Saturday, February 28, 2015

Political football - winners and losers

Senior governments download responsibility for delivering services but seldom include taxing authorities to match spending demands. The download trend is demonstrated in a report by The Columbia Institute:

British Columbia's government prefers to raise revenues from individuals through consumption taxes and user fees rather than by progressive income taxes, natural resource proceeds and levies on corporations. That serves the interests of Liberal Party shareholders but it has the potential of creating disquiet among voters, the people asked to fund government operations.

Downloading serves political purposes by shifting both responsibility and accountability. The current transportation funding debate illustrates the issue. Having spent or committed almost $10 billion on Highway 1 improvements, the Sea To Sky Highway, South Fraser Perimeter Road and the Massey Tunnel replacement, the province is not anxious to take a lead on transit improvements in the lower mainland. One reason is that an effective transit system serves a different constituency. Visions of ordinary workers toting lunchbags onto a bus do not excite Liberals like contributions from wealthy exploiters of natural resources.

So, the Clark government tossed the transit ball to municipal politicians. Those ambitious folks took the bait, created a wishlist costed by spin doctors and invited citizens to vote for imposition of a new sales tax. It is a levy that does not begin to fund the projects but voters are told, "Don't worry, accept the tax and worry about the rest of the money later."

That's a prescription for a local disaster. What happens if the provincial and federal governments contribute less than the billions needed? What if they contribute nothing? That half-point regional sales tax will suddenly grow and the wish list will contract.

Metro Vancouver mayors, with Burnaby's sage Derek Corrigan a notable exception, played into the hands of Liberal strategists. Although the business of TransLink is critical to millions of people - more than half BC's population - Christy Clark's government left the stage. They don't want to spend money from other sources, for the reasons noted above, but they will accept a sales tax increase, as long they don't have to wear it directly.

This is a template they will use elsewhere in the province. If Southern Vancouver Island wants transit or infrastructure improvements, invoke a regional sales tax. If the Gulf Island and Sunshine Coast want improved roads or ferries, how about a regional sales tax? I'm not aware of another local sales tax in Canada but it has been discussed at the Federation of Canadian Municipalities. In the USA, many local areas impose a sales tax, with rates typically between 2% and 4% added to state sales taxes. If you think the lower mainland transit tax will remain at 0.5%, then I've got a multimillion dollar bridge to sell you.

The key to understanding the actions of the BC Liberal government is to understand the interest groups they aim to serve.

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Tuesday, February 24, 2015

Setting priorities

I've written about politics influenced by a captured and compliant press. This is from a Canadian Press article that Liberals found helpful, published by Macleans Magazine weeks before the last BC election:
...A Liberal government would dedicate all revenues from liquefied natural gas and a proposed oil refinery in Kitimat to debt reduction until all provincial debt is eliminated, said Clark. She pointed out that the New Democrats have said they will increase taxes on the LNG industry.

B.C. would be debt-free in 15 years under her stewardship, she said, and the Liberals would tie government spending increases to the rate of nominal GDP...
It is worth noting that when Premier Clark made the 2013 promise to be debt free within 15 years, debt and contractual obligations were $55 billion and $100 billion. Liberals forecast total provincial debt will be $70 billion in Mar 2018 but don't report on the larger contract obligations total. By then, one-third of Clark's 15 year time frame would have passed and BC would have no material LNG revenues. Nevertheless, LNG skepticism is rare within the pro-media. It still occupies government attention and hundreds of millions in annual ministry spending.

The linked Maclean's article read like an advertisement but it was not marked as such, nor is it so marked today at their site. No reservations or alternative voices were included for even a pretense of balance. The incomplete piece would earn a failing grade in a first year journalism course.

That such fantastical claims were made and sustained so easily explains why British Columbia's government remains focused on natural gas as a supposed economic driver. It is simply electoral politics and pro-media has done a full buy-in.

LNG was the magician's rabbit in 2013 and Liberals calculate that it can be the same in 2017. That natural gas is such a tiny industry in this province matters not; it offers so many political advantages. This graph is drawn from information assembled and published by BC Stats. It needs no further commentary to emphasize my points.

Government preoccupation with the fossil fuel industry hurt BC's export and tourism industries. Observers know that billions of dollars spent by the Chinese government to acquire Canadian resource companies contributed to a dollar that went above parity with the US. We've suffered from "Dutch Disease." In BC, there has been an accelerated increase in low paying McJobs and lower employment in manufacturing and other non-extractive industries. As a result, this province has joined Ontario and Quebec at the bottom in measurement of recent wage growth. This is unsurprising since Central and Upper Canada have had similar experiences with Dutch Disease.

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Monday, February 23, 2015

Agenda journalism

Black Press political reporter Tom Fletcher, whose wife is a Public Affairs Officer for the BC Liberal Government, occasionally recalls the nineties:
The dark decade, the dismal decade, the decade of destruction ...when investment, jobs and people packed up and headed for the B.C. border in response to the NDP governments of Mike Harcourt and Glen Clark...
That is Fletcher's memory and he reminds community newspaper readers throughout British Columbia whenever convenient. Many of us remember differently. BC Stats, a division of the provincial government, provides information to test Fletcher's accuracy. First, we can determine if people were departing in unusual numbers. Here are the population numbers:
  • 1991: 3,404,049
  • 2001: 4,049,297
  • 2014: 4,657,947
The average annual population growth during the NDP era was twice what it's been under the Liberals:

All-industries job counts provided by BC Stats show:
  • 1991: 1,577,500
  • 2001: 1,920,900 - Average annual job growth: 34,340. Jobs per 1,000 population: 10.4
  • 2014: 2,278,400 - Average annual job growth: 27,500. Jobs per 1,000 population: 5.8

Unfortunately, the situation is worse than it seems since many of the jobs created in recent years are McJobs: low-paying, low-prestige positions that require minimal skills. In the last generation, new service jobs are more than double the number of new goods-producing jobs. The following graphs show the number of positions in wealth creating industries at two particular points in time.

Obviously this information is contrary to the bill of goods being sold by Tom Fletcher. He's not alone though. Gary Mason has referred to the BCNDP era as the "dismal decade" and various media members echo the concept. The late Ian Reid wrote that the Vancouver Sun had joined the BC Liberal militia and become "kind of their advance shock troops." They do this mostly by controlling the opinions expressed in editorials and news pages.

BC Liberals have courted the media assiduously and they use financial and other rewards to ensure loyalties. In addition, they employ paid staff and volunteers to troll social media to advance Liberal talking points and denigrate opponents.

Liberal allies fund astroturfing initiatives. An example was Concerned Citizens for B.C., a creation of government supporters led by Jim Shepard for a year before the 2013 election. Here is an example of messaging from CCBC:
They [NDP] took us from having one of the richest provinces in the country, where we were one of the strongest economies, to the absolutely worst economy in the province... to the point where we were on welfare...
Of course, in politics today, negative advertising and controversial claims are standard procedure. It is unsettling though when journalists become partisans, shaping reports to favour one segment of the political spectrum. It is common for reporters to repeat statements made by politicians without concern for accuracy or balance. Lies go unchallenged as if they are truth. A particularly odious example was published in Kelowna's Daily Courier, a publication owned by an ex-convict who was jailed for fraud in the USA.

One must not underestimate the destructive potential of publications serving cities and towns outside the lower mainland. Properties owned by Black Press, Glacier Media and Continental Newspapers are seen by more citizens than the big city dailies and generally, their pages reflect the interests of three very wealthy men: David Black, Sam Grippo and David Radler. Because there are few alternatives available and populations are spread widely, stories that are biased or inaccurate are more likely to go unchallenged.

Columnist/reporters like Tom Fletcher find a happy home in their workplaces. They are willing to pervert lofty ideals of journalism to serve the owners' ideological purposes and to preserve their own places in the effort. Too often though, truth is the victim.

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Hey Tom Fletcher, whose energy policy is nonsense?

The work of Tom Fletcher is a subject today and the article about agenda-driven journalism is drawing large readership. The Black Press writer offered a defence to one reader today. In it, he claimed I was offering selective quotes. He didn't saying I was inventing, just selecting. A previous exchange may cast further light on our respective positions. The following was first published in July 2014.

In the article "Unparalleled, indeed," I quoted from an item written in 2011 by Black Press proselytizer Tom Fletcher. In it, he
"lauded Gordon Campbell's "long-term strategy to export hydroelectric power" and he called John Horgan the champion of doomsayers. Fletcher wrote of "evidence that current NDP energy policy is nonsense."
Reader Merv Adey drew Fletcher's attention to this quote with:
Demonstrating, at the very least, poor arithmetic skills, Fletcher responded:

However, his was not a convincing answer since the International Energy Agency and the financial media had been reporting on a natural gas glut since 2008, three years before Fletcher tapped out his words. Besides, oversupply of electricity in the Pacific Northwest is not explained so simply. Respected energy expert Robert McCullough produced a report last winter that paints a more complete picture. It is a picture that suggests the policy that led to $55 billion worth of BC Hydro commitments for high cost private power was true nonsense in a world where electricity has been available from our neighbours for a fraction of what BC pays independent producers.
"He found there is regularly so much electricity available in the Bonneville Power Administration network that it can't sell it all.

"In fact, McCullough found, in the past two years, the market has been so oversupplied that Bonneville regularly paid customers to take electricity off its hands.

"There are a few reasons why energy prices have fallen so low. Two consecutive rainy years have put plenty of water behind the dams. Energy companies continue rapid development of wind farms, which have become more competitive in the cost of power..."
I reminded Fletcher of another of his inaccuracies, one from 2012 that demonstrated his lack of competence to report on provincial energy policy. He wrote,
"Natural gas replaced forest products some years ago as B.C.’s top commodity revenue stream, helping to keep the lights on in B.C. schools and hospitals."

Again demonstrating discomfort with calendars, the response of David Black's favourite pundit was a non sequitur:
Actually, Tom, it was two years ago you composed that misinformation and you've not corrected it since. And, aren't you one of those writers who likes to claim that BC was in the political and economic dark ages before May 2001? Heck, that was more than ten years ago. By the way, natural gas is not BC's top commodity revenue stream and here are the gas royalty numbers, drawn from Ministry of Finance documents,

Remember too that oil and gas rights sales had gone softer than a leaking balloon before Fletcher made the claim that gas was keeping the lights on in schools and hospitals. Of course, if Fletcher had his preference, lights would not be needed in public schools, but that's another story.

I don't often read Fletcher's work but I have seen enough to know he is a right-wing ideologue. Apparently, he's one who doesn't let fact get in the way of strongly held opinions that he wants to share with readers. I closed the Twitter conversation with this:

In preparing this, I looked at a number of items written by Tom Fletcher. I had forgotten his role in newspaper publisher David Black's campaign against the Nisga'a Final Agreement, a treaty initialed in 1998 and given legal effect by Parliament in 2000. Black was opposed, strongly opposed, to recognizing aboriginal rights and he ordered his entire newspaper group to give that message to readers. Many people thought that put editors in a position of conflict, perhaps forgetting that Black suggested any editors who were opposed could submit a letter to the editor for consideration.

Fletcher did not have difficulties with an instruction from the boss. In a letter to the Vancouver Sun, he said,
"What other editors and I were forbidden to do was to spend the owner's money and space to counteract his initiative on the treaty by commissioning contrary viewpoints. I have no trouble accepting that."
Of course, this presents a karmic situation. Some years ago, Black and his minions hated the very idea of negotiating treaties with First Nations. Today, they are big supporters of building Northern Gateway and other pipelines to transport fossil fuels across the BC wilderness.

What stands in the way? The consent of First Nations who, in the absence of treaties, have Supreme Court affirmed rights to control development in unceded territories.

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Sunday, February 22, 2015

Poking through transit costs - UPDATED

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Saturday, February 21, 2015

British satire continues

I enjoy Charlie Brooker's Weekly Wipe, a BBC Two satirical program now in a third series. BBC TV is not readily available in North America without use of a proxy server but programs sometimes appear on YouTube. If this short audio clip catches your attention, watch the entire show below. The segment involves comedian Diane Morgan as "Philomena Cunk" making a serious effort to learn about climate science. She says,
"If we keep discussing climate change at such an alarming rate, scientists predict the world's stock of weather footage will be exhausted by 2050..."

If you like me cannot understand time, spend more time with Diane Morgan. It's a complicated topic, as anyone who owns Stephen Hawking's "Brief History of Time" understands. His was the best-selling-least-read science book in the last quarter century.

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Frugality, thy name is not TransLink

Opinion researchers Insights West concluded in 2013 that an increase in sales tax was the least favoured funding option for TransLink. Nevertheless, that's the option preferred by most municipal politicians and the province. They might theorize that a number of small drains in our pockets will be less noticed. Also, they see the 0.5% transit sales tax as a starting point that, once established, can be easily raised, as they've done with the various other transit taxes. After all, when Canada's Conservative government introduced the temporary 1917 "War Tax Upon Income" bill, the rate for most people was under 5%. We know how that's gone.

Recent polling shows a decline in support for the transit funding referendum and I surmise that has much to do with rather cavalier attitudes displayed by proponents. This recalls the HST referendum when groups that stood to benefit financially stood on one side while the lunch bucket crowd stood on the other side that that had to vote yes to say no to HST.

Supporters of the hated tax were well funded by governments and business groups and opponents relied mostly on social media and low-cost communications. In 2015, the transit tax is being sold by politicians, business groups and labour unions - a formidable coalition - and the opposition is again centred in social media. One difference in the current contest is that the Canadian Taxpayers Federation, which approved of HST, aims to defeat the transit referendum.

While the CTF position is based on its small-government libertarian ideology, much of the dissent involves reform-minded citizens who perceive profligacy and incompetence in transit management. There is no better example than the 2009 decision to spend $100 million on a faregate project to combat payment evasion. Six years later, the budget has doubled, the project is stalled and TransLink is doing everything it can to hide details of the delays and failures. (Read Bob Mackin.)

Repeated Skytrain shutdowns led to the revelation that ancient Pentium computers using floppy disks were at the centre of the control system. Despite a crew of senior executives who shared over $200,000 in bonuses last year, TransLink had to bring in a $1,200 a day (plus expenses) consultant from Ontario to review operations. Another part of the response was to shuffle the jobs of a few executives. The people that had just been awarded performance bonuses apparently were no longer performing.

TransLink is spending millions on transit police but taxpayers wonder why an operation with predictable 7-day a week traffic flows routinely pays vast amounts for police overtime. They also wonder if individuals, having taken early pensions from other police forces, are double dipping when they earn 6-figure wages in their new police jobs and build additional pensions through benefit accrual rates well beyond those gained by most people with pensions through employment.

TransLink's board showed tone-deaf incompetence when it panicked over criticism directed at management and made a show of firing the $39,000 a month CEO and installing a $35,000 a month replacement, which meant they were then paying $74,000 a month for executive leadership. Moreover, the new blood was not all that new. Doug Allen moved from his job managing the rapid transit line that runs south to Richmond.

Perhaps TransLink should have looked further south; to Seattle, where they might have hired a CEO for less than half the price. Compare the rates of pay 140 miles away.

A comparison with America's second largest transit system leaves questions to be answered.

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Thursday, February 19, 2015

Norm Farrell with Ian Jessop, CFAX1070, Feb 19

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Effective management... of bonuses

Republished from April, 2012, proving not much has changed:

The marvellous managers of British Columbia's public service demonstrate an indisputable skill. Come hell or high water, they always manage to hit pre-determined objectives and thereby manage to trigger payments of personal performance rewards and bonuses. (And you thought the 'manage' parts of their job descriptions were about directing agencies and enterprises.)

If senior public servants were inspired by New York postmen, they might appreciate a credo like this,
"Neither rising fees nor declining services nor mounting debts nor program botch-ups nor conflicts of interest nor auditor's reservations shall stay these administrators from from the swift completion of their expected deposits."
All public agencies in this province publish high-minded statements that recount what ICBC calls the need for,
"high caliber leadership and the retention of critical talent and knowledgeable executive level leaders capable of guiding the company through a period of transformational change."
Indeed, we're big on transformational change. ICBC has been undergoing that for ten years, under the guidance of six different CEO's.

Paul Taylor, Mr. Can't-Fixit, left the Liberal Finance Ministry for ICBC in 2004. There he doubled his annual remuneration and was hauling over half a million when he departed under a little cloud, described by Black Press as,
"Controversy over vehicles ICBC repaired and sold - some with undisclosed crash histories to the unsuspecting public and other better buys to ICBC staff who trumped all other bidders in rigged auctions."
Despite that, Taylor collected a six-figure bonus on the way out the door and carried with him credits for his "Supplemental Employee Retirement Plan," to go along with his supplemental retirement plan from the provincial government. These plans are for "preserving the income replacement objective for higher income employees." The most fortunate bureaucrats are able to stack pensions from multiple public sources, leading to retirement incomes far higher than their highest paid employment. In that vehicle trading and repairs scandal of the Taylor years, ICBC paid over $800,000 in severance costs to employees fired for involvement in the questionable practices.

Despite years of management targets met and bonuses paid, ICBC found itself needing to pay $26 million in severance to eliminate overstaffing of 2012. Departing executives responsible for hiring too many employees shared $2 milion for the inconvenience of no longer collecting annual incentive rewards for mythical targets met.

This week, after a whistleblower forced it into the open, ICBC revealed that hundreds of thousand of drivers have been charged incorrect premiums. Check Bob Mackin's work for the detail.

Some may already be wondering how all senior executives of ICBC can manage to earn substantial non-salary remuneration each year while the company continues to show evidence of incompetent management. This latest scandal dates back to 2008 and ICBC's five most senior executives collected over $5.1 million in bonuses and other non-salary compensation between 2008 and 2012.

Readers should not be surprised that Paul Taylor was back at ICBC as Chairman, only to depart suddenly a few months ago, three years before his term of appointment ended and before news of the latest difficulties leaked to the public.

Rest assured, more than a year from now, when we get the executive compensation reports for 2014, payments of executive performance rewards and bonuses wil remain undistubed and the ICBC Board of Directors will continue to be a resting place for beneficiaries of Liberal patronage. This is the model that got BC Ferries where it is today.

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Wednesday, February 18, 2015

Oh, what a tangled web we weave...

I will comment about BC Budget 2014 after more study but I've read a few reports from media stenographers. Studying detail takes more time than rewording notes issued by the gaggle of Liberal flacks paid for by munificent taxpayers. One Globe & Mail report, written by the father of an executive assistant in the Ministry of Jobs, Tourism and Skills Training, is titled, "How B.C. balanced its books by controlling health-care costs."

Credibility of the piece is revealed by its first sentence,
When B.C. Premier Christy Clark made debt reduction an early priority of her government...
Priority? Maybe this writer has been spending too much time investigating new enterprises in Washington and Colorado. Either that or he's intentionally misleading readers.

When Ms. Clark became Liberal leader, provincial debt was $45 billion. In Tuesday's budget documents, it is forecast to exceed $70 billion within 3 years. In addition, under Clark, contractual obligations of the province grew by $23 billion between 2011 and March 2014. These commitments include hospitals, schools, roads, bridges and rapid transit financed with private-public partnerships as well as commitments to purchase private power, which this business-wise government resells at a loss.

The column continues,
It is the fourth consecutive budget in which the B.C. government has been able to achieve this goal, which has helped put it in a position to not only balance its books – for the third straight year – but also begin paying down overall debt.

...The province’s debt to gross domestic product ratio – the number credit rating agencies really keep an eye on – will hit 17.4 per cent this fiscal year and is forecast to decline to 16.6 per cent by 2017-18. This compares to a debt-to-GDP ratio of 54.3 per cent for Quebec and 39 per cent for Ontario. It would appear there are no immediate threats to B.C.’s plum Triple-A credit rating.
Here, the columnist is repeating Liberal puffery. The percentage is not calculated on total provincial debt, nor is de facto debt included that arises from public-private partnerships, where infrastructure is financed privately and government is obliged to pay over time, as it would with conventional financing. Undeniably, a large portion of contractual obligations ($103 billion a year ago) should be included to calculate an accurate ratio of debt to GDP.

The column applauds material savings in Pharmacare and attributes those to use of generics and lower drug prices. Long time users of prescription drugs in BC are aware that the "Low Cost Alternative" (LCA) program was introduced in 1994, when the Premier was Michael Harcourt. Contrary to Liberal talking points, there has been no recent conversion to generic drugs. Mandated interchangeability has been with us for more than a decade.

Not revealed in this article is that government is using an administrative method that reduces its Pharmacare costs - and drug costs of private insurers - but requires insured consumers to pay more out of pocket. This is done by setting prices that Pharmacare will pay for drugs below actual market prices faced by consumers. The excess must be paid. Government is relieved; private insurers are relieved; patients, regardless of ability-to-pay, are burdened.

Additionally, certain drugs that were covered a while ago under Pharmacare, and by private insurers that have me-too policies, are now excluded from coverage without Special Authorities. Since doctors expect to be paid if they negotiate with Pharmacare for a patient, there is a chill on applying for special coverage. Even if a physician requests Special Authority, it may not be granted. For some prescriptions there is no coverage. The decision is a financial one in Victoria, not a medical one in the doctor's office.

By example, Pharmacare believes that over-the-counter products, which are not covered, are appropriate for certain conditions. Again, the decision is made by bureaucrats, not by physicians.

So yes, government saved big money in Pharmacare. So did private insurers. The losers though are people dependent on prescription drugs, many of them elderly with limited financial capacity. Liberals believe this is as it should be, that citizens suffering hardship deserve minimal attention.

I searched for indicators this article was sponsored content but found none, which leaves the conclusion: the columnist is attempting to deceive for his own reasons or he is not competent to write about financial matters. Either way, the Globe and Mail deserves censure.

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Monday, February 16, 2015

Executive sweet

Thousands of BC government employees lost jobs to privatization and service cuts. Even more lost income through reductions in employment and pension benefits and, with efforts to reduce public services continuing - over 1,000 jobs gone in the last fiscal year - job security is scarce for British Columbia's civil servants.

There is however, one class of government employee that has done remarkably well. It does not involve nurses, paramedics and other vital healthcare workers. Nor does it include professional staff who should be working in natural resource, environment and finance ministries, nor school teachers who have been a favourite punching bag for a Premier who sends her child to an expensive private school few citizens can afford.

It is the management class, a small group of public servants, and one that is treated royally. Holding down directorships and other appointments that provide separate remuneration, some top earners only work part-time for British Columbia.

The United Kingdom's High Pay Commission examined trends over 30 years and cited the example of Barclays, where top pay is now 75 times that of the average worker. The commission concluded that rich ancillary rewards are now a routine part of executive pay rather than dependent on performance. Among the driving forces:
"human nature, aspiration and endeavour are seen through a prism of self interest, or as some would put it "greed" as ever larger rewards are required to generate performance from individuals at the top of companies whose predecessors but a generation ago did the job for a tenth of the pay.

...As pay escalates for those at the top it creates a new point of comparison – a new norm. Executives look to finance,finance to private equity, and private equity to footballers – each proclaiming the other is where the problem lies.
Yet, research demonstrates little relationship between pay and performance. The notion of corelation is built into the philosophy of management and unquestioned because decision makers and overseers are almost exclusively drawn from groups who are beneficiaries of the mantra. As in a game of playground leapfrog, people take turns advancing forward. This self reinforcing cycle ratchets up executive compensation. According to business writer David Bolchover,
It's not a manifestation of capitalism, it's a corruption of capitalism. People are creaming off the benefits without taking any risk. It's entirely right that people who improve the economy and people's lives and take risks get well paid, but these people are not taking risks and getting a huge pay packet based on a myth.

In British Columbia, pension funds create an unprecedented pool of public capital: about $115 billion. But, there is little oversight and no fund placements or guidelines for investment are subject to citizen review. Members of the legislature pay zero time evaluating investment practices and philosophy and, given the absence of independent review, the potential for personal gain and misuse of funds is significant. bcIMC invests in fossil fuels, tobacco, deadly arms, gambling and companies involved in criminality and unethical practices.

In this blog, I've pointed out repeatedly that executive salaries and administrative costs of the Washington State Investment Board are about one-third of those paid by bcIMC. Over time, particularly when currency exchange gains are removed, the American agency has had superior results. (From 2011 to 2014, bcIMC's American dollar investments increased 15% by exchange gains alone.)

As you scan the list of payments to bcIMC executives, consider the BC government's financial treatment of other public servants. Paramedics, for example, look forward to five years of annual wage increases that average about $7 a week while, 20% of bcIMC staff averaged raises of $800 weekly and as much as $4,000 a week, in each of the past five years, during a period of so-called restraint.

Consider also if bcIMC is an out-of-fashion old-boys club. None of the six highest paid people are female and only seven of the top paid 40. Yet their Annual Report paints a different picture. The "global governance team" is pictured as one man and five woman. In the words of Phaedrus, "Things are not always what they seem..."

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Friday, February 13, 2015

Sales tax not only way to pay for public services

CCPA Budget Submissions

Natural Resource Royalties Reform, Iglika Ivanova, Canadian Centre for Policy Alternatives, October 2014
BC used to collect well over $1 billion per year from natural gas royalties, but over the last five fiscal years these averaged a mere $330 million per year. The tax/royalty regime for LNG put forward in Budget 2015 should place more emphasis on achieving public benefits before signing away the rights to this non-renewable, publicly owned resource. BC should also collect more from companies using our water and forest resources.
The decline in revenues from natural resources is even worse than stated by CCPA since government has been building an unrecorded liability to gas producers that will offset future royalties. The amount stood at $1.2 billion at March 31, 2014.

In addition, direct expenditures by the gas ministry went up by 900% between 2008 and 2014 so the net budget contribution from natural resources is significantly reduced. Regular readers of Northern Insight will not be surprised by these numbers. We've been offering this information for some time. It is drawn from BC Government documents and the numbers are indisputable.

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Thursday, February 12, 2015

Horgan with Jessop, CFAX Feb 12

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The entitlement mentality

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Monday, February 9, 2015

Pray, don't pay

During famine of the 19th century, Irish people dying of starvation were told to pray for God's help while traders loaded ships to carry food to England. Referring the poor to God cost the elites less than would the provision of food. Some weeks ago, Stephen Harper asked Canadians to pray "for the brave men and women in uniform." I see a parallel to events that moved my ancestors across the ocean from Ireland to Canada.

The Harper Government has been happy to spend money on symbols - $28 million to commemorate the War of 1812 - but less willing to spend on supports for veterans, the men and women who served in the Canadian Forces. Stephen Harper likes to play military dress-up but he presides over armed forces that have too few financial resources to operate its obsolete equipment effectively.

The Prime Minister recently accused Justin Trudeau and his party of holding "a deep distrust and, frankly, dislike of the Canadian military." However, it is Harper, not Trudeau, who has been holding the purse strings for nine years. If we pay less attention to words of politicians and focus more on their actions, a more accurate picture emerges.

Based on numbers reported by Stockholm International Peace Research Institute, Canada's military spending, as a proportion of gross domestic product, ranks 20th among NATO member countries. It was 1% in 2013, the lowest level of 64 years reported. During Pierre Trudeau's years of leadership, Canada spent 1.9%, almost twice the proportion of today. Under Brian Mulroney, it was 2% and in Lester Pearson's day, 2.9%.

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Saturday, February 7, 2015

Readers speak

I had planned today to relate a story from a few years back, about what might have been rockets passing just beneath the helicopter I rode on a harrowing flight into Victoria's inner harbour. A time before that, I looked down the tubes of mortars on a barge near Sunset Beach, hours before the sky over English Bay erupted with a frenzy of intense explosions and the sulfuric smell of black powder settled over the section of followers I led into battle that evening, seeking a beachhead to regroup and consume rations of food and precious liquids.

However, after reading Persey's response to Lew in an earlier story, I was amused and felt less inclined to dwell on my own intrepid adventures.

In comments to the article Politics of opportunism:

The ghost of Charles Ponzi walks the halls of the BC Liberal caucus but Alfred E. Neuman is alive and well in the corridors of the BC Press Gallery.
Best single line written in a blog in over a year. Bears repeating. Regularly.

* * * * * * * * * *

After North Van Grumps reminded us in comments of Moxie, another icon of earlier days, I found the picture below. And no, it really is Moxie, not someone leading the last BC Liberal campaign. This was the cover of issue no. 51, December 1959, which came out when I was an avid reader of editor Al Feldstein's Mad Magazine.

By the way, according to Urban Dictionary,
"There are five separate pronunciations for "potrzebie," all of which are wrong.
It was a word used pretty much without rhyme or reason.

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Thursday, February 5, 2015

Politics of opportunism

In a Times Colonist Op-Ed, Bercove, Madden and Coste wrote,
We have the choice between trying to build an industry of uncertain benefit based on a finite resource that is guaranteed to increase our contribution to the climate crisis, or rebuilding an industry that could provide livelihoods on a potentially infinite basis, while preserving forest resources and mitigating climate change.

Why on Earth would we ever choose the former?
They may wonder why Liberals disregard forestry and divert attention to liquefied natural gas but this is simply politics of opportunism.

The 30-year timeline for Christy Clark’s LNG reverie means that present day politicians will be long gone before success or failure is determined. On the other hand, had they committed to rebuilding the forest industry, the results would soon be measurable through production, employment and sales statistics.

Given the paucity of capability within Liberal circles, success would be unlikely and accountability would be imminent. The alternative to real industry had to be an imaginary one. Liberals’ monumental pretense of $1 trillion in LNG business is like JFK’s more sincere promise in 1961 of
...achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to the earth.
Eight years and two presidents later, Neil Armstrong took one small step for man. Regardless of whether the landing ultimately succeeded or failed, Kennedy’s undertaking served its political purpose because it was made ten days before the President’s 1961 Vienna Summit meeting with Nikita Khrushchev.

In British Columbia, a heavily subsidized industry might stand opposite to the province's long-term needs but the LNG and Prosperity Fund announcement served its political purpose. Clark made her declaration weeks before Lt.-Gov. Judith Guichon signed 2013 writs of election.

I’ve demonstrated before that natural gas extraction has ceased to be a major contributor to the public treasury. In 2014, cash receipts from royalties and rights sales were less than monies spent by the Ministry of Natural Gas Development. Petroleum and natural gas rights brought in $383 million in the last calendar year and 2015 started slowly with the January tender gaining less than $2.3 million. Sales of rights are recorded as revenues over nine years so only a fraction of those sums offset ministry costs.

At some point, the LNG fantasy will be dealt with; like BC Hydro rates, not until after the 2017 election. Wednesday, Justine Hunter, the Globe and Mail’s Press Gallery stenographer, reported this:
Hydro rates were almost frozen in the lead-up to the 2013 provincial election by order of the cabinet. Months after the election, rates were again suppressed by the government. But the Crown corporation’s growing debt and its need to upgrade aging infrastructure would lead to significant rate hikes if the regulator was allowed to take charge now, Mr. Bennett said.
For a moment, forget the debt issue and the aging infrastructure. They are not incidental but the business plan that has new power providers paid more than the sale price of electricity makes real business people shudder. Ms. Hunter didn't bother to explain that element.

Using a favourite word in Victoria, the LNG and electricity schemes are not sustainable. The ghost of Charles Ponzi survives in the BC Liberal caucus.

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Wednesday, February 4, 2015

Easy road to nowhere

February 4, The Tyee published an article by Torrance Coste: Raw Log Exports: A Made-in-BC Problem that's Only Getting Worse.

Work here that relied on reports from BC Stats helped Torrance create his article and that's fair because part of my writing was inspired by an Op-Ed he co-wrote, published in the Times Colonist before Christmas.

This subject deserves attention. You can start by scrolling through earlier Northern Insight articles about log exports.

The forest industry is a vital part of British Columbia's foundations. Until the 21st century, provincial governments recognized its importance. It was not just the loggers of Goat Lake, the sawyers of Tatloyoka, coastal tug deckhands or tens of thousands of others directly working in forestry. It was also the people employed indirectly - machine fabricators, sawmakers, cable and chain manufacturers, log and lumber traders, railroaders, truckers, mechanics, welders, researchers, administrators, etc. - that gave our province a wealthy middle class.

Globalization changed the economy we once knew. Financial Times columnist Edward Luce wrote,
The middle-skilled jobs that once formed the ballast of the world’s wealthiest middle class are disappearing. They are being supplanted by relatively low-skilled (and low-paid) jobs that cannot be replaced either by new technology or by offshoring – such as home nursing and landscape gardening. Jobs are also being created for the highly skilled, notably in science, engineering and management.
Had Luce's eyes been focused on British Columbia he would have added logging to the category of jobs that cannot be moved offshore. However, this thriving segment of industry delivers much of its raw product to tidewater for export. We can easily understand the reasons:
  • Sawmills and manufacturing facilities require significant investments in property, plant and people. The shortest route to immediate profit is export of raw logs. It’s what I call “the tyranny of quarterly reports.” Managers are concerned with immediate results rather than creation of a strong business that will prosper over time.
  • Various factors mean that mills have high fixed costs while logging has low fixed costs. Investors can ramp up a large logging operation for a few million dollars and do it within a year. Mill owners need permanent, serviced land and tens of millions of dollars. The time for plans, permits and construction will be years. As a result, the easy road for timber rights holders is log exports.
  • Highly automated mills are capital intensive. The BC industry has underinvested and is less efficient than it could be. This condition then “justifies” exports. Industry claims that BC cannot compete in manufacturing finished lumber products so the only choice is to ship logs elsewhere.
Today's government believes that serving the multinational corporate agenda is Job One. There is no political vision for the future, no desire for British Columbians to be more than hewers of wood and drawers of water. If it were different, government would decide to promote value-added efforts. However, that would displease influential people who profit from the present system. Again, the easy road is to export unprocessed resources.

The tough choice, although the right one for the long term, would be to ensure substantially more value-added activity in BC. Liberals are particularly devoid of vision because their only real expertise is selling. Like prostitutes and drug dealers, they aim for quick scores. Their disregard for wood industries and their thoughtless embrace of LNG fantasies prove this true.

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Monday, February 2, 2015

A camel is a horse...

Voters in Metro Vancouver are asked to approve a regional increase in provincial sales tax to generate an estimated $250 million a year for TransLink. The vote is an advisory one, not binding on the province but it fits the Liberal preference for regressive taxation so the province won't be an obstacle.

In December, politicians were saying the new tax "will be separate and distinct from PST" but in January, they were saying it would be fully harmonized with the provincial sales tax. This recalls a lesson we've learned before: political promises are valid from the time given only until they are deemed no longer valid. Keep that in mind when someone says, "It's only half a percentage point." It will be half a point, but only until it is not.

The list of projects promoted by the Mayor's Council is watermarked "to be updated" so little is certain. Some items will be available to promote a future reach into the pockets of taxpayers. By example, the 2015 promise to increase peak frequency of SeaBus to every 10 minutes was first made in 2005 when TransLink was promising an expanded marine transportation system, including downtown passenger ferry service from Bowen Island and West Vancouver.

A Pattullo bridge replacement is featured but, of course, the crossing will be financed with tolls. Not included is a budget for replacement of Skytrain control and power systems, which are now using outdated technology with failures resulting in painful service shutdowns.

The sales tax proposal would be a large transit tax grab but TransLink has been steadily increasing its take. Since the referendum ask is not even sufficient to pay interest on proposed capital expenditures, there are other shoes that must drop to satisfy funding needs.

The vote would be useful if it encouraged a frank discussion of transit planning and management but I'm not sure that is happening. It seems municipal officials have only one solution in mind and that is to throw more money at problems. First, we ought to be asking if the existing sums are well spent. The answer, quite obviously, is no. Translink's passenger counts have been flat and it's costs are rising. This suggests need for circumspection and re-examination.

When I look at the organization of Translink, I recall the cautionary aphorism, "A camel is a horse designed by committee." The referendum is about giving substantially more money to the committee.


A 2012 consultants report was prepared for consideration of TransLink’s 2013 10-year plan. Some excerpts:
[TransLink] continues to lag other systems in cost efficiency, cost effectiveness and service productivity. with similar population densities appear to be attracting more riders per unit of service than TransLink. This observation is relatively unchanged over the past five years in spite of the large increase in rail rapid transit...

TransLink’s performance relative to the four Canadian transit peer systems has also deteriorated. The declines are across the board in all indicators. As a result, a costly service has become even more expensive. Cost increases have more than offset increased revenues from the fare increase and cost recovery remains low...

...Internal trends reflect increasing costs and declining productivity in both labour and equipment utilization as well as high overhead. Internal change in how service is delivered has not kept pace with external changes in customer demand and rail system expansion as well as technological advances in vehicles and equipment.

...analysis shows TransLink’s [bus] boarding per hour have dropped to the lowest level in 20 years. ...As a result, cost efficiency and effectiveness have both declined. Labour utilization declined and unproductive time remains high. Both stand out as areas needing improvement...

The analysis has revealed that TransLink and CMBC corporate overhead costs are high relative to other Canadian peer systems. Internal analysis has also shown that their rates of growth have exceeded service hour growth and that TransLink’s corporate overhead cost as a percentage of total revenue has risen...

Compared to Canadian peers, TransLink exhibits an abundance of equipment and staffing levels that help to explain its generally higher costs and lower cost efficiency and effectiveness than most of the peers, even after taking into account the challenges of its large service area. Internal trends reflect increasing costs and declining productivity in both labour and equipment utilization as well as high overhead...

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