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Budgets 2015: Business Drowning In Energy Debt And No GO For Durham

April 28, 2015 – With the Ontario Budget just completed, the Ontario Chamber and the Chamber Network are concerned about the government’s decisions that are negatively impacting business: the rising cost of electricity, implementing a cap and trade carbon pricing system, the proposed provincial pension plan and the transportation infrastructure deficit, all of which is undermining the capacity of businesses to grow and create jobs in Ontario.

The April Budget announced the sell off a 60% stake in the electricity Hydro One with proceeds from such a sale put into a Trillium Trust to pay for infrastructure of which $4 Billion is designated for GTA Transit. Current legislation requires that any sale proceeds from Hydro One must be used to pay down the electricity system debt which currently tops $27 billion. However, one line in the budget document under Hydro One proposes changing this legislation allowing the money to be funneled into the Trillium Trust.

The Debt Retirement Charge (DRC) has appeared on electricity bills since May 2002 to help pay down the debt and liabilities of the old Ontario Hydro after it was broken up into separate companies.
 

In April 2014, the Government of Ontario announced it will remove the DRC from residential users’ electricity bills after December 31, 2015. However, the DRC is to remain on all other electricity users’ bills, including large industrial users, until the residual stranded debt is retired.

Also, the Ontario Energy Board recently announced that starting May 1st rates will go up by $5.71 per month for an average Ontario household. However, this hydro rate increase has far greater significance for businesses. Increases will range between 7% and 15% per kilowatt hour impacting, for example, restaurants, fast food outlets and small industry that operate during on-peak and mid-peak times (between 7:00 a.m. to 7:00 p.m.). This takes on much greater significance given the backdrop of an impending partial sale of Hydro One. Add to these costs the charge of 0.7 cents per kWh set by the Ontario Ministry of Finance to pay down the residual stranded debt of the former Ontario Hydro and the expiration of the Ontario Clean Energy Benefit (OCEB) at the end of this year (which launched in 2011 and offered a 10% break on hydro bills) and residents and smaller businesses will see their bills rise.

“Budget 2015 does little to address business’ concerns over rising electricity rates,” stated Bob Malcolmson, CEO of the Greater Oshawa Chamber of Commerce, “and according to the most recent Ontario Chamber survey, rising electricity prices are the number one factor hurting business competitiveness. Last year alone 2700 companies left Ontario.”

The Budget increased spending in areas of strategic, economic importance, including transportation infrastructure dedicating $31.5 billion over 10 years. These funds, as reported, will be used for transit, transportation and other priority infrastructure projects across Ontario. With the Ontario Budget committing $29 billion for transportation infrastructure spending, the Ontario Chamber of Commerce is calling on the Ontario government to ensure it leverages this spending to meet Ontario’s growing transportation infrastructure deficit, and ensure these funds generate economic returns.

About $16 billion of this will be invested in transit in the Greater Toronto and Hamilton Area (GTHA) while $15 billion will be invested in transportation and other priority infrastructure projects outside the GTHA. Unfortunately, Durham Region loses out on transit dollars. The Budget makes no mention of GO Transit expansion to Bowmanville white lauding Metrolinx investments in Mississauga Transitway, expanding Bus Rapid Transit in York Region, construction of the Eglinton Crosstown Light Rail and the Finch Sheppard LRT.

Another interesting line in the budget that has implication for Durham is under the topic of optimizing the value of the Province’s Real Estate Assets suggests the government could be eyeing the sale of the Seaton lands in Pickering.

In the federal budget, according to Canadian Chamber of Commerce, a balanced federal budget only serves to bring us to base camp; we still have a mountain to climb. The measures announced in the Budget to support Canada’s manufacturing and small business sector are timely. Measures such as the Small Business Tax Reduction will encourage small business to invest and expand; the Manufacturers 10 year tax incentive should boost investment in machinery and equipment; Auto parts suppliers – largely based Ontario – will have access to $100 million fund for development of new technologies over the next five years; and the Reduction of Payroll Taxes/EI Premiums are all positive for business.

“This budget is a good starting point, but more needs to be done. To keep the budget balanced in the future and give us a fighting chance against international competitors, the government’s priority must now shift to economic growth and global competitiveness. Our prosperity depends on Canadian business winning in the global marketplace,” said Perrin Beatty, President of the Canadian Chamber of Commerce.

Measures announced in the budget to improve skills – such as better and more apprenticeship training – can create a new generation of capable workers were welcomed by the Chamber. For the last four years the Canadian Chamber has made skills a priority and for many businesses, the skills gap is the number one barrier to growth. “By recognizing that Canadian businesses need improved access to skilled workers, international markets and capital, the government is setting the building blocks for a more competitive Canada,” stated Beatty, “however; there are still many steps to take.”

The Canadian Chamber particularly welcomed renewed investments in infrastructure. Access to global markets starts at home and export infrastructure is critical. And basic public infrastructures – roads, water systems, transit – are also strongly linked to improved productivity across the economy.