North’s New Gold Rush: Mining the Government: $100K for water park that’s frozen for eight months

Commentary, Equalization, Frontier Centre

A few years back, the Yukon territorial government allocated $660,000 to a program designed “to enhance the level of e-commerce activity in Yukon.” Two years later, the money was gone, and all the project had achieved was a rudimentary website with a brief blurb and a defunct phone number.

Few in the North batted an eye. In the North, residents are accustomed to an abundance of government spending, often on bizarre projects of questionable value.

In 2006, Nunavut, Yukon and the Northwest Territories received a combined $2.2billion in federal transfer payments. This year, according to last month’s federal budget, which the Finance Minister is expected to re-submit when Parliament resumes, the payments stand at more than $3-billion — equal to roughly $30,000 per Northerner.

That’s $120,000 per family of four, even as the North lags in almost every possible social indicator. (Quebec will collect only $2,189 per person this year. Prince Edward Island will collect the highest of any province, at $3,465 per person.)

“Northern assumptions are predicated on this idea that not only will the transfer payments continue, but they’ll always go up,” says Northern scholar Ken Coates. The North’s glut of federal cash has made for some bizarre infrastructure projects. The 3,500-person town of Inuvik is close to cutting the ribbon on a $100-million K-12 school. Whitehorse has a $46-million sports multiplex and a fully-equipped 400-seat performing arts centre — despite having only 20,000 residents. The subarctic city also has a $100,000 downtown water park, which is covered in snow for eight months of the year.

The North also boasts Canada’s highest per-capita rates of artistic grants. The Yukon collects the most of all three territories, at more than $400 per person. Despite having limited audiences, Yellowknife, Iqaluit and Whitehorse all host vibrant communities of professional artists. In 2009, the Yukon’s handful of semiprofessional filmmakers alone received almost $900,000 in government support.

In 2009, while provincial governments ran up painfully large deficits to cope with the global recession, the Yukon’s right-leaning territorial government boasted deficit-free spending of more than $1-billion. “Fellow Yukoners, your input has helped us construct the largest budget in the history of Yukon,” said Yukon Premier Dennis Fentie.

“I think everyone finds it strange that a small-c conservative government is so proud of having such a large budget,” says Keith Halliday, a Whitehorse-based economist.

Despite so many billions in spending, Nunavut is currently experiencing a tuberculosis epidemic brought about in large part by the territory’s inadequate housing. In all three territories, rates of murder, suicide and sexual assault dwarf the Canadian average. In Iqaluit alone, the crime rate was 10 times the national average in 2009.

“Sure you can look at Whitehorse’s Canada Games Complex and be really impressed, but then look at the housing stock in Old Crow and you’ll be really distraught,” says Prof. Coates, the Northern scholar, who is Dean of Arts at the University of Waterloo in Ontario.

Northerners used to make their money in the mines. Yellowknife was ringed by gold mines, and the Yukon had one of the world’s largest lead-zinc mines. After a string of mine closures in the 1980s, territorial governments began leaning heavily on federal support.

Despite a recent rebound in mining, civil servants continue to make up almost 40% of the North’s labour force. Many private businesses, meanwhile, subsist almost solely on government contracts. “The challenge for Northerners is not to get complacent about the amount of money coming from Ottawa,” says Mr. Halliday.

Many Northern communities stand on the former sites of Hudson’s Bay Company trading posts and Alaska Highway maintenance camps. Their economic base long-vanished, the communities have now been transformed into “artificial government towns,” says Mr. Coates.

In Alaska, the state government is similarly propped up by large sums of money from the United States federal government. For every tax dollar paid by Alaskans, they receive seven dollars in return.

The Yukon used to spend its federal dollars on highways and dams, says Mr. Halliday, but in modern times the government is more apt to pour money into hospitals in remote communities. Rather than building up a viable economic base, the Yukon has simply saddled itself with a larger share of budget commitments.

For the time being, the North’s budgets are secure, thanks to a strong focus from the Tory government. Each year since his election, Prime Minister Stephen Harper has travelled through the North announcing new spending.

Still, Mr. Coates predicts that it is only a matter of time before Ottawa’s Northern-fixation comes to an end: “It’s inevitable that somebody’s going to look at it and say, ‘Gee, why are we spending so much here?’ ”