Proposal
Increase to the Forest Futures Trust (FFT) charge based on indexation
Regulation Number(s):
N/A
Instrument Type:
Proposal
Bill or Act:
Charge is set under authority of section 51 (5) of the Crown Forest Sustainability Act.
Summary of Decision:
The decision has been taken to proceed with the proposal. The Forestry Futures Trust will be indexed annually using Statistics Canada's Implicit Price Index (IPI).
Further Information:
Forest Laws – Government of Ontario, Ministry of Natural Resources
Proposal Number:
14-MNR001
Posting Date:
January 9, 2014
Summary of Proposal:
A $10 million annual funding level target, to be generated through charge-backs to the forest industry, was established when the FFT was created in 1994/95 to support achievement of its legislated mandate.
The resulting FFT charge was last adjusted in 1997 when it was set at $0.48 per cubic metre to allow it to meet its $10 million target given harvest levels at the time and has remained fixed ever since.
The lack of adjustment in the charge since 1997 has led to a significant erosion in the intended purchasing power of the Trust due to inflation. As recognized by the Auditor General, this has undermined the adequacy of the Trust to meet its legislated purposes under the Crown Forest Sustainability Act. MNR is seeking approval to address this issue by introducing annual indexing of the FFT charge based on the Implicit Pricing Index (IPI).
The application of an inflationary adjustment is consistent with the original intent of MNR when the FFT Charge was implemented.
Retroactive indexation of the charge to 1997 would result in a substantive charge increase (to $0.70/m3) and therefore was rejected for the more moderate increase as outlined herein while transitioning to the (annual application of IPI).
Application of the IPI to the FFT charge is consistent with inflationary adjustments made to the minimum price component of Crown stumpage charges. The IPI is deemed to be a more appropriate index for the forest sector because it targets items related to industry operations, as opposed to the CPI which targets costs that affect households.
The resulting FFT charge was last adjusted in 1997 when it was set at $0.48 per cubic metre to allow it to meet its $10 million target given harvest levels at the time and has remained fixed ever since.
The lack of adjustment in the charge since 1997 has led to a significant erosion in the intended purchasing power of the Trust due to inflation. As recognized by the Auditor General, this has undermined the adequacy of the Trust to meet its legislated purposes under the Crown Forest Sustainability Act. MNR is seeking approval to address this issue by introducing annual indexing of the FFT charge based on the Implicit Pricing Index (IPI).
The application of an inflationary adjustment is consistent with the original intent of MNR when the FFT Charge was implemented.
Retroactive indexation of the charge to 1997 would result in a substantive charge increase (to $0.70/m3) and therefore was rejected for the more moderate increase as outlined herein while transitioning to the (annual application of IPI).
Application of the IPI to the FFT charge is consistent with inflationary adjustments made to the minimum price component of Crown stumpage charges. The IPI is deemed to be a more appropriate index for the forest sector because it targets items related to industry operations, as opposed to the CPI which targets costs that affect households.
Contact Address:
Peter Henry
70 Foster Drive, Suite 400
Sault Ste. Marie, ON
P6A 6V5
Phone: 705-945-6572
Fax: 705-945-6667
Email: peter.d.henry@ontario.ca
70 Foster Drive, Suite 400
Sault Ste. Marie, ON
P6A 6V5
Phone: 705-945-6572
Fax: 705-945-6667
Email: peter.d.henry@ontario.ca
Effective Date:
April 1, 2014
Decision:
Approved