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Maley vs. The Greenway

My friend – and I do mean friend – John Lindsay, has written a letter to city council and to the press comparing the Elgin Greenway proposal to the Maley Drive Extension project. John points out that “both are strongly endorsed by staff and have been split into separate phases.” Furthermore, he says, “Both are part of “master plans” which seem to be “set in stone.” Basically he suggests that Council is wasting a lot of public money on frivolous projects instead of taking care of basic maintenance of parks and roads and making other pressing improvements. A lot of people will agree with John.

Many will also agree with his criticism that the Greenway could remove 270 parking places downtown that are needed for the Arena that Council has decided to move.

I think John’s opposition to the Greenway is misguided, and that the comparison with the Maley Drive project is misleading at best.

The Maley Drive project came out of quite a different group of staff and a quite different vision of the city from the Greenway suggestion.

Maley was proposed in the early 60’s on the view that Sudbury would be experiencing continued growth and that the main direction of growth was to the northeast. That proved false, but the City’s road engineers kept it at the top of the transportation plan for 40 years. The project will eventually cost $160 million and In my view was a disastrous mistake for the city.

Elgin Greenway Phase 1The Greenway proposal was a suggestion made as part of a downtown Master Planning project that had a 5-year horizon and was based on much more modest population projections. It took into account more recent experience from around North America that suggests that strengthening town cores is both economically and socially beneficial.

The Greenway project was partly achieved already through the Architecture School and the farmers’ market. It incorporated the necessary and already scheduled replacement of the Nelson Street Bridge, and improved access to Ramsey via that bridge.

It responded to the often expressed complaint that Elgin Street is ugly and repulsive for visitors to the city. It included, with variations, roadwork along Elgin that was already in the transportation master plan. The new parts of the plan were to be pretty cheap – some links – some grass, some lighting, some benches and plantings, places for artwork. The Greenway proposal basically added a vision to glue together a lot of work that was going to be done anyway.

All these pieces were bundled to make a project that would satisfy Council’s desire for a big vision that could attract provincial and federal money. I think the engineers and planners may have gotten a bit enthusiastic about some of the details that were included, but the truth is that a lot – probably most – of the money in the Greenway proposal was going to be spent anyway.

The Greenway project is not really very much like the Maley Drive Extension. It is cheap and comes out of a 21st century vision of the City. Maley Drive was very expensive and comes out of a mid-20th century vision that has already gone south.

So, John, I am with you in your continuing disappointment about Maley Drive, but I actually like the Greenway project.

Who Will Pay for a New Arena?

Council has made up its mind to build a new arena. The price tag is about $100 million dollars, or about $625 per person. With an average household size of 2.4 persons, (compared to 4 persons per household in 1971) the average household will pay $1500 over the next 20 years. At the current interest rate that will mean an average annual tax payment of $96.

“Average” can be tricky, though: the average moose has only one antler and the average motor vehicle in Canada has about 4.55 wheels. Your family’s share depends on how much your home is worth.

On average, the widow living alone on a pension will pay the same as the family with two working parents and two working teenagers in the next house. A family with a million-dollar house on the lake will pay more than a family in a shack. On average, apartment dwellers will pay a larger share of their income for the new arena than homeowners because the the tax rate for multiple dwellings is higher and incomes are on average lower.

50% of the our populations lives in the oId city – the core communities. More than $60 million is likely to come from these people because property values are on average higher in the core communities. Less than 40% will come from outside of the core even though half the populations lives outside of the core. In other words, old city residents will on average pay 50% more than their friends up the valley.

As the population ages (and we already have one of the oldest populations in the province) the cost will be shifted toward retired people. In 2011 the largest age group in the population was between 50 and 54.When the Arena opens, this group will be between 55 and 60. Their kids will be gone, about half will be retiring. On average this is the age group with the largest houses. They will pay more than other age groups.

About that time many of them will start downsizing. They will pay less if they downsize sooner. The will not pay anything if they retire in another town. If you plan to retire in Sudbury and stay in a large house you will pick up part of their share.

It is likely that the rents for the new arena will not cover costs and the annual loss will probably grow. The loss will be paid out of property taxes as well.

There will also be a loss of downtown tax revenue. The market price of commercial properties is very sensitive to vacancies. Rents can fall quickly and resulting in falling property values and falling assessments. A one percent drop in the price of commercial properties in downtown business district will cost the city $33,000 a year.

On top of all this, the outer districts are already spending more than their share of the budget because they have more roads per capita to maintain, and because it costs more to provide services like garbage and water in low density areas. As a result of the way we pay for roads and services, the old City of Sudbury is already over-taxed relative to subsidized outlying areas.

Finally, it isn’t likely the cost can be transferred to Toronto taxpayers the way council did with the Maley Drive extension. Senior governments say they don’t want to spend their dedicated infrastructure money on replacing an arena. It will be very hard to package other needed improvements to aging city infrastructure with the project in the Kingsway location.

Overall, older people closer to downtown will pay more than their share. The vast majority of them will not be among the less than 10% of the community who go to the new arena.

Sudbury_community_arena

Here Come the Climate Refugees

Coming to a town near you:

Another wave of Canadian climate refugees is in the news. This time it is 40,000 British Columbians fleeing forest fires. In May it was Quebecers driven out of their homes by floods. The May before that it was the Fort McMurray fire. In 2013 Alberta has the worst flood in the province’s history and the most costly natural disaster in Canadian History. In 2011 the Slave lake fire burned 4,700 hectares and destroyed 1/3 of the town and the Richardson fire, (also in Alberta) burned 700,000 hectares (Price Edward Island covers 566,000 Hectares).b-c-wildfire-2017

These are all climate related.

In most cases there are precipitating causes. The Fort McMurray fire may have been set by humans. Strong winds and unusually high temperatures and unusually low humidity made it much worse. El Nino contributed a dry fall and winter. So climate change pushed the region close to to the edge of the cliff and these other factors tipped the region over. Of course climate change contributed to the winds, the temperature and El Nino. If you are squeamish about ascribing all these disaster to human-caused climate change, you can just count 80% or even 50% of these disasters.

The point is that there are more disasters coming. Some of those will hit Northern Ontario. It isn’t a question of whether, it is a question of when. There will be climate refugees in Northern Ontario. Climate models suggest that by the end of the century the climate will have warmed and dried so much that a tongue of land extending from the Manitoba border all the way to James Bay will be turning into grassland – into Prairie.

Turning into prairie involves forests first drying out and catching fire. That’s how natures changes the guard. Normally fire in the boreal forest clears the ground for a new growth of boreal forest. In the drier, hotter 21st century we can expect bigger, hotter fires and and forests that don’t regrow naturally.

We have had giant fires before. The Great Fire of 1922 in Temiskaming and the Matheson fire in 1916 killed more people than all the other forest fires in the last century and a half in Canada. More fires are coming. What we know about climate change tells us that they are likely to be both bigger and more frequent than in the last century. We don’t know when the first of the big fires will come but we do know there will be refugees.

So are we getting ready? You had better ask your MPP. Forest management, fire control and emergency services across the north are 100 percent provincial responsibilities.

Meanwhile, think about what we are going to do with the growing number of climate refugees from the rest of Canada. Think about how will pay for the relief services, the temporary housing, the cost of rebuilding. Think about whether you have an escape plan and insurance.

Admitting a Mistake and Fixing a Mess

When you make a mistake, you have to admit it and you have to fix it.

Council made a series of mistakes leading up to their decision to move Sudbury’s sports arena. They made a series of mistakes in the meeting where they made the decision. And they made a decision that was simply wrong.

Council members who claimed they were doing what their constituents wanted made three additional mistakes. First, they made a sampling error by assuming that the people who phoned them represented the general population. Professional pollsters know better. People who get fired up enough to contact a councilor may be representative. They may be egged on by a dishonest PR campaign. Think about the recent American election.

Second, councilors seemed to assume that the people who lobbied them on behalf of the Kingsway site were well informed. A proper poll clearly showed that more than half thought they were getting an arena for free.1297681745193_ORIGINAL

Finally, they assumed that they had asked the right question. The question that people answered was like “Would your rather jump off the Eiffel Tower or the Empire state building?” or “Would you rather have a Tesla or a Lamborghini?” In the first case the missing alternative is “neither.” In the second case the choice wouldn’t matter because the majority simply cant afford to pay for either.

The question we now have for councilors is whether they have the guts to admit their mistake and the brains to fix the mess they made.

There are many ways can back away from a bad decision. Here are a few suggestions:

1) Council can call a referendum on allocating $1500 per household to build the arena on the Kingsway site. The motion only says Kingsway is the preferred location among a number considered for a stand-alone arena. Council, having selected a preferred arena, can say to the pubic, “This is the best we can find: do you want to buy it?” The referendum would fail, and council would be forced to consider renovations to the old arena.

2) Council could simply decide that the Kingsway site now has to be compared to renovating the old arena. It was simply bad thinking to consider a new stand-alone arena downtown without looking at combining a renovated arena with the Synergy center and even the library and art gallery. Since council failed to consider this cheaper and better alternative, council would be correcting one of its biggest procedural errors.

3) Council could simply drag its feet, avoiding any commitment until the council elections next year. The next council will almost certainly want out of this deal. It isn’t hard to delay. Council simply has to say will not proceed until all the necessary re-zoning is in place and then instruct staff to fight the rezoning applications. Ultimately the rezoning application has to go to the provincial board where it can easily be held up. It can refuse to support the environmental permits.

4) Council can pass a resolution saying “Whereas the decision to put the arena on the Kingsway has always depended on having an assurance that at least a casino and a hotel at the very minimum will be co-located, Council will not commit any money until construction plans are approved and all rezoning and permits are available.” This would simply be a clarification and not a rejection of council’s decision.

Mayor Brian Biggger apparently realized how risky it is for the City to spend $100 million to build an arena in the on the basis of Robert Kirwan’s unjustifiable assertion that it will create a huge amount of new construction and tax revenue and Dario Zulich’s handful of unenforceable letters of intent. Bigger tried to amend the motion to approve the Kingsway site to include some performance guarantees and was voted down.

The majority of council clearly did not understand the economic risk for the city, even though their consultants stated clearly that “Build-out of the entire site will, however, be dependent upon economic conditions in order to support future real estate investment decisions.” The necessary economic conditions probably include a strong northern economy and a growing population in the Northeast. Neither are expected.

5) Council can simply fail to pass a budget allocation for the arena. The financing motion put to council simply reads, “”THAT the City of Greater Sudbury approves a financing plan for inclusion in the 2018 capital budget that utilizes the following funding sources: a) Contributions from senior governments where available ….”. This appears to be nothing other than a statement that council will eventually consider and approve an item to be included in the DRAFT budget for next year. Council can still amend the draft. It would not take many council members to make the approval of this item very contentious.

5) Council can ask staff to report on how much federal infrastructure money might be lost if council goes with Kingsway instead of combining arena renewal with the synergy center and downtown infrastructure upgrades as part of a new arts district. Councilor Mark Signoretti has argued that the Kingsway stand-alone is almost certainly not eligible for federal infrastructure money while an expanded downtown project is. Even just putting the question on the table will make potential investors in the Kingsway site consider other possible locations. Who could criticize council for looking for free money?

6) Council can state that it has good reason to believe that a large casino is not good for the city economically, and that it supports a moderate expansion of the slots at Sudbury Downs. As an economist it is clear to me that a casino would be bad for Sudbury, so moving the arena out of the downtown in order to encourage Gateway to build a larger casino is both a mistake economically and a morally questionable action for council.

7) Council can delay action while it conducts a market study to see how large an arena should be built on the Kingsway site. Based on the experience in other communities and the expected decline in population it is very likely that the site will attract fewer spectators. That means that the site is likely to generate lower rents than downtown, and perhaps should be smaller than currently planned. It is even possible that the required annual subsidy will be in excess of $1 million.

Some of these suggestions are a bit devious. Deviousness in the public interest may be a virtue. Council has made an economic mistake. It made a series of procedural mistakes. Some councilors did not read the consultant’s report – Robert Kirwan actually bragged that he was not elected to read reports.

In the end, the motion that passed read:
“THAT the City of Greater Sudbury selects the Kingsway location, … as the preferred location to construct the Arena/Event Centre.”

It was not preferred by the half of the council that voted for the downtown location. There is no reliable evidence that it was preferred by the majority of Sudburians. All we really know is that it was preferred by a group of developers because it would help them sell a piece of nearly worthless land. The motion that was passed is not even true.

http://www.thesudburystar.com/2017/06/26/majority-of-sudburians-want-referendum-on-arena

Fixing Cap and Trade

The Ontario Liberals and Kathleen Wynne deserve credit for bringing in their Cap and trade program, no matter how flawed it is. It does not matter that it is costly, complicated and confusing. It does not even matter that will fail. It is a mess, but it is our mess now and we can fix it.

In fact it is easy to fix. The Liberals could fix it tomorrow if they want to. A bill that is coming to the California legislature shows how.

catrade

From MIT Technology Review

 

California, with the sixth largest economy in the world, is the leader in environmental action in the USA. Ontario’s Liberals copied the California system. Now leading Californian legislators want to revise the bill to make much more like a simple carbon fee and dividend.

The proposal would establish one of the highest prices on carbon in the world, generating billions annually. Most of the revenue from the proposed program would go directly to California citizens in the form of a climate dividend. This almost eliminates any negative economic effect and give the general population a reason to support the program.

The bill would not create a pure fee and dividend system. Rather than just setting the carbon price it proposes a tight “collar” on the price the legislature. That means that California would keep the trade part of cap and trade, but basically drop the cap.

It is messy, but it is a reasonable short-run compromise. The trading system is where all the costs and inefficiencies are – it isn’t needed if you have a simple carbon tax. Unfortunately there are now a lot of people making money trading carbon permits. Once you breath life into an artificial trading system it is hard to kill. Kind of like organized crime, or Frankenstein’s monster.

It is important to understand that the trading system is not what collects most of the money. Most of the revenue is coming from fuel suppliers, who are forced to buy credits. This is really just a tax on consumers collected by suppliers. In fact it is just an expensive way to collect a carbon tax. 80% of the cap and trade revenues come from the fuel tax. 95% of the costs come from the trading system.

The California bill would also set aside money for a separate infrastructure program and the California Climate and Clean Energy Research Fund. This keeps two other groups happy – environmentalists who want money for research and infrastructure, and all the scientists, bureaucrats and politicians who honestly believe they can spend money better than the people who actually pay the tax. They may be right.

A major innovation would be the introduction of border tax adjustments. Imports form jurisdictions that don’t have a tax will have the missing tax added when the enter California. California goods and services will get the tax back if they are sold in jurisdictions that don’t have an equivalent carbon price. This levels the playing field for California producers. We need the same rule in Ontario.

California’s existing system has struggled with low demand, legal challenges, and uncertainty over its authority to operate past 2020. Assemblywoman Cristina Garcia proposed a bill to add 10 years to the life of the program, and to add new restrictions on air pollutants. The bill failed.

The Governor of California is insisting that any change to the new bill needs a super majority, at least two-thirds of the assembly vote. The word here is that 79-year old Gerry Brown sees Cap and Trade as his greatest legacy and doesn’t want any changes before he retires. He would be better leaving a system that actually works.

George Bush’s favorite environmental group, the Environmental Defense Fund, is also opposing the changes. The EDF is an extremely powerful organizations with strong links to industry and a deep commitment to what it calls “market based solutions” — to cap and trade. Other environmental organizations are supporting the amendments.

It is interesting to note that the bill State Senator Bob Wieckowski introduced last month sets a schedule for raising the carbon price. It is almost exactly the same as the schedule proposed by Canada’s Prime Minister, Justin Trudeau.

Ontario could fix its carbon pricing system tomorrow, but there is serious opposition in Cabinet. Inside sources suggest that the the main obstacle is the Honorable Glen Murray. Murray is apparently deeply committed to the cap and trade approach which was popular when he was young. His commitment showed when his Ministry ran an extensive public consultation and then ignored the majority of the responses. Information about the failures of Murray’s baby get to the Premier though Murray.

Cabinet probably doesn’t know that expert opinion has swung from cap-and-trade to fee-and-dividend. They may not find out until Murray retires.

California Proposes Ambitious New Cap-and-Trade Program,” MIT Technology Review, May 1, 2017.

Economists Don’t Support Cap and Trade

My letter to the Editor of the Sudbury Star in response to a letter from Ontario Minister of the Environment and Climate Change, Glen Murray (see: ‘Cap and Trade best – Minister‘).


I do wish the Honorable Glen Murray,  Minister of the Environment and Climate Change would give us the names of the “independent economists” who claim his cap-and-trade scheme is one quarter as costly as a carbon tax and still more effective. As a professional economist I know that cap and trade is going out of fashion among economists. There are many reasons, but the main ones are that it is costly, bureaucratic, and it has not worked well in practice. I would like to know who the intellectual laggards  he chooses to believe are.Minister Murray

Murray is passing off nonsense as the gospel truth. In fact a carbon tax accompanied a dividend that returns the revenue to consumers will work better and cost consumers less than the provincial scheme. I don’t support conservative leader Patrick Brown in general, but on this issue it is Brown who has taken the more economically informed and responsible  position.

Any carbon pricing scheme needs to be supported by a well designed border adjustment tax (BTA) so that domestic producers are not penalized. Unfortunately the approach adopted by the province, with its various exemptions,  makes it much harder to introduce  a BTA.

Murray is also misleading the public in saying that $1.9 billion is being reinvested each year. First, because he doesn’t have the $1.9 billion yet – he has to sell all these permits in a market where he is competing with California and Quebec. Most analysts expect Ontario businesses to buy some of  their permits from outside of the Province. That will result in a significant drag on the economy. Second, Murray believes that he can invest the revenues more efficiently than than the people that the tax is collected from. Few economists believe that. Third, there are lawyers, brokers, inspectors, verifiers,  and bureaucrats being paid to run the system. These are nice, very well paid people, but their work would be unnecessary with a simple carbon tax.  Murray has saddled the province with a wasteful  and inefficient system.

Finally, as Mr Murray must know by now, there is no way that he can get to a carbon price that will be effective without returning the money he collects to the people. To be effective the carbon price has to be well over $100/ tonne of CO2. If he returns the carbon tax to the people, carbon pricing is basically free for consumers. FREE! If he doesn’t, the people will resist mightily, and he is going to seriously damage Ontario’s economy.

Dr. David Robinson.

Economist

Members of Greater Sudbury Council: Get this Map for the City – or Resign.

I have been suggesting to various Council members and planners in Sudbury that they need to do one simple thing before they make any more financial decisions. They need to know where their revenue is coming from and where it goes. In other words, they need a map like the one below.

The green spikes on the map show the parts of the City of Lafayette that pay in more than the city spends on them. There is a lot more red, both in area and in volume: Lafayette is going bankrupt.

Sudbury is going bankrupt too – it is running up a huge infrastructure deficit. The city in on its way to the fate of American cities that have had to stop paving their roads. Wait a minute! Didn’t we have a report to council from KPMG in December that the city will never bring all its infrastructure up to standard?

Council members are considering a master plan for the city that doesn’t show which areas pay for themselves and which don’t. If they don’t have that map they are not competent to approve a master plan. They can get the map simply by ordering the planning department to produce it. The planning department can get help from the clever people who made the map for Lafayette. It is easy. There really is no remotely acceptable excuse. Get the map or resign, friends.

And once you have the map, make sure every development satisfies one of two conditions. (1) It can be in the green areas, or (2) it can prove it will generate more than it costs.

Any development that does not satisfy (1) or (2) is being subsidized by the taxpayers in the green areas. That would make the council members accessories to daylight robbery. Of course they are accessories to robbery now, but they keep it in the dark.

Get the map or resign.

And publish the map so you citizens know you have done your homework.

There is more information about the map and what it means at https://www.strongtowns.org/journal/2017/1/9/the-real-reason-your-city-has-no-money

Note to my friends on council: don’t take this too personally – I like to express things vividly so it is hard to pretend you don’t understand. We all know that most City councilors in Ontario are willfully ignorant about where their money comes form and where it goes. You can be head and shoulders above the mob of local politicians if you just take this advice.

Lafayette-The Map