On Mar 23, 2011 when Min. of Northern Development & Mines Rick Bartolucci announced the divestiture of Ontario Northland, he stated "while the business is good, the model is not" As is the case in "spin" politics, when you are trying to justify what should not be done, the truth can be very inconvenient. In this case, it was necessary to twist the truth 180 degrees to justify a sale that would not achieve what it was purported to do. The business model of the crown corporation has enabled it to last for 110 years, from its formation as the very first provincial agency until the business was ripped away by the same government that abandoned it.
The sale of ONTC would not bring $265M into the provincial coffers, as Minister Bartolucci claimed, nor was the normal annual cost of $25M a debilitating strain on the provincial treasury, especially when one considers the value of the services provided. The annual cost had risen dramatically over the past year, based on some one-off costs and some revenue cuts that had not yet been responded to, but it is the average annual cost that must be evaluated.
The model was, and is, still good. Ontario Northland is an operational enterprise agency under the Ministry of Northern Development and Mines providing commercial and non-commercial services in Northern Ontario.
The commercial services are rail freight, telecommunications, refurbishment and bus services, while non-commercial services are rail passenger, the entire line between Cochrane and Moosonee, and the Moosonee barge (freight service between Moosonee and Moose Factory)
In theory, the commercial operations are supposed to be profitable and able to generate sufficient profit to "subsidize" the non-commercial ones. In practice this has not proven to be the case and additional funds were required from the provincial treasury to balance the books. The reasons for the inability of Ontario Northland to "break even" are varied and in most cases, as clear as mud.
It is important to note that all of Ontario Northland's business activities were started without any competition. The private sector did not go into northern Ontario initially, it was only after the crown corporation started development that others began to compete. The mandate of the ONTC was "to provide efficient transportation and telecommunications services in Northern Ontario as directed by the Government of Ontario through the Minister". The highlights are my own and reflect the main problem with the mandate.
Within the commercial operations of ONTC are hidden requirements and roadblocks to provide economic development to Northern Ontario. For instance, within Motor Coach services, which receives no subsidy, there is the need to provide service to all the small communities within reach of their routes. This means the higher volume passengers from major centres must make the sidetrips into all the small communities between Timmins and Toronto, thereby lengthening their trip and making the automobile or airplane more attractive. A private sector operator would institute express runs and bypass the low ridership in the smaller centres. It is vital to the region that Ontario Northland DOES provide service to these small communities and it must continue, but the idea that commercial operations are required to subsidize their own division, plus contribute to a profit margin needs to be reconsidered.
Charter service was started as a way to improve the utilization rates of buses needed to meet service demand peaks. There is great opportunity for charter business in southern Ontario, but ONTC is held back from competing in those markets because it has been deemed unfair to the private sector operators there and in fact, may be held back from all charter work now to protect Northlander weekend loads.
There are many other examples, Ontera's operation of small local telephone exchanges, rail freight service levels, and refurbishment's limited ability to secure contracts, all facets of their business that may be restrictive or may not be cost effective, but under direction of the Minister, are deemed essential to the provision of service. That service needs to be protected, enhanced and reviewed to find ways of documenting the value of them, at the same time benchmarking the process to ensure efficiency. Once the government is assured of good value from their investment, it becomes possible to expand the operation westward and take in all of northern Ontario.
If Ontario Northland were truly free to enter into whatever businesses would generate additional revenue, they would have developed an intermodal service that would prove to be of exceptional value to the forestry industry now. If those companies are going to expand their market, ONTC would be perfectly situated to assist with intermodal services from their door. The fact that no private sector operator has seen fit to start one up is further evidence that Ontario Northland needs to be kept intact, with all revenue streams from its marginal business operations feeding an efficient, central administration.
If ONTC, or any of its divisions were to be sold off, the administrative burden on what is left would become more onerous and require more government financial support. Ontario Northland, as it exists today, has been abandoned as an instrument of public policy in the economic region in which it operates. It should be used as a means to bring new technologies and innovation into the economy of Northern Ontario, instead of constantly being attacked for consuming public money.
The private sector may want some of the business that ONTC conducts, but they will not take the responsibilities that go with it. The model was not broken, but the relationship between the Minister and the company was, now we need to see the will to repair it, or transfer the assets and let the federal government develop the New Deal.
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