Sault Ste. Marie seeks economic development vision
Essar Steel Algoma, Sault Ste. Marie
Sault Ste. Marie is not alone in its struggle to grow and diversify.
But it's facing a tough uphill battle. Some believe the city may be undermining its own strategic goals by taking a hands-on approach to economic development, while others counter systems of the past have not been successful and change is necessary.
The views and approaches of how to meet the same end result are diametrically opposed and could lead to internal conflict at city hall. City council's decision to create a community development and enterprise division, taking on some of the responsibilities of economic development, flies in the face of its own consultant's recommendations. It also splits limited financial resources, adds to potential increased duplication and goes against expert theory that politics should be removed from economic development in order to be successful.
Mayor Christian Provenzano disagrees. He contends the city has an important role to play with economic development and believes that as leader of the community, it's his role to bring people together and be actively engaged.
When first elected, Provenzano said he saw economic development as "disorganized" and something that needed to change.
"I don't believe people were working together as they should and I believe we needed a more holistic approach," he said.
MDB Insight, recognized as a leader in its field, conducted an economic development review for the City of Sault Ste. Marie. The final report to council last summer concluded that economic development needed to be streamlined. Merger of the Sault Ste. Marie Economic Development Corp. and Innovation Centre was recommended, along with the creation of a clearer, more defined memorandum of understanding that provides more clarity on performance measures.
While neither the EDC nor SSMIC were in favour of the merger, the two organizations examined reducing duplication.
Council chose to add a third layer of economic development, shifting almost $445,000 of funding from the EDC to its own community development and enterprise department.
The department was created to push a new strategic plan for the city and to take a more proactive role in economic development. It will assume the task of labour force development. It will also lead the implementation of recommendations penned in the community adjustment committee report.
Meanwhile, the EDC would maintain responsibilities for business retention and expansion, business investment, attraction and tourism.
The move, approved by council last summer, resulted in the sudden resignation of the EDC's CEO Tom Dodds.
"The relationship between the EDC and the city became frayed," Dodds said cautiously in a recent interview. "I think what you had was an unorganized web of ideas with no real clear or overall vision."
There's little doubt that Dodds took council's decision as a vote of non-confidence and ultimately stepped aside the day after the EDC's budget was slashed, triggering a restructured economic development plan.
"This council didn't seem to accept or recognize that the MOU could have been easily altered or changed to address council's needs and keep economic development in the hands of those who have the experience," said Dodds. "It was very discouraging."
The reallocation of 28 per cent of the EDC budget to the community development and enterprise services vision does not help the city's bottom line in the short or long-term, Dodds said.
"Barring any 'steep change' or an unanticipated significant positive turn of events affecting the city's economy going forward, Sault Ste. Marie will be faced by a steadily increasing municipal tax burden borne by a shrinking number of households limited in their capability to pay for it," he said. "Sadly, council's resolution focuses resources on addressing the symptoms of a weak economy, reducing its investment in economic and business growth and presenting itself as being better able to control the local economic agenda."
Provenzano views it as the opposite. He sees the city directly investing in the community's future and changing the process to achieve that goal.
Such opposing viewpoints are not unique to Sault Ste. Marie. It's an issue many municipalities struggle with repeatedly, local economic and political analysts say.
"This is a problem that is more common than one would think and it's certainly not unique to your community," said University of Toronto Prof. David Wolfe in a telephone interview.
Wolfe, a political science professor with expertise in local and regional economic development and urban economic development, said many communities have grappled with the issue of whether economic development should be handled internally or externally.
Some cities, like Ottawa and Toronto, have gone back and forth over the years, changing their name and attempting to give economic development a fresh or different look.
The argument that a wall should be drawn between municipal council and economic development, primarily because there are often deals brokered that municipalities can't - or shouldn't - be involved with in order to avoid any perception of favouritism or conflict of interest is a long-standing one, Wolfe said.
That theory is realized when economic development organizations ink deals like subsidized lease agreements to lure a company to the city and create jobs.
In Sault Ste. Marie, the EDC purchased Searchmont Resort about one month after the existing council took office. The move was made without council's approval, an expenditure Provenzano said shouldn't have been carried out.
Dodds counters the move was necessary to protect winter tourism and preserve the industry in Sault Ste. Marie.
"That's a very significant decision and one council should have been made aware of," Provenzano said.
He subscribes to the view that economic development falls under the municipality's jurisdiction and council's role is to drive its economic agenda forward.
Sudbury and North Bay have economic development staff within their municipalities and city engagement is paramount, he suggests.
"We needed a change. Some people that thought the status quo was working well may not see this change as well received. I was not of the opinion that the status quo was working well," he said.
Dodds' view on who should be the driver of economic development lies somewhere in between: the municipality needs to set the stage for progress and development, but methods of going about creating economic development should be shouldered by the EDC with the support of the city.
A new Memorandum of Understanding for both the EDC and Innovation Centre is now in the draft stages and is expected to be completed and approved by council very soon.
Robert Reid, chair of the EDC's board of directors, said the new MOU will better define the roles and responsibilities of both organizations.
The city, he said, will be charged with the responsibility of ensuring the proper infrastructure is there while the EDC's focus will be the sales and marketing of the city as a great place to do business.
"There is a need for better clarity in the MOU so that we can hold each other more accountable," Reid said. "This document is going to be more specific than the previous one but the intent is not all that different."
Reid is careful not to provide his own opinion on the city's move to create its own economic development department. Instead, he said the city needs to move forward positively and describes the two units as a sales and marketing department with the city's role to oversee infrastructure - people, building and lands - and the EDCs task to market the city.
If that's the case, the aging demographics and declining workforce fall to the city's responsibility, something Provenzano wholeheartedly agrees with.
The current and projected decline affects the city's economic base and without intervention and significant community action, the decline will continue, Dodds said.
Studies show that Sault Ste. Marie is in the midst of a decline, and one that is projected to continue if there is no major intervention to change the trend and grow the local economy.
Ontario Ministry of Finance regional projections predict that the city's workforce and population will continue to significantly decline over the next five to 10 years. Dodds said efforts by the Sault Ste. Marie Economic Development Corp., to address this issue have not been encouraged by the city. Instead, the role has shifted to the city's new community development and enterprise services department.
The Conference Board of Canada outlook is slightly better. Its report released earlier this year concludes Sault Ste. Marie may experience "modest" economic growth in 2017-18 when compared to other mid-size cities.
That modest growth is pegged at 0.6 per cent in 2017 and 0.9 per cent in 2018, far below what growth projections are for much of the rest of the province and country. The conclusion was made after studying retail sales figures, housing starts, personal income per capital, unemployment rates, total employment, real GDP market prices and population, among other things.
A GDP under one per cent ultimately means the economy is flat.
Coupled with additional problems of the city's aging population and more people leaving the employment market, Sault Ste. Marie has greater problems filling available jobs with the existing labour supply.
"Sault Ste. Marie needs to see itself as an athlete, competing against other athletes. It should act like it is in a dead heat all the time. That's fundamental to economic development," Dodds said.
It is, Provenzano says, but the focus will lead from city hall, not the EDC.
Despite their differences, both Dodds and Provenzano agree that a combined effort needs to occur with the municipality's submission to Noront on the city's position to host a ferrochrome processing plant.
"That alignment is very much needed, especially for a project of this magnitude," Dodds said.
While the mayor has clearly charged the city department as the lead organization on the submission proposal, Dodds, who has worked in the economic development sector for 30 years, said success will only be achieved if the work is done in partnership with all the stakeholders, including higher levels of elected government representatives.
The municipality's role is to be a strong advocate for the community and the economic development corporation and the role it plays.
"Any EDC needs the full support of its municipal council if it is to be effective. The municipality's role is to take a step back, let others lead the charge and empower and engage its community to ensure it is working as a team. It must provide the confidence to the players, not control, in what they are doing," Dodds said.
Sault MPP Ross Romano has also raised concerns about being shut out of a process he believes all elected officials need on together for the betterment of the city.
Jason Naccarato, who recently stepped down as The Chamber of Commerce's president, also told city council that it wants to be a participant at the table and sent a message to council that debate is healthy and should not be stifled by only surrounding themselves with likeminded people.
Wolfe said there is no blueprint on how to achieve the best economic development results for a community.
The challenge, he said, exists when an economic development agency is established at arm's length from a municipality but receives funding from the city.
"If there is a council that doesn't feel they're getting the results they want, then city council wants to pull things back into the city," Wolfe said. "There is always a trade-off between flexibility and co-ordination."
The argument for an arm's-length agency, he said, is that it's more flexible and not tied to city bureaucracy. It also has the ability to be a little more creative or independent in formulating strategies "but in order for them to do that effectively, they've got to do it collaboratively," he said.
By pulling in some of the demographic and workforce responsibilities, Provenzano said the new MOU between the economic drivers will create a clear delineation of responsibilities.
"I've worked hard to make sure that the decisions I made are not only based on the best interest of the community, but the direction the community is going," Provenzano said.
Can he guarantee success? No, but it's worth a try, he said.
"I'm not sure where we are going to go in this direction but we know where we're going to go if the status quo stayed," he said.
Some onlookers view the issue as one of control - a situation where city council wants to take control of the city's economic development. However, a lack of understanding about economic development and the inability to delegate responsibility to those with experience in the field could result in negative effects for Sault Ste. Marie's economy.
Provenzano said staff will be hired with the expertise as required. He refers to it as growing pains and difficulty adapting to change.
Wolfe points out politics always inserts itself into economic development and can become more conflictual if the parties are not on the same page.
As a long-time resident of Sault Ste. Marie and a place he calls home, Dodds said he's concerned that economic development may be compromised and divided between the city and EDC, to the detriment of local citizens. The collaboration that Wolfe describes may be there in theory, but not always in practice, Dodds said.
Reid takes a different approach. He denied friction between the organizations. He said the relationship between the city and EDC is strong.
"We are collaborating on a lot of things. The recent Amazon bid is a recent example of us pulling together to move something forward," he said.
The Amazon project - submitting a proposal to lure the online giant to set up a second headquarters in the Sault -- may be considered farfetched by some, but one that has garnered the city, and certain people, national attention.
"At a time with this current economic situation, it's not something the EDC should be spending their limited resources on," Dodds counters.
Wolfe said municipal governments and economic development organizations need to work collaboratively if a city is to be successful. Even more importantly, one leader needs to emerge who can unite all sides and develop consensus.
That leader, Wolfe said, doesn't need to be a mayor or a CEO of an economic development corporation. In St. Catharines, for instance, it's the president of Brock University who leads the charge. Ditto in Hamilton.
In other communities, it may be the head of a Chamber of Commerce or a large business leader, he added.
The important thing is that debate be permitted but all parties believe in the same vision and work toward that vision.
"In order to be successful, that's hugely critical," Wolfe said. "I'm a huge believer in talk and you literally need people talking to each other and if they're not then you get this conflictual division. You need to create tables where all these different groups can come together and talk."
Jim Boniferro, CEO of Boniferro Millworks and chair of the Sault Ste. Marie Public Utilities Commission, said he's worked with Provenzano on the board for the past three years.
He describes the first-term mayor as having a community minded heart and spirit and has been instrumental in helping the PUC board develop its strategic vision.
"He wants to see business growth within the PUC and in the community at large," Boniferro said.
From his experience, Provenzano is open to the ideas of others but certainly does his homework and isn't afraid to present his own point of view.
"Sometimes a perception is just that, a perception because of the role they are in," Boniferro said. "I may be viewed as a likeminded person to him but we can still have a hearty discussion whether we agree or not."
Boniferro believes Provenzano can bring community and economic development together.
"This city has been at a crossroads and has had to make very difficult decisions with no room for error. We've been able to avoid those wrong decisions," he said.
Sault MPP Ross Romano, in his short time in office, has also had a difference of opinion with Provenzano on what could lead to a huge processing plant in the city.
The two elected officials have a difference of opinion about how to ensure Algoma's CCAA proceedings don't negatively affect the city's submission to Noront about hosting the ferrochrome plant.
Provenzano has made it clear the submission is a city responsibility and that other stakeholders will be called upon when needed.
Romano, who has been doing his own advocating for his constituents, wants process to be more inclusive.
Some believe that the vision or direction is to come from the community adjustment plan recommendations as that process unfolds.
Reid said he certainly believes the EDC will have a role to play as the plan rolls out and the economic development and diversity pillar blossoms.
"This community has had its struggles but we hope for change and I think everyone is working hard to move (the city) forward," Reid said.
Provenzano has repeatedly said that it's the city that is responsible for the municipality and its residents and, as such, needs to have a hand in economic development.
He has told council that the city needs to take a more holistic approach to development and how it does things in order to compete with other municipalities across Ontario and beyond.
He believes the new structure will serve the city well, building a city it wants.
"We need to be focused and aggressive and we can't keep doing things the way we have been doing them," Provenzano said.
Based on the Conference Board of Canada's latest mid-size city report and demographics and workforce trend data that he is familiar with, Dodds fears that the community's population will continue with a downward trend if a future workforce isn't developed to sustain the operations that exist now as the city's demographics age.
"That really needs to be a priority," Dodds said.
In his view, it can be achieved in several ways. The city needs to encourage Algoma and the players to move the CCAA process to a conclusion and lobby the province and federal government for help to make that happen. Dodds believes that should have occurred a long time ago.
The city, EDC and education partners need to take a closer examination of future workforce needs and create an educational climate that gears individuals toward developing those skills.
"Manufacturing is our niche. We should be turning to the big manufacturers and looking at how they can grow with new technology, determine how to engage the educators, the learners and the funding partners to make sure all the boxes are checked off and everyone is moving forward along the same road," Dodds said.
Municipalities that have been successful at growing their economy all have had a council that engages, empowers and supports community based efforts, organizations and instructors, Dodds said.
"Mayor and council must empower and support community-based organizations and institutions with the capacity and mandate to develop and advance a community-based economic growth agenda, rather than being preoccupied with controlling or orchestrating local economic development efforts," Dodds said.
Provenzano says the city is doing just that.
"I've never been shy about having an opinion or a disagreement with other parties, but I've also been very clear that if I feel strongly about something I think we need to address, I have a responsibility to address it and we have," he said.
Dodds said politicizing economic development at the local level discourages economic growth and investment and will weaken the community's global competitiveness.
The next year will determine if the changes will net results. The new community development and enterprise services division will develop its budget to start the implementation of the community adjustment committee recommendations. All eyes will be on the third-party studies to determine if there is even the slightest shift in the city's demographics or workforce statistics. Real results will take time.
"This is not a tug of war," Provenzano said. "There are significant issues in the North that have to be dealt with and we will move forward together."