The Other Side of the Economic Argument

Posted by Dianne Kerr on July 6th, 2012 1:03pm

Is the Ajax mine really an economic boon to the community if examined through the lens of cost/benefit?   

Let’s look at the promised benefits first.  380 jobs are promised but there are no guarantees.  No one will hold the proponent accountable if that number of jobs do not materialize as they so frequently do not with mega projects.   How long will those jobs last?  Afton operated intermittently with long periods of layoffs. The extremely low grade of the Ajax deposit makes it more vulnerable than others to the fluctuations of metal markets.  It is likely that Ajax would not operate without significant periods of curtailed activity and employees on layoff.  The 380 jobs represent less than 1% of the  Kamloops workforce.  Not all of those jobs will go to local residents.  With the recent federal decisions enabling foreign workers to be hired at reduced wage rates, the number of jobs for local people will be even more questionable.  The United Steelworkers are currently fighting the subcontracting practices of Rio Tinto.  Subcontracting takes jobs from union members and creates a more transient workforce.  The substantially lower wages paid to subcontracted employees puts pressure on the current wages paid union members.  There is no guarantee that this will not happen at the Ajax mine if approved.  Abacus representatives who have made the proponent’s promises regarding workforce will not be involved in the operation of the mine.  KGHM with its past wage disputes with workers will be making the operational decisions.  Additionally, technology is replacing many jobs in the mining sector.  .The Ajax proponent has even acknowledged that conveyance systems will replace trucks in later mine life. Transfer pricing also allows services like engineering and research/development to be conducted in other countries but charged back to the company in Canada – lower taxes for the company and fewer jobs for Canadians.   So very few of the numbers of people living in Kamloops may actually benefit from whatever the jobs are that materialize from the Ajax operation.  We will all, however, bear the costs of the proposed mine.  Those costs may well include loss of future job opportunities from other potential employers.  Without the Ajax mine, we are benefiting from a reported 200 new jobs with the new Telus data centre.  The Q9 data storage facility is another newcomer to our City.  If Ajax is approved, employers who no longer see Kamloops as a desirable location will take their employment opportunities elsewhere.    

What will the tax benefit be?   The provincial and the federal governments (who are the decision makers for the project) will take the lion’s share of the tax dollars.  They will take $760 million compared to the $110 million over 23 years for the City.  The City’s portion annually will average $4.7 million.  The total City tax levy in 2011 was $130 million so the projected tax for Ajax is just 3.6% of that total.  If my taxes are $1500 per year then the addition of Ajax revenue to the tax levy would potentially save me $54 a year.  From this 54 dollars, I can expect to deduct my increased hydro rates as the provincial hydro subsidy to this mine and the others approved in BC will mean rate hikes for residential and small business taxpayers.  What remains of the $54 does not account for any additional costs the City might incur as a result of costs to its infrastructure related to mine operation.  For example, the dewatering system presently used in Aberdeen may be unable to handle the water recharge into the soil from the mining operation.  This may precipitate the more costly solution of a $30 million tunnel.  If this happens and the City has to pay for the tunnel, I may actually be required to pay more taxes because the mine is here.  Additional infrastructure costs triggered by the mine (like road maintenance and rebuilding) will also be added to the City tax bill.  As a final comment on taxes, consider the frequent request for tax breaks that are often granted to large industrial companies when market conditions worsen. The projected tax benefit to the City is not a guarantee and in fact, our taxes may go up to accommodate costs associated with the mining operation.  

What is the “spin off” benefit of the mine?  Wage spending in Kamloops will depend on whether employees are local or contracted, in which case wages could be spent elsewhere.  Some mine related suppliers will certainly benefit from spending on materials and services if KGHM purchases locally.  However, other small business owners believe their businesses will be hurt.   Some fear they will have difficulty attracting and keeping staff.  Others fear they will lose customers who no longer want to visit or live in this City.  Relocation of retirees from the expensive lower mainland and other locales has begun to inject the economic benefits of their spending into the community.  Kamloops with an Ajax mine will not attract new retirees and will undoubtedly lose many of those we do have.  Their cash injection will be lost to the City.  

What are the costs to Kamloops if the mine goes ahead?   The list is long.  The visual impact of huge waste piles at the gateway to the City has a cost.  It affects the way we are perceived and will affect decisions that are made that will also affect our economic health both short and long term.  Will tournaments, special events like the Senior Games and their attendant revenue generation ($11.7 million annually from tournaments) continue to come to this City?  Will other businesses cross Kamloops off their list of preferred locations?    There is a cost to cutting off growth in the area intended for City expansion.  Also, the costs may be great in taxpayer terms if soil stability issues present us with a $30 million bill or road rebuilding requirements increase.  There will likely be costs to property owners as well.  The experts in economic issues have attached property devaluation amounts to a number of factors including those related to noise, light, dust, visual impact etc. all things that will be impacted by the mine in some parts of the City. 

Any economic analysis needs to consider risk elements.  Those risks include health risks which are difficult to assess at present since the proponent has been unwilling to provide any heavy metal assay results.   We do know that all mining activities release toxic materials into the environment, materials that can seriously affect human health.  There are also safety risks when a company reported as one of the worst polluters globally and inexperienced in open pit mining develops such a huge open pit mine and uses vast amounts of water in an area with soil stability problems.  Safety risks are compounded when the location is as close as 1.5 km. from existing housing and 1.25 km from an elementary school.  They are further compounded when the City has no control since the mine is exempt from any of its bylaws.  Monitoring and enforcement by the senior government will be the only control over the mine operation and that has been described by the B.C. Auditor General as inadequate.  So if something goes wrong, the question is who pays?  The Mayor of Sudbury has some experience with this and describes his role as that of a “beggar” seeking funds to repair the damage left by mining operations.

The biggest cost to the community will be the loss of what Kamloops hoped it would be as a City and  the loss of those things that we value most as our “quality of life” – things as basic as the air we breathe, the quality of the groundwater that makes its way into lakes, creeks, and eventually the river, the amount of fog and haze we are prepared to live with, and for some parts of the City, even the amount of sunlight that can be enjoyed once the shadow from gigantic rock piles is in place.  “ Making Kamloops Shine” (our new motto) will be virtually impossible to do if a giant mine is located within the City. 

Kamloops does and can continue to encourage and support development, without subscribing to the dangerous principle of development at any cost.  Yes, there will be some benefits if the mine goes ahead.  The two senior governments gain $33 million annually in taxes divided between them but much of the B.C. share will be negated by millions of dollars in hydro subsidies given to the mine.  In fact, B.C. taxpayers have already paid a $3.2 million subsidy to Abacus for exploration costs.  KGHM Polska will certainly make millions in profits, the customer in Asia will make millions processing the exported metal. ALL of those benefits will materialize far away from our community.   These beneficiaries will bear NONE of the aforementioned costs of the project.  ALL of those costs will be born by the City and its residents.  What do we get out of it?  A very few people of our 87,000 population will get jobs for an unknowable period of time, some suppliers may get boosts to their business, real estate agents may be busy for a time selling the homes of the many who will leave the City (led by the doctors, other professionals and retirees who will find it easiest to relocate) and a taxpayer like me may save less than $54 or more likely, may pay even more in taxes if infrastructure costs to the City soar.  It is not a lot to offset the immeasurable costs of short and long term damage to this community.  This is not a good deal for Kamloops. The costs to our City are just too great, both in human and environmental terms.   What is truly sad is that those costs will go unquantified because the assessment process does not require a high level socio economic study.   

Dianne Kerr is a former Kamloops City Councillor and member of the City planning commission in Kamloops, as well as economic development chair. She also served 2 terms as a TNRD Board Member, 5 years on the BC Environmental Appeal Board, 11 years on the Open Learning Agency Board, and 5 years on the Board of the Knowledge Network as a Member of the Canadian team assisting in the establishment of Environmental Impact Assessments in Thailand.


There are currently no comments on this blog post.

Post a Comment