[PDF] - Agenda 1. Introductions 2. The Need to Develop Local Economies 3. PDF Document

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Economic Leakage Studies

CANDO Conference, September 23, 2014

Agenda

1. Introductions
2. The Need to Develop Local Economies
3. Economic Leakage Study - Described
4. Strategies from Findings
5. Closing Remarks

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Objectives for Today

Define What an Economic Leakage Study is
Look at Case Studies: First Nations Who Have

Carried out Leakage Studies

Talk about MNP’s approach and methodology
Talk about creating strategies using the study

findings

INTRODUCTIONS

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MNP Consultants

Travis Seymour
Susan Mowbray
Chris Hild

MNP LLP

6th largest Chartered Accountancy and

Business Consulting firm in Canada

More than 75 offices across Canada
More than 3,000 team members, of which

300 work directly with First Nation and Metis clients.

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Introductions (You)

Table introductions

– Name & Title – First Nation or Org. – Why you are here? – What are your expectations for today?

Questions for the group

1. How Much Economic Activity is generated in

your community?

2. True or False, our local government buys

goods and services from local businesses.

3. True or False, there is Opportunity for More

Local Businesses to grow in our community.

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Typical Economic Development Goals – from Chief and Council

Jobs
Grow Existing Business
Increase New Business Start-ups
More Self Sufficiency
Profit?

Regional Economy

Local economy $ $

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Regional Economy

Community economy

Regional Economy

Community economy $ transfer payments

Idea

In order to Plan for

the Local Economy, you need economic ‘Data’. It’s like fishing, where data will tell you where the fish are.

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THE NEED TO DEVELOP LOCAL ECONOMIES Big Picture Issues

First Nations - Vulnerable to fiscal policy of

Federal and Provincial Government

Growing, young population, need for jobs

in community

Business Opportunities and Missed

Opportunities

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Economic Data is Needed

How Much Economic

Activity is Generated in the Community

How Much Economic

Activity is Leaving the Community (Leakage)

ECONOMIC LEAKAGE STUDIES

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What is an Economic Leakage Study?

Economic Leakage studies seek to

quantify the level and type of spending that occurs outside the geographic boundaries of a specific community by its residents

Examples

Mohawks of Kahnawake
Six Nations and New Credit
Unama’ki EBO
Mohawk Council of Akwesasne

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Kahnawake

2006 Study, Economic

Leakage

Total economic activity

was estimated to be $104.9M

Estimate for leakage was

68%

Shop Kahnawake First

campaign

Six Nations and New Credit

2010 Study, Economic

Leakage

Reasons Why Economic

Leakage happens

Refers to a prior study in

1997, how has the economy changed

Total Size of economy was

estimated to be $257 M; leakage was 62%

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Unama’ki

2011 Study
Unama’ki oversees

economic projects for 5 First Nation communities in Nova Scotia

Estimated economic

activity was $107M; leakage was about 75%

Mohawk Council of Akwesasne

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Mohawk Council of Akwesasne

MNP Project Deliverables
Methodology
Data Collection Approaches

Group Exercise

Research Findings

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Deliverables

Estimates of size of the economy within

Akwesasne

Estimates of the extent of economic leakage
Reasons for the leakage
Identify opportunities for economic development
Strategies to reduce economic leakage

Step 1: Estimate Income

Economic Activity by Income Households Local Government Business

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Step 2: Estimate Spending

Economic Activity by Expenditure

Households Local Government Business

Step 3: Reconcile Differences

Estimated Economic Activity Households Local Government Business

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Estimate Total Leakage

Households MCA Business Total Economic Leakage

Data Collection

Household Surveys
Review of Administrative Data from Local

Government

Business Survey
Focus Groups with Business Owners

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Group Activity

Focus Group Questions

Food, alcohol and tobacco

Annual Monthly Groceries $8,500 $708 Restaurants $1,500 $125 Tobacco $1,000 $83 Alcohol $800 $67 Total $11,800 $983

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15 percent of respondents purchased

groceries from Walmart. Over 60 percent of respondents purchased groceries from major grocery stores such as Walmart, Superstore, Costco and Safeway.

35 percent of respondents purchased

groceries from independents or other vendors, including farmers markets

Grocery expenditure

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%

Over

30 percent

f

respondents purchased groceries in the community.

Almost 60 percent of respondents

purchased groceries in Town C.

Grocery expenditure

0% 10% 20% 30% 40% 50% 60% 70%

Column1

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Convenience Store

Total revenue $70,100 Total expenses $63,400 Wages and benefits $11,000 Purchases, materials and sub- contracts $27,900 Repairs and maintenance $1,100 Utilities and telephone/telecommunication $2,900 Rent $7,800 Interest and bank charges $900 Professional and business fees $1,500 Advertising and promotion $600 Delivery, shipping and warehouse expenses $100 Insurance $1,000 Other expenses $8,600

Establishments primarily engaged in

retail of food and beverage products

Revenue range: $30,000 to $123,000

Source: Industry Canada, Small and Medium-sized Enterprises (SME) Benchmarking Tool - Ontario (2011)

Findings

Where does economic activity come from:

– Households: 52.9% – Local government: 32.3% – Business: 14.8%

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Findings

In Akwesasne, where does economic

activity ‘income’ come from:

– Income from Outside Sources: 90% – Income from Internal Sources: 10%

Household Leakage

Shelter
Transportation
Food
Clothing
Entertainment
Miscellaneous

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Government Leakage

Housing
Community Services
School
Economic

Development

Business Leakage

Wages and salaries
Inventory
Inputs
Repair and

Maintentance

Rent
Insurance

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Questions for the Group?

Economic Leakage can be in the range of

60 to 75%; does this surprise you?

STRATEGIES FROM FINDINGS

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Goals for MCA

Goal 1: Increase economic activity

within the local economy

Goal 2: Reduce economic leakage

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Goal 1: Increase economic activity within the local economy

Goal: Increase economic activity within the local economy

1. Stimulate business growth
2. Invest in infrastructure
3. Develop investment plans
4. Leverage Rights and Title

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Goal 1: Strategy 1

Stimulate Business Growth:

Help small businesses grow

a) Raise capability and competitiveness b) Develop a business incubator c) Facilitate procurement

pportunities

Medium Small Startup

Goal 1: Strategy 2

Invest in

Infrastructure

– Commercial development – Legal structure

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Goal 1: Strategy 3

Be strategic in which business to support or
pursue. Create a Corporate Investment Plan.

Utilities Tourism ??? Property Development Health Care Construction ???

Corporate Investment Plan

Approach to

create a corporate investment plan:

1. Review

Opportunities

2. Assess for

Project Economics

3. Assess for

Community Fit

4. Rank Projects &

Consider Synergies

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Corporate Investment Plan

Approach - take expected:

– Capital investment, capital sources, and forecasted future net income

Provide analysis for:

– Total profits – 10-year Internal Rate of Return – Return on assets – Return on equity – Leverage (debt/total capital)

1. Review

Opportunities

2. Assess for

Project Economics

3. Assess for

Community Fit

4. Rank Projects &

Consider Synergies

Project Economics Example

Profits (5 years) 10-Year Return Return on Assets (Year 5) Return on Equity Debt/Capital Ratio Risk (Highest to Lowest) Total Score Rank

Future Forestry Ltd.

$1,720,000 0% 0% 0% 0% 2 1.245084093 2

Engineering/Road Building

$525,000 0% 0% 0% 0% 3

2.431177307

3

Log Turning

$489,250 9% 19% 25% 25% 15

17.3165565

11

Energy

IPP Additional Equity

$2,160,000 2% 14% 14% 0% 1 5.864561303 1

EcoLodge and RV Park

$2,174,344 6% 17% 19% 11% 17

14.20754673

10

Renovation of lodge

$109,000 7% 15% 15% 0% 12

10.88011215

8

Aquaculture/Salmon Enhancement$120,000

0% 5% 0% 100% 13

34.50328156

13

Added Value Fish Products

$444,600 0% 44% 0% 100% 14

30.54054054

12

Logistics Services

$200,000 80% 40% 80% 50% 11

8.024375888

6

Transmission Line Construction $625,250

0% 0% 0% 0% 10

10.45676094

7

x Nations Construction

$0 0% 0% 0% 0% 4

4.705882353

4

Health Centre

$2,390,200

12%

5% 5% 0% 16

13.71249726

9

Natural Resource Management $147,500

0% 0% 0% 0% 5

5.573801356

5

Evaluation Strength of Future Cash Flows

Criteria Opportunity Future Opportun ities Forestry Tourism Fisheries Construction Other

1 2 3 4

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Corporate Investment Plan

Does the opportunity

meet community fit?

– Culture – Environment – Partnerships and relationships – Profile of organization – Employment – Community support – Increase asset base

1. Review

Opportunities

2. Assess for

Project Economics

3. Assess for

Community Fit

4. Rank Projects &

Consider Synergies

Community Fit Example

Increases Capacity / Profile Within Current Capacity Increases Asset Base Builds Important Partnership / Relationship Council / Commmunity Support Environmentaly Safe Employment Cultural Fit Sustainable Score Rank

Future Forestry Ltd.

3 3 1 2 3 2 3 3 3 23 2

Engineering/Road Building

1 3 1 3 2 1 3 2 2 18 8

Log Turning

2 1 2 2 2 1 2 2 1 15 12

Energy IPP Additional Equity

3 3 3 3 3 3 1 2 3 24 1

EcoLodge and RV Park

2 1 3 1 2 2 2 1 1 15 12

Renovation of lodge

2 3 3 2 2 2 2 3 2 21 4

Aquaculture/Salmon Enhancement

2 2 2 2 2 2 2 2 2 18 8

Added Value Fish Products

3 1 1 2 2 3 2 3 2 19 6

Logistics Services

2 1 1 3 2 2 2 3 2 18 8

Transmission Line Construction

3 1 1 3 2 2 3 2 2 19 6

x Nations Construction

2 3 1 3 2 2 3 2 2 20 5

Health Centre

2 1 3 2 3 2 1 2 1 17 11

Natural Resource Management

3 2 1 3 3 3 3 3 2 23 2 Colour Score 3 2 1

Legend

Qualitative Criteria Opportunities

Future Opportunities Forestry Tourism Fisheries Construction Other

1 2 3 4

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Project Project Project Project

Corporate Investment Plan

Consider community and

economic elements – rank projects and consider synergies:

1. Review

Opportunities

2. Assess for

Project Economics

3. Assess for

Community Fit

4. Rank Projects &

Consider Synergies

Goal 1: Strategy 4

Pursue more

jurisdiction for Akwesasne in areas the will impact economic development

Self Government

Agreements

Land Code
FNFMB Certification

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Goal 2: Minimize the Economic Leakage

Goal 2: Strategy 1

Initiate a ‘Shop Local’

marketing Campaign

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Goal 2: Strategy 2

Attract more outsiders

to visit Akwesasne by hosting more events in Akwesasne

Goal 2: Strategy 3

Help AMT businesses

secure more contracts with MCA government

Pre Qualify local

vendors.

Contract Set Aside

Program

Specialized training

for local vendors.

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Goal 2: Strategy 4

Set Multi Year targets

for Economic Leakage

Goal 2: Strategy 5

Encourage business

activity in areas that are under-serviced

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Goal 2: Strategy 6

Pursue Strategic

Partnerships with stakeholder groups in the region to market the region as a business destination.

Map of Akwesasne

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Revisit Objectives

Define What an Economic Leakage Study

is

Look at Case Studies: First Nations Who

Have Carried out Leakage Studies

Talk about MNP’s approach and

methodology

Strategies from Findings

Questions

Any questions or comments?

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CLOSING REMARKS

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Please visit us at

ur booth.