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CONTRIBUTION · 12th October 2010
Steve Connolly
Introduction

During the second week of September 2010, I had the opportunity to participate in a ‘Discovery Tour’ of Elliot Lake. Previously in the past summer, I had convened telephone discussions with several individuals who had been instrumental for saving the city from a serious population downfall that had commenced almost twenty years ago.
My purpose for my two day visit was to gather further information as to how the town leaders had achieved the success that is now renowned … and to provide that information to some of the current leaders of Kitimat, British Columbia, a city in which I was raised, of which I am very fond, and which is struggling greatly to recover from economic downfall.

I was one of more than 2500 visitors this year that will have been given tours of the city, given two nights free accommodation in a sparkling clean Hampton Inn Hotel, with two free hot breakfasts, and given the opportunity to talk to unlimited folks of all kinds.

Aside from other visitors, I was also hosted for three great hours of intense discussion with Richard Kinneally, President of Retirement Living Inc. (RTI), and an hour with George Farkouh, owner of Algoma Chrysler (three dealerships in the region), and past mayor of Elliot Lake, from 1988 to 2006. I also met with members of the Museum, Legion, RTI, Churches, Golf Course, tour operators, Tourist Center, and with other citizens, including native folks. I also met with Dan Gagnon, newly appointed as City Manager, who has worked for the municipality for decades.

I have chosen to compare Elliot Lake with Kitimat because of similarity and because I feel that one can learn from how the city leaders of Elliot Lake saved their city. I would like to underline, however, that the manner in which the recovery was done can not be identical to that which Kitimat will need. Also, there are many other cities who have suffered economic decline that have succeeded to recover well, including Gold River, Mackenzie, Tumbler Ridge. Murdockville, Miramichi, etc., and additional valuable information can be obtained from them.

Description Of Elliot Lake

The cities of Elliot Lake and Kitimat are extremely similar. Both started as ‘company towns’ in the early 1950’s. Each city was a planned community and both have similar street designs. Both cities have extremely good facilities for their citizens and
are situated in beautiful natural, but different, environment. Each city shows its age in various infrastructure, such as for some roads, cement work and for some retail buildings.
Current population for Elliot Lake is approx. 12,000 vs. approx. 9,500 for Kitimat.

Elliot Lake had a Museum similar in size to that of Kitimat. It has a golf course that is of championship quality. There are 500 members of its Legion. They have a Christmas parade that is very popular. Within a radius of 150 miles, there are 4,000 lakes and, around the city area, there are miles of well-maintained trails. Like for Kitimat, there are all kinds of other facilities. Their indoor swimming pool is nice but does not measure up to Kitimat’s spectacular new facility. Elliott Lake does not have a Wal-Mart or other big box stores, except for a Zellers. There are two large food stores. There are considerably more retail stores than for Kitimat, but less than for Terrace. There are 25 parks in the city.

Elliot Lake, built around five lakes, is situated about 30 minutes north of the Trans Canada highway, half way between Sault Sainte Marie and Sudbury. These large cities are about two hours drive away. Toronto is about a six hours drive distant. Citizens of Elliot Lake do not have to visit these larger cities often. Elliot Lake’s temperature range is almost identical to that of Kitimat, with a similar snowfall, but receives about 30% more annual sunshine. Kitimat’s rainfall is close to four times that of Elliot Lake.

Elliot Lake has no industry. The biggest employer is the hospital with 300 employees.
The city is tied with Parksville for the highest average age of its population … 55 years.
Over half of the citizens are over 55 years of age. Crime is relatively low because of this.
Apartment buildings are primarily full of senior citizens and are well cared for. Most of them have shared gardens, cared for by the tenants. They are treed and most are nicely landscaped. Elliot Lake has an extended hospital ward (64 beds), as for Kitimat, but also has three large senior's homes, where meals/assistance are provided. There are now seven pharmacies in the city. The city found $2 million to secure a full complement of doctors, 12 GP’s, some of who are building large lakeside homes and employing local people in their clinics and to build/maintain their homes. They handle from 800 to 900 people each.

As for Kitimat, many of the homes were built in the 1950’s and are simple in size and in design. Kitimat would have more upscale homes. On the whole, Elliot Lake has fewer streets whose properties are in disrepair (i.e. not well maintained), compared to Kitimat.
Boats, trailers and motor homes, prevalent on Kitimat properties, are not the case for Elliot Lake, which has marinas, central storage locations and marina/storage locations on Lake Huron, only one half hour away. They may have a bylaw to prevent home property cluttering. Many of the older retail buildings are receiving a facelift.

The city has six full-time firefighters and 18 volunteer firemen.

Taxes are relatively high. An average 3-bedroom house will pay from $2,200 to $2,500 per year in property taxes. Compared to Ottawa, at $4,500 plus annually, this is still a good deal. Kitimat taxpayers still have considerably lower taxes, but this will change dramatically soon.




History Of Elliot Lake

The first commercial uranium mine in the world opened in Elliot Lake in 1955. Soon, there were over a dozen uranium mines operating under the management of many companies, such as Denison and Rio Algom. The town boomed and, at its peak, had a population of over 20,000. It is interesting to note that one building was called the Alcan Theatre, because it was clad entirely of corrugated aluminum and because it initially functioned as a simple theatre. (Alcan has never been present in the area.) It became the first High School and is now the Masonic Hall.

The city’s downfall began in the early 1990’s, with only one uranium company left. It, too, wanted to close, but city and government pressure, and financial aid, allowed it to continue until 1996, when the city was left with no industry, as is the case now. Hundreds of housing units were being abandoned and those not owned by the mining companies were ending up with CMHC via their mortgage insurance commitment. At the time, this situation was the biggest financial ‘hit’ in the history of CHMC. The city’s tax base fell 33%. Municipal employees were also reduced by 33%. The city’s population fell to almost 5,000.

In 1988, a very competent woman, Claire Dimmock, had been the head of housing for Denison Mines … 1,500 of the city’s 5,500 residential units (vs. about 4,000 units for Kitimat) were owned outright by two of the biggest mining companies. At the same time, a young Lebanese man, George Farkouh, who had been raised in Elliot Lake, became mayor. He brought with him an MBA education from the University of Western Ontario and business experience from the CIBC bank. He became the owner of the Algoma Chrysler car dealership. These two individuals worked closely together to form a non-profit company, Retirement Living Inc. (RTI).

At the time, to save paying property taxes on 1,500 properties, the owning companies wanted to bulldoze the buildings. As mayor, George quickly created two special bylaws … one to prevent destruction of any buildings, and the other to prevent boarding of windows to keep up appearances. The 1,500 properties were/are composed of 1,000 apartment units, 400 houses and 100 condominiums.

When Farkouh became mayor in 1988, the position had been a full-time one with annual remuneration of $60,000. He agreed to be paid as ‘part-time’ at $30,000, yet worked full time to help save the city. Over the next 16 years as mayor, he refused to take increases except for cost of living. Currently/annually, the mayor earns $29,000 working part time; councilors earn about $10,000. The city manager earns $120,000 annually and is well respected for carrying out the decisions taken by the Council.

Banks were not helpful to provide financial incentives to attract new residents to the city.

There is still uranium to be found in the area. The reason the mines closed is because uranium is found in much higher concentrations elsewhere.

The history of the city has been documented in several books. I recommend, The Power and The Promise, by Catherine Dixon (1-519-438-8120).

Leadership Action Taken

With government funding of $7 million, RTI took over the 1,500 properties, almost all of which had been abandoned, and began to market the city as a center of expertise for retirement living. The financing was used to pay the property taxes and maintenance of the 1,500 properties and to commence staffing RTI. Even so, the city’s tax base fell by 33%. By 1992, RTI was starting to move forward and was lead by a new hire, Richard Kinneally, who had sales experience and a business education. Ever since then, he and George have been close friends, often arguing over difficult decisions, yet always finding time to golf and to socialize together. Needless to say, I was greatly impressed with the business acumen of these two gentlemen.

As RTI began to get results from aggressive advertising, currently spending $600,000 per year on such, it began to receive rental revenues surplus to expenses and used such to improve facilities further, including those managed by the city. Incorporation had been carefully crafted to follow regulations, to minimize government taxation and to maximize surplus funds. Today, the 1,500 units have been greatly improved, have a low vacancy rate, less than 6%, and generate excellent positive funds.

RTI has now established a subsidiary company, NorDev, for profit. Together, these two organizations gross about $13 million per year. This business, several years ago, bought the large city shopping mall that had been in financial difficulty, greatly improved the situation, with great advice from George and Richard, and sold it for a $2 million profit … which, in turn, was used to help the city. All profit goes towards helping the city. NorDev Board members work voluntarily. A large hotel that had been abandoned was, with government help, converted to an Ontario Detox Center that employs 30 folks.

The municipal golf course became managed by RTI who improved it to a championship level. RTI employees manage its maintenance. Although the golf course loses money, it is a loss leader on purpose as it is a great attraction for senior retirees. During my time there, I briefly attended the heavily attended RTI annual golf tournament at this beautiful place.

The Hampton Inn is managed by RTI’s profit-making subsidiary and surplus money is, again, used to help the city. The manager of the hotel, who I met, is also an elected member of the city Council. George Farkouh, retired mayor, remains on the Board of RTI. All members do so voluntarily. This past August, the Inn had an 86% full rate. They are hoping to average 66% for this first year, an excellent rate for northern Ontario. About 20% of the hotel’s clients receive free accommodation and breakfasts as Discovery Tour guests. RTI pays full charges to the hotel for such … with excess revenues from the 1,500 rental units.

The current average house price in Elliot Lake is about $100,000 to $110,000. House prices are rising. A very good two-bedroom apartment goes for $700 per month and this figure has risen considerably as the city has filled up with retired folks. You can still get a two-bedroom apartment of lesser quality for $500 per month. The city’s goal is to attract more residents so that prices will rise even further allowing for new construction to commence. They are not far off this goal.

Seventy per cent of the houses sold, mostly by real estate agents, are bought by people who took advantage of the Discovery Tours program. Each ‘guest’ is given two tours … one of the city and area, and another to visit real estate properties for possible rental. Guests are encouraged to rent for the first six months to a year to get accustomed to the city before buying. If a residential unit is subsequently purchased, the rental lease can be immediately broken without penalty. Seventy-five percent of the purchasers are retired or within five years of retirement.

Initially, RTI’s strategy has been to leverage the city’s advantage of low cost residential units. Their success has reduced this advantage now, as prices have risen. The strategy now is shifting to the selling of low cost waterfront properties.

To date, the hundreds of lakes in the area have been government owned. The city has recently obtained agreement to use the land, freely obtained, around 11 of these lakes to create a cottage industry. Over 200 lots have been sold and homes/cottages have begun to be built. This is only a start of a planned $500 million project … at least 1,000 lots in total. Already, the tax base has been increased and the locals have noticed an increase in cottage visitors in the summer period. RTI and NorDev are managing all of this. Elliot Lake was, and still may be, the only city in Ontario permitted to be involved in land development … permission granted to help it recover from its economic decline.

NorDev is currently building a large condominium complex in the city, on Elliot Lake, in order to sell the units for profit that will be reinvested.

Things are not perfect, but have gone so well recently that, for this year, property taxes have been lowered 30%.

Marketing

The story of Elliot Lake’s economic recovery is well known in our country. Many other cities, some from other countries, have sought advice from the city, particularly from Farkouh and Kinneally. The two of them provided an in-depth study for Miramichi and developed a recovery strategic plan and business/marketing plan for the area, with facilitation … at a cost of $400,000, all paid for by McKenna and his New Brunswick government some time ago. RTI now wants to provide consulting services on a regular basis. As I write, Farkouh is preparing to leave to speak to community leaders of a small city in Manitoba that is struggling economically.

All sorts of marketing techniques to attract retirees have been implemented. Magazine, TV, signage, newspapers, brochures, Internet and other ways have been tried and each method has been carefully measured in terms of the results obtained by method/money spent. “If you can’t measure it, don’t spend money on it.” They have captured enormous information in their data base as to the success, or otherwise, of their marketing techniques. Each person who arrives as an RTI guest in Elliot Lake is asked as to how they were initially attracted to come. Every renter, or residence buyer, regardless of origination, is asked the same question. This has allowed them to recognize mistakes and to correct their approach for better results. Obviously, the real estate sales firms work closely with RTI.

On the Trans Canada highway, one can see large signs advertising Elliot Lake as a retirement community of choice … for at least 150 km prior to reaching the turn-off for the city. The impressive Tourist Center is not at the entrance to the city, but rather 30 minutes away at the Trans Canada turn-off, where it has the greatest visibility. Also on the highway is a huge Ojibwe native Trading Post where native artists from the region concentrate the selling of their good work. (Sadly, any tourist visiting Kitimat/Kitamaat would have a hard time easily knowing about/finding any native art produced by the village.) Local native art is also sold in a retail store for such in the city of Elliot Lake.

RTI also does mathematical modeling relating to its marketing and to “job spill-through” … the economic effect that a single new additional worker, or the loss of one, has on the city. They do this for retirees as well.

RTI has 16 full-time employees, with many more during the summer period (to maintain the golf course, etc.). As much work as possible is contracted out. All senior managers are remunerated on the basis of results, i.e. rental revenue, population increase, etc. One of these is Marielle Brown, the Marketing Director, who has an MBA degree. “Every day when we come in to work, we focus on results.”

“Our best marketing tool is print. We have great success with MacLean’s magazine … as well as with CAA and CARP magazines. Others too. Stay away from free pick-up print; use that which is subscribed to. We have a strong Internet website presence, and we measure it with a statistical package. Every time we put an ad in a Toronto newspaper, we can see the hits on our website spike. City beneficiaries, such as landlords, help to pay for our website. We have had an ‘800’ telephone number from the beginning. We used to do trade shows but not so much now. We have about a 10% ‘close rate’ on the more than 2,500 guests that we bring each year to the city.”

Of interest, I noticed that this year, at the tourist bureaus in Penticton and Vernon, there were brochures for almost all northern B.C. communities … except for Kitimat, until very late in the summer.

Advice From City Leaders

If you want to save the economy of your city, don’t count on the municipal staff to do it.
Or the Council. It is paramount, though, that the Council establishes an organization, such as for RTI, that must be operated as a business, separate from the municipality. George Farkouh told me (not news, for sure), “Municipalities are sink holes for taxpayer’s money.” The Council needs to work closely with, and to greatly support, this business function. A talented and credible leader, like for Richard Kinneally, needs to be found to provide the business leadership to attract new folks to the city.

The new City Manager, Dan Gagnon, confirmed to me that, if RTI had not been formed, the city’s population would be only now at the 5,000 level. He also stated that the municipality’s economic development function has not brought in one new industry in almost 20 years. This function now focuses only on retaining the existing population. RTI and NorDev focus on increasing the population. (Kitimat might want to compare the cost of municipal salaries, etc., expended over the past five years, say, on economic development and compare such to the results achieved. Is change, and courage to do so, not required?)

George Farkouh: “You need at least four councilors on the municipal council who can work together. Pay no attention to the others.”

George Farkouh: “Do not combine economic development efforts with one or more other struggling cities. Your city’s own special needs will be compromised. We tried that and failed.”

When I asked George if he could have saved the city without his education of an MBA degree, his response was, “No.”

He also emphasized that it is hugely important to work with the provincial government re economic development. To do so, municipal political and business leaders need to be seen as competent and credible, otherwise the government will focus on other cities also crying for help, but who have got their act together.

Kitimat Scenario

My understanding is that Kitimat will lose about 1,050 jobs since Eurocan’s closing and after Alcan’s staff reduction in a few years. Given, say, a population reduction of four people to one job lost, if no other equivalent industry can be found (most likely), then Kitimat’s population may drop from 9,500 to less than 5,000 … very quickly.

Given the lack of past success to attract new business to the city, and given the now widely renowned dysfunction of Kitimat’s leaders (not just those on the Council), guaranteed to last until at least the next election, the odds of attracting any new significant business in the next five or more years are remote. For the municipal election in the fall of 2011, if the city cannot present a slate of competent like-minded city leaders, then, for sure, the city’s downfall will be fully assured. Capable people will not want to be a part of the dysfunction. People everywhere know this.

A vast number of people who have lived in Kitimat live across Canada. Many of them are disappointed and saddened by the leadership dysfunction in the city. Even a senior member of RTI has a brother who worked in Kitimat and the dysfunction issue was well known in Elliot Lake before I arrived.

Kitimat, I feel, will greatly increase the chances for success if its leaders can focus on attracting retirees. The market is huge and is growing. You only have to attract 4,000 retirees to approximate the recent past economy. The current approach to leave everything to a small, unfunded, volunteer team of well meaning people pales in the shadow of what Elliot Lake has done. I have met with Margaret Sanou, the group’s leader, a truly special person, and she would agree with me.

Ex-councilor Richard McLaren’s recent Northern Sentinel article calling for doing a reality check on Kitimat’s five-year financial plan is right on the mark. It must be done before the imminent 2011 budget preparation exercise. Within three years, municipal services, bus services, retail business, government services and much more, will all be greatly diminished. Imagine the City Center losing anchor businesses, the closing of the museum, parks, and recreation facilities … and the creation of a boarded-up ghost town. The trailer park will be even more of an abandoned eyesore as folks there move up to rent cheap/better housing units. Such will cause reduced tourism and greatly harm opportunities to attract retirees. Barry Pankhurst, head of the School Board, told me that, even now, all elementary schools could be combined into the Nechako School. This is inevitable.

Whether they know it or not, and whether they like it or not, the Kitamaat Village folks will suffer greatly also with the economic downfall of the city. Village leaders need to be concerned, included and involved in the leadership to rescue the city.

RTI’s 1,500 rental units have been the main revenue engine for Elliot Lake’s recovery success. Kitimat will not have the identical opportunity. However, it will not be long before there will be hundreds of vacant residential units sitting idle. These need to be managed collectively in a cohesive manner. Given today’s scenario, with property values guaranteed to drop, any newcomers to Kitimat would be foolish to buy, unless they want to lose money, or wait for much more than a decade to recover their equity. So, most likely, they will rent, making it even more difficult for residential units to be sold and driving their values down even further. Is the sizing of Rio Tinto Alcan’s construction campsite being designed/coordinated with the parallel increasing city vacant residential availability?

The city needs to plan for a guaranteed downfall, much worse than seen to date. Serious, difficult decisions need to be made … immediately. In parallel, focus should be dramatically changed to support Kitimat being a one-industry retirement community. Today’s financial planning most likely does not reflect any of this. Delaying immediate action will greatly exacerbate the situation, not far into the future. Full time resources need to be assigned to this immediately.

Sadly, current council meetings do not even put this top priority on the agenda. Council members should be meeting at lengthy weekly meetings on this topic alone. One has the feeling that they don’t consider it a priority, don’t know where to start and each stubborn member, in the future will blame the failure on the others. Everyone will lose.

Recent council member suggestions, such as to spend money on the Tamitik speaker system, to visit the Gulf oil spill area and to delay municipal service cuts, are all evidence of non-focus on the real priority and that no system of prioritization really exists. The dysfunction amongst city leaders, perceived as close to hatred in some cases, is so entrenched that the city will be forced to endure it for some time to come at great cost. Anyone tuned in to the situation, that I have talked to, would not agree that Kitimat’s leaders are, “ … planning for the worst, and hoping for the best”, because they are simply not planning for the worst. In fact, many citizens feel that no planning is being done.

Conclusion

Early this past August, I arranged for the Municipality of Elliot Lake to send seven packages of information to the Mayor of Kitimat for distribution to all Council members. This required some work to prepare the documentation. I would hope that, by now, such has been reviewed and shared with Margaret Sanou and with, perhaps, other city leaders. The Municipality of Elliot Lake confirmed to me that the packages were sent expediently. I have presented far more detail in this document.

Given the leadership dysfunction concern of all taxpayers in the city, I strongly recommend that taxpayer’s money not be spent to send anyone to Elliot Lake. It would be far more economical to pay for Farkouh and/or Kinneally to give a presentation to a wide audience of leaders in Kitimat, including key provincial representatives. They are willing to do so.

I hope that the information that I have provided herein may be of use to at least some of Kitimat’s leaders. At the very least, it helps to provide ideas, advice and demonstrates that Kitimat’s leaders have hardly started, if at all, to address the serious economic situation facing their city.
Respectfully,

Steve Connolly