Ministry of Northern Development and Mines - Has the time come to restructure?

The Auditor General's latest annual report gave rise to the usual expose of the government's latest weak points.  The media and the opposition immediately pounced on the most newsworthy and critical parts of that report.  Lost in the furor over Hydro One and the Social Assistance Management System was the section on Better Accountability.  Certainly not as much of a trigger issue, but at the same time, the biggest issue facing government.

The Open Government initiative was Kathleen Wynne's response to one of the most criticized actions of her predecessor.  The gas plant scandal enraged Ontario voters and demanded action from government that would ensure it never happened again.  

The Open Government panel, chaired by Don Lenihan, quickly put together an excellent report that appears to have been accepted in large part, by the Liberal government.  It involves nothing less than a wholesale change in government culture in order to restore voter trust in their elected representatives.  Bureaucrats who have historically relied on back room deliberations and carefully scripted media points are now expected to engage in public consultations and justify their plans with facts from accepted sources.  

One Ministry, in particular, seems to be having trouble making the transition.  Northern Development and Mines continues to avoid open public consultations about the future of Ontario Northland, one of the biggest economic drivers in the region.  It is one thing to be a maverick and run against the tide, but if a Ministry chooses that path, it is vital that they are seen as a positive influence.  Otherwise, they are just getting in the way.

So, lets examine the record of the only Regional Ministry in Ontario.  
In the book Governance in Northern Ontario Economic Development and Policy Making, Professor Bob Segsworth of Laurentian University writes a chapter on Results Measurement and Economic Development in Northern Ontario.
Critical of the measurements used by MNDM, Prof. Segsworth suggests 14 more relevant criteria, based on statistical information that is already available. (used with permission)

I have presented those numbers here, in a format that hopefully illustrates how Northern Ontario has fared with a separate regional ministry in charge, in relation to the overall performance of the province.






As Professor Segsworth points out, over the time period government has dedicated efforts to the economic well-being of our region, Northern Ontario has lagged the province as a whole in all of the indicators except one.  

The Dependency Rate 1 is the ratio of people under age 15 and over 64 divided by the number of people of workforce age 15 to 64 and is the only measure where Northern Ontario has an advantage over Ontario.  Dependency Rate 2, however is the number of people aged 65 and over divided by the workforce age bracket and shows a much higher ratio.  Given the trend toward longer lifespans and declining birthrate, our advantage has likely eroded since 2006.

MNDM is not much help in providing any evidence to the contrary as their Annual Report does not show any measures that might reasonably be expected to disprove these results.  This, in spite of findings by the Drummond Report, the Auditor General and other Associations that Northern Ontario needs specific economic measurements in order to gauge government's response to the challenges.

We now have the Northern Policy Institute where the various data collections that do exist can be warehoused, and Northerners of all stripes can voice their concerns about government policy.  The Ministry of Northern Development and Mines has not produced any meaningful benefit for the region and according to the Auditor General, may have caused other provincially mandated Ministries to bypass the North in their service.

Perhaps the time has come to restructure provincial government services by dismantling MNDM in favour of a more efficient delivery system and actually invest the savings in much needed infrastructure.  

ONTC Transformation - Real or political spin?

As the ONTC transformation starts to drag on, reminiscent of the Ring of Fire, or Northern Growth Plan, one begins to wonder if there will be anything left to transform.  Sales revenue for ONTC has been decimated from $114M as of Mar 2011 to  $63M as of Mar 2014, and if MNDM had the courage to post the Mar 2015 numbers, I'm sure that would have fallen further still.

Regardless of how efficient the organization becomes, if a company cannot bring sufficient revenue in the door to justify their capital cost, it will fail.  ONTC has been a political football for MNDM for over 20 years and the constant political interference has eroded the foundation built up over a century.

The current situation of a mishandled lockout, is indicative of how the constant attacks have worn away at the labour/management relationship.  Instead of trying to repair that relationship, MNDM has addressed ONTC like a political exercise designed to "spin" Northern Ontario into believing they are supporting the region.

If we look back at recent history to gain understanding of how that relationship came to be, one becomes skeptical of the MNDM commitment to Northern Ontario.  In 2003, the Liberals got elected along with a promise to develop ONTC and for a short time they did make an effort.  That effort did not include much to bolster ridership on the Northlander though, and by 2012 MNDM did away with any pretense of development and announced they were going to liquidate the company and discontinue Northlander service. (The actual announcement appears to have been deleted from the ON Newsroom website, but there are enough references available that we are certain it still happened)

This abrupt change in direction was done without consultation, without prior notification to the union and not even much warning to then CEO Paul Goulet.  Some of the claims made to justify the divestment decision were later proven to be false, and were partly why the government had to later back down on parts of the decision.

• ONTC Subsidy $100M and expected to rise 

      (Actual numbers fm ONTC Annual Reports)

          2010 - 28.0M

          2011 - 43.6M

          2012 - 75.7M

          2013 - 48.7M  (Psgr funding down 6M due to Northlander cut)

          2014 - 29.9M

• This is not a firesale

         Ontera had $41M in assets and was sold for $6M incurring a $61M loss for          ONTC

• Ridership is stagnant

            (Numbers from FOI request)

                2009 - 31,494

                2010 - 33,741

                2011 - 39,579

                2012 - 29,751 (Cut off in Sept)

          Very different government position re Union Pearson Express

• Northlander will be replaced with enhanced bus service

             The only enhancement to bus service in the North was as a result of a                improvement ordered by the Ontario Human Rights Commission.                      MNDM response was to insist ONTC operate buses on a break-even                    basis, forcing ONTC to close stations and reduce runs in the North.

        No transit system in North America operates on a break-even basis....not           even GO Transit  

Now....with this history of deception and political spin, unions at ONTC are asked to accept concessions beyond industry norms to support MNDM before they will expand and develop ONTC.

I would think MNDM would need to demonstrate good faith in a tangible way, before workers could believe them.  The current lockout only makes the prospect of co-operation more difficult and further jeopardizes the very existence of the business.  

MNDM should sign an agreement that matches the pattern already set by other unions and get on with the business of building up ONTC.  The North cannot withstand much more MNDM "development".

Canada Transportation Act Review - A Map to the Future

The Canada Transportation Act Review that was initiated last June by then Minister of Transport, Lisa Raitt, is coming up to the deadline. The 18 month period for Chair David Emerson to release his report expires at the end of Dec 2015.

The review, initiated a year early, was to demonstrate government reaction to a couple of very well publicized failures in rail service. The tragedy of Lac Megantic, of course, captured everyone's attention in July 2013, but a much smaller group was disappointed in the failure of Canada's Class 1 railways to move all the 2013 grain crop.

Together it was enough impetus to launch the review, but many are hoping it can affect much more than rail safety and peak capacity. One of the specific issues the panel was asked to review is

whether adjustments to the current transportation legislative and policy framework are required to support Canada’s international competitiveness, trade interests, and economic growth and prosperity;

For Northern Ontario, and other remote regions, the legislative and policy framework has negatively affected, rather than supported, economic growth and prosperity. The National Transportation Policy states quite clearly that competition and market forces are to be the prime agents in providing transportation services, but is less clear on when and how those goals are to be achieved when the market cannot provide.


The Canada Transportation Act defines the National Transportation Policy in Section 5

NATIONAL TRANSPORTATION POLICY

5. It is declared that a competitive, economic and efficient national transportation system that meets the highest practicable safety and security standards and contributes to a sustainable environment and makes the best use of all modes of transportation at the lowest total cost is essential to serve the needs of its users, advance the well-being of Canadians and enable competitiveness and economic growth in both urban and rural areas throughout Canada. Those objectives are most likely to be achieved when
(a) competition and market forces, both within and among the various modes of transportation, are the prime agents in providing viable and effective transportation services;
(b) regulation and strategic public intervention are used to achieve economic, safety, security, environmental or social outcomes that cannot be achieved satisfactorily by competition and market forces and do not unduly favour, or reduce the inherent advantages of, any particular mode of transportation;
(c) rates and conditions do not constitute an undue obstacle to the movement of traffic within Canada or to the export of goods from Canada;(d) the transportation system is accessible without undue obstacle to the mobility of persons, including persons with disabilities; and
(e) governments and the private sector work together for an integrated transportation system.

As noted in the Govt of Ontario submission to the review, "In reality, these conditions are aspirational". The Ontario submission goes on to touch on one of the main problems with transportation in Canada.

"Ontario’s extensive transportation system encompasses all modes and includes a wide range of services, facilities and infrastructure that are provided and operated by the private sector, as well as provincial and other levels of governments."

It is the diversity of these delivery methods and lack of co-ordination between governments that fragments transportation service in Ontario. If one considers the automobile as the prime competitor to public transportation, then the door to door service provided by that mode is what public transportation should be trying to emulate.  Yet, municipal transit may or may not directly connect to the intercity hub in the community, and the different modes of transport may or may not even be in the same area of the city, if they even exist.  Schedules are not co-ordinated, even within the same mode, if one wants to travel beyond a regional hub.
Another issue, not addressed in the Ontario submission, is whether or not the delivery method for bus transportation should be public or private sector. In Ontario, the authority for intercity bus transportation is the Ontario Highway Transport Board (OHTB). There is absolutely no connection between that entity and those responsible for other modes of transportation, therefore the ability to deliver an integrated system does not exist. 

In addition to the lack of multi-modal co-ordination, the regulation of the bus transportation industry in Ontario has failed the less populated regions of the province.  At one time the regulating of routes in Ontario was supposed to enable higher volume routes to cross-subsidize the lower ones, but as this blog post reveals, there is no mechanism to make that happen.

In fact, the only transportation provider in the province who is not subject to the OHTB regulations is the only integrated bus/rail service provider, GO Transit.  The regional commuter service is recognized as one of the best transit providers on the continent, but only GTA residents see that benefit.  Those of us in lower populated areas are faced with rail service being withdrawn and bus service dwindling.

Rail service in the North is virtually non-existent after the Northlander was cut off by the Provincial government and the Algoma service abandoned by the previous Federal government.

Bus service in the North is provided mainly by Greyhound and Ontario Northland Transportation Commission (ONTC).   Both these companies and GO Transit operate between Barrie and Toronto.  The GO Transit fare is up to 40% cheaper than the other two because they primarily operate in high density areas and are not required to breakeven, let alone turn a profit.  This competition in the lucrative GTA market means there is more pressure on the lower density corridors and for that reason service levels are being reduced.

In terms of freight rail service throughout the province, the fact that railroads are required to provide their own infrastructure means that intermodal facilities are only available in the GTA. The two Class 1 railways in Canada are only interested in the volume of business that is available from the Canadian distribution center of Toronto. This lack of competition means Canadian access to intermodal facilities pales in comparison to the United States. 

The rest of Ontario is so far distant from rail intermodal facilities the economic benefit is eaten up in the initial truck move. Proximity to those facilities also encourages their use.

For a government that is trying to reduce its environmental impact in the future these policy failures are driving us the wrong way.

ONTC Transformation - Moving Forward to Sustainability

If there is one word that has become attached to ONTC in the past few years, it has to be "sustainable".  Even Minister Gravelle has recognized the word has been bandied about so much, its overuse has to be acknowledged, but still there are no details about how we will know when the corporation has reached that state.

The best we can do at this point is try to guess what the government means by "sustainable"  One of the word's synonyms, defendable, might give us a clue.  Defendable is defined by Merriram-Webster as "to maintain or support in the face of argument or hostile criticism <defend a theory>"

ONTC has long faced hostile criticism, as the Standing Committee on Government Agencies reveals, in these two reviews from 1992 and 1996.  The more lucrative lines of the corporation have long been the target of the private sector. Their arguments were, government should not be in business and ONTC is inefficient and the fact that there is a subsidy required, proves that.

The other fact brought to light by reading these reviews, is the amount of time and effort on the part of Ontario Northland required to justify their operations and educate their political masters.  One has a hard time imagining Hunter Harrison patiently responding to all the concerns from various political constituents and given voice by MPP's.  The requirement for ONTC to be just as efficient as the private sector runs counter to its mandate and is best explained in this Letter to the Editor written by a former member of ONTC management.  

That is not to say Ontario Northland does not need to change in order to reach sustainability.  The government may need to give the company more autonomy and hold it accountable to realistic targets, but the new Commission must ensure management delivers on its responsibilities.  Industry benchmarking, with clearly supported deviations from the norm, must define operational activities that are required by virtue of being a crown agency.

The government will still be able to impose political restrictions on Ontario Northland, such as the current one in Motor Coach that prevents unlimited pursuit of charter work, but the financial implications must be taken into account when the inevitable criticism comes later regarding an inefficient operation.

Sustainability may depend more on the governments ability to understand the operation and the value of Ontario Northland to the region and use that to prevent any further erosion of the corporation.  The reality of operating in a low volume market led to the combination of different business lines with a centralized administration.  Each cut to the ONTC family weakens the structure and attacks the very premise that enabled them to gain efficiencies in those markets.

Star Transfer, NorOntair and now Ontera, may well be able to have their services continued by the private sector, but regardless of the debate about who provided better service, the fact remains, they contributed to the success of Ontario Northland.  Economic development is very difficult to stimulate, but ONTC has been doing it in a sustainable way for over a century.

New Commission should have New Mandate

The recent announcement of a new Commission for ONTC is a positive step in the tortuously, long process of turning around government direction. We have come a long way from the March 2012 announcement of total liquidation to creating a sustainable corporation, able to deliver and define its value to the region.

The make-up of the Commission has been expanded to include Northerners who appear to be well suited to understanding how the company can fit into government policy and return to making a positive contribution.  However, that contribution should not be limited to dumping cash into the provincial coffers.  As the Auditor General noted in her report, "there may well be socio-economic benefits to justify subsidizing the ONTC".

There is still room on the Commission for more stakeholder representation, such as the First Nations, but the nucleus is there to finally give meaningful input as to what Northerners expect from ONTC, in relation to what the government can deliver.

One of the issues that should be high on the list of things to do, would be a renewed Memorandum of Understanding between MNDM and ONTC.  The last version publicly available and in effect March 2012, still reflects the initial focus of divestment.  Apparently that was modified in Dec 2013 to include and prioritize transformation as the way forward for ONTC.  But with the commitment to keep ONTC in public hands (and hopefully as a stand alone agency) the corporate role needs much better definition.

One of the problems with the current structure is the requirement for Motor Coach services to operate on a break-even basis.  That in itself is a tall order for a transportation provider operating in an area of low population density, as evidenced by Greyhound's call for subsidy.  Greyhound is a large North American company with access to many routes that are in high volume and profitable areas, giving it huge economies of scale, but still is facing challenges operating in Northern Ontario.   

ONTC is further hampered by a government directive that it not offer any charter services.  The ability to offer charters and thereby boost asset utilization for a fleet that is required to protect a large weekend and holiday ridership driven primarily by post-secondary students runs counter to the demand that Motor Coach service operate without a loss.

There is a larger picture to be looked at, with how a regulated industry such a motor coach service fits into a non-existent provincial and federal transportation policy where passenger rail can contribute, but first the government's insistence that motor coach operate on a break-even basis needs to be addressed.

I hope ONTC is given a new mandate, including economic development, that will enable the Commission to deliver on the expectations Northerners have for them.  The issue of political interference needs to be addressed quickly, or they will be unable to even create a transformed ONTC that is sustainable.

Performance Measurement

In 2003, Dalton McGuinty led the Liberal party to victory by promising to balance the books and still bring improvements to Ontario's health care and education sectors.  The Common Sense Revolution, designed for the 1995 election to gain support from the average voter for the Conservative party, had not succeeded.  The idea that reforming government only required cutbacks in spending, and more use of the private sector to deliver services, did not improve life for the average Ontarian.  The Walkerton crisis, the giveaway of assets like Hwy 407 and the privatization of MTO highway maintenance all gave the "common" folk reason to believe they were not gaining the full benefit of the tax cuts given to a lot of them.

The latest election that granted a majority government to Kathleen Wynne's Liberal party showed that the outrage over government scandals like ORNGE, eHealth and gas plants was attributed to Dalton McGuinty.  Ms Wynne's role in those debacles was not deemed strong enough to warrant a return to the wholesale reduction of government pitched by Tim Hudak.  

That platform has lost even more credibility due to the performance of California under Governor Jerry Brown.  During the last campaign, the PC's used California as a warning of Ontario's future and would not likely be able to reconcile their plan with that State's return to surplus after raising taxes, not cutting them.
California is not out of the woods yet, but clearly gutting the government is not necessary to turn the trend around.

A recent Toronto Star article uses the headline "The year taxes make a comeback" to suggest the public is ready to contribute more to the government coffers in order to build a better society.  It would be a mistake though, for any party to think that funding will flow willingly, without any checks and balances.

While Ontario has been trying to find a party that can deliver better government services yet keep its finances under control, the rest of the world has been taking steps to achieve that balance.  This OECD Report shows that performance and accountability are essential ingredients of a better government.  

Ms. Wynne's government has taken some steps towards this, with the Open Government initiative, the publishing of Ministers mandate letters and the expansion of the Ombudsman's jurisdiction, but much more remains to be done.  There is not much in the way of measured performance results, publicly available, for any part of the provincial government.  If Ontario is to follow California's example in reversing deficits into surplus, they would be well advised to follow their lead to decentralize and push more power down to municipalities.

There is already a comprehensive program in place to measure municipalities performance, the Municipal Performance Measurement Program.  But even here there is much work to be done.  The results of this program are publicly available here, but there should be an easy way to compare municipalities of similar size and individually by year over year results to show trends.
There will always be factors that are not easily captured in the numbers, but if results were publicly discussed, questions would be asked and by discovering the answers, society as a whole would be much better served.

No matter which party is in power, the road to re-inventing government is a long one that will require firm leadership to marshall all Ministries onto the same path.