Priorities:

Linking Municipalities and the Growth Plan for Northern Ontario

Priorities:

Linking August 16, 2013 and the Growth Plan for Northern Ontario
Submitted by the Northern Ontario Large Urban Municipalities
August 9th, 2013

Submitted by: The Northern Ontario Large Municipalities Urban Municipalities

Priorities:
Six Key Needs For Large Northern Municipalities
Relationships
A renewed collaborative relationship built on consultation, direct engagement and strategic thinking Clear and coherent support across all Provincial ministries
Photo: Queens Park, Ontario

Infrastructure
Sustainable funding for local and regional infrastructure Advancement of multi-modal study for Northern Ontario

Photo: Jack Garland Airport, North Bay

Energy
Affordable electrical pricing for all users Encouragement of generating projects in Northern Ontario

Photo: Transmission lines, Sault Ste. Marie

Workforce Development
Enhancement programming for immigration Skills development activities focused on key sectors

Photo: Welder apprenticeship training, Cambrian College, Greater Sudbury

Research and Innovation

Enhanced funding for research and innovation activities Increased collaboration with key stakeholders

Photo: Thunder Bay Regional Research Institute, Thunder Bay

Revenue Sharing
Fair sharing of resource revenue Long-term stable funding sources

Photo: Hollinger open pit mine, Timmins

Executive Summary:
Since the earliest days of the Province of Ontario, Northern Ontario has been a region of both untold potential and major challenges. The wealth of its natural resources minerals, forestry, water, energy generating potential has made the region critical to the growth of the Provincial economy for over a century. However, the combination of geography, the distribution of its residents and communities and the cyclical nature of a resource-based economy has in the past and continues to present challenges to the development and sustainability of the region. In many respects, Northern Ontario is an exercise in extremes, accounting for 88% of the Provinces total area but only 6% of its total population. As a means of addressing these challenges, the Province has developed the Growth Plan for Northern Ontario (the Growth Plan), intended to address economic development, infrastructure investment, labour market requirements for the next 25 years, the Growth Plan is touted as the framework for Provincial decision-making in Northern Ontario. Structured around the key themes of economy, people, communities, infrastructure, environment and Aboriginal peoples, the Growth Plan expresses the Provinces intention to collaborate with stakeholders in Northern Ontario while maintaining, strengthening and creating new partnerships for the benefit of the region.
Northern and Southern Ontario in perspective Southern Ontario 12.1 million residents (88%)

Northern Ontario 775,000 residents (6%)

Southern Ontario

Timmins Thunder Bay

North Bay Sudbury Sault Ste. Marie

The Large Urban Northern Ontario Municipalities

Just as the City of Toronto, by virtue of its size and significance, influences policy making for the Province, so do the five largest municipalities in Northern Ontario North Bay, Sault Ste. Marie, Greater Sudbury, Thunder Bay and Timmins shape the course of Northern Ontario. If anything, the significance of the five largest Northern Ontario municipalities is actually more pronounced than Torontos relationship to the Province. One could argue that over time, Northern Ontario has developed into a group of sub-regions, with the five largest centres acting as the de facto hubs for economic activity, healthcare, education, research and innovation and other services.
The significance of the five largest centres 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Population Municipal expenditures Municipal infrastructure 20% 29% 17% Five largest centres as a percentage of Northern Ontario City of Toronto as a percentage of Ontario 64% 59% 57%

The Growth Plan recognizes the importance of the five largest centres in Northern Ontario through their designation as strategic core areas. The expectation of the five municipalities is that their significance to the region will be reflected not merely through special recognition in the Growth Plan. Rather the degree of collaboration and consultation afforded to them, as well as the allocation of the Provinces resources, investment and effort, is expected to be commensurate with their role as regional hubs. On a number of levels, the five largest municipalities have already forged strong relationships with their surrounding smaller communities which will form the basis for ongoing development on a sub-regional level. Similarly, all of the municipalities enjoy strong relationships with their neighbouring First Nation communities as well. From the perspective of the five largest municipalities, the implications for the actual implementation of the Growth Plan are self-evident maximizing the focus of Provincial efforts on the five largest municipalities in Northern Ontario will yield the greatest outcome for the region while at the same time ensuring benefits to smaller centres and other stakeholders in the North. At the same time, the five largest municipalities also believe that the timing is ideal for input to, and more important the Province on how best to move the Growth Plan forward. By its nature, the Growth Plan is both extensive and, in a number of instances, relatively high level. Achieving results for Northern Ontario will necessarily require the prioritization of activities as well as the development of more detailed action plans. The purpose of this document, which has been developed collaboratively by the five largest municipalities, is to provide additional perspective on what Northern Ontario needs, how best to deliver it and where the Provinces immediate focus should lie.

The Case for Action

This report is timely and important for a number of reasons:

The potential for economic growth in Northern Ontario is both significant and immediate. The Ring of Fire development is recognized by all parties, including the Province, as being transformational to the region as a whole. During the course of the development and operation of the associated mines, processing facilities and ancillary activities, the Ring of Fire project will provide an economic contribution to Ontario of the magnitude equal to the discovery of copper and nickel in Sudbury, gold in Timmins or steel manufacturing in Sault Ste. Marie. The Ring of Fire initiative is perhaps the best example of a project that is too big to fail and represents arguably the most pressing priority, from an economic perspective, for not only Northern Ontario, but the Province. However, it is not the only major initiative underway in Northern Ontario. The City of Timmins is currently witnessing a major expansion of Goldcorps mining operations while Essar Algoma Steel in Sault Ste. Marie is contemplating the potential for expanding its annual production from 2.7 million tonnes to 4 million tonnes. In Greater Sudbury upwards of $4 billion in new investment in expected from the development of new mines and other projects by international mining companies (KGHM, Vale and Glencore), in addition to the planned $2 billion investment in a new ferrochrome facility in connection with the Ring of Fire development. These and other initiatives have the potential to contribute significantly to Ontarios economic well-being but are also dependent on a supportive legislative and regulatory environment. The current economic environment in Northern Ontario is being influenced adversely by factors that fall (either in whole or in part) within the Provinces mandate. While the suspension of the environmental assessment of the Cliffs Natural Resources Ring of Fire initiative demonstrates the pressing need to address a range of issues, including strategic transportation infrastructure, electricity pricing and Aboriginal relations, it is only the latest in a series of economic disruptions that have affected the region. The recent relocation of the Xstrata copper refinery from Timmins to Quebec and the closure of St. Marys Paper in Sault Ste. Marie have resulted in the permanent loss of 670 and 390 high paying jobs in Timmins and Sault Ste. Marie, respectively. While the absolute number of jobs lost is consistent with the closure of several car plants in Southern Ontario, they are more significant when viewed as a percentage of the total available labour force. With the closure of St. Marys Paper, Sault Ste. Marie lost the equivalent of 1% of the total labour force while the Xstrata closure represented 3% of Timmins total labour force. Job losses on a similar scale in Southern Ontario centres would be measured in the tens of thousands 1% of the labour force in Toronto equates to 14,000 jobs lost, while a repetition of the Timmins experience would be the equivalent of 40,000 lost jobs in Toronto. The prospect of continuing job losses in Northern Ontario continues to be a major risk, with the potential relocation of the Ontario Lottery and Gaming Corporation from Sault Ste. Marie to Toronto and the announced intention of the Province to cease financial support for the Ontario Northland Transportation Commission placing at risk an additional 500 in Sault Ste. Marie and 950 in North Bay.

A number of changes to the policy and funding environments are being contemplated with the potential for significant impacts on the five largest centres. Planned changes to the formula for calculating Ontario Municipal Partnership Funding (OMPF) as well as the eliminating of Connecting Link funding for highway maintenance will also increase the burden on the municipalities.

Concurrent with these factors, the five largest municipalities are facing increasing pressures arising from the need to reinvest in their local infrastructure. Overall, the five largest municipalities reported a total historical investment in infrastructure of $6 billion at the end of 2011, which likely equates to a replacement value in the order of $20 billion. The ability of the municipalities to sustain this level of infrastructure, which is critical for economic development and the health and well being of their residents (and those of the surrounding region) is increasingly under strain due to industrial property assessment losses, inflation, regulatory changes, wage settlements from interest arbitration and reductions in senior government transfers. The consequence of this combination of factors is increasing infrastructure deficits in Greater Sudbury alone the estimated infrastructure deficit for roads (to the exclusion of all other municipal infrastructure) is estimated to be over $700 million, reflecting the inherent challenges of being Ontarios largest geographic municipality. While programs such as Provincial gas tax and the Northern Ontario Heritage Fund Corporation (NOHFC) provide some contribution for infrastructure, the funding is often restricted for specific purposes (i.e. transit) or involves a time consuming competition for funds, both of which challenge long-term planning for infrastructure. The recently announced Municipal Infrastructure Investment Initiative, while focused on infrastructure reinvestment, provides no direct benefit to four of the five largest municipalities that are excluded from the program due to their population and despite their infrastructure deficits.

Clearly, the case exists for both increasing and accelerating the role of the Province in supporting the five largest municipalities in Northern Ontario and by extension, the region as a whole.

The Priorities
At 50 pages, the Growth Plan represents a broad ranging statement of the Provinces intentions for Northern Ontario over the next 25 years. As a means of informing the Provinces decisionmaking process concerning the implementation of the Growth Plan as well as the optimal means of addressing the immediate needs of Northern Ontario, the five municipalities have identified six key strategic priorities for Provincial intervention. While these priorities will differ to a certain extent at the individual community level, they are recognized by all five municipalities as representing the most pressing issues that should be addressed by the Province.

1. Developing a New Provincial-Municipal Relationship

There is an overriding need to address the structure and function of the current relationship between the Province and the Northern municipalities. Without a relationship that is built on direct engagement, consultation and strategic thinking, the development of Northern Ontario will continue to be impeded by competing priorities, the absence of a coordinated approach and the dissipation of resources and efforts with little to no contribution to the region. The establishment of a renewed and enhanced relationship between the Province and the Northern municipalities is the single most important requirement for success.

At one point, the Province took a direct role in economic development in Northern Ontario through programs such as the Northern Ontario Relocation Program, which saw the Province transfer services and jobs to the North as a means of economic development. However, in recent years, and notwithstanding the completion of the Growth Plan, the Provinces response to the issues facing Northern Ontario has been viewed as both ad hoc and reactionary the Growth Plan itself being perhaps the best example by virtue of the fact that in the two plus years since the publication of the Growth Plan, the perception is that relatively little has been accomplished in attaining its objectives. Ironically, Ontario has used the same terminology to define its relationship with the Federal Government at the recent Council of the Federation ad hoc, piecemeal while at the same time calling for comprehensive planning, multi-year funding commitments and more involvement and decision-making at the Provincial and municipal levels. The five large Northern Ontario municipalities share the Provinces view on the importance of these elements and urge that they form the basis for a new collaborative, consultative arrangement for dealing with the North. This is a strategic relationship, one where the municipalities can contribute their expertise, insight, resources and relationships to help the Province attain its goals. The reality is that all residents of Ontario benefit from development and economic growth in the North (and significantly so). What is needed is not so much a plan for Northern Ontario, but an overall economic development strategy for the Province that factors in the needs of the North. Northern Ontario has the potential to make a significant contribution to Ontarios economic recovery and the five municipalities welcome the opportunity to work with the Province in this regard. The most important strategic priorities to be addressed through a new arrangement are outlined below.

2. Infrastructure
The continued need to ensure the adequacy and capacity of infrastructure in Northern Ontario is viewed as the most pressing priority for Provincial investment and action in this region. At both the local and regional level, infrastructure is critical to the economic well being of Northern Ontario and the ability of the municipalities to compete for new investment. At the same time, infrastructure investment is elemental to the well being of their residents. The municipalities recognize and thank the Province for strategic infrastructure investments such as the Northern Highways Program. The challenge from a municipal perspective with respect to infrastructure lies in both the absence of a long-term funding commitment for infrastructure investment and the timing of regional infrastructure investments. Addressing this issue will require the Province to:

Move towards a long-term funding arrangement for municipal infrastructure that avoids timeconsuming competitive application processes and allows for a multi-year, recurring stream of infrastructure financing. This will allow municipalities to address major infrastructure needs on the basis of a known allocation of funding. Act immediately to secure funding for key regional infrastructure needs, including Ring of Fire transportation assets in Northern Ontario, a restructured Ontario Northland Transportation Commission, an expanded regional harbour in Sault Ste. Marie and necessary investments in support of the Advantage Northwest Mining Readiness Strategy. In order to do so, the Province should advance the timing for completion of the multi-modal transportation study outlined in the Growth Plan. Strategic infrastructure investments are a critical component to future industrial growth as outlined in the recently completed Advantage Northwest Mining Readiness Strategy and business case for a regional harbour in Sault Ste. Marie.

Reinstate Connecting Link funding for Provincial highways that transition through municipalities, with the end result being a fair sharing of costs for Provincial infrastructure. Recognize that the needs and circumstances in Northern Ontario differ from the South, with less of a need to address mass transit of passengers. At the same time, the Province needs to expand its view of Northern Ontario infrastructure beyond primarily highways to include other transportation modes (airports, short-line rail, short-sea shipping), housing stock (affordable housing, assisted living facilities, housing first programs as investments in harm reduction) and healthcare and educational infrastructure.

3. Energy
Electricity is arguably viewed as the lifeblood of economic activity and while the Province has taken a number of steps to provide a measure of affordability for electricity pricing introduction of the Global Adjustment, extension of the NIER program the reality is that industrial electricity rates in Ontario for both large and small users are significantly higher than both Quebec and Manitoba. In an environment of increasing competition for inbound investment, often on the international scale, the disincentive provided by Ontarios electricity pricing is pronounced and has already resulted in job losses for Northern Ontario in favour of these neighbouring jurisdictions.
Electrical pricing comparison (Ontario <5MW = 100) Ontario (<5MW) Ontario (>5MW) Ontario (NIER) Quebec Manitoba 0 20 40 60 80 100

The generation, transmission, distribution and pricing of electricity falls fully within the mandate of the Province and as such, the Province enjoys full discretion in resolving the challenges imposed by the current pricing scheme. At the same time, the Province can also implement changes that fully capitalize on electrical generation as an economic development engine for the North. In addressing the issue of energy, the Province should:

Review policies that are contributing towards increases in electrical prices and implement new strategies to ensure affordable energy pricing in Northern Ontario, including the recognition of differences between Northern and Southern Ontario and the avoidance of Province-wide policies. Establish the NIER program as a permanent Provincial program while at the same time reevaluating its eligibility requirements for the NIER program as well as the allocation of Global Adjustment Costs to expand the benefits of these programs to smaller industrial electricity users, which represent an important element of the Northern Ontario economy. Plan for regional electrical generation and transmission as an economic development and revenue-generating opportunity by investing in necessary infrastructure, adjusting legislation to permit investments in larger generation projects and establishing incentives for projects that benefit the Province as a whole. Develop a comprehensive strategy for generating facilities in Northern Ontario, specifically the Thunder Bay Generation Station and cogeneration facilities in Timmins and North Bay. The establishment of a formal long-term plan for these facilities will send a critical message to industry about energy supply in the region.

It is important to recognize that energy policy and its implications for economic development extend beyond electricity to include petroleum products and natural gas. This component of the energy sector is undergoing significant change due to market forces, which gives rise to both new opportunities and new challenges on an annual basis, pipelines provide over $22 million of taxation revenue to Northern Ontario municipalities, with additional tax revenues generated from commercial assessment associated with compressor stations and other facilities; revenues that may be at risk due to the conversion of gas pipelines to crude oil and the approaching end of life for various gas plants in the North. The Province should consider additional programs to encourage competitive pricing for other types of energy.

4. Workforce Development
If electrical energy is seen as the lifeblood of Northern Ontarios economy, skilled labour is its skeleton. The diversity of economic activity in Northern Ontario and the sheer scale and breadth of industry sectors in the region is only possible through the retention of a suitably trained and skilled workforce. The importance of skilled labour to the region cannot be overstated given that trades and other specialists are often imported from Southern Ontario, other Canadian provinces, the U.S. and internationally. Developing a skilled workforce in Northern Ontario has traditionally been a home-grown affair. While immigration provided a significant influx of labourers to the region prior to and immediately after the Second World War, the recent trend is for immigrants to remain within the larger centres in Canada, including Toronto. Demographic trends and increased demand for skilled labour indicate the need to supplement local workforce development efforts with an increased focus on attracting and retaining immigrants in the North and the Province can play a key role in both aspects by:
Recent immigrants (last five years) as a percentage of total population North Bay Sault Ste. Marie Greater Sudbury Thunder Bay Timmins Toronto Ontario (total) 0.0% 5.0% 10.0% 15.0%

Expanding the offering of skills development programming (including apprenticeships) through enhanced funding to post-secondary institutions and other training providers. Identifying and implementing best practices for skills development programs from other jurisdictions with significant demand for trades, including a continuation of increases in the ratio of apprentices to journeyperson that will bring Ontario in-line with other jurisdictions. Supporting efforts by the municipalities and other organizations to attract and retain immigrants, with the focus being on relocating immigrants that have settled in Toronto (as opposed to efforts focused on immigrants in their home countries). Reinstating the Apprenticeship Tax Training Credit for information technology workers at call centres, the cancellation of which is estimated to put as many as 2,000 jobs at risk in Northern Ontario. Reviewing the process for accrediting skilled immigrants to remove unnecessary obstacles. Enhancing funding for support programs to increase the retention of immigrants in Northern Ontario and work with municipalities and the Federal government to accomplish this goal.

Develop a comprehensive coordinated multi-ministry approach to supporting Aboriginal student education that includes additional supports.

5. Research and Innovation

The evolution of the five large municipalities away from a purely resource and transportation reliance towards a more diversified economic base has been accompanied by a significant increase in research and innovation capacity in the region. Through organizations such as the Thunder Bay Regional Research Institute, the Ontario Forest Research Institute in Sault Ste. Marie, SNOLAB and the Advanced Medical Research Institute of Canada in Greater Sudbury, Northern Ontario has developed a world-class capacity for research and innovation. At the same time, public and private sector organizations throughout the region are involved the commercialization of research activities and the development of new technologies and processes that contribute towards the level of economic activity and innovation in the region. While admittedly small compared to Southern Ontario, research and innovation represents a growing activity in the North with significant potential. In order to enhance and foster a growing culture of research and innovation, the Province should:

Support increased research and innovation activities by Provincially-funded and controlled organizations with a particular emphasis on healthcare and post-secondary educational institutions. Increase the number of Provincially funded graduate spaces at Northern Ontario universities. Expand incentives for private sector research, innovation and commercialization activities. Establish programs to address workforce requirements for specialist positions. Provide financial and other resources to the municipalities to support their efforts to further develop the research and innovation capacity of Northern Ontario. Support the formation of collaborative arrangements between post-secondary institutions in Northern Ontario and their counterparts in Southern Ontario, Canada and elsewhere to expand research capacity.

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6. Fair and Equitable Resource Revenue Sharing

As early as the 1930s, the Province has shared resource revenues with Northern communities, a recognition of the fact that municipalities shoulder a significant burden of the cost of resource-based industrial activity without a commensurate share of revenue in return. Until 1990, the concept of resource revenue sharing formed an identifiable element of Provincial grant programs for Ontario municipalities, (although the form and amount of funding did change) but with the introduction of Municipal Support Grants, the concept of resource revenue sharing has disappeared. Subsequent changes to Provincial funding programs for municipalities (Community Reinvestment Fund, OMPF) not only excluded a specific component for resource-based revenue sharing, but also reduced funding as a whole. For over 20 years, a formal arrangement for sharing resource revenues with Northern Ontario communities has not existed.
A history of resource-revenue sharing in Ontario 1930s Resource-revenue sharing grants based on percentage of resource industry profits Mining revenue-sharing grants calculated based on number of employees Unconditional Support Grants (1973-1989) include elements for Northern communities, low density and resource equalization Municipal Support Grants (1990) and subsequent programs exclude specific resource-revenue sharing components

1950s

1970s

1990s

Today

The issue of resource revenue sharing is of critical interest and importance to municipalities across the North. While the Province has typically indicated that the Northern component of OMPF funding as well as infrastructure financing available through the NOHFC addresses the issue of resource revenue sharing, the reality is that:

Specific funding for resource revenue sharing provided to Northern Ontario municipalities has been eliminated as part of the Provinces funding regime, with overall unconditional funding being reduced over two decades despite increased Provincial tax revenues generated by mining and corporate income taxes. Further changes to OMPF funding, including delays in the reconciliation of downloaded costs and planned reductions, will further reduce Provincial funding to northern municipalities. While the NOHFC does provide meaningful funding for community and economic development projects, it does not support capital costs for roads or higher operating costs resulting from heavy freight movements of forestry and mining commodities and the associated deterioration of the municipal road networks and other infrastructure assets. For example, over 50% of mineral ores mined in Ontario are transported over the road network in Greater Sudbury, placing a significant toll on the Citys infrastructure. Given that a large component of resource-based industrial assessment is either underground or located outside the municipal boundaries, these municipalities have no recourse to recover these costs from industry, while at the same time receiving no funding from the Province. The ability of municipalities to recover even a portion of their costs through taxation of resource-based industries is being further eroded by major appeals on industrial properties (e.g. forestry mills) that are resulting in significant decreases in assessed values and ultimately either (i) shifting more of the tax burden to other taxpayers, namely residential, in turn giving rise to affordability concerns; (ii) reducing the overall amount of funding to the municipalities. The issue of assessment appeals is becoming more problematic in that the precedents established by resource-related appeals are now being applied across the broader industrial and commercial sectors.

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Ensuring an appropriate sharing of resource revenues between the Province and the municipalities requires a new arrangement, one that can be implemented as part of the reform of OMPF funding. The arrangement needs to recognize the requirement for unconditional operating funding (not only capital) so as to compensate all Northern Ontario municipalities for the cost of maintaining and operating the infrastructure necessary to support resource-based industrial activities that cannot be recovered through taxation.

Concluding Comments
The Growth Plan represents a significant investment and commitment on the part of the Province to contribute positively to economic and community development in Northern Ontario. In addition to providing their perspective on immediate priorities, the view of the five largest municipalities in Northern Ontario is clear the time has come to move from planning to implementing. The consequences of the current situation on the Northern Ontario economy are already manifesting themselves and without meaningful change in Provincial policy and programming, economic disruptions will continue into the future. In order to advance the directions outlined in this document, the five largest municipalities would appreciate the opportunity to host a summit with the Province within the next three months. This meeting, which would involve both political representatives and personnel from relevant ministries, would establish the framework for further interaction and cooperation between the Province and five largest municipalities. The municipalities look forward to discussing these priorities and next steps at the upcoming Association of Municipalities of Ontario meeting.

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Introduction:
This report from the cities of North Bay, Sault Ste. Marie, Greater Sudbury, Thunder Bay and Timmins is intended to help facilitate an approach to planning for Northern Ontarios continued success in a manner that is informed, strategic, comprehensive and effective. As the largest communities in Northern Ontario, the five municipalities have the breadth of resources, expertise and relationships to make a meaningful contribution towards economic and community development in Northern Ontario, provided that senior levels of government, including the Province of Ontario, allows for their participation on a meaningful basis. The five municipalities have undertaken the preparation of this document in recognition of a need to advance the broader objectives and high-level priorities identified in the Growth Plan, particularly those that have the potential for the largest contribution to the North. These contributions can be in the form of supporting new economic activity such as the Ring of Fire or preventing significant adverse disruptions to the Northern economy resulting in job losses. While the Growth Plan is admittedly in its early stages, the need for decisive action and intervention by the Province is now if the North is to continue its significant contribution to the overall economic well-being of Ontario. This report is not intended to be a critique of the Growth Plan or the efforts of the Province and its ministries with respect to economic and community development in Northern Ontario. The Province has and continues to make a substantial contribution to the North and these are recognized and appreciated by the municipalities. That said, the Provinces efforts have at time been disjointed as opposed to coordinated, reactionary as opposed to planned and both ill-timed and ill-focused as opposed to responding to the actual needs of the North in a timely manner. The reality is that Northern Ontario is different than Southern Ontario, requiring a deep understanding of the region to allow for truly effective planning for the future. This report intended to provide that insight to the Province. In addition to this introductory section, this report is divided into three separate chapter:

Chapter I seeks to provide a brief overview of Northern Ontario as a whole and the five largest communities in particular so as to ensure an understanding of the region and the significance of the five major centres. Chapter II operationalizes the Growth Plan by suggesting precise courses of action that can be undertaken by the Province in its execution of the Growth Plan. By its nature, the Growth Plan is both broad ranging and high-level and further refinement of its priorities is required. Linking the Provinces implementation of the Growth Plan to the needs and priorities of the five largest municipalities is intended to maximize the benefit from the Provinces involvement. Chapter III suggests next steps towards the establishment of an effective and collaborative relationship between the Province and the five largest municipalities that will contribute towards the economic success of Northern Ontario.

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Northern Ontario in Perspective:

With only 8% of Ontarios population, there is a risk of understating or misunderstanding Northern Ontarios contribution to the Province of Ontario. The stereotypical image of the North involves sparse population, large distances between communities and limited economic activity beyond mining and forestry. The reality, however, is vastly different. Overall, Northern Ontario has experienced a negative trend in its population over the last 15 years. Since 1996, the regions total population has decreased from 826,000 to 775,000, an overall decline of 6%. In comparison, the population of the remainder of Ontario increased by approximately 7% over the same period. The extent of the decline in Northern Ontarios population has not been even over the region but rather has been most pronounced in areas that were traditionally major centres for forestry.
Population levels Northern and Southern Ontario (in millions) 13.0 12.5 12.0 11.5 11.0 10.5 10.0 9.5 9.0 1996 2001 2006 2011 Remainder of Ontario Northern Ontario 0.90 0.85 0.80 0.75 0.70 0.65 0.60 0.55 0.50 Population change by district (1996 to 2011)

>15% decrease 10% to 15% decrease 5% to 10% decrease < 5% decrease Population increase

While a number of factors have influenced population levels in Northern Ontario, the most significant has arguably been the near complete collapse of the forestry sector that commenced in the late 1990s. Across Northern Ontario, a number of communities, particularly smaller municipalities dependent solely on a single mill for the majority of employment, faced the prospect of significant job losses and the resultant loss of population.
Community Terrace Bay Smooth Rock Falls Dorion Ear Falls Kapuskasing Marathon Primary Job Losses 400 250 70 110 510 230 Total Available Labour Force 815 670 250 715 4,085 2,360 Labour Force Impact 49.1% 37.3% 28.0% 15.4% 12.5% 9.7% Population Change 1996 to 2011 -36.7% -30.5% -28.4% -12.3% -18.3% -30.0%

The decline in the forestry sector over the last 15 years has only served to heighten the pace at which Northern Ontario was already moving away from an economy heavily dependent on extraction and processing of natural resources.

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Historically, primary resource activities such as mining and forestry represented a major percentage of employment in Northern Ontario for example, the two largest mining companies in Greater Sudbury employed an estimated 25% of the total labour force in the community during the mid-1970s. Now, primary resource activities (extraction and processing) account for only 7%, or one in 14 jobs in the region. While the reduction in resource-based employment reflects the impacts of technology on mining and forestry, as well as the almost complete collapse of the forestry sector in the late 1990s, it does not necessarily reflect an overall decline in the resource sector. Rather, the decrease in employment related to direct extraction and processing activities has been offset by significant increases in the mining supply and services sector, which involves a focus both on higher value-added activities as well as domestic and foreign markets.

Employment by industry sector1

Other Education, healthcare and social services Business and financial services Retail and wholesale trade Manufacturing Remainder of Ontario Resources and agriculture Toronto Northern Ontario

Construction

0%

20%

40%

The growth in value-added activities is best demonstrated by the significant portion of Northern Ontarios labour force employed in manufacturing, wholesale trade and business services, which collectively account for 27% of all employment in the region. Despite historical population declines and job losses, Northern Ontarios economic performance and prospects has improved significantly in recent years: Reported taxable income for Northern Ontario residents has increased from $16.0 billion in 2002 to $20.9 billion in 2009, an increase of 30%. This is the same level of increase as the Province notwithstanding the differences in population trends over this period. Over the same period, personal income taxes paid by Northern Ontario residents to the Province have increased from $818 million to $1.2 billion. Despite decreasing population levels compared to population growth in the remainder of Ontario, the percentage of Provincial personal income taxes derived from Northern Ontario residents actually grew from 2002 to 2009 (4.6% in 2002 vs. 4.9% in 2009). The Ring of Fire development will inject billions of dollars into the Northern Ontario economy in connection with mine development, transportation infrastructure and a new ferrochrome processing facility.

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In addition to the Ring of Fire project, other major investments are being made or contemplated across Northern Ontario, including: o o At least eight mining projects as identified in the Advantage Northwest Mining Readiness Strategy; The potential expansion of Essar Algoma Steels Sault Ste. Marie operations from the current level of 2.7 million tonnes per year to 4.0 million tonnes annually, expected to create 1,800 direct and indirect employment positions; The expansion of Goldcorps operations in Timmins; and Upwards of $4 billion in mining and mineral sector investments in Greater Sudbury.

o o

Concurrent with significant levels of private sector investment, Northern Ontario also benefited from major public sector investments, including the establishment of Canadas newest law school and architectural school and new research and innovation facilities including the Thunder Bay Regional Research Institute, the Advanced Medical Research Institute of Canada and the Vale Living with Lakes Centre.

Why Focus on the Five Largest Centres?

As part of the Growth Plan, the five largest Northern Ontario communities have been designated as strategic core areas, which recognizes that these cities are economic hubs that benefit all of Northern OntarioThey possess the critical mass of skilled people, as well as regional assets such as colleges and universities, innovation centres, media centres, commerce and cultural facilities that anchor many of the Norths existing and emerging priority economic sectors. They are optimal locations for infrastructure investments that help to expand on this potential, and that serve citizens across the North. The significance of the five largest communities in Northern Ontario is borne out by their comparison to the remainder of the region. If anything, the importance of these five cities to Northern Ontario is actually more pronounced than Torontos relationship with the Province: The five largest Northern cities account for 57% of Northern Ontarios total population, which is a significantly higher concentration of residents in proportion to Torontos population in comparison to Ontario (20%) The five largest Northern cities account for 64% of all municipal expenditures in Northern Ontario, which is more than double Torontos relation to the Province as a whole. Compared to the other communities in Northern Ontario, the five cities are proportionately larger, with larger resources and scope of activities. The five largest Northern cities account for 59% of all reported municipal infrastructure in Northern Ontario, with Toronto accounting for only 17% of total reported municipal infrastructure in Ontario. This is consistent with the Growth Plans view of these cities as hubs for regional infrastructure. The five largest Northern cities account for 63% of taxable income in Northern Ontario and 65% of Provincial taxes paid (Toronto 21% and 24% of Ontario, respectively). This not only reflects the concentration of population in the largest centres, but also the presence of more employment opportunities and higher paying positions by virtue of their roles as economic hubs. Over the last 15 years, the total population decline experienced by the five largest cities was 4.4%, which is almost half the population decline experienced by the remainder of Northern Ontario (8.5%).

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The significance of the five largest centres 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Population Municipal expenditures Municipal infrastructure Personal income (taxable) Provincial income taxes (personal) 20% 17% 57% 64% 59% 63% 65% Five largest centres as a percentage of Northern Ontario City of Toronto as a percentage of Ontario

29% 21% 24%

In its efforts to implement the Growth Plan, the five largest centres encourage the Province to adhere to this recognition of their importance as regional hubs. The expectation is that the degree of collaboration and consultation afforded to them, as well as the allocation of the Provinces resources, investments and efforts, will be commensurate with their significance to Northern Ontario as a whole. From the perspective of the five largest municipalities, the implications for the actual implementation of the Growth Plan are self-evident maximizing the focus of Provincial efforts on the five largest municipalities in Northern Ontario will yield the greatest outcome for the region while at the same time ensuring benefits to smaller centres and other stakeholders in the North.

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Priorities:
By its nature, the Growth Plan is both broad ranging and high level. While the Growth Plan addresses a number of elements critical to the success of Northern Ontario (and by extension the Province as a whole), the absence of clearly defined measurables and timeframes is a cause for concern. The reality is that the time for action is now if the true potential of Northern Ontario is to be realized:

The suspension of the environmental assessment of the Cliffs Natural Resources Ring of Fire initiative demonstrates the pressing need to address a range of issues, including strategic transportation infrastructure, electricity pricing and Aboriginal relations. The Ring of Fire project has the potential to be truly transformational, representing a mineral deposit equal to the Sudbury Nickel Basin, which created and sustains not only the largest community in Northern Ontario but also one of the largest integrated mineral process complexes in the world and a centre of excellence for the mining supply and services sector). In an environment of a declining manufacturing sector and increased competition for international investment, projects such as the Ring of Fire can materially impact the economy of the Province as a whole, a fact recognized in the Advantage Ontario report recently issued by the Jobs and Prosperity Council. The recent relocation of the Xstrata copper refinery from Timmins to Quebec can be directly attributed to the differential in energy pricing between Ontario and Quebec, which lies fully within the Provinces mandate. While the loss of 670 high paying jobs is consistent with the closure of car plants in Southern Ontario in absolute terms, it is more significant when viewed in terms of the percentage of labour force affected. The Xstrata closure represented 3% of Timmins total labour force and job losses on a similar scale in Southern Ontario would be measured in the tens of thousands a repetition of the Timmins experience in Toronto would result in the equivalent loss of 40,000 jobs. Additional major job losses could potentially be avoided through more effective Provincial intervention and planning for the North. The potential losses of employment at the Ontario Lottery and Gaming Corporation (up to 500 jobs) and the Ontario Northland Transportation Commission (up to 950 jobs) represent significant areas of concern for the five largest centres.

Clearly, the case for change exists. The time has come to shift from planning to implementation and the following pages contain recommendations from the five largest Northern Ontario centres on how best to focus the efforts of the Province for the benefit of not only Northern Ontario, but the Province as a whole. In order to prioritize the Provinces efforts and focus, six main priorities have been identified infrastructure, energy, workforce development, innovation and research and revenue sharing with secondary priorities also outlined in this section of the report.

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Priority No. 1 Establishing a New Relationship Between the Province and the Five Largest Northern Ontario Municipalities
Prior to advancing prioirites focused on economic and community development in Northern Ontario, the five municipalities are of the view that their relationship with the Province needs to change. Despite the efforts of the Province and various ministries in the past, the perspective of the five largest communities is that the Provinces efforts and actions for Northern Ontario have been disjointed, unilateral and not as effective as they could have been due in large part to the absence of long-term comprehensive planning and the lack of comprehensive consultation with the five largest municipalities. If the Province is to be truly successful in its efforts to support development in Northern Ontario, a new relationship with the five largest centres is required, one that is built on direct engagement, consultation and strategic thinking. The inclusion of the five largest centres at the earliest stages of planning, strategy development and resource allocation decisions will provide the Province with the benefit of their expertise, insight, resources and relationships. What the municipalities are seeking is consistent with the Provinces own objectives for its relationship with the Federal govermment a move away from so-called ad hoc, piecemeal planning to comprehensive planning, multi-year funding commitments and more involvement of all stakeholders in decisionmaking. At the same time as the Province opens its planning and decision-making to input from the five largest centres, two other important changes to its relationship with the municipalities should also change: Currently, there is a perceived absence of coordination and leadership across Provincial ministries, resulting in policy vacuums, competiting priorities and the lack of a focused approach to resolving issues. What is required is an effective central leadership position within the Province that has the authority and mandate to coordinate the efforts of various Provincial ministries and other organizations. At the same time, the planning environment for Northern Ontario should not be entirely segregated from the remainder of the Province. While the North definitely has specific circumstances, it is an important part of the Provincial economy and has perhaps the best potential for growth as a result of projects such as the Ring of Fire and Essar expansion. The development of separate plans and strategies for Northern Ontario can (and has) resulted in a disconnect with broader Provincial policy, where such policy actually exists. The reality is that Northern Ontario is a major and growing component of the Provincial economy and as such, should be factored into Province-wide policy decisions. Where such policy does not exist, for example, a Provincial mining strategy, the Province should advance its completion.

Once this new relationship is defined and estabished, the Province and five largest municipalities can proceed in addressing the following key priorities for Northern Ontario.

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Priority No. 2 Infrastructure

Over the past decade, infrastructure has emerged as arguably the most pressing issue facing municipalities not only in Northern Ontario, but across the Province and Canada as a whole. As an increasing percentage of their infrastructure reaches the end of its useful life, municipalities are faced with rising infrastructure deficits as need outweighs available funds. The financial pressures caused by infrastructure are further compounded by the need for new infrastructure requirements. Notwithstanding the nominal population growth in the five largest Northern Ontario municipalities over the last 15 years, changes to demographic patterns (i.e. smaller households, more vehicles) and infrastructure requirements driven by regulatory changes and economic development are increasing the demand for new infrastructure investments. The reality is that infrastructure requirements in Northern Ontario are two-fold:

Local infrastructure needs that will meet the requirements of municipal residents and businesses. Overall, the five largest municipalities reported a total historical investment in infrastructure of $6 billion at the end of 2011, which likely equates to a replacement value in the order of $20 billion. The ability of the municipalities to sustain this level of infrastructure, which is critical for economic development and the health and well being of their residents (and those of the surrounding region) is increasingly under strain due to industrial property assessment losses, inflation, regulatory changes, wage settlements from interest arbitration and reductions in senior government transfers.

Reported municipal infrastructure (historical cost)

Thunder Bay $1.963 billion

North Bay $752 million Sault Ste. Marie $632 million

Sudbury $2.439 billion

Timmins $354 million

The consequence of this combination of factors is increasing infrastructure deficits in Greater Sudbury alone, the estimated infrastructure deficit for roads (to the exclusion of all other municipal infrastructure) is estimated to be over $700 million. While programs such as Provincial gas tax and the Northern Ontario Heritage Fund Corporation (NOHFC) provide some contribution for infrastructure, the funding is often restricted for specific purposes (i.e. transit) or involves a time consuming competition for funds, both of which challenge long-term planning for infrastructure. The recently announced Municipal Infrastructure Investment Initiative, while focused on infrastructure reinvestment, provides no direct benefit to four of the five largest municipalities that are excluded from the program due to their population and despite their infrastructure deficits.

Regional infrastructure requirements that are necessary to support major economic development initiatives such as the Ring of Fire and other mine developments (transportation, energy transmission), the potential Essar expansion (regional harbour) and the revival of the forestry sector (transportation).

The importance of infrastructure investments is recognized in not only the Growth Plan, but also the Advantage Ontario report, both of which call for an increased focus on infrastructure investments.

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While the Province has introduced a number of strategic infrastructure investments, such as the Northern Highways Program, the reality is that there is a lack of long-term, predictable funding for infrastructure projects at the municipal level which precludes a sustainable approach to planning for infrastructure needs. Addressing the infrastructure requires the Province to:

Move towards a long-term funding arrangement for municipal infrastructure that avoids timeconsuming competitive application processes and allows for a multi-year, recurring stream of infrastructure financing. Programs such as the Build Canada Fund and NOHFC, while appreciated by the municipalities, require a significant investment in time, effort and resources while at the same time provide funding only on project specific basis. The introduction of a new, long-term funding program with guaranteed minimum funding amounts would allow municipalities to undertake longer-term financial planning that ensures a sustainable amount of infrastructure reinvestment on an ongoing basis. Act immediately to secure funding for key regional infrastructure needs, including Ring of Fire transportation assets in Northern Ontario, a restructured Ontario Northland Transportation Commission, an expanded regional harbour in Sault Ste. Marie, the completion of four-laning Highway 69/400 and necessary investments in support of the Advantage Northwest Mining Readiness Strategy. In order to do so, the Province should advance the timing for completion of the multi-modal transportation study outlined in the Growth Plan. Strategic infrastructure investments are a critical component to future industrial growth as outlined in the recently completed Advantage Northwest Mining Readiness Strategy and business case for a regional harbour in Sault Ste. Marie. Reinstate Connecting Link funding for Provincial highways that transition through municipalities, with the end result being a fair sharing of costs for Provincial infrastructure. The elimination of Connecting Link funding effectively represents the unilateral downloading of costs from the Province to the municipalities and places the responsibility for maintaining Provincial infrastructure with local governments. Introduce some form of funding for bridge rehabilitation and reconstruction, the cost of which is often prohibitive and frequently relates to bridges that were previously transferred from the Province to municipalities. Work towards greater coordination between Federal and Provincial funding programs so as to eliminate duplication and streamline reporting and administrative processes. Recognize that the needs and circumstances in Northern Ontario differ from the South, with less of a need to address mass transit of passengers. At the same time, the Province needs to expand its view of Northern Ontario infrastructure beyond primarily highways to include other transportation modes (airports, short-line rail, short-sea shipping), housing stock (affordable housing, assisted living facilities, housing first programs as investments in harm reduction) and healthcare and educational infrastructure. Address the declining quality of winter roads maintenance on Provincial highways. Since the implementation of area maintenance contracts, maintenance standards on Northern highways during winter months has deteriorated significantly, increasing the risk of injury to Northern residents and the disruption of transportation linkages as a result of road closures. The Province should consider either (i) reassuming responsibility for winter roads maintenance activities; or (ii) reevaluating the sufficiency of existing winter roads maintenance standards and ensuring contractor compliance.

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Priority No. 3 Energy

For a number of years, Northern Ontario municipalities, industry and other stakeholders have identified the issue of electricity pricing as a competitive disadvantage for Northern Ontario, with the real potential for job losses through relocations to lower cost jurisdictions and foregone investment as industry locates to areas with lower costs. The issue of energy pricing continues to be a major concern for the large-scale industrial developments proposed or underway for Northern Ontario and requires the immediate attention of the Province. While programs such as the Global Adjustment and NIER have contributed towards a lowering of energy costs, these programs are limited in their effectivess as a result of (i) the temporary nature of the program (NIER); (ii) thresholds and caps that preclude the full application of the lower rate across all electricity requirements; and (iii) the continued differential between electricity prices in Ontario and other Provinces, most notably Quebec and Manitoba.

Electrical pricing comparison (Ontario <5MW = 100)

Ontario (<5MW)

Ontario (>5MW)

Ontario (NIER)

Quebec

Manitoba

20

40

60

80

100

The generation, transmission, distribution and pricing of electricity falls fully within the mandate of the Province and as such, the Province enjoys full discretion in resolving the challenges imposed by the current pricing scheme. At the same time, the Province can also implement changes that fully capitalize on electrical generation as an economic development engine for the North. In addressing the issue of energy, the Province should:

Review policies that are contributing towards increases in electrical prices and implement new strategies to ensure affordable energy pricing in Northern Ontario, including the recognition of differences between Northern and Southern Ontario, the avoidance of Province-wide policies and regulatory changes that will allow Northern Ontario LDCs to identify potential opportunities for efficiencies and cost reductions without the requirement for consolidation. Establish the NIER program as a permanent Provincial program while at the same time reevaluating its eligibility requirements for the NIER program by both lowering the threshold for participation (currently 5 megawatts) and expanding the upper limit of the program (currently 2 terrawatts). Reevaluating the allocation of Global Adjustment Costs to provide a fairer distribution of costs to smaller users. Plan for regional electrical generation and transmission as an economic development and revenue-generating opportunity by investing in necessary infrastructure, adjusting legislation to permit investments in larger generation projects and establishing incentives for projects that benefit the Province as a whole. The true generating potential of Northern Ontario is constrained by the lack of transmission capacity, which precludes municipalities from developing projects that provide both an economic and financial contribution to their

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communities while at the same time contributing towards the Provinces goal of energy supply stability and increased generating of power from renewable sources.

Develop a comprehensive strategy for generating facilities in Northern Ontario, specifically the Thunder Bay Generation Station and cogeneration facilities in Timmins and North Bay. The establishment of a formal long-term plan for these facilities will send a critical message to industry about energy supply in the region by ensuring a long-term source of energy supply. In addition, the ongoing operation of these plants will provide an economic and financial contribution to the communities involved.

It is important to recognize that energy policy and its implications for economic development extend beyond electricity to include petroleum products and natural gas. This component of the energy sector is undergoing significant change due to market forces, which gives rise to both new opportunities and new challenges on an annual basis, pipelines provide over $22 million of taxation revenue to Northern Ontario municipalities, with additional tax revenues generated from commercial assessment associated with compressor stations and other facilities; revenues that may be at risk due to the conversion of gas pipelines to crude oil and the approaching end of life for various gas plants in the North. The Province should consider additional programs to encourage competitive pricing for other types of energy.

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Priority No. 4 Workforce Development

As the economy of Northern Ontario has grown and diversified, the nature of its workforce requirements has changed. A large part of post-World War II immigration to the region was driven by the need for relatively unskilled labour in the mining and forestry sectors. However, the increased use of technology, the expansion of the resource sector beyond primary extraction and processing into value-added areas (including supply and services) and the development of a healthcare, education and other social services into the largest employment sector in Northern Ontario have combined to increase the skill set and training requirements of todays workforce. The ability of the North to support continued economic development, both in the form of industrial activities, services and innovation, requires a continuing increase in its workforce. In the absence of labour force availability, projects such as the Ring of Fire development, Vales Clean AER project and medical research facilities such as the Thunder Bay Regional Research Institute and Advanced Medical Research Institute of Canada will be challenged. Given the potential for significant developments in the mining and manufacturing sector, as well as the recent resurgence of the Northern Ontario forestry sector, securing skilled technical trades is a particular priority for Northern Ontario. While apprenticeships represent the opportunity to develop a homegrown skilled labour force, the potential to do so continues to be challenged by the fact that Ontario has among the highest apprenticeship ratios in Canada. While the Ontario College of Trades is currently reviewing apprenticeship ratios in Ontario (and has reduced the ratios in certain instances), the concern over apprenticeship ratios and the impact on workforce availability remain. At the same time that apprenticeship ratios and other regulatory issues pose challenges to workforce development in Northern Ontario, the region is also disadvantaged by its inability to attract and retain immigrants in sufficient numbers. In comparison to remainder of the Province, Northern Ontario is marked underrepresented in terms of new Canadians. On average, only 0.4% of the total population of the five largest Northern Ontario municipalities is comprised of recent immigrants (i.e. those arriving in Canada in the last five years), compared to 11% in Toronto and 5% in the remainder of Ontario. In the absence of an enhancement of Northern Ontario as a destination for new Canadians, the ability to meet the requirement for skilled workers in Northern Ontario will be challenged.
Electrical apprenticeship ratios in Canada (journeypersons to apprentices)

1:1 1:2 1:1 1:2 1:1 1:1 1:1 1:1 3:1 2:1 1:1 1:1

Recent immigrants (last five years) as a percentage of total population

North Bay Sault Ste. Marie Greater Sudbury Thunder Bay Timmins Toronto Ontario (total) 0.0% 5.0% 10.0% 15.0%

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The availability of a suitably skilled and trained workforce in Northern Ontario is a priority not only for the five largest cities but for the Province as a whole skilled labour supports economic development initiatives such as the Ring of Fire, which will contribute significantly to the Provinces economic performance. Accordingly, workforce development priorities for the Province should include:

Expanding the offering of skills development programming (including apprenticeships) through enhanced funding to post-secondary institutions and other training providers. Identifying and implementing best practices for skills development programs from other jurisdictions with significant demand for trades, including a continuation of increases in the ratio of apprentices to journeyperson that will bring Ontario in-line with other jurisdictions. While the responsibility for establishing apprenticeship ratios rests with the College of Trade, the Province should ensure that the process proceeds on a timely basis and attains results that are in the best interest of the Provincial economy. Supporting efforts by the municipalities and other organizations to attract and retain immigrants, with the focus being on relocating immigrants that have settled in Toronto (as opposed to efforts focused on immigrants in their home countries). Reinstating the Apprenticeship Tax Training Credit for information technology workers at call centres, the cancellation of which is estimated to put as many as 2,000 jobs at risk in Northern Ontario. Reviewing the process for accrediting skilled immigrants to remove unnecessary obstacles. Enhancing funding for support programs to increase the retention of immigrants in Northern Ontario, including Municipal Immigration Information Online (MIIO) portals. Develop a comprehensive coordinated multi-ministry approach to supporting Aboriginal student education that includes additional supports.

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Priority No. 5 Research and Innovation

Innovate or die is a mantra often used in the private sector to describe the importance of ongoing innovation to the success of a business enterprise. The importance of innovation also applies to regions such as Northern Ontario, which has witnessed a move away from a purely resource and transportation reliance towards a more diversified economic base. Northern Ontario represents a centre of excellence for research and innovation across a number of sectors, including mining, forestry, environmental sciences and medical research. Through organizations such as the Thunder Bay Regional Research Institute, the Ontario Forest Research Institute in Sault Ste. Marie, SNOLAB and the Advanced Medical Research Institute of Canada in Greater Sudbury, Northern Ontario has developed a world-class capacity for research and innovation. At the same time, public and private sector organizations throughout the region are involved the commercialization of research activities and the development of new technologies and processes that contribute towards the level of economic activity and innovation in the region. While admittedly small compared to Southern Ontario, research and innovation represents a growing activity in the North with significant potential. In order to enhance and foster a growing culture of research and innovation, the Province should:

Support increased research and innovation activities by Provincially-funded and controlled organizations with a particular emphasis on healthcare and post-secondary educational institutions. Increase the number of Provincially funded graduate spaces at Northern Ontario universities. Expand incentives for private sector research, innovation and commercialization activities. Establish programs to address workforce requirements for specialist positions necessary to support research and development activities. Provide financial and other resources to the municipalities to support their efforts to further develop the research and innovation capacity of Northern Ontario. Support the formation of collaborative arrangements between post-secondary institutions in Northern Ontario and their counterparts in Southern Ontario, Canada and elsewhere to expand research capacity.

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Priority No. 6 Revenue Sharing

Notwithstanding the economic benefits that are derived from resource-based activities in Northern Ontario, the significant presence of mining, forestry and other resource industry results in a disconnect between the cost of maintaining the necessary infrastructure to support these activities and the associated funding. Presently, municipalities across Northern Ontario bear the cost of resource-based industry in the form of the need to maintain infrastructure at a capacity sufficient to meet the needs of large industrial users and the associated wear and tear on municipal road networks and other assets. To a large extent, communities that are not host to mines or mills also incur these costs as a result of the transportation of goods through their communities and the infrastructure requirements associated with supply and services provided to the resource industry. At the same time, municipalities are often unable to recover a sufficient level of funding directly from industry to recover these costs as a result of: The inability to tax underground workings of mines; The location of resource-based industries in areas without municipal representation; and The trend towards significant assessment losses on industrial properties as a result of appeals and associated decisions by the Municipal Property Assessment Corporation (MPAC).
A history of resource-revenue sharing in Ontario 1930s Resource-revenue sharing grants based on percentage of resource industry profits Mining revenue-sharing grants calculated based on number of employees Unconditional Support Grants (1973-1989) include elements for Northern communities, low density and resource equalization Municipal Support Grants (1990) and subsequent programs exclude specific resource-revenue sharing components

The issues facing Northern communities with respect to obtaining a fair share of revenues generated by resource industries is not new. As early as the 1930s, the Province has shared resource revenues with Northern communities, a recognition of the fact that municipalities shoulder a significant burden of the cost of resource-based industrial activity without a commensurate share of revenue in return. Until 1990, the concept of resource revenue sharing formed an identifiable element of Provincial grant programs for Ontario municipalities, (although the form and amount of funding did change) but with the introduction of Municipal Support Grants, the concept of resource revenue sharing has disappeared. Subsequent changes to Provincial funding programs for municipalities (Community Reinvestment Fund, OMPF) not only excluded a specific component for resource-based revenue sharing, but also reduced funding as a whole. For over 20 years, a formal arrangement for sharing resource revenues with Northern Ontario communities has not existed with the exception of the Northern component of OMPF, although reference to this grant indicates it is for higher costs resulting from Northern Ontario conditions and not necessarily resource sharing.

1950s

1970s

1990s

Today

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The issue of resource revenue sharing is of critical interest and importance to municipalities across the North. While the Province has typically indicated that the Northern component of OMPF funding as well as infrastructure financing available through the NOHFC addresses the issue of resource revenue sharing, the reality is that:

Specific funding for resource revenue sharing provided to Northern Ontario municipalities has been eliminated as part of the Provinces funding regime, with overall unconditional funding being reduced over two decades despite increased Provincial tax revenues generated by mining and corporate income taxes. Further changes to OMPF funding, including delays in the reconciliation of downloaded costs and planned reductions, will further reduce Provincial funding to northern municipalities. While the NOHFC does provide meaningful funding for community and economic development projects, it does not support capital costs for roads or higher operating costs resulting from heavy freight movements of forestry and mining commodities and the associated deterioration of the municipal road networks and other infrastructure assets. Given that a large component of resource-based industrial assessment is either underground or located outside the municipal boundaries, these municipalities have no recourse to recover these costs from industry, while at the same time receiving no funding from the Province. The ability of municipalities to recover even a portion of their costs through taxation of resource-based industries is being further eroded by major appeals on industrial properties (e.g. forestry mills) that are resulting in significant decreases in assessed values and ultimately either (i) shifting more of the tax burden to other taxpayers, namely residential, in turn giving rise to affordability concerns; (ii) reducing the overall amount of funding to the municipalities. The issue of assessment appeals is becoming more problematic in that the precedents established by resource-related appeals are now being applied across the broader industrial and commercial sectors.

Ensuring an appropriate sharing of resource revenues between the Province and the municipalities requires a new arrangement, one that can be implemented as part of the reform of OMPF funding. The arrangement needs to recognize the requirement for unconditional operating funding (not only capital) so as to compensate all Northern Ontario municipalities for the cost of maintaining and operating the infrastructure necessary to support resource-based industrial activities that cannot be recovered through taxation. Additionally, municipalities in Northern Ontario see a strong need to address concerns over assessment services provided by MPAC, including the need to: Address the significant number of unexplained and/or unsupported changes in property values as well as MPACs perceived lack of regard for the consequences of their decisions; Adopt more refined analytical techniques and expert resources for the valuation of special use industrial properties such as pulp and paper mills

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Other Priorities
In addition to the main priorities identified in this chapter, the five large Northern municipalities have identified a number of other action items that, while not considered to be immediate priorities, are important to the continued growth and development of Northern Ontario and which are listed below.

Additional support for the forestry sector

Increase the requirement for sivilculture activities on crown land to ensure sufficient fibre supply in the future Introduce policy and legislation that supports industrial innovation and increased use of forestry products, including revisions to the Ontario building code to facilitate increased use of wood in taller structures Provide funding for programs supporting the diversification of forestry and the value-added forestry sector. The need to increase the value-added component of Northern Ontarios resource-sectors is a major priority identified in both the Growth Plan and the Advantage Ontario report.

Additional support for the mining sector

Provide funding for programs supporting increased value-added activities in the mining sector. Increase financial incentives for mining exploration to a level consistent with other jurisdictions in order to address the low rate of incentive of mining exploration in Ontario.
Flow-through mining exploration tax credit rates for selected jurisdictions Manitoba

Saskatchewan

British Columbia

Ontario 0% 5% 10% 15% 20% 25% 30% 35%

Healthcare
Expand long-term care capacity by situating long-term care beds closer to community need (rather than on a district basis) Continue to fund recruitment and retention programs for healthcare professionals Increase the Provinces share of funding for major capital projects Enhance funding for assisted living facilities so as to address housing and care needs across the continuum of care

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Education
Increase incentives for youth and new Canadians to study in the North through expanded scholarship programs and tax credits Modify existing rules to allow students to participate in experimental learning while studying full-time

Housing
Increase funding for the Northern component of the Canada-Ontario Affordable Housing Program Address financial pressures arising from downloaded social housing programs, changes to housing agreements and reduced flow-through Federal funding for social housing Establish financial support for local Housing Community Improvement Plans

Other
Revise the focus of the Ministry of Northern Development and Mines trade and investment marketing activities to reduce the threshold targets for jobs, thereby allowing for focus on smaller employers and opportunities Provide financial incentives for downtown revitalization projects

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Next Steps:
The five municipalities appreciate the opportunity to provide their perspective and input to the Province on how best to support the continued development of Northern Ontario. This document and the associated presentation at the Association of Municipalities of Ontario is only the first step in establishing the new relationship that has been identified as the most pressing need by the five major cities. To be truly successful, the municipalities request that within 90 days of our presentation, the Province and municipalities host a joint summit involving both political representatives and staff (Ministry and municipal personnel) to establish the framework for future actions. Subsequent to this initial submit, the municipalities propose that ongoing interaction between elected officials occur at least twice a year, while staff resources from the municipalities and various ministries meet quarterly. The municipalities are strongly of the view that developing a new relationship between the Province and municipalities necessitates frequent constructive contact at senior levels. As stated various times in this document, the time has come to move from planning to implementation. Northern Ontario has the potential to expand significantly through projects such as the Ring of Fire but these opportunities will ultimately succeed or fail based on the actions of the Province. The North has already witnessed the consequences of inaction and is committed to supporting its economic growth and development, with the outcome being a major contribution to the economic well-being of the Province as a whole. Northern Ontario has the potential increase its already significant contribution to the Province and the five municipalities welcome the opportunity to work with the Province and its ministries on accomplishing this goal.

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