Lark Ritchie's Project Friday Decision Central Pages

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Lark Ritchie's 'Project Friday-Decision' Pages

Estimate of Loss

Just take some time to think...

Snobelen Decision to Cost Half Billion to 2 Billion Dollars?

The net effect of the Ontario government's ban on spring hunting is a staggering economic loss I conservatively calculate at nearly 2 billion dollars. A full analysis of the tourist business supply chain increases that loss even more. It is negligent change management. It is not good business. Under separate cover, I have also submitted the math to support this statement.

Snobelen's strategies ignore the long-term social and business impact of eliminating an annual 40 million dollar cash-flow injection of foreign money into Ontario's economy at a very critical period in the business cycle. If nothing changes, the effect is devastating to the north. Concurrently, the northern Ontario sub-culture has willfully, and with bias, been threatened with extinction. Its ecosystem has been radically altered.

In Canada, and in Ontario, the approach to legal knowledge expects that the people understand the law, both old and new, to somehow cascade down from parliament and legislatures to the public. Sadly the majority of Canadians haven't the foggiest notion of the mechanisms of the Canadian Charter of Rights and Freedoms. The thought is not mine, It's a summarized statement of Peter H. Russell's, one of Canada's leading constitutional lawyers.

The Canadian Charter of Rights is a fundamental set of premises and directions by which we determine societal meaning and value. When a government chooses to act in direct opposition to the intentions couched in this prime document, then that government no longer serves the common citizen, and should be removed. Also, the laws enacted by that government must be reviewed and possibly rescinded and revoked.

Beyond such action, all forms of Canadian government must be sent a reminder that the decision making must be responsible process considering the welfare of its peoples' creeds and forms of expression, and that change, and impacts of change must be managed both effectively and compassionately. Negligence is not an excuse for human pain.

Snobelen has set aside 5 million dollars for compensation for those directly affected. This amounts to an average $6,250 per business. As an annual hourly rate, we're talking about three dollars and one cent. Considering these local businesses will be affected for several years, this is tearfully ludicrous.

Substantiation

$40 Million Immediate Loss Of 1999 Cash Flow

The immediate loss of cash flow and revenue for these operators is estimated between 30 and 40 million dollars. This void creates an interesting chain reaction as we assess economic impact over a period of ten years.

Supporting Rational:
Ontario's 800 Tourist Operators annually average about 20 clients per business, or 16,000 clients during a peak two week period in the spring. Each client spends an estimated average of $1800 while in Ontario. (An average outfitter fee is $1200. Some outfitters charge up to $2,600 per person. Ancillary purchases, licences and export fees generate an additional $400 to $800 per person.)

Result: $ 28,800,000 for a two week period. Several operate more than a two week period. Allowing for those operators who offer longer programs, of three and four weeks, $40 Million is not an unreasonable number. The number has been used by John Snobelen, Minister of Natural Resources, on several recent occasions in the media.

$5 Million - Proposed Operator Buyout

This expense is considered an adequate compensation for affected operators. It ignores the chain of supply businesses consisting of equipment, food, and fuel retailers. It comes from the Ontario Coffers.

$120+ Million Foreclosure On Assets In 1999

The effects and consequences of a forty million-dollar restriction to cash flow in an industry are enormous when we consider capital investment and debt management. The northern Ontario Tourist business is viable, but it is a hand to mouth struggle. With a severely restricted cash flow, many operators may have to close almost immediately. They would leave a collective debt, conservatively estimated, at 200 million dollars (it could be as high as 500 Million) tied up in real estate mortgages and business loans.

Supporting Rational:
A conservative estimate of borrowed capital investment for these operators ranges from $200,000 to $500,000 per business in financing for real estate and equipment. If only half of those operators having this type debt/investment are forced to close (say 400), this results in frozen capital of 80 to 200 million dollars financed on a long term basis. Being very conservative, we could estimate a net foreclosure on 120 million.

$96 Million Immediate Net Loss for Financiers

The value of a business with restricted revenues diminished quickly. The business cycle has been permanently changed. A new market must be found. Short-term market conditions are bleak. Market research and development requires years. Financiers, realizing a severe change in the business, could satisfy themselves at 20 cents on the dollar, a loss of 80% or 96 million dollars loss, actual recovery of which may stretch well beyond 1999.

50+ Million Dollars Lost In Business Loans Interest

The 96 million dollar capital loss further results in lost opportunity. An expected revenue from interest over a ten-year term, even at the lowest prime rates, could be higher than 50 million dollars. This figure ignores reduction of debtor principal.

1.2 Billion 10-Year Lost in Full-Season Business Shutdowns

The northern Ontario business season is 20 weeks, May through October. If the 400 operators who lose their business through foreclosure, are forced to 'walk away,' Ontario revenue generation in the 9 years beyond 1999 drops by almost 1.2 billion imported dollars over ten years.

Supporting Rational:
[ 400 (operators) x 20 (week business season) x (20 clients) x $800 (conservative rate per person over season)] x 9 (years)]

$4+ Million Minimum Increase In Social Assistance Expenditures

Should only half of the bankrupt tourist operators (200) not be otherwise employable, and are forced to seek social assistance or additional expenses for new skill development for one year at an amount equal to the $20,000 poverty line, the total expenditure amounts to $ 4 Million.

$360 Million - 10 Yr, Survivor Lost Revenue (Two Weeks of Spring)

For those businesses that survive the strangulation of cash flow, the loss described above has been calculated for an additional 9 years to consider a ten year impact. (Industry revenue of 40 million per spring) (9 years x $40 Million = 360 Million)

Addition Risk Factors

American Sportsman Boycott Means Annual $400+ Million shutdown in direct revenue for rural Ontario supply chain services. A more broad and general boycott means an increased loss.
As reported in the Toronto Star, Thursday, January 21, American sportsmen are threatening to boycott Ontario's tourist industry not only during the spring but during the full tourist season, a period between May and October, or roughly 20 weeks. Should this be relatively successful, the tourism business in Northern Ontario alone stands to lose up to 20 * 20 million, or 400 million dollars in direct revenue that supports local Ontario secondary chain of supply services. This massive shortfall in cash flow ripples through our economy long after a boycott.

$40 million lost this spring Equates to...

221Million - Immediate Capital Loss
$120+ million dollars foreclosure on assets in 1999
$96+ Million Net Loss for Financiers
5 Million compensation Package
Total Immediate Loss (Roughly $100 Million depending on method of calculation)

45 Million - Long Term RevenueLosses (10 Years)
$40 Million 1999 Spring Revenue
$5 Million Buyout
$96 Million Immediate Net Loss for Financiers
$50+ million Lost in Business Loans Interest
1.2 Billion 10-Year Revenue Lost in Business Shutdowns
$4+ million in social assistance
$360 Million Survivor lost revenue (Two weeks of Spring)
Total ? You add it up!

Additional Risk

$400+ Million 1 Full Season shutdown in direct revenue supply chain services by U.S. Boycott

Total Loss Work It Out!

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