than it was in 2011, and the Niagara CMA has one of the worst vacancy rates in Canada.

A vacancy rate of under 3% is considered a crisis. Niagara’s average vacancy rate had plummeted to 1.4% by 2017, with 3-bedroom vacancies at a rate of just 0.7%, when the rate was 5.5% as recently as 2012. Driven by this lack of supply, average rents have soared from $790 per month in 2011 to $940 in 2017, an increase of about 20% and almost double the rate of inflation. The rate for three-bedroom units has increased by almost 25%.

Public investment should be made in projects such as affordable housing, public transit, or green infrastructure, laying a long-term foundation for sustainability. Local governments should champion projects under these umbrellas when seeking new funding.

Committing to municipal efficiency and resilience

Implement an independent service delivery audit and governance review

Since 1970, no fewer than three major governance studies have been undertaken in Niagara, each recommending changes to the governance structure. No significant action has resulted. No organization should go half a century without undergoing at least some review of its organization, structure, and goals. COVID-19 has forced almost every company in Niagara, Canada, and the world to rethink the way they do business and to remake themselves. In many sectors, seismic changes such as social media, ecommerce, and free trade had previously forced similar reforms, and those are merely the shifts that have occurred within our lifetimes.

In its decision not to force reform on municipal governments from above, the Government of Ontario made it clear that it hoped municipalities would conduct their own reviews and reform themselves as needed, and set aside funds for them to do so. Provincial funding for studies to find efficiencies and conduct reforms will be available to Niagara Region, St. Catharines, and Niagara Falls until 2022-23. Local governments must take advantage of that opportunity to review their services and their governance structures, and to make local government more efficient and responsive to citizens’ needs.

Dismantle internal municipal barriers to deliver the best services at the lowest cost

Even before COVID-19, municipal services were growing more expensive, and municipal governments across Ontario were under increasing pressure to tighten budgets. That tension has now reached a breaking point, with municipal governments across the country facing devastating revenue losses. All means to reduce municipal budgets without compromising on or reducing services must be undertaken. Sharing services between municipalities may help achieve that goal. For instance, the municipal governments of Niagara run a collective twelve fire departments, some no more than volunteer-only. Many public transit services are simultaneously run in the region, and municipal procurement is largely done on an individual basis.

A potential example that could be used as a model for Niagara is the Municipal Partnering Initiative (MPI), consisting of 18 northern Cook County and Lake County municipalities in Illinois. Under this model, subcommittees were formed to evaluate and write bid specifications for groups of services and commodities such as public works and construction, with staff supplied by partnering communities. The unique needs of each community were preserved by adopting group bid specifications in partnership and then allowing communities to opt in or out of the resulting specification. Total savings in the first five years of the program, over more than thirty joint bids, were between US$2.5 and $3.1 million. The model is easy to replicate.

Beginning with a core group is easier but can often feel exclusive and, although it is easier to get a cooperative program off the ground with a small group, that same approach can endanger its expansion. We encourage an effort towards shared services and procurement that begins with all twelve Niagara municipalities and the Region, and that all municipal governments have an opportunity to contribute to the development of the process. The project must involve both staff and elected officials.

Harmonize regulations to expedite economic recovery

There are thirteen municipal governments in Niagara, and any business here must work with at least four governments at various levels. The cost of permits and fees, when not set optimally, can be a deterrent to doing business in any community. It is imperative that these costs be seen not only as a revenue-generator for municipal government, but as a tool with which the government can influence planning in desirable ways. Low fees can offset high property taxes, or vice versa, but a municipality which charges expensive fees and high taxes is stymieing its growth and prosperity.

Communities should remain free to use fees and taxes as tools to encourage the types of growth their citizens deem desirable, but to truly encourage growth, communities should also ensure that their fee and tax structures are coordinated with each other, particularly between the Region and the other twelve municipal governments. A liaison group or committee with representation from all municipal governments should take responsibility for ensuring the coordination of permits and fees, ensuring that staff in their respective municipalities are in communication and cooperation when determining these, and that decisions are not being made in isolation.

In the hard times that COVID-19 has brought, governments may be tempted to increase fees as a way of raising revenue without increasing taxes. Fees are, as noted above, a policy tool, and raising fees has the effect of discouraging the action for which that fee is charged. Any increased fees must be approached very carefully, and only after a study of the likely impacts on economic growth and job creation.

Commit to a provincial/municipal relationship that prioritizes resilience, efficiency, and service delivery

The program of municipal “downloading” by which the Ontario government balanced its books from the mid-1990s resulted in massive costs imposed on municipalities for programs such as childcare, transit, housing, and public health. By 2017, despite the reversal of some of these transfers, the funding gap still totaled $3.3 billion.

Municipal governments collect only 8 cents out of every Ontario tax dollar and are unable to fund these programs adequately while also tending to core municipal needs such as infrastructure investment and maintenance. This problem has been exacerbated by the economic impacts of COVID-19. The phrase that there is only one taxpayer is trite, yet nonetheless true, and governments must bear this in mind. All transfers of responsibilities between different levels of government must be evaluated purely in terms of efficiency and service delivery, rather than as a cost-saving opportunity for one level of government at the expense of another. We also urge governments at all levels to hold extensive consultations with each other before embarking on services reviews or cuts that would impact the services of or costs to other levels of government.

Enabling sectors to thrive, particularly accommodation, food and retail industries

Seek reduced trade barriers across provinces and support businesses as they grow internationally

The Supreme Court decision on inter-provincial trade has highlighted the need to modernize the inter-provincial trade system in Canada, and the trade in alcoholic beverages remains the strongest example of this. The Canadian Free Trade Agreement encourages further liberalization of the trade in alcohol, and the GNCC encourages the Government of Ontario to work with the other provinces in a serious attempt at liberalizing the alcohol trade in Canada. The government has already taken steps to assist the beverage alcohol and restaurant industries by permitting alcohol to be sold with takeout and delivery meals, but we believe there are further barriers to the industry that need to be addressed, and those that prevent the sale of Ontario’s wine, beer, and spirits are one of them. As a barrier that we have imposed on ourselves, this should also be one of the easiest to lift.

Provide working capital grants or guaranteed loans to sectors such as accommodation and food services

The offering of capital and loans to businesses through programs such as CEBA have been well-received, but not industry-specific. This was likely necessitated by the fact that the speed of the government response was more valuable than its nuance. Thus, the maximum loan that a retail store can access, for example, is the same as that which a small hotel could, even though the retail store may still be doing substantial business (albeit at less than a pre-COVID level) while the hotel is all but shut down.

We have identified accommodation and food service as an industry in need of special assistance. By April, employment in the sector was at exactly half its pre-pandemic level, and although those levels have recovered to 79% as of August, it should be noted that the rate of recovery has already slowed even though the industry should be in its busy season. Firms in this industry will need greater access to capital, and over longer terms, than those in others such as financial services, which were at 99% of their pre-COVID levels in July, or wholesale trade, which had exceeded its pre-COVID employment numbers the same month. Offerings of support, stimulus, and investment should be tailored to address the hardest-hit industries.

Seek provincial/federal funding and third-party investment to fund economic drivers

When investing or seeking investment for economic rebuilding efforts, it is incumbent upon governments at all levels to consider the industries being invested in. Niagara, with a focus on tourism, has depended much more on industries such as accommodation and food service than other areas, and, as noted above, this has resulted in the region being affected more greatly than most by the disruption of the tourism sector. In 2019, almost 1 in every 8 jobs in Niagara was in accommodation and food service, which is nearly double the relative size of the industry in Canada as a whole. However, in financial services, a relatively unaffected industry, Niagara has a lower concentration than the national level by about 30%. This skewing of industry has likely contributed to Niagara’s higher unemployment and worse economic performance during the pandemic than national and provincial averages.

This should be borne in mind when seeking investment, the nurturing of existing businesses, and the attraction of new ones. The stories of Detroit or Flint are indicative of what can happen when the industry a city over-relies on can no longer be relied upon. Niagara should seek to broaden its economic base when investing and growing its economy, and target industries in which we are under-represented as well as our traditional strengths.

Reestablishing trade and supply chains

Recent events have highlighted weaknesses in our current supply chains, both COVID-related, as in the case of the 3M mask controversy with the United States, and unrelated, like the aluminum tariffs. We have long understood the dangers of over-reliance on a single trading partner, but they have now begun to rear their heads, as we have seen what can happen when that trading partner ceases to be willing and cooperative or when external factors interfere. For example, 200 of the Fortune 500 companies have or had a presence in Wuhan, the origin of the COVID-19 outbreak and one of the first to suffer economic and social shutdown as a result. Macro-level trade uncertainty has disrupted the agri-food industry, while at ports of entry, marine cargo movement has suffered as government departments offer conflicting advice and directives. Disruptions to other modes of travel and to accommodations have meant difficulties for rail crew, impacting the shipping of goods by train.

Improving supply chains does not purely or even necessarily mean the reshoring of manufacturing. Some of the key factors behind interruptions to supply chains during the pandemic have been conflicting government directives, uncertainty over rules and regulations, and the extremely rapid promulgation of new legislation, some of which conflicts with or overrides previous law. Planning for contingencies and disseminating plans to businesses and the public would help mitigate these disruptions by allowing logistics firms and others involved in supply chains to prepare themselves. The preparatory process for a variety of COVID-related scenarios could and should have begun in January at the latest, considering that prominent epidemiologists have been warning of a pandemic for years, and that MERS, SARS, and swine flu all offered warnings of what could happen with an outbreak that was not so easily contained.

Consider a cross-border regional approach to reopening

The Canada-US border has been closed as a whole, yet the frontier is almost 9,000km long, and the same conditions do not prevail along its entire length. Daily cases in the State of New York peaked at 11,500, for example, while Vermont’s did not go higher than 72. Even allowing for differences in population, the rate of infection appeared to be more than five times higher in NY than in VT.

Since commercial and essential traffic continues to flow unimpeded, the primary concern is recreational border crossings. Governments on both sides of the border should consider a re-opening with geographical boundaries, with border closures extending around hotspots to the length that tourists are reasonably prepared to travel, recognizing that a casual visitor is unlikely to travel hundreds or thousands of kilometres within their own borders to reach an open crossing point, and even those that did could still be turned back by customs officials based on their place of residence. This policy would at least benefit the hard-pressed tourism industry in relatively unaffected parts of the two countries.

Commit to elimination of trade barriers to ease the movement of goods and services

It is not just inter-provincial trade barriers that must be removed, but international ones. There has been significant recent progress on this front with the signing of CETA and the CPTPP, but we cannot use recent success as an excuse to cease progress.

The Comprehensive Economic Partnership Agreement (CEPA) with India has progressed no further than the last round of talks held three years ago, leaving Canada exporting only US$3.64 billion to the $2.7 trillion Indian economy and as little as $100 million in annual goods to be sold in India’s $800 billion retail market. The Canada-Mercosur Free Trade Agreement exploratory discussions were opened over two years ago, and no further progress appears to have been made with this trading bloc (comprising Argentina, Brazil, Paraguay and Uruguay), a potential market with a population of 260 million and GDP of over US$3 trillion. If this agreement alone could be concluded, 98% of Canada’s foreign trade with South America would then be covered by a free trade agreement.

The global nature of the current pandemic and resulting economic downturn means that all parties are motivated to move forward on free trade agreements, and Canada should do so. These and other potential agreements will take years to negotiate, which is even more reason not to delay their negotiation, and to engage foreign countries and trading blocs enthusiastically and energetically in pursuit of further opportunities for Canadian exports and imports.

Champion free and open international trade

In recent years, some countries have taken steps back from international trade, including historically major proponents of free trade including the United Kingdom, with its pursuit of an anti-free-trade Brexit policy, or the United States, whose leadership has opted to launch trade wars with erstwhile partners and to introduce tariffs that were as unwelcome on both sides as they were, thankfully, often short-lived.

International free trade is, apparently, in need of support and of champions, and we call upon Canada to take on that role even more than it has in the past. Signing more free trade agreements, as noted above, would be an excellent way to do this. Free trade brings prosperity, and the best way to prove it is to prosper through free trade. During war, countries blockade their enemies to ruin their economies; tariffs and anti-trade policies are blockades enacted against oneself. Canadian foreign policy should aim to promote free and open trade wherever and whenever possible.

Access to a skilled labour force

Commit to local economic and demographic data

The COVID-19 pandemic has reinforced the value of data. Without accurate data, for example, attempts at contact tracing and case isolation could not work, and both infections and deaths would be far more numerous. Rich data is as important to the economy as it is to public health. Focusing on economic drivers, as suggested above, will require local economic and demographic data. Niagara, no less than other regions across Canada, will need access to rich data on the population, the workforce, and economic activity. Mapping this data with GIS will allow for much more targeted and effective programs. Local governments should not be tempted to cut funding for data-gathering departments and projects in the current budget crunch, and should recognize that data is a long-term investment in the prosperity of the community.

Ensure government re-training programs meet market demands

During recessions, the number of young people enrolling in further education tends to increase. Almost half of the 2010 graduating class enrolled in some post-graduate education as a response to poor job prospects resulting from the 2008 recession. Young people are particularly fearful of entering the workforce during a downturn, and with good reason. A 2012 TD study found that it can take as long as 15 years for those who graduated in lean times to catch up to cohorts who entered the labour market when the economy performed better.

This downturn may be different, since its combination with a pandemic has an impact on post-secondary enrollment, but institutions have acted quickly to develop online alternatives and to deliver as much education virtually as is possible. This, however, risks skewing post-secondary education away from market needs more than usual. Canada, lacking a national educational policy that seeks to match education to labour market needs, often suffers from over- and under-supply in individual labour markets, which the pandemic may make worse as students are discouraged or prevented from enrolling in courses that necessarily entail an in-person component.

For example, between 2006 and 2011, Ontario produced 26,000 more new teachers than were required, driving the unemployment rate in that profession to 20% by 2013, while between 2005 and 2014, 21,000 nursing positions went unfilled. The Higher Education Quality Council of Ontario estimates that we may see gluts of lawyers and engineers in the coming years, while nursing will continue to be undersupplied.

The GNCC urges governments at the federal and provincial levels not to allow the mistakes of the past to be repeated, and to enact new measures aimed at better matching labour market needs to the supply of new talent. Post-secondary programs should be guided to ensure that labour market needs are being met, and that new entrants to the workforce are able to find work in their fields. There are a variety of mechanisms which could accomplish this, and we encourage governments to explore them.

Support private sector up-skilling/re-skilling needs

Further to the above, recessions also see large numbers of people re-entering education. In the U.S., enrollment in higher education jumped 16% from 2007 to 2010, and most of that increase came from older adults who had left the labour pool to engage in further training and education. These older adults run the same risks as their younger counterparts of emerging with skills ill-suited to the realities of the labour market, and state guidance will also be necessary to ensure optimal outcomes.

Canada is far from being a leader in employee training, with labour market training expenditure relative to GDP trailing many other countries, even during economic peaks. In 2014, Canada spent 0.1% of GDP on employee training, a mere fraction of virtually every country in western Europe and one-fifth of that spent by Finland or Denmark, for instance. All of these countries, not coincidentally, see a much higher level of public investment in labour markets. In 2017, Canada spent 0.78% of GDP on labour markets, placing us well in the bottom half of the OECD and well behind western European levels of investment.

In recessions, employer training of their workforces also tends to suffer as businesses focus on their immediate costs and curtail longer-term expenditures. In the first year of the 2008 recession, U.S. employer training expenditures had fallen by 11 per cent, while prolonged downturns across the world have been found to noticeably decrease apprentice-to-journeyperson ratios. Investment in employee training is sound both for individual businesses, for employees, and for the national economy as a whole, which can remain more competitive when its workforce is more skilled and more up-to-date with current developments, but businesses cannot always afford to make this investment by themselves when the economy turns sour. Governments should be ready to step in and incentivize employee training in the event of a downturn to keep our economy competitive.

Expand work-integrated learning

Work-integrated learning, or education with experiential or on-the-job components, is becoming more widespread and offers clear benefits in keeping education relevant and up-to-date with industry standards. However, a major barrier identified by the Business/Higher Education Roundtable is that of costs to employers, with many employers reporting that they did not have the budget to pay students. This was in addition to the barriers employers faced in finding staff time to supervise students, or to familiarize themselves with the programs involved. The federal government’s moves towards abolishing unpaid internship will likely mean that many employers will withdraw from work-integrated learning altogether, particularly in a recession.

If governments wish to see robust systems of work-integrated learning, especially with paid positions for students, they must be willing to support employers who participate in these programs, both financially, and with resources. Investment in participating employers and in furthering liaisons between the educational and private sectors to develop better educational offerings will pay off and go some way towards closing the workforce educational gaps noted above.


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