Manufacturing AUTOMATION

Toronto scoops up benefits from southern Ontario development fund

March 4, 2013
By Dean Beeby

Canada’s newest have-not region, southern Ontario, got its own billion-dollar bailout fund from Ottawa in 2009, after recession devastated the province’s manufacturing sector.

Four years later, the first report card on how the money was spent shows that bustling Toronto scooped up the lion’s share of benefits.

The finding comes in an internal evaluation of the Federal Economic Development Agency for Southern Ontario—FedDev Ontario, for short—which runs job-creation programs stretching from Ottawa to Windsor, Ont.

Prime Minister Stephen Harper launched the agency in August 2009, saying it would be based in hard-hit Kitchener, Ont., because he did not want it in Toronto.


“The goal was quite simple—to have a fairly central location that wasn’t in the (Greater Toronto) area,” he said at the time.

But Canada’s biggest city pulled in the largest share of money and jobs from the regional fund anyway—a far cry from the days when economic development agencies helped remote, sparsely populated regions with hard-scrabble economies.

The economy of the Greater Toronto Area expanded by about $706 million in the short term through fund investments, which overall boosted southern Ontario’s economy by some $2 billion.

And the Toronto area gained more than 9,550 of the 26,552 jobs, many of them temporary, that were attributed to the fund’s programs.

Those findings are from a July 2012 analysis commissioned from the Centre for Spatial Economics, in Milton, Ont., for a mid-term review of the agency’s success in rejuvenating southern Ontario’s economy.

A copy of the analysis and related documents were obtained by The Canadian Press under the Access to Information Act.

A spokeswoman for Gary Goodyear, the federal minister of state in charge of FedDev Ontario, defended Toronto’s portion of the jobs and growth.

“Given the relative size and population of Toronto, the share of total benefits estimated are not out of line with what would be expected,” Michele-Jamali Paquette said in an email.

“The agency is committed to supporting all of southern Ontario using our suite of programs.”

FedDev Ontario’s five-year term is scheduled to end in March next year, with no word yet on whether it will be renewed.

Paquette said only that the agency is “currently assessing its impact to date and its potential future role to help meet the unique needs of the region.”

A Treasury Board document last week showed the agency’s budget for its final year is being chopped by $38 million from this year’s level, to $223 million.

The mid-term report card from October last year found many of the fund’s programs remain incomplete, making it difficult to determine results. The biggest, the Southern Ontario Development Program worth $641 million, had spent only about a fifth of its budget by last summer.

The report card noted the fund’s estimated $2-billion short-term boost to the economy was a small fraction of Ontario’s $612.5 billion GDP in 2010.

Even so, the agency gave itself high marks on a range of indicators. For example, administering the programs cost about 16 cents on the dollar, half the amount it says was racked up by the Atlantic Canada Opportunities Agency or Western Economic Diversification Canada, older development funds both established in 1987.

The document also reported a long-term boost to the regional economy of about $171 million annually through the fund’s programs, dropping to about half that after 20 years.

“While it is still early days in our mandate to evaluate our outcomes, the interim evaluation shows that the agency is on track to deliver the intended results,” says a presentation to Goodyear from last September.

Many of the fund’s projects required matching dollars from the province or the private sector, and the combined funding was used as the basis for calculating economic impacts.

But the Centre for Spatial Economics, which looked at 1,000 projects, cautioned that some of the spending might have taken place even without the federal contributions.

The centre also found that the long-term economic benefits of some programs cost more than they were worth. The Southern Ontario Development Program, for example, is expected to deliver 85 cents of growth over 20 years for every one dollar spent. However, that ratio improves when a 30-year span is considered, and when short-term benefits are included.

When the agency was first announced in the January 2009 budget, the Canadian Taxpayers Federation dismissed it as pork-barrel politics. A spokeswoman said the federation’s view has not changed.

“These pork-barrel programs can pat themselves on the back and claim job creation all they want. The reality is they only calculate one side of the equation,” Candice Malcolm, the group’s Ontario director, said in an email.

“The billion dollars that went to fund this program didn’t fall from the sky. The money was taken out of the economy through taxes, or will be through debt with interest.

“Canadians don’t want the government to pick winners and losers in the economy. Corporate welfare and slush funds should not be confused with real economic growth.”

—The Canadian Press

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