Robert Kirwan Fails Economic Analysis 101

by Dr. David Robinson, economist at the School of Northern and Community Studies, Laurentian University

Why can't our councillors do basic accounting?

Let me start with an apology. This note might seem like a personal attack. I am going to explain how one of our most prominent and committed councillors is out to lunch about the Event Center.

It isn't personal, though. I am an economist who teaches public finance and cost benefit analysis. From time to time I consult on the economic impact of public projects. I also get to mark a lot of student essays on public policy issues.

Councillor Kirwan has written an essay in the Sudbury Star about the economic advantages of the Kingsway site. I am going to mark it. Lets see why I give Councillor Kirwan a D- for his analysis

1) Councillor Kirwan writes: "a decision to put the arena/event centre on the True North Strong Kingsway property will be the catalyst that will spark the concurrent development of the new Gateway Casino, plus a major hotel and conference centre."

WHY IS THIS WRONG? Because we get the casino the hotel and the conference center anyway. Gateway will build a casino whether we want it or not. Hotels are eager to get into the downtown and a downtown event center will tell them it is time to build. The hotel plus the event center IS the conference center we need.

2) Councillor Kirwan writes: "There are a number of other complementary commercial enterprises that are ready to locate on the property" He includes the Sudbury District Motorsports Association.

WHY IS THIS WRONG? Because the complementary enterprises are largely businesses that will be pulled out of the downtown. The motorsport park has an equally good location available at Sudbury Downs.

Councillor Kirwan seems to think that if you move a bucket of water from downtown to the Kingsway site you will have more water. Please don't let him make any more financial decisions for the city till he takes a course in accounting.

3) Councillor Kirwan writes: "All of this development will only occur if the arena/event centre is slated for the True North Strong property on The Kingsway."

WHY IS THIS WRONG? Because Councillor Kirwan has no evidence whatsoever that NONE of the items will be build elsewhere.

4) Councillor Kirwan writes: "The immediate impact for the city ... is an increase in commercial assessment ... (t)hat will generate more than $5 million of new commercial property tax revenue."

WHY IS THIS WRONG? Because Councillor Kirwan ignores the fact that we would get almost exactly the same new assessment in the downtown if the event center goes there. He also ignores the loss of assessment on existing businesses downtown as business move out and projects are cancelled. It is pretty hard to be sure whether city revenue would fall or rise with the Kingsway project. I would guess given falling population and population aging, that the Kingsway project has a serious chance of going bankrupt and cost in the city a lot of money. If it does well tax revenues more likely to fall than rise..

5) Councillor Kirwan writes: "since the city receives five per cent of the revenue from the casino, we will make more than $2.5 million more per year than we are currently making at Sudbury Downs."

WHY IS THIS WRONG? Because the casino will be built anyway and will increase the number of slot machines in the city wherever it goes. Councillor Kirwan actually has to show that the casino will do three times as much business at the Kingsway than it would anywhere else. There is no evidence at all that this is true. Councillor Kirwan should also think about whether it would be a good thing to have the casino take three times as much money out of the community. It isn't good for the gamblers, the city economy or the charity bingo. So whose side is he on?

6) Councillor Kirwan writes: "The savings from operating losses at the current Sudbury arena will add another $500,000 per year."

WHY IS THIS WRONG? Because the Kingsway location is so much less central that it is bound to have a harder time attracting people to games. The odds are it will lose more money for the city. And Dario was hoping to get that ongoing subsidy anyway.

7) Councillor Kirwan writes: "the city will generate $8 million of new money just by deciding to put the new arena/event centre on the True North Strong site."

WHY IS THIS WRONG? Because to generate $8 million at the current commercial tax rate of 4% Councillor Kirwan needs to have $200 million in new assessments that would not happen anyway, AND he needs to be sure that the project does not reduce assessments anywhere else. He has utterly failed to make the case.

A CONCLUSION

Almost all of Councillor Kirwan's argument is based on the idea that you can create economic activity by moving a building from A to B. For that profound failure to understand basic economics, Councillor Kirwan gets an E for his essay in the Sudbury Star.

The True North project might actually create some new business. So will the downtown project. My bet is that downtown will create more opportunities. It will support more university based conferences, help attract students to the city, support the existing arts community, reinforce the slowly improving downtown and create a dozen other synergies.

But I don't have to prove that - Councillor Kirwan claimed that the Kingsway site is better for the city by many millions of dollars and he failed to prove it was better by even one dollar.


Dr. David Robinson is a leading expert on Northern Ontario economic development, he was the first person to identify and promote the Northern Ontario Mining Supply and Service sector as our leading sector. He was also the first person to propose Northern Ontario School of Architecture, launched the community committee that brought it into being, wrote the business plan and helped select the director of the new school.

He has consulted for forest-dependent communities and written on the economics of community forestry. He is best known for columns in Northern Ontario Business Magazine that focus on Northern economic issues. He does frequent interviews for the broadcast media.