Report says city could take more control of millions in economic development spending

A third-party review of economic development in Sault Ste. Marie recommends bringing the city’s two arms-length organizations under the same umbrella and giving the city more control over how almost $2.5-million in funds are spent.

The review, completed by MDB Insight, recommends combining the Sault Ste. Marie Economic Development Corporation (EDC) and the Sault Ste. Marie Innovation Centre (SSMIC) into one new organization.

If brought together as a new entity, the report said, the two existing organizations may eliminate duplication of work and find efficiencies by reducing wage and benefit costs, as well as overhead costs such as rent.

“Both organizations have strong synergies in the kinds of services they provide, which under a consolidated structure would allow for streamlined approaches to dealing with similar client needs, while still being able to address unique needs of different stakeholders,” reads the report. 

The report further recommends a new Memorandum of Understanding (MOU) be created, replacing the existing MOUs with the current organizations.

It is in the creation of a new MOU where the city may gain further influence over the proposed new organization.

For example, the review recommends stipulating a threshold for discretionary spending within the proposed MOU.

Creating that threshold for spending, said the review, allows the city to intervene on high expenses it believes to be too risky.

The report cites the 2014 purchase of Searchmont Resort by the EDC as one such risky pursuit, though it further notes it was seen by organization as a necessary risk, given the broader consequence to economic development had they not purchased the asset.

Over the last six years, the city has funded the EDC to the tune of $1.43-1.67-million, which accounts for between 20 and 43 per cent of its revenue.

The remainder is typically made up from other funding sources, from the likes of the Northern Ontario Heritage Fund Corporation and FedNor.

Between 2010 and 2014, the city has provided $277,890 toward funding the SSMIC, which accounts for between 8 and 11 per cent of its overall revenue.

FedNor provides $575,890 annualy to the SSMIC, while the NOHFC provides over $1-million in funding. 

Both organizations, notes the report, are more accountable to the province and federal government funding agencies because of the degree to which they are funded, but both organizations rely on city funds for their core operations.

The report also recommends that council complete a systematic review of the Economic Development Fund (EDF).

Currently earmarked at $500,000 per year, spending of the EDF is controlled completely by council under advice by the EDC, for projects covered under its Terms of Reference.

Typically, the fund is used to capacity, the report said.

The existing MOU for the EDC positions the organization as a potential beneficiary of the fund, even as it has a role in advising council on how that fund may be spent.

For example, the EDC lobbied for a $100,000 loan guarantee for Searchmont Resort in 2007, which is under review by the city for renewal every three years.

Now that the EDC owns the resort, it is a conflict of interest in terms of lobbying for a renewal of that loan guarantee.

As a result, the Searchmont Ski Association, Inc. will ask directly for a renewal of the loan guarantee at Monday’s meeting of council.

Tom Vair, previously executive director of the SSMIC, now serves as deputy CAO, Community Development and Enterprise Services — which is a newly-created position overseeing economic development within the city.

The report suggests the EDF be self-contained within the municipal government, with no oversight by any outside agency, including the EDC.

"Given that the City has now established a Deputy Chief Administrative Officer (CAO) of Community and Economic Development position, going forward this office may be a better arbiter of the EDF," reads the report.

A timeline of one year to complete the recommendations is suggested in the report, although most could be completed within six months.

In his report to council, Vair recommends city council implement the MDB Insight report and that staff provide immediate formal notice of termination of the EDC MOU.

City council authorized the third-party review in the spring at the request of Mayor Christian Provenzano.

A previous assessment of the EDC was conducted in 2008.