QP Briefing: Plan for balanced budget relies on economic growth to do the heavy lifting

By QP Briefing Staff

If you believe the vision outlined in the government’s 2015 budget, the books can be balanced in three years by simply letting the economy grow while keeping a tight lid on program spending.

This will happen despite ambitious infrastructure spending, on the order of $130 billion over 10 years, which will eventually pay off by stimulating even more economic growth.

That’s if you believe the vision outlined in the budget. The core premise of this vision is that lower oil prices, a lower Canadian dollar and a strengthened U.S.
economy will boost Ontario’s revenue by about $5 billion for each of the next three years, going from $118.5 billion in 2014­15 to $134.4 billion by 2017-­18.

Meanwhile, the plan is for practically no increase in program spending during that period, keeping it steady at about $120 billion until 2017­18. The interest payments on debt will keep rising, going from $10.7 billion in 2014­15 to $13.2 billion in 2017­18. This would bring total expenses in 2017­18 to $133.2 billion.

The deficit is projected to shrink to $8.5 billion in 2015­16 and $4.8 billion in 2016­17, both of which are slightly lower projections than in last year’s budget.

The government’s net debt projection for March 31, 2015, is $284.1 billion — up from $267.2 billion last year.

“We must build”

Finance Minister Charles Sousa called the budget “a statement about where we want to go next, about what we will do next together as Ontarians to build a stronger province.”

He singled out infrastructure spending as the highlight of the document. “For a long time now, we have not been building fast enough to keep up with our needs,” he said. “We can’t afford any more delays. We must build.”

The government’s infrastructure plan remains largely unchanged, though details have been filled in on major projects such as Regional Express Rail (electrifying the GO Train corridors) and the Hurontario LRT. The “assets optimization strategy” will deliver an extra $2.6 billion over what the Liberals had previously
been planning for, raising the total transportation spending in the Moving Ontario Forward plan to $31.5 billion (up from $29 billion last year).

A lid on spending

The Liberals are relying on several measures to keep spending in check, particularly their Program Review, Renewal and Transformation process. PRRT is designed to help sniff out $500 million in annual program savings by going line­by­line through government programs and services and routing out inefficiencies.

Treasury Board President Deb Matthews is leading the program review efforts, and both she and Sousa see it as a way to dodge across­the­board cuts.

In 2014­15, the program review savings target was $250 million, which the government says it met through various initiatives such as negotiating lower costs for vaccines and telehealth services, negotiating a new agreement with AMAPCEO that achieved savings in entitlements, and finding other ways of reducing costs for supplies, travel and office space.

Digging up the underground economy and bolstering revenues also remains a focus for the government. Newly introduced was a proposal to ban the use, manufacture or distribution of “electronic sales suppression technologies” The technology allows for the use of software known as “zappers,” which let the user duck reporting sales records, including taxes paid by customers.

For the two biggest ministries, health and education, spending is forecast to increase slightly each year but will be mitigated by various measures. Justice and the children’s and social services sector will also see  slow growth. The rest of program spending will be cut by 5.5 per cent on average by 2017­-18.

The province’s health­care funding is slated to grow an average of 1.9 per cent over the next three years, up from the $50 billion set aside in the 2014 budget. The government is planning to restrain spending through additional changes to the drug benefit plan (expected to save more than $200 million a year), changes to physician services payments that have already been implemented and a new hospital funding model that’s been rolling out since 2012.
In education, the government’s $25­- billion budget will be frozen for the upcoming 2015­16 school year, but is set to increase 2 per cent annually by 2017­18. To help offset the costs of continuing to roll out full­day kindergarten, as well as over­budget school projects and boosted wages for child­care workers, the province is planning to consolidate schools and create “community hubs” that would share school space with health­care and social services.

The opposition oppose

The opposition parties argue these minimal increases actually amount to cuts when considering inflation, stressing a 3 ­per­cent to 5 ­per­cent hike in health­care spending would be necessary to compensate for increased costs in the system.
The Tories immediately said they would not be supporting the budget, say it failed to meet their preannounced conditions (which included demands that were obviously not going to be met, such as cancelling cap­-and-­trade and the Ontario Registered Pension Plan).

Interim PC Leader Jim Wilson pointed out the document had a higher growth rate for debt interest than it did for health or education.

“There is no plan to deal with the debt — it is just going up and up. Ontarians can’t afford this budget,” he said.

NDP Leader Andrea Horwath, meanwhile, condemned the budget for failing to protect public services and promising a “fire sale” of Hydro One.

“Ontarians … did not vote for a plan that fires nurses, closes schools and weakens social services,” she said. “They didn’t O.K. the sale of our revenue-generating hydro system for a quick buck.”

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Ontario Budget 2015. The trend continues: tax credits decline as grants and contributions rise

The 2015 provincial Budget provides increased support for job creation, innovation, and exports, adding almost half a billion of new funding to the Jobs and Prosperity Fund and the Ontario Youth Jobs Strategy. At the same time, the use of tax credits to support business declined. Details on how your business can navigate the incentives landscape are provided below.

Want to learn more about funding for your business? Order a FundingSources Report for a ranking of the best possible funds to fit your business objectives, or use our Government Funding Service to apply for funding for your organization.

barchart (1)Top New Money for your Ontario Business

  1. $250M for the Ontario Youth Jobs Strategy. The Ontario Government reported in Budget 2015 that youth unemployment remains “unacceptably high” in the Province. To tackle this issue, the Province would invest $250M over the next two years, bringing the total budget for its Youth Jobs Strategy to $565M. The new funds will be used to support a suite of programs serving 150,000 youth for skills development, labour market connections, entrepreneurship, and innovation. $36M of the new funding would be directed to support apprenticeships over the next two years.
  2. $200M for the Jobs and Prosperity Fund. Launched in January 2015, the Jobs and Prosperity Fund is a 10-year, $2.5B program that provides funding to projects with costs of more than $10M ($5M for food, beverage, and bio-product manufacturing projects). The Government will increase the Fund’s budget by $200M starting in 2015-26, and extend eligibility to the forestry sector. Read more about what projects are currently eligible under the Fund here.
  3. $16M for the Interactive Digital Media (IDM) Fund. The Province will provide $6M in 2015-16 and $10M per year thereafter to renew and redesign the IDM Fund. The Fund will continue to support early product development, IP investment, and company incubation, but co-productions and magazines would now be eligible. Funding for this program will be redirected from cuts to the Ontario Interactive Digital Media Tax Credit (OIDMTC) detailed below.
  4. $15M for the Ontario Music Fund. In 2013, the Government established the Ontario Music Fund as a three-year program to support the development of music companies in the Province. The Government will provide $15 million per year to ensure the continuation of the Fund.
  5. $2.3M for MaRS EXCITE. MaRS EXCITE (Excellence in Clinical Innovation Technology Evaluation), which helps innovators in the health sector accelerate the development and adoption of their technologies, will receive $2.3M in funding over the next four years.

Crowdfunding. Proposed Framework Expected this Year   

Budget 2015 reaffirms that the Ontario Securities Commission (OSC) is expected to bring forward proposed prospectus exemptions this year that will facilitate capital raising through instruments such as crowdfunding. Click here to learn more about crowdfunding in Canada.The Funding Portal_Crowdfunding Summit_final_tk_fixed

Tax Credits. Changes Ahead

Over the past 10 years, refundable tax credits for businesses in Ontario have grown at an average rate of approximately 11% per year, compared to average growth rate of 4.5% per year in overall program spending, according to the Government. In order to bring spending in line, the Budget outlines proposed changes to the following programs:

  1. OIDMTC. The OIDMTC provides a 40% tax credit for companies that develop their own digital media products. The Government notes: “In recent years, as interactive digital media products have become mainstream, tax support through the OIDMTC has grown at an unsustainable rate. Between 2003–04 and 2014–15, the OIDMTC is estimated to have grown by over 40% annually.” The Government proposes to focus the credit on entertainment products, as well as on education products for children under the age of 12. Search engines, real estate databases, and news and public affairs products would specifically be excluded from the program, as would promotional products. In addition, claimants would be required to show that at least 90% of the product is developed in Ontario by the company claiming the credit.
  2. The Apprenticeship Training Tax Credit (ATTC). The ATTC provides a 35% refundable tax credit (45% for small businesses) on salaries and wages paid during the first four years of an apprenticeship program, up to $10k per apprentice per year. Going forward, the ATTC’s general rate would be brought down from 35% to 25% (and to 30% for small businesses). In addition, the maximum annual amount per apprentice would be brought down to $5k and the eligibility period reduced from four years to three. These changes will bring funding delivered through the ATTC down to pre-2009 levels.
  3. Ontario Production Services Tax Credit (OPSTC). The OPSTC is a 25% refundable tax credit that applies to expenditures related to eligible film and television productions. The credit will be reduced to 21.5% and eligibility will be amended to ensure the program encourages employment in Ontario.
  4. Ontario Computer Animation and Special Effects Tax Credit (OCASE). The OCASE is a 20% tax credit applicable to computer animation and special effects. The credit will be reduced to 18%.
  5. Ontario Sound Recording Tax Credit. The Government proposes to eliminate this tax credit given the success of the Ontario Music Fund.
  6. Ontario Resource Tax Credit. The Province will eliminate this credit by instead providing a deduction for royalties and mining taxes paid on adjusted resource profits. This change will harmonize Ontario’s framework with those in place federally and in other provinces.

Overall, changes to these tax credit programs will provide savings of $81M in 2015-2016, $159M in 2016-17, and $184M in 2017-18, for total program savings of $424M.

The Funding Index. Business support levels rise under Ontario Budget 2015

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The Funding Index is released quarterly by The Funding Portal to provide a clear picture of how government incentives for business are distributed by region and industry sector, and associated trendlines. Following its analysis of the 2015 Ontario Budget, the Portal concludes that additional funding for direct funding programs (grants and contributions) largely offset the important proposed cuts to provincial tax credits for business.

“There has been an ongoing trend in recent years for governments to move away from tax credit programs in favour of direct grants and contributions to business. Direct funding programs provide more predictable spending levels for governments because the program budgets are capped; by contrast, spending under tax credits can rise sharply with upturns in the economy as businesses spend more and qualify for larger credits as a percentage of their spend,” said Funding Portal President Teri Kirk. “Although the use of tax credits to flow support to businesses declined, overall provincial funding under business support programs rose as a result of almost one half billion in increased funding allocated to the Ontario Jobs and Prosperity Fund and Ontario Youth Jobs Strategy. ”

  • The Funding Index reported following Ontario Budget 2015 that businesses in Ontario receive the highest levels of government support within Canada. Amounts disbursed for 3Q2014 have now been published by the Province and aggregated by The Funding Portal and sit at $1.25B for the quarter and trending toward $5B on a full-year basis. The next edition of the Index and The Funding Index infographic will be released in mid-May 2015. View the Portal’s interactive infographic to identify the funding that flows to your region or sector.

Why startup pitches must have good stories

By Mark Evans

When you’re pitching investors, partners or customers, does your pitch include a good story?

If not, you’re failing to capitalize on one of the most powerful ways to engage an audience. Here’s a good example to illustrate my argument:

I was recently the emcee at Singularity University’s Canadian Globe Impact competition. Of the five finalists, one of them told a story about how their technology would be used in the real world. Andrea Palmer-Boroski created a narrative around a mother struggling with her son’s autism.

In kicking off her pitch with a story, Palmer-Boroski quickly engaged people because they could see themselves in the story, rather than grappling with how the technology worked.

This is the power of storytelling.

It lets people immerse themselves in a brand experience, even if they little idea about what a startup does or the maturity of its product. Given the competition, storytelling is the way to capture the spotlight. This makes storytelling a must-do activity.

Too many startups mistakenly believe a good product is the key to success. While a good product is important, it doesn’t matter much if people are not able to see how the product could potentially impact their lives or the lives of others.

Not surprisingly, Palmer-Boroski won the competition. Her presentation was more engaging, relevant and personal.

This is despite the fact her startup’s technology is still more of an idea than a product. There is a lot of work to be done to transform an interesting idea into a product, which will use sensors to monitor the stress levels of people with autism.

In a world teeming with information and competition, good stories are more important than ever to get people engaged, intrigued, interested and inspired. Even with compelling technology or a valuable product, you need stories to attract and build an audience.

This is why startups need to embrace storytelling from the beginning; long before the product is developed. Stories play a key role in helping entrepreneurs determine the value of their products and potential audiences. Stories make it easier to attract employees, investors and partners when a startup is pitching a vision, mission or idea.

Storytelling should be an integral of everything a startup does: marketing, sales, hiring and pitching. If you’re not telling stories, you’re not playing the game right.

Content courtesy of markevans.ca

FundingAwards – Who got Funded – Week of April 13

Overall Disbursements: Funding from federal and provincial governments reached $67.3M this week, up from $404.5M last week.

Top Sector: Academic & Research is the top sector this week, attracting $43.6M, 65% of the total amount disbursed.

Top Region: Newfoundland is the top province this week, attracting 52% of the total amount disbursed.

Top Recipients in Ontario:

  • Industry: No new awards this week.
  • Hospitals, Universities, Research Centres & Industry Associations: Sunnybrook Research Institute receives $20M from FedDev Ontario to grow southern Ontario’s image-guided therapy cluster.
  • Charities, Non-Profits & Public Sector: The Prescott-Russell Community Development Corporation receives $934.7k from FedDev Ontario to  support Francophone entrepreneurs in eastern Ontario.

Funding Disbursed by Industry Sector:

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Funding Disbursed by Province:

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To receive daily reports on which organizations received funding in Canada, subscribe to The Funding Portal’s FundingAwards™ service.

Canadian Private Financing and M&A News Roundup – Week of April 13

  • Capital Markets
    • The Catalyst Capital Group Inc. announced the first closing of its most recent fund, Catalyst Fund Limited Partnership V, with US$650M of capital commitments from prominent university endowments, charitable foundations, pensions plans, family offices and financial institutions. Fund V’s target is $1.25B with a hard cap of $1.5B.
  • Financial Services
    • Focus Financial Partners, LLC, the leading international partnership of independent wealth management firms, announced that Dorchester Wealth Management, an investment counseling and wealth management firm based in Montreal, joined the Focus partnership as of April 1, 2015.
  • Healthtech and Life Sciences
    • TVM Life Sciences Ventures VII announced the fund’s seventh investment, a co-investment with the Fonds de solidarité FTQ. This investment was used to help launch Esperas Pharma Inc., a Montreal-based company focused on treatments for multiple types of cancers.
  • Real Estate
    • Ivanhoé Cambridge announced the acquisition of a 25% interest in Liberty Place, a core office property in Sydney, Australia. Blackstone Property Partners Asia partnered on the purchase from Lasalle Investment Management, for a total investment of AU$240M.
  • Retail
    • Staples, Inc. reached an agreement to acquire Accolade Promotion Group (APG), a leading distributor of promotional products in Canada. APG is currently a division of Golf Town Canada Inc, a portfolio company of OMERS PE.
  • Tech
    • BlackBerry entered into a definitive agreement to acquire data security company WatchDox.
    • ScribbleLive, a content marketing and live publishing SaaS platform powered by big data, acquired Appinions Inc., makers of an influence analytics marketing platform built on patented natural language processing and social network analysis technology.
    • Shopify Inc. filed a registration statement on Form F-1 with the U.S. Securities and Exchange Commission (SEC) and a preliminary prospectus with the securities regulatory authorities in each of the provinces and territories of Canada for a proposed IPO of its Class A subordinate voting shares.
    • TouchBistro closed $6M in Series A funding from Kensington Capital Partners, Relay Ventures, Difference Capital, and a new strategic investor JUST EAT, among others. This latest round brings TouchBistro’s total funding to date to approximately $12M.
    • Klass Capital announced the acquisition of Resolver Inc., a global leader in risk-based corporate performance, compliance, and assurance software.

Federal Budget 2015. New Funds for your Business

Businesses looking for possible financial support under government programs will find new funding sources in federal Budget 2015. This Budget was definitive on one point: moving forward, the focus is on job creation, growing the economy, and driving exports. Read on to learn how your company can take advantage of these new funds.

Need funding today? Order a FundingSources Report to identify your top funds or purchase our Government Funding Service to receive expert assistance with writing your applications.

Top New or Expanded Funding Programs for your Business

  1. BMW_Leipzig_MEDIA_050719_Download_Karosseriebau_max$100M for the New Automotive Supplier Innovation Program. The Budget proposes a new five-year, $100M fund to support the product development and technology demonstration activities of businesses within the automotive supply chain. The fund would target innovative SMEs that create products or processes that help meet growing global demand for fuel efficient vehicles and automated technologies. Of the total budget for the Program, $50M would be reallocated over three years from the existing $1B Automotive Innovation Fund; the remainder is new funding.
  1. $86M for the Forestry Sector. The government proposes to invest $86M over two years starting in 2016-17 to extend the Forest Innovation Program, which supports R&D and technology transfer, and the Expanding Market Opportunities Program, which supports export opportunities.
  1. $56.4M for R&D Internships. The Mitacs Accelerate Program would receive $56.4M over four years, starting in 2016-17, to support 1,500 new graduate-level R&D internships within businesses. This would bring the total number of annual internships under the Program to 6,000. In addition, Mitacs would become the new primary delivery agent for federally-funded graduate-level industrial R&D internships, while the Natural Sciences and Engineering Research Council’s (NSERC) Industrial Postgraduate Scholarships Program would be wound down.
  1. $50M for a New Export Market Development Program. The Budget proposes the creation of a new $50M, five-year export market development program (official fund name to be announced) to help SMEs pursue new export opportunities, with a particular focus on high-growth emerging markets. The program would cover a part of the costs associated with market research, participating in trade fairs and missions, shipping prototypes, and pilot projects. Approximately 500 to 1,000 exporters would participate in the program per year.
  1. $22M for the Mining Sector. The mining sector would benefit from $12M in funding over five years to renew Natural Resources Canada’s Targeted Geoscience Initiative. The Initiative supports private sector exploration, access to qualified workers, and extends the life of existing mines, among other measures.
  1. $12M for the AgriMarketing Program. The existing AgriMarketing Program, which promotes Canadian agricultural and agri-food products abroad, would receive $12M in additional funding over two years starting in 2016-17. The new funding would help enhance Canada’s presence in the highly competitive global market.
  1. Manufacturing Investment Tax Incentive. The government proposes a 10-year program that would provide manufacturers with an accelerated capital cost allowance (CCA) at a rate of 50% (instead of 30%) on a declining-balance basis for newly acquired eligible assets. This translates to a greater ability for manufacturers to acquire new equipment for long-term projects.

The Funding Portal will report on the launch of each of these new programs as they are announced by the Government of Canada in the months ahead.

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Startups. Easier Access to Bank Loans

The Canada Small Business Financing Program, which helps new businesses secure loans from participating private sector financial institutions, would be expanded to help more businesses access larger loans. The maximum loan for real property would be increased from $500k to $1M, and the eligibility criteria under the Program would now allow companies with annual revenues of $10M or less (up from $5M) to apply.

imagesAerospace. New Supplier Development Initiative

The government announced its intentions to work with the Aerospace Industries Association of Canada (AIAC) and other stakeholders to develop a national aerospace supplier development initiative. A total of $6M would be reallocated from the Strategic Aerospace and Defence Initiative (SADI) to fund this initiative. The initiative would match supplier SMEs with large manufacturers that would act as a mentor to help them improve their competitiveness and performance.

Research. $1.5B in New Funding Announced in the Budget

Since 2006, the federal government has committed more than $13B in funding to support the science, technology and innovation sectors. Budget 2015 proposes an additional investment of $1.5B to be delivered over the next five years. Here are the top Budget highlights for the research sector.

  1. $1.33B for the Canada Foundation for Innovation (CFI). The government proposes to invest $1.33B over six years, starting in 2017-18, in the CFI to support advanced research infrastructure. Part of this funding would flow to the College-Industry Innovation Fund, which helps colleges gain the necessary infrastructure to partner with the private sector. In addition, $100M would be earmarked to support digital research infrastructure.
  1. $119.2M for the National Research Council (NRC). The NRC would receive $119.2M over two years to support its industry-partnered R&D activities.
  1. $105M for CANARIE. CANARIE’s national high-speed research and education network would receive $105M over five years to support its ongoing operations and to meet growing demand.
  1. $46M for the Granting Councils. The Budget proposes to provide $15M in additional funding to NSERC, $7M to the Social Sciences and Humanities Research Council (SSHRC), $15M to the Canadian Institutes of Health Research (CIHR), and $9M to the Research Support Fund. The majority of this new funding would go towards programs that match researchers with businesses to support innovation.

The Funding Index. Trending Up in 2015

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The Funding Index is released quarterly by The Funding Portal to provide a clear picture of how government incentives for business are distributed by region and industry sector, and associated trendlines. Following its analysis of the 2015 federal Budget, the Portal has forecast that The Funding Index will trend upward for most key industry sectors throughout 2015 and well into the spring of 2016.

Historically, government funding has tended to move upward in response to downturns in the economy or a major industry sector, as a corrective measure. While a depreciated Canadian dollar has improved the export prospects for manufacturers, the Budget recognized that the sector is still performing below pre-recession levels and support for manufacturers was a major feature of this Budget.

“The Funding Index, which compares government funding and venture capital investment levels, has consistently demonstrated that government funding tends to move cyclically as a counter-measure to upswings and downturns in capital markets. This Budget extends that trend, demonstrating sound macro-economic policy,” said Funding Portal President Teri Kirk. “Additional funding aimed at the manufacturing sector to enhance export potential was anticipated. No new funding programs for the oil and gas sector were announced – a bit of surprise given drastic downturns in that sector – but the extension of Natural Gas Export Licences from 25 to 40 years and planned expenditures to support the creation of a liquefied natural gas industry in Canada will be welcome by the sector.”

Visit The Funding Index and the interactive Infographic to see the impact of Budget 2015 on your region and sector. Read our FundingReport, Special Edition, Ontario Budget 2015 on Friday, April 24.