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Toronto, other cities say costs of legal cannabis will leave them millions of dollars short

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Toronto Mayor John Tory, who heads Ontario’s largest municipality, said the staff has estimated cannabis legalization will put the city on the hook for “tens of millions of dollars” in additional policing, paramedic, fire, public health and other costs.

“And the number that they said they were going to give us was, I guess, we get $3 million,” and a similar amount after that, said Tory, whose council voted Thursday to allow cannabis stores to open shop in the city starting April 1. Late Thursday, the province announced it would only issue 25 licences across Ontario for business at first, blaming national supply issues.

“It clearly is not enough to cover all our costs.”

Tory said in an interview the city’s position has been that the provincial and federal governments should pick up all of Toronto’s extra cannabis expenditures.

“We didn’t change the law (federally) and we didn’t set up the regulatory regime provincially,” he said. “Therefore property taxpayers should not bear this cost.”

Under current plans, municipalities will share — on a per-household basis — in the $40-million Ontario Cannabis Legalization Implementation Fund, set up to offset their pot-related costs over the next two years.

The fund, which will ensure that even the smallest municipality gets at least $5,000, was sliced from a $100-million grant the province received from Ottawa to help transition into the legal pot era.

Municipalities thatallow cannabis stores to open shop will get another similar grant later in 2019.

After that two-year period, municipalities will share half of any revenues generated by Ontario’s portion of the federal excise duty, should these exceed a total of $100 million over the next two years, provincial finance ministry spokesperson Scott Blodgett said in an email.

“We would like to be very clear … municipalities must use this funding to address the costs that directly relate to the legalization of recreational cannabis,” Blodgett said.

These would include any increased enforcement costs for police and public health and court agencies, he said.

Blodgett said the provincial funds would also partially cover costs related to increased use of 311 phone inquiry lines, fire and paramedic services as well as cannabis-related training for municipal workers.

In addition to excise revenues, Ontario will keep its standard 8-per-cent portion of the federal/provincial HST charged on online and store sales. The size of this cannabis pot will depend on the number of stores that eventually open across the province, Blodgett said.

“Provincial tax revenue is directed to the Consolidated Revenue Fund and is used to meet the priority needs of Ontario families such as health care, education and infrastructure,” he said.

Read more:

Mississauga says no to cannabis

Toronto opts in

More distance urged between shops, schools

But Blodgett said that only municipalities that opted to allow pot stores will be eligible for any of the provincial funding beyond the initial payment. Municipalities have until Jan. 22 to say no to the stores, otherwise they must allow them in any number and almost any location that retail is permitted. (The Alcohol and Gaming Commission of Ontario will have sole discretion over the number and placement of the stores, which can’t be within 250 metres of schools.)

King Township Mayor Steve Pellegrini said the relative pittance smaller municipalities would get from the province in the per-household formula is one of the main reasons he rejected stores.

“We’ve got 9,000 households in … the largest municipality in terms of area” in York region, Pellegrini said. “We have more roads and everything to patrol, but with a very limited population, and I would get next to zero,” said Pellegrini, whose council voted unanimously to reject the stores.

He said the $5,000 minimum the province will give all municipalities — the only payment his opted-out community will receive — is “a joke” and would not put a dent in any town’s extra cannabis costs. “That’s insulting. That’s not going to get me anything.”

Toronto police spokesperson Caroline de Kloet said the force is still calculating what its increased cannabis costs might be.

But just north of the city, the numbers have been crunched. York Regional Police estimated those costs would soar to some $7.7 million annually by 2021, said Jeffrey Channell, manager of financial services.

That would amount to $6.41 for each region resident for police services alone, Channell said, adding that many of the estimates were based on research in Colorado and Washington state, where cannabis has been legally sold for nearly five years.

But current provincial funding for all of the region’s increased cannabis costs over the next two years — including to public health and paramedic services — is only $1.40 annually per person, he said.

The force’s increased spending would arise out of some 26 changes and requirements brought on by legalized cannabis. These include roadside testing and its required equipment; increases in criminal and motor vehicle accident investigations; a team to combat any ongoing black market sales; and a new impaired-driving co-ordinator.

Colorado and Washington research suggests the main front-line policing impacts “are around impaired driving, traffic stops, seizures, drug violations, increases in motor vehicle collisions and injured persons,” he said.

Channell said tax revenues in Washington state were much higher than expected and that the federal and provincial governments might have much more money to pass down to the municipalities than currently anticipated.

That state’s $460-million (U.S.) cannabis revenues last year would translate into $3 billion (Canadian) over this country’s population if similar sales levels were seen here, he said.

“That’s three times any official Canadian estimate of excise taxes.”

But Channell said every significant police organization in the country — including the Canadian Association of Chiefs of Police — has advocated for proper cannabis-related funding from senior governments.

York police Chief Eric Jolliffe said the region’s property tax base should not be responsible for any extra costs for his force.

“Both the federal and provincial governments are collecting revenues from the sale of cannabis and we have been repeatedly assured we will receive funding to help offset these costs,” Jolliffe said in an email. “As of now, we have only received a small fraction of the costs we have incurred for up-front training.”

In fairness, Tory said, many of the estimated cost hikes for police and other services may never materialize.

“For example, the volume of (311) phone calls we’re receiving at the moment is lower than expected,” he said, adding that expected increases in 911 calls have also failed to materialize.

“I’m prepared to have a little while where we actually see what the experience is. But I think it’s safe to say that as of this moment, the money they have committed to us is less than whatever our costs will be.”

Tory said estimates of extra pot costs the city would face would be above and beyond those the force incurred while policing and prosecuting cannabis crimes during prohibition, which ended Oct. 17.

Association of Municipalities of Ontario president Jamie McGarvey figures any money is better than none, but says civic leaders should monitor their cannabis-related costs closely.

“We’re going to be dealing with (any fallout costs) anyway so my own personal feeling is we’re better to opt in, because at least we’ll get some extra funding,” said McGarvey, who is also mayor of Parry Sound.

McGarvey — whose group helped lead negotiations over the funding split with the province under the former Liberal government — said Queen’s Park held all the cards during those talks.

“I think we tried to get as much as we could for the municipalities but that is totally on the call of the province,” he said. “They’re the ones controlling the pot, no pun intended.”

Tory said that in talks, the province has shown some sympathy for the idea the municipalities should not bear the bulk of extra costs. “They have accepted the principle that we shouldn’t be put to a lot of extra expense.”

Tory said municipalities have no way to force the province to up the ante, besides dogged lobbying.

“I’m not going to be satisfied with hope,” he said. “But my plan B would be to continue advocating,”

Joseph Hall is a Toronto-based reporter covering cannabis. Reach him on email: gjhall@thestar.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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