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Cannabis tax windfall won’t solve provincial money problems – here’s why

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Welcome to The National Today newsletter, which takes a closer look at what’s happening around some of the day’s most notable stories. Sign up here and it will be delivered directly to your inbox Monday to Friday.

TODAY:

  • The provinces are about to start making a lot of money off of legal weed, but while estimates vary, it seems pretty certain that the windfall won’t be enough to solve their money woes.
  • U.S. Customs and Border Protection is beefing up security along the Canada-U.S. border as the number of illegal crossings rises.
  • The family of kidnapped African billionaire Mohammed Dewji is offering a $567,000 reward for his safe return, no questions asked.
  • Missed The National last night? Watch it here.

Cashing in on cannabis

Recreational cannabis becomes legal at the stroke of midnight across Canada tonight.

And while there are still lots of « unknowns » about the coming weeks and months — from the efficacy of new anti-pot-driving laws, to the legality of workplace bans, to the future of the black market — one thing is not in doubt.

Governments are about to start making a lot of money from legal weed.

A 2016 Deloitte survey of cannabis consumers suggested the total value of the marijuana business in Canada, including paraphernalia, lab tests and security, will be in the range of $23 billion. (Ben Nelms/Reuters)

Estimates vary. The tax deal that the provinces struck with Ottawa last December — a 75/25 split, with the feds’ take limited to $100 million a year — was based on a projected $400 million in total annual revenue. Which is significantly less than the $618 million a year projection that the Parliamentary Budget Office came up with in its 2016 report on the fiscal fallout of legalized cannabis.

Outside analysts, however, have been throwing around much bigger numbers.

Last spring, CIBC predicted that Canada’s retail pot market could top $6.5 billion by 2020, more than what is currently spent on hard liquor and almost as much as wine. It said the provinces would take home more than 70 per cent of the profits and taxes, some $3 billion a year. (A couple of years earlier, a different CIBC report suggested the market could be as big as $10 billion, generating $5 billion in revenue for governments).

Meanwhile, a 2016 Deloitte survey of cannabis consumers suggested the total value of the marijuana business in Canada, including paraphernalia, lab tests and security, will be closer to $23 billion.

Ottawa’s decision to push back the cannabis legalization day from July 1 to Oct. 17 has messed with the fiscal revenue predictions a bit. (Ted Warren/Associated Press)

The provinces are being a little more circumspect.

Cannabis revenue estimates tabled this past spring ranged from a low-ball $1.8 million in profit on $5.8 million in retail sales in Newfoundland and Labrador — less than tiny PEI’s $7.5 million in revenue — to Nova Scotia, which was predicting a budget surplus of $29.4 million based mostly on its take from an expected $87 million in pot sales.

However, Ottawa’s decision to push back the legalization day from July 1 to Oct. 17 has messed with the numbers a bit. New Brunswick, for example, revised its cannabis revenue forecast from $6 million down to $3.6 million for 2018.

And changes of government have made things a little more opaque. The Ontario Liberals had been predicting a net loss over the first two years of government-run cannabis stores, before a $100 million profit in 2021. All of which has changed with Doug Ford’s decision to move to private retail outlets.

Philippe Couillard’s Liberals in Quebec had maintained that they had no profit motive whatsoever, amid plans to set the price of pot at a little over $6 a gram, four bucks less than much of the rest of Canada. New Premier François Legault wants to raise the legal age for cannabis from 18 to 21 and ban smoking in all public places in the province.

Colorado, with a population of 5.6 million — 800,000 more than B.C. — sold $1.95 billion Cdn worth of legal cannabis last year, collecting $319 million in taxes and fees. (Juan Mabromata/AFP/Getty Images)

The most realistic estimate might be British Columbia’s, with a projected government revenue of $200 million by the spring of 2021 and at least $75 million for the coming fiscal year.

Even that is likely blowing smoke, judging by revenue in the U.S.:

Yet the windfall from cannabis may not make that much of a difference to provincial bottom lines.

In British Columbia, cost overruns alone for the Site C hydroelectric dam — now with an estimated price tag of $10.7 billion, $2.4 billion more than envisioned — are the equivalent of almost 15 years of predicted pot profits.

Last week, the Alberta government pledged $700 million to a possible Calgary 2026 Winter Olympics — roughly 27 years of its estimated $26 million annual take from legalized pot.

And just this morning Ontario’s fiscal watchdog, the Financial Accountability Office, tabled a report estimating that the Ford government’s decision to scrap cap-and-trade will result in $3 billion in lost revenue over the next four years. That’s 30 years worth of what provincially run cannabis stores are predicted to have netted.

All suggesting that cannabis consumers aren’t the only ones taking a break from reality.


Border hopping

David Common travelled to Maine and spent time with the U.S. Border Patrol to find out more about who’s crossing illegally — and why some are choosing to jump back into the United States after making it to Canada.

My left foot was in Canada. My right foot in the U.S. Who wouldn’t hop between the two countries for fun when walking along the world’s longest undefended border?

« I’ve been counting, » the border patrol agent in a nearby pickup truck told me. « You’ve broken the law more than 10 times. »

So I stopped.

A U.S. Border Patrol pickup truck is see in the background behind a stone marker on the U.S./Canada border near Hodgdon, Maine. (David Common/CBC)

Luckily, we were on a ride-along with U.S. Customs and Border Protection, so my border-hopping didn’t put me in his sights for arrest. 

More than 32,000 others have done what I did, leaving the U.S. and walking into Canada without going through an official border crossing-point, except they intended to stay. Now the first batch of their asylum claims are being heard and some are being told « no » by Canada, which has American border agents on guard for their return south.

« The government has deemed that their claim is not valid, » the U.S. Border Patrol’s Houlton Division chief Dennis Harmon told me from his unmarked vehicle on the gravel road in rural Maine that separates the two nations. « We have some of those people trying to effect their illegal entry into the U.S. »

The U.S. border agents I spoke to continually stressed the excellent information exchange they have with their Canadian counterparts guarding the border. They said they also appreciate Canadians who call them directly, to mention things like a suspicious car on a border road. They’ve been getting a lot more of those calls lately.

‘We’ve seen an increase [of illegal border crossers] coming into the United States from Canada,’ Dennis Harmon, chief of the Houltan, Maine, division of the U.S. Border Patrol, told CBC News. (Jean-Francois Bisson/CBC)

While some of those making the crossing are people who left the U.S. for Canada illegally and have decided to return, others are believed to be arriving in Canada directly from Mexico.

It’s been a couple of years since Ottawa dropped the visa requirement for Mexican citizens. That means it can actually be cheaper to just buy a flight from Mexico to Canada, get to a quiet part of the border and walk across, rather than pay a Mexican smuggler and take your chances crossing into the southern U.S.

It’s not exactly streams of people, mind you. Yes, apprehensions are up 60 per cent in just this one sector of the Canada/U.S. border. But we’re talking dozens of people a year, not the hundreds a month illegally crossing the U.S/Mexico border.

And yet, any increase gets attention — enough that the border patrol has added agents and technology to detect illegal crossings along the northern frontier.

  • WATCH: David Common’s story on the U.S. Customs and Border Protection’s efforts to stop illegal crossings tonight on The National on CBC Television and streamed online

  • Like this newsletter? Sign up and have it delivered by email.
  • You may also like our early-morning newsletter, the Morning Brief — start the day with the news you need in one quick and concise read. Sign up here.

Billionaire kidnapping

The family of a kidnapped African billionaire is offering a $567,000 reward for his safe return, no questions asked.

Mohammed Dewji, a 43-year-old entrepreneur worth an estimated $1.5 billion US, was snatched from outside a luxury hotel in the Tanzanian capital of Dar es Salaam early on Thursday morning. He hasn’t been heard from since.

According to witnesses, a team of three masked, English-speaking men were lying in wait in the parking area of the Colosseum hotel when Dewji, a fitness fanatic, arrived for his daily workout just after 5:30 a.m. They bundled him into a car, fired a shot into the air to dissuade hotel security from pursuing them, and were gone within 30 seconds.

Mohammed Dewji, a Tanzanian business tycoon known locally as Mo, is said to be Africa’s youngest billionaire. (EPA-EFE)

Yesterday, Dewji’s company MeTL — a textile, flour and beverage conglomerate — tweeted details of the reward with the hashtag #BringBackOurMo. Azim Dewji, the kidnap victim’s uncle, told reporters that the family is only interested in Mohammed’s safe return.

« We want to assure anyone with the information about the whereabouts of our son to come forward and we will treat their information as secret. »

Kidnapping is a growing problem in Tanzania. At another press conference yesterday, Kangi Lugola, the country’s minister for home affairs, cited 56 kidnapping incidents over the past three years.

Police successfully rescued 22 of the 27 victims in 2017, Lugola said, and have freed 17 of the 21 people taken so far this year. (For a while after Dewji’s kidnapping it seemed the police had succeeded again, but the reports of his liberation proved false.) The motives ranged from revenge, to political vendettas, to « economic witchcraft beliefs. »

The American-educated Dewji is an internationally known figure who served for 10 years as a member of parliament for Tanzania’s ruling Chama Cha Mapinduzi party and sponsors the country’s biggest soccer team. Forbes ranks him as Africa’s 17th richest man and the continent’s youngest billionaire.

Dewji does not employ bodyguards. He had driven himself to the hotel in his black Range Rover with its hard-to-miss « MO 1 » vanity plate.

Tanzanian police officers inspect Mohammed Dewji’s Range Rover with the vanity licence plate ‘MO 1’ at Colosseum Hotel and Fitness Club in Dar es Salaam, Tanzania, after he was abducted on Oct. 11. (EPA-EFE)

Police have brought in more than two dozen people for questioning in connection with the kidnapping, including employees of the hotel and Dewji’s company. No suspects have been identified, although investigators have said they believe that the masked men are white.

MeTL is Tanzania’s largest domestic company, employing some 24,000 people. Dewji also heads two foundations devoted to ending poverty in the country. In 2017, he pledged to give away at least half his fortune, following in the footsteps of Bill Gates and Warren Buffet.

Tanzania’s government is promising a swift resolution to the kidnapping.

« The police will never rest until the culprits are brought to book, » Lugola said yesterday.


A few words on … 

High-risk skinny-dipping.


Quote of the moment

« We are committed to ensuring that we not only have the tools to hold guilty parties accountable for breaking the law, but [to a system that] also creates an environment that fosters rehabilitation so that we have fewer repeat offenders, fewer victims, and ultimately, safer communities. »

Public Safety Minister Ralph Goodale, tabling legislation Tuesday to end solitary confinement of federal prisoners. The government wants to create new penitentiary units, called Structured Intervention Units (SIU), to house inmates separately while still giving them access to rehabilitation, mental health care and other programs.  

Minister of Public Safety and Emergency Preparedness Ralph Goodale. (Adrian Wyld/Canadian Press)


What The National is reading

  • RCMP expect massive spike in blood test requests for high drivers (CBC)
  • New York City goes entire weekend without a shooting for first time in 14 years (NY Post)
  • Dennis Oland pleads not guilty, again, in father’s death (CBC)
  • Boko Haram militants kill kidnapped aid worker (Guardian)
  • Talks begin on disarming Korean border village (NY Times)
  • Floating pipe starts mission to clean up all the plastic in the Pacific (CNN)
  • What happens when humans fall in love with an invasive species? (FiveThirtyEight)
  • Enormous buried Viking ship discovered by ground radar (National Geographic)

Today in history

Oct. 16, 1993: Blue Jays fever? Not so much for 1993 World Series

The Toronto Blue Jays’ second straight World Series appearance somehow didn’t feel quite as special as the first. Hats and t-shirt sales were a little slow, and the scalpers were having trouble getting the sky-high prices they wanted for SkyDome tickets. It all led Paul Hunter to suggest that maybe fans were getting a bit blasé about success. Until a week later, when Joe Carter hit a walk-off home run to seal the deal and Torontonians danced in the streets.

The Toronto Blue Jays’ trip to the World Series is a little more mundane for fans after the team’s 1992 triumph. 2:31

Sign up here and have The National Today newsletter delivered directly to your inbox Monday to Friday.

Please send your ideas, news tips, rants, and compliments to thenationaltoday@cbc.ca. ​



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Anglais

‘Business as usual’ for Dorel Industries after terminating go-private deal

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MONTREAL — Dorel Industries Inc. says it will continue to pursue its business strategy going forward after terminating an agreement to go private after discussions with shareholders.

« Moving ahead. Business as usual, » a spokesman for the company said in an email on Monday.

A group led by Cerberus Capital Management had previously agreed to buy outstanding shares of Dorel for $16 apiece, except for shares owned by the family that controls the company’s multiple-voting shares.

But Dorel chief executive Martin Schwartz said the Montreal-based maker of car seats, strollers, bicycles and home furniture pulled the plug on a deal on the eve of Tuesday’s special meeting after reviewing votes from shareholders.

“Independent shareholders have clearly expressed their confidence in Dorel’s future and the greater potential for Dorel as a public entity, » he said in a news release.

Dorel’s board of directors, with Martin Schwartz, Alan Schwartz, Jeffrey Schwartz and Jeff Segel recused, unanimously approved the deal’s termination upon the recommendation of a special committee.

The transaction required approval by two-thirds of the votes cast, and more than 50 per cent of the votes cast by non-family shareholders.

Schwartz said enhancing shareholder value remains a top priority while it stays focused on growing its brands, which include Schwinn and Mongoose bikes, Safety 1st-brand car seats and DHP Furniture.

Dorel said the move to end the go-private deal was mutual, despite the funds’ increased purchase price offer earlier this year.

It said there is no break fee applicable in this case.

Montreal-based investment firm Letko, Brosseau & Associates Inc. and San Diego’s Brandes Investment Partners LP, which together control more than 19 per cent of Dorel’s outstanding class B subordinate shares voiced their opposition to the amended offer, which was increased from the initial Nov. 2 offer of $14.50 per share.

« We believe that several minority shareholders shared our opinion, » said Letko vice-president Stephane Lebrun, during a phone interview.

« We are confident of the long-term potential of the company and we have confidence in the managers in place.”

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Anglais

Pandemic funds helping Montreal businesses build for a better tomorrow

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Many entrepreneurs have had to tap into government loans during the pandemic, at first just to survive, but now some are using the money to better prepare their businesses for the post-COVID future.

One of those businesses is Del Friscos, a popular family restaurant in Dollard-des-Ormeaux that, like many Montreal-area restaurants, has had to adapt from a sit-down establishment to one that takes orders online for takeout or delivery.

“It was hard going from totally in-house seating,” said Del Friscos co-owner Terry Konstas. “We didn’t have an in-house delivery system, which we quickly added. There were so many of our employees that were laid off that wanted to work so we adapted to a delivery system and added platforms like Uber and DoorDash.”

Helping them through the transition were emergency grants and low-interest loans from the federal and provincial governments, some of which are directly administered by PME MTL, a non-profit business-development organization established to assist the island’s small and medium-sized businesses.

Konstas said he had never even heard of PME MTL until a customer told him about them and when he got in touch, he discovered there were many government programs available to help his business get through the downturn and build for the future. “They’ve been very helpful right from day one,” said Konstas.

“We used some of the funds to catch up on our suppliers and our rents, the part that wasn’t covered from the federal side, and we used some of it for our new virtual concepts,” he said, referring to a virtual kitchen model which the restaurant has since adopted.

The virtual kitchen lets them create completely different menu items from the casual American Italian dishes that Del Friscos is known for and market them under different restaurant brand names. Under the Prasinó Soup & Salad banner, they sell healthy Greek options and their Stallone’s Sub Shop brand offers hearty sandwiches, yet the food from both is created in the same Del Friscos kitchen.

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Anglais

Downtown Montreal office, retail vacancies continue to rise

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Some of downtown Montreal’s key economic indicators are heading in the wrong direction.

Office and retail vacancies in the city’s central core continued to climb in the fourth quarter of 2020, according to a quarterly report released Thursday by the Urban Development Institute of Quebec and the Montréal Centre-Ville merchants association. The report, whose first edition was published in October, aims to paint a socio-economic picture of the downtown area.

The survey also found office space available for sublet had increased during the fourth quarter, which may foreshadow even more vacancies when leases expire. On the residential front, condo sales fell as new listings soared — a sign that the downtown area may be losing some of its appeal to homeowners.

“It’s impossible not to be preoccupied by the rapid increase in office vacancies,” Jean-Marc Fournier, the former Quebec politician who now heads the UDI, said Thursday in an interview.

Still, with COVID-19 vaccinations set to accelerate in the coming months, “the economic picture is bound to improve,” he said. “People will start returning downtown. It’s much too early to say the office market is going to disappear.”

Public health measures implemented since the start of the pandemic almost a year ago — such as caps on office capacity — have deprived downtown Montreal of more than 500,000 workers and students. A mere 4,163 university and CEGEP students attended in-person classes in the second quarter, the most recent period for which figures are available. Border closures and travel restrictions have also brought tourism to a standstill, hurting hotels and thousands of local businesses.

Seventy per cent of downtown workers carried out their professional activities at home more than three days a week during the fourth quarter, the report said, citing an online survey of 1,000 Montreal-area residents conducted last month.

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