Proponent’s Economic Impact Study – Unsubstantiated and Completely Misleading Rubbish

Summary

As noted here, the Ministry of the Environment has requested that the proponent “…conduct further study with respect to navigation matters and economic impacts…”. As a result, the proponent commissioned an economic impact study. You can read it yourself here.

The study shows that the proponent has no idea whether the net effect on Bala’s local economy would be positive or negative.

The study did not get any information on; the number of people employed in Bala, the number of seasonal residents, how many tourists visit every year, how long they stay, how much they spend, nor how many cottages or cottagers there are, so the study reports it is “unable to quantify the size of the Bala Community economy in either employment or dollar terms“.

Knowing this, the study still did not attempt to interview any tourists, nor survey locals to find out what impact they expect to their businesses due to this construction, even though “60 to 75 percent expect the construction phase … to impact their business.”

So the study notes they were “unable to quantify the negative impacts of the construction phase of the project on economic activity in Bala.” Well of course, if you don’t ask, you won’t know.

While the study acknowledges that no estimate of the construction impact on local businesses is provided, the study does not even acknowledge there could be an impact on tourism because people won’t visit Bala to see where the falls used to be, or because most of the public shoreline around the falls will be too dangerous to access or fenced-in, or because there will be a 20′-high, 33′-wide concrete building looming above the Moon River instead of the natural beauty there now. The study authors didn’t even visit the site during the summer.

Yet these professionals can find the ethics to conclude “It is our collective judgment that the operation of the project over the long-term will not negatively impact local business activity“. Hey, we can make up words too. What is the value of all the work done for this study if it does not even attempt to quantify the negative.

If I buy an expensive car, am I suddenly worth more. No, because I have to pay for it.

Can I be an accountant looking only at the credits and not the debits. No, that is completely stupid and wrong.

But this study only quantifies the benefits and none of the costs and negative impacts (it is like a George Carlin newscast where there was only time to report partial sports scores – just the score for one of the two teams).

The result is the unsubstantiated and completely misleading rubbish in the deceitful press release and the proponent’s economic impact study.

Finally, while power generation facilities don’t pay property taxes, they do pay a “gross revenue charge” to the provincial government, and this is based on a combination of the annual gross revenue and the volume of water which passes through the facility. As an incentive for new construction, the provincial government typically grants a “10-year tax holiday”, so this gross revenue charge is not payable for the first ten years of operation.

And one last point about any “economic benefits”. The economic impact study notes that the annual revenue to the proposed power station would be $2.7M – but consider this:

• Existing hydro-electric power stations in Ontario receive about 3¢/kW•h for the electricity they generate, but the Ontario government would actually pay about 13¢/kW•h for the electricity generated by this proposed station.
• Which means that about 75% of the revenue is actually government subsidy, which, of course, is our tax dollars.
• Crazier than that, Ontario has been a net exporter of electricity for the past five years. So we would likely be selling this power to the United States for about 5¢/kW•h, while paying the private developer 13¢/kW•h for it.
• So most of the stated benefits would actually be taking provincial government money that should be paying for health care, public education, public transportation and everything ELSE our tax dollars should be funding.

Accordingly, we have sent this letter to the Ministry of the Environment.

 

Detail

After carefully reading the proponent’s 57-page economic impact study, we find that it does not provide any useful information on the economic impact of the proposed hydro-electric generating station project at the Bala Falls. The report completely ignores the negative impacts, and these are precisely the concerns which need to be addressed. Even the positive impacts are not known for the area local to Bala, the only economic information offered is for the larger District and Provincial levels.

Some of our concerns about the study are below.

1. The study attempted to survey about 119 area businesses (110 of these by e-mail), however they “were disappointed” to receive only 47 replies (page 5).
   • The study notes that e-mail reminders were sent out, but they made no attempt to actually phone or visit the businesses to determine why responses were not received. Hey, you think maybe the e-mails (and reminders) ended up in the recipient’s spam folder, maybe the e-mail address was one that isn’t being read, maybe some weren’t familiar with on-line surveys.  Somehow the study concludes “One reasonable interpretation of the low response rate is that opponents to the project among Bala business owners are in the minority“. Huh? If they truly were disappointed at the low response rate, they should have picked up a telephone and phoned a few businesses to see what the problem is.
      
2. Next, read the survey questions. You’ll see the survey spends more words soliciting business than actually describing the project or actually asking businesses what impact the project could have on their business.
   • The only negative impact or project description noted in the survey questions was traffic disruption, yet the study is surprised at respondents perception of the project, noting “This misunderstanding is especially evident with respect to their concerns regarding potential disruptions to traffic during the construction period.” If the survey questions only mention traffic disruption, then of course respondents are going to think about that.
   • Perhaps the survey results would have been more accurate if the survey actually described the construction site; a rock and plastic coffer dam hundreds of feet long leaving the head of the Moon River dry to the dead fish on the riverbed, construction safety fencing and construction equipment and a construction crane with a 100′ boom, all the trees on Burgess Island west of the highway clear-cut, blasting and hauling away 1,700 tuckloads of rock, construction trailers and porta-potties, pumps and settling ponds, and traffic disruptions.
   • In fact, the negative impacts are referred to as “inconvenience” (page 33). It is likely the study avoids assigning costs to the acknowledged negative impacts so these cannot be used as justification for local businesses claiming compensation from the proponent for lost business.
      
3. The study makes no attempt to assign a value to the negative impacts on local businesses during construction – “… impacts to local business from anticipated disruptions due to road closures, reduced access to the Falls adjacent to the site, and general construction interruptions have not been estimated” (page 29).
    
4. The study did not examine the possible impact on local residential property values. For example:
   • It is likely chain-link fencing will be required (as was recently installed at the Mill Stream power station in Bala – and barbed-wire fencing is installed at all three power plant at and upstream of Bracebridge).
   • It is also possible that sirens and strobe lights will need to be used to warn each time the plant begins operation, as is required for OPG-owned stations (and the proponent has stated that OPG would require the proposed plant’s operation to be cycled – such as every four to eight hours – to coordinate with the OPG plant downstream).
      
5. Significantly, the study made no attempt to understand the importance to the local area, uniqueness in the area, or tourism draw of the Bala Falls, and how this would be affected by the proposed project. Apparently, only one of the study’s three authors visited the falls (and this on a Tuesday in late September, when it would not be possible to observe how the public recreates in the area), and instead that it required “climbing down a pebble-strewn include.” Perhaps it would have been enlightening for the author to actually talk to a tourist or two (the study does acknowledge the importance of tourists to the area – page 24) to see if they’d prefer a “professionally landscaped” (page 2) stairway, or the natural beauty of the area.
    
6. The proponent “anticipates a 10-year holiday” (page 30) on taxes (which would have been a gross revenue charge of about $130,000 per year), as the provincial government typically allows this to encourage new construction of hydro-electric power stations. So in addition to receiving about 13¢/kw•h for generated electricity (when existing hydro-electric power stations in Ontario receive about 3¢/kW•h), the owners of this facility would not have to pay any taxes for the first ten years.
    
7. Many numbers are offered without any background or justification, they are just stated as fact:
   • The number of jobs to be created (page 29 and 30).
   • That $10.8M will be spent in the District (page 29).
   • The many input values to a very complicated economic model they developed. For example, the default input rate to the model for a Government of Canada 3-month T-Bill for 2010 is 4.65% where it is actually less than 1%, no information is provided on the actual input values used to generate the values presented in the study (page 31).
   • That the proposed power station could supply 4,000 homes (page 32). It should be noted that any hydro-electric power station often produces much less power than its “nameplate capacity” simply because there isn’t enough water to run the station at full power all the time. Using the proponent’s own estimated revenue of $2.7M (page 30) at an average of 13¢/kW•h indicates an annual power output of 20.7 GW•h. My somewhat average house used 14.8 MW•h last year, so the power station would only produce enough for 1,500 homes, which less than 40% of the cited number of 4,000 homes which could be powered, and also less than their reported number of 2,675 permanent resident households in Muskoka Lakes in 2006. I’m just not getting a good feeling about the numbers spouted by the proponent and this study.
   • The study is called “independent”, yet an unknown number of the costs and numbers were provided by the proponent (Appendix).
   • We look forward to the opportunity to review the assumptions and numbers used to generate the claimed results. Until this validation is provided, this entire report is just garbage in, garbage out.
      
8. Strangely, the study notes “We would expect, for example, that local businesses and residents likely want tourism development but that local cottagers likely oppose it.” (page 6 and 34) even though the study notes their own survey of business owners showed that
   • The single largest suggestion to dealing with traffic restrictions was “Cancel the project” (page 13).
   • “60 to 75 percent expect the construction phase … to impact their business” (page 21).
   • The study’s authors should read their own report. Such editorializing has no place in a report which is supposed to be factual.
      
9. The report continues to repeat the vague bribe attempts of the local government “SREL will assist with the Township’s pedestrian / snowmobile bridge project, while SREL’s contractor is on site” (whatever “assist” means), and now a new one “the possibility of SREL installing new docks at Bala’s Wharf for the Township” (page 2).
    
10. The report is self-servingly vague when necessary, such as reporting that “More than half the respondents expect the project to have a permanent impact” (page 21), leaving the reader to wonder if respondents reported a negative or positive impact. The survey results should be reported accurately and completely.
     
11. The study does note that “the costs of the project – the loss of business and the inconvenience costs – will all be borne by the Bala Community” (page 33), as most of even the cited benefits would be to the District and Province. The study then notes “This inequality of benefits and costs could be a reason behind local opposition to the project”, showing complete ignorance of the many public safety and tourism issues concerning the proposed project.
     
12. Finally, one last absolutely absurd comment (in fact, the last sentence of the study) concerning a possibly one-time payment for the use of the proposed District lands: “the District ought to earmark a significant portion of those funds to the funding of Bala Community projects that its businesses and residents feel will benefit them in achieving whatever future they choose for themselves for the decades ahead”. The people of Bala have already decided this, and it includes keeping the Bala Falls.